Building materials giant CRH still bullish despite US doubts

Building materials giant CRH has maintained its guidance for annual earnings of over €3bn, this year, despite US sales slowing in the second half.

The Dublin-headquartered group was bigged up in the immediate aftermath of last week’s US election results amid Donald Trump’s promises to spend big on infrastructure projects.

CRH makes about 60% of its profits in the US and is the third largest producer of construction aggregrates there. Its shares hit a nine-year high on the back of the election, but analysts and management have played down the significance.

In its latest trading update, CRH yesterday said that overall sales were up by 22% year-on-year, to €20.4bn, in the first nine months of 2016 — adding that annual earnings should rise by around 35% and net debt should be under €6bn by year’s end and less than twice earnings.

However, while still ahead, US sales growth slowed to 1% in the third quarter having been in double-digit percentage territory in the first half.

Management told analysts that it was well-placed to make further acquisitions with an available warchest of between €1.5bn and €2bn to play with.

And it had a healthy pipeline of deal opportunities, but played down the US election result in favour of giving the thumbs up to 22 US states approving additional infrastructure funding.

“It remains to be seen whether the legitimacy of Trump’s promises will result in a significant increase in infrastructure spending in the US. Thus, we remain cautious on CRH given the 14% share price increase it has had since the US election and the relatively high- valuation multiples that the company trades on,” said Dylan Simmonds, equity analyst with Merrion Stockbrokers.

However, he said “There has been a notable normalisation in demand in the US after a very strong first half of the year, but the structural growth story remains intact and has only been enhanced by the US election result.” CRH shares were up 1.75% in Dublin yesterday.