CRH shares surge on Donald Trump spending pledge

CRH shares surged by 5% yesterday, on the back of both a record set of yearly earnings and US president Donald Trump’s reiteration of his promise to spend $1tn on US infrastructure improvements.

President Trump repeated that campaign promise at his first Congressional address, on Tuesday night. As the leading producer in the US of asphalt for motorway construction, CRH is viewed as a possible major beneficary of Mr Trump’s spending plans. However, the Dublin-headquartered building materials giant’s chief executive, Albert Manifold, said any benefit is likely to be seen over the medium, rather than short, term.

“We’re the largest buildings materials business in North America, so we’re well-positioned to benefit from any uplift,” he said.

Mr Manifold also poured cold water on talk of CRH benefiting from Mr Trump’s plans to solidify the US-Mexican border by building a dividing wall. Mr Manifold said the group is only interested in the infrastructure spend element of the new administration’s plan. He added that CRH has no presence in the extreme south of the US and is only active in major urban areas.

As expected, CRH yesterday reported record annual group earnings (on an EBITDA basis) of €3.13bn for 2016, up by 41% on the previous year. The earnings growth was hugely helped by first-time full-year contributions from €8bn worth of acquisitions made in 2015. The bulk of that 2015 spend went on buying assets offloaded to make way for the merger of European cement peers, Holcim and Lafarge.

Sales revenue grew by 15%, last year, to €27.1bn; pre-tax profit was ahead by nearly 70%, at €1.74bn, and basic earnings per share rose 69%, to 150.2c. Growth was seen both in the Americas and in Europe.

The results also showed a first full-year dividend rise in eight years, with a 4% increase — to 65c per share — declared. However, the small increase was viewed as an indication that CRH remains more committed to investing its cash in more acquisitions than directly returning it to shareholders.

Mr Manifold partially agreed with that thinking, yesterday, and reiterated that CRH could comfortably spend between €2bn and €3bn on acquisitions over the next 18 months. However, he said such a figure related to spending capacity and not a fixed outlay target.

Crucially, last year saw CRH reduce its net debt by €1.3bn, to €5.3bn. That returned its net debt to a level of just 1.7 times earnings, down from three times earnings at the end of 2015.

CRH also yesterday announced that it has spent €500m on acquisitions and investments since the turn of the year (more than double the amount spent in the whole of 2016) and has raised €400m via disposals. Since 2014, it has divested itself of €2bn of non-core assets.

CRH’s development teams have, however, been active and have built up “a stack of deals”, Mr Manifold said, before adding that the group has a strong pipeline of potential acquisitions, but can afford to be “very selective”.

He said the group was now in “a buyer’s market” and would be looking to strengthen its presence across all geographies and products, but would maintain discipline in managing its money.

Management is understood to be interested in investing in the Philippines and in Central Europe, as well as further in the Americas.