CRH shares fall on profit drop, stalled buyback and lack of visibility

CRH chief executive Albert Manifold

CRH shares fell by around 2% on the back of the Irish building materials giant posting a drop in profits, pausing its share buyback policy and rowing back on acquisition activity due to the market uncertainty caused by the Covid-19 pandemic.

The second largest building materials group in the world said its pre-tax profits for the first half of this year fell by nearly 28% to $518m (€435m), year-on-year, with revenue down almost 5% at $12.2bn and EBITDA earnings falling 2% to $1.6bn, mainly due to one-off Covid-related restructuring costs.

However, with like-for-like revenues and earnings down 3% and up 2%, respectively, CRH described its first half performance as “robust” against a “challenging” background, with Covid having had a material impact on its key markets. 

It said third quarter earnings are set to be in line with last year.

But, visibility for the fourth quarter of this year and into 2021 is limited, CRH said.

While chief executive Albert Manifold said he doesn’t see trading levels “falling off the edge of a cliff” in the remainder of the year, that uncertain outlook has led the group to pause its share buyback programme and row back on its trademark bolt-on acquisition spree.

“The near-term outlook for economic and construction activity across our markets remains uncertain and is dependent on an improving health situation,” management said.

The group generated a record $1bn of cash in the first half, closing June with $10bn in available liquidity and $4bn less debt. But, CRH said it will focus on balance sheet preservation given the current climate.

While it has maintained its dividend payments, CRH has paused its share buyback policy and has become “more cautious” about making acquisitions. In the first six months of this year, CRH returned $800m to shareholders through a combination of buying back shares and making dividend payments.

Mr Manifold said financial strength is the most important determining factor in how a business survives a recession and CRH is in a position of not having to worry about its balance sheet. CRH’s finance director Senan Murphy said the group will remain “opportunistic” about deploying cash, with it having “a significant number of options”.