CRH expects 10% growth in first-half earnings

First-half earnings at CRH are expected to be up by around 10%, year-on-year, on a constant currency basis, with management expecting progress to continue for the remainder of the year.

The building materials company is set to become the sector’s third largest global player if it succeeds in its expected €6.5bn takeover of certain assets being disposed of to make way for the merger of European cement powerhouses, Holcim and Lafarge. It said yesterday that a satisfactory start to 2015 has been noted with sales from continuing operations up 2.5%.

“While first-half results, for this year, will exclude earnings before interest, tax, depreciation and amortisation contributions of €45m from divested businesses, overall, including the benefit of favourable foreign exchange translation effects, group earnings before interest, tax, depreciation and amortisation for the first six months of 2015 is expected to be ahead of last year’s €505m,” management said in a trading update ahead of its annual shareholders meeting this morning.

The strong first-half performance was mainly driven by a good showing in the Americas division, where recovery in the business and economic environments has continued. Sales from continuing operations in Europe were down by 2%, over the first four months of the year, but the improvement in demand seen in the latter half of 2014 has continued into this year.

CRH continues to make good progress on its well-documented €1.5bn to €2bn three-year non-core asset disposal programme; yesterday’s update noting that €540m worth of disposals were completed in the first four months of this year, bringing total proceeds to €900m to date, as had been expected.

Since the start of this year, the group has completed six acquisitions and investments, including one swap transaction, spending a total consideration of €45m in the process. Most of this outlay, according to management, relates to transactions in the Americas materials division.

CRH’s element of the aforementioned Holcim/ Lafarge deal — which has been mooted as being ‘transformational’ for the Irish business — has already been cleared by its own shareholders and the European Commission, on competition grounds.

It now largely hangs on a vote tomorrow by Swiss-based Holcim’s shareholders, but is expected to be rubber-stamped in the near future.

“Closing of the [€6.5bn CRH] transaction is conditional on the successful completion of the proposed merger of Lafarge and Holcim which, subject to the approval of the respective shareholders, is expected in mid-2015,” CRH said.

Davy Stockbrokers praised the turnaround at CRH, saying management’s optimism particularly regarding recovery in Europe appears well-placed and “augurs well for the remainder of the year”.

“The potential for further improvement in continuing operations, combined with the contribution from the Lafarge-Holcim assets, underpins our view that CRH is the most attractive play in the European building materials sector”, Davy said, while reiterating its ‘outperform’ rating on the stock.

Robert Eason, at Goodbody Stockbrokers, said CRH can get back to peak returns on the back of its Holcim-Lafarge deal.


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