CRH eyeing record annual earnings of €3bn

Building materials company CRH has said it is on track for record annual earnings, of around €3bn, this year.

It said it could comfortably spend up to €2bn on acquisitions in 2017 without damaging its balance sheet.

Last year saw CRH generate earnings before tax of €2.2bn, 35% up on the previous year.

As expected, CRH yesterday reported first-half earnings of €1.12bn, up from €555m for the same period last year, though slightly ahead of expectations.

In July, the company raised its interim earnings targets from €1bn to €1.1bn.

Revenue for the first six months rose 35% to just under €12.7bn and a 1.6% rise in interim dividend to 18.8c has been declared, with management hinting at a more progressive dividend approach in the next few years.

Yesterday marked the first occasion on which CRH has raised its shareholder dividend in seven years.

As previously indicated, CRH’s strong first-half performance was largely driven by continued momentum in its Americas division.

Mark Towe is the long-standing head of that division. He is remaining as chairman of CRH Americas but yesterday announced his intention to retire from the group’s board at the end of this year.

However, early-stage recovery momentum was seen in Europe, with the group seeing progress in all of its European markets for the first time in a decade.

Continued improvement in the European operations is expected, with management yesterday saying no negative impact has yet been seen from June’s Brexit vote in the UK.

CRH said that a number of planned big infrastructure projects are set to go ahead in Britain despite the vote to leave the EU.

“With continued positive momentum in the Americas and the modest impact of early-stage economic recovery in Europe, and assuming normal weather conditions for the remainder of the season, we expect further progress in the second half with full-year reported earnings before interest, tax, depreciation, and amortisation in excess of €3bn,” said chief executive Albert Manifold.

The group’s net debt grew by €400m to €7.1bn during the first half. 

That pushed CRH’s debt to 2.5 times its earnings, but management said yesterday it is on course to lower its debt-to-earnings ratio to “below normalised levels” — around two times earnings — by the end of the year. This will present CRH with the capacity to spend €1.5bn to €2bn on acquisition opportunities next year.

However, Mr Manifold yesterday hinted management will continue to track potential bolt-on buys rather than more mega-deals akin to its €6.5bn purchase last year of assets offloaded to enable the merger of European peers Lafarge and Holcim.

He said CRH is more used to buying smaller businesses that can be improved upon and said bolt-on purchases (€136m was spent on buys in the first half of this year) are the “bedrock” upon which the group was built. 

However, Mr Manifold also said t last year’s mega-purchases will broaden CRH’s scope for new investment.

CRH’s share price closed up 2.34%, at €29.73, in Dublin yesterday. 

That is almost €3 up from the start of the year and nearly €2 ahead of where it was when Britain voted to leave the EU in late June.

Mr Manifold also noted management’s strong focus on cash management, saying that deleveraging is ahead of plan.


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