Volatility expected to slow building materials giant CRH's growth

Building materials giant CRH is expected to see lower-than-anticipated earnings growth in 2017 in light of potential ongoing market volatility and economic uncertainty.

The Dublin-headquartered group was one of the hardest hit in the big sell-off of Irish shares last week – dropping 9% on the first day of trading following the Brexit referendum result – but recovered as the week progressed.

CRH’s revenues grew 25% and earnings rose 35% in 2015 – a transformational year helped by the record €6.5bn purchase of former assets of newly-merged European peers Lafarge and Holcim.

The group is anticipating further strong growth this year and analysts have forecast around 20% earnings growth for 2017.

However, Merrion Stockbrokers analyst Darren McKinley suggested, 2017 earnings growth of 10%-15% is more likely.

“Given the level of uncertainty around global growth in 2017 this [20% earnings growth forecast] now looks very optimistic,” he said, as Merrion lowered its rating on CRH from ‘buy’ to ‘hold’.

“CRH has held up well in the recent sell-off despite earnings not being immune from a slowdown in Europe and the UK.

"Europe represents 45% of CRH’s business and, therefore, any delayed capital expenditure across Europe – as a result of economic uncertainty – would weigh on volumes and pricing,” Mr. McKinley added.

CRH hasn’t commented on links to assets to be sold to make way for Heidelberg Cement’s merger with Italy’s Italcementi, but additional EU funding for roads and infrastructure could boost earnings.


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