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CRH profits boosted by increased demand in Americas

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Building materials group CRH has reported higher profits and revenues for 2017 as the company was boosted by increasing demand in the US and positive momentum in Europe.

CRH said its pre-tax profits rose to €2.01 billion from €1.74 billion in 2016 while revenues rose by 2% to €27.56 billion from €27.1 billion. 

The company said its full year dividend rose by 5% to 68 cent.

Albert Manifold, the company's chief executive, said that 2017 was a year of continued profit growth for CRH.

"We benefited from increases in underlying demand in the Americas and positive momentum in Europe, and with focus on performance improvement and operational delivery, margins and returns were ahead of last year in our American and European divisions," Mr Manifold added.

He said he also believed that 2018 will be a year of continued growth for the group.

CRH is the world's third-largest building group and has committed almost €5 billion to acquisitions last year, including the €3 billion purchase of Ash Grove Cement that will close in 2018. 

It will focus on integrating those deals in the first half but CEO Albert Manifold said it was already looking beyond that with plenty of opportunities in an industry "still suffering from the hangover of the financial crisis." 

"We generated €2.2 billion of cash last year, that's an extraordinary amount of money. We have to put that money to work for our shareholders," he said. 

"Our eyes are looking towards the horizon again at other deals and there are lots of opportunities out there. I think as soon as we've got the work done we need to do on the integration, we'll be moving back to the table," he added. 

The strong cash generation combined with a net debt ratio at 1.8 times earnings before interest, tax, depreciation and amortisation (EBITDA) means CRH has the financial capacity to pick and choose its deals, the CEO said. 

CRH's core earnings rose 6% year-on-year to €3.3 billion compared to a forecast in November to be "in excess of" €3.2 billion, and Manifold said the pace of growth at the end of 2017 has continued in its major markets in 2018. 

Earnings were up 5% in Europe and - despite foreign exchange headwinds - in the Americas too where it is the biggest producer of asphalt for highway construction and third biggest supplier of readymixed concrete and construction aggregates. 

Manifold said growth in Europe was continuing at a brisk pace where the market was about five years behind the cycle in North America with significant pent up demand for infrastructure projects and both residential and non-residential building. 

"While CRH's results point to further improvement in Europe and steady performance in the Americas, it is the on-going structural improvement in group margins and returns that stand out," Davy Stockbrokers wrote in a note.

Today's results show that despite hurricanes and record levels of rain during the year, CRH's Americas operations was boosted by the continuation of stable market fundamentals in the US and good underlying demand.

CRH noted that an organic sales increase of 3% in its Americas Materials division was supported by good growth in the residential and non-residential sectors.

In its Americas Product division, sales were broadly in line with 2016 as good growth along the US west coasts and parts of the south and southeast were offset by more modest trading in Canada and parts of the northern US.

Meanwhile, total sales in Europe rose by 1% and organic sales increased by 2% due to continued recovery in the company's key markets.

Its Europe Heavyside division saw a broad-based recovery in Ireland, France, Poland and Finland which more than offset more subdued activity in the UK and Switzerland. 

CRH's Europe Lightside also saw further progress as good performances in a number of its main markets resulted in sales moving 3% higher compared to 2016. 

It also said the backdrop at Europe Distribution was "stable" as a strong contribution from the Netherlands and solid demand in Belgium and Germany was partially offset by continued challenges in its Swiss market.

Meanwhile, CRH said that economic growth and market fundamentals remained robust in the Philippines, with both residential and non-residential demand stable. In India, a favourable economic backdrop continued to drive demand.

While reduced construction activity in China had a negative impact on volumes, this was more than offset by stronger pricing.

CRH noted that divestments and asset disposals during the year generated total profits of €59m.

Source: RTE 01/03/18

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