Having spent almost €8bn (£6.8bn) on investments and acquisitions to expand and deepen its geographic presence in 2015, the fact that CRH 's (CRH) trading figures have rocketed is hardly surprising. Cash profits more than doubled to €1.1bn during the first half of the year. The building materials supplier's spending spree also meant net debt surged to €7.1bn - an increase of €5.9bn on the same time the previous year. Still, a close eye was kept on costs, meaning cash outgoings were below the expected seasonal level at €0.3bn. What's more, management expects to bring down net debt at the year-end to be at or below its usual leverage ratio of between 2.2 and 2.3 times cash profits.
However, not all growth was bought in. A more advanced economic recovery in the US meant profits in North America raced ahead. Demand for architectural products such as concrete masonry and garden products pushed through a 249 per cent increase in organic sales for the products business, while price increases meant organic operating profits were up by a third. Meanwhile, favourable weather conditions in Canada and the US improved sales of asphalt, ready-made concrete and aggregates to residential and non-residential customers of CRH's Americas materials business. At the operating level, a €34m loss became a €61m gain.
On this side of the pond, a slower economic recovery meant last year's acquisition of the European part of LH Assets generated the lion's share of growth for its heavyside and lightside businesses, especially the former. Trading continued to be mixed across the continent. For heavyside, cost reduction initiatives, combined with growth in residential and non-residential demand, improved operating profits and margins in Denmark and Ireland. Sales volumes in Germany were ahead of the previous year, but cash profits were held back by pricing pressure in cement and landscaping products. Competition was also a problem in eastern Europe. Despite these pressures, the segment still managed 4 per cent organic operating profit growth.
Analysts at Numis expect adjusted pre-tax profits of €1.8bn for the year to December 2016, giving EPS of 155¢ (from €1.1bn and 94¢ in 2015).
CRH (CRH) | ||||
|---|---|---|---|---|
| ORD PRICE: | 2,541p | MARKET VALUE: | £21.1bn | |
| TOUCH: | 2,540-2,541p | 12-MONTH HIGH: | 2,627p | LOW: 1,581p |
| DIVIDEND YIELD: | 2.1% | PE RATIO: | 25 | |
| NET ASSET VALUE: | 1516¢* | NET DEBT: | 54% | |
| Half-yearto 30 June | Turnover (€bn) | Pre-tax profit (€m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2015 | 9.4 | 63 | 5.7 | 18.50 |
| 2016 | 12.7 | 407 | 33.8 | 18.50 |
| % change | +35 | +546 | +493 | - |
Ex-div: 8 Sep Payment: 4 Nov *Includes intangible assets of €7.7bn, or 927¢ a share £1=€1.17 | ||||
