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Cost cutting helps CRH face down Covid-19

While global construction markets were disrupted by the pandemic, the group limited the impact on earnings through higher pricing and good cost control
Cost cutting helps CRH face down Covid-19

Despite Covid-19 hitting construction markets in the second quarter, building materials supplier CRH (CRH) saw its cash profits (Ebitda) dip by just 2 per cent year-on-year in the six months to 30 June, to $1.6bn (£1.2bn). This was 23 per cent ahead of FactSet-compiled analyst consensus. While the group was hit by $65m of one-off costs, further damage was prevented by higher pricing and cost cutting efforts.

IC TIP: Buy at 2,940p

There was a bigger fall in pre-tax profit, however, as the previous year benefitted from $166m of disposal proceeds, largely relating to the sale of the European shutters and awnings business.

More than 50 per cent of CRH’s sales come from the US, which proved more resilient to pandemic disruption than European markets. In the Americas materials division, while northern regions such as New York saw lower volumes thanks to lockdown restrictions, this was offset by stronger demand in the west amid more favourable weather conditions. The segment’s revenue was therefore flat at $4.5bn, but operating profit surged by over 50 per cent to $289m on the back of price increases, lower energy costs and good cost control.

Net debt has climbed 3 per cent since the start of the year to $7.8bn. But having drawn down its €3.5bn (£3.2bn) revolving credit facility and issued €2bn in bonds, the group is sitting on $10bn of cash which it says should meet all maturing debt obligations for the next five years. The half-year dividend has been held steady, although the share buyback programme remains paused.

CRH expects third-quarter cash profits will be in line with a year earlier, but warned of limited visibility over the fourth quarter and 2021. FactSet consensus places cash profits at $4.2bn for the full year – a 6 per cent drop from 2019 – increasing to $4.5bn in 2021.

CRH (CRH)    
ORD PRICE:2,940pMARKET VALUE:£ 23.1bn
TOUCH:2,939-2,941p12-MONTH HIGH:3,119pLOW: 1,500p
DIVIDEND YIELD:2.4%PE RATIO:21
NET ASSET VALUE:2,330p*NET DEBT:41%
Half-year to 30 JunTurnover ($bn)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)
2019**12.871768.122.0
202012.251851.322.0
% change-5-28-25-
Ex-div:03 Sep   
Payment:25 Sep   
£1=$1.31, *Includes intangible assets of $9.4bn, or 1,195p a share, **Restated in US$, previously reported in €