CRH reports improving conditions in Europe but US slower

Wednesday 07 May 2014 17.09
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CRH's like for like sales in Europe were up 10% in the four months from January to April.
CRH's like for like sales in Europe were up 10% in the four months from January to April.
CRH's performance in the US hit by severe winter weather
CRH's performance in the US hit by severe winter weather

Builders materials group CRH has said that the improving trend in the second half of last year in Europe continued into the first four months of 2014 as the economic backdrop continues to improve.

In an interim management statement, the company said that this along with the better weather so far this year benefited construction in most of its European markets.

Like for like sales in Europe were up 10% in the four months from January to April.

But CRH said that the weather patterns in the US were much less positive than in Europe and many regions saw very cold conditions which impacted early season activity for the second year in a row.

Like for like sales in the Americas in the four month period were just 2% ahead of the same time last year. 

CRH is the leading producer of asphalt for highway construction in the US.

Given normal weather patterns, CRH said it expects trading in the Americas to improve in May and June as the construction season gets underway for its materials operations.

"We also expect continued improvements in results for Europe in May and June, underpinned by the stabilisation of the economic backdrop in our major European markets," CRH added.

However, the company said that while it has seen "limited impact" on its trading in Ukraine as a result of the political crisis there, the outlook for the country remains uncertain. Ukraine is one of its main European markets.

In Ireland, CRH said that it is seeing a pick-up in construction activity - as expected - and volumes so far this year are up 10% ahead of a very weak 2013. 

CRH shares closed 3.4% in Dublin trade this evening.

CRH said it expects group EBITDA in the first half of 2014 to be about €0.5 billion, up from the €0.4 billion reported the same time last year.

Earnings in the second-half of the year should be somewhat ahead of last year, it added.

After announcing a review of its portfolio last year, CRH said in February that it would sell 45 businesses representing 10% of net assets and would continue to keep a watch on other operations accounting for 20% of assets.
              
It said today that it was assessing another selection of businesses that account for a further 10% of net assets where the returns potential was not yet clear. The review will be completed in the third quarter.

The company said it completed seven small acquisitions and investments so far this year at a cost of €60m, most of which relate to bolt-on deals in its products business in the US.

CRH’s CEO said the company does not expect the merger of Holcim and Lafarge to have a big impact cement industry competition nor raise competition issues for its own diversified materials business.

As part of the industry's biggest tie up, Holcim and Lafarge will sell businesses worth 10 to 15% of their EBITDA to satisfy antitrust concerns - or about €5bn in total.

The merger, which is expected to close in the first half of2015, will create a global cement player with $44bn in annual sales, dwarfing the €18bn of revenue CRH roughly splits between its American and European operations.

"We've got good market positions throughout Europe and the United States, I don't think it's going to have a huge effect on the competitive dynamic within the industry quite frankly." Albert Manifold told reporters at the company's annual general meeting.

"There's always been a large number of competitors and the cement industry throughout the world is extremely fragmented anyway. This merger is a very significant move within the cement industry. Of course CRH is not a cement business."

The building materials and products group, whose cement operations represent about 15% of earnings, said it did not operate in many of the markets where Holcim and Lafarge would overlap, nor would the businesses the pair have to sell as a result conflict with its own divestment plans.