CRH increases dividend on ‘strong’ first-half earnings ahead of US listing

CRH believes it is only beginning to see the benefit of the Biden administration’s $550 billion infrastructure plan and expects robust US government support for large-scale investment to stimulate demand for its products and services for the better part of a decade. The building materials giant, which will abandon the Dublin Euronext in favour of a New York Stock Exchange listing on September 25th, has also seen an uptick in interest from US investors ahead of its Wall Street debut.

After-tax profits at the group climbed 20 per cent to $1.1 billion in the six months to the end of June compared with a record-setting first half of last year, according to interim results published on Thursday. Ebitda (earnings before interest, taxes, deductibles and amortisation) was up 14 per cent year-on-year to $2.52 billion, well ahead of analyst expectations.

CRH said “strong pricing” had offset the impact of higher costs across the group, widening its earnings margin by 90 basis points compared with last year.

The group also said it is raising the interim dividend paid to shareholders in November by 4 per cent after a “strong first half performance” in which group sales surged 8 per cent to $16.1 billion (€14.8 billion). The group is set to distribute a record $3.5 billion (€3.27 billion) to investors this year in dividends and share buy-backs.

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Sales in its European building solutions division, however, slipped 4 per cent behind the same period last year due to “softer residential demand” and extended winter weather in parts of the Continent in the early months of 2023.

The group, which had until now been the largest counter on the Dublin bourse said business in the US, where it generated more than half of its revenues and three quarters of income before operating expenses last year, was strong across its materials and building solutions divisions amid heightened demand from US government infrastructure initiatives.

Looking ahead, it said that operations in North America are expected to be “supported by robust infrastructure demand” and underpinned by “significant increases in US federal and state funding” under the Biden administration’s infrastructure investment plan.

Its European business, meanwhile, is expected to improve, benefiting “from solid infrastructure demand, good non-residential activity and positive pricing momentum”, but the residential market is likely to remain challenging.

Speaking to reporters following the release, CRH chief executive Albert Manifold said 2023 is the first year that it has seen a significant uptick in construction demand arising from the $550 billion Infrastructure Investment and Jobs Act, which US president Joe Biden signed into law in 2021.

“When it was announced, we said we might [start seeing an impact] in the back-end of last year but this is the first year where it is really hitting the road,” he said. “It is likely to continue over the next five to seven years under the current federal funding programme.”

Irrespective of which party wins next year’s US general election, Mr Manifold said the bill had bipartisan support in the US Congress and accordingly, CRH does not expect to see any change in that.

Meanwhile, CRH chief financial officer Jim Mintan said the group had interest from US investors has increased since CRH’s shareholders voted to accept the move from Dublin to Wall Street. “We have seen an uptick in our US shareholder base, which is what you would expect. I suppose also, lots of inbound queries from prospective new US shareholders in anticipation of the listing on September 25th and the indexation that will follow.”

In a note, analysts from Davy Stockbrokers said CRH’s “stellar Ebitda growth” coupled with strong cash generation “highlights the strength of its differentiated strategy and ability to capitalise on a robust environment. With infrastructure funding now flowing, non-residential markets showing improved momentum and significant capital yet to deploy, we see opportunities aplenty at the group – this will only accelerate with the primary US listing.”