Fundamentals in place for Iseq index heavyweight to maintain progress
By its normally reserved standards, building materials group CRH’s outlook for the coming year is upbeat.
Fundamentally it boils down to two points: the US will deliver growth, and while Europe will continue to lag, further savings there will ensure overall advancement.
Chief executive Myles Lee said yesterday that the group’s experience and formal indications show that US construction is picking up.
CRH’s statement pointed out that there was notable growth there in the second half of 2012 and the fundamentals are in place “for continued positive momentum”.
Lee added that indicators for housing and non-residential construction are all up. These include the Architectural Billings Index (ABI), a key measure of non-residential building, which was 54.2 in January, any reading over 50 indicates growth.
CRH is not worried about sequestration, the possible $85 billion in cuts that US lawmakers are considering. Some reports indicate that it will hit highway construction, an important industry for CRH, which owns the US’s biggest asphalt supplier, Apac.
Not so, says Lee.
“It has been mistakenly reported that sequestration will impact on highway funding, but it will be minimal, you are talking about $350 million from a programme of $80 billion, less than half of 1 per cent,” said Lee.
CRH’s America materials division, which houses Apac, was the group’s best performer last year, delivering over €4.9 billion of its €18.7 billion revenues and operating profits of €282 million. The other two divisions, products and distribution, accounted for €4.3 billion in sales and €145 million in operating profit.
While revenue split more or less evenly between the US and European divisions, the US was slightly more profitable, delivering €427 million of its total operating surplus.
In Europe, everything was down. The products business, where profit shrank by 73 per cent to €18 million, also led the way, but acquisitions boosted the European performance. However, not enough to compensate for an underlying slide.
The answer in Europe appears to be to cut. CRH’s cost reduction measures saved €166 million last year and have reduced outgoings by €2.2 billion since 2007. The group plans to save €300 million between now and 2015 and it looks like Europe will bear the brunt of it.
Meanwhile, CRH has managed to end a troublesome and long-running legal row through its asset swap with Spanish operator Cementos Portland Valderrivas (CPV).
CRH will hand over its 26 per cent in Catalan-based Uniland in return for full ownership of Bilboa-based Cementos Lemona, whose operations include a cement manufacturing plant and an import terminal in Britain.
The CRH chief executive said that the only terms on which the Irish group was prepared to exit Uniland was in return for full ownership of a manufacturing facility, which in effect, it got.
