CRH wins upgrade boost from S&P

Standard & Poor’s has upgraded its outlook on CRH’s credit rating as it sees the building materials group continuing to sell off unwanted assets and taking a more “moderate” acquisition strategy after a transformational €6.4 billion deal last year.

The ratings agency has raised the outlook on its BBB+ credit rating for CRH to stable from negative, as the group keeps a tight rein on costs and successfully integrates its biggest ever deal, the purchase of assets off-loaded by European rivals Lafarge and Holcim in 2015.

BBB+ rating is seven levels below S&P’s top-notch AAA rating for a company or country’s creditworthiness. It is three steps above what is considered sub-investment grade.

CRH chief executive Albert Manifold told analysts last month that the group has passed up on some large purchases this year. However, he suggested that it could comfortably spend between €1.5 billion and €2 billion next year without damaging its debt ratios.

The company, which sold €1 billion of non-core assets last year, raised a further €140 million during the first half of 2016 from such sales.

Disposals

“We also anticipate that CRH will continue its disposal programme, potentially resulting in higher-than-forecast cash proceeds,” S&P said.

CRH surprised investors in July when it raised its first-half earnings guidance by 10 per cent and went on to post earnings before interest, tax, depreciation and amortisation (ebitda) of €1.12 billion, which was even better than analysts’ expectations.

The group lifted its interim dividend, breaking a seven-year period of stagnation in payouts, and forecast full-year ebitda in excess of €3 billion as trading conditions in America remain positive, while Europe shows early signs of economic recovery.

“Market conditions in the Americas and Europe have been broadly supportive and we expect that will continue to be so,” S&P said.

The group’s debt rose by €400 million during the first half to €7.1 billion, equating to 2.5 times ebitda for the 12 months to June.