Una McCaffrey

CRH is on track to achieve flat profit growth for 2003, despite suffering an €86 million hit from negative currency movements and substantial weather-related trading difficulties in the first half.

The group said yesterday that it expected 2003 pre-tax profits to be broadly in line with the 2002 level of €856 million, or 10 per cent ahead when currency movements are stripped out. This compares to constant-currency growth of 9 per cent a year earlier.

The forecast, which was contained in a pre-close trading and acquisition update, came in well ahead of consensus analyst expectations of €809 million and prompted a number of upgrades.

The performance was driven in part by a strongly positive contribution from acquisitions over the year, with CRH spending a total of €1.6 billion on business development in 2003.

The company also benefited from an improvement in US and European weather in the second half, which helped to offset poor conditions in the earlier part of the year. CRH cited strong residential construction in the Republic as another positive driver, but said a weaker performance on the industrial and commercial side would hold Irish profits to 2002 levels.

Looking forward, the company said it faced 2004 with confidence "despite the current uncertainties in economies and currency markets".

CRH finance director Mr Myles Lee said each one-cent decline in the dollar against the euro had the effect of wiping between €3.5 million and €4 million off full-year pre-tax profits.

The firm draws about half its revenues and operating profits from the North American market. It said yesterday that profits in the region rose last year but predicted that this would be cancelled out by an adverse translation effect of €55 million.

A similar trend came in Britain, where a €5 million currency impact will eat into a 9 per cent climb in profits.

Mr Lee added, however, that the incremental benefits of acquisitions had helped to offset most of the "currency drag" and said this should continue in 2004.

Mr Lee said the company retained significant capacity for acquisition on its balance sheet and was "always looking at the opportunity to edge out a little".

CRH shares were boosted in early trade yesterday but were two cents down at €16.95 by the close after attracting the interest of profit-takers.