Tight cost control and the impact of acquisitions has helped CRH to offset tough conditions in many of its markets and post a 5 per cent increase in first-half pre-tax profits to €196 million.

The company, which is increasing its interim dividend by 10 per cent to 7.43 cents, sounded a cautious note on the outlook for its business, however,

"Conditions in many of our markets are tougher than in recent years and the weaker US dollar will have an impact for the year as a whole," chief executive Mr Liam O'Mahony said.

CRH said that every one cent move in the euro/dollar rate had a $5million-$6 million impact on the company.

If the dollar were to remain around current levels for the rest of the year, it would cost CRH some $20 million.

However, the building materials group believes that its emphasis on cost-efficiency and cash-flow generation, combined with contributions from acquisitions and normal second-half weather patterns, will lead to "a year of further progress in 2002."

Despite the difficult economic backdrop, the group's results were slightly ahead of expectations, with turnover increasing by 7 per cent to €4.8 billion, while operating profits remained broadly flat at €295 million.

"We have maintained good momentum in quite difficult markets across the world," Mr O'Mahony said.

Operating profit in the Republic fell by 8 per cent to €60.4 million as construction activity declined by 10 per cent in the first half.

However, CRH said that residential building activity was picking up again in the wake of the last budget, while there was also good momentum in infrastructural activity this year and into next year.

In Britain and Northern Ireland, operating profits fell by 15 per cent to €29.5 million as phased price increases proved insufficient to offset higher energy costs for its brick operations.

Except for Spain, markets remained flat in mainland Europe as they failed to take up the slack created by the slowdown in the US, CRH said.

While operating profits increased by 24 per cent to €93.6 million, this reflected the impact of acquisitions, including a strong May/June contribution from the recently-acquired German concrete business, EHL.

"Bar the Iberian peninsula, we don't see much growth in Europe," Mr O'Mahony said. "We see it as flat to negative rather than flat to positive."

The group took a €9 million restructuring charge in the first half, €7 million of which related to redundancies in its Polish operations.

The other €2 million was to cover rationalisation costs in its Dutch flooring business.

In the US, operating profit fell by 7 per cent to €111.3 million, partly due to the impact of wet weather in May and early June on its materials division.

CRH described the US housing market as "a significant bright spot" but noted that good backlogs in the materials division had been somewhat slow in generating activity on the ground.

Mr O'Mahony said July had been slightly disappointing but activity had picked up in August and the company expected to record higher full-year dollar profits.

He noted that after a year of huge recession, the US market was still stronger than a lot of European markets and said CRH was happy to have a preponderance of its business there.

After spending €607 million on 20 acquisitions in the first half, it hopes to maintain some of this momentum in the second part of the year.

CRH shares, which surged by 55 cents or 3.8 per cent early in the day, later gave up these gains in a weak market to close unchanged at €14.55.