FACED with slower economic growth in Ireland and mainland Europe and difficult British markets profit growth should slow at CRH this year.
"It would be unrealistic to expect a continuation of the 30 per cent plus increases [in profits] of the past two excellent years nevertheless we anticipate a further year of progress," CRH chief executive, Mr Don Godson, said yesterday.
CRH shares fell 12p to close at 530p yesterday, from its all time high of 542p after strong growth in recent months.
Brokers expect profits growth of 12 to 14 per cent this year, compared with the 38 per cent rise for 1995.
The company will spend £100 million to £300 million this year on investments and strategic acquisitions, funded out of the group's strong cash flow. New capital investment is aimed at ensuring minimum production costs and maximising efficiency in existing plants.
Acquisitions must meet strategic criteria and are decided after assessments by 10 project teams throughout the world. A number of acquisition targets in the US, Europe, Poland, China and Argentina are being assessed.
In existing operations, construction growth is expected to slow to about 5 per cent from 10 per cent in 1995, dampening profit growth potential. Cement prices were increased by 3.5 per cent from January 1st to recover the higher prices being paid for coal and petroleum coke used in production.
In Britain, CRH plans to expand its
Keyline building materials operations from the 100 branches to 150 or 200 over the next few years.
Restructuring at Forticrete in 1995 is expected to lead to an improved performance this year. But this market will remain difficult, with any profit improvement expected from internal measures to cut costs and improve performance at group operations.
In mainland Europe managers are nervous about meeting internal group first quarter targets after severe weather in the first two months of the year. In addition construction growth is expected to be flat in the Netherlands and to fall in Germany.
In the US bad weather hit construction in the first two months of this year and there are conflicting economic signals. While APG is expected to benefit from new paver plans and lower bitumen costs will help the materials group Mr Godson expressed some concern that the Glass Group may "come off its 1995 peak".
