CRH favoured by strong dollar and low fuel prices

A strong dollar and weak energy prices aided building materials group CRH’s performance last year, and the early indications are that these tailwinds will keep blowing this year.

CRH published results yesterday showing that pre-tax profits grew 35 per cent in 2014 to €1.04 billion from €761 the previous year. Revenues rose 25 per cent to €23.6 billion.

Group transformation director Maeve Carton estimated that favourable exchange rates were worth €218 million overall to the Irish company. "That was mainly the result of the stronger dollar."

Ms Carton noted that between 2014 and last year the US currency moved to about $1.11 against the euro from $1.33. “It is still around that $1.10 rate,” she said, adding that it was unlikely to shift significantly this year, although she did point out that currency movements were hard to predict.

Its American businesses, which are mainly focused on the US, contributed €917 million to its €1.27 billion operating profits in 2015. Its biggest division, materials, which produces asphalt, concrete, stone and paving, contributed €611 million alone.

That business benefitted directly from lower oil prices as a by-product, bitumen, is a key ingredient in asphalt.

Lower energy costs generally were also factors in CRH’s performance in 2015. Oil began the year at more than $50 a barrel, but fell steadily to the point at which it is now around $35 to $36.

Chief executive Albert Manifold acknowledged that, while the stronger dollar and lower energy costs did have an impact, they also led to customers seeking better prices.

According to him, increased sales ultimately improved the company’s profits.

“The fact is that we are selling lower-priced product and that means that we are selling much more product.”

Mr Manifold explained that as CRH’s costs were fixed, each tonne of stone that its operations process goes straight to its bottom line.

He stressed that while the dollar exchange rate and lower energy prices benefitted the group, the performance of its existing businesses and those acquired last year from Lafarge Holcim drove most of its growth.