Strong euro hits profits but CRH upbeat about 2004

CRH has reported pre-tax profits of €864 million, up less than 1 per cent on the previous year, with the impact of the rising euro cutting 10 per cent from reported earnings.

The company has struck a positive note about the coming year - saying it will benefit from the US recovery - and pledged to continue on the acquisition trail.

The building materials group yesterday reported that sales in the year to the end of December 2003 had grown by 3 per cent to €11 billion from €10.8 billion in 2002. Pre-tax profits inched up by 0.9 per cent.

However, the results were heavily affected by the negative impact of translating foreign currency profits back into euros, which cut reported profits by €86 million. CRH said that, in constant currency terms, pre-tax profits rose 12 per cent, which it says better reflected the real performance.

Earnings per share (EPS), also affected by currency translation, grew 2 per cent to 223.4 cent from 219.8 cent in 2002. On a constant currency basis, however, EPS rose 13 per cent. Shareholders will recover a dividend of 28.1 cent, an increase of 10.6 per cent on the 2002 payout of 25.4 cent.

CRH's share price remained unchanged on the Dublin market last night at €17.42. It had climbed 5 per cent in the three sessions before the results.

Irish analysts were largely sanguine about the figures, which broadly met expectations. Mr Joe Burnell of Davy Stockbrokers noted that the group had outperformed any of its peers that had reported so far this year.

The company said the flat profit performance primarily reflected the dollar's sustained slide against the euro last year. That, and its strength against sterling and other European currencies, wiped €86 million, or 10 per cent, off CRH's reported pre-tax profits for the year. It had a similar impact on sales, reducing them by €1.15 billion.

CRH chief executive Mr Liam O'Mahony stressed at a press conference yesterday that the currency hit was largely one of translation. He said it made little difference to the group's operations.

"We're not moving cash across borders and we're not moving product across borders, everything produced in the US is sold there," he said.

CRH also published "constant currency" results in which the 2002 figures were re-stated to bring them in line with the 2003 average exchange rates. These show that sales were up 15 per cent from €9.6 billion and profit before tax rose by 12 per cent from €770 million to €864 million, with a strong improvement in the second half following a poor first half affected by poor weather in Europe and the US.

CRH finance director Mr Myles Lee said yesterday that the full-year contributions of 2003's acquisitions would "more than offset" any exchange-related losses this year.

CRH last year spent a record €1.6 billion on acquisitions. The biggest was Dutch producer Cementbouw Handel & Industrie, which cost €700 million.

Mr O'Mahony said the company would continue with its long-established policy of looking for suitable acquisitions.

In the US, its materials division suffered a 13 per cent decline in operating profits to €291 million. Its products and distribution division saw operating profits fall by 8 per cent to €268 million.

Operating profits in European products and distribution grew by 55 per cent to €166 million, boosted by acquisitions. Materials had more modest growth, at 6 per cent to €133 million.