CRH said on Tuesday that it is sticking to its $5.5 billion (€5.36 billion) full-year earnings forecast, even as its Europe Materials division has weakened in recent months as it grapples with higher energy prices and euro weakness against the dollar.
The earnings before interest, tax, depreciation and amortisation (ebitda) forecast represents a 10 per cent improvement on the outcome for last year for the building materials group. Group ebitda for the first nine months rose by 14 per cent to $4.2 billion.
However, ebitda in Europe Materials, a producer of aggregates and cement, declined 19 per cent in the third quarter, following 4 per cent growth over the first half of the year, even as it pushed through price increase across the business. The division posted a 6 per cent earnings decline for the first nine months.
The Americas Materials unit, which includes CRH’s business as the largest roadbuilder in the US, saw its ebitda expand by 8 per cent. Earnings in the group’s Building Products unit, which spans making precast concrete pipes for utilities companies to landscaping products, soared 57 per cent, it said.
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The group’s sales grew by 13 per cent to $24.4 billion, while its ebitda margin widened by 0.1 of a percentage point on the year to 17.1 per cent.
‘’Notwithstanding a challenging and volatile cost environment, I am pleased to report further growth in sales, ebitda and margin during the first nine months of the year,” said chief executive Albert Manifold.
“This performance reflects the resilience of our business and the benefits of our integrated and sustainable solutions strategy.”
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Shares in CRH have declined by 18 per cent so far this year, amid concerns about the outlook for the global economy. While Mr Manifold said residential construction markets on both sides of the Atlantic have weakened in recent times amid rising interest rates, spending on renovation and maintenance is holding up.
Meanwhile, he said that the group’s key infrastructure-based revenue will continue to be underpinned by big spending programmes in the US and ongoing EU funding for projects in central and eastern Europe. Non-residential construction in the US has also proven to be “more resilient than expected” amid a trend of large companies moving manufacturing back to the country.
“We are already supplying a number of these projects, including the initial phases of a multibillion-dollar investment by Intel and Samsung to construct new semiconductor plants in Ohio and Texas, respectively,” said Mr Manifold.
CRH has invested $3 billion on 21 acquisitions so far this year, the largest being the $1.9 billion purchase of US residential fencing and railing company Barrette Outdoor Living in July.
The largest divestment so far this year was the sale earlier this year of its Building Envelope business for $3.5 billion in cash. The Dublin-based company has raised a total of $4 billion from sales of unwanted assets so far in 2022.
CRH sees its net debt burden dipping by the end of 2022 to be in line with its full-year ebitda from a ratio of 1.2 times as of last December. Goodbody Stockbrokers analyst David O’Brien said that the forecast full-year debt ratio will leave it with “the strongest balance sheet position in the group’s history”.
While Mr Manifold said that CRH’s deals pipeline “is very strong”, he suggested it may ease off on activity next year.
“At this moment in time, there’s probably a greater level of uncertainly than has been for the last couple of years, and our experience tells us to perhaps cool our jets a little bit,” he said. “We want to keep our balance sheet and keep capacity there, because the time, for me, to do deals is actually when we start to exit any phase of uncertainty.”
Shares in CRH were trading 1.5 per cent lower at €37.87 in early afternoon trading in Dublin.
Cantor Fitzgerald analysts said that the stock is now trading at 30 per cent discount to both its peers and CRH’s 10-year average relative to earnings.
“We consider that discount unjustified given the demonstrable strength of its business model, resilience in passing through higher costs to clients and the fact that it is well positioned to benefit from the infrastructure stimulus package in the US,” Cantor said.
