CRH signalled a return to growth in shareholder payouts for the first time in seven years as Ireland’s largest company sees its full-year earnings topping €3 billion for the first time ever.
The building materials giant lifted its interim dividend by 1.6 per cent to 18.6 cents, breaking a seven-year period of stagnation in payouts, after it reported first-half figures on Thursday that were slightly ahead of its recently raised guidance.
Earnings before interest, tax, depreciation and amortisation more than doubled to €1.12 billion, buoyed by its biggest ever acquisition last year. The figure was slightly ahead of market expectations, after the Dublin-based company raised its first-half guidance by 10 per cent to €1.1 billion late last month.
“With continued positive momentum in the Americas and the modest impact of early-stage economic recovery in Europe, and assuming normal weather conditions for the remainder of the season, we expect further progress in the second half with full year reported ebitda in excess of €3 billion,” chief executive Albert Manifold said.
Analysts, on average, are forecasting ebitda of €3.1 billion for the group for 2016 as a whole.
Transformational
Last year was transformational for CRH as it bought €6.5 billion of assets hived off by European cement giant LafargeHolcim to appease competition authorities. CRH subsequently sold €1 billion of assets last year as it digested the deal. In the first half of this year, the company spent €150 million on acquisitions and investments and raised €65 million from the sale of surplus property, plant and equipment.
Separately, CRH said on Thursday that Mark Towe, the head of its US operation, Oldcastle, will retire from the board at the end of the year. He will continue his role as chairman of CRH Americas.
CRH’s net debt rose by €400 million over the course of the six months to €7.1 billion, which equates to 2.5 times the group’s ebitda over the last 12 months.
“CRH’s operating performance continues to benefit from recovering construction markets in both the Americas and Europe,” said Barry Dixon, an analyst with Davy. He sees the group’s growth in profits, together with strong cash management, pushing its debt below two times ebitda by the year end.
Euro Stoxx 50
CRH’s share price, up more than 8 per cent since the Brexit referendum, is hovering around highs not seen since 2007, amid speculation that the company may rejoin the keenly followed Euro Stoxx 50 index next week. The company was relegated from Europe’s most prestigious stock market benchmark two years ago in favour of Nokia, the Finnish technology group.
“We remain confident on the investment case for CRH, given ongoing upside to acquisition synergy targets, improving markets in Europe and continued momentum in the US,” said Robert Eason, head of equity research at Goodbody Stockbrokers. “In addition, such has been the focus on cash flow, management has got the balance sheet into a position that it is likely to be doing more mergers and acquisitions, especially in 2017.”
In Europe, CRH said trading conditions in the first half reflected the modest impact of early-stage economic recovery.
“While the impact of the recent UK vote to leave the EU remains unclear for the medium term, the outlook for our European operations for the remainder of this year is for a continuation of first-half trends,” CRH said.
CRH sees “positive momentum” in the first half in its the construction market on the other side of the Atlantic continuing into the second half.
“Although a strong finish for our Americas business in 2015 means that the second-half comparatives for this year are expected to be somewhat tougher,” it said.
In Asia, the company sees positive demand for its products in the Philippines continuing for the remainder of the year.
