Buildings materials giant CRH said its pretax profits for the first six months dropped to around €100 million compared to €600 million during the same period last year.
The company said adverse weather and exchange rates had compounded falling demand and said it will accelerate its cost-cutting program in response.
CRH said it will seek to cut a further €555 million of annualized costs through 2010, on top of the €895 million already announced in January. This would take the Irish company’s annual savings to €1.45 billion in the three years through 2010.
The company expects operating profit for the period to fall by a third from the €700 million reported during the first six months of 2008 with earnings before interest, taxes, depreciation, and amortization forecast to drop 40 per cent from the €1.1 billion last year.
In a statement this morning CRH said financing constraints in the US have led to delays or cancelations of projects as non-residential construction activity slowed faster than expected.
It added that higher than average rainfall in June had slowed the start of a number of motorway projects.
It said demand from the construction sector in Ireland was roughly half that of last year. Operating profit for the first half in its European materials unit is expected to be around 70 per cent lower than the €267 million reported last year.
CRH said its European operations have experienced “very difficult” trading conditions in the first half and said it expects “little or no” improvement in demand in Ireland and Finland with construction activity in its core Eurozone countries expected to remain weak.
In India, the company said its 50-per cent owned Indian joint venture had performed strongly over the first half.
The company, which is the largest on the Dublin market, said the rate of profit decline would ease in the second half but admitted that overall trading conditions would remain “extremely challenging”.
CRH is the largest asphalt producer in the US and is expected to benefit from the $787 billion stimulus programme there but even with that boost the company expects this year to be bleak.
CRH said it was beginning to see an increased flow of potential acquisition opportunities but said it was being cautious about what to it chose to buy.
The group raised €1.24 billion via a rights issue earlier this year giving it a war chest for acquisition opportunities created by a squeeze on rivals.
For the second half the company said a combination of improved stimulus spending and the impact of cost reduction measures should impact “in the seasonally more profitable second half”.
CRH said it did not expect Standard & Poors (S&P) to cut its credit rating in the next 6 to 9 months.
"The measures that the ratings agencies use are generally centred around cashflow and our cashflow has held up very well in the first half of the year so we don't see a deterioration in our credit metrics that they would use," finance director Glenn Culpepper told an analyst call.
"We don't have an indication from S&P that they are going to downgrade us but that is obviously their decision to make." S&P rate CRH BBB+ with a negative outlook.
At 9.55am shares in the company were trading up 5 per cent at €15.95 in Dublin giving it a market capitalisation of over €11 billion. It has fallen from highs of over €19.80 in May.
In a note to investors Davy Stockbrokers said its forecasts of a 12 per cent fall in second half profits “now looks optimistic” with a decline around 20 per cent now looking more likely.
