Building materials company CRH downgraded its full-year earnings guidance on Thursday, despite reporting a jump in revenues in the third quarter and what it described as good momentum going into the final stretch of the year.
The New York-listed, Dublin-headquartered group cited challenges posed by increasing costs and subdued residential activity.
Still, revenues rose 3 per cent to $11.4 billion (€10.2 billion), driven by pricing momentum, underlying demand and acquisitions. However, impairments weighed on net income, reducing it to $1.2 billion from $1.5 billion a year earlier.
The US-listed group said it expected net income for the year of between $3.1 billion and $3.3 billion, with adjusted earnings before interest, tax, depreciation and amortisation in the range of $7.8 billion to $8 billion. Previously, it had forecast earnings in the range of $8.1 billion to $8.5 billion.
READ MORE
The cut in guidance comes as the company noted a “sharp and sustained increase” in energy costs, particularly in diesel, and across haulage and distribution, chief executive Jim Mintern said.
“For us at this time of year, it is difficult to recover that kind of cost inflation late in the year, and also in what are some of our busiest activity months,” he said.
Residential demand in the US had also softened further, he said, as interest rates rose.
“Activity softened throughout the summer and impacted volumes across many of our markets.”
However, Mintern pointed to activity in some key infrastructure and non-residential markets, including in the roads business and re-industrialisation, particularly in data centre activity.
The group has also introduced a new transformation initiative, Velocity, that is expected to simplify the organisation’s structures, optimise processes and use AI to underpin growth objectives while enhancing operational efficiency and improving margins.
The two-year programme is expected to deliver annual run-rate benefits of approximately $400 million.
Mintern said Velocity was incremental to the 2030 targets the company gave last September. “We are raising our ambition for the company across the group,” he said.
Speaking to analysts, Mintern said the broader outlook for the company remained positive as it entered 2027, although residential business remained subdued. “CRH is in good shape,” he said. “We are building a better CRH, one that is going to have structurally higher margins. I am confident that the building blocks are in place to deliver another year of growth as we enter into 2027.”
CRH also announced a new share buyback programme of up to $6 billion, set to run until the end of 2030.
Reiterating the brokerage’s ‘outperform’ rating on the stock, Davy Stockbrokers analyst Colin Sheridan said CRH’s results were slightly ahead of expectations.
“The company has launched a new multiyear $6 billion buyback programme and a transformation initiative aimed at delivering $400 million in annual benefits by the end of 2028,” he said. “The stock remains cheap at current levels, and we reiterate our ‘outperform’ rating.”
CRH recently completed the earlier-than-expected closing of an $8.5 billion (€7.6 billion) deal to acquire US peer Arcosa.
The group’s focus is on four key areas: aggregates, cement and sustainable alternatives, roads and water. It sees these benefiting from three infrastructure megatrends: continuing investment in the transport system, from roads to airports; a need to develop water management; and the re-industrialisation of the US.
Mintern said the Arcosa transaction fed into these megatrends and increased CRH’s exposure to the utilities sector.
