Construction downturn halves profits at CRH

A CONTINUED fall in residential and commercial construction across its main markets last year more than halved profits at building materials group CRH to €730 million.

The company, Ireland’s largest, said yesterday that sales were down 17 per cent in 2009 at €17.3 billion from close to €21 billion the previous year. Operating profits fell by 48 per cent to €955 million. Pretax profits fell 55 per cent to €732 million from €1.6 billion.

Chief executive Myles Lee blamed a fall in residential and non-residential building across the group’s main territories in Europe and North America for the performance.

Government-funded infrastructure spending, which was expected to ease some of the pressure during the year, particularly in the US, only partially compensated for the decline, Mr Lee said yesterday.

The group’s earnings per share (eps) fell by 58 per cent, partially as a result of new equity issued to existing shareholders last year to boost the company’s war chest.

The company intends paying shareholders a dividend of 62.5 cent a unit, which is around 0.5 per cent more than the 62.2 per cent it paid last year – adjusted to take account of its 2009 rights issue.

Mr Lee pointed out yesterday that it would be increasing dividend payments to shareholders for the 26th year running.

The group generated €1.16 billion in cash, more than double the €571 million which flowed from its activities last year. It also continued with cost-cutting measures, and made net savings of €643 million. It has now cut its operations to the point where it is spending €1.65 billion a year less than in 2007.

The group raised over €1.2 billion through its rights issue last year, and Mr Lee said yesterday that the group has the scope to spend up to €1.5 billion on acquisitions.

Last year it spent €480 million on buying rivals, mainly smaller businesses that are absorbed easily into the group and fit with existing operations. It also boosted its stake in Chinese cement producer Jilin Yatai, and embarked on a number of new developments with this associate business.

In terms of its territories, sales in Europe fell 16 per cent last year to €9.4 billion, while operating profit dropped 51 per cent to €510 million. Margins narrowed to 5.4 per cent from 9.4 per cent as prices came under pressure.

In North America, sales fell 18 per cent to €7.9 billion and operating profits were down 44 per cent at €445 million. However, the Obama administration’s economic stimulus spending programme began to kick in as the year progressed, and helped to offset a decline in the non-residential building business.