CRH extends share buyback amid talk of emerging market sales

Building materials giant CRH moved on Tuesday to extend share buyback programme amid heightened market speculation that the company is reducing its exposure to volatile emerging markets.

The Dublin-based company has hired bankers at Citigroup to help find buyers for its Brazilian cement business, the country's main financial newspaper Valor Economico reported over the Christmas period. On December 13th, Indian business publication VCCircle said CRH was planning to sell its 50 per cent stake in an Indian joint venture.

Meanwhile, CRH was reported by Bloomberg in November to have hired JP Morgan to find a buyer for the group's Philippines cement unit for between $2 billion (€1.8 billion) and $3 billion, prompting a spike in the group's shares at the time.

A spokesman for CRH declined to comment.

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Concerns

CRH, led by chief executive Albert Manifold, launched the group's first share buyback programme in a decade in May 2018 amid concerns that the market wasn't reflecting the company's intrinsic value, and has since spent about €1.6 billion repurchasing its own stock. It said on Tuesday that it planned to spend a further €200 million buying back its own shares by the end of March.

While the company has forked out almost €14 billion on acquisitions since Mr Manifold took charge in early 2014, it has also raised more than €7.5 billion selling off underperforming or unwanted assets over the same period. That included €1.64 billion from the group's agreement last July to sell its European distribution arm to funds managed by US private-equity group Blackstone.

"Further disposals seem likely with media speculation surrounding the group's businesses in the Philippines, India and Brazil," said Davy analyst Robert Gardiner. "With another year of strong cash generation likely, that leaves CRH with lots of capital allocation potential to add further value for shareholders."

Both the Brazilian business, which accounted for about €90 million of CRH's €13.4 billion sales in 2018, and the Philippines operation were acquired in 2015 as part of the group's €6.5 billion purchase of assets from European peers Lafarge and Holcim as they underwent their own merger.

Sales

The Philippines business, which recorded €431 million of sales in 2018, has been affected by weak infrastructure spending, rising local competition and a flood of cheap imports for much of its time under CRH. However, it has shown signs of stabilisation since late 2018.

Meanwhile, CRH entered the Indian market in 2008 with the purchase of a stake in a cement business called My Home Industries in Andhra Predash in the southern part of the country.

CRH's continued focus on its portfolio comes against the backdrop of it emerging in early February that Stockholm-based activist fund Cevian had build up an almost 3 per cent stake in CRH. Cevian's managing director Christer Gardell said in June that CRH "has become too complex, both structurally and operationally, which hampers performance and traps value".