CRH profits fall by 80% in first half of year

PROFITS AT the biggest company on the Irish Stock Exchange fell by more than 80 per cent to €108 million in the first six months of the year.

Building materials giant CRH said yesterday that sales for the first half of 2009 fell 15 per cent to €8.3 billion from €9.7 billion during the same period last year. Group operating profits were down 66 per cent at €241 million.

A foreign exchange charge – more than half its business is outside the euro zone – of €21 million and restructuring costs of €74 million both hit pre-tax profits, which were €108 million for the six-month period, compared with €606 million over the same time frame last year.

Earnings per share (EPS) fell in line with pre-tax profits and were down 84 per cent at 12.2 cent for the first half from 77.1 cent in 2008. Cash EPS was down 47 per cent at 75.7 cent from 142.7 cent.

However, the group said it intended maintaining dividend payments to shareholders. Chief executive Myles Lee said yesterday the directors were proposing to pay an interim dividend of 18.5 cent a share, slightly up on the 18.48 cent it paid last year (the 2008 payment has been adjusted to reflect the group’s rights issue in March).

“We are very conscious of our dividends,” Mr Lee said. “We have had 25 years of unbroken dividend increases.” The group will take into account the financial and trading outlook before deciding on a final dividend for the year, and will make its decision in March.

CRH is the Republic’s biggest company and accounts for about one third of the Iseq index of Irish shares. The bulk of its business is split between America and Europe, but it has growing interests in China and India. Ireland accounts for about 5 per cent of overall sales.

Cost-cutting measures, including about 25,000 lay-offs of full-time and seasonal staff, will give CRH cumulative savings of more than €1.4 billion between 2007 and 2010. Within that, labour costs are down €508 million, overheads by €428 million and it has achieved other savings through reduced subcontracting costs, purchasing programmes and energy spending of €514 million.

A €500 million-plus reduction in working capital to €96 million and a cut in capital spending to €316 million from €560 million, contributed to a sharp fall in cash outflows to €200 million in the first six months of the year from €577 million during the comparable period in 2008.

Capital spending during the period included €300 million for Yatai Cement, the Chinese business in which it holds a 29 per cent stake. Mr Lee said yesterday that CRH was committed to supporting ongoing expansion plans at both Yatai and My Home Industries in India, in which it owns 50 per cent.

Net debt at the end of the first half stood at €5.12 billion, down from €6.56 billion 12 months earlier. Earnings were 6.3 times interest payments at the end of the period, which the group yesterday described as “comfortable”.

The group raised €1.24 billion from shareholders in March. This, combined with its balance sheet, means that it has the potential to spend up to €1.5 billion on acquisitions.

The group believes the global construction slump, combined with the fact that many of its rivals are carrying large debt, or have been forced to refinance, will mean that businesses which it is interested in owning will come on the market at attractive prices.

However, Mr Lee indicated yesterday that CRH was in no rush to make purchases. “We have had a number of approaches, either from merchant bankers or direct from the companies themselves, but nothing hit the mark in terms of fit or value,” he said.

The second half of the year includes the busiest time for the building industry in many of its markets. As a result, CRH expects to improve its performance through this period.

Mr Lee said in a statement that the “overall rate of profit decline experienced in the first half is expected to improve in the seasonally more profitable second half”.

However, it believes that second half profits will still be lower than in 2008.