CRH's first-half profits plummet 84% to €100m

BUILDING MATERIALS giant CRH said yesterday that first-half pretax profits fell to €100 million from six times that figure in 2008.

Ireland’s biggest company said in a trading statement that it expects operating profits for the first six months of the year to be one-third of the €700 million it recorded in 2008.

“Profit before tax is expected to be of the order of €100 million after restructuring costs of approximately €75 million and an adverse translation impact at profit before tax level of approximately €20 million,” the statement added.

“This compares with a first-half 2008 profit before tax outturn of €600 million.”

Chief executive Myles Lee told The Irish Times yesterday that the first half of the year was traditionally slower for the group, which has a big exposure to European and US construction activity, which tends to accelerate during the spring and summer months and ease off in the winter.

Mr Lee said the severe winter had made the generally tough environment even more difficult during the first half of this year.

The group is focusing on cost-cutting aimed at saving €555 million a year in 2009 and 2010. Along with cuts implemented since 2007, this will bring total savings to €1.45 billion.

Group companies have laid off about one-in-four of their workers over the last two years.

Mr Lee acknowledged that further job cuts are likely as CRH presses ahead with its cost-cutting plans.

“It’s unfortunate, but it’s what we have to do,” he said.

CRH believes that, while overall conditions will remain challenging, a number of positive developments will help to boost its second-half performance.

“These include further benefits from the aggressive cost-reduction measures undertaken in 2008 and the first half of 2009, more moderate second-half energy-related input costs than in 2008 and improving infrastructure spend in the US and some European markets,” its statement said.

The US is planning to spend $27 billion on road-building and other public projects in an effort to stimulate its flagging economy. CRH is the biggest supplier of road-surfacing material, asphalt, in the country and is hoping to cash in on this.

The company believes it will see the initial benefit of this later this year and early in 2010.

Cash flow is expected to stay in line with last year. Mr Lee predicted yesterday that the group would have “strong cash delivery” in 2009.

Earlier this year CRH raised €1.24 billion from shareholders through a rights issue, which it said it plans to use to buy smaller rivals which are likely to be put up for sale at attractive prices.

Mr Lee said yesterday that the company had no immediate targets.

“We are being patient, we are talking about opportunities that would emerge later in 2009 and into 2010,” he said.

“We are looking for opportunities that fit very will with our existing operations and that come with attractive multiples.”

The group believes that the recession, combined with the fact that large numbers of players in its business borrowed to fund expansion during the boom years, will force their owners to put them on the market.