CRH shares slid 45 cents to close at €17.85 (£14.06), mainly over concerns about the earnings outlook over the six months to end December in a softening European market for the building materials group. First-half results released yesterday were slightly ahead of expectations, with pre-tax profits up 3 per cent to €186 million after goodwill amortisation.

But the markets saw the group's current trading statement as more gloomy than expected, particularly on Europe. Stockbroking analysts reacted by downgrading earnings forecasts for the year.

Broker to the group, Davy, cut its forecast 2001 earnings per share before goodwill amortisation from 130.8 cents to 125 cents. At Goodbody, the forecast was reduced from 131.6 cents to 126.6 cents. Analysts now expect the group to produce earnings growth of just three to four per cent this year, after double digit growth in recent years.

Chief executive Mr Liam O'Mahony said current conditions in the group's various geographic markets were "less favourable than in recent years". However, he added that the group expected to achieve "further progress" this year, "supported by our balanced spread of operations and contributions from 2000 and 2001 acquisitions".

While he agreed that the environment was now "tougher" than last year, he rejected any "doom and gloom" assessment. The European operations accounted for just 20 per cent of group profits, he pointed out.

"Europe is weaker. It will be the disappointment this year . . . But there is no dramatic problem. Up to now there has been a sense of false security about Europe. This is just a dose of reality. We are not known for excessive exuberance," he commented.

Mr O'Mahony said the pace of growth in construction activity in the Republic had slowed significantly, but underlying demand was supported by infrastructural spending. CRH was comfortable with Euroconstruct forecasts of a 1 per cent overall increase in construction activity this year, which includes an 8 per cent drop in residential activity, he said. The outlook in the UK remained flat, he added.

Mainland Europe was disappointing, with very difficult conditions in Germany and Poland, slowing demand in Benelux, France and Finland and overcapacity in the concrete and clay sectors. Mr O'Mahony was optimistic about the North American market, stating that stable energy costs and normal weather patterns were key to the full year outcome.

CRH shareholders are to get an 11 per cent rise in their first half dividend to 6.75 cents per share. On its proposed acquisition of Finnish company Addtek, Mr O'Mahony said the European Commission competition regulators had indicated a basis on which the deal could proceed, and that the group would now re-examine the issue.

A geographic breakdown of the first half results show good performances in the Irish market and in the US, while profits were down in Europe and the UK. In the Republic, trading profits increased to €80 million, which included a profit of €14.5 million on disposals of surplus lands, compared with a profit of €1.9 million in the previous first half. When the disposal gains were stripped out, trading profits were up 15 per cent.

UK trading profits were 2.4 per cent lower at €32 million on a weak housing market and poor weather. In Europe, trading profits fell 17 per cent to €59 million. When rationalisation costs of €5.9 million and a €5.1 million loss on disposals are excluded, trading profits fell by 2 per cent.