CRH warns on falling profits in major markets

CRH WARNED yesterday that profits are falling in many of its main markets, but said it still hoped to meet its growth forecasts.

In a statement issued yesterday, ahead of its agm in Dublin, the building materials group said that the further decline of the dollar, "together with weaker trends in a number of markets, has made our goal of achieving another year of profit and earnings growth more challenging".

It added that CRH's profitability and cashflow were underpinned by the spread of its businesses in Europe and the US, as well as a balance between products and sectors.

After the meeting yesterday, chief executive Liam O'Mahony said CRH was "not giving up on going for its 16th straight year of profits and earnings growth".

However, he acknowledged that it was going to be more difficult than in recent years, during which good conditions in either Europe or America helped to drive growth.

Mr O'Mahony also agreed there could be job losses in some of its businesses, particularly in the US, as they attempt to cut costs, but he stressed that the group had no target for lay-offs, and said it was up to the managers of each operation.

Last year, the group's profit before tax increased by close to 20 per cent to €1.9 billion, while revenues grew at a similar rate to €21 billion.

However, much of the growth came in Europe, while business in the US slowed, particularly in the closing months of 2007. CRH's operations are split almost 50-50 between the two locations, although it has begun expanding into developing markets such as China.

In its statement yesterday, the group said its Europe materials business enjoyed a positive start to the year with growth in Poland and the Ukraine compensating for a slowdown in Spain and Ireland, which have suffered as a result of declining house building.

The Europe products business was strong during the first two months of the year, but slowed in March before rebounding in April. Weakening consumer confidence hit its distribution businesses, which have an exposure to DIY markets in western Europe.

Overall, results from its American operations are behind those of last year, the company said. Falling house building in the US hit its products businesses.

Operating margins have fallen in its distribution divisions, although turnover is up.

The highway building season is just getting into gear in the US, and CRH said it expects prices to be positive for asphalt and materials.

Mr O'Mahony said the first four months of the year accounted for only about 6-7 per cent of annual profits, and that activity steps up at this point.

Meanwhile, one of CRH's rivals, Mexican giant Cemex, announced yesterday that it was "exploring" the sale of quarries and cement plants in Hungary and Austria, along with a roofing and tiling supplier in the UK.

CRH was in pole position to buy $4.5 billion (€2.9 billion) worth of assets from Cemex last year, but the pair could not agree a price. CRH would not comment yesterday on whether it would bid for the operations that Cemex now intends selling.