CRH

CRH's first half turnover recovered by 4.4% to € 8525m as the EBITDA recovered by 8.6% to € 626m and the trading profit by 45.1% to € 209m. The pre-tax profit more than trebled to € 95m. Net debt at the end of June was 21.4% lower at € 3906m, giving a gearing ratio of 39.5% compared with 48% a year earlier. Capital expenditure in the period was 34.3% higher at € 294m, while spending on acquisitions rose by 8.3% to € 130m. Since June, a further € 217m has been spent on seven acquisitions, the most important of by for which was the purchase of the VVM cement business in Belgium.

 

The European heavy building materials operations, which also include the emerging operations in China, India and the Near East, produced a turnover 9.3% higher at € 1337m, but the EBITDA was off by 2% to € 149m. Cement shipments fell by 19% in Ireland, by 20% in Portugal and by 3% in India, but increased 17% in Poland, by 16% in Finland, by 9% in Ukraine and by 3% in Switzerland, while there was a massive 30% advance in the Chinese associate. Higher energy costs had a negative impact on cement margins and also on the downstream margins in aggregates and concrete. For the full year, CRH currently anticipates € 50m gain on the sale of emission rights, somewhat lower than the € 67m achieved last year, but the first half contribution was € 5m higher at € 22m. With the completion of its current investment programme in Ukraine, this year, CRH aims to become the leading cement producer there, up from its current number four position.

 

The North American heavy building materials turnover was a marginal 0.1% ahead at € 1546m and the EBITDA was affected by higher costs, leading to a 21.3% reduction to € 59m and an increased first half trading loss. Aggregates deliveries rose by 11%, or by 5% at the underlying level, but average prices were 2% lower because of a less favourable mix. Asphalt volumes improved by 4%, but higher energy-related costs could not be fully absorbed. Ready-mixed concrete shipments advanced by 13%, or an underlying 6%, but prices were off by 3%.

 

The arbitration tribunal to which CRH and Semapa took their dispute has ruled that Semapa was within its rights to demand the exercise of a call option on the 49% stake that CRH holds in the Portugal-based cement joint venture Secil. The two parties are now obliged to complete the sale of 49% stake in Secil for € 574m, the price was set by three independent experts that is legally binding on both parties. While CRH was not a willing seller, given the recent sharp falls in stock valuations, a historic EBITDA multiple of 4.4 times and an earnings multiple of more than nine times the new situation looks fairly favourable for CRH in the context of the current depressed market conditions. CRH's gearing was a modest 33% at the end of last year, so the Irish multinational has plenty of has considerable financial flexibility and did not need the help of the Queiros Pereira family's exercise of a call option, brought about by apparent disagreements on strategy.