CRH sees pretax profits fall, trading conditions to remain difficult in 2010

CRH sees pretax profits fall, trading conditions to remain difficult in 2010
Published: 06 January 2010

CRH yesterday hiked its cost-savings targets as it signalled pre-tax profits fell 54 per cent to €750m last year and warned that trading conditions would remain difficult in 2010.

"Trading conditions remain difficult and the timing of any sustained pick-up in developed world construction demand is unclear," the Dublin-based company said in a trading statement on Tuesday.

But chief executive Myles Lee told analysts in a conference call that he has €1.5bn of firepower to carry out deals over the next 18 months, helped by a €1.24bn rights issue share sale last March.

The 2009 profit guidance, which is broadly in line with market expectations, could be further impacted by impairment charges to be finalised over the coming months, Mr Lee said.

He indicated the charges should come as CRH assesses whether plant closures in 2008 will be permanent, rather than on the back of writing down the value of billions of euro of assets acquired when the global economy was in full flight.

A four-year cost-cutting programme is now expected to yield €1.65bn of savings, up €200m from what it predicted last summer. Chief operating officer Albert Manifold said the target may jump again as CRH continues to eye outgoings.

About 40 per cent of the current target is set to comprise permanent cost cutting, as it streamlines group administration, centralises procurement and increases fuel efficiency.

CRH’s deal-making focus is on aggregates, asphalt and heavy concrete products businesses, which have the ability to buoy earnings from the time they are struck. But Mr Lee also said that the group was "also keeping a very close eye on targets we would have parked" during the economic crisis.

Turning to emerging markets, the company is looking to use its recently acquired interests in China and India to expand its presence in fast-growing regions.