CRH expects profit cut amid bad economies, weather

CRH expects profit cut amid bad economies, weather
Published: 07 May 2009

CRH issued a profits warning Wednesday over sharper-than-expected drops in demand in both Europe and the United States.

In a trading statement before its annual general meeting of shareholders, CRH said its expected first-half 2009 profits would suffer "a sharper decline" than previously forecast. It offered no specific figures on its weaker outlook.
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CRH shares led the Irish Stock Exchange lower, falling 4.8 percent to euro18.89 ($25.15).

The Dublin-based company said both Europe and the United States, its two key markets, were experiencing deep recessions as well as unusually foul weather. That has dampened demand for all of its goods, including cement, concrete, asphalt, bricks, wallboard, timber, tiles and glass.

CRH said the recession’s depressing effect on construction "has been exacerbated by the most severe winter for many years in both Europe and North America, and by continuing inclement weather through March and April in a number of our regions."

It said demand for a wide range of building materials fell 20 percent to 30 percent in both the United States and Europe in the first four months of 2009. It expressed hope that U.S. President Barack Obama’s economic stimulus plan, which includes increased construction of roads and other infrastructure projects, would stir a strong growth in demand in the second half of the year.

Across Europe, CRH reported slumps in demand for concrete and cement, most starkly in Ireland and Ukraine, both down about 50 per cent so far this year. It cited Switzerland, with its series of Alps tunnel projects, as a lone bright spot of growth in demand versus the same period of 2008.

CRH said it remained determined to exploit the bad global economy to snap up smaller, weaker rivals at knock-down prices.

In recent years CRH typically has spent more than euro2 billion annually in corporate takeovers. It has spent euro300 million already this year to buy a 26 percent stake in Yatai Cement, the leading cement maker in northeast China.

"In the current economic climate, development activity is very much focused on acquisition opportunities that offer compelling value and exceptional strategic fit," CRH said. "We expect, however, that as the year progresses we will begin to see an increased flow of potential acquisitions, driven by financing pressures and portfolio rationalization across the sector."