CRH currently expects to deliver 2008 profit before tax in excess of EUR1.6bn which would represent a mid-teen percentage decline on the 2007 outcome of EUR1.904bn, in line with guidance provided in the Interim Management Statement of 11 November. The company anticipates a lesser reduction in earnings per share as a result of share buyback and the lower expected full year percentage tax charge which was noted in earlier announcements. This, we believe, would represent a significant achievement against a tough industry backdrop.
The expected 2008 profit outturn is after an adverse translation impact of approximately EUR50m principally attributable to a weaker average S$/euro exchange rate of 1.4708 (2007: 1.3705).
While the first half of the year saw improved overall operating profit in Europe, mainly reflecting strong growth from our Materials operations in Poland nd Ukraine, this was more than offset by declines from American operations. As a result, first half profit before tax fell by EUR64m or 10% to EUR0.606bn (2007: EUR0.670 billion).
In the second half, unprecedented events in financial markets contributed to an increasingly negative business climate across the world, with the change in entiment being most marked in our European operations. As a result, CRH anticipate that second half profit before tax will show a high-teen percentage decline on the 2007 outturn of EUR 1.234bn.
The company expects that full year profit on disposals of fixed assets will exceed last year’s level of EUR57 million, while the Group’s share of associates’ profit after tax is expected to be slightly lower than 2007 (euro 64 million).
Total acquisition spend in 2008 amounted to approximately EUR1 billion. First half expenditure of EUR0.7 billion included the purchase of a 45% stake in Indian cement manufacturer My Home Industries and 100% of UK constructionaccessories producer Ancon together with 35 other acquisitions across the Group’s operations. With the deteriorating economic environment, we significantly curtailed development activity as the second half progressed; this is reflected in a second-half spend of EUR0.3bn which included the purchase of a 35% stake in French builders merchant Trialis and 15 other transactions, details of which are provided in the Development Strategy Update released today, plus the acquisition of a further 5% stake in My Home Industries.
Completion of the EUR 0.2bn Yatai investment in China, announced in January 2008, is expected shortly while finalisation of the EUR 0.4bn Pavestone acquisition in the United States, announced in March 2008, remains dependent on various regulatory approvals.
With a challenging trading backdrop for many of our businesses, management’s emphasis is firmly concentrated on operational delivery and, as a result, development activity continues to be limited to acquisition opportunities that offer compelling value and exceptional strategic fit. This emphasis is also reflected in capital expenditure which is being adjusted across the Group to reflect the reduced demand environment. 2008 capital expenditure of approximately EUR1 billion will show little change on 2007 despite higher 2008 pending on previously announced cement facilities in Ireland, Poland, Ukraine and the United States.