CRH current business outlook positive

CRH current business outlook positive
05 July 2006

CRH plc said Wednesday that it expects that profit before tax for the six months to Jun. 30, 2006 will increase by approximately one-third compared with the reported 2005 outcome of EUR383 million.  
CRH said it has had a particularly good start to the year. The current business outlook is on the whole positive and, while as always risks remain, the company expect good profit growth in the more significant second half of the year leading to a healthy advance for 2006 as a whole.  
The company’s AGM statement issued on May 3, 2006 indicated that overall trading in the first four months had been favourable with in particular a strong start from its operations in the Americas. Through May and June, the American businesses have continued to perform strongly and, despite subdued trading in a number of major markets, the company’s European operations have made progress. As a result, with an improved performance in each of our six business segments,  
Overall Irish construction activity improved further in the first half of the year resulting in satisfactory volumes while the impact of higher input costs is being offset by continuing phased price recovery. The operations in Finland have had a strong start helped by broad-based construction demand. As expected, the completion of a major infrastructure project has led to a decline in the first half cement volumes in Switzerland; however this has been compensated by an improved performance in the downstream businesses.  
Construction demand in Poland has recovered rapidly from a weather-affected start resulting in better profitability across our operations. In Ukraine, sharply higher gas costs have been counterbalanced by improved pricing, and the capital project to convert from gas-fired kilns to coal is scheduled for completion before the end of the year.  
In Iberia, the company’s Spanish operations have enjoyed a favourable start to the year although higher input costs have led to a slight decline in overall margin. While the Portuguese joint venture has faced reduced cement demand in its home market, the impact has been offset by increased cement exports and a stronger outcome in its downstream operations.  
First half operating profit is expected to show a broad-based improvement on the 2005 level.  
Despite heavy rains in parts of the east and mid-west in the latter weeks of June, first half demand in the Americas Materials Division has exceeded expectations helped by a mild winter which facilitated early private sector construction activity.   Overall volumes were satisfactory with in particular a continuing strong performance in the west. The company’s ongoing focus on effective pricing strategies to offset the impact of higher energy and input costs has resulted in good first half sales price increases and improved margins. The Mountain Companies businesses acquired at end-October 2005 are performing well but due to seasonal trading patterns will have little impact on the first half profit outcome.  
With better volumes and margins the outcome for the first half of the year is expected to show a good improvement on 2005, resulting in an operating profit for the period compared with the more traditional first half seasonal loss.  

In the US, the economy and overall construction market continue strong although, as usual, activity levels vary by region. While U.S. housing construction is moderating, activity remains at a strong level; non-residential construction is continuing to grow and highway markets are robust, although as in 2005 we may see some modest late season volume impact as a result of higher product prices.  
In Europe, recent months have seen the emergence of somewhat firmer demand in a number of previously subdued economies with ongoing momentum in the more strongly performing countries. The continuing successful recovery of significant energy cost increases remains a major focus across our operations.  
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