Spotlight on CRH
CRH reported 'satisfactory growth' in the first half of this year, with stabilising trends seen in key European markets and EBITDA growth in the Americas more than offsetting reduced activity in Asia due to a challenging market environment in the Philippines.
First-half trading highlights for the international building materials group include sales of EUR13bn, two per cent ahead of 2016 and one per cent ahead on a like-for-like basis. EBITDA of EUR1.175bn were up by five per cent YoY and two per cent like-for-like.
Europe heavyside recoveries
In CRH's Europe heavyside division, market recovery was evident in Ireland, France, Finland and Poland, partly offset by more challenging conditions in Switzerland. The UK business remains stable and had a solid 1H performance. Organic sales and operating profit were ahead of 2016, reflecting improvements in overall volumes and prices. In Ireland construction activity continues to grow in both residential and non-residential sectors with strong volume increases in cement, ready-mixed concrete and aggregates. Operating profit was well ahead despite price pressure in a competitive environment. In Spain some improvements in the macro-economic environment resulted in increased cement and ready-mixed concrete volumes and performance improved on 1H16.
French cement operations delivered growth in volumes, primarily driven by increased demand in the residential sector. The materials business in Belgium was ahead of 2016 as lower cement volumes were offset by progress on pricing. Extremely cold winter conditions at the beginning of the year and a
competitive market environment resulted in lower cement and ready-mixed concrete volumes in Switzerland and pricing pressure remained. Despite modest growth in German construction output, cement volumes in CRH's German operations were behind those of 1H16 due to weather-impacted comparatives.
Cement volume growth in Poland benefitted from positive economic developments and with flat YoY cement pricing, both sales and operating profit were ahead of prior year. Cement volumes in Finland grew on the back of strong demand, but prices declined due to increased competition from importers. Non-cement volumes were behind 2016 due to a number of large projects in the comparative period. Cement volumes were behind 2016 in Ukraine, but with price increases achieved, operating profit was ahead of 2016.
In Romania after a slow start due to poor weather in the first quarter, CRH's cement volumes improved and were slightly ahead of 2016. Infrastructure growth was lower than expected while residential demand has been solid. Cement prices improved modestly on 2016, but due to the timing of major overhaul costs, operating profit was behind 2016. Cement operations in Serbia delivered cement volume growth as a result of infrastructure projects.
Americas Materials weather effect
The Americas Materials division had a good first half, despite wet weather conditions in certain key markets compared to very favourable weather in 1H16, with organic sales and EBITDA one and three per cent ahead of 2016, respectively.
Total US aggregates volumes including acquisitions and divestments were up by two per cent and average prices increased by five per cent. Like-for-like volumes declined three per cent against strong comparatives and poor weather conditions. Asphalt volumes increased one per cent on a like-for-like basis and total volumes were three per cent ahead of 2016 while prices increased by one per cent against a backdrop of higher input costs. US ready-mixed concrete volumes, on a like-for-like basis, were in line with 2016 and average prices increased four per cent, while total volumes including acquisitions and divestments declined by two per cent.
Cement volumes in Canada decreased by one per cent reflecting declines in Ontario and Quebec due to poor weather and were only partly offset by increases in the US market. Average cement prices increased despite some pricing pressure in the Canadian regions. Overall sales were behind 2016, primarily due to a slow start to the construction season, which was also impacted by poor weather and the completion of some major projects in 2016, mainly in the Quebec region.
Weak market conditions continued to prevail in Brazil in the first half of 2017 as a result of a deteriorating macroeconomic situation and an unstable political environment. Overall cement consumption was down seven per cent in the southeast region compared with the 1H16 and selling prices decreased due to "very competitive market conditions."
Philippine headwinds
In Asia Yatai Building Materials (China) benefitted from both higher volumes and prices compared to 2016, which were only partly offset by higher fuel costs and operating profit was ahead of 2016. Cement volumes and prices in My Home Industries Ltd (India) were ahead of the 1H16. However, the benefits of the higher volumes and prices were more than offset by higher energy costs and as a result operating profit was lower than the 1H16.
In the Philippines major infrastructure projects did not progress as quickly as expected in the 1H17. Volumes were two per cent behind 2016 and operating profit and margin were also behind, due to lower selling prices in a very competitive market and also higher fuel and power costs, CRH noted.
Outlook
On its outlook in Europe the company expects the momentum experienced in 1H17 to continue and 2H17 EBITDA to be ahead of 2016. In the Americas it anticipates solid fundamentals to be maintained, with both residential and non-residential activity improving. Overall, CRHs expect EBITDA in the Americas to be ahead. In Asia,expectations are that challenging market conditions in the Philippines will continue in the second half and EBITDA will decline further.
