Trading Statement
CRH PLC
05 July 2005
N E W S R E L E A S E
5th July 2005
CRH PLC INTERIM TRADING UPDATE
CRH plc, the international building materials group, is issuing this trading
update for the half-year ending 30th June 2005. The Interim results for the six
months ending 30th June 2005, prepared in accordance with International
Financial Reporting Standards (IFRS), are due to be announced on Tuesday, 30th
August 2005.
Overview
Our AGM statement issued on 4th May 2005 indicated that overall trading had been
positive in the first four months with a strong start in our American operations
partly offset by the effects of severe March weather in Northern Europe which
hampered activity in a number of our operations. Through May and June our
American operations have continued to perform strongly and, although our
European operations have benefited from a return to normal seasonal weather
patterns, the overall trading environment for these businesses remains subdued.
Against this backdrop, CRH expects that profit before tax for the six months to
30th June 2005 will show a percentage increase in the high teens compared with
2004 (2004: € 319 million on an IFRS basis).
Europe Materials
While markets in Ireland remain very competitive, growth in residential
construction and continuing recovery in commercial and industrial construction
has resulted in good volume increases and our policy of phased price increases
is yielding benefits. Our activities in Finland have recovered well from
weather-related setbacks in March. Polish operations were most affected by the
late winter weather and trading has also suffered by comparison with first half
2004 when demand was artificially accelerated ahead of the 1st May increase in
VAT on construction products. In Switzerland, while cement operations enjoyed
strong demand from the major Lotschberg tunnel project, demand for concrete
products and aggregates was impacted by poor early weather. Our Spanish
operations have enjoyed very busy first half trading conditions with
improvements in both volumes and prices. Secil, the Portuguese cement, concrete
products and aggregates producer, in which CRH acquired a 49% stake in June
2004, has had a positive start to the year.
With a strong incremental acquisition impact due to the first-time inclusion of
CRH's share of Secil's results for January to May, first half operating profit
from this Division is expected to show an improvement on the 2004 level.
Europe Products
The Products Division continues to experience generally subdued markets and
trading over the early months was not helped by severe March weather.
In Concrete Products, our architectural operations (pavers, tiles and blocks) in
the Benelux, Germany and the UK were impacted by weather and weak demand.
Structural operations (floor & wall elements, beams, vaults and drainage
products) were less severely affected, helped by modest improvements in Dutch
housing activity and good underlying demand in Belgium and Denmark.
In Clay Products, first-half Ibstock brick volumes in the UK were below 2004
levels; however, further price improvements were achieved to offset the impact
of sharp energy cost increases. Our Clay operations in Mainland Europe have
benefited from better pricing and productivity.
Our Insulation activities have continued to suffer from volatility in
energy-related input costs with results also affected by re-organisation of
activities to better deal with the challenging trading environment. In Building
Products, Daylight & Ventilation operations faced disappointing sales in Germany
and the Netherlands. Despite flattish markets our Fencing & Security and
Construction Accessories businesses have performed well to date.
Overall, with continuing tough trading conditions in our Insulation activities
and generally subdued markets, operating profit in this Division is expected to
be lower than in the first half of 2004.
Europe Distribution
Against the background of subdued Dutch retail demand our DIY business in the
Benelux delivered good cost control and continued to benefit from the October
2003 Cementbouw acquisition. While poor weather in March affected trading in our
Dutch builders merchanting operation, this business is benefiting from the
first-time inclusion of results from NCD Builders Merchants which was acquired
in December 2004. French merchanting activities were also adversely impacted by
poor weather; however, our operations in Switzerland continued to improve.
Overall, first half operating profits in Europe Distribution are expected to be
similar to 2004.
Americas Materials
First half activity in the Americas Materials Division has exceeded
expectations. A good start to the year in the West and New York/New Jersey
operations, combined with an improved performance in the New England and Central
operations, has resulted in strong first half heritage advances in aggregates,
asphalt and readymixed concrete volumes. Average first half sales prices have
also shown good increases and we have entered the seasonally more important
second half of the year with solid backlogs at prices well ahead of 2004 levels.
With higher volumes and prices the operating result for the first half of the
year is expected to show a substantial improvement on the 2004 outcome.
Americas Products
Our Precast, Architectural Products and Glass businesses have each had a
positive first half against a backdrop of sustained strong residential activity
and an ongoing pick-up in non-residential investment. The Precast Group has seen
good demand particularly across western and southern states with improved prices
and overhead cost savings continuing to offset input cost increases.
Architectural Products has seen good demand for construction, retail and
hardscape products and further gains at its Glen-Gery brick operation, where
better volumes and prices more than compensated for higher energy costs. The
Glass Group has benefited from a strong first half sales advance combined with a
shift in product mix towards higher value insulated and fabricated items.
Despite higher input costs, our South American operations have performed ahead
of expectations.
Overall, these activities are expected to deliver a strong first half profit
advance.
Americas Distribution
The Distribution Group has performed particularly strongly through the
traditionally quieter first half of the year continuing to build on the
significant progress of recent years. Markets in Florida were buoyant reflecting
very strong maintenance and repair work in the aftermath of the devastating
hurricanes experienced during August and September 2004.
First half operating profits are expected to show a substantial profit advance.
Development
First half development expenditure amounted to approximately € 231 million of
which 35% was in Europe and 65% in the Americas. While this is a lower pace of
spend than in recent years, we continue to work on opportunities for
acquisitions across all our operations and remain committed to completing
transactions at prices that will contribute to long-term value creation for our
shareholders.
Financial
The Group's cash flow and financial position remain very strong. Higher US
short-term interest rates will result in an increase in the finance charge
compared with first half 2004 (2004: € 64 million on an IFRS basis); EBITDA/net
interest cover for the 12 months to end-June 2005 is expected to be
approximately 12 times.
Outlook
In the US, the economy and overall construction market continue to be strong
although, as always, activity levels vary by region. Economies in Europe are
generally subdued, with little sign of any imminent acceleration in demand in
the larger Eurozone economies. Overall, we are encouraged by results to date in
achieving recovery of higher input costs and look to further progress in this
regard in the months ahead.
Based on a continuation of the current US$/euro exchange rate, the translation
impact on full year profit before tax compared with 2004 will be minimal.
We have had a good start to 2005. The recent sharp increase in the price of
crude oil is of course unhelpful for world economies and will add to cost
challenges in the months ahead. However, with our sustained focus on cost
effectiveness and operational performance, we expect to make further progress in
the more important second half of the year.
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This Trading Statement contains certain forward-looking statements as defined
under US legislation. By their nature, such statements involve uncertainty; as a
consequence, actual results and developments may differ from those expressed in
or implied by such statements depending on a variety of factors including the
specific factors identified in this trading update and other factors discussed
in our Annual Report on Form 20-F filed with the SEC.
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CRH will host an analysts conference call at 8.00 a.m. BST on 5th July 2005 to
discuss this Statement and the Development Strategy Update. The dial-in number
is +44 20 7162 9919.
A recording of the conference call will be available from 10.00 a.m. BST on 5th
July 2005 by dialling +44 20 7031 4064. The security code for the replay will be
662858.
Contact at Dublin 404 1000 (+353 1 404 1000)
Liam O'Mahony Chief Executive
Myles Lee Finance Director
Maeve Carton Group Controller
CRH plc, Belgard Castle, Clondalkin, Dublin 22, Ireland TELEPHONE +353.1.404
1000 FAX +353.1.4041007
E-MAIL mail@crh.com WEBSITE www.crh.com Registered Office, 42 Fitzwilliam
Square, Dublin 2, Ireland
This information is provided by RNS
The company news service from the London Stock Exchange