25th Feb 2014 12:49
LONDON (Alliance News) - Irish building-materials group CRH PLC Tuesday said it swung to a loss in 2013, as bad weather hurt trading and added to the pressure on profit margins, but Chief Executive Albert Manifold said the year represented a "trough" in profits and it will return to growth this year.
"We are encouraged by second-half activity levels in 2013 and by the fact that, while it is still early in the season, trading so far in 2014 has been ahead of last year," Manifold said in a statement.
The company, which has operations across Europe and the Americas, was hit hard by the financial crisis and ensuing economic downturn, which weighed heavily on construction markets. Last year, it emabarked on a review of its operations in an attempt to turn around its profit margins and deliver better returns. It has completed the first stage of the review and put businesses that don't meet its new returns criteria up for sale.
It said it delivered EUR195 million of cost savings in 2013, in line with guidance it gave in November, but this was not enough to offset a decline in like-for-like sales and further pressure on its margins as many of its markets continued to suffer from overcapacity.
The company posted a pretax loss of EUR215 million for 2013, compared with a profit of EUR646 million in 2012, even though revenue dipped only slightly to EUR18.0 billion, from EUR18.1 billion. Its earnings before interest, tax, depreciation and amortisation margin declined to 11.5%, from 12.2% in 2012, even though Ebitda of EUR1.48 billion beat the guidance it gave in November 2013.
It booked EUR755 million in impairment charges, including EUR105 million for joint ventures and associates, as a result of its review as it wrote down the value of businesses it has decided to sell.
Overall revenues stayed flat as contributions from acquisitions - it spent EUR730 million on acquisitions and investments in 2013 - offset a hit from the weakening in the US dollar during the year.
Most of the business units it has decided to sell are within its European products division, the worst performing of its businesses in 2013. Ebitda declined 22% in the European products division, 21% in the European materials unit, 14% in European distribution, but was flat in Americas materials and rose 21% in Americas products.
"During the first six months of 2013, the severe and prolonged winter conditions which delayed the start of the construction season in our major markets, together with weaker trading in Europe, had a negative impact on our results. As the year progressed we saw markets beginning to stabilise in Europe, while the pick-up in economic activity in the US provided positive momentum for our Americas businesses," the company said in its statement.
It said that following a first-half decline of 6%, like-for-like sales were ahead by 2% in the second half, reducing the full-year like-for-like decline to 2%.
"The review of our portfolio announced in November 2013 aims to re-set the Group for growth. While this has resulted in significant non-cash impairment charges, we believe that dynamic allocation and reallocation of resources to optimise the portfolio, together with our traditional tight cost control and capital discipline and our relentless focus on returns, will be key to driving growth and to rebuilding returns and margins over the coming years," Manifold said in the statement.
CRH said the businesses earmarked for disposal in the first part of its review account for about 10% of its total assets. It has identified a further group of businesses, worth about 20% of net assets, which require more detailed assessment in the second half of the review.
Investment bank Jefferies said it thinks CRH can do more in terms of cost cutting, even though the company has now cut about EUR2.5 billion in costs since 2008, and noted that the company didn't expect to book further impairment charges for the next stage of its business review. It rates the stock at Buy with a 1,700.00 pence price target.
CRH shares were trading at 1,736.00 pence Tuesday morning, up 52.00 pence or 3.2%.
CRH's Year-end net debt of EUR2.97 billion was similar to December 2012 and lower than the guidance provided last year by the company as "cash management continued to be a major focus for the group as the year drew to a close."
The company declared an unchanged dividend of 62.5 cents per share.
By Anthony Tshibangu; [email protected]; @AnthonyAllNews
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