5th Jul 2006 07:00
CRH PLC05 July 2006 N E W S R E L E A S E 5 July 2006 CRH PLC INTERIM TRADING UPDATE CRH plc, the international building materials group, is issuing this tradingupdate for the half-year ended 30 June 2006. The Interim results for the sixmonths ended 30 June 2006 are due to be announced on Tuesday, 29 August 2006. Overview Our AGM statement issued on 3 May 2006 indicated that overall trading in thefirst four months had been favourable with in particular a strong start from ouroperations in the Americas. Through May and June, our American businesses havecontinued to perform strongly and, despite subdued trading in a number of majormarkets, our European operations have made progress. As a result, with animproved performance in each of our six business segments, CRH expects thatprofit before tax for the six months to 30 June 2006 will increase byapproximately one-third compared with the reported 2005 outcome of euro 383million. Europe Materials Overall Irish construction activity improved further in the first half of theyear resulting in satisfactory volumes while the impact of higher input costs isbeing offset by continuing phased price recovery. Our operations in Finland havehad a strong start helped by broad-based construction demand. As expected, thecompletion of a major infrastructure project has led to a decline in our firsthalf cement volumes in Switzerland; however this has been compensated by animproved performance in our downstream businesses. Construction demand in Polandhas recovered rapidly from a weather-affected start resulting in betterprofitability across our operations. In Ukraine, sharply higher gas costs havebeen counterbalanced by improved pricing, and the capital project to convertfrom gas-fired kilns to coal is scheduled for completion before the end of theyear. In Iberia, our Spanish operations have enjoyed a favourable start to theyear although higher input costs have led to a slight decline in overall margin.While our Portuguese joint venture has faced reduced cement demand in its homemarket, the impact has been offset by increased cement exports and a strongeroutcome in its downstream operations. First half operating profit is expected to show a broad-based improvement on the2005 level. Europe Products Despite continuing subdued markets our Products activities overall have seen agradual pick-up in underlying demand through the first half of the year. In Concrete Products, our Structural operations (floor & wall elements, beams,vaults and drainage products) are benefiting from stronger demand in Benelux,France and Denmark while the sand-lime brick business has continued to performwell. After a slow start to the year, Architectural operations (pavers, tilesand blocks) in Benelux, France and Germany have seen an improvement in demand inrecent months. With benefits from 2005 acquisition activity and organic growth,overall profitability in Concrete Products is expected to show a strong firsthalf advance. In Clay Products, production shut-downs in our UK and German operations over thewinter months, implemented in order to better balance supply and demand and toavoid seasonal price peaks in volatile winter gas markets, had an adverse impacton profitability in the early months. As a result, and despite May/June resultsbeing ahead of 2005, first half operating profit for these operations isexpected to be lower than last year. In Building Products, our Insulation activities have benefited from 2005'srestructuring initiatives with an improved performance. Our Fencing & Securityand Daylight & Ventilation operations are performing to expectations against abackdrop of very competitive markets and higher input costs. ConstructionAccessories continues to perform well and is benefiting from an active 2005development programme and the Halfen-Deha acquisition which was completed inearly May. Overall, we expect a much improved first half performance helped by goodincremental contributions from 2005 and 2006 acquisitions complemented byorganic growth. Europe Distribution Although a pick-up in overall Dutch retail sentiment has been evident sinceearly in the year, it is only in recent months that these trends have beenreflected in demand across our DIY operations. In consequence, first halfresults from our Benelux DIY businesses are expected to be broadly similar to2005. More positively, the first half of 2006 has seen improving momentum in ourBuilders Merchants businesses in the Benelux, France and Switzerland with goodunderlying profit improvement. Quester, the leading Austrian builders merchantacquired in October 2005, experienced somewhat disappointing trading in theearly months of the year; as a result, and despite some improvement in recentmonths, its contribution to first half profit growth will be modest. Bauking,the German builders merchant and DIY operator in which CRH acquired a 48% stakelast December, is performing to expectations. Overall first half operating profit in Europe Distribution is expected to show astrong improvement on 2005 levels, with the bulk of the advance generated fromunderlying operations. Americas Materials Despite heavy rains in parts of the east and mid-west in the latter weeks ofJune, first half demand in the Americas Materials Division has exceededexpectations helped by a mild winter which facilitated early private sectorconstruction activity. Overall volumes were satisfactory with in particular acontinuing strong performance in the west. Our ongoing focus on effectivepricing strategies to offset the impact of higher energy and input costs hasresulted in good first half sales price increases and improved margins. TheMountain Companies businesses acquired at end-October 2005 are performing wellbut due to seasonal trading patterns will have little impact on the first halfprofit outcome. With better volumes and margins the outcome for the first half of the year isexpected to show a good improvement on 2005, resulting in an operating profitfor the period compared with the more traditional first half seasonal loss. Americas Products Annual revenues from our Products operations are broadly divided 40%Residential, 45% Non-residential and 15% Infrastructure. These businesses haveenjoyed an excellent first half helped by generally favourable weather, goodlevels of US housing activity and further improvement in US non-residentialconstruction demand. Our Precast Group, which is a leading manufacturer of precast, pre-stressed andpolymer concrete and concrete pipe, has benefited significantly from continuingbroad-based growth in non-residential construction and good infrastructuredemand. Despite some moderation in residential activity, our Architectural ProductsGroup (APG) continues to generate good overall organic growth combined withbenefits from 2005 acquisitions. APG's Glen-Gery clay brick operation achievedstrong price increases; however, these were not sufficient to offset fully theimpact of higher energy costs. The Glass Group, which derives almost 80% of its revenues from thenon-residential segment, has enjoyed significant first-half organic growthhelped by a continuing shift towards higher-margin segments in laminated andinsulated glass. Integration of MMI, our new US product platform in fencing products, welded wirereinforcement and construction accessories acquired at the end of April, is wellunder way and we are optimistic regarding the medium-term developmentopportunities for this largely non-residential oriented business. Our South American operations are ahead of expectations to date in 2006. Overall, these activities are expected to deliver a strong first half profitadvance with a further improvement in overall operating margin, notwithstandingsome dilution resulting from MMI's lower margin businesses. Americas Distribution Following its record performance in 2005, the Distribution Group has experiencedcontinued positive trading conditions through the first half of the year in bothits roofing & siding and interior products segments. With an estimated 65% ofrevenues generated in the repair, maintenance and improvement (RMI) segment,moderation in new housing demand has had little adverse impact on business todate while the Florida market has remained particularly buoyant. First half operating profit is expected to show a substantial profit advancewith an improved margin, reflecting strong incremental acquisition contributionsand organic growth. Development First half acquisition and investment activity amounted to approximately euro800 million. This includes the purchase of MMI and Halfen-Deha, along with 34other acquisitions across our various product segments. Details of these lattertransactions are provided in the accompanying Development Strategy Updatereleased today. The Group's pipeline of potential development opportunitiesremains strong and the due diligence review under the exclusivity agreement withAshland, Inc., announced on 19 June, which may lead to the acquisition ofAshland Paving and Construction, Inc., is continuing. Financial The Group's cash flow and financial position remain very strong. While highershort-term interest rates and the substantial acquisition activity completedover the past year will result in a significant increase in net finance costscompared with first half 2005 (2005 - euro 78 million), EBITDA/net interestcover for the 12 months to end June 2006 is expected to be well in excess of 11times. Outlook In the US, the economy and overall construction market continue strong although,as usual, activity levels vary by region. While US housing construction ismoderating, activity remains at a strong level; non-residential construction iscontinuing to grow and highway markets are robust, although as in 2005 we maysee 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 anumber of previously subdued economies with ongoing momentum in the morestrongly performing countries. The continuing successful recovery of significantenergy cost increases remains a major focus across our operations. Based on a continuation of the current US$/euro exchange rate for the remainderof 2006, the translation impact on full year profit before tax compared with2005 will be minimal. CRH has had a particularly good start to the year. The current business outlookis on the whole positive and, while as always risks remain, we expect goodprofit growth in the more significant second half of the year leading to ahealthy advance for 2006 as a whole. ________________________________________________________________________________ This Trading Statement contains certain forward-looking statements as definedunder US legislation. By their nature, such statements involve uncertainty; as aconsequence, actual results and developments may differ from those expressed inor implied by such statements depending on a variety of factors including thespecific factors identified in this trading update and other factors discussedin our Annual Report on Form 20-F filed with the SEC. CRH will host an analysts' conference call at 8.00 a.m. BST on 5th July 2006 todiscuss this Statement and the Development Strategy Update. The dial-in numberis +44 20 7162 0125. A recording of the conference call will be available from10.00 a.m. BST on 5th July 2006 by dialling +44 20 7031 4064. The security codefor the replay will be 707628.________________________________________________________________________________ Contact CRH at Dublin 404 1000 (+353 1 404 1000)Liam O'Mahony Chief ExecutiveMyles Lee Finance DirectorEimear O'Flynn Head of Investor RelationsMaeve Carton Group Controller CRH plc, Belgard Castle , Clondalkin, Dublin 22, Ireland TELEPHONE +353.1.4041000 FAX +353.1.4041007 E-MAIL [email protected] 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 ExchangeRelated Shares:
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