2nd Jul 2007 07:01
CRH PLC02 July 2007 N E W S R E L E A S E 2 July 2007 INTERIM 2007 TRADING STATEMENT CRH plc, the international building materials group, today issues this tradingstatement for the half-year ending 30 June 2007 . The Interim results for thesix months ending 30 June 2007 are due to be announced on Tuesday, 28 August2007. Highlights • With a particularly strong start in Europe significantly outweighingmore challenging conditions in the Americas CRH expects that profit before taxfor the six months to 30 June will show a percentage increase of approximately25% compared with the reported 2006 outcome of euro 526 million. • Profit on disposal of fixed assets was euro 17 million for the firsthalf of 2006 and euro 40 million for the year. It is anticipated that profits ondisposals for 2007 will be ahead of last year's levels and that disposal ofsurplus properties will be an ongoing feature of the Group's activities. • First half development expenditure totalled almost euro 1 billionincluding the purchase of publicly-quoted Swiss builders merchant Getaz Romangand CRH's first acquisitions in China and Turkey. • EBITDA/net interest cover remains high at approximately 9 times forthe twelve months to June 2007, well above the Group's stated comfort level ofapproximately 6 times. CRH is committed to optimising the use of its balancesheet while maintaining an investment grade credit rating. • In March 2007, the Board announced a full year 2006 dividend of 52.0cent, up 33% with dividend cover of 4.3 times. This represented a first step ina phased reduction in dividend cover to a targeted 3.5 times for 2008. The 2007interim dividend will show a significant increase on the 2006 level reflectingthis dividend policy and broadly re-establishing the traditional split betweeninterim and final dividends. • Notwithstanding the translation impact of a weaker US Dollar, with anongoing focus on price and cost effectiveness, benefits from the record 2006acquisition spend and a sustained development emphasis, we expect strong fullyear profit growth. In a comment, CRH Chief Executive Liam O'Mahony said: "CRH has once againachieved a very positive trading performance and strong development success inthe first half of 2007. We continue to have an active pipeline of acquisitionopportunities and, with price and cost effectiveness and balance sheetoptimisation as key priorities, we expect to deliver strongly in terms of bothprofit growth and development activity for 2007 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 statement and other factors discussed in ourAnnual Report on From 20-F filed with the SEC. CRH will host an analyst's conference call at 8.00 a.m. BST on 2 July 2007 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 2nd July 2007 by dialling +44 20 7031 4064. The security codefor the replay will be 756441. Contact CRH at Dublin 404 1000 (+353 1 404 1000) Liam O'Mahony Chief Executive Myles Lee Finance Director Eimear O'Flynn Head of Investor Relations Maeve Carton Group Controller Introduction As previously indicated this Trading Statement, originally scheduled for releaseon Thursday 5 July, has been brought forward to coincide with the launch of themarketing for CRH's Euro Medium Term Note ("EMTN") Programme. CRH intends toissue Eurobonds under this Programme to refinance recent acquisition activity.The presentation associated with this marketing will be available later today onCRH's website at www.crh.com. Profit The updating statement issued in conjunction with CRH's AGM on 9 May 2007indicated that overall trading in the first four months of the year was ahead oflast year with a particularly strong start from our operations in Europesignificantly outweighing more challenging conditions in the Americas. ThroughMay and June our European operations have seen continued momentum while ourAmerican businesses overall have seen activity levels improve. As a result, CRHexpects that profit before tax for the six months to 30 June 2007 will show anincrease of approximately 25% compared with the reported 2006 outcome of euro526 million. The Group continues to realise value from the ongoing disposal of surplusproperties and assets no longer essential to its operating activities. Profitson disposal of fixed assets amounted to euro 17 million for the first half of2006 and euro 40 million for 2006 as a whole. It is anticipated that theequivalent first half and full year profits on disposals for 2007 will be aheadof 2006 levels and that disposal of surplus properties will be an ongoingfeature of the Group's activities. Development First half acquisition and investment expenditure amounted to approximately euro1 billion. This included the purchase of publicly-quoted Swiss buildersmerchanting group Getaz Romang, completed in May, in addition to CRH's firstacquisitions in China and Turkey. In February, CRH completed the acquisition ofa modern 650,000 tonne cement plant in Heilongjiang province, northeast Chinawhile April saw the purchase of 50% of Denizli Cement, an integrated cement andreadymixed concrete business with a modern 1.8 million tonne cement plant andextensive limestone reserves operating in the Aegean region of south-westernTurkey. In addition the Group completed more than 30 other transactions acrossits various product segments. Details of these are provided in the accompanyingDevelopment Strategy Update released today. Financial Higher short term interest rates and the substantial development activitycompleted over the past eighteen months will result in a higher finance chargecompared with the first half of 2006. While the net interest charge hasincreased, EBITDA/net interest cover remains high at approximately 9 times forthe twelve months to June 2007 well above the Group's stated comfort level ofapproximately 6 times. CRH is committed to optimising the use of the Group'sbalance sheet while maintaining an investment grade credit rating. Dividend In March 2007, the Board announced a full year 2006 dividend of 52.0 cent, up33% with dividend cover of 4.3 times. This comprised an interim dividend of 13.5cent (up 20%) and a final dividend of 38.5 cent (up 39%) and represented a firststep in a phased reduction in dividend cover to a targeted 3.5 times for 2008.The 2007 interim dividend will show a significant increase on the 2006 levelreflecting this dividend policy and broadly re-establishing the traditionalsplit between interim and final dividends. Europe Materials Europe Materials has benefited from a continuing positive demand and pricingenvironment in most of its major markets and favourable seasonal weatherconditions in the early months. In Ireland, lower residential activity in the first half was offset by improvednon-residential construction and accelerating infrastructure investment whichresulted in strong volume increases in stone and blacktop, and cement volumes inline with 2006 levels. In Finland, broad-based construction activity hascontributed to double-digit percentage growth in cement, aggregates andreadymixed concrete volumes, while our operations in the Baltic states have alsoperformed well. Demand across our Polish operations has been exceptionallystrong as reflected in an increase of approximately 40% in first half cementvolumes, while our cement operation in the Ukraine has also seen strong volumeincreases. In Switzerland, first half demand in our cement and downstreamaggregates, asphalt and readymixed concrete activities was well ahead of 2006levels. In Iberia, our Spanish readymixed concrete and concrete productsoperations had a positive first half achieving good success in the recovery ofhigher input costs which had impacted margins in 2006; however, our Portuguesejoint venture saw further reductions in construction activity in its home marketwhich continues to be impacted by cutbacks in public expenditure. First half operating profit from this Division is expected to show a significantincrease on the 2006 level. Europe Products Improving economies and favourable building conditions through the winter monthshave contributed to a marked uplift in operating performance. Our Concrete Products group has enjoyed good growth across its structuraloperations (floor & wall elements, beams, vaults and drainage products) and amore substantial advance in its architectural operations (pavers, tiles andblocks), with a strong pick-up in profitability from its German concrete pavingand landscape walling activities. As a result, overall first half profitabilityin Concrete Products is expected to show a strong advance. In Clay Products,first half results are substantially ahead of last year reflecting in particularthe absence of the extensive production shut-downs which impacted performance inUK and German activities in early 2006. Sales volumes improved in all marketsexcept the UK . In Building Products, the Construction Accessories businesses,enlarged through the acquisition of Halfen in May 2006, have outperformed withvery favourable trading to date in 2007; our Insulation business has continuedits strong recovery delivering further improvements in sales and operatingprofit; our building envelope activities, comprising Fencing & Security,Daylight & Ventilation and the Roller Shutters & Awnings business acquired inAugust 2006, have benefited from improving Dutch and German markets. Overall, we expect significantly improved first half operating profit from theseoperations. Europe Distribution The first half of 2007 has seen a much improved performance across this businesssegment. Builders Merchants: Our Builders Merchanting activities in the Netherlands,France and Germany have enjoyed good organic sales growth and marginimprovements across their businesses. Our heritage Swiss operations have alsobenefited from positive market growth while our Interim results will includeGetaz Romang sales and profits from completion of this acquisition in May.Builders Merchants Austria, which had a disappointing outturn in the first halfof 2006, has continued the improvement evident in the second half of last yearalthough margins there still lag our original expectations. DIY: Following moderate growth in 2006, sales in the Benelux region acceleratedthrough the first half of 2007 resulting in a strong uplift in profitability.DIY activities in Germany have also had a positive start to the year. Overall first half operating profit in Europe Distribution is expected to bewell up on the 2006 level. Americas Materials The severe weather conditions in many of Americas Materials' markets in thefirst four months of 2007 contrasted with the mild weather which facilitatedearly 2006 private sector construction activity. Despite this the Division hasturned in a positive performance with continued market strength in the West,good advances in pricing and an initial first half contribution from APAC,acquired at end-August 2006. Our New England and New York/New Jersey businesses suffered most from the poorweather conditions which also hampered activity levels in the Central region,most particularly in Ohio. The West division continues to benefit from generallystrong demand across its markets especially in Utah where construction activityremains buoyant. Although first half heritage volumes have been impacted by thepoor weather, price development across these businesses remains very positive.The integration of APAC is continuing, with excellent progress on the ongoingrealisation of synergies, and first half trading has been ahead of expectations. Overall, we anticipate higher first half operating profit with a broadly similaroutcome from heritage operations and a positive contribution from acquisitions. Americas Products To date 2007 has proved more challenging than the first half of 2006 with theongoing decline in residential markets since mid-2006 and poor early weatherleading to tough comparatives. The impact of the decline in residential construction has been most evident inthe Architectural Products Group's (APG) masonry markets although the adverseeffect has been partly mitigated by a much improved performance from bagged soiland mulch activities, which disappointed in 2006. MMI, acquired in April 2006,has also suffered from weaker new housing activity particularly in itsresidential-oriented fencing activities. In contrast, both the Precast and Glassgroups have continued to benefit from the ongoing advance in non-residentialconstruction. Our South American operations have had a satisfactory performance. We expect that first half operating profit for Americas Products will beslightly lower in US$ terms than in the first half of 2006. Americas Distribution Demand in this segment has been affected by the decline in residentialconstruction. The roofing/siding business, which accounts for approximately two-thirds ofannualised turnover, has declined from its record levels in recent years duemainly to the slowdown in residential construction, both new and remodel, andalso to the harsh winter weather in the northeast. Furthermore, 2006 had thenon-recurring benefit of extensive repair activity in Florida following theactive 2004 and 2005 hurricane seasons. Though the interior products business (approximately one-third of turnover) hasseen significant price deflation in gypsum wallboard, it has had the benefit ofgood performance from the businesses acquired in 2006. Overall, first half operating profit in this segment is expected to be well downon a record 2006. Outlook The year has started well with a particularly strong performance across ourEuropean activities significantly outweighing more challenging conditions in theAmericas. In Europe, with a more positive market backdrop, organic operatingprofit growth to date is already ahead of that achieved for the full year in2006 and we look to further progress in the second half of this year. In theAmericas, we expect that continuing growth in non-residential construction and afavourable funding and pricing backdrop for infrastructure will offset ongoingweakness in residential activity, leading to similar full year heritageoperating profit augmented by a positive acquisition contribution. CRH's geographic, sectoral and product balance continues to deliver strongly in2007 both in terms of overall trading performance and development activity.Notwithstanding the translation impact of a weaker US Dollar, with an ongoingfocus on price and cost effectiveness, benefits from the record 2006 acquisitionspend and a sustained development emphasis, we expect strong full year profitgrowth. * * * * * 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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