CRH sounds alert on earnings

The building materials group says earnings fell in the the first four months of 2008, making it difficult to achieve its goal of annual profit growth.

Morningstar.co.uk Editors 7 May, 2008 | 10:12AM
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CRH said overall profitability in the January-April period - traditionally its weakest, accounting for about 6-7% of group profit - helped last year's strong outturn but that has not been repeated.

"The further depreciation of the US dollar over recent months, together with weaker trends in a number of markets, has made our goal of achieving another year of profit and earnings growth more challenging," the group said in a trading statement ahead of today's AGM.

CRH said overall results to date this year for its European business were similar to 2007, while trading in the Americas was behind 2007 mainly reflecting continuing difficult trading in residential markets.

"Profitability and cash flow remain well underpinned by its geographic, sectoral and product balance and as we move into the busier and more significant trading months," it said.

Dublin-based CRH operates in 32 countries and employs approximately 92,000 people. Shares were down €0.38 to €23.94, valuing the group at €12.85bn.

Barry Dixon, an analyst at Davy Securities, said: "We had forecast 4% growth in operating profit in the first half and 1.7% for the full year. These forecasts now appear optimistic."

Robert Eason, at Goodbody, said he had provisionally cut his 2008 pre-tax profit forecast to €1.955bn versus €1.904bn last year.

Meanwhile, Aynsley Lammin at Citi repeated "hold" advice on CRH stock. "The outlook statement is a more cautious tone from the group," the analyst said. "They are beginning to see signs of weakness in US private non-residential work and residential markets in the US, and parts of Europe are also softer. Central Eastern Europe is strong.

"(The) consensus isn’t factoring in much growth so is unlikely to change hugely at this stage, but downside risk remains."

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