Building materials giant CRH forecast on Thursday that its pre-tax profits would rise this year from the $2.2 billion (€1.86 billion) reported in 2019, helped by a recovery in sales as economies continued to open up during the summer following the initial Covid-19 lockdown, price rises and tight control on costs.
However, the forecast does not take into account CRH’s prediction that it expects to take a $800 million full-year impairment charge, mainly against assets in the UK and China, as it assesses the economic impacts of Covid-19 and Brexit.
The group, led by chief executive Albert Manifold, said its earnings before interest, tax, depreciation and amortisation (ebitda) rose 2 per cent to $3.4 billion in the first nine months of the year, even as sales dipped 2 per cent to €20.6 billion.
It predicted full-year ebitda will come to $4.4 billion. While it said that this represents an increase in like-for-like earnings, which strips out the effects of assets sales last year, it is lower than the €4.2 billion ($5 billion) figure reported for last year, before the company switched from presenting figures in dollars from euro.
“While the outlook for 2021 remains somewhat uncertain, CRH’s delivery this year should provide investors with further proof that it is the quality play in the sector,” said Davy analyst Robert Gardiner. “Consistent earnings delivery and superior returns should provide the basis for a [share price] re-rating and continued outperformance over time.”
Mr Gardiner said CRH’s forecast that its net debt will fall to about $6 billion by end-2020, implies its debt will be below 1.4 times ebitda. “That is the lowest leverage reported by the group for many years,” he said. “The improving debt position reflects a combination of on-going strength in cash generation and prudent balance sheet management. CRH’s capital.”
Broken down by division, CRH’s Americas Materials unit saw like-for-like nine-month sales dip 4 per cent, with the negative effect of Covid-19 restrictions earlier in the year replaced by the impact in parts of the US by unfavourable weather and wildfires in August and September. While cement volumes fell in North America, these were offset by price increases.
Still, ebitda rose 9 per cent for the period, helped by “solid price progression, good cost control and lower energy costs”.
Like-for-like Europe Materials sales were 7 per cent behind 2019, with an improvement in activity the third quarter not enough to make up for the disruption of widespread Covid-19 lockdowns in the second quarter. Ebitda for the division declined 14 per cent over the nine months.
The group’s Building Materials business has been a standout this year, with nin-month sales up 3 per cent reflecting strong volumes in architectural products, improved pricing and cost control. Ebitda for the nine months was 9 per cent ahead of prior year.
“Markets continue to be impacted by the global pandemic and while we have seen some lower activity levels, I am pleased to report further improvement in trading performance, with an advance in both profitability and margins,” said Mr Manifold. “The outlook for the coming months remains uncertain and visibility is limited, however, I am confident that we are well positioned for the challenges and opportunities that lie ahead.”