CRH eyes more growth ahead after fourth-quarter profit gains

Irish building materials group CRH generated an acceleration in profits growth towards the end of the year and saw good potential for more in the US and Europe in 2018.

Sales of €27.6bn were reported for 2017, 2% ahead on the prior year and 2% on a like-for-like basis, while earnings before interest, tax, depreciation and amortisation rose 6% to €3.3bn, or 3% LFL due to a dip in Asia.

The Americas materials unit grew 3% at the organic level, supported by growth in the residential and non-residential sectors, while infrastructure remained relatively stable. The Americas Products business saw stable sales.

Sales in Europe were up 1% over all, with heavyside, including aggregates, asphalt, cement and concrete, up but lightside's high-value, innovative products were down slightly. EBITDA was 5% ahead in both the Americas and Europe.

Basic earnings per share grew 51% to 226.8 cents thanks to a one-off gain from a reduction in deferred tax liabilities due to Donald Trump's changes in US tax laws. Excluding this, adjusted EPS was 166.2 cents, or 11% ahead.

More importantly, cash inflow remained strong at €2.2bn from operating activities, though this was down from €2.34bn the year before.

The full year dividend per share was lifted by 5% to 68.0 cents, covered 3.3 times

Albert Manifold, Chief Executive, said operating profit margins growth to 12.0% from 11.5% benefited from increases in underlying demand in the Americas and positive momentum in Europe, and was helped by a focus on performance improvement and operational delivery.

"Supported by strong operational cash generation, we continued to deliver value through efficient capital management. With a balanced portfolio of businesses CRH is well positioned to capitalise on ongoing economic recovery and our focus remains on consolidating and building upon the gains made in 2017. Against this backdrop, we believe that 2018 will be a year of continued growth for the group."

In the US, GDP growth in 2018 is expected to be similar to 2017, with continued growth anticipated in US housing construction and with non-residential construction also expected to improve.

While the infrastructure market remains broadly stable, Manifold sees upside potential due to the growing economy and increased state spending on transportation improvements. In Europe, an expected continuation of economic growth should increase demand, particularly in the residential sector, leaving Manifold et al to focus on "building upon pricing improvements and efficiency gains achieved in 2017 and as a result, we expect our European business to advance further in 2018".

As for Asia, while Philippino stabilisation of the cement market is anticipated, results are expected to remain challenged.