CRH unveils buyback after slow start to 2018

Building materials group CRH saw like-for-like sales fall 2% in the first quarter with first-half profits expected to be flat, but announced a €1bn share buyback to keep investors sweet.

The Ireland-based FTSE 100 group, which recently played down suggestions that it could float its US business in New York, said it had sold off €2.3bn of assets in the first three months of the year and was targeting a further €1.5-2bn of asset divestments over the medium term, having made six bolt-on acquisitions in the quarter and saying the completion of the $3.5bn purchase of US cement manufacturer Ash Grove is due in the coming weeks.

Having strengthened its balance sheet and continuing to generate cash from the business, chief executive Albert Manifold said the share buyback is expected to complete over the next 12 months as the group returns excess cash to shareholders and continues to invest in the business.

Earnings before interest, tax, depreciation and amortisation for the first half of the year are expected to be in line with the first half of 2017 on a like-for-like basis. EBITDA growth in the Americas is expected to be flat, Europe up and Philippines down amid strong competition in the cement market.

With normal weather patterns and in the absence of any major market dislocations, CRH said like-for-like EBITDA in the second half of the year was anticipated to return to growth, led by the European economic recovery and ongoing US housing, non-residential construction and infrastructure market growth.

First-quarter LFL sales in the Americas were down 3% amid unfavourable weather conditions in a number of key regions, though the economic and business environment was said to remain positive.

European LFL sales fell 2% as recovery in certain markets offset by adverse weather conditions and the earlier Easter. Sales in the Philippines fell 5% amid ongoing competitive market conditions.

Last month, full year results showed sales up 2% like-for-like to €27.6bn, while EBITDA rose 6% to €3.3bn, but 3% on a LFL basis due to strong competition in Asia.

CRH shares jagged higher then lower on Wednesday morning, but after 90 minutes of trading stood flat at 2,487p.

Analysts at Canaccord said Q1 trading tends to be a difficult quarter to assess due to seasonality which is typically affected by significant weather impacts.

"Given the slow start to the year, we could see consensus EBITDA pull back by a couple of percent today. Underlying trading conditions and backlogs all appear to be holding up well, though, with growth in EBITDA expected in H2 2018 after an in-line performance expected for the first half of this year."

They noted the highlighting of a decent balance sheet despite the acquisitions made last year.

"While consensus could nudge lower today on a slow start to 2018, underlying trading remains positive in terms of trends for the rest of 2018 and management continues to actively manage the portfolio and capital returns. Valuation also looks relatively unstretched."