March 1, 2018 / 9:56 AM / 2 years ago

CRH already eyeing more deals as earnings rise strongly

DUBLIN (Reuters) - Irish building materials group CRH (CRH.I) reported a 6 percent increase in earnings last year, generating 2.2 billion euros (1.95 billion pounds) of cash in the process that it said on Thursday would help fund further acquisitions later in 2018.

Big spending CRH, the world’s third-largest building group, committed almost 5 billion euros to acquisitions last year, including the 3 billion euro purchase of Ash Grove Cement Co ASHG.PK that will close in 2018.

It will focus on integrating those deals in the first half but Chief Executive Albert Manifold said it was already looking beyond that with plenty of opportunities in an industry “still suffering from the hangover of the financial crisis.”

“We generated 2.2 billion euros of cash last year, that’s an extraordinary amount of money, 2.2 billion. We have to put that money to work for our shareholders,” Manifold told Reuters in a telephone interview.

“Our eyes are looking towards the horizon again at other deals and there are lots of opportunities out there. I think as soon as we’ve got the work done we need to do on the integration, we’ll be moving back to the table.”

The strong cash generation combined with a net debt ratio at 1.8 times earnings before interest, tax, depreciation and amortisation (EBITDA) means CRH has the financial capacity to pick and choose its deals, Manifold said.

CRH’s core earnings rose 6 percent year-on-year to 3.3 billion euros versus a forecast in November to be “in excess of” 3.2 billion euros, and Manifold said the pace of growth at the end of 2017 has continued in its major markets in 2018.

Earnings were up 5 percent in Europe and - despite foreign exchange headwinds - in the Americas too where it is the biggest producer of asphalt for highway construction and third biggest supplier of readymixed concrete and construction aggregates.

Manifold said growth in Europe was continuing at a brisk pace where the market was about five years behind the cycle in North America with significant pent up demand for infrastructure projects and both residential and non-residential building.

“While CRH’s results point to further improvement in Europe and steady performance in the Americas, it is the on-going structural improvement in group margins and returns that stand out,” Davy Stockbrokers wrote in a note, saying the stock looked undervalued on both a short- and long-term basis.

Shares in CRH were 2.7 percent higher at 27.89 euros by 0930 GMT.

Reporting by Padraic Halpin, editing by David Evans

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