CRH further cements itself as a leader in building materials

It posted a solid first half report with sales and earnings up.

  • In line with guidance, its H1 performance proved solid as profit continued to grow, up 5%
  • The first phase of the share buyback programme is completed and the group continues to please investors, upping the dividend per share by 2% to 19.6c
  • We continue to recommend CRH as a ‘buy’ for a medium risk balanced portfolio

Building material company CRH has posted its first half results reporting a rise in sales and earnings in the first half of its financial year. Sales totalled at €11.9 billion, 1% ahead of 2017 while earnings before deduction were €1.13 billion, again 1% ahead of 2017. This is all in the face of the bad weather and currency headwinds over the first quarter.

There has been good momentum recently in its markets, especially in its key European and American markets, which they expect to continue into the second half. The group has also benefitted from continued improvement in US housing market and it is expected that the increased US Federal and State spending on infrastructure projects will continue to bolster the business in North America.

Acquired assets have given the group an improved foothold in southern US, Eastern Europe and the Asian markets but one noteworthy negative has been the ongoing problems in the Philippines, which has negatively impacted its performance in Asia. Even so, it is expected that the momentum experienced in Europe and further earnings growth in the Americas will result in another year of progress for the group overall.

In May the group announced initiatives aimed at improving group margins, targeting €7bn cash generation over the next four years and a strategic review of its Europe distribution business aimed at improving margins and returns.

Investors will be pleased with the news that there was a 2% rise in the dividend. More good news is the completion of the first phase of its share buyback this month, with €350 million returned to shareholders to date.

Overall the group has enjoyed a solid first half and the shares have responded positively in early morning trading, increasing 2%. Considering the group’s profitability, its strong balance sheet and good cash generation as well as improving demand, we continue with a medium risk buy recommendation on the stock.

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