ii view: building materials giant CRH beats City forecasts

Fears over an economic slowdown have seen shares for this FTSE 100 company fall year-to-date. We assess prospects. 

First-half results to 30 June

• Revenue up 14% to $15 billion (£12.6 billion)
• Adjusted profit (EBITDA) up 21% to $2.2 billion (£1.85 billion)
• Interim dividend up 4% to 24 US cents per share

Guidance:

• Expects full-year adjusted profit of $5.5 billion, up from $5 billion in 2021

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Chief executive Albert Manifold said:

“CRH has delivered another strong performance with further growth in sales, EBITDA and margin, despite a challenging and volatile cost environment. This performance reflects the continued execution of our integrated and sustainable solutions strategy. 

“Looking ahead, despite some continued cost headwinds, the strength of our balance sheet and resilience of our business leaves us well positioned to deliver superior value for all our stakeholders.”

ii round-up:

Global diversified building materials company CRH (LSE:CRH) today reported results that beat City forecasts as demand remained strong and product price increases helped offset rising costs.

A 14% improvement in first-half revenues year-over-year to $15 billion helped push a one-fifth increase in adjusted profit to $2.2 billion. That’s above analyst estimates nearer to $2.1 billion. 

CRH shares rose by more than 3% in UK trading having come into this latest announcement down around a fifth year-to-date. Shares for European rival HeidelbergCement AG (XETRA:HEI) are down by close to quarter during 2022, while the FTSE All-World index remains down by just over 15%. 

The FTSE 100 index constituent CRH upped its interim dividend year-over-year by 4% to 24 US cents with shareholder returns also ongoing via a $1.2 billion share buyback programme. 

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Spending on acquisitions of $2.8 billion year-to-date, and including its purchase of Barrette Outdoor Living, contributed towards the performance. 

CRH management expects full-year adjusted profit of $5.5 billion, up from $5 billion in 2021 and ahead of City forecasts of around $5.4 billion. 

Broker UBS reiterated its ‘buy’ stance on the shares post the results summarising the performance as ‘sector leading’. 

ii view:

Dublin-headquartered CRH manufactures cement, aggregates, asphalt and various building products. Employing more than 75,000 personnel, it operates across the three divisions of American Materials, European Materials and Building Products. The US accounts for its biggest slug of sales at around 55%, with the UK coming in at just under 15%. 

For investors, an uncertain global economic outlook offers a tough backdrop. Rising interest rates in the US have seen housing-related data dip in recent months, while costs generally for businesses are on the up. Stretched government finances, with spending on the pandemic potentially substituted by spending to support consumer energy bills, could also pressure future funds into being directed towards infrastructure projects.

That said, government infrastructure spending in its biggest market, the US, remains sizeable for now. CRH’s geographical and business diversity should be remembered, while a historic and estimated future dividend yield of over 3% is also not to be ignored. On balance, and with the consensus analyst estimate of fair value stood at over £40 per share, grounds for longer-term optimism look to remain. 

Positives: 

• Diversified both by product and geographical location
• More than five years of consecutive dividend growth

Negatives:

• The weather can hinder performance
• Currency movements can provide headwinds

The average rating of stock market analysts:

Buy