The bulk of CRH’s acquisition activity last year came to fruition in the second half, when 35 deals totalling around €1200m were completed. Including development capital expenditure, total development spending by CRH amounted to just over €1450m in the year.
The largest item was the purchase of a 26.3 per cent stake in the Catalan cement producer Uniland from a number of local families at a cost of about €300m. Uniland, of which the group is a major cement customer, will be treated as an associate.
Local rumour has it that the deal has tended to cause some tensions in the main shareholding structure with some family members and even the existing management somewhat upset at this sale. While there are no immediate plans to add to the holding, one can expect CRH to look longer term and eventually take over the whole operation. We would suggest that this may well happen within the next five years in line with a fall-off in revenues (and share values) following an eventual sizeable downturn in the Spanish/Catalan cement and construction markets.
The other second half transactions in European heavy materials, totalling €15m, consisted of taking majority control of a paving producer in southern Poland and the acquisition of a further aerated concrete plant in the north-east of Poland as well as two concrete products businesses in Finland.
The European building products and distribution arm spent €358m in the second half on nine deals, of which the purchase of the leading French concrete products producer Stradal from Saint Gobain was the largest. Other concrete products businesses were purchased in Belgium and in Denmark and a hollow brick operation was acquired in southern Poland, serving the Silesian market. The German-based construction accessories producer Reuss-Seifert was bought and renamed Syncotec. On the distribution side, two acquisitions brought in another three builders’ merchant branches in Switzerland and a 47.8 per cent stake was acquired in the northern German builders’ merchant and D-I-Y business Bauking that generates an annual turnover of €531m. Bauking, which has 108 branches, will be run as a joint venture.
In the Americas, second half heavy building materials acquisition expenditure amounted to €3765m, some 92 per cent of which was spent on the three deals in the Midwest announced in November. In addition smaller ready-mixed concrete and road surfacing operations were purchased in the states of New York, Maine, Ohio, Minnesota, Iowa, Oregon and New Mexico. The building products and distribution businesses spent €152m in the six months on ten deals. These were made up of three pre-cast concrete businesses in Arizona, Kansas and West Virginia, a concrete block plant in North Carolina, two bagged products operations serving the east coast and distribution operations in Utah, Michigan, Ohio and Florida.
When it reports full year results on the 7th of March, CRH expects the 2005 pre-tax profit top exceed €1,250m, suggesting an increase in the order of 15% or so. Additional costs of €180m to €200m from higher energy and raw material costs have substantially been recovered. Ireland saw good volumes throughout the year and volumes across the Baltic region from Poland to Finland improved in the second half. Swiss cement volumes were boosted by work on the Loetschberg tunnel, but the associate Secil noted some weakening in Portuguese demand in the second half. Lower housebuilding activity in Germany, The Netherlands and Great Britain led to reduced demand for concrete and clay products there. American profits moved ahead, helped by a strong U.S. housebuilding market.
