CRH more than doubles EBITDA to EUR1.12bn in 1H16

CRH plc announces that its 1H16 sales increased by 35 per cent to EUR12.7bn and EBITDA more than doubled on the same period a year ago to EUR1.12bn. Building material sales rose on a proforma basis by eight per cent on 2015, including an increase of 13 per cent in the Americas, three per cent up in Europe and four per cent ahead in Asia.

After depreciation and amortisation charges of EUR532m (1H15: EUR366m), first-half operating profit amounted to EUR588m (1H15: EUR189m).

Americas
Cement volumes at the Canadian and US cement operations acquired as part of the LafergeHolcim assets in 2015 were ahead on a proforma basis while prices remained relatively stable. With the higher volumes and focus on cost control, proforma EBITDA margin improved. Construction demand in Brazil continues to be affected by significant economic, financial and political problems.

Europe
Construction activity in the first half of the year in the UK increased modestly compared with 2015 and volumes of cement, aggregates and ready-mixed concrete were ahead. A benign cost backdrop also contributed to an improved proforma EBITDA performance.

In France with improving residential and non-residential demand partly offset by continued low government infrastructure spend, volumes of cement and aggregates improved modestly while the pricing environment remained competitive. Sales volumes in Germany were ahead of the first half of 2015, however, price pressure persists in both cement and landscaping products.

While the Polish activities are supported by a solid macro-economic backdrop and continued construction growth, cement volumes were behind the first half of 2015 and price pressure was experienced across all our main product lines. Meanwhile, to the west of Ukraine, where CRH's operations are based, sales continues to be less impacted by the ongoing political uncertainty and cement volumes increased in the first half.

Speaking on the 1H16 results, Albert Manifold, CRH’s chief executive said:“We have had a very satisfactory first half, with good performance from our heritage businesses and contributions from 2015 acquisitions delivering significant profit growth for CRH. As always, we have maintained a strong focus on cash management, and with de-leveraging ahead of plan, I am pleased to report that we expect year-end debt metrics to be at, or below, normalised levels. Against this backdrop, the Board has decided to increase the interim dividend by 1.6 per cent to 18.8c per share. With continued positive momentum in the Americas and the modest impact of early-stage economic recovery in Europe, and assuming normal weather conditions for the remainder of the season, we expect further progress in the second half with full year reported EBITDA in excess of EUR3bn.”

Asian division reports for the first time
The newly-formed Asia division reported figures from the Philippines’ operations acquired as part of the LafargeHolcim assets in the second half of 2015 together with CRH Asia’s divisional costs. With a strong economic backdrop supported by continued government spending, strong foreign direct investment in the outsourced services sector and migrant labour remittances, both cement volumes and prices moved ahead at the company’s Philippines operations.

In India the joint venture, My Home Industries, benefitted from the favourable macro-economic situation in the country and volumes were 10 per cent ahead of the first six months of 2015, although with new competitor production capacity, prices were under significant pressure.

First-half GDP in China was around seven per cent driven primarily by residential construction in tier 1 cities as well as growth in the technology, healthcare and education sectors. Traditional heavy industries, especially in northeast China, are under pressure due to falling global demand, overcapacity and increased environmental focus. Volumes and prices at Yatai Building Materials, based in northeast China and in which the Group has a 26 per cent investment, remained under pressure.

Analyst view
"In terms of outlook, the group retains the previously announced target of FY16 EBITDA in excess of EUR3bn despite the H1 beat, most likely as part of it is driven by weather factors in America," says Morgan Stanley. "Consensus remains at EUR3.1bn expectation at this stage so in line with guidance."