Published February 26, 2013
DUBLIN – Ireland's CRH said an upswing in the United States will drive growth this year and offset the slump in euro zone markets that pushed pretax profit down five percent in 2012.
Profit before tax at CRH, one of the world's largest building materials providers, fell to 674 million euros we weak consumer and investor confidence continued to hurt its European businesses.
But in the United States, where it is the main producer of asphalt for highway construction and like-for-like sales rose 3 percent last year, CRH said the outlook was promising and should trump euro zone woes.
"There are two contrasting fortunes between Europe and the U.S., but there's now light at the end of the tunnel in our U.S. operations," CRH chief operating officer Albert Manifold told Reuters in a telephone interview.
"Despite headwinds in Europe we do think that the result of the U.S. operations in 2013 will outweigh any of the negative factors so we think we're going to see a year of progress."
Infrastructure projects in the United States were hit by a tightening of state spending and a rise in bitumen costs, a key raw material, but there are now strong signs of recovery in residential and non-residential markets, said Manifold.
Full-year earnings before interest, taxes, depreciation and amortisation (EBITDA) of 1.64 billion euros were 2 percent ahead of analyst forecasts and also better than CRH's latest guidance in November.
TOUGH EURO ZONE
Dublin-based CRH has weathered the downturn in global construction better than many of its peers by cutting costs aggressively and early, and it delivered 166 million euros of savings last year ahead of an 150 million target.
It said it would cut a further 300 million euros by the end of 2015 - on top of the 2.2 billion euros already implemented - through a number of measures including a reduction in staff and further pooling of back office resources.
Hopes the euro zone might emerge from recession soon were dealt a blow on Friday when the European Commission said it will not return to growth until 2014.
The building sector, already facing the collapse of housing markets in Spain and other crisis-hit euro zone states, is a leading indicator of whether European companies are committing to the investment needed to prevent an extended downturn.
"The overall market situation in Europe in going to be very difficult for 2013," said Manifold. "We don't see any short term end to the current crisis."
CRH also said chief executive Myles Lee would retire at the end of 2013, following completion of a five-year term at the helm and a career spanning nearly 30 years.
Shares in CRH were up 0.65 percent at 16.3 euros at 12.30 GMT, which values the group at approximately 11.7 billion euros.
"The direction of operating earnings is positive for the first time in a while for CRH," said Barry Dixon, analyst at Davy Stockbrokers.
"If this momentum continues, the stock will soon grow." ($1 = 0.7567 euros)
(Editing by David Cowell)