CRH shares jump as Trump plans to ramp up infrastructure spending in the US
Shares in CRH have risen more than five per cent today as US infrastructure spending is seen growing further in 2017.
The figures
The Dublin-based group posted pre-tax profit up 69 per cent to €1.74bn (£1.49bn) while earnings before interest, tax, depreciation and amortisation (Ebitda) for the full year increased 10 per cent on a proforma basis to €3.13bn.
Basic earnings per share shot up 69 per cent to 150.2 cents from 89.1 cents in 2015, and CRH upped its dividend per share four per cent to 65 cents.
Year-end net debt was reduced by €1.3bn to €5.3bn.
Shares increased 5.7 per cent at 2,875p in afternoon trading.
Why it's interesting
The Tarmac maker spent 2016 integrating and reducing its debt pile from the acquisition of Lafarge and Holcim, two firms it bought for a combined fee of €6.5bn in 2015. Debt metrics are now down below normalised levels, finance director Senan Murphy told City PM
Murphy said the group started 2017 very active in the mergers and acquisitions space, a strong feature of the firm's DNA. CRH has already spent €500m on acquisitions in the first two months of 2017, and it says the pipeline remains strong.
CRH's balance sheet has also benefited from increased infrastructure spending in the US, which accounts for 65 per cent of its earnings.
The firm, which is the number one building materials company in the US, expects further volume growth in America based on infrastructure plans that are already in place, like FAST, a plan that set aside $305bn for road repairs between 2016 and 2020.
US President Donald Trump last night repeated his pledge to spend $1 trillion on infrastructure. Murphy said any impact of Trump's increased spending would come in the medium term, but he added even without speculating on Trump's spending, the US already has a good funding structure in place to support growth.
What CRH said
Albert Manifold, chief executive, said today:
2016 was a year of significant profit growth for CRH, with margins and returns ahead of last year in every division. We benefited from positive momentum in the Americas, and also in Europe, particularly in the Northern and Eastern regions where we operate.
The focus on cash management resulted in our year-end debt metrics being ahead of target and below normalised levels. In addition to organic growth, we continue to develop CRH through acquisitions, having completed eight transactions already this year. With our balanced portfolio of businesses, CRH is well positioned to capitalise on the ongoing economic recovery and we see continued growth for the group in 2017.
What analysts said
Analysts at Davy said:
While CRH continues to report improving margins and returns across its divisions, strong cash generation is the stand-out feature of its full-year results. With net debt/Ebitda now at an industry-leading 1.7x, the company is back in investment mode as demonstrated by its €500m in acquisition spend already this year.
This management team is clearly focused on structurally improving returns in the business through judicious investment of cash while it is unafraid to recycle capital from lower-return businesses. We do not believe that the current valuation reflects this structural improvement in returns and this is one of the main reasons why CRH remains one of our top picks in the sector.