CRH cuts forecast as Sandy hits US unit

CRH has lowered its 2012 earnings forecast because of disruption at its US operations caused by Hurricane Sandy and continued weakness in European markets.

The Irish-based building materials company, a bellwether for the state of the global economy, said on Tuesday it had experienced much lower growth at its Americas operation during the third quarter and a higher rate of decline in Europe, particularly in Poland.

Overall third-quarter sales fell 3 per cent when compared with the same period last year, excluding the impact of exchange rates, acquisitions and divestments. CRH said full-year 2012 earnings before interest, tax, depreciation and amortisation were now expected at about €1.6bn, down from €1.65bn in 2011.

“For 2012, the recent major storm activity in the eastern US, which is likely to result in significant reconstruction work that should benefit 2013, has caused significant disruption to our materials operations in the region,” said the company.

Myles Lee, CRH chief executive, told the Financial Times that the company’s US division expected to get a lift in growth from an uptick in repair and maintenance work in the wake of Sandy in the spring. But he said it was difficult to quantify the impact on CRH numbers.

CRH said it expected earnings at its European operations to fall 15 per cent in 2012 compared to 2011. In the third quarter, sales at the company’s European building materials division fell 11 per cent, compared to the same period last year, primarily as a result of contraction in Polish construction activity. Market conditions in Ireland and Spain were “very challenging”, while significant declines in market activity in the Netherlands hit CRH’s distribution sales in Europe.

Mr Lee said CRH was better placed than many of its rivals to expand during the eurozone debt crisis because of its low debt, which is expected to be about €3bn at the end of the year or below two times net debt to ebitda. CRH also has no exposure in peripheral markets such as Italy and Portugal and significant operations in solid markets such as Germany and Finland, he said.

Last month CRH pulled out of a bid to buy a stake in Jaypee Cement – the third-biggest cement producer in India. However, Mr Lee said the company continued to have an interest in expanding its India operations.

Robert Eason, analyst with Dublin-based Goodbody stockbrokers, said the downward revision of guidance reflected challenging market conditions and the stockbroker remained cautious on CRH. "We expect no material change in the macro backdrop in 2013 so remain cautious on the stock with it trading on 17-18 times next year’s earnings," he said.

Shares in CRH nudged up to £11.44p in London.