CRH PLC (CRH) Meets Expectations, Divests Americas Distribution Business

Irish building materials giant, CRH PLC (UK) (LON:CRH), came out with first-half results that wouldn’t cheer many but it still met the guidance and showed growth in both revenue and earnings. Core earnings (EBITDA) were 5% higher at €1.17 billion and sales rose 2% to €13 billion, when compared to the same period a year ago. Comparable core earnings grew 2% in Europe, 6% in the Americas and fell 39% in Asia, while core earnings margin improved to 9% from 8.8%. “We have had a satisfactory start to 2017 with stabilising trends in key European markets and EBITDA growth in the Americas”, said CEO Albert Manifold.
LSE:CRH CRH Future Revenue and Net Income by Simply Wall St
LSE:CRH CRH Future Revenue and Net Income by Simply Wall St
However, the more important part of the release was an announcement to divest its Americas Distribution business and use the proceeds to acquire Fels, “a German lime and aggregates business”. CRH said the valuation of $2.63 billion for the distribution division, which generated an EBITDA of $150 million last year, is attractive as the company doesn’t see more accretive acquisition opportunities or ability to gain market leadership. “The integration of Fels with our existing lime businesses will give CRH a number two position in the attractive European lime market while providing a platform for further growth”, said the company. Fels, bought for €600 million, generated an EBITDA of €70 million last year. But the major reason behind the purchase is the company’s lime reserves of over one billion tonnes. CRH has made 13 other transactions involving either acquisitions or investments, spending €632 million on what it calls “development” expenditure — one of the primary growth strategies for the company. And it makes sense to invest where the value creation opportunity is better, considering years of track record of achieving a high rate of success with acquisitions and maintaining a strong balance sheet at the same time. “These transactions announced today demonstrate the execution of CRH’s strategy of adding value through the efficient allocation and reallocation of capital, and in particular the deployment of capital into an attractive growth market in Europe, while maintaining our financial discipline”, said CEO Albert Manifold. Despite its strong track record, CRH got 4-stars in our dividend ratings. If you are looking for companies with a higher rating, check out: Dividend Rockstars