Irish building material group CRH Plc (CRH.L,CRH) Tuesday reported an 18% decline in its group sales, on a like-for-like basis, for the second half of 2009. The company also said that trading conditions remain difficult, and it expects to deliver lower EBITDA and pre-tax profit in fiscal 2009.
In the first half, the company's group sales were down 21% on a like-for-like basis. Benefits from cost reduction measures and more moderate energy-related input costs compared with the second half of 2008, resulted in an easing in the rate of profit decline experienced in the first half, the company noted.
For the second-half, cash flow was particularly strong with a reduction in net debt to below EUR 4 billion at December 31 from EUR 5.1 billion at June 30, following acquisition expenditure of nearly EUR 0.2 billion in the second half.
Net debt for 2009 was reduced to over EUR 2 billion from EUR 6.1 billion at 2008-end, driven by intensified focus on cash generation, excellent working capital management and restrained capital expenditure, along with proceeds of EUR 1.24 billion from the March 2009 Rights Issue, the company noted.
Further, CRH said that total acquisition spend in 2009 reached about EUR 0.45 billion on a total of 17 transactions.
In Poland, the company's second-half cement volumes were in line with 2008 levels following a 25% decline in the first half. The company also stated that sharp first-half volume declines in Ukraine moderated through the second half. While Switzerland continued to perform well throughout the year, the demand trends evident through the first half in Ireland, Spain, Finland and Portugal continued broadly unchanged through to year-end.
Further, CRH stated that the demand patterns evident across its Europe Products operations in the first half of 2009, which resulted in a like-for-like sales decline of 19%, continued at broadly similar levels in the second half. However, the final quarter saw signs of improvement in UK brick demand as house-builders and merchants began to rebuild inventories.
The company also said that Americas Materials performed robustly throughout 2009 with strong cost and commercial delivery. While lower private sector demand had a significant negative impact on volumes, infrastructure activity gained momentum through the second half, as state authorities began to release projects financed by the American Recovery and Reinvestment Act, or ARRA. Margins expanded overall in 2009, helped by lower input costs for energy, targeted cost reduction measures and ongoing price increases, CRH noted.
In the Americas Products business, the company witnessed wider indications of stabilization in new U.S. residential construction in the fourth quarter of 2009. However, this had little or no impact on demand on the ground. Meanwhile, ongoing reductions in U.S. non-residential construction activity continued to impact the company's operations. Additionally, the pace of organic sales decline seen in the first half of the year continued with underlying sales dropping over 25% for the year in U.S. Dollar terms.
Further CRH said that in the Americas Distribution business, the Exterior Products segment was adversely affected by weak consumer confidence and poor weather conditions in the northern U.S. states in the first half of the year. While the pace of decline stabilized in the second half, it was accompanied by a deterioration in sales for the company's Interior Products segment, which is more non-residential oriented, the company noted.
Additionally, CRH stated that it has put in place a range of cost reduction measures, which are projected to deliver total annualized gross savings of around EUR 1.65 billion over the period 2007-2010 with total implementation costs of EUR 305 million. This represents an increase of EUR 200 million in savings and EUR 55 million in implementation costs compared with savings of EUR 1.45 billion and implementation costs of EUR 250 million announced in July 2009.
The company has recorded implementation costs of EUR 200 million in 2009 and expects a further implementation costs of about EUR 45 million in 2010. Incremental savings in 2010, after implementation costs, are estimated at approximately EUR 260 million.
Going forward, CRH said that trading conditions remain difficult and the timing of any sustained pick-up in developed world construction demand is unclear. The company's management remains focused on ongoing cost reduction and operational initiatives, which will benefit the company's performance in 2010.
CRH expects to deliver full-year 2009 EBITDA of nearly EUR 1.8 billion, compared with EUR 2.67 billion in 2008. Pre-tax profit before asset impairment charges is projected to be approximately EUR 0.75 billion in 2009, lower than EUR 1.63 billion reported last year.
The company said that the pre-tax profit outlook is in line with the guidance provided in its November 10th Interim Management Statement, in which the company had projected full-year profit before tax between EUR 730 million and EUR 760 million.
Further, the company said that fiscal 2009 profit would include once-off charges of EUR 0.2 billion associated with cost reduction action taken in 2009. The expected 2009 profit out turn would also reflect an adverse currency translation impact compared with 2008.
The full-year 2009 depreciation and amortization charge is estimated to be approximately EUR 0.8 billion before asset impairment charges. The company also expect that full-year profit on disposals of fixed assets will be less than half of last year's level of EUR 69 million. In addition, the group's share of associates' profit after tax is projected to be approximately one-third lower than EUR 61 million in 2008.
Based on business segments, Europe Materials' full-year EBITDA is expected to be down approximately 45% on the 2008 out turn of EUR 0.806 billion. The company said that roughly EUR 70 million of the decline is attributable to the negative translation impact of the weaker Polish Zloty and Ukrainian Hryvnia. Europe Products' full-year EBITDA outcome is expected to be approximately 30% lower than the 2008 out turn of EUR 0.392 billion. With a fall of approximately 10% in like-for-like sales, Europe Distribution is expected to report an EBITDA decline of approximately 25% on the EUR 0.258 billion achieved in 2008.
Overall for Europe, the company foresees full-year EBITDA decline of about 40% on the EUR 1.46 billion reported in 2008, reflecting the strength of the Euro impacting the translation of non-eurozone results.
Americas Materials' EBITDA for the year is expected to show a low-teen percentage decline on the 2008 outcome of US$1.065 billion, hurt by lower sales revenues. Americas Products' full-year EBITDA is estimated to show a decline of approximately 55% on 2008's US$0.543 billion. The company also said that it forecasts about 30% decline in U.S. Dollar EBITDA for the full-year 2009 for Americas overall compared with last year's $1.778 billion.
CRH.L is trading at 18.95 pence on the LSE, down 0.52 pence, on a volume of 1.22 million shares.
CRH closed Monday's trading at $28.05, up $0.72, on 37,800 shares.
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