Davy Research |
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CRH
(CRH ID)
Interim management statement due tomorrow
08 May 2012
Barry Dixon
| Closing Price: | 1459c | Rating: | Neutral | 12/01/12 | Previous: | Outperform | 12/09/11 |
FACTS: CRH will issue an IMS ahead of its AGM tomorrow (May 9th).
ANALYSIS: In its IMS, CRH is likely to give some indication of its expectations for revenues and EBITDA for the first half of the year for the group as well as for the European and Americas regions. In its full year results statement in February, management indicated that it expected another year of progress in 2012 which we take to mean a year of profit improvement. We currently forecast H1 EBITDA of €618m, 8% ahead of the €570m reported in H1 last year. Q1 peer results suggests that performance in the Americas regions could be better than expected due to favourable weather conditions in the period, while performance of the European business could be below expectations due to a combination of slower-than-expected economic growth rates and poor weather in February. Overall we believe that it is too early for the company to change its overall guidance for the full year. Management will have a much better sense of how the year is progressing when it issues its IMS in July.
DAVY VIEW: We believe it is too early in the construction season to make any meaningful change to forecasts. There are concerns, however, about the prospects of construction spending in Benelux and Poland as well as ongoing uncertainty surrounding the US highway construction sector. Combined, these account for over 40% of group profits. We believe therefore that the scope for upgrades is limited. Despite this, CRH continues to generate strong cash flow, has one of the strongest balance sheets in the sector (which is about to get stronger following the sale of its Secil business for €574m) and has an unrivalled dividend payment record. In the current market environment, these are very attractive characteristics.