ANALYSIS:CRH'S OWN stockbroker, Irish firm Davy, yesterday suggested a loss of market share as one possible reason for what it called the building material giant's "disappointing" interim results.
The Irish group produced figures showing first-half pre-tax profits were down 77 per cent and warning that, contrary to forecasts it published last month, earnings are likely to trail last year’s €1.8 billion total by 10 per cent.
Davy analyst Barry Dixon argued that CRH’s results were disappointing in light of the fact that its competitors, including US-based Vulcan and Martin Marrietta, have recently made more optimistic statements about their immediate prospects.
“There are a few possible explanations: the first is that CRH is losing market share by being less competitive in the market; another is that there has been a deterioration in spending in the US since early July which has not yet been reflected by CRH’s peers,” Mr Dixon said in a note reacting to the group’s results statement.
The group’s executives dismissed any suggestion that it was losing market share, particularly in the US, from where about half its revenues originate.
Chief executive Myles Lee said he did not think that there was any evidence that the company had lost any market share in the US.
The group is blaming weaker-than-expected demand in the US for its first-half performance, and says this is the basis of its warning on earnings.
CRH’s business is seasonal, with much of the demand for its products coming in the second half of the year.
July and August are key months, particularly in the US. Sales fell short of the group’s expectations during this period, leaving the Irish company facing a worse outcome than the one forecast in a statement published at the beginning of July.
Citi yesterday cut its rating on CRH to hold from buy. Analysts Aynsley Lammin and Clyde Lewis said one of their main cases for investing in the stock was the likelihood of a US recovery, which now looks “more fragile and delayed”.
CRH has made a number of acquisitions since the end of June, including a 90 per cent stake in a Swiss firm, Risi, which produces stone and readymix cement. The privately-held firm has sales of about €75 million a year.
The group shook hands on the deal, which is subject to regulatory approval, this week, but said a confidentiality agreement barred it from revealing the price it paid.
The company has spent €245 million on acquisitions and development to date.
