CRH sent its shares higher on Wednesday by unveiling a €1 billion share buy-back plan as it takes a breather from large acquisitions and focuses on selling off unwanted and underperforming assets.
The stock-market value of the building materials giant rose by 2.5 per cent to €24.5 billion, bringing to 4.4 per cent its advance since group chief executive Albert Manifold said in an interview with The Irish Times last week that a share repurchase programme was under active consideration.
Speaking on a call with analysts on Wednesday, a day before the group’s annual general meeting in Dublin, Mr Manifold said the decision to press ahead with CRH’s first share buy-back in a decade came as it pressed the “pause button” on major deals, after committing almost €4.8 billion on purchases last year.
With the group having sold its US distribution business, Allied Building Products, in January for $2.6 billion (€2.1 billion), a share buy-back is seen as a way of using “excess cash” as CRH’s stock trades below where the group sees its “intrinsic long-term value”, Mr Manifold said.
CRH also committed in a trading update issued on Wednesday to generating a further €1.5 billion to €2 billion from the sale of underperforming assets or businesses that no longer fit its model.
The news comes as Ireland’s largest publicly-quoted company said sales fell by 2 per cent in the first quarter of the year on the back of poor winter weather and the timing of Easter holidays.
Capital allocation
Goodbody Stockbrokers analyst Robert Eason said the sales decline was “as expected” and the plan to buy back shares and sell more non-core assets show that “capital allocation remains to the fore”.
“Overall, we view this morning’s statements as being positive,” Mr Eason said.
In Europe, sales were 2 per cent behind in the first quarter, while weather also hit the group’s activities in the Americas, with sales down by 3 per cent. In the Philippines, “competitive market conditions” meant sales were 5 per cent behind the first quarter of 2017.
In Ireland, CRH said volumes in all products were behind due to weather disruption, but also pointed to positive pricing trends, while CRH said it was a “challenging start to the year” in the UK as volumes for all products had been impacted by significant weather disruption and were behind figures for 2017.
Group earnings before interest, tax, depreciation and amortisation, however, are expected to be in line with the first half of 2017, at about €1.02 billion, and with “normal weather patterns and in the absence of any major market dislocations” CRH is forecasting earnings for the second half of the year to be ahead of last year. The first six months of the year are traditionally less significant for the group.
