28 mar. 2012

CRH : More details for 2012 - Building Materials in US Challenging, Europe Not good

From the Research desk of Goodbody Brokers

CRH (Reduce, Closing Price €15.68 / £13.15); Annual report gives more insight into outlook at a divisional level
Analyst: Robert Eason T +353-1-641 9271 E robert.v.eason@goodbody.ie
When CRH released FY11 results at the end of February, management indicated that it expects to generate further lfl growth in 2012 (Goodbody expecting 2% versus 5% in FY11), with pricing a key target area. This coupled with full year contributions from 2011 acquisitions underpins an expectation for a further year of progress in 2012 (Goodbody forecasting 15% growth in PBT). The release of the 2011 Annual Report yesterday gives a lot more detail on the 2012 outlook for the six divisions.

Volumes in US Materials are expected to be relatively flat (versus Goodbody forecasts of 1-2%), reflecting lower infrastructure volumes and demand to be flat to slightly up for residential /commercial. Management also highlights the challenging backdrop on cost inflation and therefore price increases are a priority. For US Products, management is expecting further modest sales growth in 2012 (versus Goodbody lfl sales growth of almost 8% and compared to 2% in 2011). Leverage from such growth, coupled with the on-going benefits of streamlining the business, gives “cause for cautious optimism for an improved operating outcome in 2012” (Goodbody has factored in almost a doubling of profits in FY12). On US Distribution, the outlook is for a year of further progress (Goodbody has profit growth of 17%).

As expected there is more caution with regard to the European operations (Goodbody has broadly flat profits for 2012) and the main points are: (i) European Materials – The outlook is challenging for Ireland / Portugal / Spain, but internal measures taken should lead to flat margins. Modest declines in construction activity levels are expected in Switzerland, Finland and the Benelux, while demand is anticipated to remain robust in Poland / Ukraine; (ii) European Products – The outlook for this division is uncertain for 2012, given continuing declines in consumer confidence, low residential / non-residential activity levels and further public sector cuts. However, conditions in Germany and Denmark continue to be robust; and, (iii) European Distribution – Following a good 2011 (sales / profits +22%/35%), management expects that “market circumstances may deteriorate somewhat in 2012” but still see some improvement. This reflects good prospects for operations in Germany, Austria, Switzerland and Belgium, which will be partly offset by weakening trends in France and The Netherlands.