Tags: CRH | slow | construction | economy

CRH Battles a Slow Construction Economy

By Tim Plaehn   |   Wednesday, 16 Nov 2011 04:40 PM

Materials provider CRH Ltd. (CRH) is faced with a slow construction economy in both of its major markets but has been able to increased profitability with cost controls and expanding margins. Investors looking for a way to play a construction upswing may want to consider its shares.

CRH is based in Ireland, with operations fairly evenly divided between Europe and North America and a small operation in Argentina. The company produces basic building materials such as cement, asphalt and aggregate, that is, sand and gravel. CRH also has a products and distribution division in each of the two markets which produce and sell additional construction products such as precast concrete, fencing products, glass and glazing systems and architectural concrete.

The company reports finances semi-annually as opposed to the U.S. convention of quarterly. For the first half of 2011 revenues were $11.8 billion, up 7 percent from $11.1 billion in 2010.

Profit before tax of $138 million was up almost 300 percent from the $36 million earned in the first six months of the previous year. Dollar amounts cited here are based on the euro exchange rate of June 30.

U.S. holding back

The North America materials division of CRH produces about 35 percent of the company's EBITDA and the Americas product & distribution divisions are responsible for about 10 percent.

For the first half of 2011, revenues from these two divisions were down 2 percent year-over-year and EBITDA was down 4 percent. The company's European divisions saw revenue and EBITDA increase by 13 percent and 18 percent respectively. An upward turn in the U.S. construction industry would produce a significant burst of growth for CRH.

In the United States, less than 3 percent of the CRH ADR shares are held by institutional investors. The stock is not widely followed by Wall Street. The most recent report from the analysts at HSBC Securities upgraded the stock to neutral from underweight.

The company next reports on March 1.

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Materials provider CRH Ltd. (CRH) is faced with a slow construction economy in both of its major markets but has been able to increased profitability with cost controls and expanding margins. Investors looking for a way to play a construction upswing may want to consider...
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