The Queensferry Crossing near Edinburgh used 100,000 rebar couplers manufactured by CRH subsidiary Ancon © Getty
Building materials company CRH has sold its North American distribution business for $2.6bn and used part of the proceeds to buy a lime and aggregates operation in Europe.
The Dublin-based FTSE 100 company, which historically has relied on acquisitions for two-thirds of its profits growth, said it decided to sell out after regional consolidation in the US left it with few deal opportunities.
“We found ourselves a distant number four in an industry where size and scale matters, where procurement costs matter, where logistics costs matter, and where having a national footprint matters,” Albert Manifold, chief executive, told an analysts conference.
Distribution was a small part of its North American operation, accounting for just 5 per cent of group earnings before interest, tax, depreciation and amortisation.
But Mr Manifold described the sale to Beacon Roofing Supply as a “unique opportunity” because the price represented 16 times the unit’s earnings before interest, taxes, depreciation and amortisation.
CRH said it was spending €600m of the proceeds on Fels, a German company, with operations in the Czech Republic and Russia. The deal makes CRH Europe’s second-largest producer of lime, a product used in the chemicals and pharmaceuticals sectors as well as cement.
CRH made the twin announcements while reporting first-half sales had increased 2 per cent to €13bn. Its shares were up 3 per cent in afternoon trading in London.
Like-for-like sales in the Americas rose 1 per cent year on year. In Europe, sales were 3 per cent ahead. This offset an 8 per cent decline in Asia.
The company said it faced cost pressures, particularly energy costs, but it was now seeing prices rise on the back of improved volumes in key markets. Ebitda for the six months to June 30 rose 5 per cent to €1.17bn. Pre-tax profits increased 27 per cent year on year from €407m to €517m.
Davy, the company’s Dublin house broker, said the results were in line with forecasts, adding the disposal “provides the group with significant firepower to pursue further returns-enhancing acquisitions”.
Robert Eason of Goodbody in Dublin said they were “likely to be nudging down forecasts” due to the challenging Asian market and higher US input costs.
The company spent €600m on 11 small acquisitions during the period and realised €145m from disposals while reducing net debt by €700m.
The company said it expected the second-half sales and profits to be ahead of the comparable period in 2016.
“All we need is some good weather to get out and do the work” Mr Manifold said.
Nearly two-thirds of group earnings come from the US, where activity has been underpinned in recent years by increased public spending under the Obama administration’s 2015 initiative to repair US highways.
In Europe, CRH is the second-largest building materials distributor and biggest producer of “heavyside” products which cover cement, aggregates and ready-mix concrete.
In February 2015 it spent €6.5bn on businesses being sold as part of the LafargeHolcim merger, including the Tarmac unit in the UK and a cement business in the Philippines.