Europe continues to provide FTSE 100 constituent CRH (CRH) with enough headwinds to take group revenues 5.7% lower to just over €8 billion according to interim results. That puts the business into a loss-making position and the victim of earnings downgrades by analysts, the shares falling 3.9% to £13.70.
The Irish construction materials specialist which derives approximately half of its turnover from Europe and the rest from the Americas, saw revenues in the former decline by 9.9% in the six months to 30 June while turnover from transatlantic operations only fell by 1.2%.
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation) in the group's European materials division was down 54% with severe weather conditions up to April being cited among the principle causes.
The European products division – located predominantly in the Netherlands, Germany, Belgium, the UK and France – was also hit by the long winter and while a pick-up was being reported in second quarter, it wasn't enough to prevent a 40% drop in EBITDA to €54 million.
The region's distribution division was also hard-hit and EBITDA slipped 31% in the first six months of the calendar year.
Falls in the American materials division (EBITDA down 27%) weren't quite offset by 19% and 20% gains respectively in the products and distribution businesses leading to the region's overall 1.2% fall in turnover.
Worryingly, debt continues to creep up at CRH; the group is currently in the red to the tune of €4.2 billion, up €400 million on the same period a year earlier. A bright spot for investors in an otherwise gloomy set of figures was the maintenance of their 18.5c dividend.
Investec analyst Tom Holmes says: 'While this morning’s numbers were somewhat disappointing, as an operationally geared play on the US recovery, trading at a discount to peers and with the best dividend yield in the sector, we maintain our positive stance on CRH.'
Analysts at Irish stockbroker Davy cut EBITDA forecasts by 8% but maintains an 'outperform' rating. The stockbroker comments: 'A key feature of the H1 result was the negative operating leverage associated with volume declines - some weather-related. We expect that a return to more normal weather patterns, combined with delivery on cost initiatives, will turn this leverage effect to CRH's benefit. We see significant long-term margin recovery potential.'