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.

crh conv The outlook for the group in the second half has trimmed back from an expectation of being ahead of the first six months to being in line with the first-half period.


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.'

Issue Date: 20 Aug 2013