CRH sets sights on bid for Tarmac

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CRH, one of the world's biggest suppliers of building, materials has managed to offset a downturn in the United States construction market with a strong performance in Europe helping it to a higher-than-expected rise in profits.

The Irish company said it will make further acquisitions in the second half of the year as it eyes up rival Tarmac, which has been put up for sale by mining company Anglo American.

Myles Lee, the chief financial officer, refused to rule out making a move on Tarmac, adding that "most of the major participants will be looking at the target opportunity and we will be doing likewise".

CRH posted a 27 per cent rise in first-half pre-tax profit to €670m during the six months to 30 June. Revenues jumped 21 per cent to €9.7bn. Yesterday, shares in the company increased 2 per cent, or half a euro to €30.79. Shares have been taking a hit on the back of growing fears of a wider downturn in the US construction market as CRH does about half of it business in America.

The US housing market is experiencing its worst slump in 16 years. Mr Lee said the decline in the number of new homes being built had been exacerbated by the sub-prime crisis, which has led to fewer mortgages being made available. However, the company believes migration to the US will revive the housing market in the medium term but does not see any improvement through to next year.

The company said growth in non-residential construction had offset the decline in residential construction in the US. "While the recent disruption in financial markets has contributed to added uncertainty, we anticipate that, with the broad product and end-use balance of our businesses, full-year profits in US dollars will be similar to 2006 levels," it added.

In Europe, the outlook for the second half remains strong. The company spent €1bn on expanding operations with 35 acquisitions in the first half, including Getaz Romang, a building products supplier in Switzerland. The company is Ireland's most acquisitive with €12bn spent on purchases in 10 years. CRH's biggest single takeover was the Georgia-based highways unit of Ashland, for $1.3bn in August.

Analysts at Credit Suisse said the sell-off in the stock over the past month has been overdone. "We would highlight two issues," Credit Suisse said. "Firstly, that the group's net exposure to the new US housing market, a key investor concern, is limited, and secondly that trading conditions across Europe remains, in the whole, robust."

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