* CRH's diversified business limits impact from merger
* Irish group may sell further 10 percent of net assets
* Expects earnings to rise, some sign of European pick up
(Adds CEO quotes on Holcim, Lafarge merger)
By Padraic Halpin
DUBLIN, May 7 Ireland's CRH does not
expect the merger of Holcim and Lafarge to
have a big impact cement industry competition nor raise
antitrust issues for its own diversified materials business, its
CEO said on Thursday.
CRH, which said on Wednesday it expects earnings to rise in
2014 after sales grew sharply in its struggling European market
in the first four months of the year, is embarking on a disposal
plan of its own as it streamlines operations under new Chief
Executive Albert Maniford.
As part of the industry's biggest tie up, Holcim and Lafarge
will sell businesses worth 10 to 15 percent of their earnings
before interest, tax, depreciation and amortisation (EBITDA) to
satisfy antitrust concerns - or about 5 billion euros in total.
The merger, which is expected to close in the first half of
2015, will create a global cement player with $44 billion in
annual sales, dwarfing the 18 billion euros of revenue CRH
roughly splits between its American and European operations.
"We've got good market positions throughout Europe and the
United States, I don't think it's going to have a huge effect on
the competitive dynamic within the industry quite frankly."
Manifold told reporters at the company's annual general meeting.
"There's always been a large number of competitors and the
cement industry throughout the world is extremely fragmented
anyway. This merger is a very significant move within the cement
industry. Of course CRH is not a cement business."
The building materials and products group, whose cement
operations represent about 15 percent of earnings, said it did
not operate in many of the markets where Holcim and Lafarge
would overlap, nor would the businesses the pair have to sell as
a result conflict with its own divestment plans.
After announcing a review of its portfolio last year, CRH
said in February that it would sell 45 businesses representing
10 percent of net assets and would continue to keep a watch on
other operations accounting for 20 percent of assets.
It said on Wednesday it was still assessing half of those
businesses and would complete the review in quarter three.
CAUTIOUS ON EUROPEAN RECOVERY
CRH, which is targeting a return to profit growth this year,
saw sales rise 10 percent in Europe in the period to the end of
April, driven by better weather conditions and improving
underlying market conditions.
In the United States, where CRH is the leading producer of
asphalt for highway construction, cold weather hit early season
activity but stronger housing activity and a strengthening
economic background saw revenue rise by 2 percent.
The Dublin-based group said it expects EBITDA in the
seasonally less significant first half of the year to rise to
500 million euros from 400 million a year ago.
Earnings in the second-half should be somewhat ahead of last
year, it added, with an uptick seen in commercial and
state-sponsored projects in the United States such as schools
The company's London-listed shares were down 3.8 percent by
1530 GMT, as other building stocks fell on Wednesday in a 1.5
percent weaker European construction sector
CRH said that it had seen limited impact on trading to date
from the political unrest in Ukraine, one of its main Eastern
European markets that accounted for 24 million euros of EDITDA
in 2013, with cement volumes up 30 percent to end-April.
The outlook remains very uncertain however and Manifold said
that although most of its 1,500 employees are based in the
western half of the country that has been less impacted by the
conflict, it was inevitable that there would be a slowdown.
He was also careful not to overplay the European recovery.
"We are not seeing a very significant uptick in volumes yet
so it's quite a weak recovery across a number of sectors and it
is patchy. There is no major work restarting yet, it's slow and
progressive out of a very deep recession but it seems to be
moving in the right way," Manifold said.
(Editing by Jeremy Gaunt)