Irish building materials group CRH is expected to post a steep drop in first-half earnings next week with investors eager for indications of a boost in the second half from U.S. government spending.
CRH, the No.1 asphalt producer and No.3 aggregates producer in the United States, is expected to benefit from U.S. President Barack Obama's $787 billion stimulus programme after a global construction downturn hit earnings in the first half.
An average of five analysts surveyed by Reuters Estimates predicted pretax profits before exceptional items in the six months to end-June of 101.1 million euros ($145 million), versus 606 million in the same period last year.
That would be in line with CRH's own recent forecast for an 83-percent drop. [ID:nL7424794]
However, the four analysts who also gave a number for the second-half forecast a smaller drop of 30 percent from the 1.02 billion euros achieved in the same period of 2008. CRH has not given a forecast for the remainder of the year.
Whether they can actually give any guidance for the full year ...that's going to be the really telling thing, Goodbody analyst Robert Eason said.
Holcim of Switzerland, the world's No. 2 cement maker, said on Thursday government stimulus packages in the United States and Europe would boost the construction industry with recovery in mature markets expected from next year or 2011.
A report by brokerage Davy on Friday said the American Reinvestment and Recovery Act would more than offset falls in highway spending by cash-strapped individual state governments.
There is potential upside to our forecasts for the Americas Materials division which should help to underpin the performance of CRH's share price for the remainder of the year, said Davy, which has an 'outperform' rating on the stock.
France's Lafarge, the world's biggest building materials maker, last month cut its 2009 forecast for the global cement market but said it expected emerging markets to remain buoyant outside eastern Europe. [ID:nLU211600]
CRH only generates 15 percent of its earnings in emerging markets according to 2008 figures, less than most peers.
Hence when you look at their share price performance over the last while they have been a bit of an underperformer, Goodbody's Eason said.
CRH raised 1.24 billion euros in a rights issue earlier this year to help finance acquisitions, though analysts expect it to proceed cautiously with any deals for now. However, when US demand begins to recover we see CRH's balance sheet as positioning it to be a net buyer of assets, in particular from other more stretched players, NCB analyst John Sheehan said in a note.
(Reporting by Padraic Halpin and Andras Gergely; editing by Richard Hubbard)