Equity prospects

CRH

Maude Holloway, Trainee Research Analyst

Price£26.45

52 week high-low£31.16—£15.00

Net yield2.80%

Hist / pros per14.41—20.16

Equity market cap£20,711

CRH is a leading global manufacturer and distributor of construction materials. It operates through three business divisions; Americas Materials, Europe Materials and Building Products. 99% of profits come from developed markets with two thirds from North America (mostly the US), and a third from Europe (mostly the UK).  

The Materials businesses focus on aggregates, where stones and sand from CRH’s own quarries are either sold directly to external buyers or combined with CRH’s cement to make concrete, or with asphalt to make bitumen. The Building Products division manufactures pre-engineered products like office fronts from glass and aluminium. They are fairly resilient to market downturns as they benefit from low oil and energy prices. Cement manufacturing is very energy consumptive and carries a large carbon footprint.

CRH benefits from meaningful barriers to entry; the cost of opening a new cement plant or the environmental regulation required to open a new quarry deters new entrants. They could also benefit from US and UK government infrastructure spend packages, if and when these eventually come through. However, the high operating leverage within the company means the negative effect of a reduction in volumes would be magnified.

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