CRH plc — Q1 2024 Form 10-Q
Business and period: CRH supplies building materials, products and construction services, primarily in North America and Europe. This unaudited report covers the three months ended March 31, 2024; amounts are in U.S. dollars unless otherwise stated. Results are seasonal and the company cautions that first-quarter performance may not indicate full-year results.
Financial performance
- Revenue: $6.533 billion, up 2% from $6.427 billion. Pricing and acquisitions offset lower volumes, particularly in Europe.
- Profit and margins: Gross profit rose 12% to $1.807 billion; gross margin increased to 27.7% from 25.2%. Operating income was $28 million versus $2 million. Net income was $114 million versus a $31 million loss; net income attributable to CRH was $116 million versus a $28 million loss. Basic EPS was $0.16 versus a loss of $0.05.
- Adjusted EBITDA: $445 million, up 15% from $386 million; margin increased to 6.8% from 6.0%. This is a non-GAAP measure.
- Cash flow: Operating cash flow was a use of $712 million, compared with a use of $671 million, reflecting seasonal working-capital outflows. Investing cash flow used $2.096 billion, largely for acquisitions; financing cash flow used $176 million. Cash and cash equivalents were $3.308 billion at quarter-end.
- Debt and liquidity: Short- and long-term debt totaled $12.672 billion; net debt was $9.600 billion, versus $5.406 billion at December 31, 2023. The company had $3.781 billion of undrawn committed revolving facilities and said available liquidity should meet foreseeable requirements. The RCF was undrawn, with no financial covenants. Cash covered stated debt maturities for the next 1.3 years; weighted-average maturity of remaining term debt was 7.8 years.
- Capital returns: Cash dividends paid were $750 million, including the final 2023 dividend. The company declared a $0.35-per-share quarterly dividend. It repurchased 5.0 million shares under its program; MD&A reports approximately $0.4 billion returned through the program, while the cash flow statement reports $559 million of share repurchases.
Material changes and segment trends
- Americas Materials Solutions: Revenue increased 16% to $2.202 billion, with Adjusted EBITDA of $15 million versus a $35 million loss. Pricing, volumes, favorable weather and the Texas acquisition contributed.
- Americas Building Solutions: Revenue rose 2% to $1.693 billion and Adjusted EBITDA rose 2% to $308 million. Outdoor Living growth was partly offset by weaker Building & Infrastructure activity.
- Europe Materials Solutions: Revenue declined 8% to $2.013 billion, but Adjusted EBITDA increased 32% to $90 million, supported by pricing, lower energy costs and efficiencies. Lower volumes and adverse weather weighed on revenue.
- Europe Building Solutions: Revenue fell 10% to $625 million and Adjusted EBITDA fell 38% to $32 million, reflecting subdued residential construction, adverse weather and lower activity.
- Gross profit improved despite revenue growing only modestly: cost of revenues fell 2%, including a 26% decrease in energy costs. SG&A increased 10%, principally due to labor costs, which rose 12%. Interest expense rose to $133 million from $81 million, mainly because of higher debt balances and rates.
Outlook, unusual items and risks
- Outlook: Management expects a favorable 2024 market backdrop and continued positive pricing momentum. North America is expected to benefit from infrastructure activity and non-residential investment; Europe is expected to have good underlying infrastructure and key non-residential demand. New-build residential construction is expected to remain subdued. CRH expects another year of growth assuming normal seasonal weather and no major macroeconomic dislocations; no specific full-year earnings target is stated in the filing.
- Acquisitions and divestitures: CRH acquired a Texas cement and ready-mixed concrete portfolio for $2.106 billion; total acquisition cash outflow, net of cash acquired, was $2.206 billion. The acquisitions added $1.025 billion of provisional goodwill. European Lime divestitures generated a $115 million pretax gain and contributed to $739 million of investing proceeds; the Poland phase is expected to close in the second half of 2024. Canadian cement and materials assets were sold April 1, 2024. The company also acquired a California materials business on April 5, after quarter-end.
- Earnings quality: Other nonoperating income of $161 million included the European Lime divestiture gain and unrealized investment gains. The tax benefit was $19 million; the effective tax rate was negative 19%, affected partly by the largely tax-exempt divestiture and share-based compensation tax deductions.
- Debt and market risks: Commercial paper outstanding at quarter-end included $1.863 billion in U.S. dollars and $929 million in euros. Approximately $2.8 billion of the $2.9 billion second-quarter 2024 debt maturities related to commercial paper programs. A 100-basis-point interest-rate increase was estimated to reduce pretax earnings and cash flow by approximately $13 million. The filing also identifies foreign-exchange, commodity-price, weather, construction-demand, inflation, labor-cost, geopolitical and acquisition-integration risks.
- Contingencies and controls: Management said it did not believe legal proceedings would materially affect financial condition, results or liquidity; no material risk-factor changes were reported. Guarantees covered $12.4 billion of subsidiary borrowings and related obligations, plus $0.4 billion of letters of credit. Disclosure controls were assessed as effective; no material changes in internal control were reported.
Important facts for investors to verify
- Whether seasonal operating cash outflows reverse as construction activity increases, and how working capital affects full-year cash generation.
- Commercial-paper refinancing and liquidity needs, particularly against the reported near-term maturities and rising net debt.
- Progress integrating the Texas acquisition, final purchase-price allocations and returns on the substantial acquisition investment.
- Timing and proceeds of the remaining Poland Lime divestiture, and the effect of divestitures and other nonrecurring gains on reported earnings.
- Whether subdued European and residential demand, labor inflation and weather affect the conditional 2024 growth outlook and segment margins.
- Differences between the share-repurchase amounts described in MD&A and the cash flow statement, and the timing of dividend and buyback cash payments.