Shares in the FTSE 100’s CRH (LSE: CRH) look perky this morning on the release of a trading update. The company claims to be the “leading” building materials business in the world, with around 3,100 operating locations across 30 countries.
In North America, it’s the “largest” operation of its type. It’s also big in “heavyside” materials in Europe, and trades in Asia and South America as well.
A strong trading record
CRH manufactures and supplies many types of integrated building materials, products, and solutions for the general built environment. The company has an impressive trading and financial record. Revenue, earnings, cash flow and shareholder dividends have all tended to rise a bit each year.
Meanwhile, with the share price close to 2.294p as I write, the forward-looking dividend yield for 2021 sits just above 3.3%. After the recent stock market falls, I reckon CRH is worth considering as part of a long-term diversified portfolio.
In today’s update, the company revealed a “positive” start to the year. Like-for-like sales were 3% higher in the first quarter compared to the equivalent period last year. However, the directors said in the update the outlook for the whole of 2020 is uncertain because of the coronavirus pandemic.
But the firm has been working hard to mitigate the effects of the crisis. Measures include the suspension of all non-essential expenditure and capital investment. The directors reckon they’ve taken “significant” cost and restructuring actions, as well as reducing working capital because of lower levels of turnover.
Part of the cost-saving has involved the temporary laying off and furloughing of staff in areas of the business affected by the crisis. The directors also decided to reduce their own salaries and those of the leadership team by 25%, which I reckon demonstrates integrity.
A mixed bag of current trading
Perhaps one measure of the directors’ confidence that CRH will trade through the crisis is that they’ve not cut the final dividend for the year. It will go ahead, subject to shareholder approval at tomorrow’s AGM.
One of the main challenges for CRH during this crisis is the way the company must implement social distancing measures in its operations across the world. This isn’t one of those enterprises where all activity has halted. Instead, the firm is making “every effort” to ensure it provides a safe working environment for all employees, contractors and customers.
The aim is to carry on with activities in accordance with the health and safety protocols in the firm’s markets. And the picture varies from country to country. In North America, for example, the government has applied emergency restrictions but construction is classified as an essential activity. That’s clearly good for CRH’s business.
However, in Europe, nationwide shutdowns in the UK, France, Ireland and others have thumped the company’s revenue. But in Central and Eastern Europe, the business has been affected less.
I’m tempted to buy some of the company’s shares for the gradual recovery that’ll likely follow this crisis.
Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.
Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.
The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.
But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.
Kevin Godbold has no position in any share mentioned The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.