CRH's full-year 2009 trading update confirmed our thesis that while residential end-market demand appears to be stabilising, a continued global slowdown in nonresidential construction will make 2010 a challenging year for the firm.
Consolidated sales fell 18% during the second half of 2009, a minor improvement from the 21% drop experienced during the first half of the year. Weak volumes across the firm's segments will likely persist through the near term, and although we didn't garner much new information from the firm's report, we were encouraged by a few positive trends.
Demand from the US housing market continues to stabilise, and the company believes it may experience improvements during the second half of 2010. We tend to agree with this statement, since we forecast a modest recovery during the later part of the year for most of our building products firms--that said, we don't anticipate the rebound will resemble the robust demand period that took place before the housing downturn.
In addition, 2010 may be a banner year for infrastructure activity, and the firm expects to benefit from projects spurred by stimulus funding. That said, the outlook on the nonresidential building side in both the European and American markets hasn't improved, and a lack of available financing will likely pressure demand through the next year. For 2009, the firm expects to generate EUR 1.8 billion in earnings before interest, taxes, depreciation, and amortisation, and pretax income of approximately EUR 750 million, in line with the forecast from its third-quarter interim update. These estimates are in line with our projections, and we are maintaining our EUR 19 fair value estimate.