www.independent.ie CEO of Ireland’s largest company predicts that as recovery nears, some businesses will ‘stall and fall’ due to pressure
THE Covid-19 pandemic will result in a “savage recession” around the world that will eventually present significant merger and acquisition (M&A) opportunities, according to Albert Manifold, CEO of building materials giant CRH.
He also told the Irish Independent that the company – Ireland’s biggest – is working closely with the Construction Industry Federation here to develop safe working practices so that activity can be restarted “at the appropriate time and at the appropriate speed”.
“There’s good progress being made by both the Government, the trade unions, and indeed the Construction Industry Federation to do so,” said the CRH boss.
“There is a way to do that,” he added, particularly for large-scale civil works.
Mr Manifold pointed out that during the previous recession, CRH spent €3bn on M&A between 2008 and 2013, and an additional €3bn on capital expenditure.
The group generates 65pc of its earnings in the United States. Its total earnings before interest, tax, depreciation and amortisation were €4.2bn last year.
“I wouldn’t like to take any bold or significant moves on M&A in the short term because of the uncertainty that’s out there,” he said.
“Most opportunities will emerge in the early years of the recovery,” he added.
“Although companies might stumble their way through the recession, it’s as we come into the recovery when you have most demands on working capital – on building working capital and building business. That’s when companies usually stall and fall.
“I think that during that period of time, we’ll expect to see some opportunities emerge.”
He added: “There has always been a reset or a shake-out in our industry after recessions.
“This is going to be a particularly savage recession, a tough recession, but I think that those who come into it with financial strength are the ones that will survive it best.
“I do believe there will be opportunities for inorganic growth in the recovery phase after the recession.”
CRH engineered its biggest ever transformational deal in 2015, when it agreed to pay €6.5bn for assets from rivals Holcim and Lafarge as the latter pair merged. They sold assets to satisfy competition concerns.
Releasing a trading update yesterday in advance of what will be a restricted annual general meeting today, CRH said it had a solid start to 2020.
However, activity in March, particularly in Europe, was hit as movement and business activity restrictions were imposed.
CRH has temporarily laid off about 12,000 of its more than 80,000 workers during the crisis.
Mr Manifold also defended the planned payment of CRH’s final dividend in respect of 2019 – set to be approved by shareholders today at its AGM – and which will amount to just over €494m.
The company said it has cash and cash equivalents totalling $6bn (€5.5bn) – enough to meet all debt obligations for the next four-and-a-half years. It has also reduced its capital expenditure and working capital requirements are lower. Senior management have taken 25pc pay cuts. A share buyback programme has been suspended.
