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Negative outlook for building materials industry

Post Time:Feb 23,2009Classify:Industry NewsView:408

Moody's said yesterday that the negative outlook for the European buildings material industry, which includes CRH, reflects the ongoing challenges of weakening demands, pricing pressure and tight credit set against the backdrop of a global economic downturn.

The general report into the industry added that building materials group CRH will be hit by the slump in residential construction in the US but weakness could be offset by improvements in its materials business, which could benefit from stimulus packages.

CRH generates 45pc of its revenues in North America.

While CRH has not responded to speculation that it could be planning a rights issue, Moody's said it does not expect any major debt-financed transactions in the near-term.

"However, some companies are seeking to sell non-core assets, which could trigger smaller deals involving regional participants that have not taken part in the industry consolidation of the past few years."

It added that European builders may no longer be able to count on traditionally faster-growing regions such as Eastern Europe.

Poland is still forecast to grow by 2.1pc in 2009, but this is considerably slower than its estimated 4.5pc growth in 2008.

The report added the economies of Spain and Ireland, where a building "boom" has turned "bust", are expected to contract by 2pc and 3.1pc respectively in 2009.

CRH has a significance presence in Eastern Europe, including Poland.

Moody's added that the deteriorating global economic conditions began to affect companies' results as early as the third quarter of 2008.

Since October 2008, Moody's has downgraded the ratings or changed the outlook on 10 of the 11 European building materials companies it rates, reflecting leverage ratios that eroded at an unprecedented pace.

Source: independent.ieAuthor: shangyi

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