CRH stock soars during infrastructure spending boom: CEO

Shares of building materials supplier CRH plc (CRH) reached a record high despite mixed earnings results. While CRH missed on revenue, it beat adjusted EPS estimates. CEO Albert Manifold joins Yahoo Finance Live to discuss drivers of the company's growth.

Manifold notes they are in their "tenth consecutive year of profit and margin growth" as the business is "humming." Amid inflation, CRH is focused on "increasing the value" beyond commodities for consumers. He highlights CRH's exposure to infrastructure, which is now seeing government spending increase after years of underinvestment. Infrastructure comprises 50% of sales while 25% is non-residential, limiting interest rate sensitivity and fueling gains.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Angel Smith

Video Transcript

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SEANA SMITH: Shares of building materials company CRH hitting a record high this morning. You can see the stock up just about 4%. The company reporting its full-year earnings results.

Now, they were driven by demand for construction projects, also improved pricing strategies helping to lift their most recent numbers. So for more, we want to bring in the CEO of CRH. We have Albert Manifold joining the conversation.

Albert, it's great to have you here. So I want to start with inflationary costs. It was one of the things that was pointed out within your report here saying that despite the continued inflationary cost pressures throughout the year, you were able to expand your margins and you were also able to deliver further growth in profits. How, how are you navigating the very persistent inflationary environment right now? And what does that mean for your business in the long run?

ALBERT MANIFOLD: Well, first of all, Seana, thank you for taking the time to talk to us this morning. And as you said, we announced our results this morning and the reaction on the stock market is a reaction to a very strong set of results with revenues ahead by 7%, EBITDA ahead 15%, and EPS ahead by 30%. That's our 10th consecutive year of both profit and margin growth. So the business is really humming.

With regard to your comment on inflationary costs, our business really is a business that actually provides more complex construction solutions rather than commodity products. So we're always working on increasing the value we give to our customers, we serve our customers with. We don't just provide basic commodity products, we actually turn those basic materials into complex construction solutions. So we get paid for the value and that's how we've been able to drive the margin last year and indeed for the nine previous years.

BRAD SMITH: How many of those complex construction solutions are waiting for interest rates to be more favorable to begin some of those projects?

ALBERT MANIFOLD: Well, actually about 50% of our total activity here in the US is infrastructure spending, which is both federally and state funded. And as you know the infrastructure has been long underinvested here for many years. And in recent years, there's been bipartisan support for long-term infrastructure spending to upgrade the infrastructure, which is necessary for the economy.

That's not really exposed to interest rate exposure nor indeed the second part of our-- largest part of our business, which is for non-residential construction. That makes up about 25%. So those two areas are 75% of our total construction demand.

And that non-residential construction really is a real positive for the US economy because what we're seeing is the reshoring and onshoring of critical manufacturing techniques back here to the US. Some of the largest companies in the world building chip manufacturing, data processing centers, and in terms of biotechnology, pharmaceuticals, electric vehicles, electric batteries all of that coming back to the US.

And those projects are multi-year projects. So again, neither of those two businesses are exposed to interest rates. Residential is and residential has been very slow, but that's the smallest part of our business. But even as our business is only firing on two of the three cylinders, we're still being able to produce those results that we've announced here this morning.

SEANA SMITH: But real quick, I know you just said that residential is a very small part of your business, but I'm curious what you're seeing there. Obviously, it has been one of the factors that has weighed down the overall performance although just a bit, but when do you expect to see that rebound?

ALBERT MANIFOLD: Yeah, I think the slowdown in residential, the subdued nature of residential is an affordability issue. Demand is very significant. I mean, the US has got an underbuild of 5 million homes as we stand here this morning. And it's clear to us, as interest rates lower, you will see more and more people come back into the market.

There's a need for housing going forward here in the United States that will stretch on for decades. So it's just a timing issue more than anything else. The fundamentals are still very strong. But as I say, even with a very subdued residential market, our strength in our infrastructure markets and our strength in our non-residential markets have delivered the excellent results we saw this morning.