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Fitch upgrades building materials maker CRH on business mix changes

Fitch Ratings upgraded CRH plc's long-term issuer default rating to BBB+ from BBB with a stable outlook, saying recent M&A deals shaking up the company's business mix could boost profitability.

The rating agency projected the building materials maker's EBITDA margin to expand to 12.8% in 2019 and 14% in 2020, from 12.3% in 2018, benefiting from its acquisition of U.S. cement manufacturer Ash Grove Cement Co. and the disposal of its European distribution business.

Fitch said the disposal of the European distribution business will support CRH's credit profile, with proceeds from the deal worth around €1.6 billion expected to help reduce net leverage in 2019.

CRH's funds from operations adjusted net leverage is forecast to decline to 2.3x-2.4x over the medium term from 2.8x in 2018, according to Fitch.

The company's M&A strategy is expected to be "fairly moderate" in the medium term compared with previous years, with only bolt-on acquisitions and selected disposals in the cards and no large acquisitions within four years, Fitch said.