• ICG: Reports solid start to the year -
• Grafton Group: IMS: FY outlook remains cautious; Q1 performance marginally ahead -
• DCC: FY13 results boosted by cold weather -

ICG - Reports solid start to the year

Conclusion & Action:Irish Continental Group has this morning issued an interim management statement covering the first four months of the year. Revenue increased to €72.1m (+2.4% yoy), while EBITDA improved to €4.8m (+26.3% yoy) on strong margins of 6.7% (+130 bps yoy). Operating costs increased marginally (1.1% yoy), driven by a 4.0% increase in non-fuel costs and an 8% reduction in fuel-related costs. The Group reported an operating loss of €1.1m, an improvement on the €2.4m loss recorded in the same period last year. Net debt at the end of April was €113.2m, down from €116.0m at 31 December 2012. The first four months of the year are seasonally less significant for ICG as its business is heavily weighted towards the second half. The stock offers an attractive dividend (c.5% yield) and we see significant potential for this to grow in the coming years. For FY13E, we are forecasting EBITDA of €48.9m (+6.8% yoy) and EPS of 125c (+19.9% yoy). We reiterate our Buy rating and DCF-derived price target of €23.20, representing c.12% upside to current levels.

Grafton Group - IMS: FY outlook remains cautious; Q1 performance marginally ahead

Conclusion & Action:Grafton Group has this morning issued an interim management statement ahead of its AGM to be held later today. For the first four months of the year, revenue was flat at €677m (+0.14% yoy), impacted by adverse weather conditions, economic uncertainty and a €12m FX headwind. The Group maintained its caution on the outlook for the full year and while the first two weeks of May have seen some improvement, management will maintain its focus on internal initiatives to improve profitability. Although the timing of any recovery remains unclear, we continue to believe that Grafton remains favourably leveraged to any sustained uptick in volumes.

DCC - FY13 results boosted by cold weather

Conclusion & Action:DCC plc has this morning announced preliminary results for the full year ended 31 March 2013 which were ahead of expectations. Group EBITA rose 27.5% yoy to €229.2m vs consensus on €222m and NCB on €227m. Adjusted EPS rose 32.6% to 210c vs consensus on 198c and NCB on 204c. FCF was strong and rose 35.6% yoy to €198m. Year-end net debt came in at €219.9m vs NCB on €250m, while average net debt for the year was €342m. The Board is also recommending an 11.4% increase in the final dividend, bringing the total dividend for the year to 85.68c per share (+10% yoy). In terms of the outlook, the company has indicated that its FY14 EBITA will be approximately 10-12% ahead of the prior year and that EPS would be 8-10% ahead. This compares to our forecast of 9% and 11% respectively. DCC trades on a FY14 P/E of 13.7x and EV/EBITA of 9.3x and we reiterate our Hold recommendation with a price target of 2,495p. There is an analyst meeting today in London at 11am (Dial in + 44 207 136 2055 / Access code: 68 43 800).

• CRH: Buzzi Unicem Q1 sees positive U.S. performance offset by continued weakness in Europe -
• CRH: Beacon Roofing Supply reports in line Q2; outlook positive -
• Irish Financials: Deposit rates continue to fall -
• Economic Update: Irish Construction PMI weakens again in April -
• Irish Financials: FBD Holdings - Liberty booked underwriting loss of €20m last year -

CRH - Buzzi Unicem Q1 sees positive U.S. performance offset by continued weakness in Europe

Conclusion & Action:Buzzi Unicem, the building materials group, on Friday announced financial results for the first quarter ended 31 March 2013. Q113 like-for-like net sales declined by 10.6% to €503.1m (vs consensus of €518.1m) as falling volumes (-12.5%) were only partly offset by positive pricing (+1.9%). EBITDA was also down sharply to €11.8m (-51.0% yoy) off a margin of 2.3% (vs 4.3% in Q112). Despite the deterioration of certain European markets and a general lack of visibility, management has reiterated its FY13 guidance for a 'moderate improvement' in operating results compared to the prior year. In terms of the read-across to CRH, there was nothing particularly new in Friday's statement. The U.S. recovery continues apace while Europe remains weak. CRH is an operationally geared play on the U.S. recovery (54% of EBITDA), is trading at a 20% discount to its peers on an EV/EBITDA basis and has the second best dividend yield in the sector (c.4%).

CRH - Beacon Roofing Supply reports in line Q2; outlook positive

Conclusion & Action:Beacon Roofing Supply, Inc., the U.S. distributor of roofing materials and building products, announced on Friday financial results for the second quarter ended 31 March 2013. The Group reported in line Q2 net sales of $416.3m (+5.3% yoy; -5.1% lfl) and adjusted EBITDA of $11.6m (-34.6% yoy vs consensus of $11.8m).Management remains positive on Beacon's prospects for the remainder of the year and is anticipating a rebound in activity following the challenging winter conditions. Notwithstanding the weather-affected start to the year, improving trends in residential roofing are encouraging for CRH's Americas Distribution business (c.5% of Group EBITDA).

Irish Financials - Deposit rates continue to fall

Conclusion & Action:The Central Bank of Ireland (CBI) released March's Retail Interest Rate Statistics on Friday afternoon. The weighted average interest rate on mortgages with an original maturity of over 5 years (99% of outstanding mortgages) remained unchanged at 3.00%. This rate has been broadly stable for the last year, as efforts by banks to re-price their back books (variable rate increases of 50bps and 100bps have been implemented by Bank of Ireland and AIB respectively) have offset the 25bps cut in the ECB base rate in July 2012 (which had a disproportionate effect on Irish mortgage rates due to the prevalence of tracker mortgages here). The ECB's latest 25bps rate cut in May is not yet reflected in the data but will weigh on average mortgage rates in coming months. On the deposit side, the average interest rate on total outstanding household term deposits declined for an eleventh consecutive month to 2.98% - a fall of 8bps in the month. The rate available on new term deposits is much lower at 1.19%, down 7bps m/m and 136bps since a recent peak of 2.55% in December 2011.All in all, deposit re-pricing continues at pace, although mortgage re-pricing appears to have slowed. It is uncertain the extent to which the latter reflects slower demand in the first quarter of the year. In terms of the wider trends in the market place, both 'Pillar' banks have reported positive momentum in net interest margins since the second half of last year. Bank of Ireland's NIM (ex-ELG fees) troughed at 1.20% in H1 2012 before improving to 1.34% in H2 2012, while the exit rate at end-2012 was in the range of 1.40-1.45%. This positive momentum continued into Q1 2013 according to the bank's latest IMS. AIB, meanwhile, has recorded two successive quarters of NIM progression, with its NIM (ex-ELG fees) troughing at 1.15% in Q3 2012.

Economic Update - Irish Construction PMI weakens again in April

Conclusion & Action:The latest Ulster Bank Construction PMI shows a further deterioration in trends across the sector during April, with the seasonally adjusted headline index falling to 41.9, indicating the fastest reduction in activity in seven months, from 43.1 in March. Looking ahead, while firms still forecast growth in activity (albeit from a low base) over the coming year, it is no surprise, given the above, that the rate of business optimism declined for a second successive month during April. All in all, today"s release serves as a further reminder that a meaningful recovery in Irish construction activity remains some way off.

Irish Financials - FBD Holdings - Liberty booked underwriting loss of €20m last year

Conclusion & Action:In an interview in today's Irish Times, the chief executive of Liberty Insurance in Ireland, which is the majority owner of the former Quinn Insurance business and a key competitor of FBD Holdings, disclosed that it made an underwriting loss of €20m in 2012. Substantial unrealised gains from the insurer's investment portfolio (largely due to the improvement in Irish government bonds, of which the insurer holds c.€200m) produced a total profit of €16m for the year. Revenue was down c.€10m year-on-year to €180m, driven lower by both weaker domestic demand and prices. For the current year, Liberty is expecting to break-even from an underwriting perspective, before moving into underwriting profitability in 2014. FBD will issue its first interim management statement of the year on Wednesday morning, ahead of its AGM.

• DCC: FY results to get boost from cold weather -
• Economic Update: Consumer prices unchanged in April -

DCC - FY results to get boost from cold weather

Conclusion & Action:DCC will publish FY results next Tuesday the 14th of May, with an analyst meeting in London at 11am. We forecast group EBITA to rise 23% yoy to €227m vs consensus on €222m. We forecast adjusted EPS to rise 25% to 204c vs consensus on 198c. We expect year-end net debt to be €250m and for average net debt to be €350m. DCC has now left the ISE and is solely listed amongst other FTSE Support Services companies on the LSE. Comparing DCC to the Investec's Support Services (ISS) sector shows that DCC has greater exposure to the UK (68% vs 58%), lower ROIC (FY14E 15.8% vs 21.6%) and lower forecast EBITA growth (3Y CAGR of 5.0% vs 7.8%). Additional M&A spend could however enable DCC to close this gap, as it has done in the past (€200m p.a. could boost EBITA CAGR to 17.8%). DCC trades on a FY14E PE of 13.3x and an adjusted EV/EBITA of 11.3x. This represents a 23% premium to its own 14Y historical average but generally in line with its peers.

Economic Update - Consumer prices unchanged in April

Conclusion & Action:Data released yesterday by the CSO showed that consumer prices were unchanged month-on-month in April. The year-on-year rate of growth remained at 0.5% (the slowest rate of inflation since September 2010). In summary, the headline inflation rate remains at a two-and-a-half year low of 0.5%. Within the data, we note that services prices have increased 1.7% (2.5% excluding mortgage interest repayments) in the year, while goods prices have been 1.0% lower. We have previously highlighted that muted inflationary pressures are providing some respite to Irish consumers and, broadly speaking, this remains the case.

• DCC: Meeting the neighbours -
• Kingspan: IMS: Slow start to the year but outlook encouraging -
• CRH: Winter weather weighs on trading -
• Irish Financials: Bank of Ireland - Central Bank announces pilot scheme for multi-debt restructuring -
• Economic Update: Moody's sticks to the same line on Ireland -

DCC - Meeting the neighbours

Conclusion & Action:DCC has now left the ISE and is solely listed amongst other FTSE Support Services companies on the LSE. Comparing DCC to the Investec Support Services (ISS) sector highlights how DCC has greater exposure to the UK and lower forecast future profit growth. However, DCC has an outstanding track record and its M&A firepower should enable it to boost EPS growth. The stock is also trading on a slight discount to its new diverse peer group. DCC trades on a FY14E PE of 13.1x and an adjusted EV/EBITA of 11.1x. This represents a 23% premium to its own 14Y historical average but a slight discount to the ISS sector. DCC reports FY results on 14 May. We forecast EBITA of €227m ahead of guidance on €222m, helped by cold weather. DCC will also hold an Investor Day on 6 June in London.

Kingspan - IMS: Slow start to the year but outlook encouraging

Conclusion & Action:Kingspan Group plc this morning announced an interim management statement for the first four months of the year ahead of its AGM to be held later today. Group sales increased to €520m (+10% yoy; +11% in cc) in a period characterised by a particularly slow start to the year and a subsequent pick-up in activity during March and April. Despite the recent pick-up in activity levels, a slow start to 2013 and increased seasonality in the Insulated Panels business due to the ThyssenKrupp acquisition will lead to a tough first half comparison. Although visibility is limited, growing order intake levels and improving acquisition benefits should leave the Group well positioned for H2. At consensus FY13E P/E and EV/EBITDA multiples of 19x and 11x respectively, Kingspan is currently trading at a significant premium to both its peers and its historic average.

CRH - Winter weather weighs on trading

Conclusion & Action:Yesterday's IMS highlighted challenging trading conditions in Europe, where severe weather and on-going economic woes resulted in a 12% yoy decline in LFL sales. In the U.S., a continuation of positive underlying trends was also offset by poor weather, resulting in a 2% decline in LFL sales. The tone from the post-IMS conference call was more encouraging, however, with management pointing to a broader recovery in the U.S. and a no-worse-than-expected outlook for Europe. Given the weaker than expected start to the year, we are reducing our FY13E Group EBITDA forecasts by 2.9% to €1.6bn. Despite this cut to our FY13E numbers, our underlying thesis of a U.S. led margin recovery out to our FY17E forecast horizon remains unchanged. CRH is an operationally geared play on the U.S. recovery, is trading at a 21% discount to its peers on an EV/EBITDA basis and has the second best dividend yield in the sector (c.4%).

Irish Financials - Central Bank announces pilot scheme for multi-debt restructuring

Conclusion & Action:Following extensive discussions between banks, credit unions and credit card groups, the Central Bank of Ireland (CBI) yesterday announced a new pilot scheme for the restructuring of distressed secured and unsecured debts across multiple lenders. The aim of the new pilot framework is to enhance cooperation between secured and unsecured lenders in order to resolve cases of distressed debt without the need for the borrower to enter the insolvency process. As an unsecured lender, Bank of Ireland's exposure is relatively small. Of its €100.2bn gross loan book at end-2012, less than 2% (€1.7bn) related to Irish consumer lending. Of its total consumer lending (€3.0bn; includes UK consumer lending of €1.3bn), €0.3bn was impaired at end-2012.

Economic Update - Moody's sticks to the same line on Ireland

Conclusion & Action:In an interview in Dublin yesterday, Moody's analyst Dietmar Hornung reiterated the agency's concerns over Ireland's vulnerability to contagion from the wider euro area and the level of indebtedness in the private sector. Yesterday's remarks were in line with the agency's comments in late March, when it reaffirmed its Ba1 rating and negative outlook on Ireland. Significantly, Moody's is the only one of the 'big three' rating agencies to rate Ireland sub-investment grade. It is also the only one to have a negative outlook on the Sovereign. In reaffirming its ratings and outlook in March, Moody's cited Ireland's "susceptibility to euro area-related event risk" and the "poor asset quality of Ireland's banking system, which represents a constraint on their willingness to provide new credit". The former was exacerbated by the situation in Cyprus, while on-going concerns over the latter heighten Ireland's vulnerability to financial contagion. We have argued for some months now that Moody's stance on Ireland is unjustified given the significant progress the Sovereign has made in addressing each of the factors behind Moody's initial downgrade in July 2011 (see our comment). In saying that, Moody's inaction is somewhat understandable on the back of recent events in Cyprus. Given the string of 'credit positive' developments in Ireland since the start of the year -  Prom Note restructuring, well-supported benchmark 10 year issuance, extension of EFSF and EFSM bailout loans - and the government's on-going progress in implementing fiscal consolidation, however, we continue to see Moody's softening its stance at some point during 2013. Such a softening would bolster Ireland's hopes for a smooth exit from the Troika programme at the end of this year. Of course, as indicated yesterday, the outcome of the next PCAR will have a significant bearing on the eventual decision taken by Moody's.

• DCC: Meeting the neighbours -
• Kingspan: IMS: Slow start to the year but outlook encouraging -
• CRH: Winter weather weighs on trading -
• Irish Financials: Bank of Ireland - Central Bank announces pilot scheme for multi-debt restructuring -
• Economic Update: Moody's sticks to the same line on Ireland -

DCC - Meeting the neighbours

Conclusion & Action:DCC has now left the ISE and is solely listed amongst other FTSE Support Services companies on the LSE. Comparing DCC to the Investec Support Services (ISS) sector highlights how DCC has greater exposure to the UK and lower forecast future profit growth. However, DCC has an outstanding track record and its M&A firepower should enable it to boost EPS growth. The stock is also trading on a slight discount to its new diverse peer group. DCC trades on a FY14E PE of 13.1x and an adjusted EV/EBITA of 11.1x. This represents a 23% premium to its own 14Y historical average but a slight discount to the ISS sector. DCC reports FY results on 14 May. We forecast EBITA of €227m ahead of guidance on €222m, helped by cold weather. DCC will also hold an Investor Day on 6 June in London.

Kingspan - IMS: Slow start to the year but outlook encouraging

Conclusion & Action:Kingspan Group plc this morning announced an interim management statement for the first four months of the year ahead of its AGM to be held later today. Group sales increased to €520m (+10% yoy; +11% in cc) in a period characterised by a particularly slow start to the year and a subsequent pick-up in activity during March and April. Despite the recent pick-up in activity levels, a slow start to 2013 and increased seasonality in the Insulated Panels business due to the ThyssenKrupp acquisition will lead to a tough first half comparison. Although visibility is limited, growing order intake levels and improving acquisition benefits should leave the Group well positioned for H2. At consensus FY13E P/E and EV/EBITDA multiples of 19x and 11x respectively, Kingspan is currently trading at a significant premium to both its peers and its historic average.

CRH - Winter weather weighs on trading

Conclusion & Action:Yesterday's IMS highlighted challenging trading conditions in Europe, where severe weather and on-going economic woes resulted in a 12% yoy decline in LFL sales. In the U.S., a continuation of positive underlying trends was also offset by poor weather, resulting in a 2% decline in LFL sales. The tone from the post-IMS conference call was more encouraging, however, with management pointing to a broader recovery in the U.S. and a no-worse-than-expected outlook for Europe. Given the weaker than expected start to the year, we are reducing our FY13E Group EBITDA forecasts by 2.9% to €1.6bn. Despite this cut to our FY13E numbers, our underlying thesis of a U.S. led margin recovery out to our FY17E forecast horizon remains unchanged. CRH is an operationally geared play on the U.S. recovery, is trading at a 21% discount to its peers on an EV/EBITDA basis and has the second best dividend yield in the sector (c.4%).

Irish Financials - Central Bank announces pilot scheme for multi-debt restructuring

Conclusion & Action:Following extensive discussions between banks, credit unions and credit card groups, the Central Bank of Ireland (CBI) yesterday announced a new pilot scheme for the restructuring of distressed secured and unsecured debts across multiple lenders. The aim of the new pilot framework is to enhance cooperation between secured and unsecured lenders in order to resolve cases of distressed debt without the need for the borrower to enter the insolvency process. As an unsecured lender, Bank of Ireland's exposure is relatively small. Of its €100.2bn gross loan book at end-2012, less than 2% (€1.7bn) related to Irish consumer lending. Of its total consumer lending (€3.0bn; includes UK consumer lending of €1.3bn), €0.3bn was impaired at end-2012.

Economic Update - Moody's sticks to the same line on Ireland

Conclusion & Action:In an interview in Dublin yesterday, Moody's analyst Dietmar Hornung reiterated the agency's concerns over Ireland's vulnerability to contagion from the wider euro area and the level of indebtedness in the private sector. Yesterday's remarks were in line with the agency's comments in late March, when it reaffirmed its Ba1 rating and negative outlook on Ireland. Significantly, Moody's is the only one of the 'big three' rating agencies to rate Ireland sub-investment grade. It is also the only one to have a negative outlook on the Sovereign. In reaffirming its ratings and outlook in March, Moody's cited Ireland's "susceptibility to euro area-related event risk" and the "poor asset quality of Ireland's banking system, which represents a constraint on their willingness to provide new credit". The former was exacerbated by the situation in Cyprus, while on-going concerns over the latter heighten Ireland's vulnerability to financial contagion. We have argued for some months now that Moody's stance on Ireland is unjustified given the significant progress the Sovereign has made in addressing each of the factors behind Moody's initial downgrade in July 2011 (see our comment). In saying that, Moody's inaction is somewhat understandable on the back of recent events in Cyprus. Given the string of 'credit positive' developments in Ireland since the start of the year -  Prom Note restructuring, well-supported benchmark 10 year issuance, extension of EFSF and EFSM bailout loans - and the government's on-going progress in implementing fiscal consolidation, however, we continue to see Moody's softening its stance at some point during 2013. Such a softening would bolster Ireland's hopes for a smooth exit from the Troika programme at the end of this year. Of course, as indicated yesterday, the outcome of the next PCAR will have a significant bearing on the eventual decision taken by Moody's.

• CRH: IMS: winter weather weighs on trading; full year guidance intact -
• CRH: European peers report similar trends to CRH  -

CRH - IMS: winter weather weighs on trading; full year guidance intact

Conclusion & Action:CRH plc this morning issued a cautious interim management statement in which it highlights that trading conditions in Europe remain challenging, with severe winter weather and on-going economic uncertainty resulting in a like-for-like sales decline of 12% year-on-year. In the Americas, a continuation of the positive underlying trends was also offset by poor weather, resulting in a 2% decline in lfl sales. On a divisional basis, the 12% decline in European lfl sales was driven by Materials (-17%), Products (-13%) and Distribution (-9%). In the Americas, solid performances in Distribution (+6%) and Products (+2%) were offset by falling volumes (aggregates -10%; asphalt -23%; RMC -8%) in the markedly seasonal Materials division, resulting in an overall lfl sales decline of 2% for the region. For the seasonally less significant first half of the year, the Group is expecting to report EBITDA of c.€0.4bn (-17% yoy on an underlying basis). For the second half of the year, growth in the U.S. is expected to offset trading pressures in Europe, with management anticipating that H2 EBITDA will be 'ahead' year-on-year. We estimate that CRH will need to report a c.8% increase in H2 underlying EBITDA to offset the H1 decline. Although we expect some short-term weakness on the back of what was a cautious IMS this morning, we believe that as the year unfolds a continuation of the U.S. recovery and early signs of stabilisation in Europe should compensate for the seasonally less significant first four months of the year, supporting our positive stance on the stock. CRH is an operationally geared play on the U.S. recovery, is trading at a 17% discount to its peers and has the second best dividend yield (c.4%) in the sector. Given that we are in the early stages of a U.S. led recovery, it is our view that the market is under-valuing CRH's potential for future growth.

CRH - European peers report similar trends to CRH

Conclusion & Action: Holcim reported Q1 results this morning with lfl sales down 4.3% to CHF 4,323m (cons CHF 4,650m) and operating EBITDA declined 9.5% to CHF650m. The company has maintained its guidance of "significant organic growth" in operating EBITDA for 2013. Separately, HeidelbergCement has reported sales down 1% lfl while operating EBITDA rose by 3% to €219m (cons €221m). The company keeps its outlook unchanged and says that it still sees FY "significant pretax improvement."Similar to CRH this morning both companies reported a weaker performance in Europe compared to North America. Holcim's aggregates volumes were down 11% lfl while pricing was +0.2%. Within Europe cement sales in Switzerland fell 1.0% in volumes terms and pricing was down 6.9%. Aggregates in Switzerland performed better with volumes up 5.6% but pricing was down 0.3%. HeidelbergCement reported US aggregates down 7% in volume terms, while in Western and Northern Europe volumes were down 20%. The company says that pricing was positive for US aggregates and generally flat to up for European aggregates. Within Poland HeidelbergCement says that the difficult market situation continues to be hit by the bad weather and sluggish demand from infrastructure. Pricing for cement was reported to be down. Overall, the trends reported by Holcim and HeidelbergCement this morning are in in line with that reported by CRH and by other companies within the sector. Both companies have maintained their FY guidance and both companies cite strength in the US while Europe struggles. CRH is an operationally geared play on the U.S. recovery, trading at a 17% discount to its peers and has the second best dividend yield (c.4%) in the sector. Given that we are in the early stages of a U.S. led recovery, it is our view that the market is under-valuing CRH's potential for future growth.

• Aer Lingus: April traffic figures -
• CRH: Lafarge Q1 volumes decline following harsh winter weather; outlook positive -
• Bank of Ireland:Stress tests set to go ahead in Q3 -
• Irish Financials: NIM continues to expand at AIB-
• Economic Update:Industrial Production up 2.5% in Q1-

Aer Lingus - April traffic figures

Conclusion & Action:Aer Lingus has reported April traffic data this morning with total passengers down 3.2%. Short haul was down 4.2% but long haul was up 6.3%. The load factor slipped by 3.8pp to 68.9%. Aer Lingus Regional (operated by Aer Arann) continues to show growth with passenger numbers up 5.1% to 83,000 in the month. Overall, these traffic figures were in line with expectations. The slight decline in passenger numbers was unsurprising given the timing of Easter. In the coming months we will keep an eye on the performance of Aer Lingus' long haul business, which has seen a step up in capacity this month.

CRH - Lafarge Q1 volumes decline following harsh winter weather; outlook positive

Conclusion & Action:Lafarge, the building materials group, this morning announced financial results for the first quarter ended 31 March 2013. The group reported revenue of €3,136m (-6% yoy; -4% like-for-like) and EBITDA of €380m (-26% yoy; -19% lfl), representing a margin of 12.1% (-310 bps yoy). In what is the seasonally less significant first quarter of the year, harsh winter weather and fewer trading days resulted in volume declines across all three product categories. In terms of outlook, management reiterated its expectation for year-on-year volume growth of 1% to 4% in 2013. Within the mix, however, the group expects contrasting trends across its regions, with strong growth in emerging markets (+3% to +7%) and North America (+3% to +6%) being partly offset by on-going weakness in Western Europe (-5% to -9%) and Central & Eastern Europe (-1% to +2%). This morning's statement from Lafarge bodes well for CRH's Americas Materials division (c.36% of EBITDA), but weaker demand in Europe represents a clear challenge for the group's Europe Materials division (c.23% of EBITDA). Continued weakness in Europe has been a recurring theme of late and will likely be reflected in CRH's IMS on Wednesday 8 May.

Bank of Ireland - Stress tests set to go ahead in Q3

Conclusion & Action:On Friday, Reuters reported that the Irish government has consented to holding the next Prudential Capital Assessment Review (PCAR) in Q3 of this year. There had been speculation, supported by recent comments from Finance Minister Noonan and AIB CEO David Duffy, that the next set of stress tests would be aligned with the EBA's Europe-wide exercise in 2014. As the theory goes, this would give institutions time to formulate a clearer picture on distressed mortgages and allow the tests to reflect the banks efforts in implementing the Central Bank's recent Mortgage Arrears Resolution Targets. The position of the Troika, however, has been that the tests should be carried out before year-end so as to dissipate lingering uncertainty on banks' asset quality prior to Ireland exiting its bailout. If Friday's press reports are true, it would appear that the government has obliged. In our re-initiation report on Bank of Ireland (BKIR) last week, we highlighted the significance of the timing of PCAR from BKIR's point of view. The bank has €1.8bn of State-owned preference shares outstanding which can be redeemed at par until 31 March 2014 and 125% of par thereafter. Given the magnitude of the redemption step-up (€459m, c.9% of current market cap) and the costliness of the annual coupon (10.25%, or €188m), BKIR is likely to refinance the preference shares with a blend of common equity, convertible instruments and/or other tier 2 issuance ahead of this March 2014 deadline. While we think it is unlikely that the next PCAR will result in additional capital requirements for BKIR, to go to the market looking to raise capital without confirmation of as much would add a layer of uncertainty that could weigh on investor sentiment. In that regard, the earlier publication of PCAR is certainly a positive development for BKIR.

Irish Financials - NIM continues to expand at AIB

Conclusion & Action:Allied Irish Banks (AIB) has released a short IMS this morning. The update mirrors many of the trends reported by its peer Bank of Ireland (BKIR) in recent weeks - operational performance is improving, customer deposits are resilient and central bank funding is declining. As a result of on-going product re-pricing, the group's net interest margin increased quarter-on-quarter in Q1 2013. The bank's FY 2012 results in late March showed that NIM (ex-ELG fees) troughed at 1.15% in Q3 2013, before increasing to 1.22% in Q4 2012. According to this morning's update, Q1 2013 was the second consecutive quarter of sequential growth in NIM. All in all, there were few surprises in this morning's update. The continued upward momentum in AIB's NIM is positive and should be further supported by recently announced increases in variable rates on the bank's Irish residential mortgage book. The key driver in the year ahead will be progress on mortgage restructuring. Today's IMS pointed to "continued progress" in that regard and we note reports that the next PCAR will go ahead in Q3 of this year (see our comment elsewhere in this morning's wrap), rather than H1 2014. In terms of read-across for Bank of Ireland, which we re-initiated coverage on last week, today's update further highlights the normalising funding environment facing Irish banks. However, BKIR is further down the line in terms of NIM (BKIR's NIM, ex-ELG fees, troughed in H1 2012 and exited 2012 above 1.40%) and deleveraging (BKIR completed its PCAR 2011 deleveraging target last June) than AIB.

Economic Update - Industrial Production up 2.5% in Q1

Conclusion & Action:Data released on Friday by the CSO showed that industrial production fell 2.7% month-on-month in March. On a year-on-year basis, production was 6.2% lower during the month. February's outturn was revised upwards from +0.2% m/m to +0.9% m/m. With data for March now published, we have a picture of industrial production for the first quarter of the year. The CSO's preliminary estimate shows that industrial production increased 2.5% quarter-on-quarter in Q113. Following q/q declines of 3.4% and 5.4% in Q312 and Q412 respectively, this is a welcome development. The relative improvement in industrial production in Q113 is largely a function of higher pharma volumes. After a precipitous decline of 37.5% recorded in September, which sparked fears of a 'Patent Cliff', pharma volumes rebounded 33.0% in Q4. However, in the year to date, they have been weak, declining 7.3%. Nevertheless, Q113 as a whole was up on Q412 and the broader improvement in industrial production should be reflected in Ireland's Q1 GDP.

• Aer Lingus: April traffic figures -
• CRH: Lafarge Q1 volumes decline following harsh winter weather; outlook positive -
• Bank of Ireland:Stress tests set to go ahead in Q3 -
• Irish Financials: NIM continues to expand at AIB-
• Economic Update:Industrial Production up 2.5% in Q1-

Aer Lingus - April traffic figures

Conclusion & Action:Aer Lingus has reported April traffic data this morning with total passengers down 3.2%. Short haul was down 4.2% but long haul was up 6.3%. The load factor slipped by 3.8pp to 68.9%. Aer Lingus Regional (operated by Aer Arann) continues to show growth with passenger numbers up 5.1% to 83,000 in the month. Overall, these traffic figures were in line with expectations. The slight decline in passenger numbers was unsurprising given the timing of Easter. In the coming months we will keep an eye on the performance of Aer Lingus' long haul business, which has seen a step up in capacity this month.

CRH - Lafarge Q1 volumes decline following harsh winter weather; outlook positive

Conclusion & Action:Lafarge, the building materials group, this morning announced financial results for the first quarter ended 31 March 2013. The group reported revenue of €3,136m (-6% yoy; -4% like-for-like) and EBITDA of €380m (-26% yoy; -19% lfl), representing a margin of 12.1% (-310 bps yoy). In what is the seasonally less significant first quarter of the year, harsh winter weather and fewer trading days resulted in volume declines across all three product categories. In terms of outlook, management reiterated its expectation for year-on-year volume growth of 1% to 4% in 2013. Within the mix, however, the group expects contrasting trends across its regions, with strong growth in emerging markets (+3% to +7%) and North America (+3% to +6%) being partly offset by on-going weakness in Western Europe (-5% to -9%) and Central & Eastern Europe (-1% to +2%). This morning's statement from Lafarge bodes well for CRH's Americas Materials division (c.36% of EBITDA), but weaker demand in Europe represents a clear challenge for the group's Europe Materials division (c.23% of EBITDA). Continued weakness in Europe has been a recurring theme of late and will likely be reflected in CRH's IMS on Wednesday 8 May.

Bank of Ireland - Stress tests set to go ahead in Q3

Conclusion & Action:On Friday, Reuters reported that the Irish government has consented to holding the next Prudential Capital Assessment Review (PCAR) in Q3 of this year. There had been speculation, supported by recent comments from Finance Minister Noonan and AIB CEO David Duffy, that the next set of stress tests would be aligned with the EBA's Europe-wide exercise in 2014. As the theory goes, this would give institutions time to formulate a clearer picture on distressed mortgages and allow the tests to reflect the banks efforts in implementing the Central Bank's recent Mortgage Arrears Resolution Targets. The position of the Troika, however, has been that the tests should be carried out before year-end so as to dissipate lingering uncertainty on banks' asset quality prior to Ireland exiting its bailout. If Friday's press reports are true, it would appear that the government has obliged. In our re-initiation report on Bank of Ireland (BKIR) last week, we highlighted the significance of the timing of PCAR from BKIR's point of view. The bank has €1.8bn of State-owned preference shares outstanding which can be redeemed at par until 31 March 2014 and 125% of par thereafter. Given the magnitude of the redemption step-up (€459m, c.9% of current market cap) and the costliness of the annual coupon (10.25%, or €188m), BKIR is likely to refinance the preference shares with a blend of common equity, convertible instruments and/or other tier 2 issuance ahead of this March 2014 deadline. While we think it is unlikely that the next PCAR will result in additional capital requirements for BKIR, to go to the market looking to raise capital without confirmation of as much would add a layer of uncertainty that could weigh on investor sentiment. In that regard, the earlier publication of PCAR is certainly a positive development for BKIR.

Irish Financials - NIM continues to expand at AIB

Conclusion & Action:Allied Irish Banks (AIB) has released a short IMS this morning. The update mirrors many of the trends reported by its peer Bank of Ireland (BKIR) in recent weeks - operational performance is improving, customer deposits are resilient and central bank funding is declining. As a result of on-going product re-pricing, the group's net interest margin increased quarter-on-quarter in Q1 2013. The bank's FY 2012 results in late March showed that NIM (ex-ELG fees) troughed at 1.15% in Q3 2013, before increasing to 1.22% in Q4 2012. According to this morning's update, Q1 2013 was the second consecutive quarter of sequential growth in NIM. All in all, there were few surprises in this morning's update. The continued upward momentum in AIB's NIM is positive and should be further supported by recently announced increases in variable rates on the bank's Irish residential mortgage book. The key driver in the year ahead will be progress on mortgage restructuring. Today's IMS pointed to "continued progress" in that regard and we note reports that the next PCAR will go ahead in Q3 of this year (see our comment elsewhere in this morning's wrap), rather than H1 2014. In terms of read-across for Bank of Ireland, which we re-initiated coverage on last week, today's update further highlights the normalising funding environment facing Irish banks. However, BKIR is further down the line in terms of NIM (BKIR's NIM, ex-ELG fees, troughed in H1 2012 and exited 2012 above 1.40%) and deleveraging (BKIR completed its PCAR 2011 deleveraging target last June) than AIB.

Economic Update - Industrial Production up 2.5% in Q1

Conclusion & Action:Data released on Friday by the CSO showed that industrial production fell 2.7% month-on-month in March. On a year-on-year basis, production was 6.2% lower during the month. February's outturn was revised upwards from +0.2% m/m to +0.9% m/m. With data for March now published, we have a picture of industrial production for the first quarter of the year. The CSO's preliminary estimate shows that industrial production increased 2.5% quarter-on-quarter in Q113. Following q/q declines of 3.4% and 5.4% in Q312 and Q412 respectively, this is a welcome development. The relative improvement in industrial production in Q113 is largely a function of higher pharma volumes. After a precipitous decline of 37.5% recorded in September, which sparked fears of a 'Patent Cliff', pharma volumes rebounded 33.0% in Q4. However, in the year to date, they have been weak, declining 7.3%. Nevertheless, Q113 as a whole was up on Q412 and the broader improvement in industrial production should be reflected in Ireland's Q1 GDP.

• Smurfit Kappa: Q1 results in line and market environment remains stable -
• CRH: Vulcan Materials Q1: outlook positive for U.S. construction market as recovery continues -
• Economic Update: NCB Services PMI April 2013 -
• Irish Financials: Read through from RBS" Irish unit, Ulster Bank -
• Irish Financials: ECB rate cut to weigh on Irish banks' margins -
• Economic Update: Exchequer deficit of €6.1bn recorded in year to April -

Smurfit Kappa - Q1 results in line and market environment remains stable

Conclusion & Action:Smurfit Kappa has reported Q1 results generally in line of consensus estimates. The company reported EBITDA down 2% YoY to €241m (consensus €245m), with the margin slipping from 13.4% last year to 12.7%. Pre-exceptional EPS rose 39% yoy to 35.1c. FCF in the quarter was -€23m compared to -€16m last year. Net debt came in at €2,871m down from €2,775m last year, which is after financing the acquisition of OCCG. The net debt/EBITDA ratio stands at 2.8x vs 2.7x last year. SKG has doubled its estimates of synergies from its recent acquisition of OCCG in Mexico to $28m from $14m. In terms of the outlook the company appears quite comfortable about the general market environment in Europe. Recent new capacity is expected to compensate for recent closures and the overall market is expected to remain quite balanced. SKG itself is to accelerate the planned closure of two existing paper mills in the UK before opening a new mill in Q4 2014 rather than Q1 2015. In this balanced environment we believe that the industry will need higher OCC prices to provide the catalyst for higher recycled containerboard prices. Overall this looks like a positive update from SKG. and we would expect FY consensus forecasts to remain largely unchanged. SKG's share price has declined by 15.9%, over the last month while Mondi's share price is down 3.6% and DS Smith is actually up 12.3%. Trading on a 2013e EV/EBITDA of 5.0x it trades on a circa 30% discount to DS Smith and Mondi. There is an analyst meeting at 14.30; dial-in for Europe is +44 208 817 9301, US +1 866 629 2704, Ireland +353 1 436 4265.

CRH - Vulcan Materials Q1: outlook positive for U.S. construction market as recovery continues

Conclusion & Action:Vulcan Materials Company, the U.S. building materials group, yesterday announced financial results for the first quarter ended 31 March 2013. Overall trading in Q1 was broadly in line with management expectations, with the group reporting Q1 net sales of $504.6m (+0.9% yoy) and gross profit of $18.0m (-18.0% yoy), reflecting a margin of 3.9% (-83 bps yoy). Adjusted EBITDA also declined to $26.2m (-44.9% yoy). Within the mix, a 5.7% net sales decline in asphalt mix was offset by positive growth in concrete (+8.6%), aggregates (+0.3%) and cement (+0.1%). In terms of the outlook, management maintains its positive stance on the group's prospects for the year ahead, with the positive underlying trends in residential, non-residential and infrastructure markets expected to continue in 2013. Further improvements in pricing, cost control and volumes are expected to be among the key drivers of growth for the year ahead. Full year guidance for volume and earnings improvement in 2013 was also maintained. Notwithstanding the difficult weather-related comps in Q1, these underlying trends bode well for CRH's Americas Materials division, which accounts for c.36% of Group EBITDA. CRH will issue an interim management statement on Wednesday 8 May in advance of its AGM to be held later that day.

Economic Update - NCB Services PMI April 2013

Conclusion & Action:The latest NCB Services PMI shows that the Irish services sector expanded for a ninth successive month in April, with the headline rate (55.2) signalling that the rate of growth has improved to a three month high. In all, this is a positive release that reflects the ongoing resilience in the Irish services sector (indeed last year was the first on record in which Ireland's services exports exceeded goods exports). Looking ahead, with the "Business Activity: Expected Levels in 12 Months' Time" index pointing to solid optimism across all areas of the services sector surveyed in the PMI report, we would expect these positive trends to be sustained over the coming months at least.

Irish Financials - Read through from RBS" Irish unit, Ulster Bank

Conclusion & Action:RBS has released Q1 results this morning. While our colleagues in Investec London will cover the performance at a group level, here our focus is on its Irish unit, Ulster Bank. In relation to Ulster Bank, RBS says it is "cautiously optimistic as trends improving". Management notes that "credit trends in Ireland are turning a corner, with Ulster Bank Core and Non-Core impairment losses down 27% from Q1 2012 and 29% from Q4 2012". The tone of the release has improved in line with the reported numbers - management saluted a "material improvement" in Ulster Bank during Q1, having said it was "cautiously optimistic" at the time of the Q4 2012 results. In all, there are few surprises in this release. Its main domestic peers reported improving trends in impairments in their recent results, while Ulster is far from alone in seeing a slowing in the pace of new arrears formation. The improvement in the unit"s funding position also mirrors the experience of its main domestic rivals. The nascent economic recovery in Ireland should translate into further tangible signs of improvement across Ulster"s portfolios as the year goes on.

Irish Financials - ECB rate cut to weigh on Irish banks' margins

Conclusion & Action:As was widely expected, the ECB cut its main refinancing rate 25bps to 0.50% yesterday. From an Irish perspective, the rate cut will act as a headwind for the banks" efforts to rebuild net interest margins, as 53.9% of the stock of mortgages in issue are on tracker rates linked to the ECB base rate (typically ECB+100bps). As the ECB rate has fallen in recent years, banks have had to focus their re-pricing efforts on new lending, which has been relatively muted, and their back books of Standard Variable Rate (SVR) mortgages. Bank of Ireland and AIB have announced SVR increases of 50bps and 140bps respectively in the last year, which will act as a tailwind on NIM in the current year and help offset the impact from yesterday's rate cut. We re-initiated on Bank of Ireland yesterday. The bank"s NIM (ex-ELG fees) troughed at 1.20% in H112, before rebounding to 1.34% in H212. We are forecasting a NIM (ex-ELG) of 1.54% for the current year, reflecting the aforementioned re-pricing and lower deposit rates, and had already factored in one 25bps cut by the ECB this year into our forecasts. Interestingly, the ECB reduced the rate on its Marginal Lending Facility (MLF) by 50bps. This could be of more significance for peripheral countries as Emergency Liquidity Assistance, or ELA, is usually priced off the MLF. Indeed, this may go someway towards explaining the notable strength in Greek debt yesterday. In the case of Ireland, Irish banks have no ELA outstanding after the liquidation of IBRC (the former Anglo Irish Bank and Irish Nationwide Building Society), so the MLF rate change will have no effect here in that regard.

Economic Update - Exchequer deficit of €6.1bn recorded in year to April

Conclusion & Action:Ireland"s Department of Finance released April"s Exchequer Returns yesterday evening. For the year to date, the Exchequer has booked a deficit of €6.1bn, down from a deficit of €7.1bn for the equivalent period in 2012. As ever, the headline deficit has been impacted by exceptional items, with the State"s €1.0bn sale of Bank of Ireland CoCos and payments relating to the liquidation of IBRC affecting the 2013 outturn. All in all, there were no nasty surprises in yesterday's Exchequer Returns. The plethora of reclassifications, exceptional items and timing issues make drawing hard conclusions from the Returns difficult but the broad message is that Ireland's fiscal consolidation remains on track. In the latest Stability Programme Update, released earlier this week, the government made minor improvements to its fiscal projections, with the underlying general government deficit expected to be 7.4% this year (previously 7.5%) and 4.3% next year (previously 4.5%).