CRH PLC · NYSE:CRH
CRH — Investor Day (November 2012)
56 slides from CRH's investor day presentation, November 2012
Slide 1: CRH Capital Markets Day
CRH Capital Markets Day Albert Manifold Myles Lee Maeve Carton COO CEO FD
Slide 2: CEO Introduction
CEO Introduction
Slide 3: CEO Introduction: Delivery since November 2010 CMD
CEO Introduction Delivery since Consistent relentless operational focus November ‘10 – €0.3Bn 2011/2012 gross cost savings CMD – Strict capex / working capital control Rigorous approach to portfolio allocation – €1.2Bn of bolt-on acquisitions – €1.2Bn of business/asset disposals Maintained commitmen
Slide 4: Capital Markets Day Programme
CEO Introduction Capital – Today’s focus: “Dialogue with CRH Divisions” Markets Day Programme – Introductory comments: o CEO: Development Strategy and Margin Evolution o COO: Cost Reductions Programme o FD: Financial Overview – Five Divisional break-out sessions; followed by – General assembly for Q
Slide 5: Development Strategy
CEO Introduction Development Strategy
Slide 6: Key principles of CRH development strategy
CEO Introduction Key principles Geography of CRH Strategic – Multiple growth platforms Product development Balance – Smoothing economic cycles strategy Sector/ Sector/ End End Use Use – Vertically integrated Materials Creating clustered positions Build & Grow groups of Approach – Scalable Products a
Slide 7: Key principles of divisional strategy
CEO Introduction Key principles Materials Products Distribution of divisional strategy – Asset backed – Optimising production – Building size and resource positions networks in core scale in core RMI .... regions markets – Vertically integrated – Identifying – Driving value through with significant
Slide 8: Development strategy
CEO Introduction Development – Accelerated integration to maximise short-term synergies strategy – Much greater co-ordination to maximise benefits of scale – Significant increase in resources focused on EM – Portfolio rationalisation as a source of additional funding … Some adjustments but fundament
Slide 9: €1.2Bn of development since Nov '10
CEO Introduction €1.2Bn of Europe – Cement network expansion & Downstream integration Materials €0.3Bn development since Nov ‘10 €0.6Bn Americas €0.3Bn – Expansion (Texas & Utah) plus Reserves additions CMD Europe Products €0.15Bn – Focus on sustainability / RMI segments €0.3Bn Americas €0.15Bn – Se
Slide 10: Margin Evolution
CEO Introduction Margin Evolution
Slide 11: EBITDA margin evolution: Group by region
CEO Introduction EBITDA Group EBITDA % Group by Region margin – Similar overall regional margins 25% — Group --- Europe evolution --- Americas 20% – Stable delivery 2004-2007 15% – Parallel regional declines 10% post 2007 5% – Reflecting global financial crisis 0% 2004 2005 2006 2007 2008 2009 2010
Slide 12: EBITDA margin evolution: Group by segment
CEO Introduction EBITDA Products EBITDA % Group by Segment margin – Fell earliest and furthest – 25% — Group evolution Residential effects --- Materials --- Products 20% --- Distribution Materials – Lagged Products supported by 15% government spending 10% Distribution – Has proved most resilient due
Slide 13: EBITDA margin evolution: Materials by region
CEO Introduction EBITDA Europe EBITDA % Materials by Region margin – Severe 2009 market declines; 25% evolution especially in Ireland / Spain 20% – More stable trends through 2010/2011 15% Americas 10% – Strong margins through 2009 — Materials – Input cost increases and more 5% --- Europe competitiv
Slide 14: EBITDA margin evolution: Europe Materials
CEO Introduction EBITDA Europe Materials EBITDA % Europe Materials Index margin – 2011 Ireland cement consumption 25% 200 evolution c280kg/capita at pre 1980’s levels 180 20% 160 140 – 2011 Finnish (c350kg/c) and Swiss 15% 120 (c665kg/c) usage in line with 10 100 year averages 10% 80 60 – Poland (c5
Slide 15: EBITDA margin evolution: Americas Materials
CEO Introduction EBITDA Americas Materials EBITDA % Americas Materials Index margin – 2011 aggregates & asphalt vols at 25% 180 evolution 1995 levels (US population 266m) 160 20% 140 120 – Current US population c.315m; 15% 100 almost 20% higher than 1995 80 10% 60 --- EBITDA % – While MAP-21 will re
Slide 16: EBITDA margin evolution: Products by region
CEO Introduction EBITDA Products EBITDA % Products by Region margin – US housing peaked in 2005; 25% — Products evolution European market in 2007 --- Europe 20% --- Americas – Regional declines post 2007 have 15% closely tracked each other 10% – On-going restructuring measures 5% to position busines
Slide 17: EBITDA margin evolution: Europe Products
CEO Introduction EBITDA Europe Products EBITDA % Europe Products Index margin – 2006/07 4.1 housing completions 25% --- EBITDA % 200 evolution per 1,000* — House Completions Index* 180 20% 160 140 – 2011 3.0 housing completions per 15% 120 1,000* in same markets 100 10% 80 60 – Recovery dependant on
Slide 18: EBITDA margin evolution: Americas Products
CEO Introduction EBITDA Americas Products EBITDA % Americas Products Index margin – US housing starts peaked in 2005 25% --- EBITDA % 180 evolution at 2,070k (7.8 per 1,000) — US House Starts 160 20% 140 120 – 2011 saw 611k housing starts (1.9 15% 100 per 1,000); 1.5m starts 50yr avg. 80 10% 60 – US
Slide 19: EBITDA margin evolution: Distribution
CEO Introduction EBITDA Distribution EBITDA % Distribution margin – Margins more resilient than for 25% — Distribution evolution Materials / Products --- Europe 20% --- Americas – RMI exposure has proved 15% supportive through downturn 10% – 2011 RONA c.10%; still robust for 5% point in cycle 0% 200
Slide 20: EBITDA margin evolution: Europe Distribution
CEO Introduction EBITDA Europe Distribution EBITDA % Europe Distribution Index margin – House completions in Netherlands 25% 200 --- EBITDA % evolution down 30% since 2009 — Dutch Housing Completions 180 20% 160 140 – With Dutch consumer confidence 15% 120 badly hit by Eurozone crisis 100 10% 80 60
Slide 21: EBITDA margin evolution: Americas Distribution
CEO Introduction EBITDA Americas Distribution EBITDA % Americas Distribution Index margin – 2011 U.S. Asphalt roof shingle 25% --- EBITDA % 200 evolution volumes at 2000 levels — US Asphalt Shingles Volumes 180 20% — US Wallboard Volumes 160 140 – 2011 Wallboard volumes have 15% 120 fallen to 1983/8
Slide 22: EBITDA margin evolution: Americas and Europe summary
CEO Introduction EBITDA Americas – Summary margin – Ongoing P&D margin recovery barring US “fiscal cliff” setback evolution – Private recovery will produce benefits for Materials – Expect post election industry push on highway funding Europe – Summary – 2013/2014 likely to be driven primarily by “se
Slide 23: Current EBITDA margins not the new norm
CEO Introduction EBITDA – Current EBITDA margin levels not the “new norm” margin evolution – In most protracted western downturn since 1930’s – Not unexpected Building Materials sector badly impacted – Recovery plus cost/commercial action will deliver uplift … Significant upside margin potential as
Slide 24: Cost Reductions
Cost Reductions
Slide 25: Managing through the downturn
Cost Reductions Managing – Proactively managing through on-going effects of economic crisis through the downturn o Continuing impacts of global recession o Focusing on actions within our control – Decisive response since 2007 o Reducing our cost base with an aggressive multi-year program o Resizing
Slide 26: Cost Reductions Achieved
Cost Reductions Cost Reductions Achieved
Slide 27: Cumulative cost reductions 2008-2011
Cost Reductions Cost Cumulative Cost Reductions Analysis by reductions €Bn Permanent Cost Division Reductions % 2008-2011 2.5 50% 2.0 2.0 1.8 40% 40% EMAT APD 1.5 1.3 30% 30% 28% 26% 1.0 20% EPD AMAT AMAT 0.5 24% 22% 0.5 10% 0.0 0% 2008 2009 2010 2011 Structural Process Procurement … €2bn cost savin
Slide 28: Reducing our cost base
Cost Reductions Reducing our €Bn CRH Cost Base MANAGEMENT 23.5 RESPONSE cost base 1.5 21.8 3.7 20.0 2.5 22.9 18.3 2.0 18.9 17.2 16.5 2007 Acquisitions Cost Inflation 2011 Volume Cost Savings 2011 Cost Base Baseline Cost Base … Decisive action lowered the cost base by €2bn … CRH plc, Capital Markets
Slide 29: Operating cost reductions: CRH vs peers
Cost Reductions Savings % Operating €Bn CRH vs Peers 2008 Sales cost 2.5 10.0% reductions 2.0 8.0% 2008-2011 1.5 6.0% 1.0 2.0 4.0% 1.3 0.5 0.9 0.9 0.8 2.0% 0.0 0.0% CRH CRH Heidelberg* Lafarge Cemex Heavyside Peers Holcim Note: Excludes working capital, tax improvements, synergies … CRH has already
Slide 30: Further Cost Reductions Targeted
Cost Reductions Further Cost Reductions Targeted
Slide 31: Continuing focus on costs 2012-2015
Cost Reductions Continuing focus on costs – Short-term economic challenges… particularly in Europe 2012-2015 – Continuing to roll out cost reduction programmes… – Projecting €450m incremental savings in 2012-2015 covering… o Structural o Process o Procurement … Continuing to proactively manage our c
Slide 32: Year by year category impact
Cost Reductions Year by year Cumulative Cost Reductions by Category category €m 500 impact €450m 400 €375m 300 €275m 200 €150m 100 0 2012F 2013 2014 2015 Structural Process Procurement … c.€450m incremental savings … over 70% expected to be permanent in nature … CRH plc, Capital Markets Day, Novembe
Slide 33: Further reductions targeted 2012-2015
Cost Reductions Cumulative Savings Further – Reorganisation of production footprint reductions Structural €180m – Admin rationalisation and back office pooling targeted – Reduced manning levels 2012-2015 – Increased usage of alternative fuels Process €180m – Higher level of RAP usage – Improved oper
Slide 34: Structural savings 2012-2015
Cost Reductions Structural Further right sizing of support functions savings – Europe Products - Continue to integrate back-office functions 2012-2015 – Americas Materials - Move to regional centres of administration Reorganising production and distribution operations – Europe Materials - Improve wo
Slide 35: Process savings 2012-2015
Cost Reductions Process Europe Materials savings – Higher use of alternative fuels… significant savings 2012-2015 – Improving energy efficiencies in cement kilns Americas Materials – Increase RAP usage… displacing high cost virgin bitumen – Expand use of ‘warm-mix’ asphalt technology Americas Produc
Slide 36: Procurement savings
Cost Reductions Procurement Overview savings – CRH purchases c.€13Bn of products and services each year – Pre-2008 actively managed in Divisions… now co-ordinated at Group – Focus on leveraging scale, developing structures and utilising IT – Existing initiatives have delivered c.€160m savings in 200
Slide 37: Group procurement programmes: scope
Cost Reductions Group ‘Scope’ % Spend within procurement – 63% of procurement spend Group Programmes programmes now covered by Group programmes 28% 90% 2008 – …with greater coordination Goal 35% across Divisions 63% 54% 45% 2009 2012 2011 2010 – Dedicated resources across a wider range of spend … Si
Slide 38: Group procurement programmes: savings yield
Cost Reductions Group Savings Yield… ‘Depth’ Savings Yield (%) procurement – Maximise savings as % total spend 3.5% programmes within Group programmes – As ‘Scope’ has doubled in the past 2.5% 2.7% 3 years… short-term dip in yields 2.3% 2.1% 1.5% – But good delivery overall… €160m 1.4% in 2008-11 0.
Slide 39: Group procurement programmes: delivery
Cost Reductions Group Delivery… procurement – Dedicating resources, technology and structure to deliver benefits programmes o Cross divisional team of procurement professionals o Training, platforms and information management o Effective processes and use of technology e.g. e-sourcing Examples which
Slide 40: Cumulative cost reductions 2008-2015
Cost Reductions Cost €Bn Cumulative Cost Reductions by Category Permanent Cost Reductions % reductions 2.5 55% 2008-2015 2.0 44% 1.5 33% 1.0 22% 0.5 11% 0.0 0% 2008 2009 2010 2011 2012F 2013F 2014F 2015F Structural Process Procurement … Cumulative cost reductions of €2.0bn to end-2011 … Growing to c
Slide 41: Key Takeaways
Cost Reductions Key Takeaways
Slide 42: Key takeaways: proven track record of cost reduction
Cost Reductions Key – CRH has a proven track record of cost reduction takeaways – Industry leading performance… €2Bn delivered to end-2011 – Continuous and rigorous approach to cost management… – …further €450m targeted to bring savings to €2.5Bn by 2015 ... Bottom up targets … clearly defined actio
Slide 43: Financial Overview
Financial Overview
Slide 44: Financial focus
Financial Overview Focus – Strong cash generation – Maintain strong balance sheet and investment grade rating – Diverse funding sources – Monitor financial markets and Eurozone developments – Dividends and Return on Capital CRH plc, Capital Markets Day, November 2012 Page 44
Slide 45: Capital expenditure
Financial Overview 160% Capital Capex / Depreciation % expenditure 140% 120% 100% 80% 60% 40% 20% 0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012e ... Strong control of capital expenditure … CRH plc, Capital Markets Day, November 2012 Page 45
Slide 46: Cash generation from EBITDA
Financial Overview 100% Cash FCF % EBITDA generation 90% from EBITDA 80% 70% 60% 50% 40% 30% 20% 10% 0% CRH 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 ... Strong cash conversion from EBITDA … CRH plc, Capital Markets Day, November 2012 Source: Bloomberg Page 46
Slide 47: Balance sheet strength – credit metrics
Financial Overview 8x Balance sheet Forecast End December 2012 Net Debt / LTM EBITDA strength – Europe Peers Americas Peers credit metrics 6x 6.3x 5.0x 4x 3.1x 3.3x 3.3x 2.7x 2x 1.9x 0x BBB+ BBB BBB BB BB+ BB B- CRH ... Significant balance sheet capacity ... CRH plc, Capital Markets Day, November 20
Slide 48: Gross debt components
Financial Overview Gross debt JV Debt Bank/Other components* 2% 3% US PP 5% £ Bond 5% € Bonds 25% US$ Bonds 60% ... Diverse funding sources … CRH plc, Capital Markets Day, November 2012 *Forecast for end December 2012 Page 48
Slide 49: Gross debt repayment schedule
Financial Overview Gross debt Debt €m repayment 1400 schedule* 1200 1000 800 600 400 200 0 2013 2014 2015 2016 2017 2018 2019 2020 2021+ ... Balanced maturity profile … CRH plc, Capital Markets Day, November 2012 *Forecast for end December 2012 Page 49
Slide 50: Superior dividend delivery
Financial Overview 400 Superior Rebased Dividend per share dividend 350 delivery 300 250 200 150 100 50 0 CRH 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 ... Unique long term dividend record … CRH plc, Capital Markets Day, November 2012 Page 50
Slide 51: Superior performance: return on invested capital
Financial Overview 18% Superior Return On Invested Capital performance 16% 14% 12% 10% 8% 6% 4% 2% 0% CRH 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 ... Industry leading performance ... CRH plc, Capital Markets Day, November 2012 Source: Bloomberg Page 51
Slide 52: Positioned for the future
Financial Overview Positioned for – Strong focus on cash generation the future – Best balance sheet in the sector – Significant liquidity and facilities – Unique dividend record ... Strong, flexible financial position … CRH plc, Capital Markets Day, November 2012 Page 52
Slide 53: Break Outs: Backdrop & Structure
Break Outs: Backdrop & Structure
Slide 54: Poland backdrop
Break Outs Poland – Population 38m; Belgium / Holland / Finland combined 33m backdrop – GDP / Capita €10k; Belgium / Holland / Finland €35k – €27.5Bn to transport infrastructure (2007-13 EU Cohesion Funds) – Further c.€25Bn of transport funding expected for 2014-20 – 2012F Debt / GDP 55% versus EU A
Slide 55: Netherlands backdrop
Break Outs Netherlands – Consumer confidence and housing activity at low levels backdrop – Due to Eurozone crisis / government instability – September ‘12 election outcome a significant positive – Two-party coalition; 79 seats ex 150, likely 4 year term – Clearer policy objectives should in time res
Slide 56: U.S. Asphalt backdrop
Break Outs U.S. Asphalt – 95% of U.S. paved roads are asphalt backdrop – 76% of all US highway funding is RMI versus 6% new – New roads add just 0.5% to highway network annually – Asphalt preferred for RMI / construction speed / ride quality – Recent increase in concrete’s share of “new” not signifi