Breedon Group PLC · LSE:BREE
Breedon — Investor Day (September 2019)
69 slides from Breedon's investor day presentation, Sep 5, 2019
Slide 1: Breedon in Ireland: Introduction
BREEDON IN IRELAND Introduction 5 September 2019
Slide 2: Breedon in Ireland
BREEDON IN IRELAND • A leading supplier of construction materials and contracting services on the Island of Ireland, via 2018 acquisition of Lagan Group • Well positioned in attractive Irish construction market • Anchored by modern, well-invested cement plant • Complementary upstream and downstream
Slide 3: Acquisition of Lagan Group
ACQUISITION OF LAGAN GROUP STRATEGIC RATIONALE Enhanced market position Creates a major independent construction materials group across the UK and Ireland ✓ Enhances Breedon’s geographic footprint with immediate critical mass in Ireland across Extended geographic coverage ✓ the whole value chain Sec
Slide 4: Divisional Leadership Team
BREEDON IN IRELAND DIVISIONAL LEADERSHIP TEAM Pat Ward Group CEO Terry Lagan Jude Lagan Aidan Mullan MD: Lagan MD: Cement MD: Whitemountain (RoI) (Ireland & GB) (NI) Ireland introductory presentation 5 September 2019 4
Slide 5: Divisional Leadership Team
BREEDON GROUP DIVISIONAL LEADERSHIP TEAM Pat Ward Group CEO Terry Lagan Jude Lagan Aidan Mullan MD: Lagan MD: Cement MD: Whitemountain (RoI) (Ireland & GB) (NI) Alan Mackenzie Mike Pearce MD: Breedon Northern MD: Breedon Southern (Northern GB) (Southern GB) Ireland introductory presentation 5 Septem
Slide 6: Breedon in Ireland: Introduction
BREEDON IN IRELAND Introduction 5 September 2019
Slide 7: Lagan
LAGAN A leading RoI construction materials and contracting business 5 September 2019
Slide 8: Business Overview
BUSINESS OVERVIEW Lagan presentation 5 September 2019 2
Slide 9: Business Overview
BUSINESS OVERVIEW • 13 quarries (6 active) • 10 asphalt plants (8 active) • Bitumen importation & PMB plant • Bituminous emulsion plant • 7 rmx plants (4 active) • 2 concrete block plants (one active) • Contract surfacing & highway maintenance • Specialist roadmarking • c135 employees • 35m tonnes o
Slide 10: Market Profile & Outlook
MARKET PROFILE & OUTLOOK Lagan presentation 5 September 2019 4
Slide 11: RoI Market Profile
ROI MARKET PROFILE Market size • c350 large active quarries • c40 asphalt plants • c220 rmx plants Major competitors Production Roadstone (CRH) • c33mt of aggregates Kilsaran Harrington • c3mt of asphalt • c4.3m m3 of rmx Sources: Irish Concrete Federation (2017), Independent Asphalt Producers Assoc
Slide 12: RoI Market Outlook
ROI MARKET OUTLOOK Economic growth • GDP forecast: +7.5% in 2019-20 Construction growth • Output forecast: +17% in 2019-21 • Building & construction investment: +22.5% in 2019-20 • Estimated value of construction output by 2020: €30bn Project Ireland 2040 • Population to grow 19% to 5.7m by 2040, 75
Slide 13: Project Ireland 2040
PROJECT IRELAND 2040 Substantially funded directly by Government • Priority to increase housing supply to baseline 25,000 homes p.a. by 2020 and 30-35,000 p.a. to 2027 • €2 billion Urban Regeneration and Development Fund to achieve sustainable growth in key cities and urban centres • Investment in e
Slide 14: Project Ireland 2040: Major potential projects pending
PROJECT IRELAND 2040 Major potential projects pending • Castlebar bypass €5-10m • Cork Airport runway overlay €5-10m • Cork - Limerick motorway c€30m • Dunkettle Interchange €15-20m • Galway bypass €15-20m • Macroom bypass €10-15m • N5 €10-15m Lagan presentation 5 September 2019 8
Slide 15: Operations
OPERATIONS Lagan presentation 5 September 2019 9
Slide 16: Operations: Construction Materials
OPERATIONS CONSTRUCTION MATERIALS AGGREGATE PRODUCTION AGGREGATES (6 active quarries) ASPHALT CRUSHED ROCK CRUSHER RUN & (8 active plants) SAND & GRAVEL GENERAL FILL RMX (4 active plants) BLOCKS (1 active plant) BITUMEN IMPORTATION & DISTRIBUTION POLYMER MODIFIED BITUMEN PENETRATION BITUMEN EMULSION
Slide 17: Operations: Contracting
OPERATIONS CONTRACTING HIGHWAY MAINTENANCE CARRIAGEWAY ROAD MARKING, RECONSTRUCTION SMALL SCALE, SURFACE RESPONSIVE DRESSING & HIGH MINOR IMPROVEMENTS FRICTION AIRFIELD CONSTRUCTION RUNWAY CONSTRUCTION TAXIWAY APRON & REFURBISHMENT CONSTRUCTION & CONSTRUCTION & REFURBISHMENT REFURBISHMENT STANDS PIT
Slide 18: Current Projects: N25 New Ross Bypass
CURRENT PROJECTS N25 New Ross Bypass Typical Lagan surfacing project Supply & placement of 150,000t of bituminous materials Due for completion September 2019 Lagan presentation 5 September 2019 12
Slide 19: Current Projects: Dublin Airport
CURRENT PROJECTS Dublin Airport Runway 16-34 apron rehabilitation Complex project, winter working, mainly at night, with limited availability Overnight runway pavement inlay and overlay, 200,000m² Supply & placement of 30,000t of Marshall asphalt Nearing completion Lagan presentation 5 September 201
Slide 20: Business Initiatives
BUSINESS INITIATIVES Lagan presentation 5 September 2019 14
Slide 21: Business Initiatives: Extending quarry network
BUSINESS INITIATIVES Operational quarries Extending quarry network • Selective reopening of inactive quarries • Extensions to existing quarries • Conversion of resources to reserves 3 3 5 6 • Acquisition of additional reserves, 2016 2017 2018 2019 notably in Greater Dublin Operational quarries • Emp
Slide 22: Business Initiatives: Expanding readymix plant network
BUSINESS INITIATIVES Expanding readymix plant network • Closely linked to acquisition of internal aggregates supply • Combination of greenfield and acquisition • Pipeline identified and discussions opened with selected targets Lagan presentation 5 September 2019 16
Slide 23: Questions
QUESTIONS Lagan presentation 5 September 2019 17
Slide 24: Lagan
LAGAN A leading RoI construction materials and contracting business 5 September 2019
Slide 25: Whitemountain
WHITEMOUNTAIN A leading NI construction materials and contracting business 5 September 2019
Slide 26: Business Overview
BUSINESS OVERVIEW Whitemountain presentation 5 September 2019 2
Slide 27: Business Overview
BUSINESS OVERVIEW • 6 quarries (4 active) • Sand dredging operation • 5 asphalt plants (3 fixed, 2 mobile) • 4 rmx plants (3 active) • 1 concrete products plant • 1 waste/green energy site • 2 inert landfill sites • Aggregate export terminal • Bitumen importation terminal • Contract surfacing & high
Slide 28: Market Profile & Outlook
MARKET PROFILE & OUTLOOK Whitemountain presentation 5 September 2019 4
Slide 29: NI Market Profile
NI MARKET PROFILE Market size • c100 active quarries • c33 asphalt plants Major competitors • c80 rmx plants Northstone Production F P McCann John McQuillan • c15m of crushed rock Patrick Keenan • c1.3mt of asphalt Gibson Bros Conexpo • c2.3m m3 of rmx Sources: DfE Annual Mineral Statement 2016, Man
Slide 30: NI Market Outlook
NI MARKET OUTLOOK Economic growth • GDP forecast: +1.0% in 2019 and +1.3% in 2020 Construction growth • Forecast to grow by average 0.8% p.a. in 2019-23 Infrastructure pipeline • Approved NI capital budget c£1.4bn for 2019-20 • Procurement pipeline covered by Investment Strategy for Northern Ireland
Slide 31: Infrastructure Pipeline
INFRASTRUCTURE PIPELINE Major projects (ISNI 2019-21) • York Street Interchange £120-140m • Regional Children’s Hospital Belfast £90-100m • Belfast Streets Ahead Public Realm Scheme £20-25m • Veterinary Science Laboratory Belfast £25-30m • A24 Ballynahinch Bypass £35-40m • A1 Grade Separated Junctio
Slide 32: Operations
OPERATIONS Whitemountain presentation 5 September 2019 8
Slide 33: Operations: Construction Materials
OPERATIONS CONSTRUCTION MATERIALS AGGREGATE PRODUCTION AGGREGATES (4 active quarries) ASPHALT AGGREGATES CRUSHER RUN & (3 static, 2 mobile plants) EXPORT GENERAL FILL RMX (3 active plants) BLOCKS (1 active plant) WASTE MANAGEMENT & GREEN ENERGY MUNICIPAL INERT GREEN WASTE WASTE ENERGY (1 landfill si
Slide 34: Operations: Contracting
OPERATIONS CONTRACTING HIGHWAY MAINTENANCE CARRIAGEWAY SMALL SCALE, ROAD MARKING, RECONSTRUCTION RESPONSIVE SURFACE DRESSING & HIGH MINOR IMPROVEMENTS STREETLIGHTING FRICTION CIVIL ENGINEERING HIGHWAY URBAN STRUCTURES & CONSTRUCTION REGENERATION BRIDGES HEAVY DUTY INFRASTRUCTURE ENVIRONMENTAL PAVEME
Slide 35: Current Projects: DFI Term asphalt resurfacing contract
CURRENT PROJECTS DFI Term asphalt resurfacing contract (Southern) Government investment in road improvement 4-year contract £7m p.a. 80 projects per year • 10,000t of aggregates • 70,000t of asphalt • 1,500m3 of rmx Whitemountain presentation 5 September 2019 11
Slide 36: Current Projects: Colley Lane Southern Access Road
CURRENT PROJECTS Colley Lane Southern Access Road £multi-million access road for Bridgwater 1km of new single carriageway Construction of 52m single-span structural steel bridge and 28m precast concrete beam bridge • 60,000t of aggregates • 9,500t of asphalt • 5,000m3 of rmx Whitemountain presentati
Slide 37: Current Projects: Kettering East
CURRENT PROJECTS Kettering East Creating better access for Kettering residents 2.1km of new single carriageway Construction of new 45m roundabout Construction of 60m of 1.2m diameter tunnelling 8m beneath road • 100,000t of aggregates • 14,500t of asphalt • 2,500m3 of rmx Whitemountain presentation
Slide 38: Business Initiatives
BUSINESS INITIATIVES Whitemountain presentation 5 September 2019 14
Slide 39: Business Initiatives: Term maintenance contract work
BUSINESS INITIATIVES Maintain and build on cycle of term maintenance contract work • 120,000 tonnes of asphalt laid per annum • Machine and hand-laying of CE accredited asphalt materials • Adjustment/installation of kerb lines • Adjustment/installation of drainage and ironwork • Road marking and stu
Slide 40: Term Maintenance Contracts (Asphalt)
TERM MAINTENANCE CONTRACTS (ASPHALT) Whitemountain presentation 5 September 2019 16
Slide 41: Business Initiatives: Developing GB contracting business
BUSINESS INITIATIVES Continue developing GB contracting business in alignment with GB construction materials business • Building on successful models of AWPR, Kettering/Wellingborough • Focus on projects where we can self- supply material • Contract surfacing complemented by ancillary civils • Targe
Slide 42: Business Initiatives: High PSV products
BUSINESS INITIATIVES Identify further opportunities in Group and externally for high PSV products • Currently exporting c180kt of high PSV to GB • Complement existing Group resources, to improve internal supply efficiencies • Broaden external customer base Whitemountain presentation 5 September 2019
Slide 43: Questions
QUESTIONS Whitemountain presentation 5 September 2019 19
Slide 44: Whitemountain
WHITEMOUNTAIN A leading NI construction materials and contracting business 5 September 2019
Slide 45: Breedon Cement
BREEDON CEMENT A major cement producer in Ireland 5 September 2019
Slide 46: Business Overview
BUSINESS OVERVIEW Cement presentation 5 September 2019 2
Slide 47: Business Overview
BUSINESS OVERVIEW • Modern cement plant at Kinnegad • Situated in limestone quarry with significant long-term reserves • Adjacent shale and sand quarries • Produces bulk and bagged cement for supply to Ireland and GB • c110 employees Cement presentation 5 September 2019 3
Slide 48: Market Profile & Outlook
MARKET PROFILE & OUTLOOK Cement presentation 5 September 2019 4
Slide 49: IoI Cement Market Profile
IoI CEMENT MARKET PROFILE Market size • Four cement companies • c6 million tonnes capacity Major competitors Production Irish Cement (CRH) • c4 million tonnes (2018) Quinn Lafarge Sales • c3 million tonnes Source: Management estimates Cement presentation 5 September 2019 5
Slide 50: IoI Cement Market Outlook
IoI CEMENT MARKET OUTLOOK Economic growth • RoI GDP forecast: +7.5% in 2019-20 • NI GDP forecast: +2.3% in 2019-20 Construction growth • RoI output forecast: +17% in 2019-21 • NI output forecast: avg. +0.8% p.a. in 2019-23 Sources: European Commission, Danske Bank, Euroconstruct, CITB/Construction S
Slide 51: IoI Cement Market: Cement Consumption
IoI CEMENT MARKET CEMENT CONSUMPTION Value of construction output c7% of GDP in 2018 vs c11% in 1980s million tonnes 6.5 2.7 2.9 2.3 2.5 1.9 1.9 2.1 2007 2012 2013 2014 2015 2016 2017 2018 Sources: Cement Manufacturers Ireland, Trading Economics, Construction Industry Federation, NISRA Cement presen
Slide 52: IoI Cement Market: House Completions
IoI CEMENT MARKET HOUSE COMPLETIONS RoI housing investment increased by 24% in 2018 RoI housing investment expected to increase by c34% in 2019-20 102,517 21,255 25,680 12,665 16,345 10,447 9,985 11,037 2006 2012 2013 2014 2015 2016 2017 2018 Sources: Central Statistics Office, NI Department of Fina
Slide 53: Operations
OPERATIONS Cement presentation 5 September 2019 9
Slide 54: Operations: Kinnegad
OPERATIONS: KINNEGAD • Commissioned 2002 • Kiln line rated at 1,800tpd/clinker • Can produce 700,000t cement, depending on fossil fuel replacement levels • Presently exporting bulk and bagged cement to GB • Fossil fuel replacement/alternative fuels @70% (5-10% reduction in clinker) • c50mt of limest
Slide 55: c50 Years of Limestone Reserves & Resources
c50 YEARS OF LIMESTONE RESERVES & RESOURCES Cement presentation 5 September 2019 11
Slide 56: Production Process
PRODUCTION PROCESS Quarrying Raw meal milling Clinker cooling Dispatch Raw meal preparation Clinker production Clinker milling Cement presentation 5 September 2019 12
Slide 57: Quarrying
QUARRYING LIMESTONE 75% OF MIX Drill Blast Cement presentation 5 September 2019 13
Slide 58: Raw Meal Preparation
RAW MEAL PREPARATION Stacker Reclaimer Cement presentation 5 September 2019 14
Slide 59: Raw Meal Milling
RAW MEAL MILLING Cement presentation 5 September 2019 15
Slide 60: Clinker Production
CLINKER PRODUCTION Raw meal converted to clinker Cement presentation 5 September 2019 16
Slide 61: Clinker Cooling
CLINKER COOLING Recirculating heat: no emission point Cement presentation 5 September 2019 17
Slide 62: Clinker Milling
CLINKER MILLING Cement presentation 5 September 2019 18
Slide 63: Business Initiatives
BUSINESS INITIATIVES Cement presentation 5 September 2019 19
Slide 64: Business Initiatives: Alternative fuels
BUSINESS INITIATIVES Alternative fuels Cement presentation 5 September 2019 20
Slide 65: Alternative fuels
BUSINESS INITIATIVES Alternative fuels 80% Consistent improvement in alternative fuel substitution 70% Targeting c80% in medium term 60% 50% 40% 70% 72% 65% 30% 58% 20% 10% 20% 15% 0% 2007 2008 2009 2010 - 2017 2018 H1 2019 Cement presentation 5 September 2019 21
Slide 66: Carbon reduction
BUSINESS INITIATIVES Carbon reduction Steady reduction in fossil fuel usage 2006-18 Decrease in coal usage per tonne of cement produced 63% Total fossil fuel CO2 tonnes saved by coal substitution Source: Management information Cement presentation 5 September 2019 22
Slide 67: Operational improvement
BUSINESS INITIATIVES Operational improvement • ‘Be even Better’ initiative to deliver continued operational excellence • Learning & sharing teams exchanging best practice with Hope • ‘Steal with pride’ programme of European plant visits • Ongoing coaching, mentoring and learning & development progra
Slide 68: Questions
QUESTIONS Cement presentation 5 September 2019 24
Slide 69: Breedon Cement
BREEDON CEMENT A major cement producer in Ireland 5 September 2019