CRH plc

Good morning, ladies and gentlemen. I'd like to welcome you to our 2021 results presentation for CRH. My name is Albert Manifold. I'm the chief executive. And this morning, I'll be joined later on by Jim Mintern, our CFO. And together, Jim and I are going to briefly take you through the key headlines of our results for 2021. Now, before we go into that, I want to take a moment to talk to the nearly 80,000 people who have worked for CRH during the course of 2021. We had the continual challenges of COVID, trying to live our lives in the most normal way, the stop-start nature of what COVID impacts upon our world. But all of you went about your life as normal as you could and helped produce what was a really strong 2021. On behalf of your management team and your board, I want to sincerely thank you for those tremendous efforts. I referred to COVID there, and of course, we all hope we're in the end game of the challenges that COVID has brought to us. Let's see how that plays out. Of course, in recent times, new uncertainties and new challenges have emerged. All I can say to you is that we as a senior team, most of us have been here for 20 years. And we have seen this country through some tough times, particularly the global financial crisis and the recent COVID challenges. And we're confident that we have the the sensible nature to our lives, the maturity, the experience to see us through and navigate Sears through whatever choppy waters may be ahead of us into calmer waters. I should say this morning's presentation, whilst I'm talking to you like this, there'll be some slides and presentations behind me. You can follow this presentation with an accompanying slide deck on our website, and I'll be referring to those slides as we go through the presentation. So look, we have a busy schedule this morning and just to give you a sense of the running order that we're seeing here. First and foremost, Jim and I are going to take you through some of the key numbers for 2021 and some of the key trends that were evident in our business during last year and see how they are moving forward and impacting on this year. We also want to take you through some of the way we've been positioning our business and repositioning our business in recent years and how that has changed our business. We're changing because construction is changing and how that has been impacted by our delivery of the solutions model that has been underpinning so much of the delivery in recent years. We're also going to talk about our investor updates in April and to give you a better sense of what we want to talk to you, our shareholders, about to take you through our thoughts. Of course, we will talk about our expectations for 2022 and see how this year has started and how we expect it to evolve. And as usual, we'll have questions and answers at the end. Now, it's not quite normal questions and answers. We're still living in a virtual world at the moment. But later on, I'm going to be joined on stage by Jim and indeed by Tom Holmes, our head of investor relations. And they will be feeling the questions. Tom will be feeling the questions that you are sending in online to him, and he will fill them to us during that part of the session. So if I can just move on and looking at slide two, if those of you are following us on the internet, just to talk about our year 2021. Look, another strong year, another year of continued growth for CRH. Some great numbers there, but for me, the standout last year were two numbers. Number one, the margin improvement, and the second one was the cash generation across our business. We turned 80 cents out of every dollar we earned into cash. And we deployed that cash quite sensibly across our businesses. We invested about $2 billion investing in developing our business through M&A and through expansionary capex. We returned about $1.8 billion through cash returns back to you, our shareholders. And we finished the year with one of the strongest balance sheets we have had in our history. That relentless focus on generating profitability, turning it into cash and making sure we manage our balance sheets in a disciplined way has long been a part of the DNA of CRH and long may it remain so. This morning we also announced the proposed dividend for this year of 121 cents, a 5% increase on last year. And as most of you will have seen earlier this week, we announced the divestment of our Old Castle building envelope division for $3.8 billion. And Jim is going to take you through some more details of that later on in the presentation. If I can just take you through some of the key financial highlights, as I say to you, a robust performance, sales ahead by 12% and profits ahead by 16%. And it's very pleasing for me as chief executive of this business to stand here and say, look, the key metrics that we manage, sales, profits, margins, returns, and cash, all heading in the right direction for 2021. But the key metric for me is margins. In a world where we face significant cost headwinds, when almost everybody else was taking a step backward on margin, CRH was stepping forward. And that really is down to the heart of what we're doing in our business, the solutions model, which makes us into much more of a price maker than a price taker. And very pleasing to see, as you can see on slide three, for those following online, again, the returns moving ahead. You know, few people want to talk about returns for the obvious reasons, but we never stop thinking about them. They're not where we want them to be, but we have been making progress and there's more to go there. If I can now turn to our two major markets that we're in, in principle, the first one to North America, which makes up about 70% of our group EBITDA. And just to remind you of the franchise we have in that part of the world. Historically speaking, we were based in the Northeast, Mid-Atlantic and Midwest part of the United States. In the past 15 years, we've had a strong push South and West as we follow basically population trends and economic growth. And now we find ourselves having a great mix of stable cash flow generated in the northeast and higher growth as we push south and west. As I talk about that northeast part of the United States, and I mean all the way across the Midwest, that really is home to the most intensive and extensive road infrastructure network in the world. Now, they don't build too many new roads there. But they have to do significant repair and maintenance as a result of the really brutal North American winters. Those roads have to be replaced and repaired pretty much every seven years. CRH has over decades built up a fantastic franchise across that geography of 120 million people. We provide a great service. We have long-standing partnerships with the states in that part of the world. And we have multi-year projects that carry on year after year. That is really just a bond for us, that business. It just keeps coming in. It's great business. And, of course, it helps us as we push south and west, chasing the higher growth, aligning our business with the stronger growth areas driven by population trends, movements, and economic growth in the south and west. And now we find ourselves here, again, the number one building materials in North America, the number one building materials in the most profitable construction market in the world, where demand is underpinned by three fundamentals – Strong population growth. The US population grows by about 30 million people every 10 years. Strong economic growth. And crucially, the money to pay for both public and private investment in construction. We have a balanced end use across our North American businesses. We are skewed more towards infrastructure. That's where we want to be, both public and private. It's our core competence. We like large scale, complicated, horizontal construction, both above and below the ground. That has been underpinned in recent years by strong federal support and state spending. And of course, you will have seen in November of last, the infrastructure and investment bill that was signed that committed a further $1.2 trillion to infrastructure spend in the United States in the coming years. That will increase the spend on infrastructure from the federal government by about 50% over the next five years compared to the previous five years. And that aligns very, very well with our solution strategy. Complex, complicated, specified, highly regulated, large, awkward, horizontal construction is perfect for us to play. Because we don't just provide products or materials, we provide services such as design, planning, engineering that goes with it. And that is at the heart of the solution strategy. If I can turn to the biggest business that we have, our America's materials business, which is significantly exposed to infrastructure, delighted to see that sales in EBITDA were ahead in 2021 over the previous year and volumes ahead in all products. But the story of this business is the margin, a business which is hugely exposed to energy costs. And we had very, very difficult headwinds last year. And yet we still managed to move the margin ahead. Attesting to the fact we have a different business model. And we tried to explain it by saying we don't sell rocks anymore. We sell complete road systems. We exited that business last year with very strong backlogs. And that has continued into the first quarter of this year. And as I stand here today on the 3rd of March, our backlogs are well ahead of last year. on the three key metrics for us in terms of quantum dollar terms, in terms of the volumes of products and also the margin within those businesses. So that bodes well for a good start to 2022 in our Americas materials business. On slide seven, if I can move over to building products, another continuous strong performance by this division. Now this division is made by three businesses. Our APG business, our architectural products business, which mainly is a US residential play for new and repair and maintenance. It provides products for the outdoor living space, the backyard. We own that backyard. Now, 2020 was a record year for APG until 2021 came. So that also was a bigger year, a new record. That's the gift that just keeps on giving. It's a fantastic business. The second business we have is our infrastructure product business. And again, this is effectively a play on new infrastructure. This provides products and materials that transports vital utilities around the United States. Principally, it's in and around water, the transportation of potable water, wastewater, sewage around the U.S., but also about vital utilities such as telecommunications, information technology, largely underground, but also overground as well. Highly specified work, which is where we like to play. And the last business in our building products business is our OBE business. the one that we announced at the disposal of on Monday, a very solid year on the back of a recovering non-res industry in North America. This is the ninth consecutive year this division has shown profit and margin growth. Now, that is not just happening because the industry is helping us or there are favorable tailwinds. That's happening because this business is absolutely the focus of our integrated solution strategy, which continues to deliver for us. But we'll talk about that later on. If I can move over across the Atlantic to our other main region, Europe. I said we're the largest building materials business in North America. We're also the largest building materials business in Europe, and crucially, the largest building materials business in the high growth central and eastern European markets. Last year, we saw resilient repair and maintenance business in four key markets, France, Germany, the UK and Ireland, and resilient residential spend across those markets. Happily, we're starting to see Western Europe really becoming a hub for innovative, sustainable construction in our businesses. And the really good thing about this is that we can then communicate and transport this to other high growth markets, both in Central and Eastern Europe and the South and Western part of the United States. It's easy to transfer that knowledge and understanding, which is key to our solutions business. In Central and Eastern Europe, the two big markets of Poland and Romania again benefited from EU stimulus packages, and again, very good demand for residential construction. I'm delighted to see again in Eastern Europe a higher take-up for more complex end-to-end solutions, which we see in other parts of our business. Now, before I talk about trading in Europe, I must mention our businesses in Ukraine. We employ over 800 people across four locations in Ukraine. From Odessa in the South Central and the Black Sea, all across the West, the two big operations over there on Mykolaiv, which is close to the Polish border, and Kamianets-Podilsky, which is close to the Moldovan-Romanian border. Happily, all of our 800 people are safe and away from the conflict zones. We are doing all that we can to work with them, work with their businesses, and work with their families to support them in any way we possibly can. For those who want to move west across the border, we are helping and facilitating the movement of them across the border up to this morning. About 60 families have moved across into Poland and Romania principally, and we are supporting them when they get across that border. And I know that all our thoughts are with them this morning in terms of the challenges they're faced with and indeed the future ahead. If I can move to the trading performance of our Europe Materials Division in 2021. Again, I'm very happy to see both sales and EBITDA ahead of 2020, but they should be because we had a big chunk lost out of 2020 as a result of COVID. But they're also ahead of 2019. So we are ahead of pre-COVID activity levels in terms of sales and profitability, but also in margin. The margin we have performance in 2021 in the teeth of those cost headwinds is ahead of a pre-COVID 2019. So when all else are going backwards, SeaRage are stepping forwards. It's not just good cost control. It's not just commercial excellence. It's about our solution strategy that is embedded within our business, delivering higher performance. And specifically, I call it within our Europe materials business, we saw really good infrastructure spend in France, UK and Poland, and pretty much residential was strong everywhere across our markets. So that's just a brief review of our main markets. I'm now going to pass it over to Jim, who's joining me on stage, who's going to take you through a more detailed review of the financial performance of our business in 2021.

Thanks, Albert. Good morning, everybody. I'm delighted to be here this morning presenting my first set of results as CFO. On slide 11, what we have here is an overview of our cash flow and our net debt position at the end of 2021. I think this slide is a really good example of how our relentless focus on cash generation and our disciplined capital allocation has ensured a strong balance sheet at the end of December 2021. Moving from the left, we exited 2020 with a net debt of $5.9 billion. The cash inflow for 2021 was $4.2 billion. We converted 80% of our EBITDA into cash and we reinvested in the growth of our business. We also returned cash to our shareholders. We completed M&A activity, 20 Bolton acquisitions, a net CAD outflow of $1.2 billion. That figure is net of divestment proceeds. We spent $1.6 billion on capital expenditure. And we returned $1.8 billion to your shareholders. And I'm going to go into a bit more detail on each of those in a moment. That all resulted in a net debt position at the end of December 21 of $6.3 billion, or 1.2 times net debt to EBITDA. That's one of the strongest balance sheets we've had in the history of CRH and gives us optionality for further value creation for shareholders into the future. I'd now like to talk about some of our acquisition activity in 2021. We completed 20 bolt-on acquisitions for a consideration of $1.5 billion. That represented an EBITDA entry-level pre-synergies of seven times, which really highlights our focus on maintaining our strong financial discipline, which of course has been a real hallmark of CRH for many years. Looking into a bit more detail on those acquisitions, the vast majority of the acquisitions were in high-growth markets, in the South, in the West, in the Mountain West states of the United States. And there were areas where we built out our integrated solution strategy, adding complementary products and services, leveraging and building out, filling in around our existing materials and products businesses in these same regions. Previously, we used to sell products, but today we are providing end-to-end value-added solutions to our customers. We're solving the problems they face every day. We used to sell rocks. Today, we are selling road solutions to our customers. We had lots of opportunities in 2021 for M&A activity. We have a strong pipeline as we enter into 2022. And I mentioned that we had significant financial capacity coming out of 2021. However, as CFO, I can tell you that whatever opportunities come our way, we will remain disciplined and never lose our focus on shareholder value. Albert mentioned earlier that on Monday earlier this week, we announced the disposal of a building envelope business for an enterprise value of $3.8 billion. That represented a very attractive exit multiple of 10.5 times 2021 EBITDA. And we expect that deal to close in the first half of 2022. The reason behind the investment decision followed a comprehensive review of that business. As you're well aware, we have been active managers of our portfolio. We divest, we've reinvested, and we continuously recycle the capital. And in fact, since 2014, we have divested $12 billion of our businesses at an exit multiple of 11 times, and we've reinvested $18 billion at an entry level of eight times multiple. And as a result, today, we now have a narrower, simpler, more focused, and more connected business. which is a higher quality asset base, generating higher growth, higher margins, better cash, and crucially, higher returns. I mentioned earlier about our strong balance sheet at the end of December 21. We exited at 1.2 times net debt to EBITDA. And of course, that gives us optionality for further future value creation. When I look at it, this optionality falls into a number of categories. Firstly, in terms of acquisitions, we continue to focus on the high growth markets. We continue to look for opportunities to build out our integrated solutions, businesses which are connected into our existing material and products businesses in those same areas. We have a good pipeline of activity, but of course, we're going to maintain our discipline when we consider every possible option. Looking on to capital expenditure, and particularly around expansionary capex, We spent 1.6 billion of capex in 2021. In 2020, with the pandemic, we had considerable uncertainty across a lot of our markets and we curtailed our capital expenditure activity. As we exited 2020, visibility improved in our business and we were able to step up our level of capital expenditure to the 1.6 billion spend in 2021. A lot of that spend happened in those same growth states, so Florida, Texas, into Arizona, out into California, and as well in that solution space. And I was delighted to be able to support those projects because some of those projects are the lowest-risk, high-returning projects we have within CRH. So it was a delight, as I said, to be able to see that tick up in CapEx in 2021 up to $1.6 billion. Also, further optionality about returning cash to our shareholders. Albert mentioned earlier, we've proposed a 5% increase in dividend. That represents 38 years of a progressive dividend policy in CRH. We're in the current tranche of the share buyback of $300 million, which will finish no later than the 30th of March. And that, at the end of December 21, we had returned over $3 billion, or almost 10% of our share capital to our shareholders. All of these acquisitions, the capital expenditure, the return of cash to our shareholders are crucially supported and underpinned by our structurally better business that we have today, which is delivering higher growth, higher margins and higher returns. I'll now hand back to Albert. Thank you.

Thanks, Jim. Jim. talks there about a structurally better business, and that's a term we use in CRH, and we've used it for quite a few years. But what do we mean by a structurally better business? How do we back up this claim? How do we measure on some of the key metrics upon which we should be judged? Well, let's go and look at some of those key metrics. First metric I want to look at is our EBITDA growth. Look at our EBITDA growth against our peers. Here we show our peers being our global peers, the big cement guys that are out there. Our US peers, we've got two major US peers, I won't name them, you know who they are. And it looks at the growth in our EBITDA on 2018 to 2021. Now, I didn't arbitrarily pick this period of time. Actually, I could have picked any period. You can go back and check it yourself. But here you can see CRH has outgrown anybody else in our industry. So, okay, that's interesting to see. So you can buy growth, you can take on growth anyway, you can be well positioned. How well are you running your business? How efficiently are you running your business? Well, let's look at the margins in our business. Let's look at the next slide. This looks at the expansion of our margin over the same period of time. Great performance by our global peers, almost 3% ahead. US peers, a little bit ho-hum, but CRH almost 500 basis points ahead. By investing in our business model, by investing within a business, by working hard every day, we have improved the efficiency of a business to bring that margin performance. How does it all end up? Let's look at the next metric. Look at operating cash. In the end, it's all about cash. And here again, you find CRH the winner. The good performance by both our global and US peers, very good, very impressive. But CRH ahead yet again. You know, it doesn't matter what I pick. It doesn't matter the metrics. It doesn't matter the period. CRH outperforms. We have delivered superior value to you, our shareholders. Now, we know getting to the top is one thing, but staying there is something else. And CRH has no interest in being static in any way, shape, or form. We want to put more distance between ourselves and our peers. And let me explain to you how we think we can go about doing that. CRH has been a changing business over the last decade. We have made great changes to our business model and to our structure. We have reshaped our business over the last 10 years. 50% of the business that we owned a decade ago have been sold. We've repositioned our business. We've disposed of the peripheral geographies and we've focused on our two core markets, developed world markets of North America and Europe. But importantly, within those markets, we've geographically refocused. We've pushed hard to the central and eastern European part of Europe where there's higher growth. We've pushed south and west across the US with a strong population and economic growth. We've caught that rebalancing of our business between strong cash cows of western Europe and northeast United States supplements the high growth businesses that we have in the east of Europe and the south and west of the United States. We've become a narrower and deeper business. We have refocused our business on core areas of competence. We are less an intermediate supplier of base commodity materials. We have got closer to the ultimate customer, our customer and our customer's customer, over the last 10 years. And as we've moved down that value chain, we have understood an awful lot more about our customers' needs and their problems. And that has allowed us to solve some of their problems for us by improving our offering. Sometimes it's about broadening out the product range. Sometimes it's working with them to make them understand how we can adapt our materials and innovate our materials to make their lives easier. Offsite construction, more complex construction, working with their designers and their engineers to make their life easier. And I can best express this by two of our major businesses, our fastest growing businesses. Our America's Materials business, 15 years ago, principally just broke rock and sold rock, a basic commodity. Well, then we decided we want to turn that rock into asphalt. And in turning it into asphalt, we decided, well, maybe we should get involved in actually laying some of that asphalt. And having laid some of that asphalt, our customer said to us, well, look, if you're providing the rock and the asphalt and you're building the road, Who's going to handle all the culverts and the water runoff? And how are we going to manage the on-ramps and the off-ramps and the bridges? And we got more and more involved in that. And now we are a complete supplier of the whole road solution to our major customers, the federal government and the states in the United States. I look at our APG business, our fastest growing business across CRH for almost 10 years. 15 years ago, that was a business that basically sold grey pavers. that were used for commercial or indeed industrial purposes. And then we started to think, well, maybe we can start making them in different colors and different shapes and different sizes. And we can bring them to the residential market. And then we worked with the two major big box customers, Lowe's and Home Depot's in North America to start branching out and broadening our product range to not just make pavers, but hardscapes and walling products and capstones and bark mulch and swimming pool products. So now our offering to our customer and our customer's customer is the complete range of products. And when we talk to the outdoor manufacturer, the actual contractor who designs this and puts it in place, we help him design it for his customers. Again, it's a complete package. We have helped our customers by finding out what their problems were and adding value to our offering to them. And by adding value to our customers, we're getting paid for it. It is no longer any good to be a sole provider of base materials in the world that we live in. Quite simply, you cannot run a business in 2022 with a strategy that was conceived in 1970 or 1980. You have to adapt and move on, whatever business you're in. And our focus on solving our end customers' problems is at the core of how we're going to grow Searage for the next decade. We call the integration of materials and products and services, we call that integrated solutions. And it comes to life by some of the examples that I've explained to you. That evolving part of our business is responsible for about 65% of sales so far across our businesses. And it benefits our customers, it benefits CRH, and it benefits you, our shareholders. Now let me explain how it benefits those three important stakeholders. Let me first of all talk about our customers. You know, I'm talking to you this morning, our investors, our owners, our shareholders. Actually, I spend most of my time, as my colleagues do, talking to our customers. And we hear consistent themes coming back to us. They are coming under increasing pressure with regulations, specifications, ever-changing government policy. They're under pressure to become more sustainable, to decarbonize, to recycle more. They're under pressure to improve the quality of their construction, to improve the lifespan and resilience of what they build. And at the same time, they have to speed up construction. They have to clean up construction to reduce the impact of construction on the local environment. And all of this has to be done against the background of, we want lower costs. And the constriction of the fact that labour supply is tightening. Now, government set vision and they set policy. But they never tell anybody what to do or how to do it. The contractors, well, their job is full. They're focusing on the complex matter of the construction process itself. And more and more, contractors, designers, architects and engineers are turning to manufacturers like ourselves to collaborate and innovate with them on how we produce materials and products that can solve their problems and deal with the challenges they are faced with. I mentioned already, we are the number one building materials business in North America. were the number one building materials in Europe, the two most complex regulated markets in the world. Nobody has that breadth of understanding of the materials and products of the different end uses, the different geographic challenges or the climatic challenges that CRH has. We are the ones who are best positioned to pull all that knowledge across that breadth of end use, geographies, business areas, to put it together to find solutions for our customers. It takes solutions. That ability, that knowledge takes our solution strategy right into the heart of our customers' offices as we help with them design the products that will build the world of tomorrow without destroying the world we have today. It's good for CRH. solutions that delivers for series because our two major markets are of course very heavily regulated there are solid fundamentals of population growth economic growth and indeed money to pay for the businesses going forward we're focused on our core area of competence which primarily are infrastructure and residential they are both very heavy regulated and specified areas there are policies that are enforced and are required to do business there on the provision of materials and how you construct and there is an ever-increasing focus on sustainability Resilience, increasing efficiency, lowering costs. And if you can tick the boxes on all of those issues, you will see increased demand. And companies that innovate and deliver and adapt to that changing environment will be rewarded with extra business. And we see that as being high quality growth. And that's what has been behind the delivery for the last three or four years in CRH. And ultimately, this all comes together for you, our shareholders. It brings benefits to you. You have seen the last three or four years how we have delivered superior performance. By focusing more on the public purse, by focusing more on what we consider to be a resilient residential demand going forward for the next number of years, we think we have reduced the cyclicality of our business. But running a solutions business across the materials products, it's a complex business. You need a different skill set to manage the different parts of the value chain. But CRH has always managed different businesses in different ways. And we have shown our ability to do that in recent years. And we're confident that by the execution of solutions and extension of that business across our existing profile, it will translate into higher growth in sales, profitability, margins, and cash. Now, I can't leave the subject of solutions without talking about sustainability. Sustainability is at the very core of our integrated solution strategy. And decarbonisation is at the core of our sustainability strategy. We have a long track record of industry-leading carbon reduction in CRH. Last year, we pulled back our 2030 targets back into 2025. And today, we're announcing new targets. We will reduce, over the 10 years to 2030, our total emissions of CO2 by 25%. Let me be very specific. In 2020, we emitted 46 million tonnes in total of CO2. And we are committing this morning to reduce that to 35 million tonnes by the year 2030. It's a 25% reduction. I wish I had time this morning to go through more detail on that. I don't. It would take about 45 minutes. But that's why we have set aside time in April at our investor audit to do that. And in April, we'll explain to you exactly how we're going to do that. When we will achieve it, what will be the cost? All of these plans have been verified by the SPTI to 2030 and take us in line with our overall ambition of being a net zero carbon company by 2050. Now, there's a lot more to sustainability than decarbonisation. It's also important to talk about circularity and indeed the products that we make that will build a more sustainable world. For a decade, CRH has been focused on circularity. It's a deeply embedded part of our business now. I stand here this morning with great pride to say to you, I'm the CEO of a business that is the largest recycler of any product in the United States. We recycle, nobody recycles more plastic or paper or cardboard. We recycle more building waste than any We recycle more product than anybody else. But what do we do with it? Well, we're also the largest road builder in the United States. And today, the roads we're building, 25% of all those roads are being built with recycled material. It took us a decade to get there. It's progressive work. It will increase in the years ahead. But by using recycled material in the building of roads, we are protecting and preserving the scarce resources that are out there. And, of course, we are extending the vital expensive reserves that CRH owns. Also, 100% of all the products we make are recyclable. Now, we have invested over the last decade over a billion dollars within our businesses on innovation. A lot of it has been focused on increasing sustainability. A lot of it has been actually responsible for delivering the solution strategy that's delivering for CRH today. And we will continue to do that going forward. However, additionally, we have set up a $250 million venture fund. specifically to commercialize some of the really good projects that we have up and running within our businesses to commercialize them more, to see exactly how we can get them to market that can contribute not just to our business, but also to the sustainability agenda for our industry. If I can leave you with three key thoughts how we think about sustainability in CRH. We are committed to producing the materials that we produce in a more sustainable way. We are also committed to innovating and producing products that will enable our customers construct in a more sustainable way. It probably means more offsite manufacturing and more industrialization. And crucially, we are committed to innovating and manufacturing products that will help us all live our lives in a more sustainable way. And we will talk a lot more about that when we talk in April. The reason why we've asked for this investor update in April is because we want to have a mature conversation with our shareholders. We want to take time outside of the very busy reporting window we find ourselves in at the moment and take an opportunity to expand on the key components of our integrated solution strategy. There's no big reveal here. This is about a mature conversation to explain to you how we are going to deliver more value to all stakeholders in CRH and how we place sustainability and in particular, decarbonisation and circularity, right at the core of our strategy. We'll also set out how our portfolio is going to evolve in the decade ahead and how we are going to allocate the fruits of our work, the capital, to maximise value for you, our shareholders. Now, the format of the investor day is shown on slide 27. It's a live webcast. Myself and Jim will be there. We'll be joined by Randy Lake, our Chief Operating Officer, It'll be on at 9 a.m. East Coast time, 2 p.m. GMT. And we'll take about 60 minutes to discuss our plans and our thoughts. And we'll have plenty of time for Q&A afterwards. I'm sure you'll find it very interesting. I look forward to updating you on that. So with that, I'd just like to conclude this part of the presentation by talking about our outlook for 2022. You've heard me talk about the fact we've had a strong start, a strong finish to the year. We've also had good order books. The momentum in our businesses is good. Demand is there. So we look forward with positivity. Of course, there are challenges. There are challenges with regard to cost. There are challenges with regard to the uncertainty of what's going to happen in Central and Eastern Europe. However, we will have a strong focus on the matters that we can control. Our costs, our commercial excellence, and we'll keep focused on our cash. And we'll update you again when we speak to you in April. So with that, that's the end of the formal part of the presentation this morning. What I'd like to now do is move to Q&A. I'm joined here by Tom Holmes, our Head of Investor Relations, and Jim. And together, I guess, for the next 25 or 30 minutes, what we're going to do is just take your questions that you've sent in to Tom and answer them in the best way we can. Tom, good morning. Hi. Thanks, Albert.

Good morning, everyone. So as Albert said, this morning's Q&A session will be moderated. I will take the questions that have been coming through over the last hour or so. I'll address them here to Albert and Jim on stage. Please continue to submit your questions over the webcast portal and we'll get through as many of them as we can. Please remember to give your name and your institution when you're sending through your question. There's a lot of overlap and recurring themes in the questions coming through. So hopefully a lot of them will be addressed over the course of our conversation this morning. If not, if there's any outstanding questions at the end of the session, the IOR team and I will be happy to follow up with you directly over the course of the day. So to kick us off, Albert, Jim, I have two questions here from Robert Gardner in Davie. The first is, can you please quantify the impact of rising energy costs in 2021? And what are your expectations for 2022? The second is, can you explain the strategic rationale behind the divestment of your building envelope business and what are the implications for your integrated solution strategy going forward?

Maybe I'll take those, Tom. Well, maybe I'll pass the impact of energy on 2021 to Jim later. First of all, good morning, Bob. Hope you're well. Let me deal with the disposal of all cast and building envelope for us and then come back to our energy issue. Building Envelope has been part of CRH for about 30 years. It's a very fine business. We've built that business up by acquisition and by geographic expansion, primarily within the United States. But we have become a very, very big gorilla in a small space. We owned that space. And in CRH, as you know, of course, we're very focused on operational performance. But actually, we create about two-thirds of our value for our shareholders through the acquisition process, directly or indirectly. And that business was, we bought a very big business in 2015, C.R. Lawrence. And that was the last big business we bought in that space because actually we were running out of optionality to buy businesses. And if we have no M&A opportunities, we actually tie one hand behind our back. Secondly, that was a business that was focused on the glazing market. Our customer was the glazer. There were no other products we could sell to them. I've already talked this morning how our focus is on customers. We could do more for them. We could sell more, but then we were just an organic growth play, and series don't really have too much interest in just being an organic growth play. And the last reason was that it didn't really integrate with our core competencies in and around strong, heavy, complex infrastructure, public or private, or indeed residential as well. It was a non-residential business. And when we looked at the opportunities to be able to deploy that capital elsewhere in what were businesses that did sit within our core competence, that did offer us acquisition opportunities, it was actually a decision where we said, well, let's go and test the values and see if we could crystallize the value we have now to deploy that capital elsewhere. And that was the rationale, just sensible portfolio management. With regard to energy costs, you've asked me about what we see about energy dynamics in 2022. I don't know. All I can tell you is that we managed the really brutal energy cost increases during 2021 quite well. Our margin went ahead, so we did manage it well. And all I can tell you is we keep an eye on the policy very careful. We've seen energy costs up 35% since the start of the year. But remember, we have natural hedges in place. We buy forward. We have our bitumen winter fill program, and we watch very carefully our use of fuels, and we have a constant switch away from fossil fuels as well. So we're confident that we can manage them as best we can. Let's see how the year evolves, and I'll probably talk to you with more knowledge and understanding when we talk in August of this year. With regard to energy costs in 2021, Jim? Sure. Morning, Bob.

Bob, as you know, typically our energy bill tends to be set in a range of kind of nine to 11% of our revenue. In 2021, it was just a little under 10%. As Albert said, about half our energy bill tends to be in the liquid asphalt on the bitumen side. And we've always managed our business from a margin perspective. The other half tends to be between electricity, diesel, gas, etc. And typically heading into any year, we'd have about 60% cover in place. And that's not any different heading into 2022. So when you look in that range of kind of 9% to 11%, I expect it to pick up towards the higher end of that range in 2022. But as Albert said in 21, crucially, despite the very significant inflation kind of leveraging on our solutions business, we were able to push on margins across all three divisions.

Thanks, Jim. Jim, just a quick one I see here. The post-tax proceeds for the building envelope divestment, any thoughts on that?

Yeah. We announced Monday the total enterprise value of $3.8 billion for the divestment of the building envelope. That included some assumed leases of about $350, so the net cash in is about $3.45, so a billion net of tax shade under $3 billion.

Next question here is from Gregor Kuglic in UBS. Two questions here. First one, given the strength of the existing balance sheet and expected proceeds from building envelope, what are your intentions for redeploying this capital? And the second is, can you detail how you aim to achieve the 25% reduction in carbon emissions by 2030? Can you elaborate on the additional costs or capex to achieve this?

Again, maybe I'll take the first turn. Jim, you might come back to you on the CapEx costs for that, Tom. Gregor, good morning. I hope you're well. I take the CO2 reduction question first and foremost. Look, we're going to take the time in April to go through that in detail, but it's primarily focused in three or four key areas. First and foremost, it's within the process. We're ongoing working on our process within all of our factories, not just our cement businesses, but also our agri-concrete, concrete product facilities to decarbonise that. And again, that's the part and parcel of it. innovating new materials, working with our customers to produce less carbon intensive materials. Of course, there's expenditure, there's capital expenditure to invest within our business. And of course, crucially, it's the area of fuels, not just the fuels we consume ourselves, moving more to biomass and green fuels, but also the fuels, the energy that we buy in. And that's the primary areas of where our focus will be. Again, we'll take you through that in detail when we come forward in April. Go to Jim in a second with regards to the cost of that. Just with regards to the deployment of the capital that we have, look, I think you just have to trust CRH and trust the system. Over the last decade, we've sold $12 billion worth of businesses, and we bought $18 billion worth of businesses. As Jim mentioned, the $12 billion that business we sold, we sold them at 11 times EBITDA, and we bought businesses at 8 times EBITDA, pre-synergist. So we have targets in mind, yes. It's a long list. Is there a big, expansive, huge deal we're going to do? No, we don't do that in Surge. Ours is an industry that is replete with fragmented, smaller businesses. And what we will do is we will continue to gobble up those businesses because when we buy smaller businesses, we see opportunities to create value in doing so. So it'll take time, but we will reallocate that capital back into our business to create value for our shareholders and we'll see how it goes during the course of this year and next year. Jim, would you go to the CapEx first?

Morning, Gregor. Yeah, Gregor, this is, I think, our fourth target that we've put out there in terms of carbon reduction. So what we have in place is a very clear process, built up location by location across the group in terms of how we're going to get there. We spend typically about, in 21, we spent 1.6 billion on CapEx. 22, we forecast a little increase to 1.7. Looking out in terms of the CapEx required to achieve that target, it's not a material step up on that kind of level of CapEx, 1.6, 1.7 per year. However, I can assure you that all those projects that are required to deliver it will again be looked through that same lens that we do for all capital projects, so in terms of returns criteria. So they will also earn a return on those investments.

Jim, there's a follow-up here on CapEx for 2021 coming in higher than expected. Any thoughts on that?

Sure, yeah. CapEx came in at 1.6 billion, as I mentioned earlier, the context of that. We were able to pull forward some of that expansionary CapEx and some of those growth markets, and again, in our solutions businesses. So, as I said, in and around Florida, Texas, into Arizona, we had opportunities in terms of fast-growing markets and in terms of building out our capacity because the demand was there. So, delighted to be able to support, Tom, as I said, some of the

the lowest risk highest highest returning projects we have when we can get those kind of projects so that explains the little tick up we're able to pull it forward great next question here is from david o'brien in good buddy the reshaping of the business in the last eight years has been very significant are you satisfied with your current portfolio or should we expect further evolution from here um

I just said Sirius is never static. We're always moving, not because we want to move, but because we must move. Our markets are constantly changing. Your markets are too. And we are anticipating those changes and guiding our business where those markets are going to. So, yes, I do anticipate to continue to work on our portfolio. It should be. But the reason for that is that we want to develop a better business, a more profitable business, a more cash-generative business, a business with higher growth. And we see the way our world is going. Our world cannot continue to build the way it's being built today. Two billion people will arrive on this planet over the next 30 years. Where are they going to go? We just cannot afford to construct the world that will accommodate two billion people the way we're currently building today. We're going to destroy the planet. So sustainable construction has to be the way forward. And companies like CRH are right in the center of developing sustainable construction products and materials. And that's why we'll continue to evolve our portfolio. And that's why we'll continue to evolve that portfolio in the developed world because that's where the changes will start. So yes, the portfolio work will continue, but you would expect it to do so.

Thanks, Albert. Another question here from Arnaud Le Man in Bank of America. What is the outlook for pricing in 2022 in Europe and the U.S.? ? And do you expect to be able to cover cost inflation?

Okay, I'll take that one again. Pricing, Arno, like a very topical question. I'm sure that question has been asked for every one of my CEOs of all the peer companies out there. And you've heard the responses and so have I. As a response to the very significant cost increases, there's a strong need to get good pricing in the marketplace. And I endorse that comment. I think there is too as well. We have been subject to some very challenging cost input in 2021. But our business is not just about pricing on. And you can see that. Most of the businesses who are talking about pricing have taken a step back with regard to their margin. CRH didn't. And you have to ask the question, why is that? We're not smarter than anybody else. There's no special colleges for pricing that we went to that no one else went to. It's our business model. It's different. We're becoming, because of the solutions, because we add value to the materials of products we sell and make our customers' lives easier, we get paid more for that. So pricing and a continuation of the solution strategy is how we insulate ourselves against cost headwinds and develop our business going forward. How that's going to play out in 2022, I don't have a crystal ball. All I can tell you is if you judge us on our track record last year, where energy prices went up by 65%, we had margin improvement. Again, as I said earlier to Bob, I'll tell you with great knowledge when I stand in front of you here at the half years. Great, thanks.

A lot coming through actually on US highway funding and infrastructure. generally around the theme of when do you think it will translate into higher activity levels? That's been the main one. Any thoughts on that, Albert?

Again, maybe I'll take that. Look, there has been a very supportive environment for federal funding and indeed state funding for the last couple of years on the back of quite good economic performance in the United States. Of course, you're referring to, I think, to the November statement that the bill signed on the Infrastructure and Investment Bill for a further $1.2 trillion investment in infrastructure. And there's no doubt that will supercharge investment for the next five years. I should mention of that $1.2 trillion, sewage will be a significant beneficiary. Our top 10 states account for over 30% of all of the dollars being spent. $350 million of that billion dollars will be spent on roads. However, another 200 billion will be spent on infrastructure for water, telecommunications, and IT, again, which plays right into our infrastructure products business as well. So really, almost about 550 billion of that 1.2 trillion will go to the areas that we're focused on. So that should see strong growth. In fact, we anticipate the spend in the next five years, as I said earlier, being up about 50% over the last five years. So significant growth going forward with regards to that. With regard to the timing of when it comes through, look, we are working now. Our backlogs relate to projects that were awarded and planned last year. So if you have a large infrastructure project, you've got to get permission, you've got to design it, you've got to plan it, you've got to tender it. All of that takes time. There's probably somewhere between a nine and 18-month lead time on those projects. So we don't anticipate any of the funding for the $1.2 trillion that you may be talking about hitting our business until the earliest, the very end of this year, probably start to come through in 23 and 24, will be the big years that benefit from it. But not really. This year is already set based on last year's funding.

Another two questions here from Paul Roger in Exxon. The first is on the outlook for US asphalt margins in the context of higher oil prices. And could there be a lag between higher bitumen costs and the mitigating price rises as a result? And the second one around the likelihood of large acquisitions in 2022.

Okay. Hi, good morning, Paul. Not 15 questions today, only two. I'm sure the 13 are following tomorrow morning with your notes. I'll pass the comment on margins to Jim now in a moment. Look, the likelihood of big deals, the only likelihood there is of deals in CRH is value deals. Whether they're big or small, it'll all be about value because that's the history of CRH. We don't need to go out and do big blowout deals. If I look at our industry in North America, about 15% of the industry is across the top five players. 85% is fragmented and unconsolidated. If you look at the deals we did last year, $100, $200, $300 million deals, businesses that no one ever heard of before, and there was a long list of deals out ahead of that, both in Europe and the U.S. So I don't really think there'll be a big blowout deal by CRH, not unless there's extraordinary value out there. Obviously, we keep our eyes open, something could happen, but likely it is, it'll be a continuation of the strategy of CRH that you've seen over the last two to three decades.

Emergency? Yeah. Morning, Paul. In terms of asphalt margins, when we look at the asphalt margin, we look at the whole chain, Paul. As I said, we would look everything from the aggregates into the liquid asphalt, into the asphalt, into the paving and into the service. I think the service in others. So when you look at 2021, as I said, in the AMF business overall, we managed to push margins on 20 basis points in 2021. Specifically around the question of the lag, you know, the majority of our states where we pave in the U.S. are index-linked stakes, so the pricing is linked back into the price of the liquid. There can be a lag sometimes, but however you see what we were able to do in 2021, still able to push on the full margin along the value chain from that perspective.

Great. Another question here from Elodie Rawle in J.P. Morgan. How do you see U.S. residential demand evolving in 2022, given likely rising interest rates? And do you see a meaningful recovery in non-residential demand, which could offset this?

Hi, Elodie. Good morning. Hope you're well. Look, with regard to U.S. residential, actually, U.S. residential has been robust now for about three or four years. And I think there's a couple of reasons because of that. We went through almost seven or eight years of significant underbuilds. Now, I can remember times when we had 450,000, 500,000 new homes being built for a number of years in North America, in the United States, in a market that requires probably 1.5 to 1.6 million new homes every year just to feed the market. So that has not been replaced, that slowdown. Inventory levels, if I talk to home builders in the United States, which we do quite a lot, actually inventory levels are at all-time lows. So with the demand that's there, with the inventory levels that are there, you can see it in the pricing. demand is going to continue strong. Just look at it in terms of what's the plan forward. The forecast for this year is 1.7 million new homes. Currently, our run rate is about 1.6 million new homes. So I think it's fairly robust. I take your point on interest rates because, of course, we have to watch that very carefully. But Powell has been very careful about... Sort of making a slower rollout of interest rates. But I don't want to get involved in that debate. Demand is good. We're working from historic lows. And, I mean, 30-year fixed rates are now just a touch above 4%. They haven't really moved up all that much in recent times. And we think we'll be quite robust going forward for this year for sure. With regard to non-res, we're starting to see a recovery in non-res. You will have seen the ABI stats for a number of months now have been above 50%. It's good to look at that regionally, but actually sectorally within that, there's a little bit of a change that's taking place. We're seeing perhaps that retail and hospitality is not moving forward as it has in the past. Hardly surprising. But the real growth is coming in data centres, warehouses, and indeed medical. Now, that actually plays to our sweet spot because daily centres and warehouses are complicated buildings to build. Large spans, large precast units, large footprints, significant amount of stone. And again, plays to our solutions of specified regulators and air-conditioned heating. All of that must be highly efficient buildings. And again, that's a strong growth area for us. Again, so good to see the non-rides coming back, but specifically coming back in the U.S. in those sectors and specifically down south and out west.

Thanks, Albert. A couple of overlapping ones here, maybe just two briefly. One on UK, backdrop on the UK at the moment, and also Eastern Europe, general exposure to the area and any concerns on activity levels going forward.

Okay, well, maybe I'll talk about the UK and maybe, Jimmy, you might give some dimension on our exposure to Eastern Europe. Maybe just give us an overview in terms of how we think about Eastern Europe at the moment, given what's going on there. First of all, in the UK, I mean, since the Brexit vote in 2016, we saw really a reluctance and a pullback on the exchequer to fund some of the well-touted infrastructure projects that they had heretofore planned. Happily, we're starting to see in 2021, at last, some of those projects, specifically High Speeds 2, coming to the fore, and that's feeding the industry and benefits our business. And also, happily, the council and the boroughs within the United Kingdom are getting a good level of funding from the UK Exchequer. And again, that's helping small-scale infrastructure. And that has really, combined with the strong residential market, by the way, has really driven the performance of our business in the UK. I should say, we significantly reshaped and repositioned our business post brexit because we could see there was a different demand of our environment evolving in front of us even before covid than we had thought before that and that lower cost space that tighter business in around specific areas has also benefited our bottom line performance and maybe before i ask you to talk about the dimensions of what we have in in central eastern europe and indeed maybe ukraine i just want to talk about our own view in terms of what's happening in central eastern europe and how it affects our ability to think about that that part of the world our own sense but first of all i think we're all horrified by what's going on there But our own sense is that this is almost like an event, it's a catalyst that is going to pull Europe together culturally, socially and economically. And therefore, we will see a continuation of the rebalancing of wealth through Europe, which is happening through the stimulus packages that are going to Central and Eastern Europe. So it will accelerate the development within Central and Eastern Europe. Obviously, Poland, Romania, Hungary, Czech Republic, Slovakia, and indeed down into the Balkans should be significant beneficiaries of that as well. So we think it will redouble our efforts as Europeans to become more unified in the challenge that we're faced with. With regard to our exposure there, Jim? Sure.

In Eastern Europe, taking all the way from Finland right down to our business in Romania, we generate about 600 million of EBITDA across that Eastern Europe flank of the business. Very strong growth in 2021. Building on strong growth in previous years, really underpinned by strong infrastructure in that area and also good res demand also coming through. Maybe specifically on Ukraine, just in terms of scale, but we're in about Ukraine about 25 years in total, and it's about approximately 1% of our business in total.

Thanks, Jim. One here from Cedar Ekblom in Morgan Stanley. Would you consider accelerating your share buyback program after the recent pullback in share price? Maybe, Jim, one for you. Okay.

Yeah, current launch of the share buyback is 300 million. It'll finish no later than the end of this month, 30th of March this month. We're now at an annualized rate of 1.2 billion in terms of a run rate in terms of a share buyback program. When I look at share buyback, I'm really looking at it from a capital allocation decision. I went through it earlier. We really have options in terms of M&A, in terms of CapEx, in terms of our dividend, and also in terms of the share buyback. the exit of the year at a strong balance sheet position. But right now, in terms of the geopolitical, it's certainly stood out there in terms of inflation, in terms of interest rates. I'm quite comfortable with our balance sheet from that perspective. So, you know, but any capital allocation decision that we will take, we'll always look to that critical lens of, you know, shareholder value accretion decisions.

Great. Great. Thanks, Jim. Just conscious of time for everybody watching on the line. We are up against it here a little bit with a busy schedule this morning. I might just squeeze two more in if we can. And as I say, if there's any outstanding questions over the course of the day, the team and I will follow up with you directly. Two others here have come up quite a bit actually this morning around pro forma net debt levels now comfortably below one times following the billing envelope divestment. What do we see as normalised levels? And then maybe just a brief comment on early trading and backlogs so far this year.

Yeah, in terms of performing net debt levels, we said through a normal cycle, right, we're quite comfortable at net debt EBITDA of two. At the end of December, it's a point in time. It's 1.2 times net debt EBITDA. As I said, just mentioned in the last question, quite comfortable at that level and that it gives us optionality going forward as to, you know, in terms of what shareholder value accretion decisions we will take.

And in terms... Or maybe I'll just take that for the early trading. Look, we're probably at visibility at the end of the first quarter at this stage. Off to a good start, quite frankly. Messy winter in North America, but you know what? It almost doesn't matter in January and February. Very, very slow in the construction season. Maybe down the very south and out the very west of some activity levels, but the winters in America really don't. They stop construction really till the end of March before we start going to business. But as I said, the answer is in the backlogs. We said ahead of last year on the three key metrics, quantum, margins, and volume. So we feel pretty good about that. And early season indications, we do have some canaries in the coal mine. Early season indications, in particular in our APG business, are positive. So we feel quite good about the US for the first half of the year. Europe is a different situation. We've had good weather in Europe for the first quarter of the year. And again, good momentum in our business continuing on what we saw last year. And again, a good start to the year. So backlogs in both businesses positive. Good start in Europe. Okay in the United States. Doesn't really matter this time of year. So I think we'll be okay for the first half of the year. But we're going to update you later on. Look, Tom has just said to you that we've come to the end of our time this morning. I know it's a busy day for everybody. A lot of people have results today. We're going to update you with a trading statement in April, and we've also got an investor update on the 21st of April. I look forward to talking to you then. And until then, I wish you the best and stay safe. Thank you.