CRH plc

Good day. My name is Mon Deep, and I will be your conference operator today. At this time, I'd like to welcome everyone to the CRH Earnings Update Conference Call. All lines will be placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you'd like to withdraw your question, press the star and the one on your telephone keypad. Thank you. I will now hand the call over to Albert Manifold, CRH Chief Executive, to begin the conference.

Hello, everyone. Albert Manifold here, CRH Group Chief Executive, and you're all very welcome to our conference call and webcast presentation, which accompanies the release of our earnings update earlier today. Joining me on the call is Jim Minton, our Group CFO, and Tom Holmes, Head of Investor Relations. Over the next 20 minutes or so, Jim and I will take you through some of the main points of this morning's announcement, highlighting the key drivers of our trading performance for the first nine months of the year, providing you with an update on recent portfolio activity, as well as an indication of our expectations for the year as a whole. Based on the visibility that we have at this moment in time, We also share our thoughts on some trends we're seeing across our market as we look ahead to 2024. Afterwards, we'll be available to take any questions that you may have, and all told, we should be done in 45 minutes or so. First, on slide one, I'd like to take a moment to mention a few of the key highlights from this morning's statement. Following overwhelming support from our shareholders earlier this year, we successfully completed the transition of our primary listing to the New York Stock Exchange in September. is an important milestone in our development and one that will enable Savage to fully participate in the significant growth opportunities that lie ahead. With regard to trading performance, I'm pleased to report that the positive momentum we experienced in the first half has continued into the third quarter. And for the first nine months of the year, our business has delivered further growth in sales, EBITDA, and margin. Total group sales of $26.3 billion were 8% ahead, reflecting good underlying demand and further commercial progress across our businesses. This translates into EBITDA of $4.8 billion, 14% ahead, and a further 100 basis points of margin improvement. A strong performance despite contending with some inflation and cost pressures. This morning, we've announced an agreement to acquire an attractive portfolio of cement and readiness concrete assets in Texas for $2.1 billion, a significant investment which will deliver further growth and value creation for our shareholders. I'll take you through that in further detail a little later in the presentation. We also continue to return significant amount of cash to our shareholders through dividends and share buybacks. Our ongoing share buyback program is on track to return approximately $3 billion in 2023, and the current transfer program will be completed before the end of the year. In advance of our intended transition to quarterly dividends in 2024, and consistent with our progressive dividend policy and strong financial position, This morning, we have announced an accelerated payment of our 2023 dividend, representing a 5% increase compared to the prior year. Looking ahead to the remainder of the year and based on current trading conditions and the momentum we see across our businesses, I'm pleased to report that we're raising our previous guidance and expect to deliver full-year group EBITDA of approximately $6.3 billion well ahead of the prior year and representing another record year for CRH. Turning to slide two, and before taking you through the trading performance for each of our businesses, I'll briefly outline our thoughts on the market backdrop and trading environment across our main markets of North America and Europe over the course of the year so far. Despite the impact of higher interest rate environments, we continue to experience positive underlying demand across our key end use markets. In infrastructure, our largest end market, representing approximately 40% of revenues, It continues to be underpinned by historic increases in US federal, state and EU funding programs. In non-residential, we continue to experience good demand in our key segments, particularly in new build manufacturing and industrial facilities. These are typically large complex projects which fit very well with our capability to deliver fully integrated bespoke solutions to our customers. As for residential, while the pace of new build construction in North America and Europe continues to be impacted by higher interest rates and affordability constraints, remodeling demand remains resilient, supported by high home equity values and an aging housing stock in growing need of repair, maintenance, and improvement. Turning now to the trading performance of each of our businesses, and first to the America's Materials Solutions on slide three, which delivered a strong performance during the first nine months of the year. Notwithstanding some challenging weather conditions, impacting our operations in certain regions of the United States. Total sales in either DAO were 7% and 11% ahead of the prior year respectively. And despite contending with some inflation and cost pressures, particularly in the areas of raw materials, labor and logistics, I'm pleased to report further improvement in our margin, 70 basis points ahead, reflecting good commercial management across all product lines and disciplined cost control. As we look ahead to the remainder of the year, I'm also encouraged by the positive momentum in our backlogs, which we're now seeing the benefits in the historic uplift in U.S. infrastructure spending I mentioned earlier. So, overall, another strong performance from America's material solutions, which continues to be underpinned by the benefits of our integrated strategy. Next to America's building solutions on slide four, which has also delivered strong profit goals and further margin expansion in the first nine months of the year. Our building and infrastructure solutions business continues to benefit from positive momentum in our key markets, underpinned by significant public investment in water, energy utility infrastructure, and increased levels of onshoring activity in the manufacturing sector. Our outdoor living solutions business also continues to grow well, supported by resilient residential automated demand from both retail and professional customers, good pricing momentum, and the contribution from Barrett Outdoor Living, which we acquired last year. So for America's billing solutions overall, total sales growth of 15% translates into a 23% increase in EBITDA, reflecting good operating leverage and a further 150 basis points of margin improvement. Moving across to Europe on slide five, and first to the performance of our Europe material solutions business. 9-1 sales were 6% ahead of the prior year period, with positive pricing momentum more than offsetting subdued residential demand. This translates into 20% EBITDA growth and a further 180 basis points of margin improvement, reflecting strong operational leverage and our continued focus on commercial discipline, operational excellence initiatives, and cost-saving actions to mitigate the impact of inflation. We're now in our sixth consecutive year of positive pricing momentum in Europe, with pricing ahead across all products during the first nine months of the year. Looking ahead to the remainder of 2023 and into next year, we're focused on maintaining strong commercial discipline to protect and improve our profitability. Next to the performance of Europe billing solutions on slide six. Overall, a more challenging trading environment impacted by subdued residential activity and compounded by extended winter weather conditions across our markets earlier in the year. However, activity levels in the non-residential and infrastructure segments remain resilient, supported by good levels of public funding. We continue to focus on good commercial management and cost savings actions to mitigate the impact of lower activity levels, and we expect trading trends to improve into 2024. At this point, I'm going to hand you over to Jim to take you through the year-end balance sheet expectations and our transition to quarterly dividends next year.

Thanks, Albert, and good morning, everyone. Turning now to slide seven, and here you can see the key components underpinning our expectations for our year-end net debt position. I'm pleased to report that we expect to end the year with one of the strongest balance sheets in our history, reflecting a relentless focus on disciplined capital allocation and continuous business improvement to deliver higher profits, margins, returns, and cash for our shareholders. Let me briefly take you through the key components working from left to right on the slide. We ended 2022 with a net debt position of $5.1 billion, representing a net debt to EBITDA of just under one times. We expect 2023 to be another year of strong cash generation for the group, enabling us to continue to invest for further growth while also returning significant amounts of cash to our shareholders through dividends and share buybacks. In the year to date, we've invested approximately $700 million on 16 strategic bolt-on acquisitions, further developing our solutions capabilities in road infrastructure, utility infrastructure, and outdoor living. We also expect to invest approximately $1.8 billion in capital expenditure in 2023 to support further growth in our existing businesses. In addition, we expect to return approximately $4 billion to our shareholders through dividends and share buybacks. Our ongoing share buyback program is expected to return approximately $3 billion for the year. The current tranche of our program will be completed no later than the 20th of December and we will update the market regarding our plans for further buybacks in due course. So taking all of this into account and assuming no further material development activity for the remainder of 2023, we expect to finish the year with net debt of approximately $7 billion, or approximately 1.1 times net debt to EBITDA based on our full year EBITDA guidance. Turning now to slide eight, and this morning we also announced that we intend to transition to quarterly dividends with more equally distributed payments commencing from the first quarter of 2024. This follows the successful change of our primary listing to the New York Stock Exchange in September and aligns with our transition to quarterly reporting on the U.S. GAAP next year. In advance of our transition to quarterly dividends, the Board has decided to accelerate the payment of the 2023 dividend by distributing a second interim dividend of $1.08 per ordinary share. The second interim dividend payment will be in lieu of a final dividend, resulting in a full year dividend per share of $1.33 for 2023, which represents a 5% increase compared to the prior year. We have a long and proud track record of progressive dividends, and the increase in our full year dividend that we are declaring today represents CRHS 40th consecutive year of dividend growth and stability.

Thanks, Jim. Turning now to slide nine, another agreement to acquire an attractive portfolio of cement and ready-mix concrete assets in Texas, a significant investment that would further strengthen our position as the number one building materials business in the fastest growing state in the United States. The assets are primarily located in the high growth markets of San Antonio and Austin, two of the fastest growing cities in Texas, and will really complement our existing network of businesses across the Central Texas region. As you can see from the map on the right-hand side of the slide, the acquisition is an excellent strategic fit with our existing materials and products operations in Texas. And by leveraging our expertise and technical capabilities from our wider North American cement platform, as well as our European materials businesses, it will result in significant synergies and self-supply opportunities. We have proven capability and track records in that regard. demonstrated by the performance of Ashcroft since we acquired it in 2018. Of course, Texas is a highly attractive market from a construction standpoint. Strong population and GDP growth continues to drive new build activity and is also the largest recipient of federal highway funding. As a result, the demand outlook is robust, underpins a strong pipeline of large multi-year infrastructure and non-residential projects. Next to slide 10, but you can see the total agreed consideration of $2.1 billion. The combined portfolio of assets is expected to generate pro forma 2023 EBITDA of approximately $170 million, representing an attractive valuation before the significant synergies and savings we have identified to date. The assets comprise a 2.1 million ton cement plant, together with a network of terminals along the eastern Gulf Coast of Texas, as well as a portfolio of 20 ready-muse concrete plants with annual shipments approximately 1.6 million cubic yards these are modern high quality assets with an attractive returns profile under our ownership and the transaction will be initially margin accreted to the group and perhaps most exciting of all is the potential to unlock additional further growth and development opportunities in this attractive growth market at 2.1 billion dollars this is our third largest ever deal and by integrating this into CRH we believe we can create a tremendous amount of value for our business and our shareholders. We expect the acquisition to complete in the first half of 2024, and we'll update you on that in due course. Turning now to our outlook for the remainder of the year of Slider Island. Based on current trading conditions and the momentum we see across our businesses, I am pleased to report that we are raising our previous guidance and expect to deliver all-year group EBITDA of approximately 6%. representing our 10th consecutive year of margin expansion and another record year for CRH. In addition, as a result of our ongoing focus on strong cash generation and balance sheet discipline, we expect to deliver approximately $5 billion of operating cash flow and a year-end net debt to EBITDA ratio of around 1.1 times. Now, before I hand over to Q&A, I'd like to take a moment on slide 12 to share our thoughts on some of the trends we're seeing across our major markets, as we look ahead to 2024. Today, North America represents 75% of Groupie the DA and the remaining 25% in Europe. First to infrastructure, which represents the largest exposure for the Group. Here the outlook is robust, with demand in the United States underpinned by the continued rollout of a once-in-a-generation federal and state investment programme. Similarly in Europe, we expect robust demand in infrastructure activity to continue supported by significant investment from government and EU funding programmes. In non-residential, we expect key segments to continue to benefit from increased re-industrialisation and onshoring activity. In the United States, this is supported by $650 billion of federal funding for increased investment in clean energy, critical utilities and high-tech manufacturing following the passing of the Inflation Reduction Act and Chips and Science Act. Europe is also benefiting from increased onshoring activity. to over 200 billion of high-tech manufacturing projects in the pipeline. In the residential segment, we expect new build activity in the United States and Europe to remain subdued due to affordability challenges caused by the current industrialized environment. This is not a demand issue, and we believe the long-term fundamentals for residential construction remain very attractive in these markets, supported by favorable demographics and significant levels of undergrowth. So in summary, overall trend is positive for our business heading into next year, supported by robust demand in infrastructure and key non-residential segments, partly offset by subdued activity in new-build residential construction. Regarding the pricing environment, we expect positive momentum to continue across our markets, supported by disciplined commercial management, as well as the benefits of our integrated value-based solution strategy. So that concludes our presentation today, and we're now happy to take your questions. May I ask you please to state your name and the institution that you represent before posing your questions. In consideration for others on the line and to make the best use of time we have available, may I ask you please to limit your questions to one each where possible. I now hand you back to the moderator to coordinate the Q&A session or call.

And at this time, I'd like to remind everyone, in order to ask a question, press stars and the number one on your telephone keypad. We'll pause for just a moment to compile any questions. Again, if you'd like to ask a question, please press star 1 on your telephone keypad now. Our first question comes from the line of Ross Harvey with Davey. Please go ahead.

Hi there, thank you very much. It'd be great to start with the acquisition in Texas, please. I just wonder, can you talk us through the rationale, your view on the macro backdrop in Texas and maybe also the synergy potential from the deal? Separately, we're seeing supportive growth trends in the US into 2024. I'm just wondering, can you talk us through how you feel CRH is positioned to capitalize on those?

Good day, Ross. It's nice to talk to you. Let me address your first question with regard to the deal we announced this morning, the signing of the deal with the acquisition of the cement plant and related to concrete assets in Texas. I mean, Texas is the number one construction state in the United States, second most popular state, and actually one of the fastest growing states in the U.S. We have been the largest building materials player in Texas for quite some time, and it makes sense for us, given the growth dynamics we're seeing there with population growth, inward migration. It's the beneficiary of a lot of onshoring activity. And in fact, Texas has more roads than any other state in the United States. In fact, it's got 50% more roads than the state of California, which is number two. I mean, for the broad spectrum of the businesses that we're involved in, the processing of basic raw materials, how we turn those basic raw materials into different products, be they for roads or for general construction or for complex solutions. It absolutely is right in our sweet spot in terms of the high-grade construction that's going forward here in fixed-bedder solutions. So I look at all the dynamics going forward, looking at strong roads. It's the largest recipient of highway funding as part of the federal funding that's currently in place. So everything... points towards good, consistent, strong growth. And as a number one player, we're doubling down on our position there, and I will keep doubling down on our position there because just putting ourselves into good markets like this where we have an opportunity to excel and being number one matters in our industry because it gives you scale, and scale gives you cost advantages, gives you market advantages, and allows you access more of your customer's wallet. So that's why Texas, quite simply, And with regards to the cycle, well, look, I mean, I think we're in a strong growth cycle across the United States at this moment in time. 70% of our sales go into either infrastructure or commercial construction. And if you look at where that has been driven at this moment in time, obviously infrastructure has been driven by the various stimulus packages and the robust state budgets. But on top of that, we're seeing very significant growth coming from the unshoring and reshoring of commercial activities. And I think that alone is going to drive things. For sure, residential is at a low point. But given where we've seen inflation fall back during this year, and happily so, we expect to see an easing of the interest rate environment. And that will address some of the affordability issues we expect towards the end of 2024 to see residential coming back online. So I think we're in a good place in the cycle. And actually, quite frankly, in Texas, we're in a good place to be there in that position in the cycle. It's too early to quantify synergies yet. I'll be perfectly honest with you. You would expect, as one of the most experienced and capable cement producers in the world, with cement factories all across Europe and all across the United States, we have a lot of expertise and a lot of experience. All I'll do is point you back to this telephone call in 2018 when we acquired Ashgrove. And we bought that business. We were delighted to buy it. And in the five years, we doubled the profitability of that growth over the last five years. We did that by our process technology, our skill and our expertise, by introducing different types of fuels, different types of cements. And that's exactly what we were planning to do with this particular cement plant and continue to do so across our other cement plants. And when we get our feet on the table in next year, we'll come back and we'll be more specific with our plans and the timing of those synergies. The second question was generally about growth trends across the US in 2024 and how do we view our positions? Look, we are the largest filling materials business in the United States. We're the largest aggregate producer in the United States. We're the clear number one in the growth states of Texas and Florida, two of the top three states in the United States. In fact, three of the top four states, CRH is number one in Texas, Florida, and New York. We're a top three cement producer. So we position ourselves to be a manufacturer and producer of high-quality solutions in the fastest-growing regions of the United States. As I've said to you, we are a major beneficiary of infrastructure stimulus packages, about 50% of what we do, and that looks like it's going to continue for several years going forward. On top of that, we're uniquely positioned to capitalize on the ongoing activity we're seeing. Our solutions strategy is playing out very well, and it manifests itself in the leverage you're seeing coming through in the bottom line, the increased margins you're seeing within a business, and crucially, the increased cash we're generating. So we're generating higher profits, cash, and returns than anybody else. As I keep saying about CRH, if you add up our next four peers together, they're still less than CRH on its own. That's the size and scale of CRH, and big and scale matters in CRH if you use it and position your business well. I don't believe anybody has got a position to seriously capitalize on this position in the United States going forward for the next number of years.

Our next question comes from a line of Gregor Kluvlich with UBS. Please go ahead.

Hi. Good morning, guys. A few questions, please. So firstly, on sort of capital returns, so obviously doing your buyback, the $3 billion You're kind of nearly done, but if you kind of care to take us through what you're thinking for next year and maybe related to that, I think the dividend, just to clarify, I think the re-phasing implies that you maybe pay $400 million, $500 million more than you would normally do, just sort of as a one-off. Is that fair? And then secondly on M&A, so can you just summarize for us with all the deals you've done this year, I guess with the one you've announced today, what you expect next? sort of incremental contribution to be next year to earnings, please. Thank you.

Hi Gregor, Jim here. I'll take those questions maybe first on the share buyback. As you know that all our capital allocation decisions that we take in CRH are assessed through that lens of trying to maximise and ensuring and maximising shareholder value and buybacks are a flexible and efficient allocation of that cash. We announced in March earlier this year that we were stepping up the buyback, you're right, to 3 billion over the next 12 months. That runs to March 2024 and indeed the current phase of the buyback, which is a 1 billion tranche, will end In fact, since we started the buyback program in 2018, we'll have returned by the end of the year, a little under 7 billion, which is almost 19% of the capital when we started the program. We will be updating when we finish the current tranche, into 2024 at that stage. Maybe on the dividend next. Yeah, we are advancing, I suppose, in anticipation of moving to quarterly reporting next year. We will in 2024 also be moving to quarterly dividends, right, which is more the norm with the US listing. And in light of that, we're going to advance the final dividend this year as a second interim dividend. That's going to be, the record date will be mid-December. And in fact, that will be paid in mid-January 2024. So that will bring the total dividend to a 5% increase of $1.33 per share. And in fact, when you take it together with the share buyback, that's $4 billion in cash returned to shareholders in 2023, which is about 10% of our market cap today. It's not actually a one-off increase in that obviously we're bringing forward the final dividend next year and there'll be four quarterlies declared next year. The final quarter next year will be paid in early 2025. Just in terms of the scope impact on the acquisitions, we have announced we've done 16 bolt-on deals so far this year, an average multiple of about eight times, and a total consideration of about 700 million. So that approximates about 90 million incremental EBITDA for a full year. The impact this year was about 25 million, so looking into 2024, the incremental benefit in 2024 from the bolt-on deals is going to be around 65 million. Just on the Texas deal, which Albert just referred to, the pro forma EBITDA this year is about $170 million. It will require some time to close that transaction, and assuming that we close it towards the end of Q1, that will give you a nine-month contribution next year. So the total contributions incremental in 2024 from the Botons and the Texas deal would be approximately $190 million incremental in 2024.

Our next question comes from the line of Anthony Petanari with Citigroup. Please go ahead. Your line is open. Please go ahead, sir.

Good morning. You gave some helpful commentary on 2024, and I'm just wondering, in America's materials, with the positives from public spending but also some questions around residential, is your expectation that you can grow aggregates volumes in 2024 in America's materials? And then maybe a similar question, when you look at your operating rates in cement in America's Is there room for organic growth in 24? Is that your expectation? Are you kind of functionally sold out? Just wondering if you could talk about maybe volume expectations for 24 in Americas.

Yeah. Hi, Anthony. Jim here. I'll take those as well. If you look into 2024, maybe from the U.S. perspective and looking at the end-use markets, on the infraside, we saw it in 23, that continuous kind of trending upwards, ramp up on the IIJA funding coming through, and we see that continuing, particularly in good momentum into 2024. So good, strong, robust funding at both the federal and the state level on the infra side. On the non-res side, we continue to benefit, particularly on the kind of heavy material side, which has come from the on-shoring and re-shoring projects, and particularly with our own footprint from that perspective. And that we see continuing as well, holding up in 2024. Residential, you know, continues to be subdued arbitrarily. back end of 24 before we see any improvement on that front. When you look at that all together from an activity level in 24, we'd expect activity levels across the US really to be approximately kind of flattish into 24. Now, on the pricing side, we do expect we're exiting this year with good momentum on the pricing side. And we're looking forward again in the U.S. to kind of double-digit price increases in 2024. And that's a combination of kind of price increases early in the year, but also similar to this year, mid-year prices coming through as well. Maybe specifically on the cement side, in terms of organic capacity, I think we're well positioned from that perspective, Anthony, in terms of the capacity that we have around our network with an excellent footprint with our cement assets, enhanced by the deal that we announced today, particularly in Texas. And as you know, the whole kind of trend of migration towards introducing the kind of type 1 L cements in the US as well is certainly helping from that position. So no concerns on the domestic capacity from that perspective.

Okay, that's helpful. I'll turn it over.

Your next question comes from the line of David O'Brien with Goodbody. Please go ahead.

Morning, guys. Thanks for taking my questions. Maybe I could build on Anthony's, Jim, if you could give us the same kind of commentary on the outlook for volume and price in Europe, and on the latter, just what is underpinning price tension as volumes stay a little bit subdued. And if I could tag a second on, in the statement, you talk about a robust pipeline of opportunities on the M&A front. Are there similar size deals to the type of deal we've seen today? Or how would you describe the mix of opportunities within that pipeline?

Hi, David. I'll just take the second question first about the pipeline and what work in M&A. And like Jimmy obviously commented on the European business. Look, We often talk about a robust pipeline, and here you see today some of that pipeline crystallizes. I think the key issue for us is that we have a wide and varied long list of companies that we can invest in. From our point of view, it's making sure that we prioritize those to fit with our growth ambitions and also the shape of CRH as it evolves in front of us, because we're designing CRH and looking at CRH for the years ahead, not what's behind us. The rationale for Texas really explains very clearly. It's all about being in high growth markets where we've got competency, capability and proficiency and an opportunity. We have space to grow there and being a number one is a huge advantage to us. So they're the criteria we look at. Are we the number one, number two? Are these high growth markets? Do we have a competency or near competency in this area? And does this help the overall strategic shape of CRH, which is all focused on executing solutions? Because it doesn't just give us extra sales and profitability. Anybody can buy sales and anybody can buy profitability. You can't buy returns. You can't buy cash. And you can't buy margin expansion. You've got to work at all of these. Margin expansion is because you become more efficient. you make better returns because you invest well and you get better, more profits than anybody else who invests in the business. And CRH is, by its stand alone, the best returning business in terms of investment in our business, in our industry. And our margin expansion, 10 consecutive years of margin expansion, is as a result of a perfectly thought out M&A strategy executed well on the ground by strong operations. And again, cash, all of that focused on can we buy business that keep generating the cash because the 5 billion in cash we're going to generate this year, will accumulate into 35 billion of cash over the next five years. So for us, that's what our pipeline is about. They're the criteria with which you look at. And every time we do deals, you should hold us up to that mirror and say, okay, how do you tick the box with regard to those? Because that's how you build out the quality of the business with regard to CRH. So our pipeline is good, strong, and robust. We're disciplined. We know what we're focused on. We have a longer-term plan. But that's the basis and the structure of which that plan is built. Jim, I'll pass you just by the European businesses.

Yeah, absolutely, David. Yeah, I think when you look at activity levels this year, in 23, we'd kind of see, broadly speaking, across the entire footprint of Europe, David, that there's probably... of EU funding on the whole infrastructure programme, which is certainly helping support activity levels in those particular regions and countries. And generally, in fact, our main footprints across Europe would be in similar positions with good, strong, robust support on the infrastructure side. In terms of residential, clearly in Europe it remains subdued and it's going to need a change. It's not a demand. But overall, as I said, kind of exiting this year, pretty much, I think, you know, we started to trough from the middle part of 23 and looking forward into 24 with that kind of backdrop. In terms of pricing, Two strong years in 2022 and 2023 in Europe, really reacting to that period of hyperinflation that we saw on energy coming out of 2022. And we're still playing catch up on that. And we see good momentum in that pricing heading into 2024. We're still recovering some of that inflation and looking forward to another year of pricing in 2024, which hopefully will be the seventh consecutive year of strong pricing across Europe.

Our next question comes from the line of Catherine Thompson with Thompson Research Group. Please go ahead.

Hi. Thank you for taking my question today. Circling back to the transaction today, buying assets from Martin, you did a great job of laying out the strategic reasoning why. But maybe stepping back in a bigger picture, this is you'll continue to have a close relationship with Martin Marietta. As you think about what is good for CRH but also for the industry, why does this make sense from an industry standpoint with the U.S.? What does this mean for your ongoing collaborative relationship with Martin going forward? And what are your thoughts about the Hunter facility and its relation to the terminals in the Gulf? Thank you.

Thank you, Catherine. Good day to you, too. Look, we're delighted to have the opportunity to acquire this business. We are experienced cement experts throughout the world, and we've been in the cement business for almost 80 years. The ability for us to be able to transfer our knowledge and technology from other parts of the world, quite frankly, can bring new types of products and cements to the market that don't currently exist. Jim earlier referred to different types of cement, type 1 cement, We use several different types of cement in Europe here for different applications. There's absolutely no reason why we couldn't use those types of cements in the United States. And in fact, we're already doing so. We, since we bought Ashcroft, have expanded it out to three different types of cement. What that does, though, is that it introduces different products to the market which use less clinker, allow for better applications, and indeed, better performance by those different types of cements. So actually, I think what we can do is Over time, we can bring better types of concretes, more appropriate types of concretes to the marketplace. So in that way, I think bringing our expertise to the Texas market, that particular part of the Texas market, would be very helpful going forward. I think the relationship that our cement businesses have, as indeed our agribusiness businesses have, as a basis for our solutions business going forward, is really very, very interesting. Some of the construction work that's taking place in Texas we've seen not just in terms of basic main traditional infrastructure but I mean in the modern infrastructure we're looking at transportation of bike utilities whether it's telecommunications or information technology the transportation of water or indeed the complex construction in around the reshoring of manufacturing facilities again having the base materials and the knowledge how to manipulate those to create products again helps us deliver what we say is higher quality markets products to the market as we build back America better at a cheaper cost better quality more resilient, greater sustainability. With regard to our relationships with our peers and our competitors, I think it's interesting that some people focus on being single product players. Some people focus on being broader building materials players. I think there's space for each and every one of us in the marketplace. Those who specialize can specialize in particular areas. It's obviously a narrower field to be in. We choose to be a different type of company. We choose to do so because we believe the solutions approach that we take gives us greater opportunity to create value for our shareholders. I'd like anyone to stand up for our company in terms of profit growth, margins, cash generation and returns against any other business. That's why we choose to be the business that we are because we produce industry-leading growth, industry-leading cash, industry-leading returns and I think that's what our shareholders want to see. But I think there's space for everybody in this industry and particularly in a strong growth market as we're seeing in Texas going forward, I think, the space for all of us.

Our next question comes from Elodie Rall with J.P. Morgan. Please go ahead.

Hi. Thanks for taking my question. So maybe if we can switch to cost inflation and have your early view on what we should expect for next year in both North America and Europe if we take into account your winter field program. So what kind of cost inflation should we factor in and how about wage inflation as well? Thank you.

So your question, just to be clear, Eleni, were with regard to our winter field program and how that's going and then also what we should factor in for cost inflation for next year. Have I got that correct?

Yes, everything. Thank you. Fantastic.

Maybe I might just deal with the general cost innovation. I might ask Jim to comment on the Winterfield programme and how it's going. I mean, it's very hard to know in terms of what's going to happen with regard to energy. Our expectation for energy in 2024 versus 2023, broadly speaking, is flat with this current year. We don't have any expectations. It's at a high level. But broadly speaking, with regard to energy, it's flat now. Of course, we'll react to that as it evolves in front of us, but I don't expect to see a significant drop or a significant rise with regard to that. With regard to the other costs and costs of business, we do expect to see inflation cost pressure on wages, logistics, other input costs, probably in the region of, depending on where you are, between 4%, 5%, maybe even 6%, because there's still a significant catch-up on the very significant cost of living increases driven by energy in 2022 across the broad economy. So we're expecting those. And again, that just again underlines the need for us to ensure that we are progressive with our price increases to protect our margins and our business. With regard to the Winterfield programme, Jim?

Yeah. Hi, Elodie. Yeah, this year, first in 23, we've had a very strong and good year around our Winterfield programme. And that was really on the back of kind of high levels of refining that was happening down on the Gulf Coast. And that enabled us to take a lot of that liquid off and store it throughout the winter of 22 into 23. Looking into next year, we'll only now start thinking about filling up the tanks again. And as you know, it's as much about making sure we have surety of supply. We would typically buy up to about half of our annual requirement and all season and put that into winter fill and make sure we have that product ready in the system to be able to meet demand, which in some parts of the US is quite a short paving season, which starts in kind of mid-April up to November. But looking forward again into next year, expecting a good success

Our next question comes from the line of Will Jones with Redburn Atlantic. Please go ahead.

Thanks, morning. Could I ask about America's materials solutions, sorry, America's building solutions, just the sharp acceleration in demand, in margin, sorry, in 3Q relative to the first half, just whether the what you'd call out for us on that front as to why that happened, particularly given that sales didn't really move, relatively speaking, any one-offs or mixed issues there around building solutions. Thanks.

Hi. Well, good day to you. No real one-offs or no mix there. It really just is a continuation of the improving portfolio of assets we have within those two businesses. Our two businesses, let me just remind you, within there are our outdoor living solutions business, which would be one of our strongest performing businesses in CRH over the last number of years. I mean it is resilient or on my demand because it's not exposed to new build construction but we seem to be in a sweet spot there in terms of delivering our products and getting good volumes going through there but particularly the change in our product portfolio in the last number of years has delivered a really strong performance in the bottom line and it looks set to continue into 2024. And the second business we have within our America's Building Solutions business are building and infrastructure solutions. And these are, as I say, supplying, as I talked about, modern infrastructure, supplying a lot of the products that are involved in the transportation of vital utilities, water, energy, communications, and indeed supplying products to the auditory manufacturing activities. And again, really, it's the solution story coming in there again, kicking in there, providing extra added value on top of the products That's delivering the extra margin and the extra profitability. So it's really the solution story being really exhibited. That part of our business, America's business solution, is the one that's most exposed to the solution story, and it's the one that's been the best-performing business we've seen across the last number of years.

We have time for one last question. Our last question comes from the line of Harry Goad with Barenberg. Please go ahead.

Yeah. Hi. Good morning. Thanks for taking my question. We've already talked a lot about acquisitions today, but I guess the other side of that historically has also been divestments. And I don't expect you to talk specifically about what might be for sale, but can you remind us how you think about the rationale for maintaining assets? particularly, I guess, in Europe. And it looks like obviously it's a big incremental investment in American materials. Is that where we should expect to see sort of the relative capital deployment to go in the future? Thanks.

Hi, Harry. Good day to you. Look, we were very clear when we spoke at our event in September that our business is 75% United States and 25% Europe. And we like that profile of our business because we have a lot of the advantages of Europe, a lot of the innovation, a lot of technology we have in Europe, and we bring it to scale in the United States. And I don't see that changing anytime soon. With regard to divestments, divestments take place across CRH where we see that perhaps somebody else is a better owner of a business that we own. I'm happy to say I don't think we've got any really bad businesses left in CRH. I think we've Over time, our business has been repositioned over the last 10 years. And just to remind everybody in the call of the business that we owned in 2012 and 2013, we have sold 50% of those businesses over the last decade. for about $10 billion. And by the way, we've invested $20 billion in new businesses. So it's a new CRH that's focused on going forward rather than going back. But that's not to say we don't continue on our work on portfolio. Really, for all of us as a senior management team, we are consistently looking at the performance of our businesses and the capital we have invested. And if we see opportunities to switch capital from lower-returning areas into higher returning areas, we will do that. Much the same as anybody on this call would do that. So we will continue to do that. But when we do it, it will be an expression of how we believe about the opportunities we have in the business we sell and how we can use the money from that opportunity to buy other businesses of higher returns. It won't be anything to do with the strategy of the business and whether we enter or exit a product area, a region or anything like that at all. I can assure you we are actively looking at rotating our portfolio continuously. It's something we talk about all the time. Some years it'll be tens of millions, some years it'll be hundreds of millions. But it'll all be about repositioning ourselves into higher growth areas, higher returns, higher cash, and higher margin businesses. Okay, listen, I think that's all we have time for today. I just want to say thank you for your participation. I hope we've managed to answer all of your questions, but as always, if there's any follow-up questions you have, please feel free to get in touch with our investor relations team. We look forward to talking to you again on the 29th of February next year when we report our full year results for 2023. Thank you for your time, and have a good day.

I'd like to thank our speakers for today's presentation, and thank you all for joining us. This now concludes today's call, and you may now disconnect.