CRH(CRH) - 2022 Q2 - Quarterly Report

Interim Results Overview CRH reported a strong first-half performance with a 14% increase in sales and a 21% rise in EBITDA, achieving margin expansion despite significant cost inflation. The company actively reallocated capital, spending $2.8 billion on acquisitions, notably Barrette Outdoor Living, funded by the $3.8 billion divestment of its Building Envelope business. Full-year EBITDA is projected to be approximately $5.5 billion Key Highlights CRH reported a strong first-half performance with a 14% increase in sales and a 21% rise in EBITDA, achieving margin expansion despite significant cost inflation. The company actively reallocated capital, spending $2.8 billion on acquisitions, notably Barrette Outdoor Living, funded by the $3.8 billion divestment of its Building Envelope business. Full-year EBITDA is projected to be approximately $5.5 billion H1 2022 Summary Financials | Summary Financials¹ | H1 2022 | Change | | :--- | :--- | :--- | | Sales | $15.0 billion | +14% | | EBITDA | $2.2 billion | +21% | | EBITDA Margin | 14.7% | +90bps | | EPS ($) | $1.21 | +36% | - The company projects full-year EBITDA to be approximately $5.5 billion, an increase from $5.0 billion in 2021, despite a challenging cost environment[3] - Year-to-date acquisition spending reached $2.8 billion, including the significant purchase of Barrette Outdoor Living[3] - The company efficiently reallocated capital from the $3.8 billion divestment of its Building Envelope business[3] Trading Overview First-half trading was robust, driven by the integrated solutions strategy and strong pricing which countered cost inflation. Group sales reached $15.0 billion, a 14% increase year-over-year (12% like-for-like). EBITDA grew 21% to $2.2 billion (13% like-for-like), with all divisions maintaining or expanding margins. Profit after tax from continuing operations rose 29% to $0.9 billion, with EPS from continuing operations up 36% to $1.21 H1 2022 Group Performance vs H1 2021 | Metric | H1 2022 | H1 2021 | Change | Like-for-Like Change | | :--- | :--- | :--- | :--- | :--- | | Sales | $15.0 billion | $13.2 billion | +14% | +12% | | EBITDA | $2.2 billion | $1.8 billion | +21% | +13% | | Profit After Tax | $0.9 billion | $0.7 billion | +29% | N/A | - Earnings per share from continuing operations increased by 36% to $1.21, up from $0.89 in H1 2021[8] - The strong performance was attributed to an integrated solutions strategy and successful commercial initiatives, which more than offset the impact of cost inflation[4] Capital Allocation The company is increasing shareholder returns through a 4% hike in the interim dividend to 24.0 cents per share and an ongoing share buyback program, which repurchased $0.6 billion in H1 2022. Capital reallocation is evident with $2.8 billion invested in acquisitions year-to-date, including the $1.9 billion purchase of Barrette, following the divestment of the Building Envelope business - The Board increased the interim dividend by 4% hike to 24.0 cents per share[9] - The share buyback program continued, with $0.6 billion of shares repurchased in H1. A further $0.3 billion tranche is planned for completion by September 30, 2022[9] - The Group invested $2.8 billion in acquisitions year-to-date, highlighted by the $1.9 billion acquisition of Barrette Outdoor Living, Inc. in July[10] Sustainability CRH has enhanced its commitment to sustainability by setting an industry-leading target to reduce absolute CO2 emissions by 25% by 2030. This target is certified by the Science Based Targets initiative (SBTi) and aligns with the company's goal of achieving net-zero by 2050. The company continues to innovate and expand its portfolio of sustainable and circular construction solutions - Announced an industry-leading target to reduce absolute CO2 emissions by 25% by 2030, certified by the SBTi[11] - The company is aligned with an ambition to be a net-zero business by 2050[11] Trading Outlook For the remainder of the year, the Americas Materials division is expected to show resilience, and the Building Products division is anticipated to benefit from RMI demand and acquisitions. However, Europe Materials faces challenges from inflation and geopolitical tensions. Assuming normal weather and no major macroeconomic disruptions, the company forecasts full-year EBITDA to be around $5.5 billion - Full-year EBITDA is expected to be in the region of $5.5 billion, compared to $5.0 billion in 2021[12] - Americas Materials is expected to be supported by resilient demand, while Building Products will benefit from residential RMI and infrastructure demand[12] - The trading environment in Europe Materials is expected to remain challenged by inflationary pressures, macroeconomic uncertainty, and geopolitical tensions[12] Divisional Performance Review Americas Materials The Americas Materials division achieved sales of $5.5 billion (+17%) and EBITDA of $0.8 billion (+12%) in H1 2022. Strong commercial management and pricing increases successfully offset inflationary input costs and unfavorable weather in some regions. On a like-for-like basis, both sales and EBITDA grew by 12%. Asphalt and Paving services saw strong volume growth, while Aggregates and Readymixed Concrete volumes declined due to weather Americas Materials H1 2022 Performance ($ million) | Metric | 2021 | Organic | 2022 | % Change | | :--- | :--- | :--- | :--- | :--- | | Sales Revenue | 4,750 | +564 | 5,546 | +17% | | EBITDA | 730 | +90 | 820 | +12% | | Operating Profit | 348 | +97 | 405 | +16% | | EBITDA Margin | 15.4% | | 14.8% | | - Like-for-like sales and EBITDA were both 12% ahead of H1 2021[14] - Performance by product line: - Aggregates: Volumes down 1% due to weather, offset by price improvements - Asphalt: Volumes up 10% due to robust demand and acquisitions - Readymixed Concrete: Volumes down 6% due to weather, offset by price increases - Paving: Revenues up 29% supported by strong backlogs - Cement: Sales up 15% on strong US demand[15][16][17] Building Products The Building Products division reported a 23% increase in sales and a 54% surge in EBITDA, driven by solid RMI activity, commercial progress, and strong contributions from acquisitions. Like-for-like sales grew 11% and EBITDA by 14%. The division achieved significant margin expansion through production efficiencies and cost control. The divested Building Envelope business also showed sales growth in the first four months of 2022 before its sale Building Products (Continuing Operations) H1 2022 Performance ($ million) | Metric | 2021 | Organic | 2022 | % Change | | :--- | :--- | :--- | :--- | :--- | | Sales Revenue | 3,259 | +358 | 4,022 | +23% | | EBITDA | 506 | +73 | 781 | +54% | | Operating Profit | 382 | +70 | 636 | +66% | | EBITDA Margin | 15.5% | | 19.4% | | - Like-for-like sales increased by 11% and like-for-like EBITDA by 14%[20] - Performance was strong across sub-segments: - Architectural Products: Sales ahead due to price increases and good residential RMI demand - Infrastructure Products: Strong sales growth driven by utility infrastructure demand and acquisitions - Construction Accessories: Sales were ahead in all regions[21][22][23] - The divested Building Envelope business delivered sales and EBITDA growth in the first four months of 2022 prior to its divestment in April[24] Europe Materials Despite currency headwinds, the Europe Materials division reported a 5% increase in sales to $5.4 billion and a 4% rise in EBITDA to $0.6 billion. On a like-for-like basis, performance was strong with sales and EBITDA both up 14%, as robust pricing and cost control offset significant inflation. Performance varied by region, with UK & Ireland and Europe East showing strength, while Europe West operating profit was below prior year. The ongoing conflict negatively impacted activity in Ukraine Europe Materials H1 2022 Performance ($ million) | Metric | 2021 | Organic | 2022 | % Change | | :--- | :--- | :--- | :--- | :--- | | Sales Revenue | 5,158 | +662 | 5,430 | +5% | | EBITDA | 585 | +73 | 609 | +4% | | Operating Profit | 295 | +75 | 344 | +17% | | EBITDA Margin | 11.3% | | 11.2% | | - On a like-for-like basis, sales and EBITDA were both 14% ahead of H1 2021[26] - Regional performance highlights: - UK & Ireland: Sales well ahead, with strong pricing and demand - Europe North: Positive first half with higher sales and operating profit despite energy cost inflation - Europe West: Sales ahead, but operating profit was below prior year due to cost inflation - Europe East: Strong activity in most markets, though Ukraine was negatively impacted by conflict. Overall operating profit was ahead - Asia: Sales and profit in the Philippines were behind 2021[27][28][29] Financial Review Other Financial Items Depreciation and amortization charges remained stable at $0.8 billion. The divestment of the Building Envelope business generated a significant profit of $1.5 billion, classified under discontinued operations. Net finance costs from continuing operations decreased to $197 million due to lower debt levels. The effective tax rate for the period was estimated at 22.0% - The divestment of the Building Envelope business resulted in a profit of $1.5 billion, which is included in profit from discontinued operations[33] - Net finance costs from continuing operations were $197 million, down from $206 million in H1 2021, primarily due to lower debt levels[34] - The interim tax charge represents an effective tax rate of 22.0%[35] Balance Sheet and Liquidity As of June 30, 2022, net debt stood at $4.3 billion, a $1.7 billion reduction from the prior year, mainly because proceeds from the Building Envelope divestment exceeded H1 acquisition spending. The Group maintained a strong liquidity position with $6.8 billion in cash, sufficient to cover maturing debt for the next 5.4 years, and holds a strong BBB+ or equivalent investment-grade credit rating - Net debt was $4.3 billion at June 30, 2022, down from $6.0 billion at June 30, 2021[37] - The Group had $6.8 billion of cash and sufficient liquidity to meet all maturing debt obligations for the next 5.4 years[40] - Maintained a strong investment grade credit rating of BBB+ or equivalent[40] Investments and Divestments In H1 2022, CRH invested $0.9 billion in 14 acquisitions and realized $3.6 billion in proceeds from divestments, dominated by the $3.5 billion cash from the Building Envelope sale. Post-period, the Group completed the $1.9 billion acquisition of Barrette, a leading provider of residential fencing and railing solutions in North America - Invested $0.9 billion in 14 acquisitions during H1 2022[41] - Realized $3.6 billion from divestments, primarily from the sale of the Building Envelope business for $3.5 billion in cash proceeds[41][44] - On July 8, 2022, the Group completed its acquisition of Barrette for an enterprise value of $1.9 billion[43] Condensed Interim Financial Statements Condensed Consolidated Income Statement For the six months ended June 30, 2022, the Group reported total revenue of $15.0 billion from continuing operations, up from $13.2 billion in the prior year. Group profit for the period from continuing operations was $938 million, a significant increase from $728 million in H1 2021. Including a substantial profit from discontinued operations ($1.17 billion), the total Group profit for the period was $2.11 billion H1 2022 Income Statement Highlights ($ million) | Item | H1 2022 | H1 2021 | | :--- | :--- | :--- | | Revenue (Continuing) | 14,998 | 13,167 | | Group Operating Profit (Continuing) | 1,385 | 1,025 | | Profit Before Tax (Continuing) | 1,203 | 929 | | Group Profit (Continuing) | 938 | 728 | | Profit After Tax (Discontinued) | 1,168 | 87 | | Total Group Profit | 2,106 | 815 | Earnings Per Share ($) | EPS Type | H1 2022 | H1 2021 | | :--- | :--- | :--- | | Basic EPS (Total) | $2.74 | $1.00 | | Basic EPS (Continuing) | $1.21 | $0.89 | Condensed Consolidated Balance Sheet As of June 30, 2022, total assets were $44.8 billion, relatively stable compared to year-end 2021. Total equity increased to $21.4 billion from $20.9 billion at year-end 2021. Total liabilities decreased to $23.4 billion from $23.8 billion, primarily due to a reduction in non-current interest-bearing loans and borrowings Balance Sheet Summary ($ million) | Item | As at June 30, 2022 | As at Dec 31, 2021 | | :--- | :--- | :--- | | Total Non-Current Assets | 28,248 | 30,626 | | Total Current Assets | 16,588 | 14,044 | | Total Assets | 44,836 | 44,670 | | Total Equity | 21,435 | 20,914 | | Total Non-Current Liabilities | 14,122 | 16,175 | | Total Current Liabilities | 9,279 | 7,581 | | Total Liabilities | 23,401 | 23,756 | Condensed Consolidated Statement of Cash Flows Net cash inflow from operating activities was $621 million for H1 2022, a decrease from $1.6 billion in H1 2021, mainly due to a higher investment in working capital. Net cash inflow from investing activities was $2.1 billion, driven by $3.6 billion in disposal proceeds, which more than offset acquisition and capital expenditures. Financing activities saw a net outflow of $1.5 billion, largely from share buybacks and dividend payments. This resulted in a net increase in cash and cash equivalents of $1.3 billion Cash Flow Summary H1 2022 vs H1 2021 ($ million) | Cash Flow Activity | H1 2022 | H1 2021 | | :--- | :--- | :--- | | Net cash inflow from operating activities | 621 | 1,565 | | Net cash inflow/(outflow) from investing activities | 2,125 | (519) | | Net cash outflow from financing activities | (1,470) | (2,368) | | Increase/(decrease) in cash and cash equivalents | 1,276 | (1,322) | - The decrease in operating cash flow was primarily due to an increased investment in working capital, reflecting cost inflation and supply chain management[37] - Investing activities were significantly positive due to proceeds from disposals of $3.58 billion, mainly from the Building Envelope sale[54] Selected Explanatory Notes Note 2: Key Components of Performance for the First Half of 2022 The Group's 29% growth in pre-tax profit from continuing operations was driven by a 12% organic increase in sales and a 13% organic rise in EBITDA. Acquisitions contributed $808 million to sales and $217 million to EBITDA, while divestments had a minimal impact on revenue but reduced profit on disposals compared to the prior year Analysis of Change in Pre-tax Profit H1 2021 to H1 2022 ($ million) | Component | Sales Revenue | EBITDA | Operating Profit | Pre-tax Profit | | :--- | :--- | :--- | :--- | :--- | | First half 2021 | 13,167 | 1,821 | 1,025 | 929 | | Exchange effects | (490) | (51) | (25) | (19) | | Acquisitions (2021/2022) | 808 | 217 | 148 | 144 | | Divestments (2021/2022) | (71) | (13) | (10) | (96) | | Organic | 1,584 | 236 | 247 | 245 | | First half 2022 | 14,998 | 2,210 | 1,385 | 1,203 | | % Total Change | 14% | 21% | 35% | 29% | | % Organic Change | 12% | 13% | 25% | 27% | Note 8: Assets Held for Sale and Discontinued Operations In April 2022, the Group completed the divestment of its Building Envelope business. This transaction resulted in proceeds of $3.5 billion and a recognized profit on disposal of $1.46 billion. The results of this business are now classified as discontinued operations, which contributed $1.17 billion to the Group's profit after tax for H1 2022, including the profit on sale - The divestment of the Building Envelope business was completed in April 2022[93] Profit on Disposal of Discontinued Operations ($ million) | Item | Amount | | :--- | :--- | | Net assets disposed | 2,066 | | Proceeds from disposal (net of costs) | 3,528 | | Profit on disposal | 1,457 | - Profit after tax from discontinued operations for H1 2022 was $1,168 million, which includes the profit on disposal[95] Note 10: Net Debt Group net debt decreased to $4.3 billion at June 30, 2022, from $6.3 billion at the end of 2021. This reduction was primarily driven by strong cash generation and disposal proceeds, which more than offset spending on acquisitions, dividends, and share buybacks. The Group maintains significant liquidity with $3.7 billion in undrawn committed bank facilities Net Debt Position ($ million) | Date | Net Debt | | :--- | :--- | | June 30, 2022 | (4,299) | | June 30, 2021 | (6,014) | | Dec 31, 2021 | (6,253) | - The Group has total undrawn committed borrowing facilities of $3.7 billion as of June 30, 2022[107][108] - Net debt as a percentage of total equity improved to 20% from 30% at year-end 2021[110] Note 13: Business Combinations During H1 2022, CRH completed 14 acquisitions for a total consideration of $903 million, resulting in $453 million of goodwill. The largest acquisitions were in the Building Products and Americas Materials segments. Post-period, on July 8, 2022, the Group completed the significantly larger acquisition of Barrette Outdoor Living for an enterprise value of $1.9 billion H1 2022 Acquisitions by Segment | Reportable Segment | Number of Acquisitions | Goodwill ($m) | Consideration ($m) | | :--- | :--- | :--- | :--- | | Americas Materials | 5 | 120 | 318 | | Building Products | 2 | 337 | 485 | | Europe Materials | 7 | 37 | 99 | | Total | 14 | 494* | 902* | - The total consideration for H1 2022 acquisitions was $903 million, generating $453 million in goodwill[125] - Subsequent to the period end, the Group completed the acquisition of Barrette Outdoor Living for an enterprise value of $1.9 billion on July 8, 2022[129] Supplementary Information Principal Risks and Uncertainties The Group identifies its principal risks across strategic, operational, compliance, and financial categories. Key strategic risks include industry cyclicality, portfolio management, and geopolitical instability, such as the conflict in Ukraine. Operational risks are dominated by climate change, health and safety, and cybersecurity. Financial risks include taxation uncertainties, financial instrument volatility, and potential goodwill impairment - Strategic Risks: Industry cyclicality, economic conditions, people management, commodity product competition, supply chain continuity, portfolio management, and public policies/geopolitics[163][164][165] - Operational Risks: Climate change and policy, sustainability (ESG), information technology/cyber security, health and safety, and the ongoing COVID-19 pandemic[170][171][172] - Financial & Reporting Risks: Taxation charges, financial instrument risks (interest rate, currency, credit), goodwill impairment, and foreign currency translation[176][177][178]