CRH(CRH) - 2020 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - EBITDA for the first half of 2020 was $1.6 billion, a 2% increase compared to the previous year, with a 70 basis points improvement in underlying margin despite a 3% decline in sales [7] - Operating cash flow reached a record $1 billion, significantly supporting the company's strong balance sheet and liquidity position [7][31] - An interim dividend of $0.22 per share was declared, consistent with the previous year, reflecting the financial strength of the group [8] Business Line Data and Key Metrics Changes - In the Americas Materials division, aggregates and cement volumes were stable, while asphalt and readymixed volumes declined compared to the prior year [20] - The Europe Materials division faced significant declines in the UK due to nationwide shutdowns, while Eastern Europe performed well without such restrictions [22][24] - The Building Products division saw a 2% improvement in like-for-like sales, with an 11% increase in like-for-like EBITDA and a 130 basis point improvement in margins [27] Market Data and Key Metrics Changes - Western Europe experienced heavy impacts from COVID-19 restrictions, while construction demand in Eastern Europe and North America remained more resilient [6][12] - U.S. infrastructure works continued, with some states accelerating projects due to lower traffic volumes [13] - The UK market saw a significant decline in sales, with a slower recovery compared to other European markets [24][75] Company Strategy and Development Direction - The company aims to maintain a balanced and vertically integrated portfolio to weather market volatility and support growth [14][40] - Focus on sustainability and reducing the environmental impact of construction materials is a core part of the company's strategy [42] - The company plans to continue refining its business model to deliver superior growth and cash generation for shareholders [41] Management's Comments on Operating Environment and Future Outlook - The management expressed caution regarding the uncertain economic backdrop and limited visibility for the remainder of the year [43][47] - There are concerns about the pace of new projects coming online, but the company remains well-positioned to meet challenges and opportunities [48] - The long-term fundamentals of the business are believed to remain positive despite current uncertainties [48] Other Important Information - The company reduced fixed costs by approximately $200 million and capital expenditure by $200 million in response to the pandemic [16][34] - A strong cash performance was highlighted, with a significant reduction in net debt to $7.8 billion, maintaining a net debt-to-EBITDA ratio of 1.7x [38] Q&A Session Summary Question: Performance of Americas Materials and Building Products businesses - The Americas Materials division showed strong performance due to effective cost management and good pricing discipline, with confidence in Q3 volumes [50][52] - The Building Products division benefited from increased demand in residential RMI, although nonresidential construction faced challenges [56][58] Question: Cash inflow sustainability and cost savings - The company achieved $1 billion in cash inflow due to improved working capital management, with expectations for continued focus on cash generation [63][64] - The $200 million cost savings realized are expected to have some sustainability, although some costs may return as activity levels increase [68] Question: UK market performance and recovery plans - The UK market saw significant declines but is beginning to recover, with strong demand in residential and infrastructure sectors [72][75] - The company plans to maintain operations and support employees during the recovery phase [73] Question: M&A market activity - The M&A market is currently quiet due to travel restrictions, but the company is preparing for future opportunities as the market recovers [76][78]