CRH(CRH) - 2019 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - CRH reported a record first half profit performance with EBITDA exceeding €1.5 billion, a 5% increase on a like-for-like basis compared to the previous year [6][28] - Earnings per share increased by 51%, reflecting strong operational and financial performance as well as profit on disposals [12] - The interim dividend was increased by 2%, indicating a commitment to a progressive dividend policy [12] Business Line Data and Key Metrics Changes - The Americas Materials division saw like-for-like sales and EBITDA increase by 2% and 3%, respectively, despite weather disruptions [17] - The Europe Materials division reported like-for-like sales and EBITDA growth of 6% and 2%, respectively, with cement pricing up 6% [22] - The Building Products division achieved an 8% increase in like-for-like EBITDA, with a 60 basis point improvement in margin [24] Market Data and Key Metrics Changes - Positive underlying momentum in construction activity was noted in North America and Continental Europe, while the UK faced challenges due to political and Brexit-related uncertainties [14] - U.S. infrastructure activity showed strong growth, supported by federal and state funding initiatives, with highway and street construction spending significantly ahead of the prior year [15] - Eastern Europe experienced stronger growth in new build infrastructure activity, contributing to overall positive trends in construction [16] Company Strategy and Development Direction - The company emphasized active portfolio management, announcing approximately €2 billion in divestments and €470 million spent on bolt-on acquisitions [7][9] - A profit improvement program is in place to enhance margins, returns, and cash generation, with a focus on continuous business improvement [10][49] - The integration of recent acquisitions, such as Ash Grove and Suwannee Cement, is progressing well, with increased synergy targets identified [46][47] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the underlying demand environment, expecting continued growth in like-for-like EBITDA in the second half of the year [52] - The UK market is anticipated to remain challenging, but overall growth is expected in other regions [52] - The company is focused on maintaining a strong financial position and flexible balance sheet, with plans for further share buybacks and capital allocation [39][55] Other Important Information - The transition to IFRS 16 resulted in a €193 million uplift in reported EBITDA for the first half [31] - The company generated a net cash inflow of €270 million for the first half, a significant improvement compared to the prior year [32] - Fitch upgraded the company's credit rating to BBB+, reflecting its strong financial position [38] Q&A Session Summary Question: Energy costs trends and impact on the second half - Management acknowledged headwinds from energy costs in the first half, particularly in bitumen and electricity, but expects a decline in energy costs in the second half [61][63] Question: Performance in the UK and reasons for EBITDA drop - The UK market has been a drag on results, primarily due to a slowdown in infrastructure projects, with residential and non-residential sectors remaining resilient [64][66] Question: Confidence in midterm margin targets - Management indicated that the profit improvement program is expected to yield results primarily in 2020 and 2021, with some benefits anticipated in the latter part of 2019 [67][71] Question: Capital allocation strategy as debt falls - The focus will be on internal improvements and bolt-on acquisitions, with ongoing share buybacks as a priority [76][78] Question: Increased growth rate in Americas Materials - Strong demand levels and improved weather conditions in July and August contributed to the positive outlook for the Americas Materials division [80][81]