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Edited Transcript of CRG.I earnings conference call or presentation 22-Aug-19 7:30am GMT

Half Year 2019 CRH PLC Earnings Call

Dublin Sep 8, 2019 (Thomson StreetEvents) -- Edited Transcript of CRH PLC earnings conference call or presentation Thursday, August 22, 2019 at 7:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Albert Jude Manifold

CRH plc - CEO & Executive Director

* David Dillon

CRH plc - President of Global Strategy & Business Development

* Finbarr Senan Murphy

CRH plc - Finance Director & Executive Director

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Conference Call Participants

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* Arnaud Lehmann

BofA Merrill Lynch, Research Division - Head of the European Construction & Building Materials and Director

* David A. O'Brien

Goodbody Stockbrokers, Research Division - Investment Analyst

* Elodie Rall

JP Morgan Chase & Co, Research Division - Research Analyst

* Gregor Kuglitsch

UBS Investment Bank, Research Division - Executive Director, Head of European Building & Construction Research and Equity Research Analyst

* Robert Gardiner

Davy, Research Division - Industrials Analyst

* William Jones

Redburn (Europe) Limited, Research Division - Partner of Construction & Building Materials Research

* Yves Brian Felix Bromehead

Exane BNP Paribas, Research Division - Analyst of Building Materials

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Presentation

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Operator [1]

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Ladies and gentlemen, welcome to the CRH interim results call. (Operator Instructions) I will now hand you over to your host, Albert Manifold, to begin.

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Albert Jude Manifold, CRH plc - CEO & Executive Director [2]

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Good morning, 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 2019 interim results this morning. I'm joined on the call by Senan Murphy, our Group Finance Director; and David Dillon, President of Global Strategy and Business Development; and also Frank Heisterkamp, Head of Investor Relations.

Over the next 30 minutes or so, we will take you through a brief presentation of the results we've published this morning, highlighting the key drivers of our trading performance for the first 6 months of 2019 as well as providing you with an indication of our expectations for the second half of the year. We'll also take a few moments to update you on some of the key developments from our -- across the group during the first half and the progress we're making against our strategic objectives. Afterward, we'll be available to take any questions you may have and also we should be done in about an hour or so.

So at the outset on Slide 2, let me take you through some of the key highlights of the year so far. I'm pleased to report a record first half profit performance for CRH with EBITDA in excess of EUR 1.5 billion, 5% ahead on a like-for-like basis and aligned with our previous guidance. Now despite some significant weather disruption impacting construction activity in parts of Europe and North America during the second quarter, the underlying demand environment in our core markets remains positive and leaves us well positioned as we enter the second half of the year.

As you know, active portfolio management is a key component of how we create value for our shareholders, and 2019 has been no different in that regard. We've announced approximately EUR 2 billion of divestments in the year-to-date including an agreement to divest our European Distribution business for an enterprise value in excess of EUR 1.6 billion, representing an exit multiple of over 10x EBITDA.

In addition, we spent approximately EUR 470 million on 36 small- and medium-sized bolt-on transactions in the year-to-date. The average multiple on these deals was 8x EBITDA and that is before we generate the normal savings and synergies we expect when we integrate these businesses into our portfolio.

We continue to focus on the efficient and disciplined allocation of our capital to maximize value for our shareholders and this is demonstrated by our ongoing share buyback program, which has returned EUR 550 million to shareholders in the year-to-date. Board is planning to continue our share buyback program with a further tranche of up to EUR 350 million to be completed by the end of the year, and Senan will have more details on this later on.

Of course, all of this is underpinned by a relentless focus on continuous business improvement, a commitment to excellence that is deeply embedded in the CRH DNA. And I'm pleased to report that the implementation of our profit improvement program targeting a structural improvement in our margins, returns and cash generation is progressing very much as planned.

If I can turn now to Slide 3 and our financial highlights for the first 6 months of the year. Overall, a satisfactory first half performance, sales, EBITDA and margin all ahead of the prior year benefiting from good organic delivery and contribution from acquisitions, but also currency tailwinds and the transition impact of the new lease accounting standard, a good performance in the context of significant weather disruption across parts of our businesses during the second half -- during the second quarter, excuse me, and some challenging trading conditions in the United Kingdom. All of this translates into a 51% increase in our earnings per share, reflecting good operational and financial performance for the first half as well as profit on disposals, which were ahead of the prior year. I'm also pleased to report a 2% increase in our interim dividend, reflecting our ongoing commitment to a progressive dividend policy and a sign of the financial strength, the position that's coming through (inaudible).

Before I take you to the trading performance of our business, I'd like to give you a brief overview of the market backdrop and the trading environment across our major markets.

Looking at -- turn to Slide 5. We continue to experience positive underlying momentum in construction activity across our main markets in North America and in Continental Europe while in the U.K., construction activity continues to be impacted by ongoing political and Brexit-related uncertainty. In North America, despite a slower start to the year due to affordability and supplier-side constraints across the residential construction industry, underlying demand remains solid and we've seen good growth in our more residentially focused businesses. And on the nonresidential side, here, too, we are seeing good underlying demand and our order books are strong. Good momentum in U.S. infrastructure activity continues to be underpinned by federal and state-level funding initiatives. Highway and street construction spending is well ahead of the prior year and strong contract awards data across our footprint for the first 6 months of the year, much a continuation of the positive trends.

The results were positive in Europe with low to mid-single-digit growth expected across residential, nonresidential and infrastructure markets, and even stronger level of growth in Eastern Europe aided by new-build infrastructure activity in particular. And while we've continued to experience some inflationary pressures in our businesses, the environment in Europe and North America continues to support further progress on pricing across our businesses.

So moving on, and against that backdrop, I will now take you through the financial performance of our businesses for the first 6 months of the year. And first, the performance of our Americas Materials division on Slide 7. Our business delivered a good first half with like-for-like sales and EBITDA 2% and 3% ahead, respectively, a reflection of the positive underlying demand environment I mentioned earlier. And this was delivered against the backdrop of some significant weather disruption in parts of the U.S. Midwest during the second quarter, primarily impacting our Central division. As a result, our like-for-like aggregates and asphalt volumes were slightly behind at the half year stage, but we'd expect to recover that lost volume in the second half of the year.

Pricing momentum continued to be strong with good price increases achieved across all products during the first half of the year, more than offsetting higher input costs. As a result, our EBITDA margin increased by 20 basis points on a like-for-like basis, a good outcome in the context of the weather-related headwinds we experienced across parts of our footprint during the period.

And as we look ahead to the second half of the year, we're pleased to see good momentum in our order books, both in terms of volumes and margins, pointing towards continuation of the positive underlying demand environment in both our markets.

I'm also pleased to report that the integration of Ash Grove and Suwannee Cement deals into our existing portfolio is progressing well, and these businesses are trading very much in line with our expectations. They were important deals for CRH, strengthening our footprint in higher-growth markets, providing significant synergy potential to integration with our existing operations and a platform for future bolt-on activity, all of which will deliver significant value to our shareholders going forward.

Turning to the performance of our Europe Materials business on Slide 8. Our overall like-for-like sales and EBITDA were 6% and 2% ahead, respectively, a solid performance amid a number of headwinds, which impacted our business in the first half. After a particularly strong start to the year, our volumes were impacted by some adverse weather during May and June. However, overall, our cement volumes were 2% ahead for the first 6 months of the year. I'm also encouraged to see pricing momentum in Europe continuing to accelerate. Our overall cement pricing was 6% ahead of the prior year with all markets delivering positive pricing movement.

However, despite the good progress we made on the volume and pricing front, input cost headwinds and difficult trading conditions in the United Kingdom resulted in a reduction in our underlying margin. Now we're very much focused on cost recovery and margin improvement in the second half of the year.

And finally, a comment on Asia and our cement business in the Philippines. Here, too, we had a good first half with volumes, prices and profitability all ahead of the prior year.

Next, the Building Products on Slide 9, which has delivered a strong first half performance. Good pricing and a strong focus on cost control contributed to an 8% increase in like-for-like EBITDA and a 60 basis point improvement in our margin, reflecting the strong operating leverage in the business. It's also good to see the benefits of our global products platform starting to come through as we run all our Products businesses in a more integrated manner. We've also spoken in the past of our focus on active portfolio management and how we are constantly reviewing and refining our portfolio of businesses in an effort to become a more focused and more integrated group. And we've made significant progress in that regard reaching agreements to divest our noncore Shutters & Awnings, Perimeter Protection and Europe Distribution businesses to enable us to focus in areas where we have core competencies.

It's also important to remember that we've been active acquirers in the product space in recent years, spending over EUR 1.5 billion acquiring businesses where the integration businesses benefits with our existing portfolio are now starting to come through. And as we continue to refine and tighten our portfolio of product businesses, we're focused on the parts of our business with higher growth, where our skill set is better and where we can get the benefits of integration both across and within our businesses. This, combined with a focus on strong operational excellence, provides us with a platform to create further value for our shareholders.

Now at this point, I'm going to hand it over to Senan who's going to take you through our financial performance in further detail.

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Finbarr Senan Murphy, CRH plc - Finance Director & Executive Director [3]

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Thank you, Albert. Good morning, everyone.

So as Albert mentioned earlier, we had a satisfactory start to the year and this was reflected in our financial performance, which is outlined on Slide 11. EBITDA of EUR 1.54 billion is a record first half performance for the group and is in line with the guidance that we gave back in April.

So let me take you through briefly some of the main drivers of this performance. Starting with organic growth, a 5% like-for-like improvement over last year, a good result in the context of some difficult weather and also the challenging trading conditions we faced in the U.K.

Moving on, maybe focusing on our development activity. As you can see on this slide, acquisitions net of divestments contributed EUR 111 million of EBITDA in the first 6 months of the year. This primarily consists of the half year contribution from the acquisition of Ash Grove, which completed in June of last year. And it also reflects the impact of the divestment of our Benelux DIY business, which was completed in July 2018. Next, the currency translation where the stronger U.S. dollar relative to the euro has been the primary contributor to the EUR 50 million currency tailwind in the first half of the year. And then finally, our reported results reflect the impact of the group's transition to IFRS 16, the new lease accounting standard, which came into effect on the 1st of January 2019. The impact of this change resulted in a EUR 193 million uplift in our reported EBITDA in the first half.

Turning to our cash flow performance on Slide 12. As you can see, we reported a net cash inflow of EUR 270 million for the first 6 months, that's an improvement of almost EUR 600 million compared to the prior year. And this is a good performance as we would not typically expect to report an inflow at this stage of the year given the seasonal nature of our business. Our seasonal working capital outflow for the first half reduced by over EUR 100 million and that reflects the good working capital control across the business, particularly given our higher sales and higher activity levels.

While our interest costs increased by EUR 44 million compared to the prior year, reflecting the higher average debt levels, our tax outflow reduced by over EUR 100 million in the period. And that reduction reflects the nonrecurrence of property gains tax paid on the divestment of our Americas Distribution business, which was completed in January of last year.

And looking ahead, we remain very focused on cash management in our business and we anticipate a significant inflow of cash for the second half of the year.

Now on Slide 13, you can see the consistency of our focus on cash delivery in our business. Everything we do is focused on generating and maximizing the level of cash from the assets that we own. That is what our shareholders want and indeed expect from us at CRH.

We're an extremely cash-generative business, consistently generating over EUR 2 billion of free cash each year, representing an industry-leading 80% conversion from EBITDA into cash. On a cumulative basis, you can see over the last 5 years, that translates into over EUR 10 billion of free cash generation. And it is this strong level of cash generation that provides us with significant optionality for future value creation for our shareholders, whether it's cash that's allocated to CapEx investments, value-accretive M&A or return to shareholders in the form of dividends or share buybacks.

Our focus on cash delivery also underpins our strong financial position, and you can see on Slide 14 the key components that form our year-end net debt expectations. So let me briefly take you through some of those key building blocks. We ended 2018 with a net debt position of just under EUR 7 billion and a net debt-to-EBITDA of less than 2.1x. As mentioned earlier, the divestments announced year-to-date are expected to generate approximately EUR 2 billion of proceeds by year-end. We've also been active on the acquisition front, spending close to EUR 500 million on 36 bolt-on acquisitions in the year-to-date. We also expect 2019 to be another strong year of cash generation for the group and that would enable us to return approximately EUR 1.5 billion to shareholders in the form of dividends and share buybacks. This includes our intention, as we announced this morning, to continue our share buyback program with a further tranche of up to EUR 350 million to be completed by the end of this year.

As you can see on the slide, we expect these combined movements to result in a significant reduction in our year-end net debt position and that's before the impact of the group's transition to IFRS 16. You include this transition impact, we expect our reported net debt position to finish 2019 at approximately EUR 7 billion or below 2x net debt-to-EBITDA. This is consistent with our strong investment-grade credit rating. And as we've seen in recent weeks, the rating agency Fitch has upgraded the group's credit rating to BBB+. So now we have a BBB+ or equivalent rating with each of the 3 main rating agencies and that reflects the strong financial position of the group.

I said it on Slide 15, that strong focus on maintaining our financial discipline has been the hallmark of CRH for many years and it's something that we as a management team are absolutely focused on. Despite the level of acquisitions and growth that the group has delivered in recent years, we've consistently maintained a strong and flexible balance sheet. Over the last 10 years, our average net debt-to-EBITDA ratio stands at around 2x. And we remain committed to maintaining our strong financial position and our investment-grade credit rating going forward.

Irrespective of where we are in the cycle, the one constant in CRH is our unerring focus on cash in our business and the discipline on our balance sheet. You can also see that discipline in the way we allocate capital. Over the last 5 years, we've generated approximately EUR 7 billion from divestments at an average exit multiple of 11x EBITDA and we have reinvested those proceeds into higher-growth and higher-returning opportunities at an average multiple of 8x. We are focused on the efficient allocation of capital and reallocation of capital for superior returns and cash generation in our business, and in doing so, have created significant value for our shareholders.

So at this point, David is going to provide you with an update on some of the key developments from across our business.

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David Dillon, CRH plc - President of Global Strategy & Business Development [4]

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Thanks, Senan. Turning to Slide 17 where we summarized some of the key initiatives that are underway across the group, all fully aligned with our objective of building a better business. First is our active approach to portfolio management, a continuous process for which we are reshaping our business, constantly refining our portfolio to deliver superior returns, growth and cash generation.

Second is the area of synergy delivery, creating value by integrating businesses into our existing portfolio and leveraging our global scale and better practice programs to extract operational and commercial improvements.

And of course, core to both of these is our focus on continuous business improvement, a deeply embedded practice of making our business better, both existing and acquired businesses, through incremental improvements across the group.

So 3 areas of focus, all with the same goal or purpose in mind: to deliver structurally higher margins, returns and cash.

So beginning with portfolio management on Slide 18, and we've made significant progress in our divestment program in the year-to-date, reaching agreement on approximately EUR 2 billion of divestments. These include 3 businesses in our Building Product Division, Europe Distribution, Shutters & Awnings, and Perimeter Protection. All those businesses which have delivered well for us over the years but by divesting now with attractive valuations, we're able to crystallize a significant amount of value for our shareholders.

Our largest divestment in the year-to-date was Europe Distribution. In July, we announced that following a comprehensive strategic review, we've reached an agreement to divest of the business for an enterprise value of over EUR 1.6 billion, representing an exit multiple of over 10x EBITDA. This significant level of divestment activity demonstrates the clear execution of our strategy to deliver value by actively managing our portfolio and becoming a narrower, deeper and more focused group. We've made significant progress repositioning our portfolio in recent years. We will continue to refine and reshape our business all across the group to generate superior returns and cash.

Next to integration on Slide 19 and our recent acquisitions of Ash Grove and Suwannee, which represented a major expansion in U.S. cement. Combined, this is the second largest acquisition we've ever done at over $4 billion. It provided a significant overlap with our existing business and value-creation opportunities for decades to come. The success of these acquisitions was predicated on our ability to deliver value through the quick and efficient integration of the businesses into our existing network and our ability to leverage our global expertise and best practice from across the group. The integration of these businesses is progressing well and synergies are coming through ahead of expectations.

At the time of acquisition, we had initially identified a combined $100 million of synergies over a 3-year period. But as we started to integrate them into our existing business, we were able to identify further operational and commercial improvements. This has enabled us to increase our current synergy target to $145 million, $45 million of additional value over and above our original expectations.

And turning to Slide 20 and continuous business improvement, a deeply embedded practice of making our businesses better through incremental improvement initiatives across the group, a core part of what we do at CRH. We set out in our 2018 results presentation in February that we manage the performance of our individual business units on a margin basis. And we also showed how our comparable business units were best-in-class operators. However, we also set out that we manage the overall group to maximize returns and cash, which we believe is the true measurement of overall business performance. We have ambitious goals to further improve the margins, returns and cash in our business, and as we look ahead to the next phase of growth and performance for the group, I'm pleased to report that our business improvement programs are progressing as planned. This has been enabled by the significant repositioning of our business in recent years, focusing on improving efficiency and productivity through procurement, process and structural initiatives and driving greater integration across our businesses.

We talked about Ash Grove and Suwannee and how we buy these businesses and integrate them, but it is only when we fully immerse them into our group programs that we get the full benefit over time.

We've always said that the current business improvement programs will deliver some small benefits towards the back end of this year, and that will build through 2020 and beyond. We are pleased with the progress we've seen to date and are confident we are on track to deliver against our targets. And the continued refinements and pruning of the portfolio will allow us to increase our focus in this area, extracting the maximum amount of value from our businesses and resulting in higher margins, better returns and better cash for our shareholders.

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Albert Jude Manifold, CRH plc - CEO & Executive Director [5]

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Thanks, David. Some really good progress there and good to see that delivery coming through.

And now to outlook and our expectations for our businesses during the second half of the year. So if I can ask you to turn to Slide 22, and here, we can see the underlying trading environment in our Americas Materials business remains positive. And for the second half of the year, we expect an increased rate of EBITDA growth on a like-for-like basis. In Europe Materials, while we expect continued positive momentum across most of our major markets, we do expect the U.K. to remain challenged for the remainder of the year. Overall, we expect second half like-for-like EBITDA to advance at a similar pace to that what we've seen in the first half of the year. In Building Products, we expect the strong and positive momentum in the first half of the year to continue into H2. For the group overall, we expect further growth in like-for-like EBITDA in the second half of the year and another year of progress for CRH.

Before I turn over to Q&A, just looking at Slide 23, I just want to leave you with a few key takeaways from this morning's presentation. We've had a record start to the year with EBITDA of EUR 1.54 billion and we expect further progress in the second half. Our profit improvement program is progressing well, focusing on improving efficiency and productivity through greater integration across our businesses, delivering higher margins, returns and cash for all of our shareholders. And as I said earlier, we will continue to allocate and reallocate capital to deliver superior value and cash generation for all our shareholders.

We have continued to refine and reshape our business through active portfolio management, reaching agreement of approximately EUR 2 billion divestments and spending over EUR 470 million on 36 bolt-on acquisitions in the year-to-date.

We are focused on the efficient allocation of capital to maximize value for our shareholders. We've returned EUR 1.35 billion since the inception of our buyback program in May of last year, and we intend to return a further EUR 350 million to shareholders by the end of 2019.

As you will have seen through the generations of CRH management, we are resolutely focused on maintaining a strong, flexible balance sheet and benefiting from the optionality this provides in the years ahead.

So we'd like to conclude this part of the presentation this morning and we're now happy to take your questions. (Operator Instructions) And now I'm going to hand you back to the moderator to coordinate the Q&A session of our call.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes in from the line of Gregor Kuglitsch calling from UBS.

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Gregor Kuglitsch, UBS Investment Bank, Research Division - Executive Director, Head of European Building & Construction Research and Equity Research Analyst [2]

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I've got 3 questions, please, two are a bit more short term and one a little bit longer term. So on the shorter-term one, can you just give us a sense on energy costs, how they trended, kind of if you blended it all in, in the first half and how that evolves into the second half? I guess particularly bitumen would be interesting, but not only.

And secondly, on the U.K. So obviously, it's been a big drag in the first half. I think if you do the math, maybe north of 20% down or something like that in EBITDA terms. Can you just give us a sense of what's really happening? Obviously, we've heard some delays in general, but it does seem like a pretty big drop. Perhaps there was some energy hedging, I think, last year from memory. So if you could just elaborate.

And then, finally, if I can come back to your midterm margin targets, which I think were set for 2021 of a 300 basis point improvement. I think last year was kind of 0. This year looks like it's going to be up a little bit. I guess I want to kind of gauge your confidence on how that starts feeding into next year in particular and how confident you are you're pacing at that rate, and then just for the avoidance of doubt, that, that margin target doesn't include any of the kind of accretive benefits from asset rotations, so for instance, the sale of the Distribution business.

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Albert Jude Manifold, CRH plc - CEO & Executive Director [3]

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All right. Thanks, Gregor. Three questions there: first one on energy costs, second on U.K., the third one on margin targets. I'll take the first 2 myself and then I'll ask David Dillon who's with us here this morning to talk about the margin targets at the end.

With regard to the energy costs, as you rightly say, there are some headwinds with regard to energy in the first half of this year, primarily in the areas of bitumen and electricity. Now one has to say that energy has always been there for us across the rise and fall, and we have to manage those costs and those costs have been up in the first half of the year primarily as a result of some forward contracts that we had in place as they unwind because, overall, I expect, the issue with the oil prices, you would expect energy prices to be starting to decline. However, of course, our selling prices have been going up as well. So we're used to managing our cost base, and of course, the answer to all of that is costs are going up, so are our selling prices. And if you look at our margins, you can see the response of the two. We're seeing net margin increases across our businesses.

And in the bitumen area, which you specifically asked about with regards to the United States, in particular, which are our big users of bitumen, we're already seeing net margin increases at this time of the year. We're starting to unwind and starting to see the benefits of higher throughput and our lower bitumen costs coming through.

So again, overall, for the full year, we expect the second half energy costs to be lesser than the first half of the year. And overall, in CRH, there tends to be about 9% of revenues on an annualized basis, that's where they were in 2018. And I expect energy costs to be about 9% of revenues in 2019 as well.

Secondly, with regard to your question with regards to the U.K. and certainly color, I think it's sort of a drag on the results. The U.K. is -- it's an important part of our business, don't get me wrong, but it is only 7% of EBITDA. If the volumes are back a bit, profitability is down a bit, for me, it's more of the lost opportunity rather than the actual pain of taking a reduction in the EBITDA number. Primarily, the slowdown, as we've seen since the vote in 2016 has been in the pullback in the area of infrastructure. Actually, residential has been quite resilient as indeed has nonresidential, but that has been pulling back over the last 18 months or so. Our business is about 50% exposed to infrastructure. And whilst the volumes have been relatively resilient on the basis of a good residential and nonresidential market, particularly sort of the U.K. -- I'm sorry, London I should say in the U.K., the mix of business has been less favorable and that has impacted upon our ability to keep our costs down because we are having to reprocess materials a second time rather than when we break stone in the quarry, you break it into many different sizes. And if you don't have the big stone for the infrastructure work for you, you've got to reprocess these again for smaller stone for concrete, et cetera. So the mix of business has caused higher cost base and also lower selling price and that has impacts upon our businesses.

Hard to say where it's going forward. We've come back off quite a peak in 2015. I think we're at a level now whereby it's continuing on at this level. I'm not sure we get some certainty regarding what's happening after the end of October. I think it will stay at those kinds of levels.

With regard to your third question on the profit improvement program we have in place. And just to remind everybody before I pass it to David, the program really -- well, this is -- we announced this last year. This really was as a result of a number of things. We have been changing the shape of CRH over the past number of years where we've been selling down certain businesses and reinvesting back within our core areas of competency and capability. And really, as a result of that and as a result of really running our business in a more centralized manner, we were and are looking to improve the overall internal efficiencies within our businesses and we've targeted an improvement in doing so. Now the actual program itself runs over 3 years. I'm going to pass it over to David just to take you through in terms of where we are in that program and what we should expect over the next couple of years. David?

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David Dillon, CRH plc - President of Global Strategy & Business Development [4]

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Yes. Just on the specifics. I think I said a few minutes ago, very pleased with the progress overall, a great engagement across -- right across our businesses. Important to note that it's centrally managed, but delivered locally. And CRH is a business of over 3,000 locations. So with all those things, you have smaller items that build up to a larger big number. 70% of the improvement is internal self-help, kind of classic CRH in many ways: detailed focus of what we know and what we do. It sits, as Albert said, through the refinement of the portfolio, which allows us to run the business in a more unified way. But when you get into the details, there's lots and lots of things.

I mean I'm just going to pick out, for example, if you look at operational excellence, you pick one of our business lines where we have 100 locations, which is aggregates, you're looking at improving throughput, trading and blasting, rock yield, cost per ton, maintenance costs, logistics. I mean the list goes on. But I suppose there's been a very, very good start. Again, we're starting to see it come through towards the back end of this year, but that will accelerate as we go through 2020 and 2021.

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Albert Jude Manifold, CRH plc - CEO & Executive Director [5]

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I think we were always clear that we said this is primarily '20 to 2021 before you start to see it, but we do expect to see it come through in the back end of this year when you see full level ahead. Remember, our business is quite seasonal, 1/3, 2/3, first half, second half. At the back end of the year, when the full year results come in, I expect you to see some demonstrable achievement with regard to margin improvement.

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Operator [6]

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The next question comes in from the line of Robert Gardiner calling from Davy.

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Robert Gardiner, Davy, Research Division - Industrials Analyst [7]

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Two for me, please. One, just wanted to ask on capital allocation, how should we think about that as the debt falls in the business? Should we be thinking about more buybacks, more bolt-ons or a mix of both? I'm just wondering what are you thinking about that looking into 2020.

And secondly, just wondering then in terms of your guidance for an increased rate of growth in Americas Materials in the second half of the year. So just wondering what's behind that. Does that speak to your backlogs or pipeline or the strength of trading in July, August?

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Albert Jude Manifold, CRH plc - CEO & Executive Director [8]

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Thanks, Bob. Two questions there, one on general capital allocation questions in terms of where we use the cash we're generating effectively, just maybe an update on where the U.S. is trading at this moment in time. Look, we gave a further indication this year that we focus very much on value creation across a range of initiatives, an increase again in dividend, again further buybacks which will bring the total buybacks this year to over EUR 900 million if we complete the fall program which I expect we will. And of course, we've done EUR 470 million of bolt-ons, which just come through the door every day, 36 deals done in the first half of the year. I don't see that pace changing for the remainder of the year.

Our primary focus, I have to say, going forward, actually at this moment in time, is actually on the internals of our business. We have a lot of work to do as David outlined on the profit improvement program. We have some really good businesses and they have made changes to our business, building a better business by selling down peripheral areas and focusing in areas where we've got core capability overlap and competence. And for us, that's where our primary focus is going to be: that -- whether -- the business with higher profitability, higher returns and higher cash. It's a first-world problem to have to deal with excess cash within the business. But you kind of asked that question unless you can see the opportunities open in front of you. One thing we are determined to do in CRH is we are very much focused on being a growth-orientated company. And at the moment, that growth has been -- is through organic growth within our businesses and as a result of that improvement. If and when the time is right to go back to organic growth in a large way or if opportunities present themselves, we will return to that. But of course, the focus -- the cycle of the opportunities we see and the cash we have in front of us, but we kind of ask that question on what we see. But our focus is very much on the inside of our business, continuing to do buybacks and use that cash because we think it's the appropriate thing to do at this moment in time with the cash that's available to us, and focusing on the bolt-ons. That's where we'll be over the next 12 to 24 months.

And with regard to your question with regard to where the U.S. and our guidance of an increased pace of growth, well, we had a somewhat okay first half of the year. The demand levels are there in our U.S. business. In fact, U.S. actually -- construction markets are actually fundamentally in a good place plus we have some difficult weather in the second quarter, particularly in the Central division and in Texas, which is a big area for us. What we have seen then through July and indeed into August is we've seen good volume pickup across our businesses, and really, our business has started seeing during this period of time. Remember, our Americas Materials business makes 2/3 of its profitability in the month of July, August and September because we get high volume throughput. We're working 24/7 at good, low-cost base, the work is there, we're delivering well, prices are good and it's -- the U.S. construction market is fundamentally in a good place at this moment in time.

And looking at our business itself, the backlogs within our businesses are strong, they're ahead of last year. The margin of those backlogs are ahead of last year, so it's not only a comment looking at this quarter, it's for the remainder of the year. And I have to say as I look into the first half of next year, the issue we have with our [backlog] with construction, we have got reasonably good visibility pretty much into Q1, Q2 of next year. And for the U.S., it looks to be continuing at the same pace of growth that we're seeing, which is encouraging. And the U.S. infrastructure spend is due to increase by 12% over the next 3 years, so the funding is there for infrastructure, which is 50% of the demand. U.S. housing is at well below peak levels, 1.2 million homes is just wallowing at that level there, but it's continuing on a slow pace of growth. And U.S. nonres, on the back of -- at the end of the day, there's a lot of naysayers about the U.S. economy, but if you just look at the fundamentals here, there are 2 million net new jobs to be created in the United States this year. That's bumps on seats working in factories, working in office spaces and those they have to be built. U.S. economy is growing at 2.4%, unemployment 3.7%, inflation is 2.7 -- 2.2%. And you've got a support of Fed, ready to react if need be as I read by the Fed news that were published last night from last Friday's meeting. So fundamentally, we think the U.S. construction markets are in good place. Our order books look fairly robust. And the question for us now is just making sure we get the weather to go to work, and so far, this quarter has been doing well.

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Operator [9]

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The next question comes in from the line of Yves Bromehead calling from Exane BNP Paribas.

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Yves Brian Felix Bromehead, Exane BNP Paribas, Research Division - Analyst of Building Materials [10]

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I will have two, if I may. My first one is looking ahead with your outlook on the H2 bridge, could you maybe help us in understanding the profit drivers and what you're expecting for scope in FX at current spots?

And my second question is on the Building Products side. You've had quite an impressive margin performance in H1 and you're guiding for obviously momentum to continue in H2. Could you maybe help us in understanding what are the products which are driving this margin and earnings growth improvements and if we can expect a similar trend into the margin expansion in H2 versus last year?

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Albert Jude Manifold, CRH plc - CEO & Executive Director [11]

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Thank you, Yves. Two questions there: one, on the H2 bridge in terms of performance in the second half of the year, I'll ask Senan to deal with that question in a moment; and the first -- second question was on the Building Products side, maybe I'll take that one first in terms of what's the performance, what's driving that performance.

I mean the Building Products group now is fairly young, in its infancy within CRH. It's a global products business. And I might remind you that the products that it sells, 75% to 80% of the profitability in our Products businesses are generated by products that are made from concrete. This is a core capability of CRH. I mean you should remember, with CRH, 80% of the profits of CRH are generated by cement, aggregates, asphalt and concrete, our company products, a very focused profile of business. And our Building Products business was formed so that we can really roll out the global initiatives across businesses. But that in Europe, we're doing very well. We could roll that back into the U.S. and in the U.S. back into Europe, and we're seeing the benefits of that coming through. There's no one item driving the success of Building Products, it's across. It's a reasonable volume growth across our 2 major markets, it's good commercial management, it's good cost management. The structural reforms that David referred to earlier on, the operational improvements is all down to the P&L account that's showing that very strong growth at the bottom line, and we expect that to continue. We're very encouraged by the takeoff in that business. And of course, we can build upon the capability of that. Integrating that further, our Products business, particularly in the United States and in Europe with our new cement footprints over the last 3 or 4 years is a big plus to us as well and helps that division. So I expect that to continue. I think it's a good story and it's a good story of growth for CRH.

With regard to the H2 bridge, Senan, maybe you...

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Finbarr Senan Murphy, CRH plc - Finance Director & Executive Director [12]

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Yes. Maybe the best way to explain that one, if you look at Slide 11 that we presented this morning, which has the half 1 bridge and just use the same headings, as you work maybe right to left on that bridge, the IFRS 16 translation impacts in the first half, I would take that number and double it for the full year impact. So the half 2 should be the same number.

In terms of the currency translation, as you see, with EUR 50 million of tailwinds in the first half. And again, using kind of spot rates today, you expect that number to double for the full year in terms of its impact.

Acquisition/divestment in the first half, you saw we had EUR 111 million of contribution. In summary, that's the half 1 contribution of Ash Grove from last year which we didn't own until midyear 2018. The bolt-on deals and the divestment activity are a net 0 really in the first half and you'd expect them to be a net 0 in the second half as well. And obviously, Ash Grove now moves into the organic in the second half of the year in the sense that we owned it for all of the second half of last year, so you'll see the performance this year in the second half where we would be comparing that to the full year of ownership last year.

The only thing on the horizon that will have a small impact on the acquisition/divestment side would be the timing of the closing of the Europe Distribution sale. So obviously, at the moment, it is scheduled to close in the fourth quarter. If that closes at 31st December, we'll see a full 12-month earnings impact this year. If it closes a few months earlier, then, obviously, that will be reduced accordingly.

And then, obviously, as I said, the last bridge really is really around the organic growth that Albert has talked about and we've given guidance in terms of expectations as to where you'd expect to see that in the second half.

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Operator [13]

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The next question comes in from the line of David O'Brien calling from Goodbody.

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David A. O'Brien, Goodbody Stockbrokers, Research Division - Investment Analyst [14]

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Two areas for me, please. Firstly, just on Europe and I guess the rhetoric around performance in Continental Europe seems reasonably upbeat. I'm just trying to contextualize, margins are down 40 basis points on a like-for-like. If we were to strip out Europe -- or sorry, strip out the U.K. from that, what would the margin progression in Continental Europe look like?

And indeed, when we think about price costs, there's pretty upbeat rhetoric around cement pricing. You've pointed to lower costs in terms of energy headwinds in the second half. Should we see a material step-up in terms of underlying leverage on the continent in H2?

And finally, just in terms of -- maybe following up on capital allocation, surplus capital. Do you think that metrics will be below normalized levels at year-end? If we use your guidance of EUR 7 billion debt, a consensus north of EUR 4 billion for EBITDA, we get to a kind of 1.7x-ish net debt-to-EBITDA level given you scope for maybe EUR 1 billion surplus capital by year-end. Is that the kind of right framework to think about it?

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Albert Jude Manifold, CRH plc - CEO & Executive Director [15]

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Thanks, David. Some nice, juicy questions there. I will leave the last question on debt back to Senan and I'll just take the first 2 questions with regard to Europe and where Europe is and your specific question about the U.K. and also the pricing of cement across Europe.

Look, generally speaking, I think the activity levels in our key markets across Europe have been quite good. There have been a few short-term headwinds, few pockets of where it's a bit slower, but they tend to be in project-related more than actual indication of slowdowns or anything else. U.K. is the one area where we have seen kind of a flatlining or a slight decline in overall performance. Our performance in Europe Materials for me is down 40 basis points. But if I strip out the U.K., which is a good question actually, the overall performance of the rest of Europe provided is actually up 40 basis points, which is encouraging in terms of how we're managing our costs and our margins and indeed our selling prices.

Specifically, with regards to the selling prices across Europe, you've heard me say for quite some time volumes had to come first across Europe and then in terms of volume [a preset] coming down, prices would follow. And here we've seen that coming through in the last couple of years and we're seeing it coming through strongly this year. It's my contention and my belief that there are 7 years of catch-up in cement prices across Europe. There has been a fundamental disconnect and the evidence is there, the empirical evidence is there. If you compare cement pricing across Europe with cement pricing in the U.S., which didn't have this dislocation and you can see the level of catch-up that there is. So I believe, given the demand environment we're seeing across our European markets and the activity levels that we're seeing there, particularly in Eastern Europe, that we're in for a run of good years of cement pricing as we catch up on the cost increases that we as an industry have to absorb for several years without the ability to pass those on.

With regard to the debt metrics in terms of what it means for year ending...

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Finbarr Senan Murphy, CRH plc - Finance Director & Executive Director [16]

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Yes. I think, David, actually I mean your commentary is certainly accurate. I wouldn't contradict this. I think as we've highlighted on the slide there, year-end outlook at this point in time based on acquisitions today and divestments announced today with trading and with dividend buyback and the IFRS 16 impact, we're predicting that to be in the region of about EUR 7 billion. And as you rightly pointed out, that would result in a net debt-EBITDA metric of below 2x and would create, as we've mentioned a few times, capacity in terms of optionality as to what we do and how we invest that capital.

I think in terms of the capital allocation and what we do with that capital, I'd go back to the answer Albert gave earlier in terms of the options we have available in terms of buybacks, dividends, bolt-ons and continuing to invest in our business.

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Operator [17]

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The next question comes in from the line of Arnaud Lehmann calling from Bank of America.

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Arnaud Lehmann, BofA Merrill Lynch, Research Division - Head of the European Construction & Building Materials and Director [18]

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Arnaud Lehmann from Bank of America. Firstly, maybe a strategic question. So you've ended up -- or you're in the process of selling your Distribution and obviously you sold a few months ago the U.S. Distribution. Why did you feel that these 2 Distribution business didn't fit into CRH? Do you see any kind of strategic challenges for Distribution going forward? Or was it just a question of capital allocation and opportunity to sell them at a different valuation? That's my first question.

My second question is on the U.K., not on the short-term performance, but more around Brexit. Are you doing any specific preparations? Obviously, who knows what's going to happen. But considering the risk of a no-deal Brexit, do you -- how do you prepare your U.K. business for what's potentially coming in the coming months? And are there any friction? Do you import anything? Or is there a reset from -- you're going to have to do a bit more paperwork to get your business going after Brexit? That's my second question.

And just to -- the last one, hopefully fairly brief. On emerging markets, they're almost a footnote now when you look at where your Asia operation or your Brazilian operation, they're relatively small. My understanding is that you're not that keen anymore to have a big exposure to outside of Europe and North America, but please let me know if I'm wrong.

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Albert Jude Manifold, CRH plc - CEO & Executive Director [19]

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Thanks, Arnaud. Three broad questions there: one on Distribution, one on Brexit and the final is sort of emerging markets and capital allocation. With regard to Distribution, first and foremost, I have to say we sold what are essentially good businesses. And from our point of view is we have a range of assets open to us to invest with and through and we have to consider what the opportunities are to generate income from those assets. When we look at the capability we have within our business and we felt and we still believe we have capability to run Distribution businesses, but we have better capability. And with more overlap, more confidence in other types of businesses, it made sense to us to crystallize the value that was available to us at that particular time and reinvest those proceeds back in businesses where it's easier for us to make money and we have a better chance of making higher return and cash for our shareholders. So it truly, truly was a capital allocation decision, a dispassionate position which we should make across our businesses. And we keep all of our businesses currently under review because, at the end of the day, no business in CRH subsidizes any of the business. They all stand on their own 2 feet. Distribution was a good business, is a good business. It's just that we have more capability and more optionality by investing in perhaps areas where we have greater capability and overlap.

With regard to -- with Brexit, look, we have been preparing for Brexit now for 3 years and the level of activities in the United Kingdom and our business has been slipping down for the last 3 years. I personally think we're at a level now that is it's just wait and see what happens post-October. We have a number of contingency plans in place because it's anybody's guess as to how this game can play out. You can take a bold view of this and say that post-Brexit, there will be a significant investment program across the United Kingdom for infrastructure. It certainly has those great needs. You can take the bear view that it's going to bleed perhaps the U.K. economy. I think it's going to be somewhere in between the two. But all I can tell you is working in this industry for the past 30 years, I, and certainly for the past 50 years, are well used to adapting our cost base to deal with the changing environment, be it a positive or a negative situation and we have preparations in place and possibility in place to do so as well.

And at the end of the day, with regard to the issue about whether we're impacted by imports or not as the case may be, all of our businesses, whether in the U.K., Europe or the United States, all local businesses are selling -- generating products that they manufacture locally and are sold locally. So we don't really have a big exposure to issues of imports or exports as well.

With regard to your last question to emerging markets, the emerging markets are a small focus of our business, only about 2% of EBITDA. And the focus of our business is very much on developed markets at this moment in time. It's there because, like everybody else, we had a good look at emerging markets 10 or 15 years ago and we all remember the word of Jim O'Neill and BRICS and how this is going to change the world. And of course, we see enormous growth in the BRIC countries and in the developing world. The challenge for people in our industry and in many industries, but particularly around our industry is the difficulty of making consistent profitability and good returns in those areas, and we just can't figure how to do that. There's too much disruption, too much dislocation, too much uncertainty. But particularly when, again, you're faced with a capital allocation decision of investing in Europe or North America where you've got stability, certainty, overlap, capability versus going for some of a bit more exotic, the returns you need to generate to justify that higher level of risk are extraordinary and we just don't see it. So our focus, you're absolutely right, is the developed market businesses and manage what we have in the developing world in an appropriate manner as we see going forward.

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Operator [20]

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The next question comes in from the line of Elodie Rall calling from JPMorgan.

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Elodie Rall, JP Morgan Chase & Co, Research Division - Research Analyst [21]

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So a lot have been asked already, so maybe I can ask a little bit of a cheeky one on the overall guidance. So you have stronger views on Americas Materials or you at least sound very confident and you expect similar trends in Europe. So does it mean that for the full year, we could expect like-for-like EBITDA growth or at least in H2 to be at least as much as H1, basically at least 5% like-for-like?

And then a question on your margin improvement, the 300 basis targets that you have -- basis points that you have. How much do you think we could see this year? You started to mention that we could see some impacts in H2. Overall, how much would you expect there?

And maybe a last one on potential divestments from here. I mean everything seems quite lean and clear. Are there any candidates within your portfolio for potential divestments?

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Albert Jude Manifold, CRH plc - CEO & Executive Director [22]

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Thanks, Elodie. Three questions there, one in terms of just giving -- being a bit more specific on guidance for the second half of the year given our comments about the U.S. and the markets, the way we seem to be in a good place. Second thing, question was about just a bit more commentary with regard to the 300 basis points and what we should expect for the current year. And the third question is just we give some -- I guess some directional view in terms of divestments going forward.

Well, look, and I think we are in the middle of our busy period. All we can do, with all honesty and certainty, is to give you and communicate to you the activity levels we're seeing in our markets as of today, August 22, and what we see rolling down in front of us. What that would translate into, ultimately, I won't be able to give you and inform you that at least until November because, at the end of day, July, August, September are our very busy periods. October is very busy. Unless we get those results and we see how it all pans out, honestly, I'd only be guessing other than that. I just know that I think we're going to have a stronger second half of the year than the first half of the year, the extent of it we will see where that is, and we're aware of where consensus is as well.

The second point with regards to the 300 basis points. Again, a lot of talk, a lot of commentary with regard to this. CRH is a company that is a quite conservative, cautious company. We don't say things without having some belief that we can deliver upon these things. And we're very clear. We have been pushed all around, can you deliver sooner, can you deliver a bigger number? We've been very clear about this: this is a program that looks at the reshaping and repositioning of our business. As David mentioned, the level of detail that we're down to the hundreds of initiatives that are running across all of our businesses are what's going to deliver this over the course of the next 3 years. You will see some delivery on this at the back end of this year. I think that delivery at the back end of this year will give you confidence that, ultimately, over the 3-year program we will deliver what we said we would deliver. What the extent of that will be, we'll have to wait until the end of this year because it's dependent upon a number of factors coming our way or things kicking in. If they don't kick in by December, they'll kick in by March and by June. But they will kick in. We're confident of the work we're doing will deliver on the program. But ultimately, I can't give you a view now as to what we'll be at the year-end, although I would expect you to see a delivery where you'll say, okay, that shows me progress.

Thirdly, with regard to divestments. Most of our divestments have tended to be in the area of Products and Distributions, not all, by the way. But don't mistake that for one second that the whole program of the constant review of our portfolio over. In fact, it's only just begun. The easy work has been done. As we prune the peripheral businesses out and just -- it's really because we're not the best owners of those business and reinvest back in the businesses doesn't mean that our work is finished. For me, the work goes into the Materials business and further deeper inside the Products business now because not all of our businesses are as good as they should be. We're not the best owners of all of those businesses. And we will continue to refine and reshape the portfolio because we need to and we have to. Our industry and our world is changing and we have to change with that and we have to reposition ourselves and constantly reposition ourselves for the next 10 years, not the past 10 years. I don't have any dogs business within CRH, but those businesses that I think we can reposition and reshape through portfolio management, I think we will do so and continue to do so. And better portfolio management is just an intrinsic part of good business management. It's a good -- in terms of how you manage assets and how we manage assets. And it's an essential part of how we manage CRH going forward. And it's a big part of our improvement and our margin improvement and our strategic approach to our business that I would expect to continue going forward.

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Operator [23]

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The final question comes in from the line of Will Jones calling from Redburn.

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William Jones, Redburn (Europe) Limited, Research Division - Partner of Construction & Building Materials Research [24]

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Three if I could, please. First, just exploring, I guess, Europe and maybe staying outside the U.K. and thinking about the Continent, clearly quite a bit of debate around the macro picture there as well. Are there any countries where you're thinking differently about just the growth picture, I guess, in H2 compared to H1 trying to strip out obviously any weather benefits that came back in that first quarter period?

The second was just on synergies. I think it was 50 basis points of the 300 were attributed to synergies previously, maybe that's a shade higher today with the higher Ash Grove guidance. But can you just help us on that one? Hopefully, it's more mechanical in terms of how that 50 or 60 basis points essentially flows to the P&L. Is that still majority beyond '19 or is that a bit more deliberate from there?

And then the last one, I guess, is just more strategically a few references to the Building Products division today. I mean do you think on a maybe 3-, 5-year view, that's going to become a bigger part of the group, a smaller part of the group? And then I guess a sub-question within that. The 75% or so that's concrete linked, do you want to keep that coming through the ratio or do you -- are there other products that are outside of the concrete arena where you think actually you might want to move into over time?

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Albert Jude Manifold, CRH plc - CEO & Executive Director [25]

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Yes. Thanks, Will. There are 3 questions there: first one, in terms of the big macro picture for Europe and any concerns on any particular markets; second one, on the issue of the synergies and how it fits into the 300 basis points, and I'll ask Senan to come to that a bit, but yes, and the third question with regard to Building Products and maybe our focus on our business going forward, where in the business areas will we see focus on that.

Across Europe, actually, generally speaking, other than the U.K., actually markets are pretty resilient actually despite some of the commentary. We do note some of the commentaries in recent times about Germany, but Germany is quite a small market for us. And our problems in Germany where it caused a production shutdown, [minor problems] are pretty much okay. But other than that, I just think -- other than the U.K., actually Europe seems to be pretty okay actually. It's a residential-led, nonresidential coming on somewhat, infrastructure in Eastern Europe. So no actually, pretty good shape actually.

Your comments on Building Products business -- the shape of Building Products business has been designed and positioned to cater for the changing face of construction demand going forward. And as construction demand goes forward, we will adapt and shape our portfolio to serve that market. We -- this is a part of the profitability of CRH now, is we'll continue to grow and be a bigger of CRH because construction markets are beginning to grow in this particular area. We generate 2/3 of our profits when we dig stuff out of the ground and sell it by the ton. But this area here is an area whereby we have a core capability, where we use a lot of those products and form them into higher value-added products, which give us higher margin, better returns and good cash. And this is an area where we should continue to invest. And we will follow those trends as we see them in front of us. We don't ever bat -- no one ever bats a thousand. We don't get 10 out of 10 right. We may invest in other areas. As long as we get 8 out of 10 of those areas and find it right, then we'll continue to grow in those particular areas.

My own sense is that it will continue to be strongly be a concrete-based business. But over the next 5, 10, 15 years, all the products will -- aligned to and associated with concrete will become part of that. So I take an example, we've got 2 very fine businesses called Construction Accessories and Network Access, neither of them use concrete, but they are closely aligned to and sold with the actual product. They are serving the same customer. And we can make very good returns and very good capability related to our engineering skills and knowledge and those areas where we should build out, and it's a very resilient platform because it's not only just new-build, it's RMI as well. So I see this being a broader footprint servicing a higher-growth market with better returns and cash and building a bigger and better division as part of a newer synergy going forward in the years ahead. And I think that's a very important attractive part of our business going forward and we have core capabilities within that. With regard to synergies?

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Finbarr Senan Murphy, CRH plc - Finance Director & Executive Director [26]

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Yes. Just on synergies, a couple of comments, Will. First of all, you're absolutely correct. I mean the synergies are a part of the performance improvement program of the business. They are a part of the 300 basis points, as you rightly called out. David updated earlier on the synergy delivery, specifically in Ash Grove and Suwannee, in terms of where we're at and how those programs are going really well. If you remember, those businesses when we were acquiring them back in 2017, on a combined basis, those businesses made about $400 million of EBITDA. In 2019, we'll be way ahead of that in terms of EBITDA delivery and that's really down to the strong performance on the synergy side, but also the good organic growth we're getting out of those businesses. So Albert mentioned earlier on you will see margin improvements by the end of 2019. And obviously, some of that margin improvement that's coming through is coming through as a result of the strong delivery of synergies that you're seeing in those businesses.

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Albert Jude Manifold, CRH plc - CEO & Executive Director [27]

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And specifically, on that point, the last point I'll make on that then is that we spoke before about our capability within our cement business in Europe and how we dedicated very significant resources of manpower people in North America on the cement area. They have made a tremendous impact upon that business in terms of lowering our unit costs and improving our throughput and that work will carry out for the next few years and really demonstrates the advantage of doing business and doing deals in areas where you've got a core competency and a core capability, which is cement for us. And be able to bring that talent, the capability, from Europe to U.S. have been a big plus to us. And as you said, it's been driving the performance of the business there in the last couple of years.

Ladies and gentlemen, thank you. Thanks very much. Ladies and gentlemen, that's all we have time for, I'm afraid. Just winding up here at the moment. I want to thank you for your attention this morning. Hope we've managed to answer some or all of your questions, but Frank Heisterkamp and his team are available to answer any follow-up questions you might have through the day. And we look forward to talking to you again in November when we provide you a trading update for the 9-month period ended September 30, 2019. Thank you for your time this morning.

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Operator [28]

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Thank you for joining today's call. You may now disconnect your handsets.