CRH PLC (CRH) 2008 Q2 法說會逐字稿

Good afternoon, everybody and thanks for coming on to the CRH half-year 2008 results presentation. With me here is Myles Lee, also [Emeril Finn] and [Arthur Kennedy] from the Investor Relations team. As you know, Myles is Chief Executive Designate as well as being the Finance Director, so Myles will be delighted to take all and every question at the end of the session. But remind myself, we will try and take you quickly through our presentation. Some of you may have already seen on the web this morning, we will take you through it quickly and then we will be very happy to take questions and answers.

We are joined by people who are conferencing in to the meeting whom I think are online now. Is that right? At the end of the meeting, we will open it up for questions and we will just wait a moment while the people on the conference call give instructions on how to do it, but then we will take questions from the floor here first and then later on, take them from the call.

So in terms of the results, the first half 2008 I suppose highlights for CRH, sales broadly similar to last year, EBITDA in difficult markets down 3%. EBIT down 8%, disposals up 9% and profit before tax EUR606 million, which, as indicated at the half-year in our trading update that started in July, down about 10% and that is after an adverse translation movement up about EUR21 million, which is about almost one-third of the decline is due to the translation of the weak dollar on the US profits.

Obviously, the strengthening of the exchange rate of the dollar in recent days would help if that is maintained until the end of the year. Tax rate, 23% compared to 24.5% last year, That is based on our full-year estimate and leads to earnings per share of EUR0.855 in the first half, down 8%, lower than the PBT decline. That is partly because of the lower tax charge and partly because of the impact of the share buyback, which again had a bigger impact in the second half of the year.

Dividend following 24 consecutive years of strong dividend growth, particularly strong in the last two years as we began introducing the dividend cover and increase the payout ratio a modest, but real increase again in the first half of this year, up 2.5% to EUR0.205. EUR700 million spent in acquisitions in the first half. Again, this is to underpin future growth and our relatively strong balance sheet from the point of view of interest cover, rolling interest cover of nine times bank covenants or 4.5 times comfort level, 6 to 6.5 times. So in these challenged debt times if you like or challenged credit times, strong metrics on the balance sheet.

Putting some of that in context, EBITDA EUR 1.1 billion, down 3%, a slight decrease in margin. Of note here, this is coming from record profits in 2007 following 15 consecutive years of growth, 22% CAGR and EBITDA from '92 to '07. Operating profit similarly down 8% in the first half, again a decrease in margin, but again this is on the back of record profit in '07 following 15 consecutive years of growth at a 23% per annum CAGR. And similarly on earnings per share, down 8%. This is down 5% in constant currency terms and this follows 20% CAGR in EPS over the 15 years from '92 to '07.

Dividend up 2.5%, continuing the payout increase, although a more moderate increase than the last few years, but we are really catching up on the payout. We are continuing the increase and this is on the back of 24 full year's dividend increase of 14% per annum compound over that period.

So looking at our I suppose two major operations regions -- Europe and the Americas -- in Europe, operating profit up 4% contributions from 2007 acquisitions, helping this. The table at the top here, you see a similar formula for all the subsequent slides where we show the '07 and '08 performance in the two left-hand columns and we show the change and then we analyze the change into organic growth of '07 and '08 acquisitions and foreign exchange impact.

I suppose the major message here is a very positive start from materials, we have got good advances in Poland and the Ukraine and the recovery in Portugal following a number of years of underperformance, a good rebound in Portugal in the first half of '08, more than compensating for what were quite weak Irish and Spanish markets. So a strong start for materials.

Products, good first quarter, quite strong, but then trading patterns in the second quarter significantly lower. This is mainly based in the Benelux and also Germany and France, called the [core] euro zone countries, but also UK. 2% to 3% of our operating profit last year came from the UK. So not huge in the CRH context, mainly clay products business that operates the biggest manufacturer of brick very much clear to the housing market, collapsed in new housing in the UK from physical levels, which were low by European standards and a very big fallback again in '08. So that had a major impact on the contribution from our UK Clay business.

On distribution, similar profits overall to last year. Lower DIY profits in the Benelux, being offset, if you like, to a certain extent by a good start on business merchants and then had a full first-half contribution from the Getaz Romang business that we bought in Switzerland in May of last year. Last year, we only had it for two months, so some benefits from that.

Turning to the three main segments on the material side, I suppose the chart at the bottom tells it all. You can see the decline in Ireland, still profitable at a lower level, (inaudible). Western Europe, broadly similar (inaudible) improvement in Portugal and also refers in a statement to the small contribution there from the cement (inaudible) business, which was transferred from products to materials and that is included in materials here in the first half. So that is helping the Western Europe profit slightly.

Significant growth in Eastern Europe and new regions there, including places like Turkey for example that came in late in the first half last year, contributing to the full half of this year. In total, leading to good profit and overall, this business now is about 20% Irish, 30% Western European and 50% Central Eastern Europe and new regions.

[Fewer] products, tougher times following the strong first quarter as the operating profit down 12% or EUR52 million, EUR27 million decline in operating profit. By far, the most significant part of that came from the UK Clay brick business, some reasonable contribution from the '07 and '08 acquisitions and a small negative foreign exchange impact there.

You can see the chart at the bottom, concrete products down slightly, but still holding up reasonably well, very sharp decline in clay profits. That is the big decline in its stock and building products, a shining light if you like, maintaining profit. This is in the face of tough -- particularly the construction accessory segment that we got into a few years ago, continuing to perform extremely well and showing growth for the first half of this year.

Looking at your products by geography, you can see here Benelux is a significant part of this business, holding up reasonably well. Other than Western Europe down and that is mainly the UK Clay brick business and the Eastern Europe and new regions broadly holding their own, up slightly in the first half. That is helped by acquisitions last year in places like Romania and so on and Hungary and so on.

And Europe distribution, Benelux by far the biggest part here. Although we are diversifying over Benelux, the acquisition in Switzerland last year and also growing businesses in France and in Germany. The Benelux slightly down. That is a weakness, some weakness on the side, consumer confidence low and that affecting DIY as some promotional activity affecting margins there.

Switzerland, by and large, maintaining profits and growing slightly with Getaz for the full first half and Western Europe also growing slightly. So distribution, a strong business, overall underlying performance down slightly, be down EUR12 million, but overall in the face of tougher markets, quite a good performance.

In the Americas, tougher going in the first half, operating profit here down 29%. That is down 18% in constant currency. You can see, analyzed on the right, a EUR79 million profit shortfall compared to last year. Of that, EUR35 million is due to the foreign exchange translation impact of the weaker US dollar. EUR26 million coming from the '07 and '08 acquisitions, which is a lower level than we would have expected when we did the acquisition. Some of these are in the southern part of the states, like Florida for example, where the activity is very much lower at the moment. We will come back (inaudible) at the moment and organic profits down.

The absolute decline of 29%, influenced to a certain extent by seasonal factors on the material side or the bulk of the materials profit is made in the second half. In fact, typically, up to a few years ago, materials would always have had a loss in the first half of the year and made more than (inaudible) dollars profit if you like in the second half as we brought APAC and moving a bit further south. It has become a little bit less seasonal, but still a big seasonal factor. So a small movement in activity there can have a significant percentage swing on the profits, but not necessarily reflective of the full year.

In materials, the name of the game in materials has been strong pricing to recover the significant increases in input costs over the last few years continuing this year, firstly, with oil continuing to ramp up to $140 plus as it was some weeks back. Thankfully, moderated back to the mid-teens now, but still big increases in input costs. So recovering that in pricing without having an inevitable continued impact on volume of activity, particularly on the public sector side where the dollars spent have been growing, but the dollars are buying less product because of the higher selling prices that we need to recover the input costs. So there is a bit of a (technical difficulty). We believe strongly that we have to recover the costs and we are doing it quite successfully. We had an element of a weather impact in May and June, particularly in the Midwest that hampered the start of the construction season.

Products, much more residential-oriented, so suffering significantly from the decline in residential from last year and continuing into this year and also from some moderation on the nonresidential side and it is leading to profit declines in precast in our particular products. But in fact, we had improved results in glass MMI, which is a new platform we bought a couple of years back and in South America.

So this showing perhaps the benefits of the breadth of CRH and the diversity in terms of product balance that has helped I guess some areas that are down significantly. We have other areas that are actually performing better than last year and similarly on distribution, our markets are very tough.

Sales are up in the first half, but that is reflecting the inclusion of AMS, which is the major interior products business in the West that we bought at November '07 and US dollar operating profit is up with similar margins to last year and that is on the benefit on the back of strong commercial acts, but also very strong cost measures, which were taken particularly last year when they got hit, perhaps areas of some of the other divisions maintaining the margin there has been an absolutely stellar performance by our distribution business in the first half of '08.

And looking at those three main divisions, they are the materials business. As you can see here, a 53% decline in operating profits and in euro terms down EUR35 million. Of that EUR9 million, it is a foreign exchange impact, but EUR27 million is organic decline as I say. A small profit base in the first half of the year. We are looking at operating profit of EUR31 million in a business that makes EUR600 million, EUR700 million, EUR800 million a year. So it's very much a back-end oriented business.

The table at the bottom I suppose tells it all. In virtually each division, we are seeing a lower level of profit because of the lower level of physical activity with the higher selling prices impact. We make losses in the Northeast in the first half because activity really doesn't start there until April or even May, so the severe winters and they make big profits, of course, in the second half, but we have reduced profits in the central and mid-county region and in the West.

APAC, which is more southern-oriented, is broadly similar to last year's level of profits. Overall, their profits down from EUR88 million net to EUR47 million net. You can see significant volume declines, aggregates down 19%, asphalt down 10%, bringing (inaudible) down 22%. But that is on the back of very strong price increases. Aggregate prices up 11%, asphalt prices up 12% and actually will be up more for the year as we are putting through further price increases to recover the fall in increase in liquid asphalt costs and concrete up 4%. So good underlying funding, good level of business. This is a great business for the medium term, but the unprecedented rise in energy costs having an impact on the volumes are because of the price increases we are putting through.

On the product side, I have spoken to it earlier, you can see here the significant declines in architectural products, precast, with a very strong performance of glass, which is mainly nonresidential-oriented with a significant RMI, repair maintenance improvement, orientation doing well and continue to do well in the second half.

MMI was a new platform we bought a couple of years back. [Tensing], which is a weak -- it has a significant residential component, but also with a very strong construction accessories business there is the main reason we bought in here and it mirrors our construction successes in Europe. Very disappointing performance in 2007, but coming off that low base, strong management team there, some new people in it, strong actions taken in '07 and continuing into '08.

And you can see quite a big step up in operating profit that shows, if you like, the local share hedge management team in action in turning around what was a chronic underperformance. Still not where we would like it to be, but quite a good distance back and also our South American business is showing a very good performance in the first half of the year.

America's distribution, you can see in the chart at the top, organic decline in profits in the face of the significantly bad markets, but a good contribution on acquisitions from the AMS behind where we would like it to be, but they are in weaker markets than were predicted at the time, but still at least quite profitable and then a negative foreign exchange translation impact, but the most significant one there I think is the maintaining the margin at 4.5%, 4.6% last year and the face of these markets is well beyond what the bulk of the market is doing thus far. I think that points well against the management team in action.

On the development front, we spent about $700 million in the first half of the year, maintaining the sound record. The acquisitions in the first half are crucial, as well as the main ones on the materials side where our first cement investment in India, 45% of My Home Industries in south-central India. We just recently brought that up to 50% because (inaudible) originally. So it's done in two stages. Very little contribution first half and obviously that could mean the second half and it is just a first step as a sales expansion into some of the emerging Asian markets. As you know, we already have a toehold in China and we are hoping to expand that and refer to that in a minute.

On the product side, probably the most significant deal within the UK and construction accessories business, a very fine business, which also exports quite a bit out of the UK and despite the lower UK market, it is actually doing relatively well at the moment. And then 35 medium to small bolt-ons right across the group adding to product and regional positioning.

We have also got another EUR600 million of things that we announced earlier in the year. These are subject to regulatory approval too, to main deals one, the materials business I alluded to a moment ago in China by 26% of Yatai Cement, which is a leader in the northeastern provinces of China and we will have the option there to bring that up to 49% and also we will participate in significant capacity expansions there coming to at the moment. That is going through a series of regulatory steps of 10 or 11 steps we have to go through in getting these things approved in China. We are well down the line, successful at each step so far, but it just takes time. We would hope and expect that will come later in the year.

And on the product side in the US, we announced a major acquisition of Pavestone earlier in the year, which is a leading supplier for the home centers of architectural products pavers, patio type products, bag goods. We are ourselves the other leader in the US in different parts of the US. So this is a complementary business with significant synergies on the cost and delivery side. Again, that is not about (technical difficulty) go through the hoops with the Department of Justice in terms of antitrust cares and that's taking some time because we are into a more formal second request there, which is because we are both in the same line of business, although in different parts of the country. We would hope that would come later in the year.

We continue to have a focus on development as very much part of CRH's [stock in trade], but it would be fair to say that with the growing negative sentiment in the markets in which we operate over the last number of months that the focus of the business in terms of the primary focus is shifting from the development from -- although we remain poised to do that -- shifting more to the operations to make sure we are running the business as well at managing cash tightly, managing the costs tightly, delivering the profit as well as possible.

And I think on the development front, we have a strong balance sheet, so we can certainly have the capacity to do it, but it's only where we see compelling value and strategic fit. And I think the risk factors are heightened out there. We have got to be doubly careful, but at the same time, we shouldn't be afraid to take the appropriate opportunity (technical difficulty), but I think there is certainly a shift of emphasis. It is very much more on the running of the business as usual at the moment with development being a part, but not quite the primary thing. So I will hand you over to Myles and maybe take you through quickly some of the financial (technical difficulty).

Just a few slides here to hopefully improve your understanding of our results for the first half of the year. Here we are. Some of you here regularly will know that each year, in each half year, we present this particular slide, which shows the components of the change from the prior period and you can see here on the left-hand side of the slide, you can see the first half P&L captions for 2008 and 2007.

In light blue, you can see the total change for each of those captions and then we analyze that change between the underlying organic performance across the business, the incremental impact from prior year and current year acquisitions and then finally, on the far right-hand side, you can see the impact of foreign exchange translation on the results for the half year.

And if you look at sort of the right-hand half of the slide, you can see there in the organic column, that our underlying sales declined by 5% in the first half of the year and that represented a decline of about 2% on the European side and about 12% on the American side of the business. And that was in contrast to last year when underlying organic sales grew by 5% in the first half of the year. So quite a change in terms of the operating environment since that particular period.

Looking at the operating profit decline under the organic column, you can see an EUR84 million reduction in operating profit, EUR14 million of that coming in our European operations, EUR70 million coming from the American operations. And the incremental operating profit margin on the organic sales decline as of the order is 17%. Last year, when we had a 5% organic sales increase, the margin on the upside was 23%. So through effective cost action, we have limited the incremental operating profit decline on that sales decline and I will come back to it in a few moments to what we have been doing on the cost front across the business over the last 18 months.

The organic profit on disposals, you can see there an increase of EUR3 million. We have had lower profit on the sale of development land in Ireland in the first half of the year, but that has been offset by higher profits on disposals in the European and in the US business.

On the finance costs, when you look there in the organic column, you can see that, as a result of our strong cash flow and slightly lower US dollar interest rate, we have a net benefit of the interest line before acquisitions and exchange effects of EUR30 million.

Also, our associates have turned in higher profits. That is a combination of higher results in Israel and in some of our Polish associates, offset by a slight decline in our (inaudible) cement associate in Spain. So when you add all of those up, you can see there that underlying profit before tax declined by EUR47 million, or 7% in the first half of the year.

Looking on the acquisition side and particularly looking at our 2007 acquisitions, we had quite a significant acquisition span in 2007, which contributed very strongly for the period of ownership for those acquisitions in 2007 that contributed about EUR101 million of operating profit in 2007. The contribution in the first half of this year is EUR1 billion in sales, EUR50 million in operating profit. That reflects about EUR487 million of sales coming from the European side of the business with EUR27 million of operating profit. And that is a margin of about 5.5%, which is a good margin in the context of the fact that about half of those incremental sales came from the low margin, less capital-intensive distribution business.

However, when you look at the contribution from the US side, about EUR513 million in sales and about EUR23 million in operating profit from '07 acquisitions there. That is somewhat disappointing and that reflects the fact, as you are seeing on the earlier slide that Liam presented, we had EUR180 million or so of incremental sales from '07 materials acquisitions.

We had no operating profit in the first half of the year and that reflected lower than anticipated operating profits in some of the 2007 acquisitions in Florida, partly offset by seasonal losses in the first half of the year on some of the materials acquisitions in the central and in the western US. And after finance costs, '07 acquisitions added some EUR2 million on the profit before tax line.

Thus far in '08, we have spent over EUR700 million in acquisitions, but about 90% of that was spent in the second quarter. So there is a fairly modest impact in the first half of the year from that acquisition spend. For the year as a whole, we would expect that '08 acquisitions completed in the first half would add about EUR400 million to full-year sales with an incremental EUR200 million coming in 2009.

Finally on the FX column, you can see there that the impact of currency movements and particularly the impact of the weaker US dollar knocked about 3% off our reported pretax numbers for the first half of the year. So had there not been any exchange changes, we would have been reporting a 7% decline in profit before tax rather than the 10% reported today.

I mentioned on discussing this particular side that we have done a lot on the cost side over the last 18 months and targeted cost reduction programs. They are an ongoing feature of CRH's operating performance, tailored to particular business performance issues and even in good times, we have had some businesses which haven't been performing for one reason or another where we have taken significant cost action.

But I suppose over the last 18 months and with a significant change in the environment as witnessed in the organic column on the previous slide, we have taken a lot of action to deal with developments in our various markets and a lot of significant measures implemented since the earlier part of 2007 focused on four particular headings there -- labor savings in the business to balance capacity with the underlying market demand; energy cost management against the backdrop of sharply rising energy costs. We have been investing for greater energy efficiency. We have been increasing our usage of alternative fuels. We have been changing production mixes and we have also been making more use of substitute materials, particularly in our materials business in the US where we have increased our usage of recycled asphalt in order to substitute for the use of virgin asphalt.

And then we have been doing a lot on the purchasing side right across the group to leverage our presence in 34 countries and 4000 locations and in our cost base, as market demand has increased in a number of our business areas, we have kept the cost base flexible by buying in a lot of services, buying in hard haulage for instance, buying in a lot of contract labor and maintenance and specialist services and while that has helped to keep the base flexible on the cost side as volumes have increased, it has meant that we have been able to dispense with a lot of those bought-in services as volumes have declined in quite a number of markets.

So when we look at what we have been doing since the earlier part of 2007 and we total all of that up, we estimate that we have realized annualized gross savings since early 2007 of about EUR550 million across (technical difficulty) and when we net off the implementation costs to achieve that, that comes down to saving of about EUR500 million.

We provide a little more detail on those savings under the four headings labor savings, energy-related savings, purchasing initiatives and other overhead reductions and then the scaling back of bought-in services there. And you can see that it's split very broadly a little over 50% on the European side, a little under 50% from the Americans, which broadly reflects the balance of the group.

And when we look at how those savings are coming through in our own report profitability, we estimate that about EUR50 million of those savings actually impacted in '07, about EUR350 million coming through in '08 and about EUR100million coming through in '09.

Now while that is a very significant level of savings, it hasn't been sufficient obviously to offset the impact of higher input costs in a reduced amount, but our performance would have been very much worse than what you see there for the first half of the year and what we are indicating as our expected results for the full year. It would have been a lot worse without those particular cost actions. And this is actions taken at local levels since the early part of 2007 as part of the ongoing good management of those businesses by the profit responsible managers in those businesses units.

And obviously we are very alert to what is developing in the marketplace and what may be coming down the line in terms of further challenges for our businesses in 2009 and we would have further contingency plans in place if there is further action needed in the course of the next six to 18 months right across the business.

Moving on, again, each time we present (inaudible) fund flow, so where are we generating cash and where we are utilizing it and you can see here for the first half of the year, the inflows, profit before tax, depreciation, amortization of intangible assets topping up to a figure of EUR998 million, just under EUR1 billion and about 4% lower than the equivalent figure in the first half of 2007.

And then moving down the slide, you can see the outflow and you can see there quite a significant increase in the working capital outflow in the first half of 2008 compared with the equivalent period in 2007. Normally we are a seasonal business. We are generally at a low ebb in terms of activity at the end of the year and the beginning of the year and then we build up to very high levels of activity during the first six months of the year. So this is a normal seasonal pattern and there are some underlying reasons as to why the figure is larger than it was last year and I have a slide in a moment, which will give you a little bit more detail on that.

Tax paid, higher than in 2007, the dividend increasing by 25%. That reflects the 25% increase in our final dividend, which is paid in May as part of our policy of increasing our dividend payout and that combined with a 48% increase in the interim dividend, which was paid last November, gives us a 31% increase in the total dividend in respect to 2007.

Capital expenditures moved slightly ahead to EUR560 million from EUR520 million. But within that, there is an increased level of spend on our four major cement projects, which are underway at the moment in Ireland, Poland, Ukraine and also in Florida in the US in our joint venture cement facility there.

In actual fact, our underlying capital expenditure level is lower than it was last year because we are -- again, in response to tougher market conditions -- we are scaling back our underlying capital expenditure requirements across the group, focusing very much on essential CapEx, which is needed to maintain the fabric of the business, but there is a lower level of development CapEx going on and that will be something that will be I will come back to in a minute when I talk about the capital expenditure outlook for the full year.

So the operating cash outflow, with that higher seasonal working capital build, was higher at EUR577 million than in the first half of 2007. And looking on then to where what further we have done on the investment side in 2008, you can see there the EUR744 million of development activity and acquisitions and investments in the first half of the year, lower than the EUR1 billion or so spent in the first half of last year. We continue obviously to be active in seeking opportunities to dispose of surplus assets.

Share issues reflect the take-up under [script] issues, which has been lower than it was in 2007 and you can see here the significant purchase of shares that have been taking place in the first half of the year, EUR370 million, which includes share buyback, less some proceeds from options, which have been satisfied through shares repurchased under the buyback.

And then finally, we have a positive translation adjustment there arising from the weaker dollar. While that impacts adversely the translation of our reported profits, it does impact favorably on our reported debt increase for the first half of the year. So when you put all of that together, a [debt] increase of EUR1.4 billion in the first half of the year, that is after spending EUR1.24 billion on acquisitions, on capital expenditure less disposals, plus the EUR300 million share buyback plus the EUR600 million of seasonal working capital build, which will largely reverse in the second half of the year and that leaves debt to shareholders' funds at the end of the period somewhat higher at 87% compared to 72% at June 2007.

Obviously with the decline in share price, market capitalization is reduced for CRH as it has for all of the other participants in the sector, so we are looking at a higher debt to market cap rate of 66% at the end of June 2008.

So just looking at working capital outflow, what we do on this slide here is we analyze the working capital outflow in the first half of the year by business segment. Top line shows the EUR606 million working capital build over the first six months of the year. The second line at the top of the slide shows the EUR329 million build in '07 and then the third line shows the change for each of the individual business segments and there are factors affecting each particular business segment.

In Europe, materials. We have had to make repayments in the first half of the year for the major capital equipment that will be coming in in order to construct the new cement plants in Poland and Ukraine and that, combined with the very significant revenue growth in both of those countries, have contributed to a EUR65 million increase in the seasonal working capital outflow in Europe materials.

Europe products, as you are seeing from Liam's slide, had a pretty slow backdrop in the first half of the year, the reduction in underlying sales and with that has come a reduction in the underlying working capital that was in that business and there has been good working capital reduction right across the operations on the European product side of things.

On the European distribution side, we have had an increased requirement for working capital in the first half of the year. That reflects the inclusion of Switzerland for the first time. We acquired that in May of 2007, so we missed out on the first four months of '07 and the seasonal working capital build that takes place over that period. And we also, as a result of slow demand in our DIY business in the Benelux in the first half of the year, we were left at the end of June with higher than anticipated inventory levels in that particular business, which contributed to the working capital outflow. Both inventory levels would be liquidated as we move through the second half of the year.

On the US side, I think if you look there at the '07 line, you can say that for a very seasonal business, which builds up from very low activity levels at the end of December to a very high state of activity in June, 2007 saw a very modest EUR10 million build in working capital in our Americas materials business. And that reflected the fact that the seasonal build in our heritage businesses in the first half of '07 was substantially offset by the reduction in working capital in the APAC business, which we bought in August of 2006 and where we had a lot of integration efforts focused at reducing working capital levels. So that [led] to a very low outflow in the first half of 2007. This year, we have had a more normal Americas materials working capital build without that offsetting impact.

In Americas products, a significant raw material cost for us is in steel in the MMI business, which provides a lot of steel for its fencing, its construction accessories and its welded, wiring reinforcement business. Steel costs have moved up substantially over the course of the last 18 months and MMI purchased more proactively this year ahead of price increases and had higher steel inventories in volume terms at higher average prices, which contributes to that Americas products working capital increase.

And on the distribution side, you can see there in '07, distribution was hit very hard in '07, made a lot of cost-saving measures in the first half of the year, reined in their capital expenditure very significantly in the first half of '07 and actually generated a working capital inflow in the first half of 2007.

This year, they have actually built their inventory levels of shingles quite substantially in the first half of the year. Shingles are small asphalt roofing tiles, which are used extensively in the US as a roofing material. There have been significant hailstorms across large areas of the US in the first half of the year, which led to shingles being in actual short supply and we decided that the Americas distribution business should build their inventory in the light of that shortage of supply in the first half of the year. So that has contributed to a turnaround in their working capital build in the first half of the year.

So all of that I think hopefully gives you some flavor of the various factors affecting working capital in the first half of the year. All of these will result and while we've had a strong first half of seasonal outflow, we will have a stronger second half of seasonal inflow than we had last year as the business winds down to the seasonally low levels of activity at the end of the year. So we expect a strong second half inflow on the working capital front.

And when we combine that strong seasonal inflow with our significant second-half profitability, which is much greater than the profitability in the first half of the year, we would expect in the second half to see our cash flow before acquisitions and before any further share buyback being well in excess of EUR1 billion.

We are also adjusting our maintenance CapEx levels, as I said earlier, due to the reduced demand in the marketplace. While I think the reported capital expenditure levels for the year will be around last year's levels at about 1.4 times depreciation, when you strip out what we expect to spend on the major cement plant, we are looking at a net capital expenditure level broadly in line with depreciation as we reduce our capital expenditure across the group. And as Liam has mentioned earlier on the development front, the focus is only on opportunities at the moment that offer compelling value and strategic (technical difficulty).

On the funding side, we have been quite active through the year on the funding side. Since the 30th of June, we have raised an additional 650 million of finance through a combination of issues in the bond market and also some facilities put in place with our banking group. We are looking to further bond issuance in the second half of the year. In April, we tapped the sterling market with a seven-year starting bond issue.

In July, we raised some 10-year funds in the US bond market and we are targeting some further bond financing in the second half of the year, as well as some further facilities from our banking group and with strong interest cover, again, as Liam has mentioned, nine times interest cover EBITDA interest cover on the 12 months of June doubled the interest cover level allowed for in our bank covenants and well above our 6 to 6.5 times comfort level and we remain committed to our investment grade debt rating from S&P, Moody's and also from Fitch.

On delivering value for shareholders, I mentioned dividend policy. The increasing of the payout ratio targeting 3.5 times dividend cover for the current year and a payout ratio of just under 30% and the 2.5% dividend increase that we have paid at the interim stages, that is part and parcel of that particular policy.

On the share buyback, you will remember in January we announced a 5% share buyback. That would represent a buyback of about 27 million shares. To date, we have bought back 16.5 million shares, average price worked out at a little under EUR23 per share and that program is continuing as we speak and will be completed during the course of the current year.

So I hope those slides have given you some feel for the financial side of our performance in the first half of the year and on the outlook on the financial side for the year as a whole and I will hand you back to Liam who will make some comments on the outlook.

Thanks, Myles. Firstly, coming to a slide that is summarized as one of the very important features of CRH. Those of you that have followed us over the years are sick and tired of hearing us talk about balance. Balance is fundamental to CRH. We are in an industry that is cyclical and we believe that by having balance by geography, by product, by end-use and between new and repair and maintenance that we give ourselves more resilience on the downside and also offer many more platforms for growth on the upside.

And what we show here, and this is a slide you will have seen before, our product balance -- we are fundamentally a 75% heavyside building materials group as the manufacture of primary building materials, cement, aggregate, ready mix and asphalt where they relate to construction and about 20% in concrete products, which closely related in the sense of the materials business. About 75% fundamentally heavyside and the other 25% lightside, still roughly half and half between other value-added building products such as, for example, the construction accessories business is a good example that we got into in the last five or six years in Europe and very, very successful.

We have grown to be a European leader, have a significant business in the US, very profitable, increasing profits even in these tough economic times. So that is an area where we we'll see products I think cycling in or possibly other products cycling out over time as we change the portfolio. These are products potentially with high growth potential, good margin potential and good ability to create strong positions.

And the second part of that 25% is in the purely focused added value distribution business on both sides of the Atlantic and again, that has been very, very successful and you will have seen in the numbers area, we are speaking about some very strong performances and robust performance by some of the companies in the products area and in the distribution area this year plus some of the other areas were suffering more from the housing downturn.

On the geographic side, which traditionally being the Western Europe and Americas business, in the last 10 years or so, we have gotten involved more in Eastern Europe and from the mid-'90s onwards and more recently, the Mediterranean Rim and in the last couple of years, out into Asia with initial positions in China as a toehold, which we hope to grow as we said earlier and also in India. These are platforms for growth in the future.

At the moment, it is roughly half and half between Europe and the Americas, out of Asia by a percent, roughly 42% each and 15% to 16% in emerging markets. I would expect over time to see the emerging markets proportionally grow, but I think at a moderate pace. CRH has a big asset base and to make a significant impact there, if it doubled the emerging markets proportion for example, it would require a very, very large deal, purely focused on emerging markets. And we think, at this stage, we don't know enough about the (technical difficulty) to make that [source], but we certainly want to do it on a gradual basis and as we get confidence and success, then to accelerate the pace may be in the years to come.

So we think this concept of balance in our strategy remains fundamental to CRH and I think we will inform what we do going forward. It doesn't mean we are unchanged. It is the right balance will change over time, but it is all about balance and not being too heavily exposed to any one particular area.

As we look to the future, two slides -- one for Europe and one for the US for the rest of the year. In Europe, profit improvement in the first half and for the full year, we look for a low single-digit percentage increase for Europe in total. The table there summarizes in total, as well as the materials side, good half one performance in Eastern Europe and also recovery in Portugal we see more than offsetting significant weakness in Ireland and Spain. We see that trend continuing broadly, nothing (inaudible), but broadly like that in the second half. And of course, we have the benefits of a new Indian joint venture coming in for the full second half. So we would expect a mid-teen percentage increase at this stage of Europe materials in total terms.

On the product side, the converse here where this is mainly focused in what I would call the core euro zone countries at the heart of Europe -- Benelux, Germany, France, some in Switzerland and surrounding areas and here, we are seeing weaker markets, particularly in quarter two. We expect that trend to remain and possibly even intensify in the second part of the year as the euro zone economy appears to be running out of steam somewhat at the moment. And the significant resultant organic decline, which would be partly offset by acquisition contributions in the second half.

But putting that all together, we'd expect a mid-teens percentage decrease for Europe. Products profits on the distribution side, we think we have a robust performance here with a broadly similar outcome to last year, ongoing challenges from euro zone growth, but still business performing quite resilient with some contributions then from acquisitions kind of rounding out the picture. So overall EUR1.106 billion in Europe in the first half last year and we expect a low single-digit percentage increase for the full year here.

On the Americas side, in US dollar terms, we expect to show a low teen percentage (technical difficulty) decline on 2007 and again, the table sets out the details. On the materials side, it is kind of more of the same, strong pricing for recovered input costs affecting volumes and perhaps as an increasingly adverse rate in the second half as we continue to ramp the prices up to reflect the significant cost increases we have had, particularly in the asphalt business where liquid asphalt has been spiraling up.

Hopefully with a recent drop in oil from peak, we see that filtering through in due course to some of these (inaudible) costs and reducing these pressures. But for the rest of this year, at this stage, we continue to see pressures there. Although we have seen some good decreases for example in the recent weeks in the price of diesel fuel for example at about $0.50 a gallon, which if maintained will have a good benefit later on in the year.

So assuming the overall weather patterns in the second half to be normal and that is normally what happens, that's why we call them normal weather patterns, we would expect a low teen percentage profit decrease in materials. We still see this as a fundamentally strong strategic business for the long term and push funding from the public side, but it is just the rate of price increases that are needed to absorb the phenomenal cost increases, in turn easing to the public (inaudible) and [leave] less volumes [still].

On the product side, much more residential-oriented and also some nonresidential exposure here. Again, second-half residential continued to be very, very poor. No doubt about it. Hazard (inaudible), it's hard to say. It's certainly not at any stage near recovery. I think that is more dependent on some visibility on a resolution or a [ramp] being the site of the underlying credit problems in the US broader economies. And there is no visibility on that at the moment, so housing I think will take some time to come back. Housing will come back. We should bear in mind that the US at the moment is probably building less than half the number of houses per annum that are required for the underlying demographics of the country.

So building way below trend at the moment, but that will continue for a period of an overhang of repossessions and all that, but it is a blip. This will come back in due course. However, in the second half in what I'd say is a tough market and also some weakening on the nonres side.

Having said that, we have had significant cost reduction initiatives and also we are having a very good performance out of our last MMI businesses, which will limit the operating profit decline. It will still be overall we think the high teen percent decrease for products.

Distribution, good performance, maintaining margin, but by and large last year and of course, a mid-teen percentage profit increase. The first half exceeded our expectations. We have the benefit of cost savings that have been put in place and also good commercial focus. I think the teams have there hands up a little bit on that and they are quite positive in terms of their full-year forecast. Overall for the US, we see a low-teen percentage increase in dollar terms from last year's record EUR$1.343 billion.

So looking to the outlook for the year, it is very much about performance and growth. That has always informed us. That work continues to inform us. Obviously '08 is not going to be a growth year. We are coming off 15 consecutive years of profit generating (inaudible). So very substantial performance and expansion of the business for a number of years coming off a high level. It will be off somewhat this year.

(inaudible). In the last few weeks, we have seen some easing of headline oil prices, commodity prices coming off a bit and more recently, the strengthening of the US dollar from a very weak position will help the translation impact in the second half hopefully, less severe percentagewise in the first term if the current increases -- the current strengthening is maintained as well as to say the country sites that we think may not be in euro zone economies we see again today, but poor economic indicators out of Germany and the dollar bouncing up a couple of cents certainly the last time I looked. So that would be helpful to CRH in the medium term.

Having said that for the rest of this year, the weight of news flow, economic flow, news flow, credit markets, all that, it is all negative and has continued. Maybe we are getting towards more stability, but still continuing ways of negative news flow and the international scene and the fixed picture have also been quite risky in recent times, with some adventures down in Georgia and whatever that is adding to risk uncertainties generally in the world. So we don't see any relief for the second half of this year.

We indicated at the half year with our update in July that the outcome for '08 will be lower than last year's record level and at this stage, we anticipate an overall [GDP] decline broadly similar to the first half, which in the first half was about 10%. That was broadly similar to that, plus or minus a little bit, with a lesser EPS reduction due to the share buyback because the level of bigger impact in the second half and also the expected lower tax rate.

I suppose looking a bit beyond that, because we need to keep this performance in perspective, CRH is a company that has tremendous strength, significant business on both sides of the Atlantic, growing our market position. Very strong market positions in its main market. These have been built up over many years, painstakingly put together.

On the materials side, we have strong, strategic, aggregate reserves in the United States for example in excess of 10 billion tons of permitted aggregate reserves, half as much again on permitted, what we believe permitable, all close to significant urban areas. These are not going away. These are here for the long term.

These underpin that side of the business and we have a strong experienced management team that have been through down cycles before and as you talk I suppose more recently -- I have overseen the succession here in CRH of Myles leaving and being appointed Chief Executive Designate to take over on January 1 and following from Myles appointment, a series of appointments, interim appointments for the organization are up for the organization and has given us the opportunity to move a number of people in the 40 or 50 years significant achievement under their belt, with lots of ambition in wanting to grow the business.

Substantially a new team in place at the top of the United States that is very vigorous, very strong, very ambitious, a new Chief Financial Officer Designate in place. Here we are bringing somebody from the US. For the first time, a US national bank here to the financial center here. It was a man that was responsible for half of our US business thus far.

And one final point to be announced probably on the Europe materials side is a successor to Albert Manifold who has been moved up to Chief Operating Officer and again, we would expect to see that in the not too distant future. And this is CRH and actually these moves were planned many years ago. Some of the people that we would have seen featuring in these moves you would have seen them being moved two or three years ago to different positions to broaden their experience, having been identified as people that have the capacity to come up. So I think this is just a good, smooth CRH transition in place and with a strong team going forward and whom I have tremendous confidence I should say.

As we said earlier, good balance sheet capacity to avail appropriate development opportunities. Clearly our focus is very much in line to business. We don't want to distract ourselves from that. We want to maintain strong balance sheet, good ratings, absolute commitment to that. But having said that, this cycle will throw up opportunities and we want to be and are in the position to avail of those at the right time as long as they offer good strategic fit and compelling value.

Clearly, the outlook is going to be somewhat difficult for the immediate future, but as Myles has shown, we are proactively managing the cost base to deal with the short-term challenges and there is no big deal in this. This is what a good company should be doing and we just put up those slides to show you we are at it. Not that we should be applauded for it because that is what you would expect us to do, but we are doing it and if further is needed next year, we will do it and make sure the group is positioned for the eventual upturn.

And as always in CRH, the focus is on delivery. Delivery in the short term, making the best of whatever circumstances we have and also leading us well poised for strong continued delivery into the future and the longer term.

So that is the formal presentation. Thank you. We will now take questions and we will start with questions from the floor and then we will take questions from those who're joining us on the conference call. But in that, we just need to get instructions out first, Audrey, on that from the moderator to the people on the conference call and then we will start to take questions. So just one minute before we just head that up. I am handing it back to the moderator for a moment.

(Operator Instructions).

So while those are queuing up, we will take questions from the floor and for the benefit of everybody here and also those on the conference call, in asking questions, even though most of us know each other here, I would ask you to identify your name and yourself by name and the institution you represent. And Barry, a big surprise. You had your hand up first here on the left. Just because we are in your premises, doesn't give you any right to ask the same question.

Barry Dixon from Davy. Just two questions. I suppose one is the UK -- there are a number of businesses I suppose, which you have identified in the statement, which aren't performing that well and I suppose I think of UK [break] in particular and possibly also on insulation. You have talked about pulling back or at least pulling back on the acquisition. Would you look at disposing of those businesses or what needs to happen in order for you to dispose of those businesses?

Second question is just in terms of the US materials and I suppose a two-part question. One is you might give us just your general sense in terms of how you see highway budgets working out in 2009, particularly given the risks on the states side of that. And the second part of that is in terms of the increase in asphalt, liquid asphalt prices that we have seen recently, would that encourage you to sort of expand your winter-fill program? And you might just tell us how much that winter-fill program is at the moment.

And then a last question is just can you give us some sense as to what labor costs are as a percentage of the total cost base?

Thanks, Barry. So I'll deal with the disposal one and then perhaps Myles, you will talk to the serious question of the labor costs. On the disposal, that is the brick business is having a particularly tough time at the moment both in Europe and the US. Brick is substantially a new residential building product. A very fine product, a traditional product and has a very important place in the building scheme, possibly on a more -- affected on the op market end of things rather than on the (technical difficulty) (inaudible).

We have very fine brick operations in UK and US and of course, Europe as well, but the biggest point there is (inaudible) in 1999. Market leader in both the UK on the one hand and also in the Northeast US. Business was well run, very efficient, has a very, very strong future. However, it is badly affected by the huge drop, almost unprecedented drop in new residential activity, new residential activity in the UK for example. What was supposed to be a strong market was operating at about four houses per thousand population. Most markets in Western Europe operate in the region five to seven, five on the low, seven on the high. So the high in the UK was lower than what we consider the low in most European markets.

This year, UK is operating at close to half that level. So it is such a dramatic drop. (inaudible) volumes in the industry are down I think about 15% in the first half. So we are looking at a very, very harsh time like in the cycle, a period tied to new housing. It's a more cyclical business. It is part CRH's portfolio. It is very (inaudible) for products in some ways, but it is part of CRH's portfolio. It is not a product that we must have as cyclical, but it will be up when other products are down. On this part of the concept of portfolio management it's to have a diversification across the portfolio.

As I explained earlier, indeed insulation falls into this area of building products where we have a range of new products come in from time to time and as they come in, we have to look at the portfolio to make sure we are not just adding incessantly. We have got to have a portfolio there that we can manage and add value in and I am sure from time to time we may see disposals. Nothing significant like that is planned at the moment and quite candidly, this would not be the type of thinking of trying to sell it. It is operating at a very poor time. This is a weather business I should emphasize. We have a full management team. We have no problem with any of that.

(inaudible) something that will be reviewed in the future, but it's (inaudible). We have no -- we have not particularly aversion to selling businesses in order to make way for (inaudible) for CRH and would make better sense for somebody else and we can create value in the process (inaudible) business and all that. So it is not every economically (inaudible). But both businesses, in particular, you have particular rough hand at the size of that we have just got to wait and see how it comes out. As soon as (technical difficulty) well-managed and I guess it's not much more to say on that.

So disposals per se are not off the agenda and we have done some moderate disposals over the last few years (inaudible) big way. But we have done some trimming around the edges of the portfolio. And I think you will see somewhat more of that into the years ahead, particularly in that greater building products area as CRH continues to expand. Myles, what are your thoughts on materials?

Yes, a few questions there. Barry, first of all, on the labor costs on the total group, they were costs representing I think around 18% or 19% of sales in 2007. On your questions on the US material side, on the winter-fill, we can store about 30% of our annual usage public with that. So that gives us storage of somewhere around 600,000 tons to 650,000 tons.

One of the opportunities obviously with the APAC transaction was to add some storage capacity to the APAC market territory and we have been adding some storage in that area over the last 18 months, but we would hope over time to find opportunities to find some other strategic storage positions within the APAC market area. [Jim Greek] has increased somewhat our capacity to store and to buy in the winter months when liquid asphalt prices generally drop quite sharply because there is not a whole lot of activity in road surfacing in the northern parts of the US.

So that gives us an opportunity for those who aren't familiar with that particular issue to buy in liquid asphalt cheaply in the off-season. And it gives us security of supply for about a third of our requirement and it also enables us to take the cost of that liquid asphalt in advance when we (inaudible). So we are trying to increase our storage capacity.

With regard to budgets on the highway side for (technical difficulty) is the last year under the current federal highway funding program. In terms of federal allocation for highway funding, it probably grows by about 4% to 5% in dollar terms in 2009 compared with 2008 and that -- the budgetary year for federal highway funds runs through the end of September. So at the end of September '09, the current program expires and we would be looking to the new administration in the White House, whatever shape that is, to begin the process of debate and dialogue with regard to the review of the federal highway funds. But in dollar terms, the funding level should move up next year.

I suppose the pattern, unless there is major change on the infill cost side, is likely to be less pricing for the industry, is going to be stronger than that particular increase of the dollar amount. So the pattern that we have had for a number of years now has been a very strong price increases for us both for aggregate and our higher infill costs and underlying declines in the volume of aggregates actually laid on the nation's highway in the US would have to change at some point.

John Mattimoe from Merrion. A few questions if I may. First, in US materials, two questions. First, just on the July, the late July and August increase in the liquid bitumen cost during the month, was that a lag effect? Or was it seasonal effects going on there? Or is there anything funny going on, on the refining side? Just it seems a little bit counterintuitive, given what crude prices did over August.

The second question on the materials side is just in relation to your comment, Liam, on the reserves side. You mentioned that you [fell from] another 5 billion of unpermitted reserves. I was wondering if you could give us a sense of how optimistic you would be over the long term on the prospects of getting permits on those. Is it a case that they are reserves co-located to existing permitted reserves and it is just getting an extension there of the new greenfield sites? Or what type of hurdles have to be overcome in the process?

Then on the US distribution side, if I could just ask. I think you mentioned during the day that there's some parts of that business that showed early signs of stabilization in the like-for-like sales trends from some residential end markets. I was just curious as to whether you are seeing any other initial signs of any stabilization in residentially exposed businesses anywhere else in the US business?

Then on the Europe Materials side, two questions. One is just on the capacity increases coming through in cement markets in Europe. Are there competitors in any markets bringing on capacity that you feel might be disruptive from pricing?

Secondly, just in relation to comments you made earlier on Central and Eastern European countries. You mentioned that you are looking in future years for more reasonable growth compared to the go-go growth of more recent years. I was just wondering whether that is a sign of a slowing in those economies, or whether it is just a maturing in the growth rate there.

And you will be glad to know my last question is just on the relative attractiveness of acquisitions and buybacks in current times. I seem to get a sense from this morning's webcast that you seem to be quite guarded on your attitude towards both areas.

I was wondering, is that is a case of just trying to protect and maintain balance sheet strength at the moment? Or is it a case that you are just keeping your firepower dry to see whether there is any advantage in maintaining your capacity to do any distressed deals if they come along in the current circumstances? Thanks.

Thanks, John. I'll take your 50 questions (inaudible) [hand them over to Myles, I suppose].

The last one on the buyback, (inaudible) buyback I spoke to this morning and I can speak to it again. (inaudible) on the buyback at the moment, one thing it is not -- it is not holding our powder dry with the expectation that the share price would be lower in three months' time (inaudible) buy it back cheaper. That is certainly (inaudible) [thought process] there.

We believe a buyback is dramatically attractive to share base at the current share price, or indeed at higher share prices, where we started out doing this some months back.

But the whole question of buyback and acquisitions is all a reflection of balance and prudence at this point in time. We are facing significant challenges in our Western economies. We are facing a credit crunch that is affecting banks, financial institutions, all the way down into the [root] economy (inaudible) businesses.

It makes acquisitions riskier on the one hand, but also perhaps cheaper and more opportunity on the other hand. Just getting the right deal at the right time that has the right price tag attached to it, to make it (inaudible) value. But clearly [more is] attached to our own business, as reflected in our share price at the moment. (inaudible) that is the investment view (inaudible) might not necessarily agree with (inaudible) share price (inaudible).

But that is [irrespective] of that, it's the view of the world out there that there is a lot more risk around. So to not be overexposed on the balance sheet side, I think makes extremely good sense at this stage. I think we would have to be -- and are [intent] to be -- very careful and prudent how we look at that going forward.

We are committed to a strong investment grade rating on our debt side. Absolutely (inaudible) and we will not do anything that would [incur] that. We have very strong cash flow that comes in from the business, of course, and that gives us options to do things.

Then we have got to weigh up (inaudible) internal capital expenditure, which in fact we are cutting back on some of the -- not cutting out, but cutting out back on some of the internal CapEx, because the volumes don't demand it at the moment.

The attractions of acquisitions, which may be very good, and we shall continue to do them (inaudible) right price and the right time. And then the buyback, which is very, very attractive, but has to be seen in the balance of the whole use of funds and (inaudible) balance on the balance sheet.

So it's a very attractive in a [cognizant] way to weigh up all that at the moment. There is no (inaudible) going for broke in any particular way. I think it is just a very prudent measure [when you're in the middle in the growth]. That is how the Board will continue to review that situation.

On the US Materials, actually (inaudible) the US distribution and the [Europe] Materials (inaudible). On the US materials, is the run-up in liquid asphalt in late July and August -- although headline oil prices were beginning to level out and in fact come down at that stage. There is a growing trend for a bigger proportion of the (inaudible) to be [distilled] further and further down, to try and get more added-value product sales for the oil company.

That is putting a certain element of squeeze, I suppose, on liquid supply. Now, we have plenty of supply, but that is beginning to ratchet prices upwards quite significantly. The (inaudible) quite significantly from some time from middish-July onwards, at least.

They have been more stable; in fact there are some signs that they may be leveling off, or even we have seen in some cases going down slightly over the last week or so. But it is a very dynamic situation. We think it is a function of just the relatively high oil prices and the pressure to try and fill more down to (inaudible). But we are seeing (inaudible) supply and we are passing the cost increases through.

On the reserves side, I will be quite satisfied that the bulk of these reserves are permittible over time. There is no doubt. Because many of them are contiguous to existing deposits. Some others are in new areas (inaudible) further out with the use of (inaudible) over time (inaudible).

That is something we will be doing on a gradual basis going forward. We have, as I said, very substantial permit reserves already. But we will be moving on the [old] permitted stuff just locally as opportunity and time dictates. I would be very optimistic the way our (inaudible) going forward (inaudible) will be a great source of value to the Group. Myles?

On the distribution question, John, in the US and the area I think where we have seen a more positive trend emerging -- and particularly in our Roofing & Siding business over the last couple months -- have been in the Northeastern part of the US, which would have been one of the, if you like, the Heartland or the Allied distribution business. That has turned more positive over the last three to four months. Not quite sure what [it's] saying, but certainly there has been a much better level of reroofing and residing activity in that particular market area.

I can't say there's any other particular geographic part of the US we'd single out at the moment in terms of showing better signs of life on the residential side, other than in that particular business in the Northeast. It's pretty RMI -- repair, maintenance, and improvement -- orientated in that particular business.

On the Eastern European side of things, in terms of the cement capacity additions, others and some of the major players in Poland are also adding some incremental capacity.

I think we are ahead of the curve in the Ukraine in terms of what we are doing in converting our existing wet process plant to dry process. We also have been ahead of the curve there in converting the plant from gas burning some years back to coal, which has proved very effective as far as particularly with the big hikes that the Ukraine has seen since the Russians increased the price of natural gas to the Ukraine.

We don't see any major disruption arising from the new capacity being brought onstream by ourselves and some of the other players in Poland. I will probably just have to see how that evolves.

The growth levels in Eastern Europe have been, if you like, moderating someone through the second quarter and into the third quarter. Perhaps a bit more so in Poland than in the Ukraine, where volume growth has continued to be very right strong right through to today.

I suppose Poland has been somewhat disappointing in terms of the pace at which they have been able to pick up (inaudible) [restructuring bonds] and put them in place. Also, Poland is not immune to some of the credit pressures on the commercial investment which have been affecting more of the Western economy. But it has been a very positive market, with good year-to-date growth, and we have had a good improvement in margins year-to-date in Poland -- and also indeed in the Ukraine. And we would expect that to continue through the second half.

It's Robert Eason from Goodbody Stockbrokers. I had just a few questions, not quite the 50. Just in terms of your guidance, if I could just go back to the H1 trading update when you were giving guidance, on the conference call you indicated that you literally took the budget from a [bitter views] level; you aggregated them up; and you took a bit off in terms of a safety gap.

I just wonder, is that the same process that has been done in terms of coming up with this? Or just give us a bit more color on that.

Also just in terms of acquisitions, you have quite clearly said that your comfort level in terms that EBITDA interest cover is kind of 6 to 6.5. If a compelling deal does come up, are you prepared to go below that? Or is that the definite cutoff in terms of your comfort?

Kind of at a similar level in terms of your dividend cover, on the slide there you said 3.5 times cover by the end of '08. If consensus forecast is right going into '09, and CRH as well as other building materials companies are set for another fall in profits, are you prepared for that dividend cover to come down in 2009?

Also in relation to restructuring costs, can you just give us a flavor how much of that EUR50 million came through in H1 in terms of the costs associated with the restructuring, and maybe just a broad split where it ended up? Se we can just have a feeling where it then falls out as we go into next year.

And maybe just a bit more detail on Ireland. I just thought compared to some of your peers that have reported -- or I should say just one peer at the moment. But just in terms -- sales down EUR120 million, but profits only down EUR17 million, which I think is a remarkable performance, just given the underlying market conditions.

Give us more detail in terms of what is behind that. Is that trade-off between sales and profits sustainable for the next 18 months? Because quite clearly the operating environment is not going to change much in that time frame.

Also just in relation to the US, how long can this trade-off between pricing on aggregates and fall-off in volumes last? Because literally States are getting less value for their money. [If] building materials companies running the risk that a new government will come in and just [get] their permits left, right, and center, trying to get the supply up?

Or is there some risk of any sort of intervention there? Because clearly it can't last indefinitely.

Not quite to 50, but not far off. (inaudible). Just on the last one on the US trade-off between price (inaudible). The reason for the [hike] is in fact because of very substantial cost increase.

The reality is that the profit, profitability, return on investment, and so on in the materials business in the US and in the other business is actually going down very significantly, despite very major investment in [locating] reserves and other things over the last number of years. It will come back (inaudible) great business long term.

But there is no question here of the industry in some way ripping off the consumer, or ripping off (inaudible). If somebody else wants to start up had a magic calculator that could it do cheaper, they are welcome to it. The reality is that these price increases are absolutely justified and were based on the huge input cost increases that have come through. So that is (inaudible).

Now clearly you run the risk of getting to a price where you kill of demand because prices have gone up so much. Are we at that point? I just don't know. I can say it is very, very dangerous not to focus on trying to put your pricing so to reflect the genuine cost increases you have had, given that the industry in total has had. Because if you let your margins slip, it is very easy to let the margins slip; it is very hard to get them back subsequently.

So I think the industry's focus will continue to be on trying to maintain a reasonable level of pricing going forward. These [assets] (inaudible) permits for reserves, or building [quire]plant, or building asphalt plants, or whatever else. So that is where the focus will remain.

I always hope -- it is not a good thing for the industry to have to put prices up to this extent. And I would fervently hope that we will see oil prices coming off.

I think if the oil price is sustained at the 110 level rather than 140, one would expect to see some amelioration coming soon on the cost side. Which I am not sure whether it would bring price decreases or not, but certainly it would obviate the need for further price increases (inaudible) going forward. So that is the way I would hope that would work out.

Your question of your [post] the profit forecasts at this stage compared to the half-year, it has been a similar type of process where we have looked to it as we always do. We look to each of the business units to give their best view of the whole year based on what they have delivered year to date, what their backlog looks like, what the [mire] in the backlog is, and what they see coming up out there in the marketplace.

We stand back and take a view in the center as well, based on our sense of the overall trends that (inaudible). So there is a sense of the bottom-up and top-down. It is not necessarily the top just of necessity giving a haircut in the regions. It could well be in some cases that you feel the regions are not being ambitious enough in their profit forecast.

And that happened at the half-year. We took the view, and I said this strongly myself, that although our companies had looked quite seriously at their numbers, when things were going down that they tended to be -- not quite in denial, but a little bit of wishful, hoping it wouldn't get quite as bad as [largely] was saying it should. So we added in a bit of downside for that.

In the more recent processes, I think the companies are -- had the experience in July and August under their belt. What has been coming through is much closer to the, [I suppose], the slightly downside position that we viewed from the center rather than what they had initially viewed themselves. So that is pretty well much reflected.

We are still taking, on the center, I think another modest haircut on the numbers in the center at the end of August. This is a very dynamic position out there. I was asked on TV this morning, was this an optimistic view or a pessimistic view, or could it get worse, or how do you view it, or whatever else? The answer I gave was just the honest truth. It's (inaudible) view.

It is not meant to be either an optimistic view or a pessimistic view. It is meant to be the best view that we have of the business as we see it at the time, taking account of the risks and so on that we see out there. So it would be fair to say that the risk profile -- not just for CRH, but the risk profile of the world and business (inaudible) terms is higher now than it has been for some period (inaudible). And that has been reflected in the risk to our forecast on the upside as well as the downside.

But it is our best middle view of how we see the whole year at the moment. But it's not meant to be a three decimal places number. It is meant to be a sense of where the number might end up.

Myles, would you maybe talk to the acquisitions, the dividend restructuring and, perhaps more detail on [iron]?

Okay. If I take the Irish situation, your question, obviously our margins in Ireland were more severely impacted as a result of the percentage decline in the turnover level. I think we indicated when we were looking forward to '08, when we announced our 2007 results in March, that a part of the decline in our cement volumes in Ireland in 2008 would come -- would be met by cutting back on our imports of cement and clinker, which had reached pretty large levels in 2005, 2006, and 2007, in satisfying the market.

Those imports of cement have become pretty marginal in terms of profitability because of the cost of sorting clinker in Europe and then transporting it to Ireland. So, much of the reduction in turnover has been satisfied, if you like, by reducing imports which had been low margin. And therefore the impact on our own margins has not been as severe as if we had been backing out domestic cement production. So hopefully that explains that particular question.

On the interest cover side of things and the EBITDA net interest cover lever, we are very focused at the moment on maintaining obviously an investment-grade credit rating for our debt. With a 9 times EBITDA and an interest cover, that is no particular problem for us.

But I think with the current awareness of debt levels, with the nervousness that we see in credit markets, I would not want to our see our EBITDA net interest cover falling below 6 to 6.5 times, no matter how compelling the particular acquisition opportunity, given [that our adjusted present state] of credit markets. Now obviously that is something that could change quite radically in a couple of months. It could get (inaudible), it could get worse.

On the dividend cover side of things, we have indicated that we are reducing our dividend cover in a phased way and targeting a 3.5 times dividend cover. But that is not a fixed point. I mean, the dividend cover could be somewhere on either side of that depending on the particular circumstance, and depending also on the particular trading outlook.

We have a 24-year history of consecutive dividend increases. We wouldn't let that go lightly. If that meant dipping somewhere below a 3.5 times dividend cover, dipping modestly below that for a period, I think that is something we would have to consider at the time. But I think we wouldn't want to break our record on the dividend side lightly.

Our dividend decision for final dividend generally gets, for a particular year, is reached with the full-year results in the March after that particular year ends. So again that gives you a view on the outlook and how you see trading evolving over the next 12 months. That also informs the decision on the final dividend in any particular year.

On the cost to implement our savings programs, which I indicated there were about EUR50 million, I don't think it is particularly helpful to actually split them out. Because as you can see the savings that have been achieved significantly outweigh the cost to implement. Therefore, I don't think (inaudible) the costs to implement are broadly split between Europe and the US. I don't think it is particularly helpful because the savings are so much more significant with those [cuts in place].

[John Cheng] from [NTV]. (inaudible) very large number of questions. A couple of quick ones first. Could I just get some indication? You mentioned the improvement in the MMI and the [insulation] business. Roughly where do you see margins in those businesses being at for the full year?

Secondly, just [based] on (inaudible). I think you were indicating previously kind of pre the end of the year a [quoted] level, just from a point of view of year-end.

Thirdly, the precast business seems to suffer quite badly even though there has been a (technical difficulty) reasonable nonresidential market in the States. Is there anything regional on there that drags it down? Or [what was the] reasoning behind that?

Then just two more, firstly on US pricing. You seem to have achieved better product increases than a number of your close peers. Just wondering, any change of strategy? Or is there any kind of regional factors at play there?

Finally, just with the new cement capacity coming on next year, you will obviously be starting to depreciate some of those assets. [Against] slowing demand backed up, will they be net accretive to earnings? Or will they -- in the short term, at least -- represent at least represent a drag? Thanks.

Thanks, John. (inaudible) Myles, you might cover the margin one and the (inaudible) at the end. (inaudible) based on it is our expectation that that will be closed, [and that] are closing before the end of the year. But of course it is subject to ongoing dialog with the Department of Justice, who take their time. (inaudible)

So we will just have to see how that runs out. We'll have to see what the outcome of their deliberations are. So we would -- so that needs to be approved, and (inaudible) have it approved in substantially the form that it was represented. If there's any significant changes, for example, from the Department of Justice, that will (inaudible) tell us.

So the Board expectation is pre-year-end. (inaudible), now so perhaps not; that is not the expectation of (inaudible).

On the precast side, I suppose the precast might be slightly earlier in the cycle to a certain extent than some of the other non-res products. In that sense it is not so much a regional thing; we think it is just a [cost spur]. Whereas there is also a significant residential [held] for the precast (inaudible) significant infrastructure (inaudible) precast.

So again, the higher prices in other product -- not so much the precast products, but in other products -- will be limiting the physical amount or output that going [to the spend] if you like. So we think that is what we [hand].

The extent of the pushback on the precast is probably, at this stage, slightly more than we would have anticipated ourselves, quite honestly. (inaudible) on the other side which is almost totally non-res is still extremely busy. Now that is repair and maintenance; that may be later in the cycle or whatever.

On the pricing side relative to peers, we don't comment on each peer individually. There are times when their pricing seems to be higher than ours. (inaudible) I just think it is regional. There could be product mix, there will be particular jobs coming into it.

(inaudible) we are doing dramatically better or dramatically worse, we are just reporting as it has kind of come. But not really a particular change in strategy, other than there is a determination by us to recover the prices as they come.

Myles, you might talk (inaudible) cement (inaudible)?

On the insulation we have made good progress in moving margins back up from the near zero levels that they fell to back in, I think it was in 2005. But I think obviously we have had some pressures in markets, particularly with weakening demand on the European side. So I think we are going to end up with a margin, EBIT margin, on the insulation (inaudible) probably mid-single-digit margin.

I think similarly on the MMI, which margins were 1% to 2% EBIT margin last year, I think we are going to end up [where] it's going to be a mid to high single-digit margin on sales in MMI for the current year, with the very good recovery that we have seen there.

On the [commissioning and the use of impact] in Ireland, obviously that is going to give rise, as we said, to higher depreciation on the Irish side. But we will be closing one of the older kilns in Platin when that plant is onstream. That is going to give us greater efficiencies on the production front, so I think we would see the commissioning of the new plant as being positive for the margins in (inaudible) in 2009.

Thank you. I think we have probably covered most topics here. We are also running a bit late in time. I see an [Audrey Kennedy] glowering at me over here on the right-hand side. (inaudible) not on the plane in five minutes, I am going to be killed. In the interest of self preservation I think we will draw matters to a close.

We have no questions from the people on the conference call. But we thank those on the conference call for coming on the call. Could I will just say to everybody here, thanks for coming today and for your questions.

On a personal note, this is the last time I will be here certainly in this capacity. I might sneak into the back of the hall to listen to what these guys have to say in six months' time. But just (inaudible) at CRH, nine years as Chief Executive. I will retire as CEO at the end of the year, and I just -- I have always enjoyed coming to these sessions and that the interplay in the Q&A is always good.

I would like to thank you for your continued support for and interested in CRH. I leave the Company, I think, with a tremendous management group in place. I think the management transition, as I said earlier, has gone tremendously smoothly. It's given us the opportunity to move a number of key people up through the ranks into absolutely vital positions for the next number of years. We have a strong, energized management team under Myles [and Greg].

(inaudible) just in [great place]. We have a wonderful strength in CRH, great market positions, great physical assets. But most of all in tremendous people, and the great culture of performance, and getting out there and doing the business. That will see us in great stead into the future.

So for me stepping down, I just look forward to tremendous potential and success for CRH. Again, thank you all for your continued interest in CRH and for your support over the years. Thank you.