CRH PLC (CRH) 2009 Q2 法說會逐字稿

Okay. Good morning, everybody, and you're very welcome to this webcast this morning which accompanies the release of our results for the first six months of 2009. My name is Myles Lee. I'm Group Chief Executive with CRH, and I'm joined this morning by my colleagues, Albert Manifold, Chief Operating Officer, and Glenn Culpepper, our Finance Director.

What we'd like to do first of all is run through a brief presentation. I will deal with the trading performance across our main business segments. Albert will recap on the cost-saving measures that we announced with our July interim management statement. Glenn will comment on some financial aspects of our first half results. And then we'll -- I will return to deal with the outlook for the remainder of 2009.

So, looking at the -- first of all looking at the key points of our first half performance, first of all, I think you will see that all of the numbers in our trading results are very much in line with the guidance we provided on July 7. Reported revenues at Group level down 15%, EBITDA down 41% and operating profit down 66%. Profit before tax EUR108m, a decline of just over 18%, and that's after EUR74m of restructuring charges and EUR21m of adverse exchange translation effects, principally arising due to weakness in currencies in Eastern Europe.

Traditional first half operating cash outflow, as we build up towards the busy part of the season, we reduced that very sharply from a EUR600m outflow in the first half of 2008 to adjusted EUR200m outflow in the first half of 2009. And that, despite a sharp decline in profitability, reflects very good delivery on working capital and also constraints on our capital expenditure level.

And with that strong operating cash performance in the first half of the year and with a good outlook for operating cash inflows in the second half of the year, notwithstanding challenging trading, the Board has considered it appropriate to maintain the interim dividend at EUR0.185, which compares with a rights adjusted interim 2008 dividend of EUR0.1848.

First half development spend, as we announced in July, just over -- just under, sorry, EUR300m, mainly comprising the acquisition in January of the 26% stake in Yatai Cement in the northern part of China. And we are working actively with our partners in Yatai to expand operations in that territory, in the provinces of Jilin, Heilongjiang and Liaoning, and we have good plans there to expand capacity substantially over the next couple of years.

And in our July IMS we updated our cost-saving guidance from the previous figure provided in January and indicated the total cost-saving efforts, gross cost-saving efforts, which should deliver EUR1.45b over the period 2007/2010, and Albert will recap on those numbers for you in a few moments.

So I think the key messages from the first half results are, notwithstanding very difficult markets, an intensified focus on cost and cash management across the Group in a challenging trading environment.

Moving on to look at the results by our main territories, first of all looking at the overall combined results from our Materials, Products and Distribution businesses in Europe, where tough trading was exacerbated by the first harsh winter for a number of years and also adverse translation effects. And in organic terms, stripping out acquisitions and foreign exchange translation, sales here were down 19%, EBITDA was down 42% and our operating profit declined by 58%. And that was after total restructuring costs in our European operations of EUR41m in the first half of the year, a significant element of that restructuring obviously going into the markets most affected particularly by volume declines, particularly in the Irish market.

You see here on the acquisitions column, good delivery from 2008 acquisitions, EUR213m in sales, EUR19m in operating profit. And that reflects a combination of a number of transactions, on the Materials side the acquisition back in May of last year of My Home Industries, 50% stake in My Home Industries in India, an acquisition in April of 2008 in Construction Accessories in the UK, which has performed very well for us, and a number of bolt-on acquisitions to our Distribution business in Europe. So, predominantly, that 2008 acquisition effect is reflected in our European operations.

And the adverse foreign exchange translation, notwithstanding a stronger dollar in the first half of the year compared to the first half of last year, that was outweighed by the devaluation in the Polish zloty and in the Ukrainian currency in the first half of the year.

So, overall, as I say, tough trading on Europe. Looking at it in more detail, looking at our Europe Materials business, we had very marked first half volume declines and the impact of those was tempered by aggressive cost-saving measures, but nonetheless we saw sales decline by 28%. EBITDA was down over 50% and operating profit declined by 70%, in line with the guidance that we provided back on July 7.

Volume declines, as I mentioned, marked volume declines in Ireland. Looking at cement demand and other products, down about 50% in the first half, Finland and the Ukraine both showing cement volume declines of 45%, Portugal less affected, down 20% in the domestic market in Poland. And Secil, which is our Portuguese joint venture, actually had a good performance outside of Portugal in its North African and eastern Mediterranean operations, but the domestic market was down.

Poland suffered quite severely in the first quarter from a harsh winter. First quarter volumes in cement in Poland were down 50%. But May and June traded very much, in volume terms, in line with the same months in 2008, to leave volumes down 25% at the halfway stage.

Switzerland, one of the strong markets for us in Europe Materials in the first half, volumes ahead there, primarily due to infrastructure projects which are ongoing there.

And again, as I mentioned, the acquisition column there mainly comprises our Indian cement joint venture acquired in May 2008. As you can see there, a good performance from that business in the first half of the year. We're very pleased with the way that is developing and we have expansion plans in that particular area as well, which hopefully will have moved on over the next 12 months.

Europe Products, you can see here on the slide, impacted by sharp residential declines. Also slow in non-res, but not as severely impacted in the non-res segment as in residential. And you can see here that the declines in sales and in operating profit and in EBITDA were less severe than those that we experienced on the Materials side.

Concrete business profits declined pretty much across the various territories, Denmark particularly tough there. However, some more resilient areas in concrete products aimed at repaving and repair, maintenance and improvement. But profits there lower despite very sharp cost-reduction measures over the last two years.

In Clay, UK brick market remains very difficult, some signs of improvement in recent month-on-month volume dispatches. That's consistent with some of the newsflow we're seeing out of the UK house builders. But mainland European performance in clay well below 2008.

In Building Products we have a mix of different businesses, insulation, fencing and security, building envelope products, construction accessories in particular more focused on non-residential than the Clay and Concrete businesses. And that business there proved more resilient in the first half of the year. But, overall, again, a tough outlook, a tough backdrop, for our products in the first half of the year.

Our third segment in Europe, Distribution, more robust than Products, and again that will reflect primarily the exposure that we have here through builders merchanting and do-it-yourself stores to the repair, maintenance and improvement segment, which proved more robust. Like-for-like sales, when you strip out acquisitions and foreign exchange here, were down about 11%, and that's about half the rate of decline in our Products business. And similarly, the declines in EBITDA and operating profit levels are about half of the declines that we experienced in our Products business.

So, more resilient here on the Distribution side, and primarily that's attributable to a robust performance in our DIY activities, primarily in the Netherlands and in Belgium, where we saw good second quarter trading, in particular I think an increased level of people doing it for themselves rather than having others do it for them. And we were able to maintain margins in our DIY activities in the first half of the year, which contributed to the more robust performance as well on Distribution.

But overall, as you can see, a tough backdrop in the first half in Europe, not helped, as I said, by a harsh winter and the effects it had particularly in the first quarter.

Looking at the Americas overall, again, we had some tough weather effects here, particularly in the earlier part of the year. Residential continued to decline but at a somewhat slower pace. We've seen a rapid fall-off in non-res construction through the first six months of the year. And, again, that's associated with the financial disruption that we saw in the autumn of last year, and again the drying up of available funding for commercial projects and other projects.

The percentage change numbers that you see there, particularly on the sales side, are somewhat flattered by exchange effects. The dollar has been much stronger in the first half of 2009, on average, compared with the first half of 2008. We translated our first half '08 results at a rate of $1.53 to the euro. The average rate in the first half 2009 was $1.33. So, when you look at the US or the Americas performance overall in dollar terms, we're looking at sales down 24%, EBITDA down 47% and EBIT down 92%.

As you'll see in a moment, we'd good delivery from the Materials side of the business, in a tough market, but Products and Distribution were severely impacted. You'll all be aware, obviously, that the first half of the year is traditionally much less profitable for us than the second half because of the seasonality in our Heavy Materials business, and we do expect a much stronger level of profit in the second half of the year. I'll come back to that later.

Looking at the segments, then, in the Americas, Americas Materials', despite sharp volume declines, continued operational best-practice efforts contributed to a stable EBITDA margin in this business, despite a 23% decline in sales in US dollar terms. And when we look at the performance from others in the sector, we see this as an outstanding performance against a tough market backdrop. As I say, we'd poor weather; there is an element of this business as well that goes into private activities, so it's suffered with res and non-res.

Stimulus impact is coming through, but there was limited impact in the first half of the year as many states geared up to allocate the funds. But we did see stimulus projects being released and hitting the ground in the first half, particularly in Vermont, New Hampshire and in Iowa. And we're seeing an increasing level of projects coming through as we move into the second half of the year.

But tough backdrop here, volume declines, aggregates like-for-like down 30%, asphalt down 25%, readymixed down 34%, but good price development across all of these businesses. And again, as I mentioned, operational best-practice efforts here very important in this particular business and very good delivery on the margin side in the first half of the year.

Products, as you can see, with res further declines, with non-res rapidly falling off. Overall, sales in US dollar terms here down 24%, significant declines at EBITDA and operating profit level.

MMI, which is a business which is involved in fencing and construction accessories and in reinforcement -- steel reinforcement for concrete products businesses, was particularly affected. Its main focus is non-residential and sales in this particular business were down 40%. So, MMI very much affected by weak demand, intense competition in its segments, and also impacted by the decline in steel prices, which had risen, as you'll remember, to very high levels in 2008 and then fell off in 2009. So, we had a very tough first half of the year, but we have had significant restructuring there.

Cost efficiencies in the other businesses, particularly in Precast, enabled us to maintain margins at the same level as the prior year, despite a very sharp volume decline in that particular business, and also limited the declines in our Architectural Products and in our Glass businesses.

The final leg in our Americas business, Distribution. Again, impacted by housing and also lack of consumer confidence. Heavy repair, maintenance and improvement element here on the roofing side of this particular business and, again, with the impact of the financial fallout, consumers very slow to spend in the first half of the year. So, our dollar sales here were down 21%.

The Exterior Products, the roofing and siding, held up somewhat better, but again impacted by that consumer confidence level, also by poor weather. The Interior Products is more focused on non-residential and again, with the rapid fall off in non-residential activity, the sales decline was sharper in Interior Products than in the Exterior Products side of the business. But, again, this is a seasonal business, makes most of its profits in a traditional year in the second half of the year, so we would expect it to be profitable in the second half of 2009.

So, as you can see, a tough backdrop across almost all of our segments in the first half of the year, a lot of effort going in on the cost-reduction side. And I'll just hand over to Albert now to recap for us on the cost-saving measures that we identified back in July and just take you briefly through those. So, Albert, hand over to you.

Thank you, Myles. I just want to run through a few slides here, to update you on the progress of our cost-reduction program.

We show here, on the first slide, the cost reduction or cost savings we announced in January of this year. We identified further initiatives which we announced in July, which increased those cost savings by a further EUR555m. So now we are targeting cost savings of EUR1.45b over the next three years, finishing in 2010.

On the next slide, I just want to run through the timing of how these cost savings come through our business. You can see there on the right-hand side the EUR555m of additional savings we identified in July coming through and -- in 2009 and 2010, bringing the total to, as I say, EUR1.45b over a four-year period ending in 2010. We show also here the cost to implement those savings, totaling over the four-year period EUR250m.

So, in the current financial year, in 2009, we're targeting net savings of EUR690m. As at the end of June, we've achieved about EUR300m of those net savings and we think we're in a good position to achieve the full year target of just under EUR700m.

Just turning now to the breakdown of those cost savings by division and as you can see, on the left-hand side the position in January, how it moved on with those further initiatives in July. And you can see all four divisions are contributing strongly to the cost savings that we're projecting. And you can see, I think, particularly strong performance by our two P&D divisions in delivering those cost savings, particularly so when they're faced by an unprecedented downturn in both the residential and non-residential markets in both Europe and in the United States.

Looking at the breakdown of those cost savings and, again, you can see the EUR1.45b total cost savings. We've analyzed those into three broad categories - direct labor, overheads and other direct. If I can just briefly take you through those three categories.

On the direct labor side, we're targeting just over EUR500m of savings. Of course, principally most of that is in lay-offs, most of them permanent, but there are some extended temporary lay-offs and temporary closures of operations as we seek to try and balance our production with reduced levels of demand. We also have a number of operations which are rotating crews across multiple locations, to try and maximize the labor efficiencies across those operations. And lastly, of course, we have reduced or changed shift patterns, to again more accurately match our production capacity with the demand that's actually out there.

Looking at -- turning to the overheads, on the overheads, you can see they are targeting savings of about EUR430m. About 60% of those savings relate to headcount reductions. But we're also targeting and reviewing the whole area of our support services and since last year we've been introducing a rolling program of shared services throughout all of our operations. We've done so in the United States and we're doing so in Europe and Ireland and Denmark, have been particularly successful in doing so. Where we've done so again, not only have we reduced significantly our headcount, we've also enjoyed greater efficiencies in doing so.

Of course, we have delivered, and I think on multiple overhead categories, in the first six months of the year cost reductions across many, many different areas. All discretionary expenditure, of course, has been curtailed and we're doing everything we can, multiple initiatives in place to keep costs to an absolute minimum.

And the last category looks at the other direct areas, and this picks up areas such as productivity, efficiencies, reduced subcontracting costs, purchasing programs, energy initiatives. It has long been the strategy of CRH for many, many years to ensure that we keep flexibility in our operating cost base. There has been significant outsourcing in CRH for a number of years, and this has been primarily in the area of transportation, delivery, haulage, maintenance, drilling, blasting, many other direct operating areas.

This has been a particular advantage to us in the current climate, where we've seen very significant volume decline, because we've been able to reduce costs very quickly and respond very rapidly at a very low cost and take those costs out very quickly.

In addition, we've also accelerated Group purchasing initiatives and have extended Group purchasing programs throughout the whole Group. And we've enjoyed good savings in areas such as energy, mobile plants and subcontracting, and in fact across all the board.

And also we've -- on the whole area of energy, we've invested a significant amount of time and energy in the whole area of looking at our energy utilization, energy efficiencies. And in our Cement businesses we've reduced our clinker content. We've looked at the increased usage of alternative fuels and we've enjoyed significant benefits because of that. And in the United States we've looked at increased uses of our recycled asphalt and we've enjoyed good benefits there in reducing the -- or increased the use of recycled asphalt and asphalt mixes.

The work here is ongoing. What we're showing you here really is an update on the progress we have to date. I think we're in a good place to deliver upon the savings we've identified. We've a continual focus on our cost savings going forward. We're continually reviewing them in the light of current market developments and volumes and expectations that we see out there. And it is our intention to update you further at the IMS in January in 2010.

So, I want to pass you now over to my colleague, Glenn Culpepper, who's going to take you through some details on the financials.

Thank you, Albert. We'll begin the financial review with a look at the components of our performance in the first half.

If you adjust for foreign exchange effects and acquisitions, you'll see here on this slide that our like-for-like sales declined EUR2.1b or approximately 21%. Our declines in EBITDA and operating profit of EUR490m and EUR482m would represent about 23% of the decline in sales. If it weren't for the cost-reduction efforts that Albert's outlined here today, we would have expected that that EBIT leverage would have been well in excess of 33%.

In addition to reducing costs, our management has been very focused on liquidity and cash generation. This means reducing cash outflow from trade working capital and capital expenditure.

In the area of inventory, it's very difficult to maintain your inventory turnovers in the face of declining revenue. However, we have been able to do that. Our inventory turn is stable with last year and we've taken over EUR130m of products off of our balance sheet.

On receivables, we've also maintained our day sales outstanding, which measures the rate at which we convert our sales to cash, stable with 2008. We think that's a very good performance in light of the very difficult credit conditions in the market.

With respect to CapEx, we continue to cut back our capital expenditures, to reflect the lower capacity utilization in our plants. And finally, we're very strongly committed to maintaining our investment credit rating.

Turning to the summary first half cash flow statement, as we said before, our operating -- our profit before tax has declined almost EUR500m, but despite this we've actually turned in a better cash flow performance in half one compared to 2008. We did this by reducing working capital by more than EUR500m. Our taxes paid have come down in relation to the lower profitability. The dividend here represents the payment of the final dividend from 2008. Capital expenditure is cut back significantly. It represents less than 80% of our depreciation and amortization. This would be in contrast with expenditures last year that were about 150% of our depreciation and amortization.

So, overall, our operating cash outflow in the first half was just EUR200m, compared to almost EUR600m in 2008.

This leaves us with very good debt ratios and interest cover. We believe we're among the best in the sector on these measures. In particular, our debt to EBITDA is 2.3 times, and you'll be aware that the majority of the international players in our sector would have debt that is in excess of 3 times their EBITDA. Our EBITDA net interest cover, at 6.3 times, remains comfortable. This is calculated after significant one-off charges that we've talked about. Absent those one-off costs, this ratio would be closer to 7 times coverage.

This leaves us with a very strong debt maturity profile. As you can see here, we have no undue concentration in maturities in the next five years. At the end of June, our gross debt, including our share of JVs, was EUR6.2b and against that we had cash of EUR1b and undrawn committed facilities of EUR1.9b. Since the end of June we've continued to generate cash and our current maturities due within one year have been reduced by a further EUR400m, and our underlying committed facilities now stand at EUR2.3b.

I'll conclude with just a couple of remarks about our dividend. With a stronger first half cash flow and expected strong second half cash flow, the Board has decided to maintain our interim dividend. The Board will make its final dividend decision in March of 2010, considering the economic and trading environment and other relevant factors.

So, with that, I'll turn it back over to Myles for his concluding remarks.

Thanks, Glenn.

As you've seen from the earlier slides, notwithstanding an easing in the rate of decline in profitability in the second quarter, it was a tough first half in trading terms. But as you've seen from Albert's presentation, significant work continues on cost reduction and that tempered the rate of decline overall for the first half of the year and we'll gain more benefits from that in the second half.

And our cash performance, as you've seen in the first half of the year, from Glenn's slides, has been very strong. And so much stronger indeed that we would have flagged when we announced in our July IMS statement, when we got all our debt consolidated, we actually turned in a better performance than we would have indicated back then. So, big positives there on cost reduction and on cash generation.

Over the last two months, after a lot of very negative indicators through the first half of the year, we've finally seen some more positive economic and financial indicators coming through. Hopefully, we're going to see those sustained through the second half of the year, but there's obviously uncertainties relating to that. And in any event, those more positive indicators will take time to feed through to demand in our end markets, in our end business segments. So, meanwhile, the trading conditions on the ground remain very difficult.

Looking at it between our two main sectors of operation, in Europe the outlook is obviously particularly challenging for our Materials operations here in Ireland, and also in Finland, which as you saw earlier had a very severe volume decline in the first half of the year. Also challenging for the non-residential segments in our Products and Distribution businesses. They performed somewhat better than residential in the first half of the year.

But obviously, as we work through the year, order backlogs work out and the pace of new orders replenishment is somewhat uncertain at the moment. But, again, hopefully those more favorable indicators in some of the major mainland European economies will be helpful.

You'll remember, in 2008, after a strong first half in Europe, we saw very sharp declines manifesting themselves through the second half of the year. So the comparators will be somewhat easier for us and less demanding in the second half of 2009. We've seen more favorable Polish cement volume trends through recent months. And with the benefits from restructuring, combined with those two facts, we expect that the rate of EBIT decline will moderate in the second half of the year for our European operations.

Looking to the Americas, again, over recent months we've seen some indications of stabilization in US residential activity. Hopefully, we'll see those continuing and look to a flattening in the decline of residential activity and maybe some pickup in 2010. But non-res is still continuing to fall, obviously influenced by liquidity and financing issues. So our Products and Distribution operations in the Americas face ongoing challenges in the second half of the year.

Infrastructure activity, however, continues to gain momentum, helped by an increasing flow of stimulus projects. And as the leading producer of asphalt for highway resurfacing in the United States and as a top player also in aggregates, we're in a very good position to benefit from that. So we look to an active work program for our Materials business in the United States through the second half of the year to the close of the season and we look for a strong full year performance from our Materials operations in the US.

So, overall, we expect that the rate of profit decline experienced in the first half of the year will moderate in the second half, with benefits from aggressive cost-reduction measures that we mentioned earlier. Also, you will remember that the third quarter of last year saw severe spikes in energy costs, with oil trading at $140, $150 a barrel. We're now looking at much more moderate energy costs, and that particularly will be helpful to us in the second half of the year in our energy-intensive operations and also in our Materials operations in the United States.

So, in these difficult times, our management teams right across CRH are resolutely focused on commercial delivery and on cash generation, to ensure that CRH is well positioned to respond to the evolving trading and market circumstances, and also well positioned to take advantage of the opportunities that will inevitably arise in these tough markets.

So, that's the end of the presentation. We'll now move over to questions and answers. We will have questions and answers from a number of sources, from the floor here in Dublin, on the phone lines and also questions submitted over the web. So I think what we'll intend to do first of all is take questions from the floor here in Dublin, then move to the phone lines and then a mix between the phone lines and the web Q&A.

So, for those of you here in the floor in Dublin, maybe you might state your name and firm in asking questions. And then, when we've exhausted things here on the floor, we'll move over to the other two sources of questions. And myself and Albert and Glenn will be happy to respond to the questions that you do have.

Morning, gentlemen. It's Barry Dixon from Davy. A couple of questions. The first, I suppose, in terms of the cost savings, and it's obviously a very impressive number, the EUR1.45b, Albert, can you give us some sense as to what proportion of that you think is sustainable longer term? So, I know you're saying that about EUR450m-odd of it is overhead and the balance is in direct. When you say direct, does that mean variable and that that will just come back as the volume grows, or is there an element of those direct costs which essentially don't come back as the recovery happens? I'm just trying to get some kind of sense of operating leverage as markets recover, or when they recover.

Well, Barry, the split between the cost savings, the EUR1.45b over the four-year period, is probably about 60%/40% variable, 60% variable, 40% direct. So, one can assume that the variable cost obviously reflects total volume.

So, if you want to address the 40%, the fixed costs, we have taken some costs out of our business which will not return, because we've taken the opportunity, quite frankly, to relook at our businesses. We've looked at the way we organize our businesses, the way we administer them, the way we support our businesses, and as I said and outlined, in the support services we've done that already initially in Ireland, in Denmark, in the United States. And those costs, we reorganized our business totally so they will not return back into the business. Other parts of the support businesses -- support costs will come back in as volumes recover, but only as volumes recover. It's a very tough question to say how much of the 40% is going to come back in, but certainly I think there's a not insignificant part of it that has gone and will not be returning.

The second area, I suppose, is just in terms of US infrastructure. This is an area where we see there's lots of potential, given your position in the US market. Can you give us some sense as to how that market is evolving now, in terms of we're seeing the federal budget obviously is relatively stable, looks like it's going to be extended for 18 months, we're hearing, I suppose, more negative news on the underlying state budgets as state budget deficits grow and maybe states pulling back from spending there? And then, on top of that, you have stimulus coming through and I suppose there's a view out there which maybe is stimulus just going to offset the slowdown in underlying state budgets.

You might just give us some sense on that and then some sense in terms of what it might mean for volumes in the second half and into next year, relative to the declines we saw in the first half, and also in terms of what impact, if any, it might have on aggregate pricing in the US and your assumptions around that for the second half.

Barry, maybe I'll take that particular one. I think we would feel that on the infrastructure side of things it's inevitable that some of the states will take the opportunity to cut back on projects that they fund because of the presence of the stimulus funding. But we would still expect to see a net increase in volume terms in infrastructure spending in 2009, and again in 2010. But the private side is obviously going to be slower, has been slower in the first half of the year, will be slower for the year as a whole. So, we're looking at volume declines in our Materials business for the year as a whole.

But we would feel -- and this would be subject, obviously, to how weather patterns play out to an extent in the back end of the year because that's important to us as we come towards the end of the season, but we would expect that the volume declines that we would see, particularly in aggregates and in asphalt, will be less severe for the year as a whole than we have seen in the first half. Readymixed tends to be more private focused, so I think probably the volume declines there that we've seen in the first half are likely to be broadly similar for the full year.

On the pricing side, we've continued to see, as we've announced here, good pricing in the first half of the year on aggregates, on asphalt. I think we would expect to see a mid-single-digit price increase for the year as a whole on aggregates. What asphalt price we achieve will depend very much on input costs, but we would expect -- and the important thing here is that -- is margins, we would expect to expand our asphalt margins for the year as a whole.

And just a last area in terms of obviously the balance sheet. Very strong cash generation, obviously, in the first half. Can you just maybe talk about the acquisition strategy? There's still a situation, I suppose, whether the number of bigger companies with highly indebted balance sheets. How are you looking at acquisition opportunities? And can you give us some sense as to what kind of level you could get down to in terms of EBITDA interest cover, in terms of doing deals over the next couple of years?

Well, I think we would see that for a lot of the larger companies with significant debt burdens, a lot of their attention over the last number of months has been focused on refinancing. I think for many of them now those refinancing packages are in place. But obviously, I suspect those packages contain significant milestones in terms of what has to be achieved in terms of deleveraging and generating cash. So, we would expect to see a lot of opportunities coming on the table over the next 12 to 18 months.

We've looked at opportunities over the past six months. In many cases, the fit hasn't been right, the value hasn't been right, for the point we're at in the trading cycle. We continue to look at opportunities. I think we're well positioned to take advantage of that. I think we have the financing capacity to take advantage of that as well. It's not as strong as it might have been earlier in the year, when expectations in terms of profit levels for the current year would have been higher, but we would retain capacity to spend up to EUR1.5b on acquisitions over the next 18 months. But uncertain climate at the moment. Trading outlook is difficult. We have to be very careful and cautious how we deploy the money that we raised from investors back in March.

Robert Eason from Goodbody Stockbrokers. Can I just add a follow-up on that comment on the acquisitions? I think in previous presentations you've indicated that your own comfort level of EBITDA interest cover is around 6 times, which is significantly above your banking covenants of 4.5. Now, in these markets, as you come closer to the bottom, and let's all hope we are getting closer to the bottom, are you prepared to dip underneath that, the 6 times, in anticipation that it will pick up as profits recover? So that's my first question.

And another follow-up question on aggregate pricing. There's been a lot of commentary from many of your peers of some regions seeing price falls on aggregate. I would just like you to comment on your experiences by regions. And can you generalize that to other regions in 12 months' time, in terms of pressures appearing in regions that are doing okay at the moment?

And throughout the presentation, especially in the US, you were emphasizing the difficulties on the non-res side. Are we seeing any light at the end of the tunnel there in terms of the rate of declines at all?

I think, Robert, maybe to -- on the non-res side of things, I think we're not seeing any particular light at the end of the tunnel in non-res other than that we believe that in our Precast business I think there are some, if you like, some positive factors there, particularly in 2010. Because I think as the infrastructure funding that's coming through at the moment is very much focused on repair and maintenance projects, I think as we move into 2010 we're going to see some new build infrastructure projects taking off, and I think that could be helpful for our Precast operations on the public spending side.

But on the private non-residential side, the market continues to be extremely difficult. And I think until we see more stability in the banking system and, if you like, more support for development projects and all the rest, I think non-res is going to continue to fall for the remainder of this year and indeed I think into 2010 as well.

On the aggregates pricing side, we've given you the information that on average we've generated high-single-digit price increases for the first half of the year. I think that's been pretty uniform across our operations, mid to high-single-digit price increases right across our territories. And that comes from an intense focus on the commercial aspects of our business, to capitalize on the market positions that we have and our reputation as being able to deliver quality products on time.

I think our delivery on that front, on the pricing side, has been stronger than some of the other average figures which have been quoted by some of the other players. I think that would reflect geographic positions and it was also the fact that in some of those markets which were formerly very strong prices pushed ahead at above-average rates for a number of years. And indeed some of those companies in those markets delivered average price increases some years ago that were well in excess of what we were delivering. I think there's now some readjustment which is influencing their overall pricing comments.

So, I think we see a good backdrop continuing, but the pace of price increase in aggregates will temper down a little for the year as a whole. We still expect a mid-single-digit price increase for the year as a whole.

Going forward into next year, I think a little too early to be speculating about what we might see at that particular point. But we're very focused on getting value for the aggregates and for the significant investment indeed that we have in aggregates in the ground. We've got to earn a return on that, so we've got to command a good price for those particular products.

With regard to the interest cover, I think as we move through the cycle and hopefully see things beginning to bottom out, I think for the right opportunities we would be prepared to see EBITDA net interest cover dipping below that 6 times. But I think we'll be very cautious in moving to that and I think we'd want to have a strong sense that we were through the worst in the economies and that things were picking up.

But, again, coming back to what was highlighted on Glenn's slides, the strength of the cash flow in the first half of the year, what we've been able to do in terms of limiting the seasonal outflows, I think we will deliver a good second half delivery on operating cash. And again, as you've seen, balance sheet very strong, maturity profile very strong, so a lot of flexibility still there, even though the profit expectations for the year are lower than they would have been six months ago.

Sorry. Just one follow-up question in terms of your potential write-down of goodwill at the year-end. I just noticed MMI had another very difficult year. I think, from my memory, saw its profits down about EUR80m. I know there was an inventory write-off there, so that's probably a good chunk of that. And I think it was about two or three years ago that business also went through difficulties. Is there any risk of goodwill write-down in that particular business and generalize that across the Group as well?

Well, I suppose MMI had a very good performance in 2008 but obviously is having a difficult time in the current year, as indeed are most of the players in its sector, but it continues to be cash positive. And Glenn, would you like to comment just on that aspect?

We've done our interim calculations internally and we don't see a goodwill impairment in our business up till now. We'll have to see how the full year turns out, obviously. But MMI and other businesses that have been challenged as far as P&L are all cash flow positive this year, so that's really the test. And to some extent we think it would be inappropriate to take one year, which is an extremely challenged year, and make a call on the long-term value of the business based on that one year's performance.

Good morning. John Mattimoe from Merrion. Just a couple of questions. First, just in follow up, you've already discussed the demand side for US infrastructure and non-res. I was wondering if you could update us on your thoughts on the residential side, particularly in the context of your comments on the stabilization, or the possible stabilization, that you made in the statement.

The second area is just in relation to pricing. You've obviously touched on US Materials, maybe if you could give us a sense on pricing trends in European Materials and in the Products and Distribution side, and whether prices have continued to be resilient there as well.

Also then, looking at the cost side, maybe for Glenn, if you could update us on energy cost trends H2 and H2 and how they might roll into early 2010.

And then, just a last question for Albert on the cost-saving side. You indicated you'll have a further update at the end of the year. Could you give us some type of sense as to how -- what type of scale we might be looking at in terms of if your initiatives and cost savings from now on and, in that sense, are you well down the road? Is there much more to go for? Is it going to be modest from here on and so on? Thank you.

A number of questions there, John. I think on the housing side we've obviously seen some better overall indicators over the last couple of months. Single-family starts have picked up. Existing home sales have picked up. But for every good statistic, there is also a little sting in the tail still, in that the -- on the housing side the foreclosures are increasing, a lot of repossessions still going on.

But I think it is welcome that we are seeing some more positive indicators on the housing side. I can't say that it is feeding through to any increased level of activity on the ground at the moment, but hopefully a continuation of those indicators would see housing maybe hitting bottom some time in 2010 and then beginning to recover from there. So it's really still very uncertain, but at least it's promising to see some good measures coming out for a change, rather than the continuous negative ones that we had for the first half of the year.

On the cost side, I know you directed the question at Albert, but really what we've said is we'll come back to you and update in January. I think in the meantime we are not making any comment, other than you can be assured that we are looking at further measures. And obviously, what we do implement and what we do move on will be very much tailored to the demand patterns that we see through the second half of the year. Glenn.

Yes. On energy, just to start with liquid asphalt, which is our biggest energy product, we came into the year with higher prices in the wintertime and early spring for liquid asphalt than we had in 2008. This was due to the rapid ramp-up in 2008 kind of carried through early this year.

Oil prices are much lower now than they were this time last year, so we would expect lower liquid asphalt prices for the remainder of the year. Exactly how much is hard to say because we'd have to make a call on crude oil. We did well with our winter fuel program, but we are now getting into the part of the season where we've used part of that and we're into our summertime purchases, which we do in spot markets. But it would be difficult to see the very rapid ramp-up that you saw last year in liquid asphalt.

In diesel fuel, that's come down very significantly. In the first half, our diesel costs were down 36%. Our diesel costs are down less than some others because we hedged in 2008 and others didn't, so we're not getting as big a bang this year but certainly a very significant decrease in diesel costs. And we'll see how the rest of the year plays out.

Natural gas has -- prices for natural gas have cratered and so we're paying much less for that, which is an important component of our energy costs in our factories. So, very favorable prices currently, and hopefully they'll maintain themselves.

(Technical difficulty).

Pricing trends in -- obviously, on the cement side, we've -- as we've mentioned before, the Turkish market we've seen declines. In the Ukraine, obviously, with the scale of the volume setback, prices there have declined. On the heavy end, on the cement side, across our other operations in Europe, prices would be ahead of last year to varying degrees, depending on the severity of the volume decline. Somewhat tougher, though, on downstream markets, obviously, where there's more -- fairly intense competition, and people trying to compensate for volume losses and in certain segments or geographies looking for volume in other areas. But it's more competitive in the downstream markets.

John Sheehan.

Good morning. It's John Sheehan from NCB. Just a few questions. To go -- revisit the energy, could you just give us a sense as to the absolute energy bill, if you're talking prices where they're at at the moment for the main components that you use and you just projected them to the end of the year, what the overall expense you'd estimate this year would be?

Secondly, in relation to working capital, a good improvement year on year. I think the first half last year had seen a bit of a bulge in it, which was recovered in the second half. I'm just wondering could we expect to see a meaningful working capital inflow for the full year 2009, or is that not realistic?

Thirdly, just maybe to -- just to restate your views on CapEx for this year and next, and specifically, I suppose, in relation to the number of bigger cement projects. Have any of those just been mothballed at the moment or have they been brought on as originally planned?

And then, a final one, just two things on the financials. One, a sense just of the full year interest charge post the various refinancings that you've done.

And last one on FX, the impact on the balance sheet. I think there is a net EUR96m hit there. I'm just wondering the components of that, presumably the dollar gain and there's some hits then on the Eastern European currencies. Thanks.

A lot of questions there, John. I think on the energy side, obviously very difficult to -- at this point in the year to project where we'll be come year-end. I suppose, in 2008, with the rapid ramp-up in energy costs during the course of the year, the energy and energy-related input costs in total accounted for about, I think, 11% of turnover, whereas we look back to 2007 that probably was around 9% of turnover. So I think we would expect, with the more moderate energy costs, to see that dropping back in terms of the total bill, compared with 2008, but we can't be precise about that at the moment.

I think, in terms of capital expenditure, we've just over EUR300m spent in the first half of the year. I think we would see, with the finalization of the cement project in the Ukraine, that we'll probably see a similar level of expenditure for the second half. But the underlying level of spend, excluding the large expenditure on cement projects for the year, will probably be about EUR0.5b. And we continue to be in a mode of being really very, very selective with regard to the capital expenditure projects that are proceeded with, so continuing restraint on capital expenditure.

I think, on the working capital question, interest and on the foreign exchange, maybe, Glenn, you might handle those?

We would be very determined to see a positive inflow from working capital this year. It partly depends on how strong the year finishes. If we have an early winter, then the level of sales will drop off quicker than if we don't. But with the lower level of business activity that we have and the good gains that we've made in managing in particular our inventories, we'd expect to see a strong working capital inflow this year.

With respect to the foreign exchange, the dollar is stronger in the first half than it was in 2008. The negatives were primarily the Polish zloty and the Ukrainian hryvnia. So we would have quite a bit of our debt denominated in US dollars, relatively little debt in Poland.

Interest charge.

Oh, and the interest charge we'd be looking at roughly double what the first half is.

If there are no more questions from -- sorry.

Hi, Myles. Hi, guys. Just three questions. Paraic Quinn from Bloxham Stockbrokers. The first is on the MMI that you touched on earlier on. I'm just wondering, in terms of the pricing competition and how the pricing competition has developed since the mid year on the MMI business. And then, similarly, for the APG business, just I'm wondering in terms of the current pricing backdrop there.

And the final question, then, in terms of within the American Distribution and the split between the exterior and interior, I'm just wondering, given the difficult backdrop for the non-res, are you expecting the exterior proportion of that business to increase in terms of then that -- the impact that's going to have on the margins within the division?

Maybe if I start with the Distribution side, I think on the Exterior Products I think the backdrop remains difficult, I think, because of the non-res focus of that particular business. A lot of products there go into refit of offices and updating commercial buildings, retail and all of the rest. I think that's going to remain difficult for the remainder of the year. We have in recent months seen a more stable and slightly improving performance on the Exterior Products side of things, on roofing and siding, and we think we'll have a better second half in that particular business.

But the Interior Products and the fit out I think are going to remain difficult for the remainder of the year. And I think the operating margins for that Distribution business for the year as a whole, and we would expect profits for the year as a whole, will be much lower than last year.

On the MMI side of things, a lot of fragmented competition in the various segments we're in, in MMI, in fencing, in the steel rebar for concrete products and also in the construction accessories. Very non-res focused and it continues to be very competitive. And we've seen a lot of very, very, very aggressive pricing activity in the first half of the year from a number of players in the market. I believe some of that has become less intense over recent months. And, again, the steel prices have stabilized as well. So I think hopefully a better performance, relatively, from MMI in the second half of the year.

APG, a mix of businesses here. We've seen, actually, good demand for our homecenter business again, where we channel a lot of concrete paving products into the big homecenter stores, Lowe's and Home Depot. And, again, that business has held up well, people doing it for themselves now rather than contracting others in to do it. But in the commodity gray block, in the commodity paver side, very competitive price declines. But on the more high quality, higher added-value masonry and paver lines, we are getting modest price increases there.

And APG I think has been more stable again in performance over the last couple of months. And, again, a lot of cost-cutting in that particular business, which is bearing fruit for us and will contribute in the second half of the year.

So I think if -- having, I think, got through all of the questions on the floor here, we'll take some on the telephone line. And please, again, we would -- I think you'll be moderated there, so we'll know who's calling. Thank you.

(Operator Instructions). We have a question from the line of Aynsley Lammin. Please go ahead with your question and announce your company name and location.

Hi, morning. Aynsley Lammin from Citigroup in London. Most of them have been answered, but just a quick two. If you could give any guidance on property disposals for the second half.

And then, just on the -- obviously stage two of the Federal Funding Program is coming to an end soon. If you've heard any more news on the nature of a new stage in terms of amounts or how that will be organized, that would be great. Thanks.

On property disposals, I think we would expect to have a stronger level of property disposals in the second half of the year. In the current climate, things are taking longer to batten down in terms of property disposals. And there were a number of disposals which we had earlier in the year hoped would actually fall into the first half of the year, but I think now likely are -- are now likely to complete in the second half of the year.

With regard to the debate on the TEA, the SAFETEA-LU extension, I think that's continuing. I think with the stimulus package at the moment the inclination of politicians would be -- for the ongoing funding would be just to continue it at the expiring level. But obviously, the industry is working hard to try and get more positive outcome. I think what is positive, though, is that the Highway Trust Fund and deficits in the Highway Trust Fund have been an issue over the last few years, but there seems to be a positive attitude towards funding those on Capital Hill.

So I think we'll just have to wait and see how the newsflow pans out over the next six to nine months on the renewal. Meanwhile, though, as I say, we are seeing the stimulus program coming through to a greater extent than we've seen in the first half of the year.

Great. Thanks very much.

Our next question comes from the line of Laurie Mathers. Please go ahead with your question, announcing your company name and location.

Hi. Good morning, everyone. This is Laurie from Goldman's. I've actually got four questions. The first one was just regarding your forecast of net debt for the full year '09. Given that you've obviously made some more positive commentary about cash flow in the second half, just wondering if you believe that the consensus forecast of around EUR4.4b for full year '09 would be achievable. So that's question one.

Question two was just, with regard to the trend that you're seeing in US non-res, is that trend actually accelerating, i.e. is the decline -- are the declines getting worse?

The third question was just on CapEx. Was it correct that you were saying you would be hoping for around EUR500m of CapEx this year, or was that EUR600m? And then, if you believe that will go up or down in 2010.

And then, the final question was just on the US Products and Distribution margins obviously being hit quite hard now. I was just wondering, is that because you took out the easier costs last year, volumes still going down, and so that's why you're being hit?

And the second part of that was just in Europe. Obviously the margins in those P&D areas are holding up. Do you think that actually as we progress forward next year that margins could get hit, i.e. the normal one-year lag? Thank you.

Thanks, Laurie. I think, on the net debt side, I think you mentioned a consensus forecast of EUR4.4b. I think in the options of acquisitions we would expect to do better than that, given what we've achieved on the cash flow side in the first half of the year. Obviously, a lot depends on exchange rates, but I think, EUR4.4b, we certainly would have ambitions to do much better.

On the CapEx, I mentioned a similar level of spend in the second half of the year to what we've seen in the first half, which would imply roughly EUR600m spend in the current year. But then, looking forward to 2010, probably about EUR100m of large cement plant expenditure would drop out, so you're probably looking at an underlying run rate of about EUR0.5b. What that will be in 2010 will depend very much on how trading circumstances evolve. If we see a pickup in demand, obviously that may bring with it some pickup in CapEx. But, again, in the mode we're in at the moment, I think a level of EUR600m for the current year, moving down to EUR500m next year, would not be unreasonable.

With regard to non-res on the European side, yes, I think it has got a bit tougher on the non-res side as we've moved through the year. Again, it's a process of backlogs being worked off and while new projects are coming in -- not coming in to fully replenish those backlogs. So we have to wait and see what happens in the second half of the year. Some of the GDP figures out of Europe, major countries like Germany and France, have been somewhat encouraging over recent months. But we just have to see if they are maintained and how they feed through --

Sorry to jump in, can I just ask --?

-- to end user demand.

I just wondered (multiple speakers).

On the Products side and margin, Albert, (inaudible). Your question there, Laurie, was related to cost takeout. Albert, would you like to deal with that?

I think the question was related to European margins on the Distribution (multiple speakers).

On the margins on the European side, it really has been the strong delivery on the DIY side in Europe. They've done quite well for us. And as Myles said earlier on, I think it is really a question of people switching from getting contractors in doing work to doing it themselves, and I think in the current environment that is going to continue. So I think we will see a strong delivery on the European side.

On the US Distribution side, yes, you're right, we took a lot of costs out of last year and we continue to take costs out of our US Distribution business. But we have seen a 20% decline in our revenues in the US Distribution business and it's very tough to try and maintain margins with that level of decline. But we keep focusing on our volume levels in our business and we'll continue to take costs out as we see it. But I think the US Distribution margin has been hit by that very severe decline on the top line.

Okay. And assuming you can hear me, can I just ask for the trend on the US non-res side? Just -- obviously you've had a -- you were saying that res has started to bottom but the non-res may fall down. I'm just wondering if the trend within the US non-res is actually accelerating.

I think we've seen -- the trends you've seen in the first half in terms of the sales decline are reflective, I suppose, of continuing but less severe declines on the residential side. But the non-res has been sharper in the first half of the year than we would have expected, and that has continued over the last month or two. But I think we are getting into much easier comparisons now, as we move into the latter months of 2008, because, again, post Lehman's in September of last year, we would have seen a rapid fall-off beginning at that particular point. So how it all pans out for the year as a whole is still somewhat uncertain or --

Perfect, cool. Thanks, guys.

Our next question comes from the line of Tobias Woerner. Please go ahead with your question.

Morning, gentlemen. Tobias Woerner from MF Global. Three questions, if I may. The first one relates to your cost savings, and apologies if that was answered already and you can ignore it if it has. It's just in terms of the achievement of the cost savings in the first half vis-a-vis the second half, if you could provide that, please.

Secondly, with regard to Poland, you described it somewhat more positively in your statement, if you could put some numbers to it and what you expect with regard to the full year here.

And then, lastly, with regard to India and China, what your CapEx intentions there are with your partners and what that implies for volumes.

Okay. Thanks, Tobias. Maybe I'll deal with Poland and then Albert might talk to the cost savings and then to the India and China.

In Poland, as I mentioned in the presentation, our cement volumes in the first half of the year -- in the first quarter of the year declined by 50%. Through May and June, we saw our cement volumes in our market territories running broadly in line with the levels we would have achieved in those months in 2008, which left our half-year volumes down about 25%.

Over recent months, since the end of June, we've seen again the cement volumes continue in our particular territories to run broadly in line with the equivalent months in 2008. And if that was sustained for the remainder of the year, we would probably be looking at a full year cement volume decline which would be roughly half the decline we experienced in the first half of the year. So, hopefully, that gives you some direction on what we're seeing in our particular cement operations in Poland.

On the cost savings, Albert?

Yes. Tobias, just to clarify the point that I made, our target for cost savings for the current year, net cost savings in 2009 are targeted at being EUR690m. As at the end of June, we've achieved EUR300m of those as net, after cost of implementing, and I think we're in good shape to get to our EUR700m target for the year.

Just addressing your question with regard to India and China and our plans for building our businesses there and what we're doing and the cost of doing that. If I can address India first, just to remind you, our plant in India, we've a 50/50 joint venture in a plant -- cement plant at Mellacheruvu, cement plant at (inaudible) the screen showed behind me another face of the interim statement. It's the biggest cement facility we have in the CRH Group, individual production facility, producing 3.5m tonnes of cement.

We are actually in the process of commissioning -- the final stages of commissioning a 1.2m grinding station, about 450 kilometers away from this current production facility, up the coast north, as you move towards Calcutta, which will take us to new markets. That has been effectively paid for. It just cost us over about EUR100m to do that. It's being commissioned in July and August and they will be fully operative in September. That will lift our capacity and our production in India, because we are in a good strong growth market, to over 4m tonnes next year and we hope to fully utilize that capacity by the end of next year, at the start of 2011.

In China, as you know, we signed a deal. We acquired 26% of Yatai Cement in the early part of this year. We have an option to step up to 49% within a three-year -- four-year period. The plan -- that is a business that has had a core cement business and we were building that business. The plans were to build that business to 18m tonnes by the end of this current year. We are currently well on our way to do that. We currently have about 14m to 15m tones, as of today, currently built and producing, and the remainder of that 18m tonnes is currently under construction.

We are in a strong growth market in the north east of China. We produce -- we are selling everything we can produce and I think we have plans to build that business on again from the 18m tones, but only, as I say, if we see it makes sense to do so. But it's a strong growth market, growing at 10% plus per annum, and I think it makes sense to build capacity to service that demand. Cost of building in China, as you know, probably about - depending on where you are - $80 to $90 per tonne.

Thank you. If I may just ask one follow-up question?

Yes.

With regard to the Ukraine, could you kindly give us a similar insight into the volume developments to the one you gave us on Poland?

Well, volumes in the Ukraine to the half-year were down 45%. That has tempered back somewhat over the last couple of months, but really has not yet -- in terms of cumulative year-to-date volumes, it's a less severe decline but not significantly lower.

Thank you very much.

Our next question comes from the line of Mark Hake. Please go ahead with your question.

Good morning, gentlemen. Most of my questions have actually been answered. Just one outstanding question. You said, Myles, I think, in the context of the UK, that you'd seen some stability in the brick business. I wonder whether you could just give us some idea as to what the US brick business is like at the moment.

The US brick business is severely impacted, with significant volume declines and very tough pricing environment year to date. As you are aware, Mark, it's pretty small in an overall CRH context, with turnover of less than $200m. But it is a very tough environment at the moment, some relief from the lower natural gas prices that Glenn referred to earlier. But unfortunately, with low production volumes, that's not particularly of benefit to us at the moment and the profits there are well down in the first half of the year.

But are you seeing any stability in terms of the deliveries or orders in that business?

I would say it's still declining but at a slower pace.

Okay. Great. Thank you.

Our next question comes from the line of John Messenger. Please go ahead with your question, announcing your company name and location.

Good morning, gentlemen. It's John Messenger at RBS here. I've got three, if I could. The first one was just double-checking on some different numbers that Glenn and Albert gave. The cost-saving number, Albert, I think you mentioned EUR300m net. Can I just confirm that it is EUR300m net/net, because obviously Glenn mentioned the kind of gearing you would have seen if you hadn't had the cost savings, which was more like a EUR200m delta on the numbers quoted there? So, just to confirm costs incurred and the gross and the net cost saves, if I could.

Second question -- shall I just give you them all or should I just stop there?

Yes. No, go on, John. Give us them all, yes.

The second one was just on the interest bill. Not wishing to give you a hard time, but after the equity issue, should we not all be thinking of a relatively lower interest bill in the second half? And I understand it may be a pension cost dynamic or the cost of debt overall, but I wonder if you could just flesh out the justification as to why that interest bill should be a straight doubling.

And the third question was on US Materials. The first half performance looks amazing, given the revenue drop and the way you limited that at the operating line. I understand that revolves a lot around the benefit of obviously better pricing and a lower cost base in that first half. But your comments about margin expansion into the second half of the year, do you feel confident in that kind of statement, as things stand, given what is obviously a more competitive environment as contractors are trying to pick up workload to support order books into that infrastructure movement that's going on there?

Those were the three, if I could.

Okay. Well, I suppose maybe if I -- on the US side, as I mentioned, I think yes, the Materials business delivered a terrific performance in the first half of the year in holding that EBITDA margin, despite the volume decline. I think that's really due to a very significant cost takeout right across the business in the course of 2008 and into 2009, and a very acute focus on commercial aspects of the business and particularly on, as I say, getting value for the extensive reserves that we have in the ground.

And I think as we things at the moment, and certainly we are dependent to some extent on weather patterns as we move out towards the end of the season, but we would expect to have a strong second half for the Materials business and to -- with lower energy input costs and with the pricing that we're seeing and with all of these benefits coming through, we'd hopefully, for the year as a whole, be able to modestly expand that EBITDA margin.

I think, with regard to interest costs, yes, hopefully we will be able to deliver somewhat better on the interest bill for the full year. But we do have -- and we did do there back -- just before the end of the second half, we did issue a Eurobond at a coupon of around 7.5%. So that will be an influencing factor in the finance charge for the second half of the year. But with strong cash flow, and hopefully we'll be able to deliver strong cash flow than expected and exceed our expectations in the second half of the year, as we indeed did in the first half, which may mean that the interest bill may work out somewhat less significant than we've indicated there a minute ago.

On the cost-saving side, I don't think there is any inconsistency between what Albert said and what Glenn advised. Maybe, Albert, you'll just highlight that.

Yes. Just to -- hi, John. It's Albert here. Just to clarify, the gross savings, John, in the first half EUR375m, cost to implement about EUR75m, so about EUR300m net. That's the EUR300m net number there. And in fact I can't recall the exact form of words that Glenn used, but I am familiar with it. The leverage that's on the slide says 23%. I think Glenn said north of a third, if we hadn't taken the costs out. But if you do the math on that, it's about 35%, 36%, you'll find that's a EUR300m difference on the revenue line.

On that, if you were a gambling man, and thinking of the second half and there's obviously the energy dynamic working one way, obviously the difference in operational leverage between Products and Materials and Distribution, but that gearing level which is about -- I think if you back it out it's about 37% pre the cost-saving dynamics. Would you actually say that gearing number will go up or go down, given the mix of what is happening in the Group as it stands today, just for a straight -- for investors who are trying to do that exercise?

Well, I think the -- I suppose the leverage number that's in the first half in terms of the underlying operating profit and EBITDA decline and the sales decline was about 23%, as we showed on the slide. We would hope in the second half that would be somewhat lower. But very difficult as to how the various factors will combine in terms of second half delivery, in terms of what we're seeing in terms of demand pattern in the market, in terms of the impact of our cost-reduction efforts and indeed in terms of the impact of lower energy costs. We'd be hopeful that the rate of operating profit decline would -- as a proportion of sales will be somewhat less in the second half than we've seen in the first half.

One quick one on the interest, coming back. What is the strategy in that you had a $100m bond that you're buying back in, or the cash tender for, and that had a coupon down at 6.4% and it was very long term, out to 2033? Just to understand why is that being bought back in, given that you are having to borrow at more like 7.4%, 7.5%? Thank you very much.

John, those were bonds that were carried on our books at above par value, because we had swap arrangements that required us to restate the bonds as interest rates move. So we were carrying them on the balance sheet above par value and they were trading in the market well below par value, and we didn't like where they were trading. We thought that the bonds were undervalued in the marketplace and so we decided to make an offer without knowing how much would be taken up.

We are willing to buy back as much as $100m. There was about $52m tendered and that's how much we bought back. But what it did for us is it tightened the spread on the bond. We are looking at our long-term financing and we think that that will help us the next time we go to the bond market.

Thank you.

Our next question comes from the line of Robert Muir. Please go ahead with your question, announcing your company name and location.

Morning. It's Rob Muir from Morgan Stanley in London. I just wanted a quick follow-up on the acquisition spend. I think you said you would have EUR1.5b to spend, potentially over the next 18 months. Given the uncertainty and the outlook in the second half, can you just give us some more clarity on your thoughts on the timing of that spending and if there are any contingencies, such as recovery, around that?

Well, I think, Rob, what we'll be looking at, obviously, is for opportunities that in our developed world fit well with our existing businesses, particularly on the heavy end, where we think there will be some opportunities emerging. And obviously, as Albert has mentioned, participating in the growth plans of our partners in both India and in China. And that may involve some acquisition activity there over the next 18 months in either one or perhaps even both of those particular markets.

We're continuing, though, to be very cautious in terms of approach to valuation. We've looked at a number of things over the last six months which just either didn't fit or wasn't appropriate for us at the particular price it would have needed to complete some of those deals. So we continue to be active in looking at opportunities. We have the capacity. But we are being cautious in how we approach things and particularly in how we value things in the current uncertain climate.

But do you feel right now that there's not too much -- that those opportunities are going to remain for the back half of this year, maybe, if you have to cut back on the spend or your plans?

Sorry, I'm not quite clear on your question.

So if you -- when you're talking about the cover of 6 times EBITDA net interest and having to be very sure that we're down at the bottom of the market before you'd possibly go below that, that may not happen -- I'm thinking that may not happen back half of this year, just in terms of the timing of opportunities.

Well, I think if we see something in the next two or three months at the right price for us, I think we -- taking into account the current trading backdrop and the outlook, I think we would be prepared to complete deals against that backdrop. And hopefully we will see some activity over the course of the next six months or so.

Okay. Thanks very much.

Our next question comes from the line of Mike Betts. Please go ahead with your question, announcing your company name and location.

Yes, good morning. It's Mike Betts from JP Morgan in London. Two quick questions, please. Firstly, I think Benelux was like 40% of profits in the first half, obviously partly seasonal. But could you maybe expand a bit more on how you see the outlook, particularly in Holland? You've talked about DIY, but what about the other markets? Euroconstruct was forecasting a further deterioration in 2010, but what are you seeing out there on the ground?

And then, second, Myles, when you've talked about acquisitions, you mainly seem to talk about parts of other public companies. What's happening in the private family sector in terms of transaction prices? Are there any signs of those now coming down or with the pickup in share prices have they actually still sustained at the higher levels? Thanks.

Okay. Well, looking at the Benelux, Mike, you know it is a tough market at the moment. Particularly the housing side is down sharply and the projections are that it will decline further in 2010. Non-residential has been slowing. So it has been difficult, but I think we've been performing well there. We continue to do well on the cement business, on the Materials side, which is cement trading and readymixed. Some of our concrete businesses, particularly, as I mentioned, some of those particularly that fell into local authorities for paving on roadways and pathways, continue to have quite a good business pace. That's been basically depending on public spending.

But the private side is tough and I think will continue to be, looking out through the second half of this year and indeed into the first half of next year. Builders merchanting has also suffered. But the DIY side, as I mentioned, has held up pretty well, with people spending and doing things more for themselves. But I think it remains difficult and we've had a lot of restructuring in our Dutch businesses and will continue, I think, to take restructuring measures through the second half of the year.

But not getting any worse, Myles, it's kind of stabilizing?

I would say that over the last three months the trading has been in line with our own internal projections.

Okay.

And there are some slightly positive indicators, but I think with the uncertainty we would expect it to continue to be a tough market for the remainder of this year and into 2010. Hard to know what happens. We've seen better GDP figures coming out of France and Germany recently. It remains to be seen whether some of that begins to rub off in the course of the next 12 months on the Dutch market.

On the acquisition side, we continue obviously to have a dialogue with a very large number of private sellers. I think, as we would have mentioned earlier in the year, we parked a lot of those debates and discussions and they will continue to be parked, but ready to be resuscitated at a point when we would deem it appropriate. I think obviously a lot of those private sellers have their own financing problems and probably are finding the ways to refinance less easy than has been the case for very large public companies with very significant debt burdens, and companies that are of vital importance obviously to their lenders. With a lot of the private companies, they tend to have smaller borrowings so they probably tend to be in a somewhat tougher position.

So we continue to have a lot of targets there and we continue to keep an eye out for what may come out from some of the larger players, now that in many cases their refinancing plans have been completed.

Okay. But the multiples that people were asking on the private sector, have they changed at all?

Not -- we wouldn't have seen a significant change over the last six months, but they are not -- the combination of those multiple expectations and the trading is not particularly to our appetite at the moment, so we are continuing to be in a hold mode with a lot of those transactions.

Okay. Thank you very much.

There are no further questions on the telephone.

Okay. Well, I think, having exhausted the telephone questions, perhaps we might move now to those that are in on the website.

There are a number of questions here. The vast majority of them have already been covered. The first lot in from Mark Stockdale in UBS is questions with regard to the net debt to EBITDA, views on pricing in the US and fuel costs as a percentage of sales, which you have already covered. He did have one question with regard to how does the US road backlog compare to a year ago.

So net debt to EBITDA?

Yes. View on pricing in the US for 2009 and fuel costs as a percentage of sales, which you've pretty much already answered. Just the only outstanding question he has was on the US road backlog.

Yes. I think, on the road backlog, I think we would have seen -- obviously, with the release of more stimulus funding, we would have seen our overall backlog on the construction side pick up as we've moved through the year. But it still would -- because of the decline on the private side, it would still lag maybe 5% or so at the current point behind the equivalent backlog at this point last year.

And another question came in from Ankur Agarwal in Nomura. He had one question that you just answered there a moment ago, with regard to activities through July and August, and one outstanding question. Have you seen press expectations of likely targets increase between March, when you raised capital, and now?

I think, as I mentioned, on the private side I think we haven't seen significant change in terms of expectations. But again, we haven't been moving on those targets because we're being cautious and want to get a better handle on trading.

I think very difficult on the sort of assets that might be available from the public side. I think we've seen some deals done in the sector. Cemex sold their operations in Australia, but I think that was at a multiple of 6.5 times, which I think was probably not an unreasonable multiple. And certainly, if we look at what we were doing deals at through '06, '07 and '08, probably at 7 to 7.5 times EBITDA, that multiple for that particular transaction would have been lower than that, which is good to see that benchmark in the market. But there haven't been many benchmarks in terms of public deals.

There are no more questions on the web. I have one more that's just come in and it's come in from Michael [Shaefer] in Wellington. Assuming flat revenues for 2010 and all else being equal, by how much will costs fall, given the expanded cost-cutting program?

Sorry, again, [Lynn].

Sure. Assuming flat revenues in 2010 and all else being equal, by how much will costs fall, given the expanded cost-cutting program?

Albert, maybe you can handle that.

2010?

2010.

Okay. Well, our cost program, as we go forward, as I said to you, we're taking costs out in the current year of EUR690m. Those costs, as I say, are being taken out in the current year and they will be -- again, we should see the benefit of that next year. We also have programs in place to take out a further EUR100m of costs next year, gross costs which net down to about EUR75m. Again, it all depends on what the volume levels are like next year whether in fact we have to put back in some of those variable costs, if the volumes recover, or indeed, if it goes the other way, if volumes decline, we'll take further costs out.

So of the costs in the current year, that EUR690m, those costs should be out this year, by the end of this year, and we should enjoy the benefits of those next year.

Thank you.

Okay. I'd just like to -- so if there are no more questions here in the room, which I don't think there are, I'd just like to wrap up and thank everybody for attending here in Dublin this morning, for joining us on the phone lines and for submitting questions by webcast. If there are any follow-up questions from anybody, please direct them to Investor Relations at CRH and we'll be happy to respond to them. So thanks again for your attention this morning.