CRH PLC (CRH) 2016 Q2 法說會逐字稿

Good morning, ladies and gentlemen. I'd like to welcome you to the 2016 interim results for CRH here, today, in London.

My name is Albert Manifold; I'm the Chief Executive of CRH. And I'm joined here on stage by Senan, Senan Murphy.

Morning, everyone.

Our new CFO. And together, for the next 30 minutes or so, we're going to take you through a presentation of really what's behind the results you've seen this morning, the story behind them, and how we see the world; a little bit about 2016, of course, upfront.

But I'm going to take about 5 minutes, at the end of that presentation, before the Q&A, just to take you through the changes that we've been through in our business, and looking at where we are now, and where we see the next few years.

The years 2009 to, I suppose, 2012, 2013 we had a terrible recession; significant restructuring; cost cutting; really getting in pace with the volumes we [saw] there. 2014, market changed. We reset our business for the next phase of growth across CRH.

I suppose, 2015 really was the year of big deals; and 2016 is a year of delivery, as we said last year.

I think it's good to ask ourselves the question now, as we see the year coming out ahead of us, where 2017 is going to be, and, indeed, the years to 2020, 2021, and just give you a sense of where we see our business. After that, of course, we'll go in to Q&A here in the room; and we'll have people on the wires as well.

So maybe just kicking off, looking at some of the key messages, I'm not going to dwell too much on this page. Two points I want to make about this.

I came up through the operations of CRH and for me, as an operator, the real health of the business is shown by the margins and the returns that are delivered by the business.

We can see our business, again, ahead in the first half of the year, ahead of margins and returns in all divisions, real, great strength coming through; and also very strong, tight cash management, delivering a very good cash performance in the first half of the year.

And Senan is going to take you through how our cash performance in this first half of year should unwind towards the end of the year and give you a sense of where we see the year-end debt level, which is crucial to us, of course, returning to the M&A game.

Looking at some of the key numbers here, and this is a page of big numbers at this stage, again, two numbers I'd just like to highlight for you there.

The EBITDA margin, on a pro forma basis, almost 1% ahead of last year. A real sense of good leverage in our business; tightly managed. This business has come back.

And for the first time in -- since, I guess, 2010 -- 2009, actually, our dividend moving ahead. Really, a sense of showing that our businesses are moving ahead in terms of performing ahead of our plan; good strong cash performance; and, really, a sign of confidence of where we see the business going forward.

I'm glad to see that returning again. We had a progressive dividend policy for 26 years; we held it for the last seven years. To me, that seven years is almost as impressive as the 26 years before that. But now we return to dividend increases again, which is good to see.

We're going to talk about the trading performance of the businesses across our new structure.

We announced there, a couple of weeks ago, that we're reporting within the Americas, as we've always done, but now Europe, and a division in Asia as well. I'm going to go through the performance across those three territories, just to give you a sense of how our business has performed.

Just looking at Europe, first and foremost, the map on the right, with all the different colored shades of blue, that shows you the countries that we're in across Europe. Very substantial business, at this stage, of size and scale and breadth, really, as a result of the big transactions we did last year.

But, more importantly, it shows you across Europe the GDP trends. All of those are showing growth in 2016. That's the first time we've seen that in quite some time. So, we're seeing the very early stages of recovery starting to come through. It's low growth, it's slow, but it's starting.

The impact of Brexit, the vote was only nine weeks ago today, is not really fully understood. Here in the UK, and also Continental Europe, we haven't really got a sense of what the impact in the medium term will be. I'm sure we'll talk about that later on. As of yet, we haven't seen any real impact on our businesses.

But, one thing is for sure, is construction markets across Europe are well below long-term trends and needs; and, construction spending is forecast to increase. What we need to debate, of course, is the pace of that growth and the period at which it's going to extend over.

Looking at the trading performance for the first half of the year, you can see, really, two quarters very different in Europe. The first quarter relatively flat with the first quarter of last year, but in the second quarter we returned to growth.

I should say all of that growth is volume led. There's still almost no pricing in Europe. In one or two markets we do see pricing coming through, but it's all volume led. But that's entirely consistent with what we said in the past, in that a recovery will come through in volume first and then prices will follow.

Do you remember the USA in 2011, 2012? That's where we are here again. Volumes come back first. And it took two or three years before pricing became an embedded part of that business, as it is there now, and I'm confident that will happen in Europe in the years ahead.

Looking at the growth rates that we're seeing in quarter 2, and for the first half of the year, we expect that modest low level of volume-led growth to continue for the remainder of the year across Europe.

Just to give you a sense of our businesses in Europe now, post the big deals that we did, it's important to know that CRH is now the largest heavyside business in Europe: across 13 major geographies, a very deep embedded business across residential, non-residential, and, indeed, infrastructure.

These new platforms that we acquired last year in the United Kingdom, in France, in Germany, and in South East Europe will not only give us growth through acquisition, but, as we said last year, will beget a decade of further vertical integrated growth in our business. That's what we always do. We buy the platform and we grow downstream, and we intend to do that on those new platforms.

I should say, I'm talking about Europe here, but I'm going to include Canada and the Philippines in this as well, is the integration of those heavyside assets we bought last year is now complete. They are now CRH. There's no more LafargeHolcim; it's now CRH.

We've done very well. We've gone quicker than our thought. Our synergy delivery is on track. And, in fact, we identified EUR40 million of synergies this year; but, during the course of this year, we have identified a further incremental EUR10 million. So we're tracking about EUR50 million this year, so we should increase the overall total by about EUR10 million.

But, again, we'll come back and update you with that at the end of the year when we've delivered. We like to talk about what we've done, rather than what we're going to do.

Just turning to the Americas, and a very different clip on terms of economic growth here across the pond in the United States, and, indeed, in Canada, but particularly in the United States: very positive economic momentum. And, of course, construction markets, as you will have seen, are consistently outpacing economic growth, and we're seeing this in our own businesses.

Primarily led by a very strong, consistently strong, residential and non-res market, probably moving in the range of 3% to 3.5% volume growth year on year, which is consistent with what everybody is telling you.

Infrastructure is also powering ahead; good strength, consistently coming through, underpinned now by long-term funding that's in place that will take us to 2020, gives us good momentum behind that business.

And all of these underpinning a very good pricing environment as well, as we seek to recover seven years of no pricing in the United States. This is our third year of getting pricing back, and we're still not back to where we should be. So that coming through, on top of volume, is very good for our businesses.

And just to give you the size and scale of the US here, one number I want to pick out on the right-hand side of the page which really stands out for me, over the next decade the US will spend $10 trillion on construction. That's the size of the GDP of China; the second-largest economy in the world. So a very significant opportunity for us in the US as we go forward.

Looking at the performance of our US business, a very strong first quarter. Now, that has to be taken in to consideration of very favorable weather.

In our businesses in the US, we would not expect to start working until the second week of March. Actually, for the second week of January we were back working, so we effectively had almost two extra months of construction spend. Happily, we didn't borrow from the future, because the backlogs were very good going forward. So it was just extra work that needed to be done.

But we've returned to more normalized trends in the second quarter, and they're the trends that we're seeing rolling out during the current quarter. It's going fairly well, we're halfway through our most important quarter, the third quarter in the United States, and it seems to be tracking the second-quarter volume levels, pricing levels we've seen there.

Margins and returns in the US ahead in all divisions, as they are in Europe, again; again, the real sign of health of our business coming through.

And happily, the Canadian business is fully integrated now as part of our Americas business, integrated with the business itself, the border, performing very well.

The interaction between the two teams has gone very, very well. The Canadian team have stepped up and the performance in the first half of the year of 2016 is ahead of the first half of 2015, and we're delighted to see that.

Again, just a sense of the opportunity we see, and what we see our business delivering across the Americas, and specifically in the United States.

We're the largest building materials player in all of the United States, and growing.

The top 10 players in the United States only make up 25% of the total aggregate and asphalt market out there, so significantly fragmented market; many, many years of consolidation to come, which is exactly where we want it to be.

The margins and returns that we are generating through our US businesses are ahead of where I, as an operations guy, and we, as a team, would expect them to be at this point in the cycle, which is very interesting. Not really surprising, but interesting, and it's caused by a couple of things.

During the period 2009 to about 2013, we went through a very significant restructuring program. We took out about [EUR2.5 billion] of costs across all our businesses.

But we also reinvested in our businesses. We reinvested across our Group, in the teeth of the recession, EUR2.5 billion in capital expenditure. Now that went in to make our businesses more efficient, more effective, better placed, and better balanced. And we're seeing the benefit of that coming through now as the volumes return with higher margins, and good leverage, and a good drop through to the bottom line, which is contributing to better returns.

And I should say, with regard to CRL, the C.R. Laurence business which we acquired last year, $1.3 billion deal last August, the integration of that business has gone well. It's performing very well, synergy delivery is on track; and, again, that business is ahead for the first half in 2016 versus a pro forma 2015. So, delighted to see that. And the team did a great job there, as well.

Just moving to our new division of Asia, which is primarily about our Philippino business, the business in the Philippines, and just to remind you of what that is.

The Philippines is a country of 100 million people. Ours is a cement business there. It's a 20 million tonne cement market, and we're the number two player there with about 6 million tonnes of cement capacity. We are completely sold out, by the way, as is everybody. We're importing cement to supply that market.

The business has gone very well, driven by strong residential, strong repatriation of funds from overseas, Philippinos who are sending money back to build the residential market; but very strong commitment to infrastructure.

And the new administration has almost doubled the commitment to infrastructure in the next five years, which is good to see. And that's going to underpin demand for those markets again for the next decade or so.

And the key challenge for ourselves is to build capacity to max demand and supply the market, which we will do. And we have signaled that to the market, and we'll let you know about when we make our decision in 2017/2018.

But good growth in top line, good control of costs, profits ahead; and we're very pleased the way that has landed within CRH, ahead of last year.

Just to call out two countries at the bottom of that chart there, India and China, neither of which, I should say, are consolidated in the EBITDA numbers you're seeing this morning.

India's a 50/50 joint venture. Broadly speaking, volumes are ahead in India, prices are back. We deliver on average, and this we will do again, mid single-digit returns on that business. That's a long-term play for CRH, but a good business.

China, a much more challenging environment. The overall market for many businesses in China significant volume reduction down in that business, and grappling with the challenges of overcapacity and how it's going to deal with that, and that will play out over time. Our investment there is a 26% holding in the north east of China in a cement business there called Yatai Building Materials.

So pulling all that together, and just to give you a sense, if I can take on a walk through our first-half performance in 2016 versus last year, on the left-hand side of the slide you can see the EBITDA performance for CRH last year of EUR555 million. To that, we add the pro forma first half LafargeHolcim of 2015 to give us EUR934 million as a pro forma H1 2015 result for CRH.

And the growth you can see coming against that in this current year is pretty much all coming from the heritage businesses, which is a real sign of strength in our core asset-based businesses, delivering good volumes, good pricing, good margins, and better returns.

I should say, with regard to LafargeHolcim, they are also delivering very well, as, indeed, are CRL.

With LafargeHolcim specifically last year, they delivered an EBITDA pro forma of about EUR820 million EBITDA. That was up from the previous year of EUR750 million, so a very significant uptick in one year for those businesses. And we said in February, if we could hold that for this year I thought that would be a very good performance. Well, actually, in the first half of the year you can see they're actually ahead again. So, good to see that.

And all of those coming together to deliver an EBITDA figure for the first half of 2016 of EUR1.12 billion.

So that's really a little bit of what's behind the delivery of the numbers themselves; the story behind it, what's driving the numbers.

I'm going to ask Senan now to take you through the actual components of the actual profit growth itself; and crucially then, take you through what's been happening in the cash side of things, and where we see the cash ending up, and debt ending up, at the end of the year. Senan.

Thanks, Albert. Morning, everyone. It's a pleasure for me to be here. This is my first opportunity to actually speak to all of you at a results event. And with a very strong set of results, it's certainly a nice way to be able to start this conversation.

Today, what I'd like to do is just spend a few minutes running through some of the highlights of our financial performance for the first half of the year.

Starting with sales and earnings, today, we're reporting a sales number of EUR12.7 billion for the first half of the year; that is a 35% increase over the corresponding period last year.

In addition, we're reporting an EBITDA of EUR1.12 billion. That is more than double the EBITDA that we reported for the first half of last year. Very strong performance.

As you can see on this slide, there are a number of components, there are a number of elements that are driving that strong performance. The one that stands out most for me, however, is the organic growth. It's a significant organic growth that we've delivered in the last six months.

What you can see here is organic sales growth of EUR800 million in the first half, and a corresponding EBITDA growth, in organic terms, of EUR150 million. That converts to a 19% operating leverage. That's significant profit delivery.

Obviously, the other significant component in the first half of this year is a contribution from those large acquisitions that Albert mentioned earlier that we completed in the second half of last year. Here, you can see that those deals are contributing nearly EUR2.9 billion in sales and over EUR380 million in EBITDA in the first six months of this year.

As Albert mentioned earlier on, those deals now are fully integrated in to our business; they're delivering on their synergies; they're performing in line with our expectations; and we're very happy with the way they're operating.

Next, we move on to our operating cash highlights. The key takeaway for me on this slide is the fact that our cash flow from operations in the first half of this year is EUR300 million better than the corresponding period last year. Again, there's a number of key drivers behind that.

Obviously, our earnings delivery, our earnings growth is a major contributor; and, certainly, our ability to be able to convert those earnings in to cash flow.

But there's two other items that I'd like to call out here on this cash flow that bear attention: our capital expenditure, and our working capital. On capital expenditure, we're investing over EUR400 million across our business in the first half of the year; that equates to 80% depreciation.

I guess, in addition, there's a very strong focus and control around this to make sure that, that capital spend gives us a strong return on our investment. And the best way to think about that, or articulate that, is that during 2016 we would expect that 40% of that capital spend is on expansion activity, or expansion investment, as opposed to maintenance or replacement activity.

The other item that's worth attention here is the working capital. You can see, in the first half of the year, that we had an outflow in working capital. That reflects the seasonal nature of our business. We always have, in the first half of the year, a situation where we ramp up our working capital balances in preparation for a busy second half of the year.

So rather than focusing on the movements here, I think what's more important is to focus on the absolute balances. And if you look at our working capital balances at the end of June, and think about them as a percentage of sales, what you will see is continuous improvement over previous years.

So this area gets a very strong focus across the business. It's one that everybody is measured on, and it's one we pay a lot of attention to, and, as a result, you're seeing progress year on year.

And finally, moving on to our net debt. Albert gave you the summary in his introduction. We're ahead of our de-leveraging target.

What we've shown you here is our forecast year-end net debt position. Rather than focusing on the mid-year one, which is obviously impacted by that seasonal working capital feature I mentioned earlier, we're looking forward to the year-end. And what we've shown you here is our expected movement in net debt over 2016.

The big standout you can see is a EUR1 billion of cash inflow from operations. So that is that strong earnings delivery we've talked about being converted in to cash.

It's also worth highlighting here that we are assuming, for this year, that our acquisition activity will be funded by proceeds from divestments. That was the case in the first half of the year. We spent EUR150 million in the first half on acquisitions, and that was largely funded by the EUR140 million of proceeds that we got from divestments.

And the final feature on this movement that is worth acknowledging is that we will be spending approximately EUR400 million on dividends back to our shareholders during 2016.

What that leaves us with is a position where by the end of this year we're comfortable that we will be at or below EUR6 billion of net debt. When you think about that net debt as a ratio to EBITDA, it sets us up to be in a position where our net debt-to-EBITDA by the end of the year is at 2 times, or below.

So the summary, for me, is that we're ahead on our de-leveraging target; that we're well on track to move our balance sheet back to normalized levels; and that we are well set to exit 2016 with a really strong balance sheet.

I'm going to hand you back now to Albert. He's going to give you a little bit more color about the second-half outlook.

Thanks, Senan. I just want to leave that slide up there for a moment, because that, to me, is probably the most important slide in the presentation this morning.

We went to our shareholders 16, 18 months ago and we asked them to trust us. We said we're going to -- we want your money, please. We're going to take that money, we're going to borrow more money, and we're going to invest in assets to create value for you, our shareholders.

And a key part of that promise to them was we will pay back that money we borrow as quickly as we possibly can, to get the debt levels of CRH back to where you expect them to be. And it's a credit to Senan and his time, Maeve and the team before him, and, indeed, all the people in our Group, that we have focused on that and have provided very strong, tight cash management, and are well on track to deliver our plan; in fact, ahead of our plan.

Just looking at the outlook for the CRH Group, before I talk about where I see us going in the next few years, we've signaled well to you, with our announcement at the end of October, where our earnings levels are going to be. Some are north of EUR3 billion. I don't know specifically where they're going to be. I don't know where it's going to land; it'll depend upon the weather, how long the season goes, volumes, pricing, whatever. We'll let you know as soon as we know.

As Senan has made clear to you, the net debt, at EUR6 billion, we're looking at a net debt-to-EBITDA ratio below our normalized levels at about 2, which is very good to see. That's going to be delivered by, as I said earlier on, modest growth continuing in Europe. It's a slow unwind, but growth all the same.

In the Americas, we have a very challenging second-half comp. You will recall, in the second half of last year there was no winter. In fact, we worked all the way through Thanksgiving up to Christmas. We planned to work the Thanksgiving. This year, we plan to work Thanksgiving as well, by the way.

But given the pace of growth in the economy, given the pace of growth in construction markets, we still believe the second-half performance in the United States will be ahead of the very, very good second-half performance of 2015.

And, as we said, the backdrop in the Philippines is positive: good volume growth, good pricing, still continue to good profitable growth in the second half of the year.

So, that's how 2016 shapes up.

I now want to talk a little bit about where 2016 leads us on to. This is the foundation for the next few years. And what I want to talk about is where we're positioned in our markets, and how we see 2017 to 2020 rolling out, and the next phase of growth for CRH.

Let me start about this year. This is the foundation. This is a year, as we said, of delivery. And for us, that's about delivering our EBIT targets and our cash targets.

But some other interesting things are happening within our business. Our margins and returns are being restored very quickly. Of course, that's through the strong operational delivery of our businesses. But it's also about disciplined capital management.

In the last four years, we disposed of -- last three years, we disposed of over EUR1.5 billion of businesses at 10 times EBITDA, and we reinvested that at 8 times EBITDA. That capital management philosophy has been very supportive of improving returns in our businesses.

And the last point, crucially, there, strong cash generation capability. Cash is the life blood, the oxygen of the business. We're using it now to restore our debt metrics, for sure. But as always, in the future, we'll use it for growth; capital expenditure; acquisitions; looking after our shareholders; but, in particular, growing our businesses.

And having that oxygen, having that cash going forward is crucial to that growth story. And I think we've proven again our ability, as we have in the past, to deliver strong cash generation in our businesses.

If I was standing here this morning and had to invest my elderly mother's pension fund, the two places in the world I would invest her meager pension fund would be the United States and Europe. And, hey presto, look where we make 90% of our earnings.

The two parts of the world where we see the most constant stable earnings flow in the next few years, where you can get cash out, and it's predictable, and you can plan your business, and you have visibility are the Americas and Europe. And 90% of our earnings are earned in those two geographies.

Not only that, look on the right-hand side, we're the largest building materials player in all of the United States, by a country mile. Also, post the big transactions last year, we're the largest heavyside player in all of Europe. So we're in the right footprint, and we've got leading market positions.

Crucially, we have got well-invested businesses that have the capacity to bring back volume through those businesses that gives good drop-through with leverage to the bottom line.

Our biggest business in CRH, US materials, is only operating at 70% capacity; thus, it could put another 30% of volume through tomorrow, if the markets were there.

Our cement businesses in Europe are working at less than 70% capacity. And, as anybody who runs a business knows, it's that filling up of capacity, where you get that good leverage and drop-through to the bottom line, that helps deliver those increased margins and those better returns. And it should continue so, if the volumes come through.

So we're in the right markets, got great market positions, we've got the assets ready to go. But where's the volume going to come from? And that's about the cycle. And let's just stop and look at the cycle in Europe and in the US.

It's our contention, and I'm going to discuss it in a moment, is the US is not even yet at mid-cycle. And Europe, as we all know, is clearly just starting on a very slow growth phase. It will be low and slow, but it's growth.

Just looking at the US, and there's a lot of facts on this page here, but three numbers I want to read to you: 4 million homes underbuilt since 2010, one in every six miles of US roads in need of repair, and $225 billion of FAST Act highway funding put in place between 2016 to 2020.

Now, as US construction activity levels returns to long-term trends, we believe we are going to see a sustained period of construction growth in the US for the next five years, which sets our businesses up very well to enjoy the benefits of that.

Looking at Europe, 400,000 homes per annum in housing starts below the long-term average; 2015, for the first time in a decade, EUROCONSTRUCT showed that all 19 countries showed construction market growth, I can't even remember when I last saw that; and over $1 trillion of private money available for investment in European infrastructure over the next decade, up about 35% to what it was in the previous decade.

If you can recall the first slide we showed on Europe, GDP up in all of our major countries. EUROCONSTRUCT showing increases in 2015. and in 2016, for all of the big 19 countries it measures.

And if you look to the presentation today, go to page 39, for those of you who have it, look at the volumes increases across all our markets. All of the 13 markets where we do business, volumes are up. I can't remember when I've seen all of those three indices pointing northward.

I'm not, for a second, saying Europe is in a hockey-stick growth, but Europe's stabilized over the last 12 or 18 months. It is a volume-led recovery. It is going to be slow, but it's happening. And pricing will follow in time.

Look, it's very easy to stand here this morning and present a great set of numbers for CRH. This is a good-news day for CRH. All of the hard work that we have done in the teeth of the recession, and as we worked past that recession, doing big deals, bedding them down, has been to get us to this point in time.

In CRH, we would believe that great companies produce superior performance, not just in one or two years, but over a sustained period of time.

And looking at where we have our footprint; and looking at our market positions, and looking as where we are in the cycle; and looking at what we do in terms of generating profitable growth, improving returns and margins and cash, we believe that CRH has a great opportunity to capitalize on those market positions in the years ahead.

So, with that, that's the end of the presentation part of this morning. I'm now going to move to questions and answers.

Initially, I would ask we'll go in to the room, probably do about 20, 25 minutes here in the room. We will have people on the telephone lines, and particularly those online, who want to give questions. (Conference Instructions).

Yassine Touahri, Exane BNP Paribas. A few questions. Firstly, on would you -- there are a lot of political changes in Europe, in the UK, it's an election year in the US, there will be a lot of election in Continental Europe, how do you think this could impact your business? Do you see this as an opportunity? Do you see more infrastructure spending? Or do you see this as a risk?

Then, my second question would be on cost inflation. What we've seen since the beginning of the year is that commodity prices have started to increase and coal prices, asphalt costs are rising today. Do you think this could slow down the pace of your margin expansion next year? Or do you think this could be offset by more pricing [costs]?

And the last question on capital allocation. We've seen that you created an Asia division, does it mean that you've got ambition to become bigger in this region through acquisition, or through CapEx?

So three questions there: one discussing the political changes that may be coming in the United States and, indeed, in Europe 2017 with some elections in Europe, and, obviously, at the end of this year the Presidential in the US, and the impact that may have on infrastructure.

Then, a question on some cost inflation coming in, whether that will squeeze our margins and we can manage our margins.

And the last question, the ambition we have for acquisitions, based on the Asia division, just for the people on line.

On the first question, with regard to the political changes, I think the US has set its stall out with regard to infrastructure spend, absent what happens on the political stage.

And the Federal Government have committed to the FAST Act; they put funding and cash in place to increase funding for the next five years. In addition to that, we have seen, across the last, I guess, 12, 14 months, 18 states deliver specific state initiatives that will deliver about [$27 billion] of extra funding to highways and roads programs, again, over the next coming years.

It is interesting to note, when you add both of those together and look what happened over the last four or five years, because we can be seduced in to thinking that the current environment is the new normal, we spent, in the United States, about $420 billion on roads over the last four, five years -- four years.

In the next four years, with the federal money and the state money that's committed, that's likely to be closer to $470 billion. So I think we're looking at a very significant uptick of 11%, 12% in actual dollars of spend available for US infrastructure in the next number of years.

With regard to Europe, of course, a lot of the European infrastructure spending comes from the European Union, and, of course, it comes from local governments. Most of that is focused -- over 50% of that is focused on Eastern Europe, and most of that is focused on big countries, such as Poland and Romania.

I don't think that any of the elections next year are going to have a significant impact on that. They are long-term programs that take place over decades, and they're put in place for seven, eight years, or so, so I don't significantly -- I think it's going to be a significant difference.

With regard to cost inflation, and what we're seeing in our businesses, for the first half of the year I'll actually say, probably, we have seen cost deflation in our business with commodity prices.

We cover forward a lot of our other costs, electricity, coal, petcoke, oil, etc., etc., so it tends to evolve over time. We're not seeing any cost inflation pressures. But normally, we do have a good track record of passing on cost inflation in our businesses, in particular, in periods of better volumes. In tough periods of volumes, it's more challenging. So I don't have any concerns in terms of margin compression with regard to any cost inflation we might see in our markets.

And with regard to the Asia division, the Asia division really was a reflection of the fact that we had a business of size and scale out there in the Philippines. The Indian and Chinese businesses do take up a lot of management time; they need dedicated management focus so it's to reflect that.

We have an ambition about growing our businesses in Asia, but very much in line with our long-stated strategy of slowly but surely feeding it out.

You're not going to see a big explosion of CRH investment. We're linked with every second deal out in Asia, but that's the newspapers for you. We have a steady, progressive approach, built over decades, of how we see Asia evolving because of the slow game. And this, just setting up a division, doesn't signify any change in that strategy. It's a slow build out.

Gregor Kuglitsch, UBS. I've got three questions. The first one is on pricing in Europe. Can you give us a little bit of an outlook when you see that turning? I think it was quite clear still under pressure in most of your geographies in the first half. That's the first question.

The second question is can you give us some kind of sense, it's obviously difficult for us to do, as the business stands today, what you think, at the peak, on a pro forma basis, the EBITDA was? So against the EUR3 billion, do you have a rough guestimate for us, just so we have a little bit of a reference point?

And then, as we go in to next year, I think you called out that you'll be back in the M&A game, I think that's what you said. So, can you give us a little bit of color as to what kind of direction you're thinking? Is it rebalancing more away from cement and heavyside, which obviously you went a little bit overweight, or is it more a geographic game? So if you can give a bit of color of what we should be expecting in terms of M&A in to next year, please. Thank you.

Okay, there's three questions there. Very quickly, on the pricing in Europe, you're right, it remains very challenging.

What is significant, if you look on page 39, I'm sorry to say, but a lot of the facts are on that page in terms of volumes and pricing with Europe, on the left-hand side of the columns you'll see all the arrows pointing north, all pluses, which is volume. On the right-hand side, which is pricing, all the arrows are pointing south. That just doesn't make sense.

But actually, if you stop the clock and look at where you are in recession, the early stages of recession, normally, and we've said this before, you see a scramble for volume as people try to fill capacity. And that tends to come at a little bit of pricing indiscipline.

There are some good markets around where we start to see pricing coming back. And I believe that in this time next year we'll be in a better place, and in 2018 we'll be in a better place again. It's a long slow unwind, but I think we've turned a corner. But it is challenging, you're absolutely right.

With regards to where we are with regard to EBITDA and our businesses this year versus where we were in terms of the peak, it's a very different business, of course, and it's like comparing apples and oranges. It was below EUR3 billion in terms of at the peak in where we were, but our business now is completely different. (inaudible) completely has different sides. The volumes aren't back to where they were, so I'm not too sure it's actually comparable in terms of looking what it was.

With regards to the M&A, and looking at that and where our focus is going forward, you're absolutely right, we have taken a shift towards the heavyside businesses. But that was opportunity-driven. And we did say last year we felt that the deals that we did last year on the Lafarge Holcim deals were very much three or four years of acquisitions compressed in to one deal. We saw the opportunity and we, basically, just executed against that opportunity.

We do have a long-term strategy, I think, that balance businesses against end use across different products and different geographies; that has not changed, and will not change. Over time, it will redress itself. But it's when you make a big step to one direction you're not going to autocorrect it in 12 months; it will take time.

But over time, what has dealt and delivered for CRH has been having a balanced strategy, it's helped us ride out the recession much better than anybody else; strong cash flow; better balance to returns; better balance in terms of end-use exposure. And we think that's the right strategy for our business going forward, and that's what we will return to in time.

Robert Gardiner, Davy. Three from me, again. It's brief, but just to go back on the European pricing, and the kind of competitive dynamics there, just to pick out a couple of markets where you have very large operations, like Switzerland, Poland, and even the Philippines, relative to what some of the peers are reporting. I don't know if you can just expand on the kind of competitive dynamics in those markets.

Two, in terms of, again, back on M&A, you've obviously passed on a lot of deals this year. I just wonder, in terms of where price expectations are now, have they moved? Are they -- have they reset higher?

And just to come back on the UK then and Brexit, rather than ask what's going to happen as a result of Brexit, I'm just wondering, maybe, how your mindset, as CEO, changes, given the uncertainty. Does it affect your CapEx decisions, capital allocation here, how you think about that? Thank you.

Okay, they are three good questions there, Bob, I have to say. Specifically going back on the pricing in Europe, and you mentioned Switzerland, Poland, and the Philippines, you're right, we have lost market share in Poland, and we have lost market share in Switzerland, and we have lost market share in the Philippines.

Now, most people I know in CRH know that is -- just goes against the grain. We don't give away market share. But when I see the fact that -- and I take a country like Poland as a good example, Poland this year will have about 15.8 million tonnes of cement, which is about 2% up on last year. That's the same level of cement demand as in 2008. The price of cement is 25% lower in Poland today than it was in 2008. And since then we've had cost increases, increased regulation, increased certification; all of that has come through our businesses.

So I believe, as a Chief Executive of a business, we have to earn a price that helps us generate a level of profitability that gives a return for the investment that we have made, the hundreds of millions investment we have made.

You reference other people who have produced results. We are down 9% in our volume in a market that's up 2%. Others are up double-digit percentage, but their prices are in the toilet. I have no idea what they're at. But I know in running a business, to build long-term value for shareholders I've got to get paid for the products that we're selling.

So we are patient, and we're showing forbearance. It won't last forever. But we're doing what we can. And that's the same story in Switzerland, by the way, and the same problem: people chasing short-term gain by dropping prices. That is not conducive towards running a good, long-term business that generates returns.

In the Philippines it was the same case in the first half of the year. We held our price. In fact, we increased the price when others dropped it. And one player in specific, specifically decided to increase their volume. Now they came back and they've increased their price, back to where the normal price is for everybody else in the market and their volume is coming back.

So it's about showing leadership in a market where we're -- in markets we're not the price leader. But we're trying to show with price leadership in terms of getting returns for our shareholders. I hope it will come through in time. I believe it will. That's what's behind the differences your seeing, what you're talking about.

With regard to M&A, you're exactly right, that we passed on a lot of deals in the current year. In the last month, or so, there was two very big, chunky deals in the US we passed on, both of them on price expectations. It wasn't the right time for us anyway. We wouldn't have done them because, at the moment, we're focused on de-leveraging.

I would have to say, it's ever been thus, I always feel we spend too much for businesses. You know that, I've said it: oversees, that we pay too much. I will never pay, we will never pay, for our synergies to other people; we will never do that.

I think the deal flow is good. There's a lot of deals out there. I think we're in for a period whereby many companies and groups are going to have to consistently de-leverage and sell business, and I believe we'll be in a sweet spot with money available to continue to do deals. There's a lot of deal flow out there, and I think prices are pretty much where I'd expect them to be.

With regard to how I would view the UK, and looking at here at the moment, we haven't seen any dramatic move in nine weeks since the vote. The housebuilders are continuing on to build. They're making all the right signals. They're continuing to finish out what they're going to do.

I think there's little impact in the visibility we have to 2016. So in terms of that part of the market, in terms of the non-res market here, perhaps a little bit softer at the high-end things here in London, but only a wee bit, nothing significant, nothing dramatic.

And infrastructure, very firm commitments given by the government that they are going to continue with those major infrastructure programs that we've seen in terms of High Speed 2, Highways England, in terms of all of the things like that.

From our point of view, we have a heightened level of awareness and caution, for sure. It doesn't stop us pulling back on projects. It just makes us question them a little bit more earnestly, and follow the trends a little bit more carefully. And I think everybody will be in the same way.

This game has yet to play out; it will probably be in the medium term, rather than the short term. We just keep an eye on [that].

Arnaud Lehmann, Bank of America Merrill Lynch. I have three questions, if I may. Firstly, a general one for you Albert. You've done the part for your restructuring, you've done the acquisitions, now you've almost done the de-leveraging. You've explained fairly clearly your view of the cycle for Europe and the US. What's left for you to do, as a CEO, in the next one, two, three years beyond just running the cycles, let's say? That's my first question.

My second question is coming just to follow up on M&A. You expressed your interest, or you said the assets were in good shape in Belgium and the US from HeidelbergCement and steel, while, obviously, you didn't proceed with these acquisitions. Do you have any comment to make on those?

And lastly, you said your strategy is more about pricing, rather than volumes. However, when I look at your Americas materials business it feels like you have more volume than competitors, but maybe slightly less pricing, so could you please comment on that?

Okay, three questions there. First of all, the minute a business becomes about the CEO you should sell the stock. I'm just a guy passing through here. I represent the seventh CEO of CRH, and there'll be eight, and nine, and 10. It's about the Company; it's not about an individual.

What I did say to you was CRH, regardless, [happens] to be a great Company, and great companies produce superior performance over a sustained period of time.

We have a good cycle. We are on the right side of history at this moment in time in looking at the cycle.

You're right, we will play the cycle well. But we're generating a lot of cash, as Senan has explained, and that cash will be put to use in terms of acquiring further businesses, increasing the breadth of our businesses, the depth of our businesses in creating further value for our shareholders. That's what we as a team are focused on in CRH. That's the future.

With regards to those Belgium assets you referred to, yes, I think they were very fine assets. We had a good look at them. We spoke to Heidelberg about them, but at the end of the day they decided to sell them to Cementir. And I wished Cementir very well. They're a good player; they're a good operator; they run their businesses very well. And I think Heidelberg got a good price. I wish them both very well on what they did.

With regard to the US, yes, our volumes are ahead. I wouldn't get too concerned about the volume increases in the first half of the year. It's very much the slow end of the year. I would look at the full year. So, whilst we're seeing mid-teen growth in the first half of the year, overall we're looking at 4%, 5%, 6% volume growth at best for the full year, which is more in line with everybody else.

I would say that the weather up in the north and the north east was very favorable in the winter season, which is where we are strongest. So we are the ones who would benefit most because of that. I don't think it signifies anything else other than that.

And in terms of the cost dynamics that you see, again, that's over a 12-month period. You find one or two or three months where we're doing a lot of base work, the average price drops down, rather than the high [value-added stone]. It doesn't indicate a different change in construction; it's just the type of material you're supplying at a particular time. And particularly with lower volumes, it can give you -- screw your percentages. I'd watch it over the full year, rather than the six months.

John Fraser-Andrews, HSBC. I want to carry on, on American materials. After the very strong performance in half 1, and I note what you've just said about the weather in the north east, but you also said earlier that your backlogs were very good; that you haven't borrowed from the future in terms of what's happened in Q2 and current trading. So can you indicate where those backlogs are? Are they consistent with that 4% to 5% volume growth in that American materials?

Can you say, within half 1, to what extent was that very strong EBITDA increase bolstered by any stock profit on your bitumen purchasing program? And can you give a comment on where the contracting margins are trending in that materials business?

The first and the third questions are yes/no answers, so I can just give you -- and I can go in to the bitumen prices in one second, in the middle.

First of all, in the backlogs, just to confirm, the backlogs are exactly where we would expect them to be. They're pretty much in line in some of the businesses, and ahead of last year, and are consistent with the volume guidance we're giving for the full year. So they're in pretty good shape at this point in the season.

With regards to the contracting margins, contracting margins are actually ahead, again. Again, good to see that because, again, it really attests to, I suppose, the strength that contractors feel about bidding work, going forward. That's the part of our business where we've got the longest lead times; most of our work is almost 12 months ahead. And the margins are ahead in that business at this moment in time.

Specifically about bitumen, and what's happened in bitumen, the benefit we got with lower bitumen in the first half of the year, again, it's over the full year. We do most of our bitumen in the second, like this quarter and next quarter.

But specifically to your question, everybody has seen the price of oil fall down, and, indeed, the price of bitumen reduced during the first half of this year, our customers, too.

Most people who follow our business very well in the United States know that our asphalt business is a significant user of that bitumen. It's actually half of our total energy cost bill. We spent about EUR900 million on bitumen last year, but you've got to slice and dice that.

About one-third of all our contracts for asphalt have got these clauses in them called escalators. That means if there's a move in the price of bitumen we have to automatically pass that on or give the benefits to our customers, because it's the major cost component in asphalt. So immediately if there's a price drop in bitumen that automatically gets passed to the customer, so we don't have a benefit there.

Another one-third of our asphalt work is short-term bid work. So we're bidding work today that we'll do some time in the next 10 or 14 days. And actually, again, there's a natural fall there because you're bidding on the current price of bitumen. So you're seeing that there -- people are seeing that coming through.

The last one-third, you rightly say, is a piece we try to hold on to. But I should say, in time, it drifts back in to the marketplace. We don't just dump all our winter-fill, as people see, on to a particular market; it's bled out over the whole year.

And remember, it's less than one-half of our total bitumen needs in the full year go in to our winter-fill. It's an advantage, but not as much as people think.

In a full-year basis, I would say you would look at the benefits we have of reduced energy, because it's not just about bitumen; the other half comes through -- it's another 25%, 35% comes through diesel and gas and in electricity. These prices are well known, and customers will demand them passed through to them in lower logistic costs, or whatever.

So our advantage on a full-year basis is measured this year in tens of millions of dollars, not hundreds of millions. It's good, we're glad to have it, but it's nowhere near as significant as people might think.

And in the first half of the year, you can imagine, it's a lot less than that, due to the fact that we don't have the big volumes. The big volumes come through in half 2.

Robert Eason, Goodbody. Just a few questions. Just in relation to US products, kind of two questions, just on the non-res market, what is your thoughts on that? There's some talking about projects just being delayed ahead of the Presidential election, so just your general commentary around US non-res market.

And sticking with US products, compared to the last couple of years the drop-through in terms of the organic growth just stepped down a bit in the first half. Just maybe just go through the dynamics of that, and the expectations of drop-though as the volumes continue to come through that business.

Coming over to Europe and European materials, and your consistent comments about the pricing environment in European materials and we have to wait for it, in terms of that drop-through coming through, should we start stepping up the drop-through in to the second half? Or are we really talking about 2017 and 2018 before you get that real strong double-digit drop-through?

And, sorry, just one financial question. Just kind of a note 12, you talk about acquisition costs, they were EUR25 million last year, they were EUR1 million this year, but you distinctly say it does not include ongoing integration costs. Can you just give us a flavor of what those ongoing integration costs were in the first half, and what we should be plugging in for the full year? And is there any carry over in to 2017?

I'm going to pass the acquisition costs to Senan in a moment. First, I had that conversation with my guys, can I start booking price increases for 2017? They say no, by the way. That's probably my answer to you.

Senan, maybe on acquisition costs, and I'll take the other three questions.

Yes, just on the acquisition costs, you recall that we would have talked about the integration costs associated with the LafargeHolcim assets being approximately EUR100 million for the year. The amount incurred actually in the first half of the year was EUR25 million, so it's gone well.

We are obviously not complete yet; we still have a lot of work to do over the next four months to get there by the end of this year. But I would anticipate that we'll live well within the envelope of the EUR100 million that we guided at the beginning of the year.

Just going back to the three questions you addressed, first of all, the pace of growth and what we're seeing in terms of US non-residential. If I look at just the publicly available information, the ABI for the last 30 months, 26 of those months it's been in positive territory; five of the last six months. And where it does dip in to the negative territory, it's just dipping in to negative territory.

We find that to be the most consistent external guidance in terms of where non-res construction is. It actually follows -- it's a good six or nine-month lead time. I know there's some contradictory information out there from Dar Group; we actually can't figure it out.

Talking to developers, talking to contractors, it's very consistent what we're seeing with ABI. That 3% to 5% growth seems to be going forward. It seems to be in commercial, lodgings, office space, warehousing; that seems to be the areas where it's continuing to grow.

Our order books are good. Our purest non-residential businesses are all [capital]-bidding envelope. And some of our products businesses, the order books for those businesses look pretty strong for the remainder of the year. So it looks to be in good shape. Not seeing any sign of a pullback there at all.

As I mentioned, products business, you're right, the drop-through in the first half of the year was 11% leverage, as opposed to what you would expect to see, 15% to 20%. That's a product mix issue more than anything else.

In our America's products business, it's an APG precast, which is a heavy industrial infrastructure-type business; and also, we have [OBE].

What we did see in the first half of the year, with a higher than anticipated spend on US roads and infrastructure, they performed better in the first half of the year. They tend to be more lower commodity-type margin products. So in that compressed six-month period they're the ones that perhaps pulled down that drop-through. It's just a mix issue. Over the 12 months, it should even itself out over time.

Third issue, with regards to European pricing, seriously, what I'm saying to you on the stage is there, at the moment, I wouldn't say it's there. We like to talk about things that have been delivered, rather than what's coming.

I hope -- I wouldn't be say anything if I didn't think it's coming, if I didn't think it's coming. But I think it's going to take time, and it's going to be patchy. Ultimately, I think it'll come back. But I'll wait before talking about it before I be booking it in to any numbers.

Will Jones, Redburn. Three as well, if I could, please. The first, just on the UK volumes in the first half, I think there's a plus 21% number on cement for the first half, is that a one-off? Or is it something about how you're running the strategy in tarmac, please?

Second was I think in the annual report there was a reference to an ongoing dispute with LafargeHolcim regarding the final payment for that deal. Can you just update us on where that is at, please?

Then, the last one was a more general one around distribution, which, obviously, given everything with LafargeHolcim and CRL in the last couple of years, has taken a bit of a backseat, if you like, in terms of development inside the Group. How do you see that business in terms of how big it needs to be, or any other measure over the medium term, both in the US and Europe? Just strategy, really, for that area.

Okay, Will, three questions, two of which I'm going to answer; one which I won't. I've no intention of publicly going in to a spat between ourselves and LafargeHolcim on an open microphone. So, that will be sorted out in the fullness of time.

With regards to the cement volume you referred to, that's a peculiarity. We were required, and happy to do so, to supply cement to LafargeHolcim as part of the disposal, which is why it's skewed our volumes much higher than they should be. Our real cement volumes are up 4%. So there's an internal -- it's just -- it's a one-off, we had to supply volume for a particular project which they were doing, we had to continue the supply of it.

With regard to distribution, Europe distribution or any, America's distribution as well, I have to say, we actually -- distribution is a key part of what we have, going forward.

And we have got, of course, an option to acquire a very significant business in France, coming up in the next couple of years. We have a participation in Samse, which is a big business in the eastern part and southern part of France; very fine business, it generates good returns.

France, of course, is in a difficult place construction-wise, but the residential market is strong. And, in particular, there's one part of France where we do see growth in residential going forward, absent any kind of a difficulty, the overall French construction market; it is the south and the east.

So distribution remains core to our business, it's a key focus for us. And in a couple of years' time we'll be talking here, hopefully, about stepping up that investment, which is [still quite an] investment of EUR600 million, EUR700 million going in to that, again. So it's a key part of what we do, I wouldn't just misinterpret the last 12 months.

Christen Hjorth, Numis. Just a couple from me. Can you give a bit more color on the additional synergies which have been identified in LafargeHolcim assets; and also, the scope for additional synergies going forward versus the target?

Secondly, CapEx at 80% of depreciation, how do you see that playing out for the next couple of years?

Okay, I'll pass CapEx to Senan in a moment, to talk about that.

With regards to the additional synergies, mainly coming through an improved process and greater cross-selling between our businesses.

If you can recall, a big part of what we said about the footprint of doing the LafargeHolcim deal was we saw great synergy between our businesses, how they would fit together. And I think, perhaps, we're seeing more savings, in particular, which we're seeing between our Belgian and French businesses than we would have anticipated; and also, between our Canadian and US business, which has allowed to step up the improvements in the course of this year.

With regard to making any further statement with regard to synergies, I think what we'll do is at the end of this year, when we report our results for 2016 in the spring of next year, we'll update you in terms of where we see the targets, as we achieve them.

Senan, in terms of --?

In terms of the CapEx, I think 80% is a measure over the first six months. So, obviously, you need to extrapolate that over a longer period of time.

I think it's probably a fair reflection to think about our CapEx as being in line with depreciation, so at about 100%. We should certainly be in the 90% to 110% range.

In terms of our CapEx, I think it's worth highlighting the fact that 65% of our CapEx today is going in to our Americas business. So you would expect that in a business where we're closer to full capacity. And then, for example, in our European heavyside business, where we're not at full capacity, you would have a lower amount of CapEx.

So I think the fair number to think about is about 100% depreciation. And in terms of where it's going, obviously, it's going -- more and more of it is going in to expansion.

We're obviously looking at Asia as well in terms of CapEx, going forward. That will be something we'll come back to you with in the future.

I'm just conscious we -- I need to give some time for people on the telephone lines, (inaudible), and also the [wires]. So we might take one or two more questions from the floor, before we go down the lines on the wire side.

Glynis Johnson, Deutsche Bank. Just one question, if I may then, please; and it really follows on from the CapEx, but in more general terms.

You talked about a 70% utilization in US materials, but obviously you have a number of products within that. I wonder if you can give us a bit of color about the different product areas, either relative to each other or relative to that 70%, so we can see where you are more strained in terms of the capacity available.

Okay, as a general overall comment with regard to capacity, first of all, it's more regional differentiation than actual within the actual project, within the product itself.

What I would say to you is that capacity is something -- we're not measuring capacity as three shifts, seven days a week, because you can't sustainably run a business on that basis. We look at a capacity probably about 2.25, or maybe 2.5 as the absolute maximum we can get.

Looking on that basis across all our material business lines on our materials business, OMG business, so aggregates, asphalt, ready-mixed concrete, and, indeed, our precast business in products, again, at 70%, there's plenty of headroom there with regard to it, going forward.

The area where we might be tight in capacity in our products business. And that would be regional, were we've seen the strongest of growth, which would be in the southern states, and particularly out west. And, in fact, we're building capacity there. But back east, we still have plenty of capacity.

So maybe if we looked at a little bit of Florida, Texas, maybe as you go further west, and in to the Pacific Northwest, that's where the capacity might get a bit tighter. But again, I would say to you, we're actually constructing [factories that will be cheaper] there as well.

So, all told, I think we're still comfortable with the figure we're giving you of 70% of the big profit earners in the materials business across all the range of businesses, across all the geographies would have that capacity spare.

Aynsley Lammin, Canaccord. Just one very quick one on acquisition spend. Obviously, leverage is better than expected. Could you just give us a feel for what level of acquisition spend you'd be comfortable with, what we should expect in 2017, 2018; or the other side, what kind of range of net debt-to-EBITDA you'd be targeting? Thanks.

Okay, we've been very consistent at CRH over the years. Part of our investment offering is looking at a net debt-to-EBITDA that we're very comfortable with. And the normalized level, as Senan has said earlier on, would be about 2.2 times, or so.

Looking at that level and where we are at the moment, we have no intention of stepping our net debt back up to 3.5 times, which it was after the LafargeHolcim deal.

So to keep it within the comfortable and historically normalized levels within CRH, we would anticipate in 2017, if we get our debt level back to where we've indicated, which we think we will, probably somewhere in the region of EUR1.5 billion to EUR2 billion would be appropriate in terms of spend out of our own debt [metrics].

(Operator Instructions).

(multiple speakers) maybe move, if you don't mind, to the telephone lines, in terms of any calls. Or, indeed, if we have any questions from the web, I might take those, because I know people are frantically waving at me to stop this part of the call. Thank you very much, indeed.

(Operator Instructions).

(multiple speakers) coming here. First question on capital allocation -- maybe I might talk about it, and, Senan, you might come in on this. The question is, on capital allocation, how do you prioritize capital expenditure versus acquisitions, versus dividend? Which is a good question in terms of --

Well, I don't think, at this moment in time, anybody buys CRH stock purely for the dividend. We're not a dividend-yield business; we're a business that grows its bottom line and provides growth in the stock price. And I think everything we would do is supportive of that.

We see deals out there that we can buy businesses at prices that create value. And provided we consistently see that going forward, we will be in the acquisition game.

I would be very supportive of expansion CapEx. And I'll ask Senan to talk about this in a moment, in terms of where the pace of that actually is.

If I looked at our capital expenditure going backwards, and, indeed, going forwards, the best-returning investment we have in CRH is internal CapEx. We have been very consistent on that. And the more CapEx we can put in to our businesses to improve our processes, to expand our footprint the more we will do. So, actually, we Will prioritize both of those, because they bring growth.

Of course, we do recognize that the dividend is very, very important as well, which is why we've shown that this morning.

Senan, in terms of CapEx, I wonder if you might just talk about, historically, what it's been and as we look at it going forward?

Yes, I think, look, we've talked about CapEx earlier on a couple of times. Again, the ongoing guidance is that our CapEx, going forward, you'd expect it to be in the 100% plus or minus on depreciation. And more and more, obviously, there's an emphasis around expansion CapEx.

I think you can all rest assured that there isn't any CapEx deals that come to Albert and myself that get turned down because of any obsession with hitting debt targets. So we're investing where required in our businesses, and supporting growth to do that; and I think that will certainly continue to be the case.

If you go back and get my view on that question, CapEx, obviously, in terms of good returning CapEx is our first priority. Having the capacity to do acquisitions then, obviously, is what Albert just talked about, secondly. And this year, obviously, our focus was to get our balance sheet back and healthy so that we would be in a position to be able to do that in 2017, and beyond.

I've controlled the questions, so you get the next couple. One here, working capital-to-sales has improved again, is that sustainable? And do you think you can improve from here?

Again, as I talked about, working capital as a percentage to sales is something that it's a continuous journey. It's a focus around the business.

What I would say is -- Albert gave some credit to some finance people earlier on. This goes across the business. Everybody in the business focuses on working capital. It's actually part of our bonus scheme, or part of our measurements, so everybody is focused on it around the business.

Albert talked about cash being king, and so all of our business leaders all think about cash and run their businesses and focus on our working capital.

As our business continues to grow, I think we have opportunity to become more and more efficient in terms of the way we operate it. And it's what you've seen from us, is that continuous improvement journey around CapEx as a percentage of sales continuing to improve. That's what we've shown you throughout 2015; and, obviously, we're still on that journey in 2016; and it will continue to be a focus past 2016, as well.

Well, for me, a good question here: it says talking about the -- give me your sense of where the strategy of CRH is going to unfold? Where do I see the next big deal or deals coming from in the next few years ahead?

We have been very consistent over the years of talking about the balanced approach we've had. The CRH balanced approach is the end use, end markets, and products and we've been very clear about that.

I suppose, if I look at some of the deals that were of interest to us during the course of this year, there was a very big distribution business in the United States which we passed on because of price and timing, but that was a nice business. That's indicative of how we feel, the strength we feel about continuing to invest in the United States economy. It's a great place to do business.

There was a very big heavyside business in the US, which would have been very good to our business if we could have got it at a price that made sense to us. Again, we couldn't. But again, an indication of plugging back in to the heavyside businesses in the United States, which we see as a source of sustainable growth, going forward.

The question I asked from somebody about distribution, the fact that we're focusing on -- we've a very big deal coming our way on French distribution, hopefully, in the next two or three years. We have faith in distribution in Europe; it makes very good returns. Margins are ahead in that business for the first half of this year.

Again, looking at that, so it's really filling out the strategy in the areas where we have faith in our business; we've a proven ability to deliver profits and improve those businesses; and building out our footprint, rolling the model out on a geographic, on a vertical-integration basis.

I do think, of course, the challenge with our businesses, we will have to continue to step out. It's interesting, if you go back 10 years in time and look at parts of our business that didn't exist 10 years ago, how small was Europe distribution 10 years ago? How small was our OBE business 10 years ago? How small was our APG business 10 or 15 years ago? All fundamentally important parts of our business now.

We have great growth vehicles that are there that may not be immediately obvious to you. Our lightside business in Europe didn't exist 10 years ago; it's now a EUR1 billion, EUR100 million EBITDA business.

It's based on innovation and growth, searching new markets. And, actually, that is the trend that is going to continue in our markets, and we have to address those trends going forward.

So I think it's a continuation of filling out our geographic spread; continuing with the vertical integration, because we get very good returns there; but always selectively looking for the associated businesses side in the construction market, because the market is changing and we have to adapt those changes in the future, as we have done in the last decade, in the past. I think we're ready for that.

Mike Betts, Jefferies.

I had two questions, if I could, please. I think you talked about your volume guidance for the year, 4% to 5%. Can I ask what you're thinking on price?

And I think you touched on it a bit talking about more base material, but the 3%, obviously, in half 1 is somewhat lower than the 7%, 8% your competitors are achieving. Do you think you'll get it that high for the year? Or do you think the 3% is a better guide?

And then secondly, the McInnis cement plant that's opening in Canada, could I just revisit that and ask do you now see that as a threat or an opportunity; I mean an opportunity, I guess, to buy cement potentially in the US, but maybe a threat in Canada? And how are you planning to deal with that? Thank you.

Mike, just to be clear, Mike's talking about the US market there, referring to the fact that our volumes were ahead and our prices were ahead by 3% when others were reporting a price increase of maybe 6%, more 6%, 7%.

Again, I suppose, just be careful about looking making long-term judgments based on the first half of the year. We will guide you towards that price increase that we're indicating, so 3%, 4% for the full year, rather than anything higher than that.

We seem to be, my opinion, in that early mid-cycle phase of the US where we're looking at volumes up 3%, 4%; pricing, on average, about 3% in terms of our products. It's to do with mix, of course. But, generally speaking, I would say it's across the range, about that level.

Specifically with regard to McInnis cement -- and just to fill everybody in the detail, this is a new cement plant that is being constructed out in the very Eastern Seaboard of Canada, which will bring new capacity on to that part of Canada. And the question is will that impact upon our businesses this year, next year or the year after that, either in Canada or North America.

That business is not up and running yet. And our business, as I said, in Canada has shown good growth in the first six months of the year; volumes and prices are ahead.

With regards to what it means for the markets going forward in the future, well, I can't speculate. All I can tell you is that there are imports of cement all along the Eastern Seaboard of the United States, and the price of cement in the United States is $10 a tonne higher than it is in Canada.

The cement plant was built on water, with the specific capability to export. I'll let you draw your own conclusions as to where most of that cement may end up.

Okay, I hope that answers your questions, Mike.

Thank you.

Just returning back to two other questions I have on the wire. One here, topical question, Senan, the FX impact in 2016, what do you think, given the weakness of sterling, that will be for CRH for the full year, please?

Yes, FX, obviously, sterling is our biggest factor. But if you look around our business, at today's exchange rates, if you were to apply them to our business and look out to the second half of the year, probably talking in or around EUR80 million of FX headwinds; the majority of that in sterling. Again, using today's exchange rates, you're probably talking about EUR50 million of that headwind caused by sterling.

As you'll remember, or look at sterling, average exchange rate 2015 to average exchange rate 2016, assuming today's price holds for the rest of the year, you're talking about a 12%, 13% devaluation in sterling when you apply that to our UK earnings. That's what you end up with.

And just a last question here, because I'm just -- they're winding me up here at the very end here. Just in terms of the EUR1 billion cash flow versus EUR3 billion EBITDA, given what we've done in previous years, why that reduction in cash conversion in 2016?

Yes, okay, I guess, looking at that conversion between EUR3 billion in ETBIDA and EUR1 billion this year, I think it's a very strong conversion.

If you go back to 2012, 2013, 2014 there's a couple of features that certainly have changed in our business since then. The first thing is that our level of CapEx now, obviously, is much higher than it was back in those years when we were, obviously, minding our CapEx, or constraining our CapEx.

The second thing to bear in mind is that our debt levels, our leverage levels are higher now. I think in 2014 we would have been at a net debt number of about EUR2.5 billion; today, we're obviously on track to be at EUR6 billion or below at the end of this year. So, obviously, that drives the higher gross debt level, drives up our interest cost.

And then, the other feature, I think, is that our effective tax rate has gradually gone up over the last number of years as the mix of earnings we make in dollars has increased.

Thanks, Senan. I'm just going to conclude things then. We're just right on the time: it's 9:45. I just want to thank you all for your time and your attention here this morning in the room; and, indeed, those who have taken the time to watch us down the line.

The next time we're going to talk to you officially, of course, is our interim results -- our IMS statement, excuse me, in November.

If there's any questions, or any things that have not been addressed fully, I'd ask you to please contact our IR department. Frank Heisterkamp, our Head of Investor Relations, is in the room here at the moment. We're happy to, again, share with you more detail, if you want to do that, as well.

So, thank you, again, for your attention; thank you for your time. And we'll talk to you all again in November. Thank you very much.

Thank you for joining today's call. You may now replace your handsets. Albert Manifold Senan Murphy Mike Betts