CRH PLC (CRH) 2016 Q4 法說會逐字稿

Welcome to the CRH plc 2016 full-year results conference call. (Operator Instructions).

Good morning, ladies and gentlemen. My name is Albert Manifold, I'm the Chief Executive of CRH. And I'd like to welcome you here this morning, those of you in the room, and also those of you who are watching it on the webcast, to the presentation of our 2016 results for CRH.

I'm joined here on stage, in London, this morning by my senior executive colleagues. From the left we have Randy Lake, who heads up our materials business in the Americas; next to him we've got Ken McKnight, Ken runs our European heavyside businesses, in this region here; Keith Haas, heads up our Americas products and distribution business; David Dillon, heads up our lightside and distribution business in Europe; and finally, at the end we've got there Senan Murphy, who's our Finance Director.

And also, in the audience we've got Maeve Carton, our Group Transformation Director, [with us] this morning.

What we're going to do for about the next 20 minutes, 30 minutes, or so, is we're going to go through a short slideshow presentation.

We did have a couple of announcements this morning, which are on our website: (inaudible) development update, which we will refer to during this presentation.

But, in particular, we have a slideshow presentation. You have hard copies in the room with you this morning. But down the Web, there are copies on our website. And we will refer to that; it will help you follow our presentation, if you could have that available to you during the course of the morning.

So, with this, we'll take about 30 minutes. After that, as usual, we'll have some questions and answers in the room here, initially; and then after, that we'll take some time to go down the Web; and, indeed, any calls we have coming in. All told, we should be done by about 9:30 AM, 9:45 AM.

Okay, let me just start with some of the financial highlights for the year, for 2016, for CRH.

A year of quite considerable growth, both from revenues and a profit point of view, on a reported basis. Of course, that reflects the impact of the full-year contribution of some of the big acquisitions we did in 2015.

So we've chosen, also, to set out for you here the pro forma increases we've seen, both in sales and in EBITDA; and good, solid, strong growth being delivered by our underlying businesses there, as well.

We have set out for you, in the past, our desire to improve our margins and our returns, to bring them back to peak for the course of this current cycle. And I'm very pleased to see that we showed good progress with regard to those key metrics for us during the course of this year; and we will discuss that and go through that in detail, later in the presentation.

Also, great progress shown in the whole area of cash generation and, indeed, debt reduction.

We asked our shareholders in 2015 to support some big transactions and trust us with their money; we took on debts to finance those transactions. But we committed to ourselves, and, more importantly, we committed to our shareholders, that we would reduce that debt as quickly as we possibly could.

And I'm very happy that in 2016 we've done so, ahead of what we thought was achievable, and have brought our debt metrics back down to more normalized levels. And Senan is going to take you through a lot of that detail in his presentation, as to where that cash came from and how we see that going forward.

And finally, very happy to see the fact that we've decided to move the dividend again, moving it more -- back to a more progressive dividend policy, with the dividend up 4% to EUR0.65.

So, a year of strong delivery, strong financial performance for CRH in 2016.

What we're going to do now is we're going to move to what's behind those numbers, what drove that trading performance. And my colleagues are going to take you through each of their business as to what they saw on the ground and what drove that performance during 2016.

If I can, first, move to Europe, and just to give a sense of the size and scale of our European businesses, before I hand over to Ken McKnight, first; and then, David Dillon.

In Europe, we produce about 35% of our EBITDA. Of course, it's a very important region to us. Post the deals of LafargeHolcim, we have made some very big significant acquisitions; and, actually, now we are the largest single heavyside player in all of Europe. So, an important region to us.

Maybe, what I might, first, do is ask Ken to take you through his heavyside business and what drove the performance of that business in 2016. Ken?

Thank you, Albert. Europe heavyside business has more than doubled since 2014. In fact, we now operate in 18 countries; and we are, as Albert said, the number one heavyside building material business in Europe.

Our business is very much focused and concentrated on the west, and the north, and the eastern parts of Europe. In each of those regions, we have built strong market positions; and, in fact, we would be a top-three player in all of our main markets.

So the business has grown considerably in terms of size and scale; but, [most] importantly, it's also grown considerably in terms of EBITDA and earnings.

Our EBITDA, actually, has more than doubled in the same period. That's, of course, because of the successful integration of the assets we acquired from Holcim and from Lafarge, back in 2015. That transaction did considerably increase our cement and aggregates positions right across our businesses. In fact, cement and aggregates would probably account for about two-thirds of our total divisional profitability.

But we're not just a cement business, and we're certainly not just an aggregates business. We're very much a diversified, vertically integrated building materials business. That diversification helps us, both in the way we run our business and the way that we service our customers. It also gives us a balanced exposure to the end-use markets of residential, non-residential, and infrastructure.

So, I'll just flick on to our numbers for last year. I think if I was looking for one word to describe our trading performance I would use the word satisfactory.

That's not to say that it wasn't a year when we had some ups and downs. Our markets were ahead in the UK, and in France, and in Germany; and, in fact, those three countries would cover about 50% of our EBITDA.

The UK remains a very important and good market for us. We saw volume and, indeed, price increases in our cement, our aggregates, and our readymixed concrete businesses.

Our asphalt volumes were a bit flat; that's really saw a slower pull-through of some public -- release of some public projects. But we did compensate that by an increased focus on private and commercial work.

And so, to Brexit. What we did see was a temporary slowdown in the days and weeks immediately after the vote, but by the third quarter our volumes had gone back to what they were before the vote. And we had a very strong finish, too, in the UK, 2016.

So I would say that Brexit had no material impact on our UK business last year; and for the UK, it was a year of increased sales and increased profitability.

If I turn then to France and to Germany, in both of those countries we saw volumes increase, but we also saw a slight decline in cement pricing. And I think pricing is probably the biggest single challenge we have in the division.

And by way of illustration, if I look at two other countries which are important for us, Poland and Switzerland, in both of those countries we had stable markets and we took a very firm position on pricing, really to protect our margins and our returns. So against a stable market background, our volumes actually declined a little bit. So, clearly, we lost a little bit of market share, and we intend to recover that in 2017.

If I was to summarize 2016 for the year of heavyside division I would say it was a year of improved financial performance; a year of continued growth; and a year, also, we saw a lot of the good work that's done by our teams on the ground actually coming through to the bottom line.

These teams continually focus on how we can make our businesses better, either by increasing the leverage of our vertical-integration model, or by delivering and driving our operational and commercial excellence initiatives.

So I believe that puts us in a very strong position for 2017; and, indeed, for the years ahead.

Before going into our performance in lightside and distribution in detail, I thought I'd just remind you of what our businesses do.

And, first, lightside. Lightside designs, manufactures, and supplies engineered value-added products to the construction industry. We have market-leading positions in our chosen segments in Europe, and our products exportable. We export around 10% of our products globally, where we supply high-margin projects, using the knowledge and innovation here in Europe.

Our businesses include construction [sector], for example, which supplies the connecting and fixing technology used in infrastructure and its skyscrapers. And our networks access products business supplies the kind of components that are used in telecom and utility networks.

If you look at our projects, we range from the tallest residential building in the world in New York, all the way to the broadband network rollout here in the UK.

Our distribution business, on the other hand, consists of builders' merchants, general builders' merchants, and also professional suppliers of plumbing and heating suppliers, which service a professional customer base. We're also a do-it-yourself brand, which supplies the end consumer in different markets.

Overall, CRH is the number-two building materials distributor in mainland Europe.

And by nature, this business is more local. Our strong local brands and our people, they build deep customer relationship, they provide good service, and they're known for their reliability. And we have a strong footprint in our markets.

What I really like about the lightside and distribution businesses is their attractive fundamentals. First, they're geared towards residential and non-residential buildings and repair and maintenance and improvements, so they provide a good balance for CRH; second, these businesses are all asset-light; and third, they generate good predictable cash flows for CRH.

We'll now look at the numbers in detail, and, first, Europe lightside, where it's been another good year.

We grew sales and we delivered good profits in lightside. We saw good demand in key markets, particularly the UK and Germany; and in the Netherlands, our business continue to improve, on the back of strong residential new build.

New product development, performance improvements, and good cost control all contributed to these results.

You hear us talk about capital allocation in CRH, and in lightside we had both divestments and acquisitions, which also helped to improve our margins.

In Europe distribution, overall, we saw flat sales across Europe. But overall, I'm satisfied that we delivered a good performance, with 3% EBITDA growth.

In the Netherlands and Belgium, which together accounts for around 40% of our business, we continued to grow.

Germany was stable; Switzerland and France were more competitive; and our French business was further impacted by periods of heavy rain and deep flooding, which led to some temporary branch closures during the year.

What does it take to be successful in distribution? Well, it's all about detail. It's all about doing lots of different things, doing them well, and doing them consistently, and that's what our teams are so good at.

And furthermore, in Europe distribution we improved our category management across Europe, we maintained good cost control, and (we benefitted from restructuring efforts across the business.

So, overall, in summary, good progress in both lightside and distribution with improved margins and improved returns to both segments.

Thanks, David. I think, really, when I look at the European businesses I think these have to be taken in the context of the economic backdrop that we're seeing. And there's a fairly anemic slow pace of improvement in Europe and yet our businesses have been changed and restructured and have delivered improved performance.

If you listen to the words that both Ken and David used, they spoke about commercial excellence, operational excellence, which is deeply embedded within CRH, but that's what has changed those numbers. But also, quite significantly, the shape of that business has changed over the last five or six years.

We've done an awful lot of divestments in our business over the last five, six years, and we're going to talk about that later. A lot of those have come out of Europe lightside and distribution businesses, and also the heavyside. We've done a very significant amount of acquisitions, which have primarily gone into Ken's area, into the heavyside business.

So, it's a different shape of business, a different positioning of the business for growth going forward. But a lot of the work will be done internally, a lot of really good work done in both of those businesses.

I want to now focus on the larger part of our business, which is the Americas, and just, again, put some context on this.

The Americas produce about 65% of our EBITDA, and they did so last year, and Randy and Keith are going to take you through what's behind those businesses.

So, firstly, I'm going to ask Randy, who runs our American materials business. It's our biggest and our most important division and it's the one that has seen significant growth potential coming through over the last couple of years and really delivered very well for us in 2016. So, maybe, Randy, you might take us through what's behind the delivery of those numbers.

Yes, thank you, Albert. Certainly, there's been a good bit of change over the last 18 months or so in North America, but with that change has provided some good opportunities for growth for us.

You would certainly know that we're the largest building materials company in North America, currently operating in 43 states and in eight Canadian provinces.

When we leverage the overall scale of that business our market positions, as well as the vertically integrated nature of our business, to drive performance not only across the enterprise, but also down into the individual product lines, but it's really -- I think one of the things that stands out to me is certainly the market-leading positions.

You would know about us in New York, in New Jersey, into the Northeast. But as you move yourself west to Ohio and Michigan, West Virginia, and Kentucky we have reserve positions that will never be replicated, and that's just a facts. And it's really those reserve positions that underpin and protect our business in markets for generations to come.

And Ken mentioned that, really, the power of the vertically integrated business is something that sets us apart. It's that demand pull that we get from our quarries to our asphalt plants to our paving crews that drive the types of operational efficiencies that translate into improved margins and returns; the kinds of things that you're seeing here this morning.

Certainly, our focus is on the infrastructure market. Roughly, 55% of our total revenue is derived from some sort of federal state or local government spend.

And just if you think about North America as a whole, just the sheer size of that infrastructure market today, the amount of repair and maintenance that needs to be done is significant. And that's not even talking about the capacity-enhancing projects that need to be done just to keep up with the growing population.

And if I look at the infrastructure market, one of the things that really we like about that business, in particular, is just the consistency that it brings to our business. No matter what the economic cycle is there will always be a need to invest money in the maintenance and repair, and, in fact, even improve the overall structure itself.

And, of course, last night, President Trump again restated his fact of having a significant investment in our infrastructure. I think that's a bipartisan issue. What that actually looks like, we don't know; it's very early to tell.

But, obviously, because of our market positions, you would assume that we would benefit from any kind of increased stimulus in terms of infrastructure.

But what we do know, we operate with the here and now. We know that the FAST Act is in place, we know that there's been a number of key state initiatives that actually grow the overall pie of infrastructure expense, so it gives us optimism as we look into 2017.

Turning to our trading results, it was good performance by the teams across North America; really solid growth across all US regions. I'd highlight a couple.

Our business in Texas did very well. We have a position in Austin, in Dallas, and that team has really worked very diligently over the last three or four years. We saw significant volume increases, as well as margin expansion in Texas, so the team has done a fantastic job.

If you move west into Utah, northern Utah, Idaho, Salt Lake City, in particular, I would call that a very balanced growth between res, non-res, and infrastructure.

And certainly, up in Eastern Canada, our position is relatively new there over the last 18 months, in Montreal and Toronto. A large amount of design-build projects have come through, where we've been able to leverage our contracting capabilities to ensure that we have pull-through of materials.

So good performance, really, across the entire business.

And if you then look down into our individual product lines, good volume and margin expansion across all product lines. I think that's really a testament to the commercial teams that we have across the country.

Obviously, we have a big piece of our business that's related to third-party customers, great engagement there; but at the bid table as well, leveraging our market positions to drive the type of results we've seen.

When you combine that with the operational side of the equation, we made changes, roughly, three or four years ago, where we have dedicated resources that work with our operating teams to ensure that the best practices are shared across the entire business.

And you couple that with the work that Ken and his team have done specifically here in the UK with Tarmac, we've learnt a lot from them and leveraged those initiatives in the States. And it drives the kind of operational leverage you're seeing here today: a 2 percentage point increase in EBITDA margin.

So, the teams are pleased. Great to see the hard work over the last four, five years begin to materialize. And I think it sets us up well for 2017.

Similar to what Randy talked about, 2016 was a year of significant progress for the Americas products and distribution division. Before we talk about that, though, I might just hit on some of the basics of our division.

We have -- in our products space we're organized into three major business groups. Each one of those would be manufacturers and marketers with value-added and innovative construction products and solutions. And, in their own right, each is a leader in the market space within which they compete.

We've coupled that with having a leading position in specialist distribution, where we're a leading supplier of both exterior and interior building products to professional contractors.

Collectively, these businesses have an excellent footprint. You'll see we're in 43 states, in five provinces, and we participate in all the major markets across the United States and Canada.

Important to note here, as well, is our diverse customer mix. We would sell everyone from a DIY consumer through the big-box retailers, who are channel partners with us, to the largest general contractors in North America. So you might find our products everywhere from the small home improvement project to the glass bar on top of the new World Trade Center.

This business, in contrast to Randy's, is really driven by the residential and non-residential markets in North America, which provides welcome balance. And there's good fundamentals underpinning those markets, really driven by population growth and the vibrancy of the private economy in both the United States and Canada.

Looking to our Americas products business and our results for 2016, it was an exciting year for us. There was a good market backdrop, good advancement in the residential markets, especially in single-family housing.

The recovery in the res markets, especially in the United States, has been driven by robust growth in multi-family, and now the single-family segment is coming on, which is important to our business because, as you can imagine, a single-family home is more material and product-intensive than a multi-family home.

We also saw continued good growth in the non-res markets, which is an important part of our business. But for the product side of the business, it wasn't just a story of good markets.

With the culmination and continued hard work on our commercial initiatives around product mix, around market share, around pricing, innovation; strong cost control and procurement advantages; and, importantly, changes in our portfolio over time, where we've taken capital out of some lower margin, lower returning businesses and reinvested in higher margin, higher returning businesses, they've all come together and driven a strong result for us in 2016 with good advancement in the top line, strong profit growth, and accelerating margin improvement.

As you might recall, in 2015 we bought a company called C.R. Laurence. It was actually the second-largest deal that CRH had ever done. As we look at that deal, we're about 18 months in, it's going quite well, and delivering ahead of expectations. And the combination of CRL, with our legacy building envelope business, which CRL is now a part of and integrated with, is providing further opportunities for solutions selling and growth over the medium and long term.

Now, if we look at our distributions operations, again, a good favorable market backdrop for our distribution business. But this is also a very well-balanced and fine business. It's about 50/50 both in terms of new and RMI exposure, and 50/50 in terms of the res and non-res markets.

As we look at how that plays into the two divisions that I've talked about, our exteriors division, which is about 60% of the Group in distribution, benefited from a good RMI market. This is a part of our business which is probably 80% driven by repair and replacement of exterior building products. So they advanced well, on good market backdrop there.

The interiors part of our business is more geared towards new construction; maybe, 75% of the business there driven by new construction. And they had strong advances on the back of the good commercial markets, as well as multi-family housing, which, while not growing quite as fast as it once was, it's still trading at robust levels.

So, overall, good advancement for our distribution group in terms of the top line; continued tight management of margins and procurement had a good flow through the profitability; and continued margin improvement in our distribution business.

Thanks, guys. Two businesses and both, clearly, at different points of the economic cycle; the Americas clearly much further down the road in terms of economic recovery, Europe very much at the start of that road. But some common themes that you've heard my colleagues talk about.

We have a changed operating model within CRH. We work much more at getting the most out of all the assets and attributes we have within our business.

Just listen to the words that they use. Randy spoke about the idea of developing connections with the Tarmac business here in the UK to leverage the strength and knowledge and understanding we have to make both building materials business in the Americas, and, indeed, the business here in the UK, better.

David and Keith also working on innovation of new products and bringing products to market; again, looking at how we can do that best across both our key geographies.

But they've also been reshaped. The changed operating model has led to a lot of divestments. We've divested over EUR2 billion of assets over the course of the last 2.5 years, and that has impacted every one of those divisions. We've actually acquired about EUR10 billion of assets; again, across all of those divisions. We're shaping it for better growth, better returns, and better margins.

And the focus that you heard my colleagues talk about, a focus on commercial and operating excellence, trying to get the most out of the business that we actually have.

And again, going back to the core message that we've always had in CRH, that relentless focus on performance and growth, on margins and returns; that relentless focus on cash, which delivers so much for us.

I now want to just focus on the last and our smallest division, but it's only a fledgling division, but very important for future growth, is our businesses in Asia.

And just to remind you of what we actually have out in Asia, for a number of years, some of you may well recall, we have some equity accounting, some minority interest investments both in India and China. These are smaller investments in large businesses out in that part of the world to tap into the Zeitgeist and the growth potential that's actually out there, and position ourselves, if we choose to do so, to follow growth.

Our strategy for the developing markets is very clear: we try not to be too much too soon, nor, indeed, too little too late. We watch those markets. And, as those markets develop and returns increase over time, we expect to increase our presence there, but only as returns come to us. That's just an approach that's very important to us.

What has changed in the last couple of years, of course, is that we have acquired a position where we are now the majority owner of the Filipino cement business for public cement; the number-two cement player in the Philippines. It currently produces about 6 million tonnes of cement.

But, of course, there is very significant growth in the Philippines going forward, and our focus is on expanding that capacity and to grow with that market and grow our position out there.

Just looking at the performance of that business for last year, our first full year of ownership, we're quite satisfied with the performance of the business. The selling prices were up in a competitive market. But we, in pursuit of our overall strategy of trying to maximize margins and returns, took prices to a point, up to a point, where we felt we should be getting for product.

There are some very significant investments that have to be made by the industry here in the years ahead, and they are going to cost hundreds of millions of dollars to do that, so we have got to get paid for that to get a return.

Now, others took a different view, where they chased volume and market share, but were left stranded. And although the market went up, our volumes didn't go up by as much. We lost a bit of market share. It's the same story Ken referred to in the Polish and Swiss markets.

Now, happily, in the fourth quarter we start to see others come back to the price level we had set. And I feel confident that in 2017, when they are back at those levels, as they appear to be now, we will recover our market share.

The fundamentals in the Philippines are very good. They are big infrastructure needs, strong support from the government for that infrastructure, good residential demand, primarily funded by expats repatriating money to build homes back home. So there's a good level of demand there, very significant needs, and we're very satisfied with our first full year of performance in that business.

And now, let's move over to Senan, who might take an opportunity now to take a few moments to take you through some of the finer details of what delivered the performance in our trading operations, and, in particular, our cash during the course of 2016. Senan?

Okay, let's talk about our financial performance for 2016. As Albert said in his introduction, he shared with you some of our financial highlights for last year. What I'd like to do now is actually talk to you and share with you a little bit more color around some of those highlights.

Starting with sales and EBITDA, today, we're reporting sales in excess of EUR27 billion for last year, and that's a 15% growth over the sales number that we reported last year. In addition, you can see that we're reporting EBITDA in excess of EUR3.1 billion; that's a 41% growth over the EBITDA that we reported for 2015. So, strong growth in both sales and EBITDA.

And, as you can see on this slide here, you can see some of the -- or two, at least, of the key drivers behind that year-on-year growth.

The first key driver, and the one that really resonates with me, is the strength of our organic growth. You can see here we've had organic growth in both sales and at EBITDA: sales up EUR684 million, EBITDA up EUR239 million.

And when you put those two numbers together, and you convert it into operating leverage, that equates to an operating -- or an organic operating leverage of 35% over the last year, and that's well above our historical norms.

The other big driver in terms of our year-on-year performance is the contribution from acquisitions. We now reflect the full-year earnings and sales of those two large acquisitions that we completed in the second half of 2015.

And, as you heard from my colleagues here this morning, from particularly Ken and Keith, those acquisitions are fully integrated now into our existing businesses; they're performing well; and the synergies that we identified for those deals at the outset are coming through at an accelerated pace.

You'll see, in our announcement today, that we specifically call out synergies of EUR89 million delivered in 2016 from those two deals; and that basically runs out at about EUR20 million ahead of the synergies that we would have last guided to you, when we talked to you back in August.

Moving on to talk about our cash performance, big highlight on this slide, for me, is the EUR2.3 billion of cash that we've generated from our operations in the last year. What's behind that? What's driving that? Well, clearly, the scale and size of our EBITDA is the star point.

But the other big feature that comes through here is our ability to be able to convert that EBITDA into cash. What you can see here is a 75% conversion of that EBITDA into cash, which reflects how efficiently we manage our working capital, our interest position, and our working -- and our tax position.

The highlight in that conversion, for me, really is the working capital performance. When we spoke to you last year, you will recall, we talked about working capital at record levels.

The working capital metrics, or if you look at our working capital as a percentage of sales, last year you recognized, and we talked about the fact, that it had improved over our historical norms or over previous years. And we're very pleased this year to be able to report further progress in that working capital metric over our performance last year.

So, what's driving that? I think it's the fact that cash continues to be an area that is focused on across the Group. All of our operating companies think about cash, are measured on cash, and are focused on driving results there.

And, I guess, in summary, what we have is we generated EUR2.3 billion of cash last year across the Group. That can now -- that was used to pay -- obviously, and invest in CapEx, to pay a dividend, and, obviously, to pay down our debt levels.

Speaking of debt, and, for me, this is probably one of the highlights of our financial results today, the performance on debt, you will recall, when we spoke to you at the beginning of the year, about the fact that it was a priority across the Group to pay down our debt levels, to deleverage our balance sheet, and to effectively reduce our net debt to EBITDA ratios.

You can see the outturn for the year. Our net debt ended a shade under EUR5.3 billion, and our net debt-to-EBITDA ended the year at 1.7 times. That 1.7 times is well below what we would call normalized levels.

Again, there's a number of drivers behind that net debt reduction. The first one, obviously, relates to the strength of our cash generation from operations, which we've talked about on the last slide. But in addition, what you're seeing here is quite a disciplined approach to our capital spend over the last year. We spent an equivalent amount on CapEx in 2016 compared to 2015, despite the fact that we have a larger footprint, and despite the fact that our sales have grown.

And, in addition, what you're seeing here is quite a disciplined approach towards acquisitions. We did say, again, at the beginning of the year, that our acquisition activity would be self-financing; in other words that we would, if we did acquisitions, generate enough proceeds from disposals to be able to fund those acquisitions. And that's the way it turned out in 2016.

We spent EUR213 million on acquisitions during the year. And that was fully funded by the EUR283 million of proceeds that we generated from divestment activity over the last year. So, actually, we ended up with a net inflow of EUR70 million from our acquisitions divestment activity.

So, clearly, we're pleased to see this progress on our net debt position, and to effectively take our metrics from 3 times down to 1.7 times over the last year. And that really is as a result of a lot of hard work, but also a very strong financial discipline across CRH.

That financial discipline is the hallmark of CRH. And certainly, you've heard it from my predecessors, where they've talked about that discipline in the past, and what you're seeing today in that result is a continuation of that discipline.

As we end 2016 and head into 2017, we have a healthy balance sheet; and we, looking at our metrics, are well positioned to be able to support growth opportunities, as they arise, in the year ahead.

And finally, I'll say a few words on dividends. We're generating a lot of cash around the business. We have many uses for that cash. We've continued to be very committed in terms of supporting performance and growth going forward, and we see plenty of opportunities to be able to reinvest that cash and drive value for shareholders.

But we also recognize the importance of dividends for our shareholders as well, especially in the current low interest-rate environment, so we're pleased today to be increasing our dividends per share from EUR0.625 to EUR0.65, which is 4% increase. And it is the first increase that we will have delivered since 2009.

Looking forwards, and thinking about dividends, what should you expect from us, well, Albert mentioned earlier a progressive approach towards dividend payout. And really, what we want to balance, going forward, is further progress in terms of our dividend per share growth. But, at the same time, we have an ambition to rebuild our dividend cover, going forward.

Today, our dividend cover is just over 2 times; and our ambition would be to drive that cover back above, and up to, around 3 times in the medium term. So what that will mean, as you look forward, is you should expect from us to see dividends per share progress, but it would lag our earnings per share growth in the years ahead.

Thanks, Senan. So you've heard from my colleague so far about performance, and what's happened in 2016, and what's driven that performance.

Senan has taken you through how the results of that performance arrives in higher profitability, and, indeed, how we convert that profitability into cash. Very impressive, what we've seen so far.

But for us, in CRH, we have been focused for the past many, many years, but, in particular, over the last three or four years, about bringing our returns and margins back to peak levels. And I want to talk a little bit about returns, and the progress we've made so far, and what we can make going forward in the future.

In 2013, at the end of 2013, at the end of the crisis, we took a stop and had a good look at ourselves. We had invested in our businesses for the last 20 years, and we had a very broad and solid good footprint of businesses.

But the world changed from about 2008, 2013. And we took a broad look at ourselves to make sure that the assets that we were invested in were appropriate for the future growth of CRH and to match the return expectations we had for our business.

It wasn't that they were bad businesses, as such. It may have been that, in fact, some of them didn't work out. No-one ever (inaudible), no-one ever gets it right 100% of the time; we don't either, by the way. But it may also have been, and largely was the case, that the original investment thesis that was behind the original investment no longer applied, because the world had changed.

So, as a result, of that, in 2014 we announced that we were going to embark on a divestment program of about EUR1.5 billion to EUR2 billion worth of assets over the course of the next three to five years.

Well, as you can see by the slide here this morning, after 2.5 years we've disposed of over EUR2 billion of assets, or agreed deals to do so. And I think that constant reallocation of capital back into better-performing assets has been a key part of the delivery for CRH.

Broadly speaking, across those 2.5 years, we've sold those assets at about 10 times EBITDA, and we've taken that EUR2 billion, and we've bought assets at about 8 times EBITDA. So, clearly, there's a gain for our shareholders on the multiple arbitrage.

But that misses the trick. The real beauty of this is that we have repositioned our business into higher growth, more sustainable businesses that get better returns and are more supportive of earnings, margins, and, indeed, long-term profit growth.

And we've been very active for the first two months of this year, as you will have seen by the development update we released this morning.

(multiple speakers) -- assets in Germany that we acquired as part of the (inaudible). If you recall we did say, when we bought those assets, at the time, we would dispose of businesses out of that package that we bought. And we sold that at 13 times EBITDA. Now, that's because it fits the business we sold it to much better than it fits our business.

But, at the same time, we've taken those monies and we've reinvested them back in our materials business in the Americas, into fully integrated businesses that we will be able to drive value.

Now, we paid 10 times, but that's a pre-synergy number. And we will be able to drive further value through synergies as we go forward in that business. So, again, the advantage of that carrying forward into 2017.

And we aim to keep that activity level up through the course of the years ahead. Portfolio management, allocation, and reallocation of capital are an embedded part of what we do in our business now and they are fundamental to improving returns and margins as we go forward.

I just want to present this slide, again: third year in a row where we've shown the margins and returns delivery across all of our businesses. And in all of our regions, and in all of the divisions in those regions, yet again, we see improved margins and improved returns.

And what I should say is we are ahead of where we expected to be, given current activity levels. What I mean by that is that the US has shown signs of improvement. But there's a lot of road ahead of the US recovery.

Our belief, and I'm sure we'll get into it in the questions and answers, is that this, rather being a strong and short recovery, is going to be a long and medium-paced recovery in the United States, given what we're coming from.

And Europe, as you know, has only just started that journey. And yet, our margins and returns are way ahead of where we thought we'd be. In fact, this year, our most important business, the American materials business, has got an EBITDA margin of 15.8%, which matches the peak we've ever achieved in that business.

The volumes have not come back, the pricing has not come back, but the restructuring, reorganization, and what we do in commercial excellence, the vertically model, is delivering ahead of where we expected to be. And that's a very good sign.

And to give you a little bit more granularity inside of those margins and returns, we show the charts here for the regions in terms of the red line showing the United States margins over the last few years, and the blue line showing the European margins.

Of course, you see a better margin increase and improvement in the Americas business. They've got the help of a good strong economic recovery.

But for me, actually, I think the European model, European margins and returns, are equally as impressive. With no help from the market, with no help with increased volumes, the improvement is all about self-help, either through portfolio management; the allocation of capital; as the groundwork for commercial and operational excellence; and sharing information across the regions, across the businesses to drive performance and growth.

Just some takeaways I want to leave with you. We are going to spend the next three to four weeks on the road, talking to investors. And this presentation will be in front of every investor we meet. And, in fact, at the back of the presentation, on the margins and returns, there's a lot more granularity with regards to, by division, how the margins and returns perform by division.

But there are some key messages that I want to try and communicate to investors, as I walk out of the room, or as my colleagues walk out of the room, one we hope that they remember.

If I look at the delivery this year in terms of profit and cash, and if I look at CRH, after 20 years in CRH I think there are two phrases that remind me of CRH.

Number one is disciplined money managers. We manage money well; and I think you've seen that in the cash performance and the cash delivery this year. And the second one is we are very strong operators of businesses. And those two provide a very strong combination that delivered really strong profit growth and really excellent performance in cash generation, and, indeed, on debt reduction.

The second one, in the top right-hand box, margins and returns. If I want to see a transparent health check on any business that I look at I look at three things in a business, because you can't fudge these things: it's cash generated, margins, and its returns over a period of time. You can't fudge those. They give you the window, if you watch those over time, into that business.

And look what's happened in CRH over the last few years. Through repositioning, through working on our businesses, by being disciplined money managers, by being good operators we have managed to deliver returns and improvement; and there's a way to go on those metrics as we go forward, again.

Combining that, again, with that word again, discipline, capital allocation. If we invest shareholders' money in assets it is our responsibility to make sure those assets are working today, and every day, for the best for our shareholders.

It's not about yesterday, it's about tomorrow. And what happened yesterday is yesterday. We've got to make sure that the profit and returns we generate tomorrow are the best we can get out of those assets. We don't fall in love with them; we work and sweat those assets as best we can. And if we see better opportunities to do that, we divest those assets and we reinvest that capital.

We're on a road, we're on a progress with regard to doing that, and that will continue on for the years ahead. That has created value for our shareholders; it has helped improve returns and margins; and will be supportive of profit growth as we go forward.

And finally, in terms of the balance sheet, for decades the generations of CRH has excelled at doing small-, mid-sized acquisitions and building them on to our business. No one has ever doubted our capability of doing that.

In the last two years, we've done some of the biggest deals that our industry have ever seen, and those businesses have been seamlessly integrated into our businesses. And in doing so, we've generated profits, and indeed cash, for our businesses.

And we have used that cash wisely. We have paid down the debt that we took on, when our shareholders supported us in 2015, to acquire those businesses, and we have restored back our balance sheet.

We've always had the capability to do small- and mid-sized deals, we knew that. We actually knew we had the capability to do large-sized deals; now, you know that. And now we have the capacity, again, to go back out and start doing deals in the years ahead.

So all of that, we believe, positions CRH well positioned for growth going forward. Because it will come in three areas that we have proven ourselves to be good [with it].

Number one is our good solid organic growth. If I look at our footprint in the Americas and Europe, we seem well set with regards to the next few years to have good solid growth coming through there at a good pace that we can absorb, integrate, and deliver on it.

Number two, with the capacity in our balance sheet restored, and, indeed, our capability, we've proven to ourselves, and to you, to integrate those deals and buy businesses, we have the capacity for acquisitive growth and to be able to create value doing that.

And thirdly, the whole area of synergies. Synergistic growth, by putting businesses together, that's where the real magic of CRH comes together. We see opportunities in businesses that when we bring them into our businesses we create value for our shareholders.

So those three areas alone, we believe, position us well for future growth in the years ahead.

If I can just leave you with some key thoughts with regard to specifically 2017, and how we see our business here on March 1.

Looking at the European businesses, given what Ken and what David have said, and what we think ourselves, we look at ourselves as being well placed for continued progress in Europe.

There is a slowly improving market situation: you can see it in the volumes that are set out in the presentation this morning, you can see it in Europe construct numbers, you can hear it from other people talking about the market.

And we believe, on the heavyside, a slight and small but gradual improvement in pricing, and further good work being done on the innovation side with the lightside distribution business, we believe this will be a year of progress in Europe.

We expect the Americas to continue along the same pace of volume and pricing growth that we saw during last year. The world didn't just end on December 31, it continues on through; and what we're seeing for the first half of this year would indicate the pace and the areas to be broadly in line with that.

And we expect further improvement in Asia as capacity and markets move ahead.

And combining that with the capacity we have on our balance sheet, and the disciplined approach we take to acquisitions, where, for the right opportunity, we have the fire power and the capability, we believe that, combined with the organic opportunities, that we believe this will be a strong year of growth, strong years of growth going forward.

And again, with CRH, what you've heard through the generations, it's deeply embedded within our DNA, whoever stands up here, before or in future, it's a relentless focus on performance and growth; a relentless focus on margins and returns; and a relentless focus on cash. And that is what we think positions us well, in 2017, for another year of growth.

I'm going to call a halt to this part of the morning. We're now going to move to questions and answers.

What I would ask is we're going to take some questions from the room, first of all, probably, about 20, 25 minutes or so.

I do want to leave plenty of time for questions to come on the webcast and on the wires; a lot of people are not physically in the room here this morning. (Conference Instructions).

Emily Biddulph, JPMorgan. Two questions. First of all, on your strong free cash flow generation, the fact that is now back to EUR5.3 billion normalized leverage, you're clearly increasing on acquisitions, you've done a lot of bolt-on in 2016, funded by divestments, does it mean that we should expect something bigger in 2017? And if yes, in which regions, which divisions?

And second question, if I may, on asphalt margins, clearly, prices of asphalt have come down, [while] bitumen costs have come down further in 2016. Can you give us a bit of granularity on your margin improvement in 2016 in US asphalt and the sequential improvement between H1 and H2, if you can? Thank you.

Two very different questions there; one about our capacity for acquisitions, and our ambitions for acquisitions in terms of where we see that going, [I'll maybe leave] that to the second question. And the first question was I'll just talk briefly about asphalt margins, and I'll ask Randy for his comments on the ground as well with regard to that.

I think it's important to remember that in last year we saw lower fuel prices than we saw in 2015. But as one -- [we referred], CRH in the past, the bitumen price itself is a very well-known publicized number, and our customers are fully aware of this. And, in fact, so aware of it that, actually, when we sign our contracts to actually sell asphalt, and bitumen is a major considering part, in about two-thirds of the contracts we include what we have called indexation clauses. That means, effectively, there's a natural price adjustment to the actual end product, based on the bitumen price.

In those other contracts, actually, there's just a time adjustment, because we're bidding for work now but in six weeks' time we do that work but there's a natural correction every six months.

So when last year, at any lower price that we saw coming through in bitumen, you can take it there's about two-thirds of that lower bitumen price, both in the United States, and the same in the business in Tarmac in the United Kingdom, was passed back to the customer. So the view that we would have a fantastic holiday on course last year just doesn't face reality in terms of what it is going forward.

Randy, you might just talk about how asphalt performed last year; and also, how you're looking at asphalt rising energy costs in 2017, as well. Just put a bit of context around that.

Yes, I think it's kind of building on what Albert indicated. In a rising cost environment -- as you would be well aware, we have a pretty significant infrastructure on storage across the United States, where we have certainly a winter-fill program. But to really build on what Albert indicated, [stain] indexes primarily, and then our third-party contracts with indexes, would reflect any kind of significant movements.

I think there's two things you get from us; you'll get certainly the procurement opportunity because, by far and away, we would have the capacity, the largest capacity to house bitumen in the off season.

And then secondly, from an operational standpoint, to really focus on maintaining and growing our margins, it's about increasing the use of recycled material. It's about warm mix asphalt technology. It's all those sort of things that we go into to ensure the growth of margins.

So when we look at our order book now, and going in 2017, we're pretty confident about the margins, as we look at it today.

A question there, also, maybe, Senan, I might ask you to comment on the performance on half 1 versus half 2 two in terms of how that played out, not necessarily with [the US], but for --

Overall, I guess, looking at half-one versus half-two performance, we had a very strong first half, as you would have seen.

I guess, if I think about it in EBITDA terms, looking at pro forma EBITDA we were 20% ahead in the first half. First half, obviously, is a seasonally smaller half in the year, and you saw by the end of the year there are pro forma growth, which, for me, is a like-for-like growth, was at about 10%.

So we did say that at the half year, we had a very strong first half, and as you head into the second half that we anticipated that some of that would slow down and we'd end up with a full-year outcome of around 10%, which we're very happy with.

And, obviously, something to bear in mind as you go into 2017 is we've got a very tough comparative as you look at the first-half performance, given that we had a particularly strong first half in 2016.

And going back to the question in terms of acquisitions, capacity, ambition, and also where they might take place, our balance sheet has been restored now back to the levels that are actually below our long-term net debt-to-EBITDA levels, which tend to be around 2.2 times, we're back down to 1.7 times. So, clearly, we have a lot of capacity to do deals, and that has changed.

What hasn't changed is the fundamental discipline that we have in CRH, not just on returns on margins, but also on the discipline of actually building a balanced business.

We have seen that was has guided us through the biggest, the toughest recession we have ever seen is that balance helped us, both the regional balance, but also an [end-use] balance, a new build versus an (inaudible) balance; assets that give good short-term returns, which tend to be the products the lightside and distribution businesses, versus the assets that deliver the longer-term returns in terms of the heavyside assets.

So I don't see any change to that whatsoever. And I would misinterpret any short-term, or two year or three-year, focus on particular acquisitions; that's more pertaining to the opportunities that presented themselves. If we see large heavyside assets that are good value, good pricing, or good returns that doesn't indicate a change of strategy, it just says that's an opportunity for CRH.

I should point out, of course, that the second-largest deal, after Lafarge Holcim, that we ever did was actually in Keith's area, on the products business, the United States. The CRL deal was the second-largest deal we ever did. So, again, a really [affirmation] that products is a big important part for us, both in the Americas, and in the Europe and beyond.

So no change in the strategy: very balanced approach over the next few years, looking at the opportunities, but only if they arise and create value for our shareholders.

Gregor Kuglitsch, UBS. I've got a few questions. The first one is just on market share, and pricing policies of the Group. I think you flagged a few markets where you lost share last year. Equally, you said you were more confident about pricing, particularly in Europe, as you go into next year. If you can give us a little bit of color as to why you think things may change, because, obviously, last year was still challenging.

Second question was on free cash flow. I think you sort of did EUR1.7 billion-odd of pre-dividend free cash flow last year. Can you just run through what we should be thinking about as we go forward, whether you -- to the extent that you can grow that number into 2017, and beyond?

And then finally, and this is probably one you may not want to answer, but your EBIT margin last year was 7.5%, return on net asset was a little bit under 10%; what do you think is normalized for CRH?

You're right about the last one, Gregor. I'm going to hand, in a moment, the free cash flow comment and rolling forward to 2017. I'll just, maybe, give an overview on the comment on the market share; and maybe ask Ken, who might comment on the two markets that you referred to are Poland and Switzerland. In fact, there were three markets, the Philippines, which I'll maybe talk a little bit more, comment about.

With regard to cement pricing, our focus is very much on margins and returns for all our businesses. Our focus has been making sure that we get paid for the product that we have and the product that we sell.

I can't control markets. I can't control the activities of other people. All we can do is show leadership, and show what makes sense for us. So in some of the markets that Ken has to operate in, I take Poland as an example, the pricing of products in 2016 is lower than it was in 2008.

Now does anybody think that the operating costs of our businesses are lower or higher than they were in 2008? Well, they're clearly significantly higher. And we have to get paid for the investment that we have made, going forward.

So as we take a, while some call it a virtuous view, I will call it a commercially logical view of making sure we push our prices, others took an opportunity to take market share from us. And in both of those markets that Ken spoke about, and you talk about in detail, we suffered.

If I talk specifically about the Filipino market, is very much with the same story. We saw a growing market; we saw a market that was sold out; and we saw a market that was in need of some price increases.

Because everybody, all cement players in the Philippines, have got very significant investments, going forward, to build capacity for their market growth that we're seeing there. They will cost hundreds of millions of dollars. And at current pricing, you would not be able to make those investments.

So one has to try and move prices on. And we did. And we suffered because of it. Because, again, others were slow to follow us on price. Now I'm happy to say that, generally speaking, during the course of quarter 4, in 2016, we have started to see the market come back to us. And now, as we approach 2017 season, and move forward on that, we think we will see an improvement during the course of this year. And that will help us, of course, recover our market share and our volume position.

But maybe, in relation to Poland and Switzerland, Ken, you might have just a specific comment in relations to those.

Sure, Albert. I would just echo your comments when you talk about the Philippines, a very similar situation.

I mentioned Poland and Switzerland specifically in the presentation. We took a very firm line on pricing at the start of the year. The market has been slow to catch up, if you like. We've seen that again particularly towards the end of the year, and even in the first few weeks of this year, that gap, if you like, between where we had positioned ourselves and the general markets starting to close.

So something we're watching very closely. But one thing is for sure, having taken that stance last year and lost out a bit in market share, we do fully intend to recover that in 2017.

I think the other thing you see that's probably driving the catch up is the fact there is some cost inflation coming back into input cost inflation coming back into the businesses. And people, I think, generally accept aren't going to absorb that, they're going to try and pass it on. That, again, I think, will help a more positive pricing environment going into 2017, both in Poland and in Switzerland.

And that last point is an important point. We generally find across the industry that people are more supportive across the industry for price increases when they themselves had to absorb cost increases as well. It tends to help achieve those.

Senan, you might have a comment on the rolling cash flow forward into 2017.

Gregor, there's a number of components to the cash flow, as you've described there. The first one, obviously, is EBITDA in terms of further progress on EBITDA; and then, there's the tax effect that comes off that.

Effective tax rate this year was 27%. I'd probably guide somewhere in the 27%, 28%, next year. But, obviously, EBITDA will track and follow our -- our tax will follow our EBITDA.

The other component in there is, obviously, our interest expense; that should be relatively stable from this year to next year in terms of no major change in our borrowings.

And then, the two bigger elements that come through in that cash flow, obviously, are working capital and CapEx. As we've said, our working capital performance this year is very strong. We ended up with working capital, as a percentage of sales, just a shade under 8% this year; last year, we were a shade under 9%; and, historically, we were in excess of 10%. So we've made a lot of progress over the last number of years in terms of working capital.

I would think, for forward-looking purposes, where we are, if we can hold that, that's good. And as you continue to grow your top line I would be surprised if I'm back here next year saying working capital's an inflow; it should probably be an outflow, in line with the growth in sales. But we'd, obviously, be intending to make sure we hold what we've gained in the last year, or two.

And then finally, I think, in terms of CapEx, this year we spent EUR850 million on CapEx; that works out to be about 85% of depreciation. Certainly, we'd be guiding, going forward, that, that number should be, on average, 100%. We said that last year. We spent less than 100% this year, really, just probably mainly due to timing matters, and so on. But I think you look back to next year and out, probably, in the 100% range.

And what I would call out, and we've spoken about it before, is when you look out over the next three years to four years we've already highlighted the fact that we would have an intention to spend quite a bit of CapEx in the Philippines in terms of expanding capacity in that market. So that will probably bring the number above 100%, as you look out over the two-year to three-year period.

Just on your last question with regard to EBITDA and returns on where we are, where we think we are in the cycle, I'm not going to get into pitching a specific number there, because, quite frankly, actually, we have a changed business model. And, as I said to you, if you'd asked me three years ago where we would be in terms of margins and returns I wouldn't have thought we'd be here.

It is interesting to note that where we are in the US construction cycle, and I don't think anybody things we're anywhere near peak at this moment in time, certainly 2016 wasn't peak, and yet our materials business, our biggest and most important business, now matches peak margins.

That tells us something has happened within that business to either reduce our cost base, or to change the way that we're operating, or the way that we're pricing our product, or something that has delivered those. And it gives us a sense of encouragement that, as we go forward, we are doing the right things.

What I can tell you, though, is when we look at the pace of growth in the US I look at that, perhaps, it's going to be a longer and more developed recovery in the years ahead of it. And how that's going to be funded and financed, I'm sure we'll get into that as we go forward. I think that there's a few more years to go on it, yet.

And when I look at Europe, I look at Ken's cement business, which are operating probably at about 55% or 65% of capacity utilization, we have paid for those hard assets, they have yet to be used. And I look where pricing is in Europe, that again gives me a real hearten that there's better days ahead of us, both in terms of margins across the Group as we go forward. But we'll report those to you as we deliver them, rather than what we hope to get.

Robert Gardiner, Davy. Could I just go back, maybe, on something Senan talked about there in terms of CapEx? You've highlighted where it will step up because of capacity constraints in the Philippines. But it'll just be interesting to know in terms of where you're constrained maybe elsewhere that you require growth CapEx, and where that might step up, presumably, in the United States.

Also, back on acquisitions, just wondering, in terms of the pipeline there, you've obviously done a lot in the United States in January and February so just wondering in terms of pipeline opportunity, in terms of CRH products in the United States.

And finally, to go back on cost inflation, which we've talked about in a few geographies, bitumen being one, but also in Europe, just wondering if you could talk a bit more in terms of what you're seeing on the cost inflation side across your businesses. Thank you.

Okay, three specific questions. And I'll just go to the guys on the cost inflation question at the very end.

With regards to the CapEx, in terms of where we see constraints and what you think CapEx is going to evolve over the next year or so, Senan, you want to (multiple speakers)?

Yes, I think if you look at CapEx, Robert, this year, if you look at it as a benchmark, I'd say, obviously, a larger portion of that CapEx has gone into the Americas, into Randy and Keith's business, in terms of expanding capacity, but, in addition, obviously maintenance and safety spend.

I'd say overall, if I look at our capital spend this year, about 40% of that is into what I would call expansion CapEx, and the rest, obviously, maintenance and safety.

I think when you look across David and Ken, David's business is a capital-light business, so it doesn't require as much capital investment. And Ken's businesses, when you look across, obviously, there's regular maintenance required, but, again, from a capacity perspective, Ken has good capacity today, so there isn't lumpy spend coming in that direction.

I would say Americas and Philippines are probably the majority, as you look forward.

But no significant big, lumpy ones. The Philippines is the only one that's out there, and that probably starts at the back end of 2017 and extends on for two or three years. Probably, the quantum is in the region of EUR300 million, EUR350 million over that period of time.

But absent of any acquisitions around, that we don't see at this moment in time, no big major, just standard CapEx as we go forward.

Just on the cost inflation, and what I might do is I must just ask -- maybe go to just Keith and David to get their perspective, because both of them run diverse and different businesses, which have got a good footprint across the business. And I'll come back to Randy and Ken to talk about the energy prices.

But, maybe, just in terms of general cost inflation, wage inflation, what you're seeing across your businesses, Keith, maybe, first.

Yes, sure. As Albert mentioned, we have a very diverse cost base between heavy materials, like cement and aggregates, all the way to plastics, and steel, and aluminum. I'd say, generally speaking, there's some ups and downs in that. But, generally speaking, it's a relatively modest cost inflation environment, at least in the products and distribution world.

If you look in our distribution businesses, for instance, roofing materials are somewhat driven by the price of petroleum. So it was a benign environment in 2016; look for stability, really, going forward in that.

And one of our other major products would be drywall or gypsum board. And 2016, again, would have been a year of just stability in terms of pricing, maybe a little bit of weakness in the first half in stability. In the second half, we'd look for modest increases going forward.

Steel for global commodity, so it's going to fluctuate a bit here and there, but we've seen no major fluctuations, maybe, a broad upward trend there; and aluminum stable; and plastics benefiting from the fact that feedstocks have been stable to declining.

And so, it's a competitive market in terms of those raw materials, at least for the products business in the Americas.

If I can just say in the US, the second [point], maybe, again, Keith and Randy again, we employ 35,000 people in the US and there's a tightening on the labor market going on over there; are you seeing anything on the labor cost inflation coming through your business?

We've seen some, but I wouldn't call it unreasonable. Wage inflation, there's a lot of talk about it, but it seems to be along the lines of what you would read in the papers and headlines, in the 3 percentage range, which is enough for us to be able to absorb and build that into our cost models and our pricing strategies going forward, so we've been able to recover that as we move forward.

Yes, and I would say that I would agree with what Keith has said. I think, for us, it's about just the quantity of good labor. So that's -- it really may have -- has increased our focus on the training aspect of operators, and things like that, but from a pure cost standpoint has been very modest in terms of inflation.

I think, just again, whilst the question is about labor costs, or about cost inflation, I would say that the constraints in the supply side of labor is probably the brake on the US construction market.

You can have all the aspirations and all the demand, indeed, all the money you want to go out there, but the labor force, what we hear from our customers and from our contractors, can only absorb a certain amount of increased volume. And that's probably the natural brake that's keeping it back, as much as anything else.

David, maybe, just in terms of the general European economy, what you're seeing [on costs].

I think you're starting to see some wage inflation creeping back in, which is a helpful thing, actually, to be honest with you. You're looking at 1%, 2%, nothing more than that. But, actually, we like some inflation as well; it allows us to pass on some increased pricing, as well.

Keith mentioned some inputs of raw materials. What we tend to do in some of our engineered products, certainly across Europe, is we succeed in passing on those price increases over the short and medium term anyway, so, actually, we don't see a big impact of that. And, actually, we welcome some inflation across Europe, as well.

Then, maybe, Ken, specifically on energy, which is a big cost center for you, in terms of how you're managing that in 2017.

Yes. Randy touched on, I think, a big competitive advantage to have in the US is the winter-fill storage that you have. We don't have that in Tarmac, if you like, if you just talk specifically about bitumen.

What we have done during the year, we took advantage, I think, of the fairly low-price environment for energy during 2016. And we've hedged, I think, about 60% of our requirements, both in terms of bitumen and coal, and petroleum, coke for our cement businesses going forward into 2017.

If you look where the energy prices are currently, I think we're quite satisfied of the decision we took in the hedging.

I think generally, as the point's been made, I think it was a point that David touched on also, where we see some cost inflation coming back into businesses I think that does actually help us in the pricing environment. We intend to fully recover any cost inflation, going forward.

And then, we talk about this on our calls every week in terms of how we manage cost inflation, I think, you are hearing that there is inflation in the system, both in Europe and in the US; it's coming across all sectors, but it's manageable, it's something that we're used to.

And the one thing that I can say for sure is that every year prices will fluctuate, and we have to manage it, and we always do reasonably successfully.

Just on the last question that you raised, Bob, with regard to acquisitions, what the pipeline was like, and in terms of what prices might be like and where they might be, as such. I think that just, generally speaking, when you look across our sector it comes as no secret to anybody that the sector is still quite heavily indebted and quite heavily leveraged. So it is still a buyer's market, and I expect it to stay that way for quite some time.

I think, also, the fact that we took on a pause on acquisitions during the course of 2016 has meant that our development teams have still been very active and still been very busy. And I have a pile of acquisition proposals that high on my desk.

The great thing about that is that we can be selective. And I think that we have been in the first two months of this year. And that's very positive for CRH, not just because it's the long-term growth that we're looking to direct and form and shape of the business going forward, but it's very positive from a returns perspective and from a cash perspective.

So the pipeline is very good, it's across a lot of businesses. We have a lot of deals on the slate. And what we've got to try and do is pace those deals in a way that we can absorb them and create value for them, as such. But the quantity or quality of deals is not an issue for us at this moment in time, far from it.

Paul Roger, Exane BNP. I'll have three questions, please. The first one is on the drop through: 35% of organic sales to profit in 2016, wonder what your expectations are for 2017, and maybe say a bit about the medium term as well.

The second question is in divestments. I think, in 2015 you said you expected to make about EUR2 billion. You've obviously now done that. Does that mark the end of the divestment process? And linked to that, interestingly, you haven't mentioned Brazil at all today, maybe you could comment about that a bit.

Then, thirdly, very specific, clearly, there's a new entrant in Canada this year. What impact do you think that will have on the market? And what's your strategy to respond to that? Thank you.

Okay, Paul, three very -- questions. I'm going to leave the 35% leverage question to the end, to Senan. With regard to -- I'll pass Canada over to Randy in terms of what the competitive reaction might be, has been or might be, with regard to a new entrant in Canada, what the price has been, as such. I'll take the other two with regards to divestments, and, indeed, Brazil.

The short answer to the question is, no, it doesn't mean the end of any program, whatsoever. I hope I can be very clear about that. We have just managed to generate ahead of our expectations, EUR2 billion of investment after 2.5 years.

We think it is good, strong, disciplined capital management that we are constantly challenging our asset base to ensure that we're getting the best out of the asset base that's there. It is almost Darwinian in that you don't want everyone to be in the bottom 20% of any list on CRH, trust me. And that's constantly -- if you cannot find your way out of that then you're a candidate. And that's something we constantly keep under review, and will keep under review in the years ahead. It's just good proper management.

With regard to our Brazilian business, and just to remind people what we have in Brazil, this came as part of our CRH -- acquisition of the LafargeHolcim assets. We have three integrated cement plants, which produce about 1.5 million tonnes of clinker. We have two other grinding stations, which lift that cement capacity to about 2.5 million tonnes of clinker. And we have to other further distribution sites, mainly focused on the southeast of Brazil, in a [miniaturized] Sao Paulo and Rio de Janeiro markets.

Clearly, Brazil is a very challenging market. One can see the volume's down by 10%, 12%. Pricing is down as well. And Brazil seems to be in a state of difficulty and flux. When all of that is going on around you, it's not a good time to do anything stupid, or quick.

This is a small part of the investment that we bought. It's an interesting potential, first of all, for us, as we seek to develop a business. Brazil has got a long-term need for construction, going forward. We've got a footprint in that business.

There are five integrated production facilities, seven if you include the distribution sites. For us, it's just something that we're watching and will developed in the longer term, as we do with our other developing-market businesses.

Maybe, what I might do now, Randy, you might just have a quick comment on Canada, the new entrant, in terms of what pricing has been like this year, and what you anticipate for next year. I'll pass then on to Senan, after that, for the leverage question.

As you can imagine, it's McInnis Cement, and Port-Daniels, where they're building a new facility. With our investment in Canada, obviously, we'd have an influence there.

I think what we've seen in 2016 is actually a stability in cement pricing. You would assume, and you can assume from our standpoint, that as we acquired those businesses there's certain share of those marketplaces that we would intend to maintain in. But, at this point in time, I think most of the impact has been felt in late 2015, actually, well before the plan actually was online.

Now, when it comes to start producing, I'm sure there'll be some fine-tune hedging around the edges on pricing. But, at this point in time, we're anticipating it to be relatively stable.

I think it's important, though, to remember that we are the largest consumer of cement in North America as well. And so where that plant is based, the ideal market would be in the northeast, down the coastline of the eastern part of the United States, so we view that as an opportunity as well.

So pricing stable; but also, for us to be able to leverage the opportunity we have in terms of our consumption.

Paul, in terms of your operating leverage comment, obviously, 35% operating leverage this year, which we'll take. Obviously, it's a strong performance.

I think looking forward, we'd go back to what we said previously, which is that over the long term we'd expect our operating leverage to be in the 15%, 20% range. And I wouldn't stray away from that in terms of looking out for 2017.

Thanks, Senan. I'm just conscious, we have calls coming down the line. I'm going to take about five minutes more of questions in the room and then I'm going to go down the lines, and then the wires again.

Will Jones, Redburn. Just a couple things, if I could. First, could you just maybe talk in a bit more detail about Tarmac in the UK? Clearly, the biggest business you bought from LafargeHolcim, and, arguably, the one with the most potential. Just any initiatives, above and beyond the market volume picture, that you're enacting there that might help over the next few years?

The second one, just to Senan, around tax rates. Obviously, Trump has talked about lowering the US tax rate. Is there anything in your tax accounting that you'd flag to us that wouldn't allow you to partake your benefit from that, if it happened? Or would it be fairly clean as a transfer benefit to yourselves?

The tax question, I heard clearly. On Tarmac, you're asking anything unusual within Tarmac that we're seeing?

Just an update on business initiatives, really, at the Company level, to try and improve margin.

Maybe, Senan, you might just comment on tax for us.

I'll take the tax one, first. Our tax position this year, effective tax rate, 27%, nothing unusual about it. The effective tax rate in the Americas would be higher; and then, we'll have, obviously, other jurisdictions where it's below 27%, and, therefore, it blends together and reflects the footprint of our businesses.

There's no clarity yet in terms of what President Trump has in mind for the tax regime in the Americas. We'll keep a close watch on it and watch it.

In the event, obviously, that the tax rates do go down in the US, and we have a significant presence there, obviously, we'll be a beneficiary from it. But that is way too early to determine yet exactly what is specifically within that, and we'll wait and see.

I'm going to pass the Tarmac question to Ken in a moment, because there are some specific business initiatives. We've taken in terms of reshaping that business. We've done some acquisitions here in the United Kingdom. But also, we've integrated that business very well with our production facilities in other parts of the world, in Europe, in particular.

But just, generally speaking, about Tarmac and Brexit, just to be absolutely clear, as Ken said when he made the presentation, what we saw, we did see a bit of a slowdown during the summer months; but, actually, from September onwards we saw a fairly consistent recovery in demand.

The construction market here in the United Kingdom is largely driven by infrastructure and residential demand. Now you would have all seen, and know better than I do, in fact, in terms of how the housebuilders have commented over the last six months in terms of demand going forward. What they feed back to us is there is good solid demand going forward, for the next 12 months at least, and that seems to be underpinned by our order books.

Also, with regard to infrastructure, again, it's coming through slower than we would have thought. But that slowdown happened in 2015, pre-

Brexit; it was a move to Highways England, and it just lowered the pace of growth, rather than anything else. And that seems to be at a fairly consistent growth rate, going forward.

But, generally speaking, I have to say, we're quite pleased with where we're sitting here now, at March 1, in 2017. In looking at our order books for the UK, it looks as if it's fairly solid, going forward, for this year.

Ken, just the business initiatives, I know you've done a lot in terms of buying business downstream, and also integrating with Ireland, that makes a big difference. Maybe, you might just explain what you've done there.

I think what we have seen, the Tarmac, obviously, a big consumer of cement as well, as well the three plants we got as part of the [City's] deal. What we've seen, whether we export cement from Ireland to our own terminals around Britain, but also into Tarmac and Northfleet, and that's worked out very well in terms of some of the synergies that Senan touched on earlier on.

I think the other thing in Tarmac, when we bought the joint venture, the Lafarge Tarmac as part of the deal, it was in the process of being set up for an IPO. What we've been looking at since, is it above operating company costs? And we're in the middle of a pretty serious review at the moment, looking at just the costs above the operating companies in the business.

I think that's part of what we said: depending where Brexit goes, we've got to be able to react quickly. And we make sure that Tarmac is in a nimble position to react to any changes that Brexit might through up at us. So, again, all that process is another initiative, if you like, that's underway at the moment.

Please don't forget all that money I gave you to buy those readymix plants that you told me would boost profit (laughter).

Okay, I'm going to take one more question from the room, please, if you don't mind.

John Fraser-Andrews, HSBC. I'm going to ask two questions. The first one is about the volume outlook in American materials.

Albert, you flagged a similar level of growth, your products did 2% to 4% last year. And if I can remind you, in November you also flagged that over the coming years you'd expect 4% public spending growth from totting up what's coming through from FAST Act and state authorizations [hosts]. So can you elaborate -- have you recalculated those state authorizations number, and how you see the flow of volume over the year coming from those two sources?

Then, the second question is on the lightside and products businesses were respectively the star performers in the two countries. Was it that on that side of the business you were able to put through more price than elsewhere? Was it that you've done more value engineering in terms of portfolio movements, or how you set up those businesses? Thank you.

I'll come back to the infrastructure funding question and the growth in the end, and maybe I might just go first to David and Keith.

They've both got very different businesses. David's business, of course, has been reshaped, a lot of divestments, but, actually, he's explained to you what it's for. But Keith's businesses was a very big beneficiary of development activity, particularly with the CRL acquisition, and that, obviously, helped in terms of growth.

Maybe, Keith, you might go first; and then David, for his comments as well, please.

I would say, in response to the question, it's not necessarily about price over cost. I think that's there were no major changes in that year over year. It would be, as Albert indicated, two things; one, I think product mix shifts to higher-value products that the market is accepting, and that's built off of years of development in terms of our innovation and trying to bring new products to market that offer higher margins than the products that they might displace; and a better portfolio with America's products.

As I indicated before, we've exited some businesses that were lower returns, lower margins. And if you look at that and the capital that's been reinvested, either in CapEx, in support of higher-margin businesses, or, indeed, the C.R. Laurence acquisition, and the effect that that's had both in insolation in terms of the quality of the business that we bought, then with the follow-on delivery of synergies, it's had a very beneficial impact on the overall products business for us in the Americas.

Just to add a couple of things there, I think the same thing that we see in Europe, the innovation, that kind of thing, is actually driving our pricing in some businesses.

But I think, really, we sell solutions. We don't sell a lot of products, I think, in terms of our offering lightside and I think that's helping us to actually provide a better offering for our customers.

I think overall, as well, we've done a lot of restructuring over the last couple of years. You see that benefit flowing through a bit last year, and a bit more this year as well, which has helped us, as well, position for going forward.

Just let me give an overview of the federal funding, just for everyone in the room, and also the state funding; and I'll ask Randy to see what he's seeing on the ground, going forward, for 2017.

Just to go back on the numbers, the overall funding of infrastructure for the last four years, ending in December 2016, accounted for about EUR420 billion. That was funded by the federal government and the state government.

And when we spoke in November, you're absolutely right, we talked about the stages of that growth, going forward, to match that. In fact, they had indicated when we roll forward another four years, from 2017 to 2020, we calculated, given with the FAST Act, and given commitments made by the state, that, that EUR420 billion would rise to about EUR485 billion. So a EUR65 billion increase, which informed the comment we made, there was about 15% across the four years.

What happened in November 2016 was the states, when they voted also for their President and for Congress members, they also voted on specific state initiatives to increase funding to infrastructure spend; and about 20 states voted and approved increased funding initiatives, which has changed and increased the level of funding.

If I look at our big states, and look at 10 or 11 of those big states, there's probably about an additional EUR40 billion of funding to be spent over the next four years on top of that EUR485 billion. So that looks to be about a EUR525 billion spend for the next four years, which is an increase in totality of 22%, so that compares to the EUR425 billion for the last four years. So, a very significant funding increase, coming forward.

And the US is unique in the world; not only does it specify where it wants to spend money, not only does it say this is our target, our plan, they actually put in place the cash to finance it as well. So it looks to be very strong going forward. And the benefits, of course, will roll out over those four years.

But maybe, specifically on the ground with regard to 2017, Randy, you might just talk in terms of what you're seeing in your order book and your backlogs, and the volume increases you expect this year.

I think, just to build on, I think it's important, those local initiatives, and there were over 200 across the United States were voted on, 74% of those passed in November, as Albert indicated, significant movements in some of the states in which we operate, those tend to happen very quickly, versus the FAST Act, which is a heavy engineer and design aspect.

Those local -- because people are willing to give you -- give their local governments money, their tax money, because they see projects actually hitting the street in the next 30, 60, 90 days. And typically, those are maintenance kind of activities, which plays to our strength.

As we look into the backlogs, our backlogs would be very similar to the same position that we are last year.

I think the one thing that we are pleased about is just seeing the margins continue to move forward. I think that's a reflection of not only a growing infrastructure, but also a more balanced recovery across all aspects of the US economy.

So when we look here today, we're pretty satisfied with what the 2017 will hold for us.

(technical difficulty).

Robert Eason, Goodbody Investment Banking. Just two questions from me. In the presentation, you talk about the pace of the synergies came faster than you expected in LafargeHolcim. My question, therefore, is on the quantum of synergies: what can we expect? You guided the market EUR120 million back last summer, so just -- that's my first question.

My second question is, again, just on US funding. And you kind of touch on it earlier on in terms of the biggest constraint facing the US economy is actually labor. So we hear every -- well, tweet every day now in terms of infrastructure funding. Is this just going to be just a myth in terms of the US being able to deliver whatever comes down the tracks?

And in terms of what we've just got in front of us, that's really all that the industry can deliver realistically? So they're my two broad questions.

Okay. What I'll do is I'll just clear up the synergy question first, and then come back and answer the broader question on the infrastructure. Senan?

I'll take the synergy question, Robert. So you're correct, LafargeHolcim, we identified -- initially, actually, when we did the deal we announced EUR90 million of synergies over a three-year period. We updated that early last year to tell you that it was EUR120 million over a three-year period, so EUR40 million a year.

What we actually delivered in year one, which is this year, is EUR70 million against that EUR40 million. So, as I said, significant acceleration of synergies. At this point, I would say some of that is acceleration, and I would expect and hope that some of that is permanent.

We wouldn't at this stage call up the EUR120 million for years two and three. But we'll keep you up to date, as we head into 2017, in terms of further progress around that.

I'm not going to actually talk about it, I'm going to actually pass it over to Randy; he's the guy who runs the business.

But, again, just to repeat what we did say, probably, the biggest constraint that we're hearing back from our customers, and from our contracting part of the business, is absolutely right, it's on the labor side of things. There is a pace of growth that it can absorb, but that's probably the single biggest factor, rather than finance.

But maybe, Randy, your comment in terms of current administrations view on infrastructure, and how you assess that in your plans, going forward.

I think that your terminology, is it a myth, I think it's an interesting comment. I don't think it's a myth.

When you think about the overall infrastructure, there's, in our country, in the US, 600,000 bridges that 50% are 40 years old, or older; 500,000 public use airports, 70%, 75% of those are paved; and over 4.2 million lane miles, currently. The idea of an increased investment, I don't think that's a myth. Now, the process and how you get to that, who knows what that looks like.

I think the encouraging piece, from our perspective, is that when a President says it's a priority it brings people to the table. And so, there's conversations.

And typically, you would be well aware of this, it's a bipartisan issue, the fundamental thing underneath it all is you could say 1 trillion, you can say whatever number you want, it's how do you actually pay for that. I think what's encouraging would be go back to the local initiatives and that the users of the infrastructure are willing to pay for that increased investment.

So there's a broad consensus across the country of the identified need, and they're willing to participate in some way, shape, or form. I think we're way too early to know exactly what that looks like, but I think we're encouraged by the conversation.

I'm conscious that we're actually going to lose the webcast feed, if I don't just wrap up fairly quickly. And I have got a number of questions that have come in on the Web here, so I'm actually just going to go through them. They deal with some specific questions with regard to this morning. I might just clean them up.

The first question, really, just on the use of capacity in the US, it's more a question for Keith and his business. Keith, obviously, you talked about the business and the development of your business. The capacity constraints within your business, where are they, where you're seeing them, and how you address them in your products and distribution business?

Sure, Albert. We're multiple years into a slow recovery in the markets in North America, principally, in the United States, and that has led to some capacity constraints geographically, and by product line. Again, I would say they have really been concentrated in some of the higher-growth markets in the US, which would be the south and west; as well as some of our key and core product lines, where we're leaders in the industry, and that would be throughout the United States, and, to some extent, in Canada as well.

I think our approach to that has been to address them on a very targeted basis. We have the ability, given the scale of our products businesses, and, indeed, our distribution businesses, to where capacity can be added in quite an incremental manner.

So it's not a major CapEx, it's not major additions of capacity that upset local supply-and-demand balances. But it has been a significant point of focus for us to invest where we need to invest, to maintain or grow our market share, but do it along the way of doing it smartly and either maintaining or improving returns along the way.

And given some backdrop of some tailwinds in the markets, and our ability to add capacity either into our existing footprint, which might mean upgrading equipment so that we get 10% or 20% extra capacity by replacing out an old piece of equipment, or adding an extra production line to where we already have, let's say, three in a particular location. And we've been able to do that in a smart way in terms of application of capital, and done it in a way that we're staying ahead of the market so that we're not sacrificing either customer service or market share, and being able to continue to avail ourselves of the growth opportunities that are there for us to have.

Okay, thanks. I'll try and move through these fairly quickly. Just a question, I hear what you say on Brexit, but surely you've had some currency effects in 2016. Surely, sterling was a big headwind? Senan, you might just quantify what that was?

Yes. I guess, looking at our numbers today, when you look at the EBITDA number there, in excess of EUR3.1 billion, I would quantify the impact of currency, if I look at where exchange rates were in 2015 and apply them to 2016, as being a currency headwind of about EUR70 million. Most of that's in sterling, as you'd anticipate, so about EUR50 million of that EUR70 million is in sterling.

But we've effectively absorbed that currency headwind in arriving at the numbers we report today.

And just two last questions on Europe. David, you spoke about the distribution business being solid in Germany, but distribution margins overall are flat sales, but margins are up. How is that?

A lot of different things. I think I mentioned in the commentary, lots of little things. I think we have improved some of our European items as well, though, particularly category management, some of our assortment issues, so procurement, things like that. I think we did manage to keep a tight rein on costs, as well, across our businesses.

Again, it's a mix of different countries as well. So it's a broad footprint we have, and so different country stories within that. But, overall, I think a decent performance within that year.

And last question, just in terms of, again, Ken, you spoke about Germany being a solid business, but you're exiting Germany. Are you exiting it in its entirety? And why? What's the decision to dispose of the businesses in Germany?

I wouldn't say we're necessarily exiting Germany. We, obviously, have -- as part of the Holcim/Lafarge deal we had three entities in Germany that came on the cement side, two integrated plants and a grinding station: one in the east, one in the south, and one in the west.

The integrated plant in the east and the grounding station in the west are what we announced this morning for sale, or being sold. That leaves us very much with the integrated plant in the south, and we see that very much as a complement to our Swiss business, and will be supportive of our Swiss business.

And, actually, in the southern part of Germany, that's the part of Germany that's growing the fastest, and certainly where the better pricing is. So we're quite happy to be left with that asset down in that part of the world, where it will be very complementary to the business in Europe and Switzerland.

Thanks, Ken. That brings us to an end of our presentation this morning. I would like to thank you, for those in the room, for your time and attention; and, indeed, those who listened in, or watched on the webcast.

As a Group, we will come back and inform the market of the latest development and trends at our Annual General Meeting, which is at the end, April 28. And we look forward to updating you then.

Thank you very much for your time. Thank you.