CRH PLC (CRH) 2018 Q4 法說會逐字稿

Good morning, ladies and gentlemen.

I'd like to welcome you to the 2018 results for CRH this morning.

My name is Albert Manifold, I'm the Chief Executive of CRH.

I'm joined on stage by a number of my colleagues.

On my far left, we have Senan Murphy, who is our Finance Director.

Next to Senan, we have Keith Haas.

Keith is the President of our Building Products business.

Onne van der Weijde is the President of our Europe Materials business.

And beside me here, Randy Lake, who is the President of our Americas Materials Business.

So the running order this morning is, of course, we're going to go through a brief presentation of the financial results we published this morning.

Also want to go through some of the trends that were evident in our business as we went -- as we delivered those numbers for last year.

2018 has been a very busy year for us actually, with a lot of initiatives running through our business, and we want to go through and discuss our progress on some of those.

And of course, at the end, as usual, we will have some Q&A and give you some thoughts about how we feel about 2019.

So just some of the key messages here before I pass over to Senan.

2018 was a year of record profit delivery for CRH.

Profits of EUR 3.4 billion, 7% ahead of last year, 2017, and margins ahead as well.

I'm very glad to see a lot of strong cash generation out of that EBITDA, very strong cash generation, 70% of our EBITDA being turned into cash.

Of course, a continued focus, as you would expect, on CRH on efficient capital management.

We will discuss quite a bit about that during the course of this morning's presentation.

And a good start to the profit improvement program that we announced at the end of May last year.

So Senan, maybe over to you to talk about some of the key financial numbers.

Thank you, Albert.

Our financial highlights on this slide speak for themselves.

Today, we're reporting sales growth of 6% over last year.

We're also reporting EBITDA growth up 7% over the prior year.

Now they're headline numbers.

And if you look at our organic growth, or if you look at the like-for-like performance against those numbers, you can see that we've delivered an organic growth, 3% on the sales line.

We've also delivered 3% organic growth on the EBITDA line.

And for us, we think they're good results, especially when you consider the headwinds that we faced across our business over the last year.

You'll all remember that we've had headwinds on the weather front, and we've had weather disruption in many parts of our business, particularly during some of the busy seasons.

And we've also dealt with a spike in input costs across many parts of our business over the last 12 months.

We're also reporting earnings per share growth today, which is up to 3 -- over EUR 3 a share.

That's a very strong growth.

And clearly, that reflects the underlying trading performance.

But included in that number as well is the gain that we made on the sale of our Allied business, which was completed at the early part of 2018.

Now as the CFO, clearly, the number that's on this page that impresses me most, the one I'm most pleased with, is our cash generation.

It's the results in terms of our cash performance.

EUR 2.4 billion of cash, as Albert has mentioned in the introduction, generated from our operations.

And what that EUR 2.4 billion of cash has allowed us to do over the last year is reinvest in our business, but it's also allowed us to actually buy back shares.

We spent EUR 800 million last year in terms of buying back shares.

And I'm also pleased to say what it's also allowed us to do is to propose an increase in our dividends, up 6% for 2018.

Thanks, Senan.

So look, a very brief overview of the key messages and, indeed, the key financial numbers for 2018.

I now want to turn to the trading operations, then give you a sense of how those numbers were delivered.

And firstly, I want to turn to the Americas and discuss exactly what was behind the delivery of those numbers.

I'm going to ask my colleagues, Randy and Keith, to take us through their individual businesses at the moment.

But first, I want to go through some of the key market backdrops that were there and how we delivered against those numbers.

Now it will come as no surprise to you that there was significant weather disruption across all construction markets in North America last year, and we were impacted by that.

However, despite that, we saw quite a favorable economic environment, good GDP growth, good economic activity and, again, continued record job creation.

Good momentum in our businesses, particularly in the second half and particularly in the last quarter of the year, was evident, and that's continuing on to 2019.

I'm sure the guys will talk more about that.

And despite the significant weather disruption and, of course, very significant headwinds on energy cost, I have to say we focused very much inside our business, improving our operations, focusing very much on commercial excellence within our business.

And I think we delivered really good performance across our businesses in 2018 in the U.S.

So maybe I might turn to you, first, Randy, to take us through our biggest division, the Americas Materials Division.

Yes, thank you, Albert.

We were pleased with the performance in 2018 where we saw sales, EBITDA and margins move ahead of prior year.

And despite some of those significant challenges that Albert referenced, we delivered record margins during the course of the year.

On a like-for-like basis, we saw a slight turn backwards in margins, primarily in and around the well-documented weather events in and around Texas, the northeastern part of the United States and Eastern Canada and, certainly, the input cost impact in and around our asphalt business: bitumen, diesel and natural gas.

But I would say, overall, we're very happy with what's happening in regards to the States in particular, and their involvement in the infrastructure space, a real active participation in taking ownership of their investments.

When you underpin that with the federal program, we're seeing increased bidding activity across all of our markets.

And with that increased activity, obviously, we're seeing an increase in our backlogs, but more importantly, margins are improving in those backlogs.

It's been a busy year, certainly, from an integration standpoint.

We'll talk a little bit about Ash Grove in a few moments.

But integrating Ash Grove along with Suwannee American full year, happy with the progress there, delivering on our expectations in and around profitability, the identification and then the delivery of synergies.

So off to a good start, good conclusion to '18, good momentum going into '19.

Keith?

Thanks, Randy.

For Americas Products division, it was another strong year like our Americas Materials Division.

As a reminder, our business is underpinned by residential and nonresidential construction in North America: United States and Canada.

And as Albert alluded to, there are good market fundamentals there, probably mid-single-digit growth in both of those key markets.

We were, however, impacted by the unfavorable weather that's been well documented.

We have a lot of business that we do in the first half of the year.

So this constrained our ability to demonstrate strong organic growth behind those market tailwinds.

But I'm proud of our teams that really focused hard on our operations, on commercial excellence, on operating efficiencies and cost reduction.

So with the 2% like-for-like growth in our sales for the year we were able to demonstrate a 6% growth on our like-for-like profitability and good margin improvement for the year.

So overall, a very strong performance for our Americas Products team.

We did get off to a slow start due to the weather in the first half of the year, but we've built momentum through the year.

We had an excellent fourth quarter, and that gives us an optimistic outlook for 2019.

Thanks, guys.

Good delivery across 2018.

And hopefully, we can see the same across 2019.

Good momentum coming into the year and, certainly, a good start to the year as well, thankfully.

And right now, I'd like to turn to Europe and, indeed, Asia.

And before I ask Onne to take us through the Materials business, and Keith is actually going to cover off the Distribution and Products business, again, I just want to give you a backdrop to how the environment in which we traded across Europe.

And actually, it was quite pleasing to see the continued recovery in Europe unfold.

And in 2018, we saw that happening across some of our very big markets.

Particularly in core eastern access of CRH, which is very important, which is high growth, we saw a good delivery as well.

Really good to see [off] cost headwinds that we saw in the businesses again and, again, a good start to the year across Europe.

Onne, maybe you might take us through the Materials Business, and Keith will take us through Products and Distribution.

Absolutely, a pleasure to do so, Albert.

So good growth in sales development in Europe as well.

So we had a top line growth of 10% and also followed by a 9% increase in EBITDA, so very pleasing results.

Like-for-like, we had also a good -- if you back out the, what we called the Beast of the East last year, and so we had a slow start of the year.

But taking that into account, the cost inflation we had and the energy cost inflation and the Brexit uncertainty, very pleased to have a 4% like-for-like growth.

Similarly, good volume development, especially in the East: Poland, Serbia, Hungary, very good growth over there.

Also, beginning of the year, last year, we had a good start with pricing.

It accelerated a little bit towards the end, and it is continuing in 2019.

So all in all, Albert, very pleased with the results for 2018 and hopeful for 2019.

How did it go for you, Keith?

Thanks, Onne.

Our trading performance in our Europe Lightside division was very similar to Onne's performance in Europe Materials.

We service mostly Continental Europe, but about 15% of our business is in markets outside of Europe, Australia and others.

It was a very good year for that.

On the continent, we saw good market backdrops in our major economies.

And the U.K., which is the major market for our Europe Lightside business, was stable, which was probably a little bit better than expected, given the uncertainty that's been spoken to about in the U.K. So all our businesses within Europe Lightside, we were able to advance.

Together, we were able to generate a 5% like-for-like improvement in our turnover, a 6% move forward in terms of profitability and 5% on a like-for-like basis in the division.

Our margins were basically in line with the prior year.

And that, I view, as a very strong performance because the division faced a number of headwinds on the cost inflation area, primarily in the world of labor, a lot of labor cost input inflation, as well as key raw materials like steel and aluminum.

So overall, a very good year for Europe Lightside.

Like our Americas business, we finished strong and, again, that points us toward further growth in 2019 in this division.

Now looking at our Distribution division.

It was a little bit more challenging environment, as you can see by the numbers on the screen.

I would point out that while we're reporting a significant decline in profitability and in profit margin, that's really due to one-off items, including the divestment of our Benelux-based DIY business, which was done in July of 2018.

Taking that out of the equation and you look on our like-for-like trends, we had good momentum in some of our key markets in Europe, in the Netherlands and in Germany.

Some challenges in some of the other markets, including Switzerland, where we faced sort of a number of challenges, especially in Switzerland for the last several years, but we started getting that turned around in the second half of the year and saw improving trends in our results coming out of Switzerland in the back half of the year.

So overall, on a like-for-like basis, broadly in line in terms of profits and in terms of margins for the year in 2018.

As you know, we announced about mid-year last year a strategic review of our Europe Distribution operations.

We're well advanced in that.

It's gone well.

It's a very detailed and thorough review of our business.

We've made a lot of progress so far.

We're not quite concluded, but we're looking at all options in terms of value creation for our shareholders for this division.

Thanks, Keith.

And lastly, to our Asian division, our smallest division.

It actually represents about 1% of EBITDA.

And during 2018, we saw the market recover there, in the Philippines in particular, which is what we're talking about here.

It recovered quite well on the back of good strong residential, non-res and infrastructure growth.

And we saw in our business volumes and prices moving ahead.

Unfortunately, we were also hit with the same challenges with regard to cost increases that we saw in Europe and the Americas, and we just failed to be able to pass back on enough of those cost increases to our customers to recover the profitability.

We significantly reduced the profitability, a very disappointing performance with regard to the EBITDA delivery.

And of course, margin got compressed as well.

Now we worked hard during the course of 2018 on our businesses.

We've taken a lot of cost out.

We're doing a very ambitious program to swap our production from offshore production to onshore production.

And as an industry, we're working with the government and have been successful in getting the government to support onshore production of cement and clinker.

And we saw the impact of that towards the tail end of last year with an improving situation.

And we're confident that 2018 represents the trough in our EBITDA performance in the Philippines, and we expect a recovery during the course of 2019.

So that's just a quick summary of the overall trading performance.

Good performance across the businesses in general.

But across -- let's see how the trading performance moves into financial performance.

And Senan, I might ask you to take us through a few slides to explain that, please.

Yes, what I'd like to do for the next few slides is really just consolidate or pull together the divisional trading updates that you heard from each of my colleagues here and paint for you the group picture.

Starting with, obviously, our EBITDA performance.

When you look back in terms of how we've done over the last 12 months, as Albert said in the introduction, record profits this year, just shy of EUR 3.4 billion EBITDA delivered.

And that's a 7% growth over prior year.

Now there's a lot of moving parts in that 7% growth, pluses and minuses throughout the year.

And what I'd like to do is maybe pick out just a few of the highlights that stand out over the year.

Clearly, I'm going to start with organic growth.

And if you look at our organic performance across our Americas and our European businesses, in total, that added up to 3%, or in euros terms, that's about EUR 100 million of organic growth year-on-year.

The other big standout positive year-on-year is the contribution from acquisitions.

This year, we now have a full year earnings from Suwannee, the acquisition we did in Florida.

We've a full year earnings from Fels, the German acquisition -- or the European acquisition, actually, we did last year.

We also have a half-year contribution from Ash Grove, which closed in June of 2018.

And then we have 45 bolt-on deals that we added throughout 2018, of which there is a partial year contribution in there.

So you can see a big contribution on the acquisition front.

Not everything is positive.

So when you look at our record profits, obviously, you need to take into account some of the headwinds we faced, and currency is -- currency translation is one of those.

So you can see EUR 100 million of headwinds on the currency translation side that we absorbed in arriving at that EUR 3.4 billion.

Moving on to our cash performance over the last year.

As the CFO in the business, obviously, you'd expect me to think about this as the most important metric, or certainly the one that I spend a lot of time looking at.

I look at our cash performance on a daily basis around the group.

But this is not just a financial measure; all of our operating companies care about cash.

Everybody focuses on it.

We, obviously, reward people based on our cash performance.

So when you look at our cash performance of EUR 2.4 billion generated over the last year, one of the standout things is the conversion from earnings of EUR 3.4 billion into cash of EUR 2.4 billion.

That's north of 70%.

So it's another year of very high conversion from earnings into cash.

And again, there's a lot of drivers behind that.

But a few that stand out really are that we start, really, in a position where we've got strong quality of earnings.

There's a lot of focus around the group on managing our working capital.

So clearly, that's an area that helps us in terms of delivering that cash performance.

Also, we have a healthy balance sheet, and with that healthy balance sheet means that we have normal debt levels.

We have a very strong investment grade credit rating, which then all means that we're able to control our interest costs, and that leads to the type of cash generation you see on this page.

I've mentioned healthy balance sheet.

So let's talk about our debt performance over the last 12 months.

If you look back on this slide, you see, from left to right, the movement in debt during 2018.

We started out the year at EUR 5.8 billion of debt.

That was 1.8x net debt/EBITDA.

As I mentioned, we had a very busy year on the divestment front and also on the acquisition front.

And you can see that we have EUR 1 billion of cash outflow net between acquisitions and divestments over the year.

But what stands out and what's most important on this slide is that strong cash generation that we talked about, EUR 2.4 billion of cash.

What that has allowed us to do is reinvest in our business, but it's also allowed us to give back EUR 1.3 billion of cash to our shareholders in the form of dividends and in the form of buybacks.

And with all those moving pieces, we still ended the year at just under EUR 7 billion of debt and just under 2.1x net debt/EBITDA.

And that level of debt for us is something that we think about as a comfort level within CRH.

Thanks, Senan.

Look, I think when you see that performance being translated into that type of financial performance despite the progressive change you see in CRH, despite the dynamic change you see around us, there is one constant about CRH: that commitment to strong, strict financial discipline that runs through our balance sheet and our cash generation, it's never changing and really important to our investment story and really important to us as a business.

2018 is interesting to look at.

It is a record year of profitability, but it is only a snapshot in time.

It doesn't tell you anything about the story of CRH in terms of where we've come from and where we're going to.

What I'd like to do over the next few slides is explain to you exactly what our plans are as we step and push on with the next phase of growth for CRH.

But to do that, I've got to go back to the past just to set the scene.

This slide here looks at our performance over the last 5 years.

And you can see a very significant change in pace and delivery within the business: increased revenues, profitability, improved margins, improved cash and improved returns.

And of course, the markets recovered during that period of time.

But the markets didn't recover to that pace.

We repositioned, we redeveloped, we reorientated and we have improved our business during the course of the last 5 years.

And of course, for us, the key thing we focus on is returns and cash in CRH, the true measure of any investment.

And you can see over that 5-year period, we've actually doubled our cash generation, and we've improved our overall returns by 370 basis points.

And the importance of this guide is not to say or pat us on the back on a job well done.

That's yesterday's news.

It's to illustrate to you the momentum that is there within our business.

And that momentum carries us forward, the work we're doing and the work we're going to do as we push on to the next phase of growth.

Interesting to look inside that to see exactly where that was delivered.

Look at the organic growth within our business, and this is against the backdrop of a fairly anemic flashed Europe over the last 5 years, of course, with some recovery in the U.S. But look at 3% solid CAGR organic top line growth and happily turning that with 25% leverage into an EBITDA CAGR over the last 5 years of almost 10%, a really strong performance in our core heritage businesses.

Of course, we've been very active on the acquisition front, good inorganic growth.

We acquired businesses that last year contributed almost EUR 1.5 billion of EBITDA.

About 50% of that came in Europe; about 50% of that came in the U.S. That balance is important to us.

But interestingly, of course, you can see the EBITDA margin, accretive to the overall group margin and part of the overall improvement story within CRH.

Senan, you might take us through some of the financial impacts over the last 5 years and how we've dealt with them.

The strong financial discipline has been a hallmark of CRH over the last number of decades.

And I think if you look back here specifically over the last 10 years and look at our net debt-to-EBITDA ratio, it comes out at 2x.

And despite the acquisitions that Albert talked about on the last slide over the last 5 years, we've still maintained a very healthy balance sheet.

You can see in 2015, we actually stretched our balance sheet to be able to afford the acquisition of the LafargeHolcim assets and also to be able to afford the acquisition of C.R. Laurence.

And the important thing is that within 12 months, we had paid our debt down to normal levels again.

So we're back at normalized levels.

So when you look at that metric, I think what's important is, going forward, that strong financial discipline is something that still remains here in CRH today and is something that we're wedded to going forward.

If you look at our cash generation, look back over the last 5 years on cash, generated over EUR 10 billion of cash.

Again, that's approximately EUR 2 billion a year -- just over EUR 2 billion a year in terms of the average cash generation over that period.

What that past performance does for us is it gives us confidence about the cash targets that we've set for ourselves as you look out over the next 3 years.

But also what's really important about that cash performance is that it gives us optionality going forward.

It gives us optionality in terms of how we create and maximize value for shareholders, be that in the form of acquisitions or investing in our business or be that in terms of returning cash to shareholders.

Thanks, Senan.

We've set the scene: record profits in 2018, good delivery across the last 5 years and good momentum coming into the business.

And the question now for us and for you, our shareholders, is how are we going to use that momentum going forward to build further value as we push on with the next phase of growth?

So against that backdrop, I just want to set out to you what we consider to be some of our key strategic priorities or objectives and how we think about the business.

They haven't changed in the last 5 years, and they underpin how we think about the next few years.

First and foremost, portfolio management.

You have seen us actively manage our capital base during the course of the last 5 years and that, of course, is going to continue, very important as we reposition the business towards higher growth areas.

You've seen our unerring, relentless focus on the efficient allocation of capital, either internally and, last year, externally, for the value creation for our shareholders.

But at the bedrock of it all, the simple principle that we have had in CRH for decades: we build better businesses.

The most sustainable competitive advantage in any business is continuous business improvement because every year you move the goalpost, you get better and everybody is chasing you.

And that is embedded deeply within CRH, and it's what will lead to structurally higher returns, margins and cash for us in CRH in the years ahead.

So how have we been doing against these particular objectives over the last number of years?

Well, the portfolio is probably known to most of you.

Of course, some of the areas may be not immediately obvious.

We have shrunk down from 7 divisions of 2012, 2013 down to the 5 -- 3 core divisions now at this stage.

We have gone narrower and deeper.

And look at some of the numbers there.

1/3 of all the businesses we owned in 2013 have been disposed of.

Over half the profitability of last year, in a record year, we delivered with businesses we acquired in the last 5 years.

And our program continues on and continues on.

That efficient use of our capital base, allocating, reallocating, is very important as we drive value in our business going forward.

The allocation of capital, both within our portfolio and without.

We have disbursed EUR 3 billion of our shareholders' cash back to them over the last 5 years.

That's what companies should do.

We generate an enormous amount of cash on an annual basis.

And we want to give it back to shareholders and add to share price growth, profitable growth or cash disbursements back to them, and we've been committed to doing that for the last number of years.

And finally, this commitment to continuous business improvement.

You can see the improvements we've had in the business for the last 5 years, the market can deliver that, we deliver that within our businesses.

And of course, we've now last year announced a further program for profit improvement.

And turning to that profit improvement program.

Last March, at the end of -- last May, excuse me, we announced a 300 -- a target to increase our margins by 300 basis points going forward.

And we didn't just dream this.

This was well thought out, and it has been enabled by the portfolio review and the reshaping of our businesses back into certain 3 core markets where we have a unique core competency in those 3 divisions.

And those 3 divisions just don't stand alone.

They are businesses that drive value for our shareholders by the way they interact with each other, the way they supply product to each other, the way they provide best practice and knowledge-sharing across their businesses, the way they service the market and the way they innovate to develop future opportunities together.

And even within the divisions themselves, that relentless pursuit we have to vertical integration, the key differentiating factor for CRH is how vertically integrated our businesses are, more so than any other business in the building materials space.

We drive value up and down the chain and grab value and profits all the way through the chain as we do that.

And actually, that's what the magic dust of CRH is all about.

It's not about the people on this stage today, because we change every few years.

It's the business model that CRH has that consistently delivers industry-leading returns and cash generation year after year.

And the answer is in the business model that we have.

So we have a clear model in place, but we also have a clear plan to improve upon that model, and we announced that last year.

And we're looking at this, have this morning 3 of the key people who are responsible for delivering that plan with their teams.

So I'm going to ask Randy first and then Onne and Keith to take us through the areas that they've got primary responsibility for.

So Randy first, you're leading the charge on procurement.

Maybe you want to just take us through your thoughts and your plans in that area.

I'd say we're well pleased with the progress so far in 2018 leading into '19 in and around the concept of global procurement.

Yes, we really view that as a key strategic lever to delivering and helping to deliver on the 300 basis point improvement.

And the reason we believe that is actually because we have experienced it so far, even in work that has been done through 2018.

So we know when we manage our spend and coordinate that spend centrally we deliver higher savings, roughly 2% to 4% higher savings than if those same items were procured locally.

And it's all about really category management.

And I often say, we organize ourselves globally but activate locally.

So we've built our teams from a group to a division level to interact closely with our operating entities.

And those teams are delivering everything from global IT licensing agreements to coal for our U.S. cement operations, but real, tangible results that our operating folks can see, taste and feel.

That builds adoption and it allows us to continue to create momentum.

And thus far, through 2018 going into '19, we've identified just north of EUR 100 million savings in terms of procurement over the next 3 years.

Onne?

And similar to you, Randy, I see a lot of opportunities in process improvement by leveraging our group expertise.

A good example for me is logistics.

Up until recently, we were very locally managed.

Every group company was doing it on its own.

We have now a much more concentrated approach and coordinated approach, and we're using and sharing best practices, so good opportunities there to reduce our cost and optimize our service delivery.

But also in energy and energy -- saving of energy, reducing energy cost and usage, we have invested more in 2018 in [any of our] platforms.

We have increased our capability to use a version.

We're targeting another EUR 10 million in savings in 2019 alone.

But also, more classic, we're optimizing our footprint.

We closed one of our smaller production facilities in Poland, and we're concentrating at the more efficient facilities.

And by doing so, we improve our competitive position.

Over to you, Keith.

Thanks, Onne.

Along with the procurement and process savings that Randy and Onne outlined, which really cut across all our businesses, structural cost improvements are going to play a big role in our profit improvement program moving forward.

And these structural cost savings are really enabled and driven by the fact of what Albert talked about, going from 7 divisions a number of years ago now to 3 divisions, which are larger, more integrated platforms of scale.

And this simpler organization format is allowing us to really reorganize our management structures, streamline our supporting functions from the operating company level all the way up to the center, and consolidate our regional network of offices that supported a more regionally operated business.

And as we look through that, we've identified up to EUR 100 million of structural cost savings out of the organization.

Implementation of those plans began last year.

And so far, we're progressing well.

Thanks, Keith.

Look, you've seen exactly the plans that have kicked off, those progress works being taken.

One thing I want to say is that about 70% of the initiatives that we're taking to deliver those 300 basis points are internal to us.

They are within our control, that we have the chance and the power and the opportunity to deliver.

And that's really comforting for us as we go forward.

Just one last area we want to cover is, who are we now as a company in terms of our positioning in the markets that we're in?

Because the CRH of 2019 is a very different CRH to the CRH of 2015 or, indeed, 2013.

As Keith has said, we've been reorganized from 7 divisions back now to 3 divisions, focused on the area of core competency, much more focused.

And now with profit improvement, global focus in areas such as increased efficiency, increased productivity and increased effectiveness into how we service our customers and our markets, very much have been in the fore of what we do.

So it's probably worthwhile as we have our colleagues here to take us through the individual businesses and how they are thinking about the position of the businesses in the markets that they're in and how they're thinking about their opportunities going forward.

So first, Randy, I'm going to turn to you, run our largest business, Americas Materials, and just take us through your thoughts in terms of the next few years in Materials business.

Yes.

You certainly would be well familiar with Americas Materials.

We are the #1 building materials business in North America, a very large footprint across 44 states and 8 Canadian provinces, and I think really highlighted by the investment in long-term reserves in those key markets.

I think over the years, we've done a good job at not only driving regional balance but I think, more importantly, balance in terms of end-use exposure.

And the map on the right-hand side kind of talks or tries to explain a little bit of that.

If you look in the northeastern part of the U.S., it's our largest and most profitable market across all of AMAT, really characterized by densely populated areas, a large infrastructure system, harsh winters, drives a large amount of repair and maintenance activity.

And so for our business there, it's just a consistent delivery of returns and cash.

As you move down into, what I call, the Smile States and up to the Pacific Northwest, places like Florida and Texas, Seattle -- or excuse me, Washington and Oregon, there's a little different dynamic there.

It's high population growth.

Florida is growing at 3x the rate of the national average, more folks moving into those particular areas.

So the market is more descriptive of residential and non-res construction.

We have good positions in those particular markets to be able to build upon and take advantage, but it's a great complement to what's happening in the Northeast.

And then in the central part of the United States, I would call that stable.

We have had long-term positions there.

We have an opportunity to build on those positions through the Ash Grove acquisition.

But those markets kind of consistently deliver year in, year out as well, but a different dynamic than the other parts of the U.S. And I think as they work together, as it does economies all over the world, the states' economies are slightly different.

And I think that's important in regards to the ability for us to deliver consistent returns and cash.

Certainly, the vertical integration model is important.

We have done this for years in terms of building our position around aggregate in the last 18 months, significant investments allowing us to do that in the cement business as well.

And really, I think that positioned us in some of those high-growth markets to take advantage of the dynamics that are happening, again, in the South and up into the Pacific Northwest.

When you look forward, especially in just the nature of our business and the aggregate business in particular, 70% of the aggregate reserves and production are still in the hands of private entities.

Most of those are integrated.

They're integrated into ready-mix businesses or asphalt business.

They look much like ourselves.

So it gives us a unique perspective, I think, a competitive advantage, as we look to continue to consolidate markets within the U.S. And I think fundamentally, if you believe in the U.S. construction fundamentals and you look at our portfolio of businesses there and really believe from a long-term cash and returns standpoint, we're well positioned.

Talked a little bit about the nature of vertical integration, and we tried to depict this on the left-hand side.

We really have a unique integrated approach compared to our most natural peers, who are primarily in the aggregate space.

If you look at the chart there, 15% of our revenues are derived from the sale of aggregate versus 60% to 75% on our peer group.

That integrated model, we believe, gives us a competitive advantage and insights into the market.

I'd say 3 things in particular.

One, commercial insights.

We understand what the customer wants and expects.

We understand the levers that are required in individual markets to drive performance.

From an operational standpoint, the idea of base loading a more heavily capitalized business such as cement or aggregate is important.

To have that, that drives efficiency and improvement in your plan and consistency in those plants.

And from a customer standpoint, we understand the products and services that our customers need.

But I think, more importantly, we provide an integrated solution specifically in and around the infrastructure space that no one else can deliver on.

And I think from that standpoint, it's unique.

But moving to the right-hand side, it doesn't matter or -- and oftentimes, I'd say people look at the margins.

And our business say, well, they're slightly lower than your direct peers.

Our focus is on cash and returns.

And we think the vertical integration model is the best way to deliver on that.

It doesn't mean we don't manage our business by line of business.

So on the right-hand side, we show a comparison for gross margin in regards to our aggregate business.

And you can see 28% gross margin.

I would call that best-in-class when compared to the 2 largest peers of ours in that space.

But at the end of the day, the model is -- and our model is about driving shareholder value in and around returns and cash.

The vertical integration drives superior performance there.

I think part of that is certainly the internal focus that Albert talks about, continuous improvement.

The other way for us to drive value is the creation of platforms.

And over the last 18 months, we've been fortunate enough to acquire the Ash Grove business, a full year of Suwannee American.

You combine that with the Canadian cement business, we have a leadership position now in North America.

It's given us exposure to those faster-growing markets in Florida and Texas, Utah and up in the Pacific Northwest.

But I think, really important, we'll talk about this a little bit, is the overlap and the ability for us to self-supply, again, hallmarks of that vertical integration model.

We are the largest consumer and purchaser of cement in North America.

So we have a significant opportunity there to benefit from this platform but also to fill in the gaps in that central part of the United States where there's a tremendous overlap with Ash Grove and our existing footprint.

And we talk about Ash Grove, and I mentioned earlier, we're on track delivering, as expected, from a profitability standpoint.

We announced at the end of last year EUR 100 million of synergies.

Happy to say this morning, we've identified another EUR 10 million, primarily in and around the commercial procurement and G&A space, with maybe an unequal weighting on the operational side.

And just a thanks to Onne and his team.

When we began to integrate this business, just the technical expertise that we have around Europe and Asia and Onne's team, not only helping us to evaluate the deal but then to begin to execute, it's really boots on the ground.

So we have people embedded in our business from Onne's team.

So Onne, I just thank you and your team for the help in letting us accelerate performance there.

Pleasure to do so, Randy.

And maybe that's much easier for me to do because, in a way, your business is so similar to ours, actually.

Like you, we have a very much integrated business model, and we are #1 in a lot of positions we are in, in the Northern Europe.

An attractive footprint.

And like Randy has an area in the East, we have the area in the West where we have more stable markets, continuous growth, especially focusing on the RMI.

And I don't have a Smile State, but we -- I have the East.

And the Eastern markets have a much better growth of up to 5% and above.

And that has also worked out during the last year where we had the Eastern region performing very well with -- especially Poland and Romania and Serbia and Hungary growing very well.

So if I move on.

Like you, Randy, we have a very uniquely integrated model.

And I took here the comparison of cement like you did for aggregates.

We have about 20% revenue generation from cement, whereas our peers typically have between 45% and 60%, as you can see right here.

But if you look at our margins, we are very competitive like in the case of aggregates.

Our margins are at par or better than the competition.

And I think that is at the core of what we are doing in CRH and the integrated business model.

We want to make sure that we secure our baseload and that we invest also in -- and in addition to what Randy was saying before, that we make sure that we can always sell our product, that we have a good utilization of our assets.

And that's why we invest in other businesses and integrate them.

And I would like to remind you these businesses have a much lower capital requirement than all the other businesses.

So we compete line for line for businesses, either the cement, aggregates, ready-mix, whatever we do, that combines -- what we are doing is we're competing and achieving and targeting return on assets and generating cash.

And moving from our Materials businesses to our Building Products businesses, it's an exciting development that we are now unified in a single building products division within CRH.

And I just want to take a few moments, maybe give a snapshot of what that division looks like and bit of the road ahead for it.

So it's a big group.

We're about EUR 10 billion in sales, broken into 4 major product platforms, as you see on the graphic there.

About 80% of our EBITDA and profits is derived from the 3 sort of legacy Building Products platforms that we had, doing very similar things in Europe and in North America.

Our first will be our Infrastructure Products platform where we engineer and manufacture both enclosures and structures, primarily for the protection and the delivery of critical utilities like water, electric and telecoms but also structures for transportation infrastructure.

Our Architectural Products business designs and manufactures innovative products that are really geared toward the improvement of the exterior built environment, with one of our biggest markets being the outdoor living space.

And finally, our BuildingEnvelope group, which, again, designs, engineers and manufactures high performance and customized enclosures.

They close -- the BuildingEnvelope, close out the structure of a building, primarily for nonresidential markets but also a growing residential business.

And sort of taken together, again, it's EUR 10 billion in revenue, very good market positions in many parts of the world and very strong performance over the last 5 years.

But kind of why are we putting this together as one division?

And I think it's really about repositioning CRH for the changing needs of the construction world.

There are a lot of trends that are happening around us that are requiring us to adapt and evolve.

Some of those would be the fact we have labor shortages in our markets, and primarily in our customers.

So we have to adapt to bring products to market that ease and speed up the pace of construction on job sites.

Within that, there's a demand from our customers and from owners, in general, for more integrated products and solutions and logistics from major suppliers like CRH.

And as you well know, there's more demanding environmental and regulatory factors that feature into our products, which actually increases the performance of buildings, and that's pushed back onto companies like us to come up and design and bring to market those types of solutions.

And we've had lots of very good businesses, pockets of excellence around the world, but we've approached the addressing of these needs and the evolution of our business in a bit of a fragmented and regional manner.

And the trends that we're seeing are really global.

They're running at different pace in different parts of the world, but they're happening everywhere.

And so for us to take full advantage of it and generate the highest cash and returns we can for CRH, we viewed that to bring this into a unified, more singular approach in terms of strategy and execution to address these needs through our Building Products division is the best route forward for us.

And so what are some of the features of this division as we get started?

It's effective January 1, and what we'll be looking for is kind of full leverage of our scale, which allows us a broad reach but also procurement advantages, process advantages like we talked about before, and our capabilities, our talents within our organizations, our product development and branding and operational capabilities.

Increased integration of our businesses, and Albert spoke about it.

And that's integration within the Building Products division, with businesses that make that up in terms of how they bring solutions to customers together but also tighter integration and better integration with our Materials businesses, both in the Americas and in Europe where we can capitalize and take advantage not only of the great market positions that our businesses have in Randy and Onne's world but also that pull-through demand from upstream in their businesses, downstream through the businesses in my division to increase overall volumes and returns for CRH.

And you think about what role does Building Products play for CRH?

And I think it's quite important that we're aligned to attractive markets.

Our business, as I spoke about before, is driven by the nonresidential and residential aboveground construction markets primarily.

And that provides good balance and good growth prospects through the cycle as it counterbalances the more infrastructure-focused businesses in Randy and Onne's world.

And our business' one feature then would be kind of a lower level of capital intensity, kind of like the downstream products you spoke about, Onne, where we have the ability, once we have established positions, to generate very attractive returns over the cycle and, given the low capital intensity, very high conversion of profitability into free cash.

And so as we look forward in terms of value creation for Building Products, what we'll see is, again, as I spoke, an increased integration of all of our businesses.

And through this, we'll be providing that bundling of logistics, services and a wide range of products that, quite frankly, our customers are demanding.

And our customers are increasingly global and that -- therefore, it's raising the bar of execution for us.

And we see, within the division, significant value-creation opportunities over the long term.

We have great businesses, but they still have room to run to achieve their full potential in existing geographies.

And also, as the needs of our customers and the circumstances in the world change, we will grow into new geographies and new adjacent product spaces that continues the evolution of our businesses to create continuous value and create more cash and profitability for the company moving forward.

And everything we do in Building Products is completely aligned with CRH's core capability around buying good businesses, building them into strong integrated platforms and driving continuous business performance through them over time.

Senan?

Thanks, Keith.

It's good to hear an update from you on our new Building Products division, and especially to hear about key value creation opportunities you see ahead.

So I'd like to just use the last few slides here to look forward now, and this slide specifically here, I'd like to use this to talk about our capital allocation thoughts as we look forward.

It's important to say upfront that any of our capital allocation thoughts or conversations are all really motivated around creating value for shareholders -- or maximizing value for shareholders.

So it's important to say upfront, we have a healthy balance sheet today.

We intend to keep it that way going forward.

That's a priority for us.

So maintaining the health of the balance sheet, maintaining our investment grade rating is important to us.

Now we are throwing off a lot of cash, and that's a fantastic opportunity for us.

That gives us optionality as we look forward.

On the one hand, we can use some or all of that cash to reinvest in our business or to acquire capital -- returns-accretive businesses going forward.

On the other hand, we can think about giving some or all of that cash back to shareholders in the form of dividends or in the form of buybacks.

Specifically on dividends, what we're happy to reiterate is that our progressive approach towards dividends.

So as we grow our earnings as we look out over the coming years, we intend to keep growing our dividends.

We keep on building back our cover.

Our cover today is at 2.5x.

And as you look out over the coming years, we intend to keep building that cover so that we can continue to be able to maintain or increase dividends into the future just like we did over the last 40 years.

On buybacks.

Over the last year, we did EUR 800 million of buybacks.

We announced another EUR 200 million before Christmas, we've EUR 100 million done, as Albert said, as of today.

The remainder of that will be completed by the end of March.

Buybacks now are an ongoing part of the way we think about capital allocation going forward.

So it's there for us to think about it, and when this phase of the program is over, we'll be back to you to update you in terms of further phases.

Obviously, we'll go through approvals at our AGM in terms of getting approval from our shareholders to be able to issue and buy back more shares, but that should be something that you think about from us going forward where we will constantly update you in terms of how we're doing.

Thanks, Senan.

So just to conclude, you've seen the performance of 2018, a really good, strong year.

We've shown you what we've done over the last 5 years.

And you can see the momentum that's been in our business and it continues forward at the next -- for the next phase of growth of CRH.

We've shared with you as we have before, our guiding principles in how we think about the strategy of our business, and indeed, how the short-term issues that we're thinking about as we work forward to deliver this 300 basis points improvement, all of it focused on one thing, driving returns and cash to drive shareholder value.

That is our relentless, unyielding focus at CRH and it will remain so.

Just specifically with regards to 2019, as you would have picked up from some of the comments, we've got off to a good start actually.

The momentum of last year in both of our major markets in the Americas and Europe has been good and we think it will continue on.

Of course we'll update you as we go through the year regularly, but off to a good start.

We're very much focused in terms of focusing on the continuous business improvement programs we have in our businesses.

Building better businesses is fundamental to what we do in CRH and none more so than now.

We have specific programs in place to deliver over the next 3 years and it's to work with that, now we go, and we'll update you during the course of this year and the next 2 years, following on our progress and our journey.

But of course, underpinning it all, as Senan has said, an absolute relentless focus on strong financial discipline, maintaining the optionality that, that balance sheet gives us, and of course, focusing on increasing and improving our very good and solid cash flow to our businesses.

And we're confident 2019 will be another year of progress for CRH.

So that's the end of this part of the presentation this morning.

We're now going to move to Q&A.

And if I can ask you in the room please just give your name and the name of your institution when you ask a question, because there are people are watching on the lines.

I'm also conscious of the fact that more and more people are dialing in to this so I want to give sufficient time at the end of the presentation for that as well.

So let's move at the first question here please.

Yes, it's coming.

Elodie Rall from JPMorgan.

So my first question would be on Cevian Capital, since they took a stake in your capital earlier this year.

Can you comment if you had any discussion with them?

And I would appreciate any comments that you have on that.

And my second question is on your U.S. outlook, you're talking about trends to stay to -- volumes to grow at similar pace as last year.

But last year, you had some weather impact.

So could you quantify that weather impact and how that comes into play in your guidance for 2019?

Okay, so 2 questions there.

One was about -- commenting about on accounts regards to Cevian Capital's investments in CRH and any discussions we may have had with them.

And then also, about the outlook for the U.S. performance this year in terms versus last year and also about the weather outlook -- weather impact on last year, I think that was the question.

So I'll ask Senan maybe at the end to come back and talk about that rather than before.

And I'll ask Randy to comment on the outlook for volumes and prices, and I'll deal with the question regarding Cevian.

We have many investors in our business, and we speak to all investors.

I have absolutely no intention to discussing the discussions I have with individual investors.

Nobody would want that.

Nobody down the line would want me discussing with anybody else what we talked to them about individually.

We're an independent business, focused on delivering value through the creation of better cash flow and higher returns for all our shareholders.

That remains our simple focus.

Nothing changes before or after any investor comes or goes, because we have a clear plan in place to deliver that.

The numbers last year are a record performance for CRH.

We've produced industry-leading returns, industry-leading cash, and we have a plan to improve upon that, and that's where our focus is going to be on our business going forward.

And we openly engage with all shareholders with a view towards doing that and we intend to continue to do that.

Maybe I'll turn to you, Randy, in terms of volumes and prices for this year's expectations?

Yes.

And hopefully, we tried to describe a little bit with the map that I walked through.

Obviously, there's differences in terms of the rate of growth based upon kind of the makeup of those markets.

And so I would say, on average, it's going to be low single digits on the aggregate side as well as on the pricing side.

But as you can assume, that rate of growth will be higher in the Smile States and out in the Pacific Northwest.

We tend to spend a lot of time with our customer base.

Obviously, a big part of our customer base are the DOTs.

So we have clarity in regards to what projects are coming up, and that's transparent on a state-by-state basis.

But interaction with our customers across the entire platform of the business, we'd be comfortable with stating it a low single digit growth of pricing and volumes.

You certainly would see different words from folks that we would compete with within the U.S., but I think our information from our customer base really gives us clarity about what will happen into '19.

And just on weather, I actually addressed that.

Probably, the easiest way to think about weather is it had an impact across, obviously, many parts of our business over the last year.

And the way I'd probably articulate it best is operating leverage.

Our operating leverage for the group in 2018 was 11%.

If I take Asia out that, it was 14% for the Americas and Europe.

And we would have expected that to be north to 20% in a normal environment.

And so really, what weather is showing you is the impact in terms of the operating leverage across the business in terms of performance.

And I'd say, obviously, operating leverage is something you should look at over multiple years rather than any one year, but that probably gives you an indication of what impact the weather had for us this year.

It's Paul Roger from Exane BNP.

A couple of questions.

First, Albert, maybe to push you a bit more on being a bit specific on the guidance.

I think you've historically said that this is a business that typically does sort of 5% like-for-like EBITDA.

You did 3% last year, so as -- I don't know if that's generous or not.

But my question, base case, you've got the easy base, as Elodie said.

You've got less cost inflation, and you've got the type of operating leverage that Senan is talking about.

I guess the overall question is, is this the only reason why you can't do sort of high single digits or quite a lot better than historically?

And then the second question is, maybe for Onne, is on the Heavyside price in Europe.

I think you mentioned there was an acceleration out to 2019.

I wonder if you could be a bit more specific in terms of the magnitude?

And if there's any reason really, why Europe overall can't ultimately get to that sort of 30% operating leverage that we've seen in the last 5 years in the U.S.?

Thanks, Paul.

So 2 questions there.

One, in relation to the guidance this year, and then with that to Onne about pricing.

I'll just give some thoughts on that myself before I pass it to Onne.

Look, we're sitting here at the end of February, at -- the year has to run out ahead of us, and let's see what it brings.

What we can say, you're absolutely right.

The momentum is good within our businesses.

And we have a number of factors that are tailwinds within our business this year that were headwinds last year.

Energy probably should be a tailwind for our business this year, because it was a very significant headwind last year.

We have a full year contribution of Ash Grove coming in; it was only 6 months last year.

We have initiatives running through our business to improve our businesses.

So we are very -- we set ourselves very ambitious targets, but what that is going to be and what that's going to deliver, let's see how the year rolls out.

And we're quite good.

As we get towards the end of the year, we get very specific and narrow towards our guidance, because it really takes us to get past the interims at the end of August into that August, September, October period before we actually get real visibility as to what the year is going to be.

And we try to be precise about that.

But up to that point in time, it's just conjecture, actually.

Just before I pass to Onne, specifically on the pricing, just a comment I've made before on pricing in Europe and I've made it for several years and it's true.

If one goes back to the late 1990s and in the early 2000s, there used to power to putting U.S. dollar pricing of cement and euro pricing of cement as well.

And then of course, what happen is this dislocation during the global financial crisis and indeed, after the global financial crisis, as the U.S. recovered quickly, the U.S. has sped on to ahead now where U.S. cement is trading at $110, $115 a tonne, and Europe generally is wallowing somewhere between EUR 65 -- EUR 45 to EUR 65.

So my own contention would be that, given the level of investment in cement business, because as my colleagues have mentioned, one of the reasons why the cement businesses need very high margins, because they're so capital intensive and they eat cash.

Cement businesses eat cash.

One of the reasons why we produce so much cash is actually because we don't have a big [proponent] of the cement business.

That's why we can generate the cash that's there.

But you need to have higher price in Europe to pay for the investments that are in the ground, and I do believe that market owes us, over time, EUR 30 to EUR 40.

They're trying to bring us back to what would be the priority had we had existed for 30 or 40 years.

With regard to the specific markets, I don't expect it to go to 15 markets, Onne, but just directionally, how you feel the pricing would go in 2019?

Well, I would like to talk about 15.

And 9 out of 15, we had a price increase in 2017.

We increased that to 12 countries out of 15 in 2018, and so clearly, the target is to get to 15 out of 15 countries price increase.

And not only that we want to cover the 100%, but also, as you were saying, to increase the quantum of the price increase.

And I see good opportunities to do that, actually.

We were a little bit helped by the good fourth quarter and a relatively good weather, so that helped with the price discussion, which we usually have end of the year, beginning of the year.

So we have made good progress in the discussions.

And the only thing that is holding back maybe the 15th country is that, in all the countries we have long-term contracts, and in the case -- in this specific case, Switzerland, we have longer-term contracts, which is more difficult to increase prices.

But on the free volume, we see very reasonable price increases.

Robert Gardiner from Davy.

So 2 for me.

So one, maybe just to go back on price/cost, particularly in the United States and the energy benefits that you might see there, especially in your asphalt business, with lower bitumen, lower natural gas prices.

Just wondering, Randy, is -- in terms of how that's gone, with winter fill, how your projects look with the DOT, what's -- was there any big potential benefit coming there?

And two, I just want to go back on vertical integration, especially in the context of the slides where you showed your ags and your cement margin relative to peers, and I'm just wondering, again, if you give us some practical kind of color on the benefits of being vertically integrated relative to those peers, and what -- how they accrue to CRH?

Thanks, Bob.

Two questions there, one about the energy benefits.

It's impossible to give a sense of what the energy benefits are going to be this year, because the market has yet to play out.

But specifically with regard to winter fill and how the winter fill program is going, I'll ask Randy to update that and then I'll come back in the end.

Your question was about integration and margins within the integrated business, I think so.

Randy, just in terms of how winter fill is going and just on how it's being run so far?

Yes.

I think a couple points, Bob, there just to clarify.

Certainly, crude has come down.

I think crude in the last quarter and the early part of this year came down roughly 38%.

But the rack pricing for bitumen only moved 4% down.

So the -- what people were actually buying bitumen for is not directly linked with the price of crude.

So I would say a couple different things in and around that: one, you know our business well.

Certainly, about 1/3 of what we do is, we kind of avert risk because of the winter storage that we have; 1/3 of that is derisked because of the state indexes and then 1/3 of our asphalt is kind of to play for in the market.

In reference to the winter fill, I would say it's broadly similar to what it was last.

Because you have to remember that some of the challenges that we had in regards to just selling and laying asphalt meant that we were carrying a little bit more inventory going into the latter half of the year.

And so from a total cost basis, it's roughly flat with last year.

But we'll see our contracts.

The contracts that we're bidding now would be reflective of the current market price of bitumen, and I would expect there to be some advancements as we go into the season in 2019.

Thanks Randy.

And specifically with regard to the question on margins.

I think margins are very interesting provided you're comparing similar businesses, provided you're comparing apples with apples.

The CRH business model, as most people, it's a very different model to anybody else.

We choose not to have a monolithic heavily capital-intensive cement or aggregate business.

Because we run those businesses and it's extremely hard to produce returns and cash in those businesses.

As I said, your heavily high capital-intensive business eat and consume cash.

We choose to have an integrated model, which is a very different model, a more balance model that delivers all through the line but delivers sustainably higher returns and cash, as our colleagues have shown to you.

And year after year, CRH does that.

You saw 4 competitors there.

I'm not going to name them publicly on stage here, but you can work out who they are.

They're 4 of the biggest companies in the world.

And yet, for year after year, we produce higher returns at higher cash than they do.

But why is that?

It's the business model.

The fact that the lower capital intensity downstream gives you a proportionate higher margin and gives you higher returns and higher cash.

And until our shareholders tell us something else, we are going to focus on returns and cash.

And that business model is what underpins CRH going forward.

Yes, margins are important.

But we compare our business on a line-for-line basis, and my colleague said on a margin.

But as an overall business, the judge of ourselves or any investment is returns on cash and that's how CRH wins, hands down, year after year.

John?

It's John Fraser-Andrews, HSBC.

Two questions for me please, the first one in Americas Materials.

You mentioned earlier that the margins in the backlogs are higher, and Randy, you just said that you've got a small tailwind from the bitumen cost.

Can you elaborate on other costs?

So diesel soared last year.

How -- what was impact is from cost inputs and to what extent it's pricing as well?

And then the second question is for Senan.

In the cash generation, the sort of key inputs of what's draining the EBITDA, are there any advances you see in working capital, interest expenses or sort of further getting the tax rate down which is going to help that cash conversion?

They really love you, Randy.

Another question for Americas Materials.

And before I pass it to you, Senan, you might just have a comment on...

Yes, I'll start off with the second question there, John.

In terms of working capital, I think we've made a lot of progress over the last 3 or 4 years in terms of our working capital, in terms of bringing that down as a percentage of sales.

And you've seen over the last year, while there was an outflow in the full year, that outflow is really driven mostly by the growth in sales.

So we continue to be very focused on that.

I wouldn't be expecting or anticipating that you'll see a further reduction in working capital as a percentage of sales going forward.

So what we have, we hold, and obviously, we stay focused on that.

I think in terms of interest costs, our interest costs next year are expected to go up by 10% to 15%.

The main reason, we have a little bit more debt on the balance sheet now.

We would have issued $1.5 billion of long-term money during 2018 at a rate between 3.5% to 4%.

So that comes into the equation.

We also had a lot of cash on the balance sheet, as you'll recall, in the first 6 months of 2018, because we had the proceeds from Allied, and we didn't close out on Ash Grove until the half year.

Tax, the effective tax rate this year is 23%.

That's great progress from where it was 2 years ago, which was we were up in the 27%s, 28%s.

I'd hold it at 23% going forward.

That's now reflective of, obviously, the reform of U.S. tax coming through and the footprint of the businesses we have today.

So Randy, the diesel cost and then in terms of, again, the utilization going forward?

Yes, I guess, a couple of different pieces there.

One, as we've seen, we track this certainly on a weekly -- daily, if not weekly basis, in terms of overall bidding activity.

So overall bidding activity has improved, which, in turn, has allowed us to grow our backlogs, but more importantly, to be targeted in terms of what type of jobs we will execute on.

We have more flexibility there.

So certainly, the margins are improving in the backlog.

That work typically is 6 to 9 months out.

We'll get some advantage of that in 2019.

I think it bodes a little better for 2020 though as well.

And when I talk about energy input costs, certainly bitumen is a big part of that, diesel as well.

We would say that's going to be broadly flat as we go into 2019, and our pricing in and around aggregate in particular, which uses a good bit of off-road diesel, we should see progress there.

So I would say, all in all, still a lot to play for, John, but I would anticipate benefits in the latter half of the year, even going into 2020.

David O'Brien from Goodbody.

Firstly on M&A if I could, please.

A step-up in the level of bolt-on activity into the mid-40s, and particularly, in Americas Materials, we're now a bit half of that.

Are we already seen the benefits of the enlarged platform you've created in North America?

Like are we already seen some bolt-ons into Ash Grove?

And can you discuss experiences in value creation?

Are there differences between smaller deals and the larger ones you've done?

And maybe the pipeline there?

And switching onto Americas Products, very impressive, I think, operating leverage.

It's just, how sustainable is that?

And we've been looking at the context of the larger group, how can we get the group level up to just similar types of rates?

Okay so it -- I mean 2.5 questions there, I guess, David.

First question on M&A and bolt-ons and last year for the pace, I'll deal with that.

The second question was on the delivery last year, Americas Products, Keith you might deal with that in terms of the leverage of Americas Products and the ongoing impact of the group, you might just deal with that, and leverage going forward, Senan, if you don't mind.

And so just with regard to the M&A bolt-on deals last year, just to be clear, it's in the announcement.

We did 45 deals -- 46 deals last year.

We do a deal about every 10 days, 9 days in CRH.

And actually, we don't make any fuss about it.

They just come in through the door.

And actually, last year was the year when I was trying to pull back a bit, actually.

We had some big deals to integrate.

So that was the year when we put our foot on the brake.

And we spent about 650 million on those deals.

As Randy said, in our biggest markets, 70% of the market is unconsolidated, it's fragmented.

We have a long, long list of deals to look at and the only thing to decide whether we buy them or not is the pace at which we were to buy them and the value we buy them at.

Incidentally, the multiple in those deals was actually 6x EBITDA before synergies.

That's where the real value creation in CRH is.

But you rightly pointed out about the platforms.

The key about CRH is, when we buy the platforms, that begets another 10 or 20 years of add-on deals for value creation, because as the add-on of 6x and how we consolidate those businesses and pull those smaller businesses in and getting the benefit of professional procurement, proper processes, more service to the markets, more ability to service our -- the market, that is, for the last 50 years, what has been behind the delivery of the profit improvement for CRH.

So there's no slowdown in the deals.

The deals are there, they're focused.

It's just a question of what we want to do, and our focus is very much on bedding down the platforms of business that we acquired last year.

With regard to the Americas Products division, which has a good performance last year and a good performance leverage-wise, Keith, you might just have a comment on that?

Yes.

It's just, I think what you saw in 2018 is a continuation of a long-term trend within our products business in Americas of margin improvement.

And obviously, as the margin increases, that is going to through -- flow through as positive operating leverage, our impressive operating leverage.

It's really kind of down to a few things, really.

A long-term continuous focus on being a more efficient operator, looking at not so much our portfolio of businesses, but looking at our portfolio of products and aligning our products to higher-margin opportunities in the marketplace and focusing there as changes in the market evolve.

And when you look at could we do it going forward?

Certainly, we've been really focused on it for the last number of years.

I think we have 5 or 6 years of improving margins in Americas Products.

And as part of our overall plan for another 300 basis points for CRH, we're putting in a whole new set of plans in terms of cost productivity, efficiency, commercial excellence to continue to drive further margin improvement in the division.

So yes, I would expect -- I don't know if the level of operating leverage would be the same going forward, but certainly, we have plans in place to continue to improve the margin profile of the business.

And I might just add there, I think the operating leverage that Keith achieved over the last 12 months in his division is equally achievable in both Randy and Onne's business going forward.

I mean, my guidance overall, when you look at the group, is that you'd expect 2019 to be back at that north to 20% operating leverage again.

And we've talked about specifically the reasons why we didn't achieve that in 2018 based on weather and based on input costs, particularly the spike in input costs, but I think in a more normal environment, you'd expect to see us go back to what you've seen from the sort of the previous 5 years.

I'll take one more question from the room.

We've got a number of questions that have just come in down the wires there, so Arnaud, please.

Arnaud Lehmann from BofA Research.

I have 2 questions, if I may.

The first one is on the 2019 and the outlook, just to understand a little bit better the top line, because you see a continuous momentum of Q4, what you're seeing in the Q4 of 2018, you started the year with similar trends.

But is it not just reflecting the leading indicators we had until the third quarter of 2018?

When we look at leading indicators in the last quarter of 2018, we see, in a lot of markets, residential and nonresidential trends plateauing or trending down.

So do you expect 2019 to be a year where H1 is, in terms of top line, better than H2?

Or is it not the right way to look at it?

And my second question is on -- just an update on the European Distribution.

We see different players trying to sell their Distribution assets at the moment.

You're one of them.

We see threats from -- apparently from some private equity, equity firms, that are looking at this type of assets.

It looks like to obtain a fair multiple, if you wanted to sell this asset, will be probably a little bit challenging in this context.

So if you don't get the multiple you want, what could be your other options for Distribution?

So 2 questions there.

One, with regard to the run rate exiting last year, does this indicate something that you're going to get off to a particularly strong start in half 1 versus half 2 to get the actual reads through the full year?

And the second question is really just an update on where we are on the process of the strategic review of the European Distribution.

On the first question, what we're indicating with regards to the run rate at the start of this year and the tail end of last year is we're, of course, backing out all the factors that impact upon how it can be skewed one way or the other.

Remember, we had a very significant weather disruption, particularly in North America, at our busiest period in August and September.

That meant that a lot of that work moved into the start of quarter 4. But of course, we're smart enough to know our business very well and talk to our clients so we can back that out to get a clear run rate of what the level of activity across our markets actually is.

And that informs out comments that the pace of growth during the course of last year will continue into this year, and it started out that particular year, because of course, we're reporting results now for 2018, and we can see how February has finished ahead of us.

But we have order books as Randy says around 6 to 9 months.

So we already have work planned for April, May, June, July that gives us an indication, provided we have no major weather dislocation again, both in our European and U.S. business, where the run rate for our businesses is actually coming in.

And that's what informs us in terms of the run rate, broadly speaking, a continuing of the trends we saw in a normalized half 2, not weather impacted or skewed.

With regard to European Distribution and the challenges we're faced with, with a view to, as you say, of getting a multiple on that or not, or only concern is how we decide to allocate this capital.

We have an amount of money allocated into the European Distribution at this point in time.

This is a good business.

It makes good profits, it generates good cash and generates good returns.

And for any financial manager, any manager of capital, you've got to look at say, what can we do to improve that business, what will it generate in terms of returns in cash, and then dispassionately compare that against what I can crystallize the value of that business for now, and then allocate that elsewhere to create higher returns of cash for our shareholders.

And that is exactly the process we're going through.

And when we finish that process, and it's not going to take another 6 months, but it's not going to take -- it won't be done in 6 weeks either.

We will then be able to evaluate those 2 options and then make the best decision for our shareholders, and when we get there, I promise you we'll explain why we have done that and what we're going to do very clearly to our shareholders at the appropriate time.

Okay, I'll take one more question, Will.

I'm sorry, I'm conscious of our time here as well.

Sorry, Will.

Will Jones from Redburn.

Three hopefully, quite quick ones if I could, please.

The first, just picking up on cement business.

In your various geographies, there were a few areas of, I guess, price spats last year, a couple of regions in the U.S. Switzerland, obviously, there's been a few back-and-forths over the last couple of years.

Do you think those areas of tension has kind of played out now?

And are there any new areas that might be more competitive, I guess, in your business in 2019?

Second, just specifically around the U.K. I think the text refers to profits having fallen in the U.K. last year, no surprises there.

But I guess, if we were to assume no big disruption from Brexit over the next month or 2, do you think you can stabilize the profitability in the U.K. in '19?

Or maybe even improve it?

And then the last one is just bringing up on procurement.

I think in November, you talked about half of what you intend to do having been identified.

The 100 million-plus talked about today, what percentage is that of the total, I guess, is that number?

Three questions there, actually.

Just in the interest of time, I'm going to deal with the first 2 myself, which is the cement question and talking about how the U.K. performed in 2018 and 2019.

I'll ask Randy at the end to come back and talk about the procurement in terms of comments with regard to that.

Look, the world is not perfect.

There are spats in the U.S. even though the U.S. should be heading north in terms of volumes and prices.

Specifically, you're referring to Texas -- West Texas, and also, you're referring up to the Midwest.

We don't really get hurt greatly in -- up in the Midwest and indeed in West Texas.

My own sense is, these things go on as people jostle against each other and compete, they tend to be more temporary in nature.

I don't think there's any long-term sustainable issues there with regards to competition within the United States.

So I think it's more defined.

With regard to Europe, actually the Swiss issue was, as Onne said, it wasn't really a competition issue.

It was the fact that we were locked into long-term contracts.

That was more the issue with us, that we couldn't push the price on.

When the pricing moved on others, it's the timing of the unwinding of the long-term contracts.

And I would echo Onne's view that actually -- I think that actually the sustainability of -- a sustainable delivery of price increases in Europe was building.

Actually, what we've been saying this on this stage for 3 years now.

We called it in 2016, further in 2017 and we're seeing it again in 2018, and again more in 2019.

So I think that just going to continue to push on.

And for me now, it's not a question of how often or how broad spread that price increase is going to be.

It's how consistent we get that.

We're build back up those prices.

Because the ambition is there.

And also pushed by the higher energy cost, you need to get them, you need to recover on the back of the businesses.

Randy, just on procurement?

Yes, I would say we're early days there.

My -- it's -- the organization is in place, really, probably in total at the beginning of this year.

But those identified savings or those categories in which we thought were easy enough for us to attack had global appeal, and we can deliver on.

So I would expect, as we go forward, we'll keep you informed in regards how our progress is there.

But it's really category by category over that 18 billion of spend.

So more to come.

I'm just going to have to move to some of the questions that we've got on the wire because actually we're out of time.

But I'm going to try and give it another 5 minutes.

So if people are still watching, please stay with us.

First question, Randy, just comment your thoughts on the potential for a new U.S. highway.

We will not FAST Act.

So a new U.S. highway and the updates on any states' funding initiatives that are currently in place at the moment.

Okay, I'll try to be brief.

2018, I mentioned we were pleased, in 2018, we had another 19 states who put forward 27 separate initiatives that equated about $6 billion of additional infrastructure spend.

Good progress there.

There are 570-some valid initiatives, 470 passed, so roughly 80%.

That generated $37 billion of spend over the next decade, some more heavily weighted towards Florida and Texas, but still good momentum there.

There is a lot of talk, and certainly, with the change in regards to representation and Democrats took the House, and so the committees, specifically the House Transportation and Infrastructure Committee, has changed its leadership.

Peter DeFazio, who is from Oregon, is now the chair.

He is going to bring forward a bill with his co-chair, Sam Graves, in May of this year, that will be pretty substantial in regards to additional funding.

It is the industry as a whole -- not just our industry, the users: the Americas Trucker Association (sic) [American Trucking Associations], UPS, FedEx, U.S. Chamber are all on board with a $0.20 to $0.25 increase in the user fee, or the gas tax -- the federal gas tax.

That will be part of the plan that will be brought forward.

And I think critical is that the Trump Administration is no longer -- he hasn't said it publicly, but his staff is no longer talking about a significant portion of $1.5 trillion investment being private/public partnerships.

It's kind of fixing the Highway Trust Fund, and the way you do that is through the gas tax.

Just the last question on the U.S., Keith, we'll just go to you.

Just question of what's driving the fluctuations in the nonresidential market?

And maybe I would just add, the residential market, your thoughts on that going forward into 2019, just what you see, if anything?

Sure, Albert.

I think, if you think about the non-res market, one thing to remember is it's not a holistic market.

It's made up of a lot of different subsegments: office, commercial, institutional, educational, all of these different things.

And I think what we're seeing now is in a cycle that's now several years old, is some parts of those are maturing faster than others.

And so, again, the private side of that recovered quicker in the commercial arrangements.

And now, we're seeing kind of a come-on in things that are backed by more public money like schools and other sorts of public buildings.

And so, I think what you're seeing in the commercial markets in non-res is continued growth, but different pace of growth for different subsegments within nonresidential.

Certainly, our experience has been that we came out of 2018 with a little bit of tailwind in that part of our business, and prospects look good in that for 2019.

Just talking with the general contractors and people who do a lot of that work, they had very good years last year and very good backlogs coming into 2019.

And in the res market, again, it's probably been, as a cycle, slower than most people would have thought in terms of growth, but I think there's still growth in that cycle.

The long-term needs of housing in the United States and Canada are being underserved by the current pace of construction.

So we're well below any sort of real estimate of long-term averages.

I think it's just about reinvigorating that industry, getting the right block formation and family formation to be able to pull through and fully realize the potential of that.

And so again, we're not expecting gangbuster growth in residential, but we would say sort of mid- to low-single-digit growth in residential, both in terms of new construction, and actually, what's more important to our business in North America is the repair and improvement and maintenance of existing housing.

So again, good growth we're expecting going forward, and probably, long-term, good potential in that market.

Two very specific questions, I'll answer myself, just as they were asked.

How is CRL performing?

CRL's performing very well, ahead of plan, ahead of budget, and actually giving very good returns.

I'm very pleased with that acquisition.

Very specific question, how is France performing?

Very well, actually.

Just 3 quick questions for you, Senan, I'm sorry.

The impact of IFRS 16, which is an important impact for the numbers next year, and also in terms FX outlook for 2019, your own thoughts in terms of a lot of headwinds this year and next year, and contribution of bolt-ons in 2018 and an outlook for '19?

You don't know '19, but contribution of bolt-ons?

All right, bolt-ons -- I'll take that backwards.

Bolts-on last year, we talked about the 45 deals done, so that's EUR 650 million spent on those deals.

Multiples on there about 7x in terms of where they come out.

So about EUR 50 million from bolt-ons last year, and probably another EUR 40 million to be added onto that as we go into 2019.

FX, EUR 100 million of currency headwinds last year.

That really was mostly U.S. dollar.

As you know, the dollar moved from 1.13 in average to 1.80 in average.

Spot price today at 1.14.

So that would suggest that if it stays at 1.14 for the year, most of that EUR 100 million of headwinds becomes a tailwind for next year.

First question, oh yes, the IFRS 16.

IFRS, look, over the next couple of weeks, the IR team will be available to talk to you about that in more detail.

But basically, in summary, what it means is, we've got about EUR 600 million of operating lease charges through a deduction in arriving at EBITDA today under operating leases.

A little bit less than 2/3 of that now would be capitalized going forward.

So that would boost our EBITDA by the tune of EUR 350 million, EUR 400 million in '19.

Obviously, drive up the margins in a corresponding way.

By the time you get to EPS, it has washed itself out, because it comes back out in depreciation and higher interest cost.

On the balance sheet, likewise, it's a net 0, but it will drive up our assets to the tune of EUR 1.8 billion, EUR 1.9 billion.

And likewise, it will drive up our lease liabilities by the same amount and drive up our net debt accordingly.

So my simple calculation would be the just under 2.1x net debt-to-EBITDA on, let's say, at a new norm will become just under 2.4x.

And again, the last thing I'd say on that is, that it has more of an impact in terms of our Products and Distribution businesses than it does in our Materials businesses.

And that's really by virtue of the fact that that's where we have a lot of buildings and leaseholds activities.

So about half of the EUR 2 billion -- or EUR 1.8 billion I mentioned, is probably to be associated with your business, Keith, and the rest then is split fairly evenly between Randy and Onne.

Thanks, Senan.

Look, I want to thank you all for your attention this morning as we've kept you here a lot longer than we should have.

And just to say that, we hope you got a clear understanding of what we're doing as a group.

It's been a really good year for us in 2018.

We've got clear plans to improve our business going forward for next year and the years beyond.

And the next chance we'll have -- the next time we'll have an opportunity to talk to you is when we give our update trading statement on April 27, which is a day in advance of our annual shareholders' meeting on April 28, and we look forward to doing so.

Until then, thank you for your attention and have a good day.

Thank you.