CRH PLC (CRH) 2015 Q2 法說會逐字稿

Ladies and gentlemen, good morning. I'd like to welcome you to the 2015 interim results of CRH. My name is Albert Manifold. I'm the Chief Executive of CRH and I'm joined here this morning by our Finance Director, Maeve Carton.

And for the next hour or so what we want to do is take you through our results for the first half of the year, talk to you about an acquisition we've just announced this morning of C.R. Laurence deal in the United States, talk to you about some of the key issues we're focusing on at this moment in time and our outlook for the rest of the year.

As usual, we're going to do Q&A at the very end, probably get about half an hour or so of that, and we'll have questions from the room and we'll have calls down the line as well.

We're taking a slightly different approach to it this morning. We're going to show a video where we're going to show you a little bit about our business, but I'll talk to you more about that as you go through the presentation.

So to start, what I want to do is just maybe just show a couple of slides myself, which just talks about some of the key issues, the key areas of focus that we're working on in CRH. And none of these should be a surprise to any of you.

What we're looking at in CRH, and we spoke about last year, is we very clearly said that, as the cycle was turning, we were focused on bringing margins and returns back to peak in the quarter this current cycle.

And I'm glad to say that we showed satisfactory progress in the first six months of the year, with all six divisions showing an improved margin performance and, indeed, an improved performance in returns. So good to see that coming through. So a continuation of that.

What we're also seeing, of course, is the continuation of the portfolio management that we spoke about last year. You will recall that in November of 2013 we spoke about a strategic review over our business and at the end of that we identified EUR1.5 billion to EUR2 billion worth of businesses probably wanted to dispose of and reallocate that capital back into our businesses.

Well, we've disposed about EUR1 billion of the program. We identified about EUR1.5 billion to EUR2 billion. We've EUR1 billion gone. And we've happily reallocated that back into some of the big transactions we've done this year; LafargeHolcim and now this morning C.R. Laurence. And they are earnings enhancing, returns enhancing and value creating for our shareholders.

So we've made good progress there and I want to reassure that's a continuing part of our business going forward.

Of course, having done two big deals now in the first eight months of this year our focus clearly should be, and will be, on integration of those businesses within CRH. Integration in terms of deriving the synergies, arriving at those synergies, getting those, capturing those. But also driving performance and focusing on those businesses because they're fine businesses with great growth platforms: four in LafargeHolcim and now one other one in Americas Products. So five new growth platforms.

But we need to integrate them, bed them down, run them at the rigor that we run the traditional heritage businesses in CRH and, of course, then use those as growth platforms as we go forward.

And finally, all of this done against the backdrop of the strong financial discipline that we expect within CRH; the strong rigor that we bring to our businesses.

And, again, this morning we want to reconfirm to you the comments that we made in February of this year that we are intent on returning our debt metrics back to normalized levels at the end of 2016, even after doing this $1.3 billion deal because that's what you expect from CRH. Both Maeve and I will talk more about that later on during the presentation.

Well, you'll have seen the numbers this morning that are well out there at this stage. Sales, EBITDA and margins ahead. So good progress in the first six months of the year.

And really, as an operating guy, an operations guy, I look at the constant currency basis and you can see modest recovery in the first less important half of the year in terms of sales revenues. Ahead 3% but very good leverage drop through to the bottom line. Leverage of 26% coming through to the bottom line. So very satisfactory to see that coming through.

And, again, an improvement in margin.

Of course, the business has benefited from positive tailwinds on currency and you can see that coming through in the reported numbers. But as I focus on, I focus on the right-hand side of that page and we're delighted again to confirm yet again a further year of delivery and dividends. The 31st straight year on interim dividends confirmed again at EUR0.185.

And we'll talk more about that, I'm sure, in the Q&A. But we do appreciate the importance of dividends to our shareholders. We appreciate the fact that you have supported us through five difficult years of the downturn. We have delivered dividends and maintained it at that level. But, as the business grows and the profitability grows and the cash growth, we know the expectation on dividend and we'll review that again when we come back to look at this in the full year in February.

What we want to do now is actually -- unusually we're going to try and make sense of the breadth of CRH. We're not a typical building materials business. We're not a pure play. We're not a pure cement play where it's easy to say we buy and sell grey powder. We're not a pure distribution play. We're a broad portfolio of businesses across regions and sectors and sometimes it can be difficult to convey that to you.

So what we want to do is we want to bring you to our businesses. So what we have done is we've made a video, which lasts about 15 minutes, in which I and my colleagues who deliver these results will talk to you about their businesses, from their businesses and show you the breadth of their businesses, the products that they sell, how they produce them and, of course, how they deliver the results for the first half of the year.

So we'll let this play and at the end of it I'm going to come back, Maeve's going to talk about the components of the profit performance and the cash conversion and I'm going to talk to you about some of the key things before we go into Q&A and the outlook for the year.

(video playing)

CRH is the largest building materials company in North America. With operations in all 50 states and throughout Canada we are the leading supplier of materials and products to the infrastructure, commercial and residential construction sectors.

We've seen continued positive momentum through the first half of the year. Residential and non-residential demand has been robust while the infrastructure market remains broadly stable. This is feeding through to health volume increases across all our businesses in which we're delivering solid margin expansion as a result of our disciplined pricing and cost control as well as a favorable currency effect.

Looking now at each of our US divisions in turn. Our Americas Materials division had a very strong start in what is the seasonally less significant part of the trading year. Here's Randy Lake, CEO of that division, to tell you more.

I'm proud to be able to share details of our strong performance during the first half of the year. This is a testament to the hard work of everyone at Americas Materials. It's been a real team effort and puts us in a great position for the second half of 2015.

Americas Materials has had a great first half, with strong demand leading to healthy volume and price gains across our main regions and product areas. This is particularly the case in the central, western and mid-Atlantic markets. Yes, we too have had a few setbacks due to bad weather in Texas and the Midwest but overall we're very happy with the trends that we're seeing across the board.

As you know, our business is predominantly about renewal of aging infrastructure and with our leading market positions in well-populated regions we have the capability to deliver on projects both large and small.

A great example in the Northeast right now is a project to provide 250,000 cubic yards of high-performance concrete and 335,000 tonnes of asphalt to the reconstruction of one of the busiest runways at JFK airport in New York.

This solid momentum in our markets is translating into significant profit. The result of tight cost control and commercial management that we've continued since the downturn, we're really seeing those efforts pay off now and you can see it in our margins.

The infrastructure sector, which is 60% of our business, is largely stable. Increasing investment by state and local governments is offsetting some short-term funding uncertainty at the federal level. Interesting to note that 38 states have now brought forward supplementary funding initiatives, of which 29 are either in process or pending.

We're also seeing a substantial uptick in highway contract awards, which is feeding a robust pipeline of projects across the country.

In the second half of the year we see strong backlogs continuing to drive ongoing activity throughout the business. I look forward to updating you all again early in the new year.

Turning now to our products division. For the first half of 2015, I've seen a marked improvement on the weather-affected start to 2014. Here's Keith Haas, CEO of Americas Products, to give you a sense of the trends we're seeing in these businesses.

I'm delighted to update you on what's been driving the strong performance of Americas Products during the first half of the year.

Americas Products delivered a solid performance in the first half, particularly in the Sun Belt and West Coast regions, driven by steady improvement in both residential and non-residential markets.

The residential sector continues to improve in all regions, with particular strength in multi-family construction. US housing starts are at a post-crisis high, with a welcome improvement in the larger, single family segment.

Meanwhile, continued job gains and rising consumer confidence are driving an increase in home improvement demand; a trend that we hear echoed by our large retail customers as well.

The non-residential market is showing solid growth. Leading indicators, such as the Architectural Billings Index, have been consistently positive in recent months and we are seeing improvement across the board.

It's interesting to note that it's not just about new build and non-res. There are many projects to repurpose and refurbish the existing building stock to suit current usage requirements, which also generates demand for our products.

While our strong outturn in the second half of last year means that the comparatives are tougher for us in the remaining six months of 2015, we're focused on continuing to drive performance through innovation and collaboration across our businesses.

And I'm confident that we can deliver further gains in the second half of the year in both volume and margin across all our businesses. Our backlogs are strong and I'm encouraged to see capacity utilization rates improving across our three product groups.

As you can see, in addition to the factors currently driving our strong performance, the indicators show that we can expect continuing positive developments in the second half and beyond. I'd like to thank our team in Americas Products and I look forward to updating you on our full-year performance at the beginning of next year.

What you're seeing here are the benefits of CRH's balanced portfolio at work. While Randy's business is 60% exposed to infrastructure, Keith's business is 45% exposed to residential and a further 45% exposed to non-residential. This gives us our desired breadth of exposure to different end uses in different sectors in the markets in which we operate.

And now to our Americas distribution division, a business that is also seasonally biased towards the second half of the year. Here, Bob Feury and his team delivered an increase in EBITDA in a tough market, supported by some top-line growth and a strong focus on cost management and commercial excellence initiatives.

A particular highlight has been our transition to a regional service center model; effectively transforming the business from managing branches to managing markets. This has delivered improved working capital, cash flow, reduced costs and accelerated growth through the addition of low-cost service centers.

While the RMI-focused residential roofing market has been slow, the commercial roofing market is more robust and has driven strong results in the first half of the year. Order books are in good shape as we look ahead to the second half of the year, bolstered by some storm-related repair work across the Midwest.

The wallboard market continues to bring modest pricing and volume gains, with the West and Northeast delivering particularly good growth.

So, overall, good economic momentum in North America that we're all very well positioned to benefit from. With all our businesses seeing demand on the rise, there's nowhere else we would rather be than here in these markets at this point in the cycle.

Let me now touch on our businesses across Europe. Our heavyside business is resource backed and vertically integrated, with leading market positions in cement, aggregate, ready-mixed concrete and concrete products across generally stable Northern European economies.

You will have heard me refer to our lightside businesses as being an innovation machine. Here we create unique engineering solutions to aid the construction process. Our distribution platform then caters for the needs of the small and medium-sized builders through our general builders' merchants, our specialized central heating and plumbing businesses and also our leading DIY brands.

Overall, we've a really strong footprint in Europe and, while market conditions have been mixed, we are now seeing some positive signs of recovery.

Looking at our [trading] performance. Against the mixed economic backdrop and market challenges in some of our largest markets, for example Switzerland and Finland, profit from continuing operations was ahead of last year. This is a testament to the resilience of our European business and highlights the benefit of our balanced portfolio.

A continued focus on cost management is also helping us deliver profitable growth and we've taken the right steps to ensure that all our businesses are well positioned for the recovery phase of the cycle.

Let's look at each of our European divisions in turn. First to Europe Heavyside and to Managing Director, Ken McKnight.

I'm pleased to have the opportunity to update you on the performance of Europe Heavyside, where we have worked hard to produce a steady first-half result; this despite challenging circumstances in some of our core markets.

In Western Europe the recovery in the Irish construction sector continues to gather momentum, with domestic and export demand driving healthy cement volumes.

The UK market is also performing strongly and in the past few weeks we have commenced the integration of our newly-acquired assets from LafargeHolcim, which gives us our strong position in this market.

Our structural and concrete products businesses in the Netherlands are also performing well, benefiting from a revival in residential new-build construction as well as further commercial excellence initiatives to deliver a good operating leverage.

We are particularly proud of our recent success in securing a three-year contract to supply all of the landscaping products for the Amsterdam Municipality; a testament to our quality products, competitive pricing and sustainability record.

We have, however, faced headwinds on a few fronts. In Switzerland a cooling in the residential market together with a strong Swiss franc has resulted in challenging trading conditions. In Finland markets remained weak in the early months of the year. However, we are now beginning to see an improving demand backdrop.

In Eastern Europe, where we are this year celebrating 20 years in Poland, our cement and downstream businesses are performing well in competitive markets. The situation in Ukraine remains uncertain, though our volumes are holding up quite well.

Again, in this region we continue to win contracts to supply major infrastructural developments. Recent examples include a contract for 1 million cubic meters of concrete for a railway station in Poland and another is our involvement in a world-record continuous concrete pour of some 25,000 cubic meters in St. Petersburg.

Overall, I think it's fair to say there's pricing pressure across the region but as volumes recover we expect prices to follow.

Given our successful efforts to manage cost during the downturn, I am confident we are in a good position to capitalize on this recovery. I look forward to coming back early in the new year to give you a full update on the trading of Europe Heavyside.

The main takeaway here is the importance and value of our broad footprint in Europe, demonstrating a key element of our strategy at work. And now for a few words on Ken's lightside segment.

As with most other European divisions, it's been a good first half for lightside too, with sales from continuing operations ahead of last year, despite lower project activity and fewer working days.

Our core countries contended with a mixed economic backdrop too and this is reflected in performance.

For example, Halfen, our engineered accessories business in Germany, had a slow start to the year but has since improved and the outlook for the second half is more positive. Halfen was also recently included as one of the top 100 most innovative medium-sized companies in Germany; recognizing its continued growth in new products and solutions.

In the Netherlands we're seeing encouraging signs in the residential and new-build market. The Swiss and Belgian businesses were broadly stable, while France remains extremely competitive.

Meanwhile, Ancon, our engineered accessories business in the UK, continues to deliver strong growth and good margins. And I'm pleased to report that this year Ancon once again received the Queen's Award for Enterprise for its exceptional achievements in international trade; its second Queen's Award in three years.

And, finally, to Europe Distribution, where I'll hand you over to our Managing Director Marc St. Nicolaas for an update.

Despite challenges in some of our markets, Europe distribution has continued to deliver a solid top-line performance in the first half of 2015.

Throughout our businesses we have been pushing a range of performance excellence initiatives, particularly in procurement, customer service and productivity. The impact of these initiatives is really beginning to come through.

Our businesses are largely exposed to repair and maintenance demand, which, in mature European economies, typically represents 50% to 60% of construction spend. With more than 650 stores in six countries across Western Europe, we are well positioned for growth as economies improve.

For us the first half of the year was really about the Netherlands and our sanitary heating and plumbing business in Belgium, Germany and Switzerland.

In the Netherlands, our largest market, we posted a strong performance in the first six months; driven by a recovering residential backdrop. We are seeing some really encouraging signs here. The number of housing transactions is up, house prices are rising and consumer confidence is improving from month to month.

We have driven top-line growth by expanding our private-label offerings and we have also implemented stock-availability initiatives to ensure stronger customer service. I'm happy to say that this has enabled our businesses to outperform the underlying market during this period.

Another highlight was the solid performance of our sanitary heating and plumbing businesses in all our markets.

Belgium, in particular, was strongly ahead, with our consolidation strategy really paying off and with repair and maintenance activity remaining resilient, despite a more subdued residential market.

So, overall, a good first half for Europe Distribution, leaving us well positioned for the second half of the year.

So, as you've seen from the numbers and as my colleagues have outlined, we're still in the very early stages of recovery in Europe but our actions on reining in cost during the downturn and our strong footprint leave us well positioned for the coming upturn.

We've already seen the benefits of increased utilization levels in the United States and we look forward to further benefits in Europe as demand returns to more normalized levels.

(end of video)

And I suppose that really is the story of the first half for CRH; each of the businesses in the United States and, indeed, in Europe delivering at different points of the cycle. And, as I said there, really the benefits of the work that we did in 2011, 2012 and 2013 in taking costs out and managing our businesses well and reorganizing coming through now at this stage.

We're seeing very good leverage coming through our US businesses; above and beyond what we should have expected in normalized times. And at the start of what's the recovery in Europe, we're seeing that starting to come through.

If you look at our European businesses, at three big countries in Europe, being the Netherlands, Poland and Switzerland, what we're seeing -- and Finland, of course, we put with that as well, we're seeing a very mixed position with volumes ahead both in Poland and the Netherlands, but volumes well back in Switzerland and Finland and yet, against that backdrop, we show an improvement in profitability.

So that's how the six divisions have performed and I think this chart shows further -- we're focusing on the idea of improving margins and very satisfying to see all six divisions showing an improvement in margin and, I should say, although we don't show it there, an improvement in returns.

So you've heard from the guys how the divisions have done and now maybe it's time to pull it together from a Group perspective and see what the components of the profit and how that's changed over the first six months of this year to last year and, indeed, how we've converted it into cash. Maeve?

Thanks, Albert. Don't you love that slide with all the arrows going up? It's fantastic.

I'm going to talk about the components of performance, as Albert said, and that strong performance, with all those arrows going up, is really the main contributor to our financial performance this year with sales growing to EUR9.4 billion, an EBITDA up EUR50 million; a 10% increase in overall EBITDA.

That positive performance from the operations, though, does offset a couple of negatives in the numbers, which I'll talk about now. The first negative is actually the other side of a positive; the positive being the divestment program which, as Albert said earlier, is well underway.

We've generated proceeds of EUR1 billion from divestments since this time last year. But, of course, as those divestments happen, we lose the sales and profits from those businesses. So the first negative, if you like, is the loss of EUR34 million of EBITDA from those divested businesses.

The second negative is a once-off item where we've made a provision in the first-half numbers for a fine levied by the Swiss Competition Authority, which they announced during this year. The Competition Authority, or the Commission, did not publish the basis of their finding.

We think it's ill-founded and when they publish the basis, which we expect sometime in October, we expect to be vigorously defending our position and appealing that fine. But, in the meantime, in accordance with good, prudent financial practices, we've made full provision for our share of that fine in the first half of the year. That fine, of course, against the whole industry; EUR32 million being our share of it.

The positive currency impact is a factor in the performance for this year with particularly the strengthening of the US dollar and the Swiss franc helping to contribute to improvement and, as you can see there, a EUR59 million positive impact from that.

But the key part of the financial performance is, of course, that strong continuing operations, which delivered EUR69 million of incremental EBITDA on sales of EUR248 million. That EUR69 million is a nice big number in itself but what's more important about it is that it represents an operating leverage of 28% on those incremental sales.

So we're really seeing the benefits, as Albert said, of all the hard work during the downturn, of our balanced portfolio and our good positions in North America and in the more stable markets of Europe and we're benefiting from the economic momentum there.

So, overall, a story of strong operating leverage.

Now this couldn't be a results announcement without me talking about the cash flows either. And the cash flows in the first half of the year have a characteristic of being an outflow rather than inflow at operating level because, of course, in the construction industry, which means a lot of it happens outside in weather conditions, the big season for us is the middle of the year.

So during the first half of the year our working capital levels are building up and so at the half-year typically we have an outflow, which, for the first half of this year, was EUR613 million.

I'm sure you're looking at that saying, well, that's all very well but it's EUR173 million higher than last year. But, if you look closely at the movement in the numbers, the big contributor to that increased outflow this year is EUR125 million of extra capital expenditure; capital expenditure in the first half being EUR338 million.

Most of that increase comes from our US operation where, as the year is progressing, we're reinvesting and investing in our businesses in the US to make sure they're well positioned to benefit from that good momentum, which Randy and Keith talked about.

The other thing I would draw your attention to for the year is the working capital figure. As I was saying, the first half of the year typically in our business sees us building up working capital for the busy season. And I think the thing that is important about this for this year is that the number, the outflow, is actually pretty similar to last year. It's still a big number but similar to last year, even though our activity is improving.

So we're seeing sales go up, profits go up but the outflow from working capital staying pretty stable. So that's really the effects of our strong cash management processes and capabilities coming through for the rest of the year.

Well I think, as Maeve says, no one likes to see a cash outflow like that. But the only time as a Chief Executive or, indeed, as a senior manager of the business where we are happy to see that kind of an outflow is when it's for capital expenditure supporting growth.

And that's really what we're seeing now at this stage. We are getting to capacity utilization issues out West in our products business, in particular, supporting residential and non-residential in the United States. And, again, that CapEx is supporting that growth in business. So it's the only time I'm happy to see it but it's good because it's the future of our business.

What I'd like to do now is maybe just talk about three or four key themes that we're focusing on in CRH during the remainder of this year and, indeed, next year; some of the new to you, some of them not so new.

And the first one is this issue of the reallocation of capital.

Last year we were very clear. We set out our stall and we said that we had identified EUR1.5 billion to EUR2 billion worth of businesses that we were going to sell over the next three to five years. Not that they were bad businesses. Some of them weren't great, some of them were very good businesses but they just didn't fit the returns profile that we wanted in our business or we couldn't see ourselves growing those businesses within those sectors.

Well, we're very happy to say we've had very good progress in the first half of this year, another EUR670 million of divestments in the first six months, bringing our total divestments in 12 months to over EUR1 billion. So well down the road towards achieving that goal. And, of course, that money has been redeployed back into very good acquisitions.

When I look at some of the areas where we sold, businesses which are in lower growth areas, particularly in some of the parts of Europe, where perhaps they were in heavy concrete-type businesses, which would have seen strong growth in the early 2000s, but have run out road, we've reallocated that capital back into the higher growth businesses of LafargeHolcim and now today into C.R. Laurence.

So good concepts, good ideas in terms of boosting our returns and our margin.

And I want to assure you that we are seeing this now really as an embedded part of how we do our business in CRH going forward and an embedded part of any acquisition we do, be it LafargeHolcim or C.R. Laurence or acquisitions in the future going forward.

As I talk about LafargeHolcim, maybe perhaps what I might do is just bring you up to speed as to where we are. Now, just to remind those of you in the room or on the lines, this is a deal that we signed in February of this year; $5 billion of sales, $750 million of EBITDA and a $6.5 billion price ticket that came with it. So a very big deal for us.

But it wasn't one group. This is a regulated deconsolidation in our industry. It was a virtual group put together by businesses that were being sold by Lafarge and Holcim as part of their merger. So they never actually worked together. And, in fact, it was very interesting when we pulled all the managers of these businesses together for the first time, most of them had never met each other.

Well this was not one group. We described it as four growth platforms. And all those growth platforms are now a part of CRH, with the exception of the Philippines. That deal has not closed yet and should close some time towards the backend of September or early October at the latest. But the Americas and European parts of that business have closed in late July/early August.

Now we have only had this business for three weeks. We have our feet under the table and all we can do is confirm to you that the trading environment in the countries that we're operating in seems to be broadly in line with our expectations. But what we will do is we'll update you fully in November, when we have our feet under the table and when we get a sense of what those businesses are doing.

The only good thing about the frustration of the last six months of not being able to get our hands on these businesses is that we've been able to prepare. We've prepared for integration internally within CRH and now also within LafargeHolcim.

We've had good communication and good collaboration between the businesses and we hit the ground running on August 3 with seven individual integration teams across the platforms, one in each of the platforms. So each of the divisional teams in CRH and in LafargeHolcim businesses have integration teams.

And they're working on the things that you would expect, such as commercial management, procurement, purchasing, engineering, managing the production sense, IT, talent management, all those things you would expect to be working on the ground.

And all of that's happening in each of the divisions and there's oversight at a Group level. I and Maeve and, indeed, Mark Towe, our other executive director in the United States, with some other senior experienced executives sit on an advisory board, giving oversight to all of this.

So we are really getting into the teeth of this now. I expect the process to take somewhere between six to 12 months, probably six to nine months, actually. And we'll update you, as I say to you, as we go through this in November.

And, again, this morning we want to confirm to you that the EUR90 million synergy that we spoke about in February, we're reconfirming that target this morning. And, hopefully, there's some upside in that as we go forward.

I also want to talk to you about the C.R. Laurence acquisition that we've announced this morning. There were four growth platforms with LafargeHolcim that came along and go on top of our existing business. And now we have a fifth new growth platform.

We've been talking to this business for about 10 years. We know these people really well. I met Don Friese for the first time about seven years ago. And this is a very complementary business to our Oldcastle BuildingEnvelope business.

And let me just take a moment to explain to you what BuildingEnvelope actually means. It's actually a glazing business or a glazing systems business that supplies glass, effectively to the non-residential market and a bit to residential.

Our business in the United States is a $1 billion business; EBITDA of north of $100 million. It's a very fine business, very good returns and it posted strong growth again this year.

What this C.R. Laurence business does is that it actually sells products that are complementary to that business.

Our heritage business largely sells glass, not float glass but what we do is we buy in float glass and we shape and bend and cut and mold it and send it back out to our customers within 24 hours in the way that they want. So we sell glass. What C.R. Laurence does, it sells all the products that a glazing contractor or a glass shop need to put the glass in place.

So all the extruded aluminum, which we manufacture, by the way, as well, and all the things, the doors, the hinges, the handles, the handrails that go with any kind of a glass application, this is what C.R. Laurence sells. So it's entirely complementary with our business that we have at the moment. So now we have a complete package to sell to the one customer.

This market sector in the United States is about $25 billion market sector. Combined, these two businesses will have revenues of about $1.5 billion, $1.6 billion and EBITDA north of $220 million, $225 million.

It's a very fine business. We paid a [rich] price for this. It's 11 times EBITDA. We like to sell businesses for that; we don't like to buy businesses for that. But it comes with a very significant synergy element to it and they're easy-win synergies. There's $40 million of synergies, at least, identified in this business. But a lot of them are just purely on the integration of the supply chain. And let me explain what that means.

What we do is we're a very big manufacturer in our OBE business of extruded aluminum. So all the aluminum that holds the large glass panels in place in office blocks, in stores, in shops, we extrude and we manufacture that.

Actually, C.R. Laurence buys about 10 million kilos of extruded aluminum every year and almost none of it from us. So we will shift across that supply back into Oldcastle BuildingEnvelope.

Likewise, we buy a significant amount of the products, the hardware. All the accessories that the glazier needs to put the glass in place, we buy from other people other than C.R. Laurence. So we will then bring that into the OBE business.

So we'll cross sell and merge the procurement channels together. That alone will deliver about $25 million of synergies to the two businesses.

Secondly, of course, we've got some restructuring and reorganization to do. We've both got complementary footprints in terms of the geographies we serve and, indeed, customer base. And that should save about $5 million on an annual basis.

And then, of course, there's pull-through demand. We thought we were very good in Oldcastle BuildingEnvelope. With 15,000 customers, we turn our business around in 24 hours. C.R. Laurence have 60,000 customers, 60,000 glaziers and glass shops around North America. Their average order size is $350. They process 7,000 orders per day and they ship within 24 to 48 hours.

This is as much a distribution business as it is a manufacturing business.

And what we now have access to is all those glazing market outlets through our glass business that (inaudible) bring to us. And we believe conservatively that will bring another $10 million of EBITDA business to us.

So that's how we conservatively get to the $40 million and we think we'll get there within two years.

Not only that is, we're seeing this being exposed to the high-growth non-residential and residential growth markets of the United States.

And if I had to pick any markets where I want to be exposed to in the world, I would want to be exposed to the US residential and non-residential market. It's growing this year at a clip of about 6% per annum. I don't see that changing anytime soon.

So well positioned for organic growth, good position for synergies and we think some upside on those numbers as well.

Just looking at the financials. As I said to you, we paid 11 times earnings but post synergies of $40 million it gets down to 8 times. And, in fact, with a bit of growth coming through there we think we'll deliver very well. I should say, though, it is still earnings and returns accretive from year one.

So a great fit for our business and a testament to the strength of CRH that we can handle all of this out of our existing resources. The cash conversion we see in our business is coming to the fore again. So a good deal for us. And, of course, the key issue for us is to move forward and integrate that.

And that really is the focus now for CRH over the next 12 to 18 months. We've done two very big transactions this year. Lafarge Holcim, done through our heavyside and materials businesses and now our products business in the United States. A completely separate part of the CRH, the broad balance we have within CRH. But the focus of both of those businesses has got to be on integration.

And that's where our focus will be over the next 12 to 18 months. Applying the rigor and discipline, the way we run our businesses in CRH, to those businesses but also keeping our eyes and ears open, because we learn every time we buy a business. And there's lots to learn from Lafarge and Holcim and lots to learn from C.R. Laurence.

But, at the end of it, we'll be ready and we'll be back in business again for further acquisitions. But for the next 12 to 18 months we will do deals, of course, because small deals coming to CRH bolt on to what we do. But all of those deals will be funded out of divestment proceeds. Our focus now is on the integration of these two businesses for the next year or so.

But maybe, having done all these deals, what I might now ask is Maeve to explain exactly how the debt profile of our business is going to change and be adapted to the spending for the deals and also then, of course, exactly what that means for our debt metrics at the end of 2015.

Well, before talking about the future debt profile, have a quick look at the debt profile as at June 30.

Albert talked just there about a rigor and a discipline and he not only stole my thunder with the slide but stole my thunder in terms of what I was going to describe the way we think about finances. A real rigor and adjustment to the way we think about finances and manage them. And I think a couple of the actions that we took in 2015 demonstrate that; that planning ahead, being sensible, prudent and whatever.

The first was in February when, with the announcement of the LafargeHolcim transaction, we also announced a share placing, in which we issued 74 million shares and raised EUR1.6 billion of cash. That was part of prudent planning for that acquisition. So, at the same time as announcing it, securing a significant part of the funding upfront. And then also negotiating with our bankers the financing for the remainder, which got paid a few weeks ago.

The second step was the raising of $1.75 billion in the US bond markets in 2015. We hadn't been to the US bond markets for a number of years so we were delighted to get back in there. Our bonds' activity in the last few years have been in Europe.

And, with our return to the US, we were delighted to have such a demand for our bonds that the amount we raised matched the highest ever amount we ever raised in the bond market.

And probably even more interesting was that that activity in the market was taking advantage of the current very low interest rate. So the 10-year tranche that we got out of that $1.75 billion was at the lowest rate we've ever paid in the US bond market.

So, again, a very satisfactory outcome, planning for the debt maturities. As you can see there, those actions are part of our planning for making sure that debt maturities are evenly spaced out and not going to put the Group under pressure at any given time, but also organizing for the future in terms of securing long-term interest rates at the current low level.

We used $1 billion of that $1.75 billion to buy back early bonds that would have normally been repaid in 2016. That gave rise to a EUR38 million hit in the first-half profits but will secure lower interest costs in 2015 and 2016.

So, overall, our financial discipline and approach is to support our commitment to our investment grade rating.

So I'm sure you're wondering, how can we maintain that commitment to investment grade rating after the amount of money we've just spent on acquisitions in the case of C.R. Laurence and LafargeHolcim?

So, in order to explain how we can be confident about that, I've gone back to the yearend debt at the end of last year, just because the middle-of-the-year debt can be distorted by those cash outflows that I was talking about, which are seasonal in nature.

So at the end of 2014 we finished the year in a strong position, with net debt of EUR2.5 billion, which represented a multiple of approximately 1.5 times our EBITDA for 2014.

If you layer onto that the cost of debt for the LafargeHolcim transaction, our debt before C.R. Laurence had gone up to EUR7.4 billion on a pro-forma basis. And then when you add on C.R. Laurence the debt is EUR8.6 billion. And when you add the EBITDA of CRH, C.R. Laurence and LafargeHolcim the multiple is 3.5 times.

That is a level that's significantly outside the comfort zone for me, for sure, given that CRH's long-term average net debt-to-EBITDA number is somewhere in the 2 times to 2.5 times range, which is also consistent with our credit rating.

So our commitment is to get our metrics back down to those normalized levels by the end of 2016. And the last part of this waterfall shows you why we're confident in saying that we can do that. We need to reduce that EUR8.6 billion of debt down to around EUR6 billion and that will get us below the 2.5 times EBITDA. And so we need EUR2.5 billion of cash inflows or debt reduction.

And we've split how we think about that into cash from operations and cash from divestment.

On the operations side we've put in EUR1 billion here and we believe that's a conservative assumption. If you look back at last year, in 2014, you remember our operating cash flow for 2014 showed EUR900 million of operating cash flow generated by our business. That translated into a reduction in overall net debt, after acquisitions and divestments and dividends, of EUR700 million.

So if you put that in context, EUR1 billion over the two-year period 2015 and 2016 certainly feels achievable.

The second item is the proceeds from divestments. Albert has already talked about the fact that we've generated EUR1 billion of divestments so far since this time last year when we announced our divestment program. So of that EUR1.5 billion, we've already delivered EUR1 billion. So we're well on track to deliver that.

So, overall, we're confident of and committed to getting our debt levels back to a normalized level.

Plus all of those numbers there that Maeve was talking about were from a base 2014. The EUR1 billion of cash that's been generated from operations there is actually on a 2014 number. Of course, it doesn't factor in the growth we're seeing in our business in 2015 nor, indeed, what we anticipate during 2016.

And it's a very clear statement by Maeve and by me and by the senior management. We are absolutely committed to restoring our debt level to those levels by the end of next year and we're confident that we can.

Just to conclude this part of the presentation, I just wanted to talk a little bit about the remainder of this year and how we see the overall year ending up.

You've heard all our guys in their narratives talk about how they see the second half of the year. Well, Europe we see is going to continue on the way that the first half went. And, in fact, July and August has been exactly that. Very much a bit of a mixed bag but we're holding our own on costs, smart commercial management, being very tight about our businesses. And we think the second half in Europe is going to be broadly in line with the second half last year, which, by the way, was very good.

United States had a cracking second half in 2014 and it's going to be very difficult to match that, yet the momentum of the business is strong. Volumes are good, very tight commercial management, very tight cost control; all of the things Randy and Keith talked about of all the good work done over the previous years are still there now and the leverage is very good.

And we do believe with that momentum, with that demand structure, with our management of the businesses, that we will see growth in our EBITDA in the United States in the second half of 2015.

And all of that leads us, when you put it together, that we think we're going to see good progress in the second half in EBITDA for CRH as we go forward.

So what I'd like to now do is move to the Q&A part of this morning. As always, for those in the room or, indeed, those on the wires or those online, if I could ask you please to perhaps just give your name first, the name of your institution and we'll endeavor to answer your questions. And we've probably got about 20, 25 minutes or so.

Arnaud Lehmann, Band of America Merrill Lynch. I have three questions, if I may. Firstly, just coming back on your H1 results. Looking at Europe, I think I understand volumes across the board; some pluses and some minuses, probably broadly stable. It sounds like there was a bit of pricing pressure as well. So could you discuss that a little bit and how you manage in this context to do broadly stable earnings? That's my first question.

My second question is related to LafargeHolcim asset. Could you help us understand the contribution of this asset? Potentially this year you said the contribution so far is in line with expectations. Consolidation from August, probably a bit of seasonality involved. I would expect H2 to probably be a bit bigger than H1 for this asset in terms of profit contribution and the Philippines obviously being delayed by a few months. So what sort of impact should you expect in H2?

And the last question is on your balance sheet. You obviously stated very clearly that you're committed to an investment grade rating. Is that something you have already discussed with rating agencies after the LafargeHolcim deal and maybe ahead of the CRL acquisition? So you are committed to it but are the rating agencies in line with your view?

I'll take the first two questions with regard to the volumes and pricing environment in Europe and also with regard to the LafargeHolcim. I think Maeve will have a comment on that as well, by the way. And, if you don't mind, I'll leave the balance sheet question and the rating agency to you, Maeve.

Just with regard to Europe, what I think we are seeing is very early stages of recovery. This feels like the United States of about 2011, which is a patchy volume recovery.

And, as I go through our footprint in Europe, and our footprint is broadly speaking a Northern European/Eastern European footprint on the heavy side, so if you look at what we have.

Ireland volumes are up but prices are down. UK volumes up and will be up and prices up. Belgium prices are down but volumes flat. Netherlands volumes slightly up and prices so-so. Switzerland volumes and prices down. Germany volumes slightly up, prices so-so. Poland volumes up, prices down. Romania, not in our business yet but in LafargeHolcim, volumes up, prices down. Finland volumes down and prices slightly up.

So a real mixed bag. The process of improvement on volume starting to come through. And this is typical of what you see in heavyside businesses, be it cement, construction or, indeed, other commodity products; the scramble for volume as volume starts to slip back in.

And what's happening is, we saw it in the United States, we should have seen price increases in 2012 and 2013. Do you remember it was only last year we started to see prices come through? (Inaudible) only got price increases last year. And this year they're well ahead. They're up 6%, 8% and we ourselves are well ahead. I think that's the kind of curve we're seeing in Europe.

I think it's a flatter curve in Europe but I think at last we're starting to see some of that drift through. We've been to hell and back in Europe and we're not out of the woods yet but at least we're starting to see some improvement.

I'm disappointed as an operator in the pricing environment in Europe. I think it should be better. But it is what it is. And how will we manage it? Good, tight commercial management. We fight for market share. We hold our market position in every market we're in. Tighter controls.

The integrated model works very well in this because we can protect ourselves because we sell so much of our products to ourselves. About one-third of our cement in Europe is sold to ourselves. That's a great strength to be in on January 1 every year. You don't have to fight that volume. That's ours.

And we can protect pricing that way as well because we sell to ourselves.

So that's how we produce the profits that we do and it's why we're probably ahead of our peers is because of the value of the integrated model. And that's how we do that across Europe. I expect it to improve next year but it will be a slow pull out.

With regard to LafargeHolcim, the challenge we have is that we've literally had the business for 24 days, of which there are Sundays and Saturdays in that. And our ability to begin to understand the numbers has been very limited. This goes from the Philippines, well, not yet, but it goes from Eastern Europe all the way to Canada and all the countries in between.

So all we can do this morning with any certainty is confirm to you what we're being told, is the trading environment is in line with what expectations those countries would be. And if you look at the read across that was done, Barry and Bob did a very good note on this quite recently where they said, look, if you just read across LafargeHolcim (inaudible) what they're saying about those markets that's how those countries probably are trading. And they're exactly right.

So what they said about Canada, broadly flat, that's a big market. What they say about the UK, it's up, it's broadly up. And what they said about the Philippines, again broadly up. And so it's there for us. But when we get into the businesses, we'll get an understanding and we will give you a detailed update in November when we get there.

Of course, the contribution in the period immediately after acquisition can also be impacted by some of the accounting entries that we are required to do for valuations of inventory and things like that. So there will be a lot of moving parts to working that through.

In relation to the investment grade rating, as we've said on a number of occasions and said again this morning, our investment grade rating is really important to us.

In considering the LafargeHolcim deal first and, of course, more recently the C.R. Laurence deal, we thought about what would be the impact of this deal? How does it fit with our cash flow characteristics? And that slide that I showed you, how we see our credit metrics getting back to normalized levels by the end of 2015 would have been part in our thought processes feeding into that.

We can't speak for the rating agencies but we thought very carefully about it and believe that our cash characteristics and strong track record will be taken into account by the rating agencies [when] they consider it.

Thank you very much. Thank you.

I've got three questions. One is on CRL. Maybe you can give us maybe a little bit of a better feel for what kind of growth this business either has been printing for the last few years or what do you expect in terms of organics? Obviously I think you describe it as a high-growth business in your outlook.

The second question is on operational leverage. I think, Maeve, you mentioned first half was 28%. I seem to remember last year you were also in the 20%'s but equally you've traditionally talked about 15% to 20%. So I just wanted to understand whether your view of operational leverage has perhaps changed a little bit. I understand obviously there's a lot of moving parts with pricing but maybe a view on that.

And then finally, I think CapEx went up quite a bit in the first half. Can you give us a sense if that is going to be a recurring feature for the next few years? Obviously the US coming back, so where that's trending. Thanks.

I'll take the first question and maybe give the leverage question, the CapEx question, to Maeve.

CRL, as we said, has been a high growth business and, in fact, really since 2010, going back to the last five years, which are probably the most relevant, this business has been growing at a CAGR of 10% per annum. That is against a very lackluster backdrop, a very difficult backdrop, in the United States. And that has been organic growth and a little bit of acquisition growth.

As I said, it's done 30 deals over the last 20 years. It's got very strong brand names acquired in those businesses. But really it's the channel, the access to market that it has developed. And it's a very innovative business. It's bringing new products and access to the customers that's been driving those sales and we're looking to piggyback upon that.

So very strong growth historically. We're looking for that to continue.

The operating leverage side. Yes, we delivered a 28% operating leverage in the first half of this year, largely driven by that very strong momentum that we saw in the US.

When I gave the indication last year of somewhere in the 15% to 20% range as being a long-term estimate of where we think our operating leverage is, that was taking into account cycles, the mix of the business and all the moving parts that feed into these calculations. And that view really has not changed.

There will be distortions or different numbers in short periods and, of course, you'll know that the first half can be very distorted by small numbers. But there's nothing in the trend that would change our view about that. We're delighted with the good performance in the first half of the year and look forward to continued good performance in the second half.

Well, the one thing about leverage, of course, we have -- bringing it on to the CapEx, Maeve, is the fact that the LafargeHolcim deal that we are acquiring probably comes at a higher leverage. And when we digest those businesses I think we'll maybe go back and revise that 15% to 20% that you're talking about to (multiple speakers).

Yes. Given the margins of that business, absolutely.

On the CapEx side, yes, as I was saying earlier, the increase in CapEx in the first half of the year reflects our willingness and readiness to invest in the businesses when we see opportunities for growth and our commitment to making sure that our businesses are ready and able to take advantage of the markets that they find themselves in. So we're absolutely ready to do that.

What we did during the downturn was hold a very tight rein on the CapEx. Some of that helped by the business and nature of the business as the lower levels of activity have lower wear and tear on the equipment and, therefore, the need to actually spend money reduces as well. But also the natural characteristics of our capital expenditure, which is primarily made up of a large number of small projects. So that gives us great flexibility in tough times to pull back when we need to.

What I'd also been saying, though, was that over the coming years as we see markets picking up it's not sustainable to keep the levels of CapEx at 65% or 70% of depreciation. It was going to be trending up anyway.

And in 2015 we saw the beginnings of that in the half year. I would expect that to continue through 2015, 2016 and over the next number of years it would be at or around 100% of depreciation. And it may even get over that in occasional years.

Typically for us, capital expenditure spikes in years when you've significant cement-related investment. And that can give rise to higher expenditure and that can reduce [backend] (inaudible).

(inaudible) the growth and the (inaudible).

Exactly.

Yassine Touahri, Exane BNP Paribas. First question on your US materials business. We've seen some of your peers publishing relatively good margin expansion in the first half. I think that your -- in the aggregates in this [field] the margin was up by more than 300 basis points. In the asphalt business we've seen one of your peers publishing very strong margin improvement in the second quarter, with more than 700 basis points.

Have you seen these kind of margin improvements and do you expect these kind of margin improvements for the second half? Or is your business different?

And then my second question is on CRL. Could you give us the operating profit for this year? And also could you give us a sense of what was the operating margin in 2005/2006 at the peak before the crisis and whether you think we can go back to peak margin in this business?

In CRL or in --?

CRL.

Well, let Maeve answer the historic question with regard to CRL in terms of margins. I'll talk about the materials businesses.

The business you refer to in terms of -- it's very hard to get a comparison across peers in asphalt because we're by a country mile the largest player and probably the person you're referring to, we know who it is, is only a small player.

I would say the big margin expansion we're seeing in our business this year is actually on the aggregates business, not necessarily the asphalt business, in the first half.

Remember the first half of the year is seasonally less significant for us and really the asphalt business only kicks off in May for us. The volume levels come through May and June that we're reporting here are not necessarily representative of the full year.

I think we would have seen the aggregate expansion primarily due to the fact that we've got a better production balance than -- I know that sounds very technical but what that means is effectively when we crush stone in a quarry we crush it to many different grades. And if you have all parts of the construction cycle being busy you can sell all of your stone. If you've only small parts of it busy, you're left with mountains of stone.

But what we have in the United States now is all parts of the construction cycle are busy. So that allows you to get good production efficiencies and, of course, get good sales for all that product and that helps our margin.

Of course, higher volumes help our margins as well and that's what's driving a lot, with good commercial management, our aggregate margins this year.

Of course, asphalt, the margins will expand this year. We have seen falling bitumen costs but, of course, a lot of our contracts are (inaudible). And we've talked about this in the past. The fact that our customers read the newspapers too. And what they do is they expect to see the pass-through of falling diesel cost, falling asphalt and the falling bitumen costs to them.

And, particularly in the second half of this year, where you're seeing rack prices for bitumen down 15%, 17% in the months of June and July, they are being priced into contracts of work that we're doing today and in September.

So you will see falling asphalt prices. But we will see margin expansion, because we will try to hold onto that.

But, of course, remember, we much prefer low-price bitumen because low-price bitumen is low-price asphalt and low-price asphalt is more volume. And we make far more money breaking and crushing rock and coating that rock with bitumen than we do marking up high-price bitumen.

That's what we want. We want to sell volume. We just don't want to (inaudible) bitumen. So that's where the key is for us. It's cost efficiency, good production balance, good aggregates volumes being driven by good market demand and good asphalt demand as well. So that's what we're seeing.

The margins you refer to, I know who you're referring to, that's probably not representative of what we see.

With regard to CRL, in terms of the current year EBITDA is [115]. I'll let Maeve comment on the depreciation and the amortization to give you the operating number and the margins, Maeve.

The depreciation is a relatively small number historically; about $10 million to $15 million. Obviously, under CRH'S management that will be a different number, because we've got to work through the valuations of the balance sheet and so on. So that could be a different number going forward.

It's a high-margin business, also characterized by very strong growth, as Albert was talking about.

One of the characteristics of this business is a very, very strong focus on customers and being ahead of the customer needs and serving their needs. So that has protected the business in terms of its margins through the downturn. So it's been a really resilient solid business.

Clearly, some margin declines as activities fell back during the downturn. But during that period the business continued to innovate, to service customers really well, maintain its customers, continue with service, continue to grow, continue to make acquisitions right through the downturn.

So a very, very focused business, but very resilient model. So we're delighted to have it on board.

Do you have a sense of what were the peak margins?

The margins are broadly consistent over the years. But that growth that you're seeing now at the moment, effectively what this business does, it sells small price ticket items matched with large price ticket items. So there isn't the attention to the pricing of those items by our customers. So we do manage to hold the margin quite well.

So what you're seeing now in the current year is typical of what we would have seen historically over time.

Barry Dixon, Davy. A couple of questions, please, Albert and Maeve. Just moving on the CRL, I think the statement, it seems that it has some businesses outside of the US. And maybe you might just give us your thoughts in terms of the potential for growing that glass business, that architectural glass business, plus CRL outside of the US. And I think Europe and Australia are two of the markets in which it's involved.

The second question, perhaps then just moving on on that, in terms of the development of the business. You've also announced that you did a small acquisition in the European products business in Australia. And so you might just talk to the potential for building out that Australasia business. You now have China, India, the Philippines and these potential two businesses outside of that. And so, maybe, I suppose, the potential for growth and the timeframe maybe for growth for that third geography.

Just on the integration of the Holcim-Lafarge assets, and you've reiterated the synergy target and the timeframe on that. You might just maybe talk a little bit, Albert, in terms of the -- your target of getting back to the Group peak margins and returns. How dependent is that objective on the successful integration of these assets and the achievement of that EUR90 million of synergies?

And I suppose a slightly related question is, has the deal or the two deals that you've announced this year, has that changed your longer term view on your vision for CRH over the next five years, either in terms of geographic balance or divisional balance between heavyside and lightside? Thank you.

Well, three questions there. First of all, with regards to CRL. And, actually, the question with CRL and the question with the small acquisitions we're doing [this year] are both actually linked because they're actually -- they do open a little bit of a window into the future strategy of CRH. Because CRH is changing. There's no question about that. And changing because we need to change the environment that's actually out there.

This business that we're buying in CRL has plans, before we buy it, to become a global business. It currently sells all through North America. It's got 42 locations all through Canada and the United States. But it's got locations here in the UK, in Germany and in Denmark and plans to expand through Europe. It's also got a market down in Australia.

And there's no way are we going to constrain those plans. In fact, we're going to encourage those plans.

But what you will start to see, because for the first time in CRH, we're looking at probably a global business (inaudible) CRH.

Our business is we report US, Europe, Asia. That's [the way we report] regionally, which is quite a heavyside way of doing things. You become local businesses. There is not a heavyside business.

So this business will be run in an entirely different way. It will be the first truly global business within CRH.

It has good prospects for growth. And what we'll have to do is piggyback on top of our lightside business that we have, the footprint we have and the knowledge we have of those markets, plus all of Western and Eastern Europe, which will be a big plus for the business and are not factored into any of the numbers we have here.

The second point is Australia. It's only a small deal, in mid-teens but it's in a very fine business called [Hubert], which is a composite access chambers business. It's part of our lightside business. But, again, a strong growth business. It's grown from very low levels five, six years ago to being a decent sized business with great returns.

And it was delivered by our team down in the office in Sydney. We opened up an office in Sydney last year. We spoke about it last year. And, again, they've had a number of deals coming through the door.

And, again, looking at Australia and New Zealand and looking at the future growth that we see down there and the spread of a global business that we are now, again it just testifies the fact that this is an area of interest to us and we will be developing our business going forward with regard to that.

The last issue was the issue of bringing in returns on margins back to peak, which actually all of this is balanced, stretched, returns driven. It's all about that, margins returned back to peak, because we equate that with shareholder value.

And what these two deals have done, or will do, is, in fact, we believe they will advance that process and speed up that process. Why do I believe that?

Well, if I look at the LafargeHolcim deal that we acquired, we paid 8.5 times EBITDA for a quality heavyside asset at a trough in the cycle. They are better returning assets than the existing heritage business within CRH. So even at the existing level, they will enhance the returns.

Likewise, with CRL, the growth dynamics we're seeing on the top line and on the bottom line, when you marry that with our Oldcastle BuildingEnvelope business and, of course, look at the international expansion opportunities that brings and, of course, all the add-ons we can do into that lightside product business, which we like and is a key part of the strength and future of CRH, again that will enhance the returns.

So I would expect both of those to advance us down the road towards bringing those margin returns back to peak.

Christen Hjorth, Numis. Just a couple of quick ones for me. In terms of employing your capital and strategy and process of doing that, obviously there are a lot of opportunities out there. And you've talked previously about maybe adding bolt-ons to the assets acquired from Lafarge and Holcim. How do you decide where to employ that capital? And what's the process of making that decision?

And then secondly, just a bit more color on the guidance for H2. I think you said good progress. Is that excluding the acquired businesses or on an organic basis?

Maybe I'll pass the second question to Maeve in terms of the second half in terms of what that means, whether it's heritage or including LafargeHolcim.

The question in terms of how we allocate capital going forward, it's a key question within CRH and it's tied back into the strategy of CRH going forward. And our strategy that we have at the moment, I think it's really going to bring benefit in the next five years or so.

We're very much focused on businesses that are generating cash, profits and you can convert those profits into cash and you can access that cash and you can reallocate that cash back in.

For us that has been in known businesses, in known areas, or adjacent areas where we feel comfortable. So heavyside, distribution and in building products.

But the geographies become key to us now. If I look at the building materials sector and look at the footprint of CRH, we've got a great footprint, given what we're faced with in the next five years or so.

Most people who know me know I am an emerging market [bloke]. I believe in emerging markets in the future. But that's a long-term comment. Short term, we're faced with challenges.

And I know the model very well. If I look at the BRICs of five or six years ago, and look at the challenges they're all faced with now. And that's because they didn't make the fundamental adjustments that were necessary, at the time of buoyancy and growth, that were necessary to stabilize their economies. And they're doing it now from a position of weakness.

That doesn't mean there's anything bad. It just means you can't make profits in those countries for the next five years or so.

But we have a minor exposure to that and it just testifies to the strength. As we always said about emerging markets, it's not too much, too soon, nor too little, too late. It's the measured approach, because emerging markets are going to grow for all of our lifetimes and lifetimes beyond. There'll be plenty of places where we can grow in those markets.

For us it's about returns and margins and cash now, today, tomorrow, next year, next five years, and look at our footprint. We're the largest building materials business in the United States. We're the largest heavyside materials player in Europe. We're the number 2, number 3 distributor in Europe.

We've got great footprints in a market that is clearly recovering and a market that's just about to recover.

Provided we're not idiots and we run our businesses well, with good cost structure and good cash conversion, you can see what we've done, typical CRH, we've done it for the last 20 years and what we'll continue to do, those small bolt-ons to those businesses and the adjacent businesses.

And every now and then a platform step out, like CRL, or like Eastern Europe, or like into distribution, where we do best, we've bed it down. Look at SHAP five years ago. That was a new business and now look at -- it's an embedded part of our business.

So I would expect in the next two or three years to be very selective on add-on deals. We can be. But in 2017, 2018 move back into the acquisition game again, looking to see exactly how we can step out and build beyond.

Because what we are seeing here is that we are just at the cusp in CRH to our organic growth potential in our two core markets. And the fact that we've yet to deliver on two of the biggest acquisitions we've ever done in CRH, we have not yet realized the growth potential of those businesses yet. And I think we're just at the cusp of a very significant growth period for CRH and (inaudible).

The second-half outlook statement that we gave refers to our continuing businesses, so the businesses that we have in the balance sheet at June 30. As Albert said earlier, we'll update you on our expectations for the contributions from both LafargeHolcim and from C.R. Laurence in November.

We've run way over our time and I'm not going to get to the phone lines and I'll take the web questions. We'll have to actually respond to them in writing. I'll stay in the room if you don't mind, because we've got about three more minutes left, so I might just take Will.

Will Jones, Redburn. Three if I could, please. On Europe, the guidance for the second half, I think in end of the first half you did better on the like-for-like EBITDA than you thought you would in May. Your comps eased quite significantly on sales second half versus first.

Is the flattish commentary potentially conservative against what you did in the first half and how last year evolved?

Just to come back, secondly, on Americas Materials, the margin expansion of about 140 bps in the first half. Do you think that's indicative of the full year? Or, with it being a big second half business, should we potentially expect more than that in the second half?

And within that, the asphalt price decline of 2% in the first half, are you saying that we should think of a bigger number, just given where bitumen is, for the second half?

And sorry, just to tie up on disposals. I think -- is slide 16 excluding anything you get from the Philippines, the EUR1.5 billion? So you've still got another EUR500 million back in the core business to go and find?

Albert, if I could just take that question first. The EUR1.5 billion is not exactly a projection. What we're saying is that that's the kind of proceeds, together with cash flow of EUR1 billion, that will get us to the answer. And, in saying that, we've said we've already delivered EUR1 billion. So delivering EUR1.5 billion in total over the two-year period looks achievable. So that's the context. So it's not a specific number.

But there are still disposals in the core business to go and find, yes.

Yes.

With regards to the European volumes and you said you're alluding to the change in tone maybe from what we said in May, and what's happened in June, July, August, you're right.

Actually the second half of last year was flattish, but actually the challenge out in Europe there is probably more to do with pricing than it is with volume. And I think we're just being cautious and careful with regards to how that comes through. That's a very heavyside comment. I think that's good. The lightside business and the distribution business are solid and they should do well.

So our comments overall are with regard to Europe and you've seen, if you look, I think it's on slide 28, if you look at it in terms of constant currency performance of the heavyside business, you can see a reduction in top line. They're down by 1%, 2% and the heavyside business was (inaudible) flat on the EBITDA.

So it's fairly flat and we think that's going to carry on for the second half of the year. We don't see any change with regards to that.

With regards to margin performance the first half of the year in Americas Materials, I -- (technical difficulty)

(Operator Instructions).

(technical difficulty) unwinds. Remember two-thirds of our profitability in Americas Materials is generated in July, August and September. September is our biggest month across CRH. So really until we get to the end of September we don't really have visibility as to how the year is going to shape out.

I actually think the margin you're going to see in the business will be squeezed because what we've seen is, -- it's well known that energy prices are down. We're under constant pressure from our customers, which leads me into the last question in terms of asphalt pricing, the very point I made there about the fact that rack prices for bitumen are down 15%, 17% in June and July and, indeed, in August. That's going to be factored into the work that we're doing in August, September and, indeed, October.

I still think we're going have margin expansion because that's what our business is about, about managing the expansion. For the asphalt business we want the volume for the aggregates, as I said.

David O'Brien, Goodbody. Just following up on Americas Materials and the paving business, in particular. Margins have been maintained. Can you -- have you got inflexion point where you can start to drive down forward now at this stage? How do you expect them to evolve?

I think we use -- our paving business is very important to us because it's an important part of the chain. It's not necessarily important per se in its individual area in terms of making profitability. But it is profitable.

What it does do, of course, is it gives a great pull through demand. 60% of all the paving that we do is done with our own asphalt. So we can specify our own asphalt. And, of course, 30% of our aggregate in those asphalts comes from our quarries as well.

What I can confirm to you, in maintaining it that's been a big help for our volumes back up the chain.

But what we are seeing, and I think Randy said it in his piece, that the backlogs from those businesses are strong, they're ahead of last year and we've picked up a positive momentum in margins second half of the year.

Okay, I'm sorry, I'm just winding up at the back here, I'm sorry about that. We're going to have to end it here for this morning.

I want to thank you all for your participation this morning. My apologies for those down the line that we didn't get to and, indeed, what we will do is we'll endeavor to respond to those questions. I know there's quite a number of questions that have come in on the line.

I just want to leave you with one slide, all of which is familiar to you. But the single thought I would say is that we are moving into a new phase of the construction cycle into two major markets, which is the Americas and Europe.

The Americas more clearly defined. All we're discussing now is the pace of growth. I think this is a long unwind, a longer construction cycle, because of the depth of the decline we saw before this. And normally it's seven years construction cycle peak to peak, trough to trough. We think this is a 10-year unwind.

And remember, infrastructure is flat. Infrastructure hasn't started yet. And that's 50% of total construction spend in the United States is all purely driven by res and non-res. But that has yet to happen.

And we think that's more sustained demand for it and we think we're very well positioned to do that.

And in Europe we're starting to see, at last, stability come to the market. Last year, some kind of modest growth. It feels like the early signs of recovery. I think it's going to be much flatter curve, but I think our positioning on the heavyside businesses of Northern and Eastern Europe is very strong and the balance that we bring through our distribution business and our lightside business, particularly with exposure to RMI positions, is very well for growth.

So I think, as I said, with the organic growth profile we see across our businesses in those two major markets and the fact that we've yet to deliver on those two big acquisitions, I think we're poised for a period of very significant profit growth in CRH in the years ahead.

So thank you very much this morning for your time and attention. Maeve and I both look forward to doing this all again in November at our IMS in London. So wish you all good health, good luck, for the next few months and we'll see you all in November. Thank you very much indeed.

That will conclude today's conference all. Thank you for your participation, ladies and gentlemen. You may now disconnect.