Operations Review: EuropeMaterialsAnalysis of Change€ millionAcquisitions% ofGroup <strong>2007</strong> 2006 Change Organic 2006 <strong>2007</strong>ExchangetranslationSales Revenue 18 3,651 2,967 +684 +457 +24 +210 -7Operating Profit 28 586 421 +165 +125 +6 +34 -Average Net Assets 2,611 2,125Operating Profit Margin 16.1% 14.2%Albert ManifoldProductsAnalysis of Change€ millionAcquisitions% ofGroup <strong>2007</strong> 2006 Change Organic 2006 <strong>2007</strong>NonrecurringitemsExchangetranslationSales Revenue 17 3,628 3,186 +442 +161 +196 +85 - -Operating Profit 15 308 221 +87 +30 +20 +6 +31 -Average Net Assets 2,392 2,081Operating Profit Margin 8.5% 6.9%Excluding non-recurring 8.5% 7.9%Máirtín ClarkeDistributionAnalysis of Change€ millionAcquisitions% ofGroup <strong>2007</strong> 2006 Change Organic 2006 <strong>2007</strong>NonrecurringitemsExchangetranslationSales Revenue 16 3,435 2,786 +649 +76 +25 +566 - -18Operating Profit 10 212 172 +40 +23 +1 +36 -19 -1Average Net Assets 1,287 1,014Operating Profit Margin 6.2% 6.2%Excluding non-recurring 6.2% 5.5%<strong>CRH</strong>19
Europe Materials<strong>2007</strong> OverviewEurope Materials continued tobenefit from strong economicconditions and increased itsprofitability significantly during <strong>2007</strong>,primarily through organic growth.In Ireland we benefited from thehigh levels of infrastructure andnon-residential activity whichcompensated for the decline in theresidential sector that has emergedfollowing record house completionsin 2006.The Finnish economy performedwell with strong constructiongrowth, particularly in the nonresidentialsector which posted adouble-digit advance. The BalticStates eased in the second half, butSt. Petersburg continued to growat pace.Strong growth in foreign directinvestment led to high demand forconstruction materials in Poland,particularly in the industrial andcommercial sectors. While therewas a good level of activity in roads,this will grow in the years ahead assubstantial European Union fundingflows through into constructionprojects. High levels of demandhelped the pricing environment forall products.Following some difficult years, theUkrainian economy grew stronglyand construction activity benefitedresulting in a significant increase incement demand.Switzerland continued on a stablepath and <strong>CRH</strong> operations benefitedfrom infrastructure projects in itsregions.In Spain housing demand eased,particularly in Madrid and theSouth. While volumes were weakergenerally, good cost control led tobetter margins and profitability.Portugal again saw a lower level ofconstruction despite a recovery inthe economy. Downstream activity,exports and a good performancein operations outside of Portugalresulted in an overall improvedperformance.In August we bought out ourpartners in the Benelux cementtrading, readymixed concreteand aggregates joint venture,Cementbouw bv. The companywas reorganised to report underthe Europe Materials Division andhas performed to expectation sinceacquisition.<strong>2007</strong> saw the commencement ofthree major cement projects aimedat modernising and expanding ourcement facilities in Ireland, Polandand Ukraine. With a combinedvalue of approximately €0.6billion, this investment programmedemonstrates <strong>CRH</strong>’s commitmentto investing for the future.The focus on developing andemerging markets continued andthe Division’s acquisition of a 100%stake in Harbin Sanling Cement,China and a 50% stake in DenizliCement, Turkey, has created newplatforms for growth.IrelandIn Ireland construction demandcontinued to grow in the first half of<strong>2007</strong>; however, the second half sawan accelerating decline in residentialoutput. The National DevelopmentPlan continued to underpin demandin the road sector, while privateinvestment remained strongparticularly in commercial and retailprojects. Agricultural constructionrecovered well, supported byenvironmental improvement grantaid. As a result overall demandfor our products was at a similarlevel to 2006. The NorthernIreland business, particularlyquarry products and construction,benefited from the general sense ofoptimism in the economy.Ongoing programmes to reduceoperating costs and improveefficiency delivered furthersavings in <strong>2007</strong>, particularly inthe area of energy cost reduction.Commercially, the emphasis on costrecovery through price improvementcontinued. Profits were aheadof 2006.Irish Cement commenced a€200 million investment projectto modernise its Platin Works.The investment will create anultra-modern, energy-efficientplant meeting world best practiceemissions standards. It is dueon-stream towards the end of2008 and demonstrates <strong>CRH</strong>’scommitment to meeting the longtermneeds of the Irish economyand construction sector.Finland/BalticsThe Finnish economy grew by 4%in <strong>2007</strong>. Broad-based strength inconstruction activity contributedto strong advances in cement,aggregates and readymixedconcrete volumes. There was aparticularly strong increase in newnon-residential construction, whichgrew by over 20% when comparedwith 2006 levels. Ongoinginvestments in infrastructure suchas the Helsinki-Turku motorwayand Vuosaari port, combined witha stable residential constructionmarket, also underpinned volumegrowth. All products achievedimproved pricing and this resultedin a very good uplift in operatingperformance. The new clinker lineat the Lappeenranta cement plant,commissioned during the first halfof <strong>2007</strong> has performed satisfactorilyto date.Sales volumes in Estonia, Latviaand St. Petersburg were generallyahead of 2006. Higher input costsremained a challenge, particularlyin Russia, though good cost controland better pricing held overallprofits in line with 2006 levels.Overall, good volume growth andbetter pricing delivered improvedprofitability in the Finland/Balticregion in <strong>2007</strong>.Central Eastern Europe<strong>2007</strong> was another good year for thePolish economy with GDP growthat 6.5% and unemployment fallingto a new low of 11.4%. Inflation,although low, rose to an average2.5% while overall constructionoutput increased by an estimated16% on 2006. The unusually mild20 <strong>CRH</strong>
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