2009 Annual Report - CRH

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Emerging Regions – Strategy in Action
In the early 2000s, CRH commenced a detailed review of Asian markets to identify
possible opportunities to enter the building materials sector in this region. Market size
and scale, population growth and GDP per capita were identified as key leading
indicators for our industry. China, the largest cement market in the world, and India,
the second largest, were identified as being of particular interest. With strong
population growth in both countries, GDP growth of 7% to 9% p.a. and progressive
urbanisation, the development potential was clear and CRH focussed on these two
countries as the primary targets for entry into Asian markets.
China
In February 2007, CRH completed its first transaction in China with the purchase of
Harbin Sanling Cement Company (‘Sanling Cement’) in Heilongjiang province,
northeast China. This single operation cement plant, with a capacity of 650,000 tonnes
per annum, is located approximately 45 km southeast of Heilongjiang’s largest city,
Harbin (population: 9 million).
In January 2009, CRH established a more significant position with the acquisition of a
26% associate shareholding in Yatai Building Materials Company (‘Yatai Cement’), the
leading player in China’s northeastern provinces (Heilongjiang, Jilin and Liaoning) and a
top 10 cement supplier in China. Yatai Cement has strong ambitions to grow and is
considered to be a primary consolidator of the cement industry in northeastern China.
In early 2009, Yatai Cement’s operations comprised four integrated cement plants and
four separate grinding stations in Jilin and Heilongjiang, with a cement capacity of
14 million tonnes per annum. Since then, Yatai Cement has expanded its market
presence by increasing its stake in Tonghua Cement in Liaoning and by acquiring Jinyuan
Cement in Jilin. Following these investments, and the completion in 2010 of an extensive
capital expenditure programme, the combined cement capacity of the enlarged Yatai
Cement group will be approximately 21 million tonnes. With excellent assets in a
high-growth region, CRH plans to work with its partner to build Yatai Cement into a
significant vertically integrated building materials group in northeastern China.
India
In May 2008, CRH entered the Indian building materials market through the acquisition
of a 50% stake in My Home Industries Limited (MHIL), a cement producer headquartered
in Hyderabad with modern production facilities, strong market positions and
excellent reserves in central and eastern Andhra Pradesh. At the time of acquisition,
MHIL’s operations consisted of three cement production units at Mellacheruvu in central
Andhra Pradesh with an annual production capacity of approximately 3 million tonnes.
MHIL has since constructed a new grinding plant at Vishakapatnam on the coast of
Andhra Pradesh, increasing annual production to 4.2 million tonnes and expanding its
market footprint to include the Orissa and West Bengal markets. CRH looks forward to
further developing this business with our partner as the Indian economy and building
materials markets evolve.
Our investment focus in Asia is driven by the creation of both long and short-term
shareholder value. As the Chinese and Indian markets develop, more sophisticated
construction markets will emerge and, as has been our experience in Eastern Europe,
a wide range of value-added construction products will be required, enabling CRH to
roll out a broader range of products across the industry.
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