2009 Annual Report - CRH

Chief Executive’s Review continued
Americas Materials saw second-half
benefits from infrastructure projects
funded by the American Recovery and
Reinvestment Act. However, with
weaker residential and rapidly declining
non-residential demand, overall
aggregates volumes for the year fell
23%, with asphalt down 15% and
readymixed concrete lower by 32%.
As a result reported US Dollar
revenues fell by 19%. However, strong
pricing and lower energy costs
delivered an overall improvement in
margins limiting the US Dollar EBITDA
and US Dollar operating profit declines
to 12% and 16% respectively.
Americas Products & Distribution,
which relies heavily on residential and
non-residential activity suffered
severely. High-teen percentage sales
declines in Architectural Products and
Roofing & Siding Distribution were
outweighed by more significant
declines in other segments leaving
overall US Dollar sales revenue 25%
lower than in 2008. US Dollar EBITDA
was 58% lower, while US Dollar
operating profit fell 89% exacerbated
by significant losses in MMI due to
steel price erosion.
On July 14th 2009, Van Neerbos
Bouwmarkten celebrated the
opening of its flagship DIY-store in
Amsterdam. This new store, the
largest Gamma store in the
Netherlands, added 10,000m 2 of
selling-space, reinforcing CRH’s
market-leading position with the
GAMMA brand in the Netherlands.
Over 8,000 people visited the store
on its opening day and
approximately 250,000 customers
have visited the store since then.
16 CRH
Throughout 2009 we continued the
cost reduction efforts initiated in 2007
and progressively implemented further
cost and efficiency measures across
the Group. Combined savings from
these cost actions over the four
years 2007 to 2010 are estimated
at €1.65 billion. These measures are
outlined in the Chief Operating Officer’s
review on page 19.
2009 Rights Issue & Development
Maintenance of a strong balance
sheet and a disciplined and rigorous
approach to acquisition activity have
always been core financial principles
for CRH and this conservative
approach to balance sheet
management and development has
ensured a solid ongoing financial
position over the long term. In March
2009, the Board decided it was
appropriate to strengthen CRH’s
financial flexibility to ensure that the
Group could take advantage, in its
traditional long-established disciplined
manner, of an expected increased
flow of development opportunities
driven by deleveraging and portfolio
rationalisation across the sector.
The Rights Issue, on the basis of
2 New Ordinary Shares for every
7 existing Ordinary Shares at €8.40
per New Ordinary Share, raised
€1.238 billion net of expenses and
was strongly supported by CRH’s
broadly spread investor base.
To date, the flow of acquisition
opportunities arising has been lower
than anticipated, as the mid-2009
recovery in bond markets facilitated
significant fundraising across the
sector thereby alleviating short-term
financial pressures for many
participants. In addition, a greater
than expected deterioration in industry
trading conditions as 2009
progressed was not matched by
reductions in vendor expectations.
Against this background the Group
invested a total of €0.46 billion during
2009 on 17 transactions.
First-half expenditure included the
purchase of a 26% associate stake in
Yatai Cement, the leading cement
manufacturer in northeastern China,
plus six other acquisitions across the
Group’s Materials and Distribution
segments. Second-half spending of
€0.18 billion principally comprised
four important bolt-on transactions
in our Americas Materials Division
completed in November/December
plus six smaller Materials transactions
in Poland, China and the US.
For 2010, management remains
focussed on operational delivery while
continuing to evaluate acquisition
opportunities that offer compelling
value and strategic fit. CRH expects to
see more acquisition opportunities as
industry participants, both public and
private, re-evaluate their portfolios and
seek to restore flexibility to their
balance sheets.
2009 Organisation and People
As outlined in the 2008 Annual Report,
the second half of 2008 and beginning
of 2009 saw significant position
changes at senior management level in
CRH, all of which were filled from within
the organisation. In very difficult circum-
stances the new leaders have stepped
up to their roles with energy and
commitment ensuring the continued
effective functioning of the senior team
and indeed the wider organisation.