2009 Annual Report - CRH

Responding to the evolving market
environment during 2009 has
obviously required a substantial
re-thinking of organisation structures
and staffing levels with a consequent
reduction in employment levels in all
business segments. These reductions,
while painful and regrettable, have
been necessary to limit the impact on
the Group of sharply lower levels of
demand for our products.
Corporate Social Responsibility
(CSR)
A positive commitment to CSR is at
the centre of CRH’s philosophy and
management approach. Throughout
the Group we strive to operate to best
international practice in the areas of
corporate governance, environment
and climate change, health & safety
and social performance. Our
commitment in this regard is set out on
page 10 of this Report and in the
separate annual CSR Report which is
available for download from our
website, www.crh.com.
Once again in 2009, CRH was
included in the Dow Jones World
and STOXX Sustainability Indexes
on the basis of a rigorous analysis
of performance carried out by
Sustainability Asset Management
(SAM) of Zurich who have rated CRH
as “Gold Class”. We are also a
member of the FTSE4Good Index and
have been rated amongst the world’s
most highly ranked companies by
GovernanceMetrics International (GMI)
which focuses on performance in the
area of corporate governance.
Strategy
CRH’s strategy continues to be
focussed on the manufacture and
distribution of building materials, with
approximately 80% of our business in
heavyside – cement, aggregates,
asphalt, readymixed concrete and
concrete products – and the
remaining 20% split between lightside
value-added building products and
distribution. This mix provides a
balanced exposure to residential/
non-residential/infrastructure
end-uses and also to new build/RMI,
each of which displays different
cyclical characteristics in terms of
timing, amplitude and duration.
In geographical terms CRH is
balanced roughly 35% Western
Europe/50% North America/15%
Emerging Regions, the latter
comprising significant operations in
Eastern Europe built up over the last
decade and more recently-established
positions in Asia.
With a challenging trading backdrop
for many of our businesses over the
past two years, management’s
emphasis has been firmly
concentrated on operational delivery
and establishing a base from which to
deliver a strong rebound in margins
and earnings as markets stabilise and
recover over the coming years. This
was accompanied by a curtailment of
development activity from mid-2008
as the economic environment
deteriorated and financial uncertainty
spiked in the aftermath of the Autumn
2008 financial crisis. However,
value-enhancing acquisitions have
been, and will continue to be, a core
driver of CRH’s long-term
development and with the recommencement
of acquisition activity
since mid-2009 we believe that CRH
is well positioned to deliver an
improving deal flow as industry
valuations adjust and trading visibility
improves.
In addition to our development efforts
we are continuing to re-evaluate
elements of our existing portfolio
which, given recent significant
changes in the economic
environment, may no longer offer the
opportunities for growth and/or
returns originally envisaged.
2010 Outlook
We expect a difficult demand
backdrop through much of 2010 with
continuing declines in non-residential
activity across our markets not helped
by a poor start to the year as a result
of prolonged severe weather in
Europe and North America during
January and February.
In Europe, concerns remain relating to
fiscal deficits in a number of countries,
although some markets have proved
resilient. In Poland, which has
weathered the economic downturn
better than many other European
countries, our operations are
well-placed to benefit from
infrastructure-driven growth in 2010.
In the United States, recent data
releases on residential construction
activity have been below expectations
and the likely timing of recovery in US
residential activity remains unclear. On
infrastructure, the extension of the
SAFETEA-LU Federal Highway
funding programme is currently the
subject of intense debate in the US
Senate and House of Representatives
with progress anticipated over the
next 10 days. Recent euro-weakness
and the relative strengthening of the
Polish Zloty and US Dollar compared
with 2009 will, if maintained, be
beneficial in 2010.
The significant adjustments to our
cost base achieved over the past
three years and our ongoing
restructuring measures, together with
our substantial balance sheet
capacity, have strengthened the
Group operationally and position CRH
well to respond to upside demand
developments and to avail of
value-enhancing acquisition
opportunities as these arise across
our markets.
Myles Lee
1st March 2010
CRH 17