2009 Annual Report - CRH

operating adjustments were
implemented including the temporary
suspension of some business lines
until such time as trading conditions
improve.
Overall operating profit declined
compared with 2008.
Switzerland
GDP declined by 3.4% in 2009,
exports dropped by 12.5% but private
consumption remained stable.
Construction output rose by 3.3%,
the highest growth since 2004.
Civil engineering, supported by the
national stimulus programme, grew
by 8.8% and residential construction
was up by 2.3%. Industrial
construction activity declined.
Lower fuel costs partly due to high
usage of alternative fuels, together
with increased volumes in our cement
business and better margins in our
downstream readymixed concrete
and aggregates business, led to
a profit outcome ahead of 2008.
Market leadership
positions
Cement
Top 10 Western Europe
No.1 Finland, Ireland
No.2 Portugal, Switzerland
No.3 Poland, Ukraine, Tunisia (49%)*
No.1 Aegean region, Turkey (50%)*
No.1 Northeast China (26%)*
No.2 Andhra Pradesh, India (50%)*
Aggregates
No.1 Finland, Ireland
Asphalt
No.1 Ireland
Readymixed Concrete
No.1 Finland, Ireland
No.2 Portugal, Switzerland
Agricultural & Chemical Lime
No.1 Ireland
No.2 Poland
Concrete Products
No.1 blocks and rooftiles, Ireland
* CRH share
Iberia
Spanish construction activity
continued its decline in 2009, falling
by about 20%. Residential and
non-residential building fell steeply,
only partly compensated by
infrastructure spend, resulting in a
lower profit outcome.
The Portuguese economy declined by
2.7% in 2009; however construction
fell by about 7% with the residential
sector registering the largest decline.
Our Secil joint venture, with three
cement plants in Portugal, suffered
from reduced domestic demand but
increased its export volumes albeit at
lower prices. While Secil enjoyed a
good performance in its activities
outside Portugal due to favourable
demand and pricing coupled with
lower fuel costs, operating profit
overall was down on 2008.
Eastern Mediterranean
As expected, the Turkish economy
and domestic Turkish construction
activity continued to contract in 2009.
Strong export demand however
helped selling prices in the Aegean
region to stabilise in the second half of
the year and the implementation of
strong cost-control measures and
improved operating efficiencies helped
partly to offset the downturn in
domestic demand. Overall operating
profit was lower than 2008.
China
Our Chinese operations performed
well in 2009 with cement volumes in
northeast China increasing by 12%
due to strong demand from
infrastructure projects which were
funded by the government stimulus
programme. This increased demand
created a favourable pricing
environment that enabled our
wholly-owned Sanling Cement to
improve on prior year’s performance;
our new associate Yatai Cement, in
which CRH has a 26% share,
exceeded expectations and reached
record volumes.
India
My Home Industries Limited (MHIL),
our 50% cement joint venture in the
Andhra Pradesh region of southern
India, had a strong performance in the
first half of 2009 which benefited from
strong government investment in
housing and infrastructure. However,
following the national elections,
market conditions weakened in the
second half with newly-commissioned
cement capacity putting pressure on
volumes and prices across our market.
This resulted in operating profit for the
year broadly in line with 2008. The
new grinding plant near Vishakapatnam
in eastern Andhra Pradesh was
commissioned in August 2009.
Outlook
Further declines in construction
activity in Ireland are anticipated in
2010. Lower consumer confidence,
continuing restricted credit availability,
unsold building stock and supply
overcapacity will continue to put
further pressure on volumes and
margins.
Polish GDP is forecast to grow by
between 1.5% and 2% in 2010,
however unemployment is expected
to continue to increase. Inflation levels
are expected to continue to decline
and interest rates are likely to remain
low. An increase in overall
construction activity is expected,
supported by a significant increase in
infrastructure contracts awarded and
a number of sports and stadium
projects required for the European
Football Championships in 2012.
In Ukraine, construction activity is
forecast to increase modestly in 2010
resulting in improved volumes of
cement. This together with continued
focus on cost efficiencies should
deliver improved margins.
Construction demand in Finland is set
to fall further by a mid single-digit
percentage in 2010, with continued
weak levels of activity in non-residential
construction partially offset by
improving residential construction and
relatively stable infrastructure volumes.
Switzerland is expected to stabilise at
current levels. Both residential
construction and infrastructure will
continue to grow and are expected to
compensate for a decline in
non-residential activity.
In Portugal, the outlook remains
challenging with a further decline in
residential activity likely to be offset by
increased infrastructural activity. Cost
efficiencies and improved use of
alternative fuels should help maintain
margins, but export markets are
expected to be more challenging.
Turkish GDP is forecast to grow by
2.5% in 2010 and domestic
construction activity is expected to
increase at a similar rate. The positive
trends experienced during the second
half of 2009 are forecast to continue
into 2010 although cement exports
are likely to face stiff competition.
Cement demand is expected to grow
strongly in northeast China due to the
continuing Government stimulus
package and an improving residential
market. We anticipate further margin
improvement at our Sanling Cement
business. The ongoing investment
programme with Yatai Cement,
together with a full year’s contribution
from new acquisitions, will bring Yatai
Cement’s total cement capacity to
21 million tonnes.
In India, we expect growth in demand
in the Andhra Pradesh region to
recover during 2010 and this should
ease the pressure resulting from
additional supply capacity. A full year
contribution from MHIL’s new grinding
plant is expected to add to sales
growth and performance.
Overall we anticipate more stable
markets for Europe Materials’
products in 2010 and we expect to
benefit from lower energy prices and
cost reductions in our operations.
Industry capacity reductions and some
increase in demand later in the year
should be supportive to margins.
However, the year has commenced
with severe weather in many markets
and the extent to which this will impact
on demand and pricing levels for the
year as a whole remains uncertain.
CRH 23