2009 Annual Report - CRH

Building Envelope Products
These operations specialise in
systems and products for entrance
and climate control solutions, and are
mainly active in non-residential
construction focussing on the growing
RMI, safety and comfort market
segment. Volumes at our Entrance
Control operations in fencing, security
and access systems were lower than
2008. Our Rooflight & Ventilation
business, which specialises in climate
control, suffered a decline in activity
although pricing remained generally
robust. Sales to the industrial sector
continued in line with 2008. The
Roller Shutters business turned in a
satisfactory performance being only
marginally behind 2008 due to
successful new product launches and
tighter cost control. As part of our
annual strategic review of businesses
we have decided to exit climate
control activities and concentrate on
the more focussed Fencing, Security
and Shutters businesses that, for the
future, offer us greater market
leadership potential in Europe.
Construction Accessories
No.1 Western Europe
Fencing & Security
No.1 security fencing and perimeter
protection: Europe
Rooflight & Ventilation
No.1 (joint) glass structures, plastic
rooflights, natural ventilation and
smoke exhaust systems: Europe
Builders Merchants
No.1 Austria, Netherlands, Switzerland,
France: Burgundy, Rhône-Alps
and Franche-Comté,
Germany: Sachsen-Anwalt,
Niedersachsen, northern Nord
Rhein Westfalen
No.2 Ile-de-France
DIY Stores
No.1 Netherlands, No.2 Belgium
Member of Gamma franchise
No.5 Germany (48%)*
Member of Hagebau franchise
No.2 (joint) Portugal (50%)*
* CRH share
Insulation Products
Our Insulation business manufactures
a variety of high quality foam products
for use in the residential, nonresidential
and industrial buildings
sectors. The decline in residential
markets, across Europe, and price
pressure in Eastern Europe were the
main reasons for lower operating
profit, although these effects were
tempered by strong demand for RMI
products driven by ongoing European
legislation for energy efficiency.
Following rigorous strategic analysis
we have decided to exit the Insulation
sector as we no longer see a route to
becoming a pan-European leader in
this sector.
Distribution
Trading conditions for our distribution
businesses continued to be very
difficult in 2009 with the residential
sectors across all our markets
showing various degrees of decline.
Price discipline and tight management
in purchasing resulted in gross
margins in line with 2008. However,
operating profit declined 29%. The
principal focus is on further cost
reduction at overhead level, improved
category management and greater
benefits from operational excellence
by leveraging our economies of scale.
Professional Builders Merchants
With 479 locations in six countries,
Professional Builders Merchants has
strong market positions in all its
regions. Benelux: Markets were weak
in 2009 and this resulted in lower
sales and operating profit compared
with 2008. France: All regions
experienced a slowdown and further
restructuring costs resulted in
operating profit well down on 2008.
Trading results at our associate Trialis
(in which we acquired a 34.8%
shareholding in July 2008) were below
expectations as its markets in the
southwest of France proved to be
very difficult. Switzerland: Compared
with other Western European
construction markets, the Swiss
market was less impacted. However
the combination of lower volumes in
heavyside materials and additional
restructuring costs resulted in a lower
operating profit outcome versus 2008.
Austria: Despite slowing sales from a
weaker residential market, our
initiatives to improve gross margin
and reduce overheads contributed
to an increase in operating profit.
Germany: Bauking, in which we have
a 48% joint-venture stake, operates
primarily in northwest Germany. Sales
in this region suffered and despite a
small increase in gross margin and
relentless cost control, like-for-like
operating profit was down. Our
Sanitary, Heating and Plumbing
(SHAP) business in Germany,
acquired in 2008, is a leading player
in the northwest part of the country.
Benefiting from a robust demand for
heating equipment, performance was
in line with expectations. We see this
business as a platform for further
SHAP growth in Germany.
DIY
The DIY Europe platform has activities
in five countries with 241 stores
under five different brands: Gamma
(the Netherlands and Belgium),
Karwei (the Netherlands), Hagebau
(Germany), Maxmat (Portugal) and
Jelf BricoHouse (Spain).
The Netherlands: Despite a sharp
decrease in consumer confidence,
sales and operating profit in the first
half of 2009 were relatively robust but
thereafter demand declined further
especially in the fourth quarter, with
full-year operating profit lower than
2008. Increased competition and
promotional campaigns had a
negative impact on margins; however,
this was mitigated by efficient store
operations, tight cost control and
sharp franchise formula management.
Belgium: Gamma Belgium with 19
locations had lower sales and
operating profit mainly due to weaker
consumer confidence and demand.
Germany: Bauking operates 51 DIY
stores under the brand name
Hagebau. Although Bauking managed
to keep costs under tight control,
operating profit declined in a very
competitive market. Portugal: The
economic environment continued to
be difficult and operating profit was
down on 2008. Spain: We entered the
Spanish DIY market in May 2007 in
the Alicante/Valencia region. Market
circumstances have been very
challenging and results, while below
expectations, were broadly in line with
2008.
Outlook
The markets for our businesses will
continue to be difficult in 2010.
With the exception of the UK, the
residential sector will be challenging
especially in the Netherlands. The
non-residential sector is expected to
weaken further. Public sector
investments in France and
Government infrastructure initiatives
in the Netherlands should provide
some upturn in related concrete and
distribution businesses. The RMI
sector is expected to decline but at a
slower pace than the new building
sector. With the exception of Poland,
Eastern Europe market conditions will
be very demanding. The effects of our
comprehensive cost-reduction
programme initiated in late 2007 will
be continued through into 2010. More
benign energy prices should provide
some relief on the cost side.
CRH 27