CRH Regulatory News (CRH)

2023 Interim Results

Key Highlights

• Strong H1 delivery; further growth across all key metrics

• $0.6bn acquisitions year-to-date; robust pipeline of opportunities

• Strong & flexible balance sheet; significant optionality for future value creation

• Overwhelming support for transition to US primary listing; effective 25 September

• Increasing cash returns; interim dividend +4% & $3bn share buyback underway

• Positive outlook … expect FY EBITDA of c. $6.2bn

Albert Manifold, Chief Executive, said today:

"I am pleased to report a strong first half performance reflecting the continued delivery of our differentiated strategy, further commercial progress across our businesses and good contributions from acquisitions. The strength of our balance sheet together with our relentless focus on disciplined capital allocation will enable us to invest in future growth and value creation opportunities for our business."

Announced Thursday, 24 August 2023

1 Prior year income statement information is presented on a continuing operations basis, excluding the results of the Building Envelope business which was divested in April 2022 and has been classified within discontinued operations.

2023 Interim Results

Trading Overview

CRH delivered a robust first half performance with strong pricing offsetting cost inflation, significant contributions from prior year acquisitions and good underlying demand in key end-use markets. First-half sales of $16.1 billion (H1 2022: $15.0 billion) were 8% ahead of the same period last year, or 4% ahead on a like-for-like basis2. Supported by our continued focus on commercial management and operational efficiencies, EBITDA of $2.5 billion was 14% ahead of 2022 (H1 2022: $2.2 billion) reflecting further margin expansion. Like-for-like EBITDA was 7% ahead of H1 2022.

• Americas Materials Solutions delivered a strong performance with sales 9% above 2022 levels driven primarily by solid price progression across all lines of business. EBITDA was 13% ahead, as good commercial management offset the impact of higher input costs and lower volumes resulting from unfavourable weather in certain regions.

• Americas Building Solutions sales were 21% ahead of 2022, as strong contributions from prior year acquisitions and good commercial progress offset the impact of unfavourable weather on first-half activity levels. EBITDA was 25% ahead as a result of continued progress on pricing, cost control and production efficiencies.

• Europe Materials Solutions sales were in line with 2022 reflecting continued strong pricing progress which offset the impact of lower activity levels. EBITDA was 13% ahead, supported by good commercial discipline across all markets which, together with a continued focus on cost savings, more than offset cost inflation.

• Europe Building Solutions sales were 4% behind the same period in 2022, impacted by extended winter weather conditions and softer residential demand. EBITDA was 15% behind the prior year.

First-half profit after tax of $1.2 billion was 26% ahead of 2022 (H1 2022: $0.9 billion) driven by a robust trading performance and the contribution from prior year acquisitions. Earnings per share (EPS) for the period was 31% higher than 2022 at $1.58 (H1 2022: $1.21 from continuing operations). Note 2 on page 17 analyses the key components of the first-half 2023 performance.

Capital Allocation

Consistent with our progressive dividend policy and our strong financial position, the Board has decided to increase the interim dividend3 to $0.25 per share, an increase of 4% on the prior year. On 2 March 2023, the Group announced its intention to substantially increase its share buyback programme through the repurchase of up to $3 billion of shares over the next 12 months. The increase in our share buyback programme demonstrates our confidence in the outlook for our business and our continued strong cash generation, while retaining the financial flexibility to invest in further growth and value creation opportunities for our shareholders. The Group completed the most recent tranche of the increased share buyback programme in June, bringing total share repurchases to $1 billion in the first half of the year. On 30 June 2023 the Group announced a further $1 billion tranche to be completed no later than 22 September 2023.

Sustainability

We remain committed to continuously improving our sustainability performance by providing integrated sustainable solutions for our customers, increasing circularity in construction, and innovating to create a more sustainable built environment. Earlier this year, we announced an industry-leading target to deliver a 30% reduction in group-wide absolute carbon emissions by 2030. The Science Based Targets initiative (SBTi) has validated our 2030 decarbonisation targets in line with a 1.5°C pathway. Dedicated teams across our business continue to make progress delivering against detailed bottom-up roadmaps, which keep us on the pathway to achieving our overall ambition of becoming a net-zero business by 2050.

Trading Outlook

Looking ahead to the remainder of the year, our operations in North America are expected to be supported by robust infrastructure demand, underpinned by significant increases in US federal and state funding, as well as good activity in key non-residential segments, supported by government funding initiatives in clean energy and onshoring of critical manufacturing. Although residential construction activity is expected to remain subdued across many of our markets in the current interest rate environment, the underlying fundamentals are attractive and supportive of robust long-term growth. Our businesses in Europe are expected to benefit from solid infrastructure demand, good non-residential activity and positive pricing momentum, while the residential market is expected to remain challenging. Overall, assuming normal weather patterns for the remainder of the year and absent any major dislocations in the macroeconomic environment, we expect full-year Group EBITDA of approximately $6.2 billion (2022: $5.6 billion), full-year net cash inflow from operating activities of approximately $5 billion (2022: $4.0 billion) and a year-end net debt to EBITDA ratio of between 1.1x and 1.3x (2022: 0.9x).

2 See pages 35 to 36 for glossary of alternative performance measures (including EBITDA, like-for-like (LFL)/organic and net debt/EBITDA), used throughout this report. Operating Cash Flow is net cash inflow from operating activities as reported in the Consolidated Statement of Cash Flows on page 14.

3 Further details on the dividend process, including the relevant dates, payment currency and currency election options, are set out in note 7 on page 23.

Americas Materials Solutions

Americas Materials Solutions first-half sales were 9% ahead of 2022 driven primarily by solid price progression across all lines of business which was partly offset by lower activity levels due to unfavourable weather in certain regions. EBITDA and operating profit were 13% and 26% ahead of prior year respectively, supported by good commercial progress across all markets and strong operational efficiencies offsetting cost inflation. On a like-for-like basis, sales increased by 8% and EBITDA by 12% compared to the first half of 2022.

Solutions Lines

Essential Materials

Aggregates volumes were 2% behind 2022, with decreases in the West and South regions due to unfavourable weather partly offset by good demand in the Great Lakes and Northeast which benefited from higher levels of infrastructure funding. Aggregates prices increased by 15%, driven by strong commercial management. Our cement business delivered robust sales growth driven by strong price progression of 17%, while volumes were 5% behind due to adverse weather early in the year, primarily in Texas and the West.

Road Solutions

Paving and construction sales were 8% ahead of 2022 due to improved pricing and good project execution on a strong order book. Asphalt volumes were broadly in line with the prior year as robust demand in the Northeast, Great Lakes and West regions was offset by inclement weather impacting activity levels in the South. Asphalt prices increased by 13% compared to the prior year. Readymixed concrete volumes were 3% behind 2022 levels, impacted by softer new-build residential demand in the South and unfavourable weather in the West, while demand in the Great Lakes and Northeast improved. Readymixed concrete prices increased by 14%.

Regional Performance

Sales in the Northeast region were 7% ahead of 2022 supported by solid price progression as well as improved volumes underpinned by robust construction demand. Operating profit increased, driven by improved pricing and cost saving measures which offset higher input costs.

Great Lakes region sales were 12% ahead of 2022, led by improved pricing and good construction demand in key markets, supported by favourable weather. Growth in operating profit was achieved through strong commercial management and ongoing cost control.

South region sales were 11% ahead of 2022 with strong price progression across all lines of business and increased construction revenues. Volumes were behind the prior year in most lines of business, impacted by inclement weather. Operating profit improved with improved pricing and cost saving measures offsetting the impact of input cost inflation.

The West region delivered 7% sales growth, driven primarily by disciplined commercial management with strong pricing across all lines of business as well as higher construction revenues; however, unfavourable weather impacted volumes in certain markets. Operating profit was ahead of 2022 due to strong price progression combined with cost saving measures partly offset by lower volumes and input cost inflation.

Americas Building Solutions 

The table above excludes the 2022 trading performance of Building Envelope which, following its divestment, has been classified within discontinued operations.

Americas Building Solutions delivered sales growth of 21% in the first half of the year reflecting the benefits of our integrated solutions strategy, strong commercial progress and the contribution from prior year acquisitions; sales were 1% ahead on a like-for-like basis. Sales growth, combined with a continued focus on cost control and production efficiencies resulted in EBITDA 25% ahead of the prior year, 3% ahead on a like-for-like basis. Operating profit was 19% ahead of the prior year, 1% ahead on a like-for-like basis.

Solutions Lines

Outdoor Living Solutions

Sales were ahead of the first half of 2022 driven by good commercial progress, solid underlying demand and the contribution from Barrette Outdoor Living which was acquired in July 2022 and is performing in line with expectations.

Building & Infrastructure Solutions

Sales benefited from increased demand and robust public funding in the telecommunications, water and energy utility markets. Demand remained positive with good commercial management across all geographies and product lines offsetting increased raw material and production costs.

Europe Materials Solutions

Europe Materials Solutions sales were in line with 2022, and 5% ahead on a like-for-like basis, driven by strong pricing which offset the impact of lower activity levels in most regions. Improved pricing, commercial and operational excellence initiatives and a continued focus on cost savings resulted in EBITDA 13% ahead of 2022, or 14% ahead on a like-for-like basis. Operating profit was 24% ahead of the prior year.

Solutions Lines

Essential Materials

Total sales were ahead of 2022, primarily driven by good pricing progress across all markets. Activity levels were impacted by unfavourable weather, subdued new-build residential demand amid higher interest rates and ongoing cost inflation.

Road Solutions

Despite strong pricing in the United Kingdom (UK), Ireland and Poland, total sales were behind 2022 as demand was impacted by adverse weather conditions in the first half of the year.

Regional Performance

Western Europe (UK, Ireland, Finland, France, Benelux, Denmark and Spain)

Sales were well ahead of 2022 driven by the UK, Ireland and France with positive pricing across all major products offsetting lower volumes. Activity levels were lower across most countries in Western Europe as cost inflation and high interest rates impacted new-build residential activity. Operating profit was ahead of the first half of 2022.

Central & Eastern Europe (Poland, Romania, Ukraine, Slovakia, Hungary, Switzerland, Germany, Serbia and Croatia)

Strong pricing across all countries in the region more than offset softer demand resulting in sales in Central & Eastern Europe ahead of 2022. Adverse weather conditions at the start of the year and subdued new-build residential demand across a number of key markets negatively impacted activity levels. Operating profit was ahead of the prior year supported by strong pricing coupled with easing energy costs. In Ukraine, the construction market is gradually recovering despite the ongoing conflict. The safety & wellbeing of our employees continues to be our number one priority and we are doing everything we can to support our employees and their families in Ukraine at this very challenging time.

The Philippines

Sales in the Philippines were behind 2022 as a result of challenging trading conditions impacted by delays in the commencement of government related projects. While lower volumes were partially mitigated by higher pricing and cost containment initiatives, operating profit decreased compared to the prior year.

Europe Building Solutions

First-half sales in Europe Building Solutions were 4% behind the prior year, 6% behind on a like-for-like basis, driven by lower volumes due to extended winter weather conditions and subdued new-build residential activity. A robust performance from Infrastructure Products was offset by slower markets in Outdoor Living Solutions and Construction Accessories. EBITDA and operating profit were 15% and 27% behind the prior year, respectively.

Solutions Lines

Outdoor Living Solutions

Sales declined in the first half of 2023, reflecting a slower start to the year due to unfavourable weather and a strong prior year comparative. Market demand in Germany, Belgium and Slovakia slowed, whilst Poland remained stable. Public sector order books in the Netherlands and Belgium were more positive, partly offsetting a slowdown in the private market.

Building & Infrastructure Solutions

Infrastructure Products experienced robust sales growth in the first half of 2023 with good market activity and increased pricing in Europe. Volume growth in our Australian businesses was supported by good demand in both non-residential and infrastructure markets.

Demand for Precast Products was negatively impacted by slower markets and a downturn in the new-build residential market in Finland. In Benelux and Denmark, lower market demand and postponed projects also resulted in lower volumes which were partly offset by commercial progress.

Our Construction Accessories business was negatively impacted by lower new-build activity in certain markets, particularly in Germany.

Other Financial Items

Depreciation and amortisation charges of $0.9 billion were higher than the prior year (H1 2022: $0.8 billion) due to the impact of acquisitions.

Net finance costs of $147 million were lower than 2022 (H1 2022: $197 million) primarily as a result of higher interest income.

The Group's share of profit from equity-accounted investments of $7 million was behind 2022 (H1 2022: $8 million), primarily driven by the performance of the Group's associate in China.

The Group reported profit before tax of $1.5 billion (H1 2022: $1.2 billion). The interim tax charge which represents an effective tax rate of 22.0%, has been estimated, as in prior years, based on current expectations of the full-year tax charge.

Transition to US Primary Listing

On 2 March 2023, CRH announced that following a review of its listing structure, the Board had concluded that it is in the best interests of our business and our shareholders to pursue a US primary listing, together with US equity index inclusion as soon as possible. At an Extraordinary General Meeting (EGM) on 8 June 2023, shareholders overwhelmingly approved the transition to a US primary listing on the New York Stock Exchange (NYSE), with the changes expected to take effect on or around 25 September 2023.

North America currently represents approximately 75% of Group EBITDA and is expected to be a key driver of future growth for CRH. We believe a US primary listing will bring increased commercial, operational and acquisition opportunities for our business, further accelerating our successful integrated solutions strategy and delivering even higher levels of profitability, returns and cash for our shareholders. 

Balance Sheet and Liquidity

Net debt of $6.9 billion at 30 June 2023 was $2.6 billion higher than at 30 June 2022 (H1 2022: $4.3 billion). The Group's net debt position at the end of H1 2022 reflected the proceeds received from the divestment of Building Envelope in H1 2022; debt levels increased in the second half of 2022 with the acquisition of Barrette Outdoor Living in July 2022 for $1.9 billion.

A first-half cash inflow from operating activities of $1.0 billion was $0.4 billion ahead of the prior year (H1 2022: $0.6 billion) primarily due to increased profitability and lower investment in working capital.

In July 2023, the Group accessed the euro debt capital markets and raised €2 billion in funding across three tranches in 4-year, 8-year and 12-year tenors at a weighted average coupon of 4.13%. A €0.75 billion bond was repaid in April 2023 from existing cash resources. As at 30 June 2023, the Group had $4.3 billion of cash with sufficient liquidity to meet all maturing debt obligations for the next 3 years.

The Group continues to maintain its robust balance sheet and a strong investment grade credit rating with a BBB+ or equivalent rating with each of the three main rating agencies.

Development Activity

2023 Acquisitions

The Group spent $0.2 billion on eight acquisitions in the first half of the year, the largest of which was the acquisition of Ulricehamns Betong AB in Sweden by Europe Building Solutions, expanding our precast concrete solutions offering in an attractive market.

Post 30 June 2023, the Group completed four more acquisitions, the most significant being the acquisition of Hydro International, a leading provider of stormwater products, wastewater treatment products, wastewater services, and data solutions. This acquisition represents an excellent strategic fit for our existing business, supporting our vision to be a leading provider of solutions in the circular water economy and complementing our Building & Infrastructure Solutions businesses in both North America and Europe.

2023 Divestments and Disposals

During the first half of 2023, the Group realised proceeds of $42 million from the disposal of surplus property, plant and equipment and other non-current assets. There were no business divestments completed during the period.

Condensed Interim

Financial Statements

and

Summarised Notes

Six months ended 30 June 2023 

Condensed Consolidated Income Statement

Condensed Consolidated Statement of Comprehensive Income

Condensed Consolidated Balance Sheet

Condensed Consolidated Statement of Changes in Equity

Condensed Consolidated Statement of Changes in Equity - continued

Condensed Consolidated Statement of Cash Flows

(i) Repayment of lease liabilities in the period to 30 June 2023 amounted to $149 million (30 June 2022: $159 million; 31 December 2022: $297 million), of which $22 million (30 June 2022: $27 million; 31 December 2022: $48 million) related to interest paid which is presented in cash flows from operating activities.

Supplementary Information

Selected Explanatory Notes to the Condensed Consolidated Interim Financial Statements

1. Basis of Preparation and Accounting Policies

Basis of Preparation

The financial information presented in this report has been prepared in accordance with the Group's accounting policies under International Financial Reporting Standards (IFRS) as adopted by the European Union, as issued by the International Accounting Standards Board (IASB) and in accordance with IAS 34 Interim Financial Reporting.

These Condensed Consolidated Interim Financial Statements do not include all the information and disclosures required in the Annual Consolidated Financial Statements and should be read in conjunction with the Group's 2022 Annual Report and Form 20-F.

The accounting policies and methods of computation employed in the preparation of the Condensed Consolidated Interim Financial Statements are the same as those employed in the preparation of the Annual Consolidated Financial Statements in respect of the year ended 31 December 2022, unless stated otherwise below.

Adoption of IFRS and International Financial Reporting Interpretations Committee (IFRIC) interpretations

In May 2017, the IASB issued IFRS 17 Insurance Contracts which is effective for reporting periods beginning on or after 1 January 2023, with presentation of comparatives figures required.

In addition, the following standard amendments became effective for the Group as of 1 January 2023:

•  Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgements - Disclosure of Accounting Policies

•  Amendments to IAS 12 Income Taxes - Deferred tax related to assets and liabilities arising from a single transaction

•  Amendments to IAS 12 Income Taxes - International tax reform - pillar two model rules

•  Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors - Definition of Accounting Estimates

The new standard and standard amendments did not result in a material impact on the Group's results.

IFRS and IFRIC interpretations being adopted in subsequent years

The Group is currently evaluating the impact of the following standard amendments which will become effective for the Group as of 1 January 2024:

•  Amendments to IFRS 16 Leases - Leases Liability in a Sale-and-Leaseback

•  Amendments to IAS 1 Presentation of Financial Statements - Classification of Liabilities as Current or Non-current and Non-current Liabilities with Covenants

•  Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosure - Supplier Finance Arrangements

There are no other IFRS or IFRIC interpretations that are effective subsequent to the CRH 2023 financial year end that are expected to have a material impact on the results or financial position of the Group.

Significant Estimates, Assumptions and Judgements

The preparation of the Condensed Consolidated Interim Financial Statements in accordance with IFRS requires management to make certain estimates, assumptions and judgements that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Management believes that the estimates, assumptions and judgements upon which it relies are reasonable based on the information available to it at the time that those estimates, assumptions and judgements are made.

Estimates and underlying assumptions are reviewed on an ongoing basis. Changes in accounting estimates may be necessary if there are changes in the circumstances or experiences on which the estimate was based or as a result of new information.

The significant judgements, the key sources of estimation uncertainty and underlying assumptions applied in the preparation of the Condensed Consolidated Interim Financial Statements were the same as those applied in preparing the Consolidated Financial Statements for the year ended 31 December 2022.

1. Basis of Preparation and Accounting Policies - continued

Impairment

As at 30 June 2023, the Group performed a review for potential indicators of impairment relating to goodwill of $9.3 billion (30 June 2022: $8.5 billion) allocated to cash-generating units ("CGUs"). When reviewing for indicators of impairment in interim periods, the Group considers, amongst others, the results of the last annual impairment test, the level of headroom and financial performance in the first half of the year. The carrying values of items of property, plant and equipment were also reviewed for indicators of impairment. These reviews did not give rise to any impairment charges in the first half of 2023 (30 June 2022: $nil million). As part of our annual process, we will update our impairment reviews prior to the finalisation of the full year Consolidated Financial Statements for 2023.

Going Concern

The time period that the Directors have considered in evaluating the appropriateness of the going concern basis in preparing the 2023 Condensed Consolidated Interim Financial Statements is a period of at least twelve months from the date of approval of these financial statements (the "period of assessment").

The Group has considerable financial resources and a large number of customers and suppliers across different geographic areas and industries, and the local nature of building materials means that the Group's products are not usually shipped cross-border. The level of cash and liquidity available to the Group including our ongoing ability to access the debt markets, the quantum of our liquidity facilities, the absence of financial covenants associated with our debt obligations and the continuing maintenance of strong investment grade credit ratings demonstrate the significant financial strength and resilience of the Group. No concerns or material uncertainties have been identified as part of our assessment.

Having assessed the relevant business risks, including the climate change risk, identified and discussed in our Principal Risks and Uncertainties on pages 37 and 38, the Directors believe that the Group is well placed to manage these risks successfully and they have a reasonable expectation that CRH plc, and the Group as a whole, has adequate financial and other resources to continue in operational existence for the period of assessment with no material uncertainties. For this reason, the Directors continue to adopt the going concern basis in preparing the Condensed Consolidated Interim Financial Statements.

Translation of Foreign Currencies

The financial information is presented in US Dollar. Results and cash flows of operations based in non-US Dollar countries have been translated into US Dollar at average exchange rates for the period, and the related balance sheets have been translated at the rates of exchange in effect at the balance sheet date. The principal rates used for translation of results, cash flows and balance sheets into US Dollar were:

2. Key Components of Performance for the First Half of 2023

Continuing operations

(i) CRH's share of after-tax profit of joint ventures and associated undertakings. 

3. Seasonality

Activity in the construction industry is characterised by cyclicality and is dependent to a considerable extent on the seasonal impact of weather in the Group's operating locations, with activity in some markets reduced significantly in winter due to inclement weather. As shown in the table above, the Group's operations exhibit a high degree of seasonality and can be significantly impacted by the timing of acquisitions and divestments.

4. Revenue

A. Disaggregated revenue

In the following tables, revenue is disaggregated by primary geographic market and by principal activities and products. To further accelerate the development of the Group's integrated solutions strategy, the Group transitioned to a new organisational structure, effective from 1 January 2023. Accordingly, for the purpose of disaggregation of revenue we have included certain products together, as follows:

Essential Materials manufacture and supply cement, lime (in Europe), and the full range of construction-grade aggregates.

Road Solutions support the manufacture and supply of readymixed concrete, asphalt and paving and construction services to build and maintain road, highway and commercial infrastructure.

Building and Infrastructure Solutions connect, protect and transport critical water, energy and telecommunications infrastructure and deliver complex commercial building projects.

Outdoor Living Solutions integrate specialised materials, products and design features to remodel and enhance the quality of private and public spaces.

Comparative amounts for 2022 have been restated to reflect the new format for disaggregation of revenue.

Revenue from external customers (as defined in IFRS 8 Operating Segments) attributable to the country of domicile and all foreign countries of operation greater than 10% are included below. Further operating segment disclosures are set out in note 5.

Footnotes (i) and (ii) appear on page 19.

4. Revenue - continued