CRH Investor Day 2010 EUROPE PRODUCTS & DISTRIBUTION ERIK BAX 2 Europe Products & Distribution (EPD) y BUSINESS MODEL y COMPETITIVE ADVANTAGES y OPERATIONAL EXCELLENCE y DEVELOPMENT OPPORTUNITY y KEY TAKE‐AWAYS CRH Investor Day, November 2010 3 Europe P&D – Today Leading Regional Industry Positions y Concrete Products: Benelux, DK y Concrete Landscaping: DE y Clay Products: UK y Construction Accessories: Europe y Outdoor Security: Benelux, UK, DE y Building Materials Distributor: NL,CH,AT,DE y DIY: Benelux €1.7bn to €6.6bn in 10yrs CRH Investor Day, November 2010 4 Europe P&D – Changing Face of European Construction Non‐residential Spend – W. Europe Residential Spend – W. Europe 100% 100% 90% 90% 80% 80% 70% 70% 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% 2006 2007 2008 2009 2010 2011 2012 New RMI 2006 2007 2008 2009 2010 2011 2012 Source: Euroconstruct (Jun‐10) RMI … an important driver for the near future CRH Investor Day, November 2010 5 Europe P&D – What We Do Products Products for construction Land‐ scaping Distribution Outdoor Security Builders Merchants SHAP Sanitary Heating & Plumbing Leadership positions with a balance in New/RMI CRH Investor Day, November 2010 DIY 6 Europe P&D – Total 2009 Sales €6.1bn* Products Sales*: Distribution SHAP Products for construction Land‐ scaping Outdoor Security Builders Merchants Sanitary Heating & Plumbing €1.7Bn €0.4Bn €0.3Bn €2.5Bn €0.3Bn DIY €0.9Bn * Sales exclude Insulation and Climate Control Products Res 50% Distribution Non‐Res 35% CRH Investor Day, November 2010 Infra 15% Res 80% Non‐Res 20% 7 Europe P&D – Sales Split per Country Products OTH 20% Distribution NL 24% UK 12% BE 14% DE 16% FR 14% OTH FR 10% 8% DE 13% NL 40% CH 29% Focussed on mature economies with growing RMI CRH Investor Day, November 2010 8 Europe P&D – Business Model y Grow the business in large European construction markets y Increase exposure to RMI in mature economies y Build scalable businesses y Drive Commercial and Operational Excellence y Replicate business models in new and adjacent markets y Innovate and develop new products/solutions y Selective opportunities in Central & Eastern Europe Focussed on growth opportunities in stable mature markets CRH Investor Day, November 2010 9 Europe Products & Distribution (EPD) y BUSINESS MODEL y COMPETITIVE ADVANTAGES y OPERATIONAL EXCELLENCE y DEVELOPMENT OPPORTUNITY y KEY TAKE‐AWAYS CRH Investor Day, November 2010 10 Europe Products – Competitive Advantages y Full range of value‐added, engineered products y Broad product range offering construction solutions that: o Increase efficiencies on site o Create more design freedom for architects o Enhance the built environment y Innovative Pan European product development y Management mix of { Strong operators { Dynamic entrepreneurs { Top class professionals Adding value through innovation and engineered products CRH Investor Day, November 2010 11 Europe Distribution – Competitive Advantages y Extensive regional leadership network y Strong brands and local franchises y Knowledge transfer from DIY to B.Merchants y Proven operational team y Rollout of model to: o Increase network density o Capture network synergies o Centralise procurement strategies o Expand into (adjacent) regions/countries Adding value through rollout of scalable model CRH Investor Day, November 2010 12 Europe P&D Competitive Advantages – Our Returns Return on Invested Capital ROIC 12% 10% 8% 6% 4% Industry Peers CRH Europe P&D 2% 0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: Bloomberg Delivering returns that will improve as European markets recover CRH Investor Day, November 2010 13 Europe Products & Distribution (EPD) y BUSINESS MODEL y COMPETITIVE ADVANTAGES y OPERATIONAL EXCELLENCE y DEVELOPMENT OPPORTUNITY y KEY TAKE‐AWAYS CRH Investor Day, November 2010 14 Europe Products – Operational Excellence Regional Production Strategy Procurement & Commercial Synergies Broad Footprint to Supply National Accounts Example: Concrete ‐ Landscaping y Multiple facilities operating as a regional production platform y Cross divisional synergies (APG, US) on commercial best practice & innovation y Centralised procurement within Concrete Group (e.g. cement, add‐mixes etc.) y Network synergies in logistics & warehousing Leveraging the benefits of our regional platform CRH Investor Day, November 2010 15 Europe Products – Gross Margin Improvement y Severe sales declines 2008 – 2010 Very tough markets { Margin pressures Index (2008 = 100) { { Optimising facilities { Benefits of central procurement { Commercial excellence 82 80 '08 '10F Gross Margin % Index (2008 = 100) Lower cost production 100 100 60 y Benefits of operational excellence { Sales 120 120 104 100 100 80 '08 '10F Delivering margin increase against tough market backdrop CRH Investor Day, November 2010 16 Europe Distribution – Operational Excellence Integrated Multi‐ Brand Outlets Synergies between DIY/GBM/SHAP Tailored Distribution Formats Example: Distribution y Integration of back offices y National purchasing programmes in GBM; Europe‐wide programmes in SHAP y Best practice roll out DIY to GBM – Category & Margin management, Stock control y Multi brand strategy maximising the franchise footprint y Innovation – tailoring distribution formats for specific markets CRH Investor Day, November 2010 17 Europe Distribution – Strong Sales Growth y Successful acquisition strategy ‐ developed an integrated distribution group y Tailored distribution formats for growing market segments y Different channel sales through different single locations y Successful multi‐brand strategy in major metro areas Sales €3.4Bn €3.6Bn €2.2Bn €1.4Bn 2003 2005 2007 2009 Grown into #3 Distributor in Europe CRH Investor Day, November 2010 18 Europe Operational Excellence – Our Products Margins EBITDA % EBIT % Upside leverage to margins as markets normalise CRH Investor Day, November 2010 19 Europe Operational Excellence – Our Distribution Margins EBITDA % EBIT % Upside leverage to margins as markets normalise CRH Investor Day, November 2010 20 Europe Products & Distribution (EPD) y BUSINESS MODEL y COMPETITIVE ADVANTAGES y OPERATIONAL EXCELLENCE y DEVELOPMENT OPPORTUNITY y KEY TAKE‐AWAYS CRH Investor Day, November 2010 21 Europe P&D Development Spend – The Last 10 years CRH Development Activity 2000 ‐ 2009 y 134 deals Spend (€m) 1000 y In 20 countries 900 800 y With a total value of €3.9 billion 700 600 y Comprising deals valued: o 127 < c€10‐100 million o 6 < c€100‐500 million o 1 < c€700 million (2003: Cementbouw) 500 400 300 200 100 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Expanding our footprint … from €1.7bn to €6.6bn CRH Investor Day, November 2010 22 Europe P&D Development Opportunities – Products Products 100% Relevant market size €20-25B 80% 60% Products for construction Land‐ scaping Outdoor Security 40% 20% 0% c10% E. Prod. y Precast concrete – Value added concrete products for new build y Engineered Construction Accessories – global growth potential y Concrete landscaping – RMI growth in mature and emerging economies y Outdoor Security – growing security/access control markets in mature Europe Focus on Scalable Leadership Positions … and Managing the Portfolio CRH Investor Day, November 2010 23 Europe P&D Development Opportunities – Distribution Relevant market size €40-50B 100% Distribution 80% 60% 40% 20% 0% Builders Merchants c10% E. Dist. SHAP DIY Sanitary Heating & Plumbing y Unconsolidated markets – substantial opportunities remain y Builders Merchant: increase existing network; establish new platforms y SHAP: further opportunities in mature markets y DIY: selective growth in Benelux Growing exposure to important RMI markets CRH Investor Day, November 2010 24 Europe Products & Distribution (EPD) y BUSINESS MODEL y COMPETITIVE ADVANTAGES y OPERATIONAL EXCELLENCE y DEVELOPMENT OPPORTUNITY y KEY TAKE‐AWAYS CRH Investor Day, November 2010 25 EPD – Key Take‐Aways Europe Market y Mature Western European economies with growing RMI emphasis y Fragmented light‐side markets with significant scope for consolidation y Emerging Europe: broadening product range as markets sophisticate CRH Europe Products and Distribution Leadership Positions RMI Focus Engineered Products Innovation Pursuing growth opportunities in mature markets CRH Investor Day, November 2010
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