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
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Europe Operational Excellence – Our Products Margins
EBITDA %
EBIT %
Upside leverage to margins as markets normalise
CRH Investor Day, November 2010
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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
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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