CRH plc (NYSE:CRH) Q1 2024 Earnings Call Transcript

CRH plc (NYSE:CRH) Q1 2024 Earnings Call Transcript May 10, 2024

CRH plc beats earnings expectations. Reported EPS is $0.16, expectations were $-0.14. CRH isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day and welcome to the CRH plc First Quarter 2024 Results Presentation. My name is Christa and I will be your operator today. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] At this time, I’d like to turn the conference over to Albert Manifold, CRH Chief Executive Officer, to begin the conference. Please go ahead, sir.

Albert Manifold: Hello, everyone. Albert Manifold here, CRH Group Chief Executive, and you’re all very welcome to our Quarter One 2024 results presentation and conference call. Joining me on the call is Jim Mintern, our Group CFO; Randy Lake, Chief Operating Officer; and Tom Holmes, Head of Investor Relations. Before we get started, I’ll hand you over to Tom for some brief opening remarks.

Tom Holmes: Thanks, Albert. Hello, everyone. Before we begin today’s proceedings, I’d like to draw your attention to Slide 1 shown here on the screen. During today’s presentation, we’ll be making some forward-looking statements relating to our future plans and expectations. These are subject to certain risks and uncertainties and actual results and outcomes could differ materially due to the factors outlined on this slide. For more details, please refer to this slide, our annual report and other SEC filings, which are available on our website. I will now hand over to Albert, Jim and Randy to deliver some prepared remarks. After that, we will open the line for a Q&A session.

Albert Manifold: Thanks, Tom. Over the next 20 minutes or so, we’ll take you through a brief presentation of the results we’ve published this morning, highlighting the key drivers of our operating performance for the first three months of the year, our recent capital allocation and development activities as well as providing you with an update on our expectations for the year as a whole. Afterwards, we’ll be available to take any questions that you may have and all told, we should be done in about 40 minutes or so. First, on Slide 3, some key messages from today’s results. Overall, it’s been a good start to the year in what is the seasonally least significant quarter for our business. Further growth in revenues, adjusted EBITDA and margin compared to the prior year period continues to be underpinned by the benefits of our integrated solutions strategy as well as positive pricing momentum, early season project activity and benign weather conditions in some key markets.

Notwithstanding the good start to the year, it’s still very early in the construction season, and we’re pleased to reaffirm our previous guidance to the market for 2024. Assuming normal seasonal weather patterns and no major dislocations in the macroeconomic environment, we expect full year group adjusted EBITDA to be between $6.55 billion and $6.85 billion, which will represent another strong year of delivery for CRH. As most of you know, we’ve been very active on the acquisition front in recent months, increasing our exposure to attractive high-growth markets and strategically developing our solutions capabilities to deliver further value for our customers and our shareholders. In February, we completed the $2.1 billion acquisition of our portfolio of cement and readymixed concrete assets and operations in Texas, a significant investment, which will further strengthen our position as the number one building materials business in the fastest-growing state in the United States.

So far, we’ve identified run rate synergies of approximately $60 million and Randy will take you through that in more detail a little later. In April, we acquired a materials business in Northern California, representing an attractive entry point into this market for our Americas Materials Solutions business due to a substantial aggregate reserves and virtually integrated asphalt and readymixed concrete operations. We recently announced a proposal to acquire a majority stake in Adbri, a leading provider of building materials in Australia and we expect that transaction to close in 2024 subject to regulatory and Adbri independent shareholder approval. The strength of our balance sheet also enables us to continue to return significant amounts of cash to our shareholders.

Our ongoing share buyback program has returned approximately $600 million so far this year. And today we’re announcing a further quarterly tranche of $300 million, representing an annual run rate of approximately $1.2 billion. Following our transition to quarterly dividend payments, the Board has declared a new quarterly dividend of $0.35 per share, representing an annualized increase of 5% on the prior year, in line with our strong financial position and policy of consistent long-term dividend growth. Turning to Slide 4 and our financial highlights for the first three months of the year. Overall, a good performance across all key metrics with revenues, adjusted EBITDA, margin and EPS all ahead of the prior year period. Total revenues of $6.5 billion were 2% ahead.

This translated into adjusted EBITDA of $445 million, 15% ahead and a further 80 basis points of margin improvement, reflecting the continued benefits of our integrated solutions strategy, disciplined cost control and further operational efficiencies. Now at this point, I’ll hand you over to Randy to take you through the operating performance of each of our businesses.

Randy Lake: Thanks, Albert. Hello, everyone. Turning to Slide 6 and starting with the America Materials Solutions, which had a good start to the year, supported by positive pricing across all lines of business, favorable weather in certain key markets and contributions from acquisitions. All of this resulted in total revenue 16% ahead of the prior year period. In Essential Materials, first quarter revenues were 12% ahead of the prior year with good activity levels in the West and Great Lake region of the United States. Our aggregates pricing increased by 8% despite being adversely impacted by geographic mix while our cement pricing increased by 9%. In Road Solutions, good demand, together with further price progression in asphalt and readymixed concrete resulted in Q1 revenues 19% ahead of the prior year period.

Of course, it’s worth noting that Americas Material Solutions is particularly seasonal and the first quarter typically only accounts for between 10% and 15% of our annual volumes. Combined with the timing of our annual maintenance program, you can also see how seasonally insignificant this period is from an adjusted EBITDA and margin perspective. As Albert mentioned, we recently completed our acquisition of a portfolio of cement and readymixed concrete assets in Texas. Our focus now is on integrating these assets into our existing business and delivering on the synergies and growth opportunities that we’ve identified. And I’m pleased to report that the early integration is progressing well and in line with our expectations. Turning to our end markets and first to infrastructure, which represents our largest exposure in North America.

Here, the funding backdrop is robust with demand underpinned by the significant increase in US federal funding through the IIJA as well as positive momentum in transportation funding initiatives at the state level. We also continue to experience good demand in the industrial and manufacturing sectors, which are also supported by significant federal funding and increased onshoring activity. Looking ahead, as the construction season gets fully underway across many of our markets, I’m encouraged by the momentum we’re seeing in our bidding activity and our backlogs, which reflects the significant increase in US infrastructure funds that are now coming through. Next to Americas Building Solutions on Slide 7, which has also experienced a good start to the year, benefiting from positive pricing, cost control and good delivery from recent acquisitions.

Notwithstanding some unfavorable weather conditions and subdued newbuild residential demand impacting activity levels during the first quarter. Our building and infrastructure solutions business continues to benefit from significant public investment and critical utility infrastructure. Outdoor Living Solutions had a good start to the year with first quarter revenues 5% ahead driven by good early season demand in both the retail and professional channels and resilient residential repair and remodel activity. For Americas Building Solutions overall, total revenue growth of 2% translated into a 2% increase in adjusted EBITDA and a further 10 basis points of margin improvement. Moving across to Europe now on Slide 8, and first to the performance of Europe Materials Solutions.

Despite record rainfall impacting activity levels across several key markets in Western Europe during the first quarter, our business delivered a strong performance with adjusted EBITDA 32% ahead of the prior year. This was driven by further growth in our Central and Eastern European markets, good commercial management, lower energy costs and our ongoing focus on cost management and operational efficiencies. While residential demand remains subdued, infrastructure and nonresidential segments continue to be underpinned by government and EU funding programs. Our first quarter results also reflect the divestiture of Phase 1 and 2 of our European Lime operations. The final phase, consisting of our Lime operations in Poland is expected to complete in the second half of 2024.

Next to the performance of Europe Building Solutions on Slide 9. This is our smallest business, representing less than 5% of group adjusted EBITDA in 2023. And it’s much more exposed to residential newbuild construction than the rest of our businesses. Overall, a challenging start to the year, impacted by subdued residential activity and compounded by adverse weather conditions across our markets. We continue to focus on cost management and operational efficiencies to mitigate the impact of lower activity levels as well as maintaining positive pricing momentum to protect our profitability. So at this point I’ll hand you over to Jim to take you through our financial performance in further detail.

Jim Mintern: Thanks, Randy, and hello, everyone. As you heard from Albert earlier, we’ve had a good start to the year and this is reflected in our financial performance as outlined on Slide 11. Let me briefly take you through the main drivers of our adjusted EBITDA performance, moving from left to right on the slide. Starting with organic growth of $47 million, a 12% ahead on a like-for-like basis reflecting good underlying demand in our key markets, further pricing progress amid an inflationary input cost environment and the continued benefits of our differentiated strategy. Acquisitions, net of divestitures, delivered a further $11 million of adjusted EBITDA, primarily reflecting the contribution from our acquisition of material assets in Texas and the impact of the divestiture of Phases 1 and 2 of our European Lime operations.

Overall, we delivered $445 million of adjusted EBITDA, 15% ahead of the prior year period and representing a good start to the year in what is our seasonally least significant period. Next to Slide 12, where I will just take a moment to highlight some of the key components of our net debt movements and our strong and flexible balance sheet. Firstly, on the left hand side, you can see we ended 2023 with a net debt position of $5.4 billion. Turning to our cash flow performance. We reported a net cash flow outflow of approximately $700 million in the first quarter. An outflow at this stage of the year is to be expected given the seasonal nature of our business as it reflects the buildup in working capital in advance of second and third quarter trading, which are seasonally our most important trading periods.

Acquisitions, net of divestitures and other items, resulted in an outflow of approximately $1.9 billion during the first three months of 2024, primarily reflecting the acquisition of Material Assets in Texas and the proceeds from the divestiture of the initial phases of our European Lime operations. We also invested $500 million in capital expenditure to support further growth in our existing business. And we returned $1.1 billion in the form of dividends and share buybacks, demonstrating our commitment to returning cash to our shareholders. Taking all of this into account results in a net debt position of $9.6 billion at the end of the first quarter, representing a net debt to adjusted EBITDA ratio of approximately 1.5 times on a trailing 12-month basis.

Now at this stage, we would like to briefly update you on a few other items from today’s announcement. Active portfolio management is a continuous process in CRH, and we are constantly allocating and reallocating our capital to create value for our shareholders. As you can see here on Slide 14, we have been very active in this regard so far this year. In addition to the divestiture of the initial phases of our European Lime operations, in April, we also completed the divestiture of certain cement and material assets in Canada. On the acquisition front, in addition to the completion of the Material Asset acquisitions in Texas in February, we entered into a binding agreement to acquire a majority stake in Adbri, a leading provider of building materials in Australia.

Adbri has high quality assets and leading market positions that complement our core competencies in cement, concrete and aggregates while creating additional opportunities for growth and development for our existing Australian businesses. The proposed transaction is subject to regulatory and Adbri shareholder approval and is expected to complete in 2024. In April, we acquired BoDean, a material solutions business, including two hard rock quarries in California. This represents an attractive first entry point into California for our Americas Materials Solutions business, particularly due to a substantial hard rock reserves and vertically integrated asphalt and readymixed concrete operations. We also invested approximately $100 million on seven strategic bolt-on acquisitions, further developing our integrated solutions strategy in the areas of road infrastructure, critical utility infrastructure and outdoor living.

All of this activity represents our commitment to allocating and reallocating capital into attractive high-growth markets and areas where we can further develop our integrated solutions strategy. Now at this point, I’ll hand over to Randy to update you on the synergies we have identified following the completion of our $2.1 billion acquisition of Material Assets in Texas.

Randy Lake: Thanks, Jim. I’m pleased to report that we’ve identified approximately $60 million of run rate synergies, which we expect to be achieved by year three. And on the right hand side of Slide 15, we’ve outlined the expected phasing with approximately $15 million anticipated in the first year. There are significant benefits that arise from integrating these assets into CRH. They’re an excellent strategic fit with our existing operations in Texas, and as a result, there are significant opportunities to self-supply our own downstream solutions businesses. It will also be very beneficial from a network optimization point of view. It will allow us to be much more efficient in how we manage our materials flow, our logistics and how we service our customers across our wider regional footprint.

We’ve also identified significant synergies from operational improvements, leveraging our expertise and technical capabilities from our wider North America cement platform and Europe materials businesses to optimize plant performance and improve production efficiencies through increased usage of alternative fuels and raw materials. There are also savings to be generated by integrating these assets into our global procurement network, leveraging our scale, purchasing power and supply arrangements for materials, equipment and services. So in summary, the early integration is progressing well, and we look forward to updating you on our progress.

Albert Manifold: Thanks, Randy. Great examples there of some of the real and tangible benefits and value creation opportunities that we see in our ownership. Now before I provide you with an update on our expectations for the full year, let me share our thoughts on the outlook across our markets. Turning to Slide 17. North America represents 75% of our adjusted EBITDA with the remaining 25% in Europe. First, infrastructure, which represents the largest exposure for our business. Here the outlook is robust with demand in the United States underpinned by the continued rollout of once-in-a-generation federal and state investment. Similarly in Europe, we expect robust demand in infrastructure activity to continue, supported by significant investment from government and EU funding programs.

In nonresidential, we expect key segments to continue to benefit from increased reindustrialization and onshoring activity. In the United States, this is supported by $650 billion of federal funding for increased investment in clean energy, critical utilities and high-tech manufacturing following the passing of the Inflation Reduction Act and the CHIPS and Science Act. Europe is also benefiting from our increased onshore activity with over $200 billion of high-tech manufacturing projects in the pipeline. In the Residential segment, we expect newbuild activity in the US and Europe to remain subdued due to the affordability challenges caused by the current interest rate environment. This is not a demand issue and we believe long-term fundamentals for residential construction remain very attractive in these markets supported by favorable demographics and significant levels of underbuild.

So in summary, the overall trend is positive for our business, supported by robust demand in infrastructure and key nonresidential segments while newbuild residential construction is expected to remain subdued. Regarding the pricing environment, we expect positive momentum to continue across our markets, supported by disciplined commercial management as well as the benefits of our integrated and value-focused solutions strategy. Turning to Slide 18. And against that backdrop, this morning, we have reaffirmed our financial guidance for 2024. Assuming normal weather patterns for the remainder of the year, and no major dislocations in the macroeconomic environment, we expect full year group adjusted EBITDA to be between $6.55 billion and $6.85 billion, net income to be between $3.55 billion and $3.8 billion and earnings per share to between $5.15 and $5.45, representing another strong year of delivery for CRH.

It’s still very early in the construction season, but we will, of course, update you on our expectations as the year unfolds and the season gets fully underway across our markets. So that concludes our presentation today and we’re now happy to take your questions. May I ask you please to state your name and the institution that you represent before posing your questions? I’ll now hand you back to the moderator to coordinate the Q&A session of our call.

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Q&A Session

Operator: Thank you. [Operator Instructions] Your first question comes from the line of Anthony Pettinari from Citi. Please go ahead.

Anthony Pettinari: Good morning. I was wondering if you could talk about pricing dynamics and price cost in Americas Materials and are you still seeing or guiding to double-digits for the year on pricing?

Randy Lake: Yes, Anthony, thanks for the question. Q1, in terms of aggregate pricing, was up 8%. I think a bit impacted by the geographic mix and seasonality that’s associated just with the platform of businesses we have. So good progress there. If you look on a mix-adjusted basis, pricing was up double-digits, which is really consistent with what we indicated at the beginning of the year. So there’s really strong support, good momentum in terms of underlying pricing in ag and cement as well. So we’re happy with the progress we’ve seen in terms of cement, up 9% across the group, again, supported by a good underlying demand.

Anthony Pettinari: Okay. That’s helpful. And then just with Hunter, can you talk about maybe the current kind of state of cement pricing in Texas? And are you seeing any weakness there may be in the southern part of the state that see some imports or how would you characterize the Texas cement?

Randy Lake: I guess I would characterize it very similar to what we’re seeing across the nation. So good support for pricing. We’re really seeing no concerns in Texas. First quarter certainly was impacted by weather. So we take that into consideration, but we expect positive pricing as we go throughout 2024. But I’d call out Texas, not just cement. I think it’s ags, it’s asphalt, it’s readymixed concrete, it’s really all the downstream businesses as well. So we see good support and expect progress in 2024.

Anthony Pettinari: Okay. That’s helpful. I’ll turn it over.

Operator: Your next question comes from the line of Kathryn Thompson with Thompson Research Group. Please go ahead.

Kathryn Thompson: Hi. Thank you for taking my questions today. First is just on the outlook. You have stronger-than-expected volumes in the US market. Could you give a little bit more color in terms of how much of that is fundamental demand versus favorable weather or other factors? And then along with that backlog trends for the year and color on that? Thank you.

Randy Lake: Yes. I appreciate that question. I guess it’s probably a mix of both. Certainly, weather for us was favorable in, I think, we called out the Great Lakes region kind of the Michigan, Ohio area. So good demand there, probably helped by weather, but also some significant projects that we’ve had in our backlog and able to execute on. Out West, specifically kind of Utah and Idaho, again, pretty favorable weather. I think it’s important to remember kind of in total terms, the absolute volume shift are pretty low in terms of overall percentages for the year. It’s less than 10% of our total material or aggregate shipments. But again it’s supported though, and I guess, to your question on backlogs, it’s good to have that early momentum, and it reflects what we have in our backlogs today.

So you see both federal and state funding initiatives coming through in terms of underlying bid activities. We’re getting our share of those businesses and actually margins are up in all lines of business, which is good to see. I would call out both the roads business, but the also the critical infrastructure, we often don’t talk about kind of the underground utility work that’s associated with roads. And both our businesses, the backlogs there would reflect good underlying demand.

Kathryn Thompson: Okay. Great. And one follow-up question related to Texas and cement. Some of our primary research has pointed to a shortage of fly ash due to issues with a supplier recently, which conversely could be a net positive for your cement business. Stepping back and looking at the bigger picture, as you have coal-fired plants in the US phased out and tightening the supply of fly ash, what does this mean for CRH’s business, not just for this year, but when you look a few years out? Thanks very much.

Randy Lake: We’ve been — it’s a good question. We’ve been proactive in terms of the use of an introduction of SCMs in our individual markets. So I think I’d broaden it to say not just fly ash, but looking at alternative materials, pozzolans, and so forth. And we have the capabilities, one, to blend; two, to integrate for our customers; but three, more importantly, the access to it. So whether those reports, the ability to kind of consume and then transport to our major markets. I think we’re well positioned to deal with what is certainly a shortage in fly ash, but good alternatives in terms of overall product mix.

Albert Manifold: And I should say as well I mean across we have you know a decade of capability in our European business in dealing with this issue in terms of blending and technology as well. So that’s big advantage to us as it rolls out here in the US at the current time.

Kathryn Thompson: Perfect. Thanks very much.

Operator: Your next question comes from Ross Harvey with Davy. Please go ahead.

Ross Harvey: Thanks very much and thanks for taking my question. I’m hoping you can elaborate on the guidance maybe the pluses and minuses that you see in relation to the ’24 guidance. I know you’ve reaffirmed it today just a good strong Q1 performance in there, new synergies, further M&A? Can you just elaborate on that? Thanks.

Jim Mintern: Good morning. Jim here. It’s been a good start to the year, but it’s still very early in the season for us, Ross. And since we issued the guidance at the end of February, we’ve been active on M&A. We’ve had eight bolt-ons here to date, including the attractive entry into the California material with the BoDean acquisition. We’ve also announced this morning the Texas synergies. So that’s $60 million synergies by year three, and $15 million in the current year 2024. However, the kind of contributions from the bolt-ons and the Texas synergies are largely offset by the divestment of the cement and material assets that we announced in Quebec, which closed on the 1st of April. So overall, when you put them together, the kind of plus and minuses, there’s not that much of a difference in the kind of $70 million to $80 million we set out on the end of February in terms of the contribution from bolt-ons in ’24.

But just to confirm, that doesn’t include any contribution potentially from the closure of the Adbri acquisition in Australia. So overall pluses and minuses. It’s a good start to the year. We’re happy to be able to reaffirm this morning and our guidance for the full year.

Albert Manifold: Ross, it’s Albert. Look I know there’s an incredible focus on the first three months of the year. But it literally is a short snapshot. And let’s just take a step back here. Look, for sure, we’ve had a good start to the year. And as we look here, Randy mentioned, backlogs look — take us through the first half of the year looks strong and continues to be strong. So we’re in a good place and happy to be that. But let’s just take a step back here. Like we are at the early stages of a major growth cycle for our industry, but backed by unprecedented government support for both infrastructure spend both in the United States and indeed in Europe. On top of that, we’re seeing, again, very significant levels of reshoring and onshoring investment that’s going to drive demand in the commercial sector.

So honestly, as I look forward in the next five, six, seven years, I know we’re talking about one quarter results today. We’re looking pretty good as an industry all the way to the end of the decade. So the short-term, the medium-term and the long-term outlook, all look very positive for CRH. Now against that backdrop, I know you want to talk about the first three months of the year, but our focus in this business is on three main areas. Of course, number one, it’s an execution of our operational performance. Every day, we work at that here, delivering the performance in terms of profitability cash. Number two, I think, it’s crucially important now at the start of this major growth cycle is to invest in our businesses, investing for the next growth cycle.

And number three, as you expect from CRH to continue to be disciplined stewards of capital. We talk about how over the next five years, we will generate $35 billion of free cash flow. And this year, you’re starting to see what we’re doing with that. I expect us to spend close to $4 billion on M&A in this year with deals announced or deals already in the pipeline. On top of that, we’re going to spend about another $1 billion in growth CapEx. That’s $5 billion investing in the growth of our business for 2030 and beyond. In addition to that, with buybacks announced, the run rate we’re looking at and dividends, it’s likely we will distribute a further $3 billion back to our shareholders, dividends and share buybacks. So a very significant investment in the first year of that $35 billion that we’re seeing there.

The industry backdrop is good. We are the number one player in the United States and Europe. Therefore, we will be the major beneficiary in this growth cycle. And no one else can touch our cash generation. And particularly when we use that cash to drive performance for further growth and rewarding our shareholders. And again, we talked about the first quarter, but let’s just take a step back and look at the short and medium-term growth cycle and see where we are. And I think CRH positions itself very well for that.

Ross Harvey: That’s great. Thanks for your perspective, Albert and Jim.

Operator: Your next question comes from the line of Michael Dudas with Vertical Research Partners. Please go ahead.

Michael Dudas: Good afternoon, gentlemen. Hello? Can you hear me?

Albert Manifold: Yes, go ahead, Michael. Please go ahead.

Michael Dudas: Okay. Great. Thank you. Sorry about that. Yeah, thank you. First just quick, I know you gave a lot of details on the Texas acquisition. Relative to what you saw going into negotiations and what you’ve seen early on and relative to your playbook, are you at, behind or ahead of schedule relative to some — obviously you put out some pretty interesting synergy targets. Maybe you can just share some thoughts on that first.

Randy Lake: Yes, happy to. Well, I think, we’re satisfied so far. We’ve identified $60 million at this point in time. We’ll continue to dig in. But I think there’s a couple of things maybe to call out and we did a bit in the presentation. We are the largest building material supplier in the State of Texas. We have a really unique portfolio of businesses downstream consumers of cement, whether that’s the readymixed business or critical infrastructure or the outdoor living. So just the that internal consumption is a big value creator for us. But when you look at the context of that plant, along with our other plant in Midlothian, Texas, our assets in Arkansas as well as Kansas kind of that network optimization is a huge benefit from a transportation standpoint and the ability to serve that market in the way it needs to be served as it continues to grow.

So those are — that’s a nice pool of opportunity for us. I think the other bit, which we have called out in the past, I think, is important to say is that it’s a great example of Ash Grove. It’s probably the best most tangible example. In 2018, acquired that business and have doubled the profitability in six years. That was driven by the usage of internal resources to drive operational performance. So being a leading producer of cement, 40 plus plants around the world, optimizing, taking our best practices, applying those in terms of the plant in Hunter is another large pool of opportunity. And so we’ve clearly identified opportunity there. And then the last just kind of the housekeeping you would expect us to do in and around procurement and kind of weaving them into our underlying platform in terms of leveraging our size and scale.

So as I said, it’s a good look at it, and as of today, $60 million of opportunity so far.

Albert Manifold: I should say, Mike, just to add to what Randy just said. I mean, Randy, talked $60 million at this point in time. Our feet are just under the table there. We’ll see how it goes. But again, it’s worthwhile asking how do we do this? Well, CRH, the new owner of this business, brings technical capabilities, and it brings a solutions model, and that’s what delivers the extra profitability. So as compared to previous owners, we’re going to increase the profit of this business by over 30%. And it’s done because we have technical capability, but we integrated it into our solutions model, a model that now shows you versus previous owners who are dedicated, focused materials players, the solution model, it delivers higher profitability.

It will deliver those profitable translation to higher cash and better returns. That’s the advantage of investing and working with CRH and multi-companies like this. And again it must be seen against the backdrop of our constant portfolio management. During the course of the last 12 months, we disposed of maybe slow growth businesses in Lime business in Europe. We disposed the business in Quebec. That money has been reinvested into the fast-growing regions of Western Texas in and around this plant here. And again, that’s what you should expect to see as efficient, disciplined stewards of capital.

Michael Dudas: That’s a great segue. And my follow-up is maybe Albert you could or gentlemen you can elaborate on your current visibility on the M&A pipeline and some of the valuations you’re experiencing in your negotiations?

Albert Manifold: Look, valuations have always been too high in my 25 some years in CRH, and they continue to be too high, except, what we do is, but when we deliver synergies like we deliver for synergies, that’s how we pay those high prices and we deliver shareholder returns. Our pipeline is strong. I already said earlier in this call that I expect us to do about $4 billion worth of deals this year, between what’s announced and what’s coming. We will digest those deals. We’ll obviously integrate them, create those synergies and move on to next year after that. So the pipeline is good and strong, happy that it’s continue to build out our footprint. And I think the portfolio management will continue as we continue to reallocate capital back into the higher growth products of our solutions model.

Michael Dudas: Thank you, gentlemen.

Operator: Your next question comes from the line of Brent Thielman with D.A. Davidson. Please go ahead.

Brent Thielman: Great. Thank you. I guess my first question would just be if you could provide an update on the timing of US index inclusion?

Jim Mintern: Good morning, Brent. Yes, firstly, there are several key equity indices in the US, right. You have S&P, Russell, CRSP, MSCI, and they all have different eligibility criteria and rebalancing timelines. Since the relisting last September, we’re very pleased with the progress we’ve made to date. In fact, today, the NYSE represents over 80% of our daily trading volumes and also today the majority of our shareholders are now based in the US. For us, the filing of our 10-K and our US GAAP financials in February was also a key kind of important milestone for us. But obviously inclusion is at the discretion of the individual index providers, but we’re confident that we’re eligible for consideration. And of course, we’ll be seeking inclusion as soon as possible.

Brent Thielman: Okay. I appreciate that. And then my follow-up would just be on Americas Building Solutions. You mentioned good early season demand trends in Outdoor Living. I’m wondering how that might inform your view for the first half or rest of the year for that group, in particular, just in terms of organic growth potential this year?

Albert Manifold: I have to say, I think, there’s one particular division within our Americas Building Solution, which for me has always been the canary in the coal mine, which is our Outdoor Living business because it’s the early season sell-in, the spring season selling for our Outdoor Living business, and it gives you a good sense of what the underlying demand is for the small jobbing contractors across the United States, which is a good bedrock. And I have to say the seasonal demand has been better than we expected. Volume levels are ahead. Activity levels are strong. Sell-through numbers are still strong. I saw the numbers for last week, again, continue to be strong and the order books are goods. So I’m positively pleased with the development there and it’s a good sign as we start to ramp up for the busy part of our season now.

Brent Thielman: Okay. Great. Thank you.

Albert Manifold: Thanks, Brent.

Operator: Your next question comes from the line of Keith Hughes with Truist. Please go ahead.

Keith Hughes: Thank you. I agree with your comment, Albert, about being a canary in the coal mine. Can you just speak a little more on specifically what products in Americas Outdoors that are doing well and leading the charge here?

Albert Manifold: The question was, I used the term canary in the coal mine for Outdoor Living and what products am I specifically talking about. Actually, it’s a wide range, but it’s mainly our hardscapes and paving products that are used in building at the back yard. Usually what happens as we come out of the winter season, early spring season, people are prepared to spend time, effort and energy, preparing their Outdoor Living areas for the summer season. So it tends to be those hardscape areas, concrete pavers, bricks, hardscapes, all of that walls, capstones all of that, that’s where the demand comes from as people prepare for the season, and it really indicates the level of activity that people are prepared to invest in their homes.

So we have always found that to be a good indication of the underlying demand and confidence for people to send in this environment. And that’s what we’re calling it from. And we haven’t been proved wrong yet in the 25 years. We’ve really had a strong business in this area.

Keith Hughes: Okay. Thank you.

Operator: Your next question comes from the line of Will Jones from Redburn Atlantic. Please go ahead.

Will Jones: Thanks. Good morning and can I just ask around the asphalt and paving elements of Americas Materials, please. Perhaps you could just update us on the winter fill program as you come out of that now? And what — how that went and how you feel it leaves you with regard to what you need on price over the summer season? And then linked to that, I guess, the paving revenues, I think 20% or so growth. I appreciate it’s a small quarter, but can you help us understand that? And whether that solutions approach is helping you maybe gain share in that area? Thanks.

Randy Lake: Yes. Thanks for the question. I think just as a reminder, on the liquid asphalt side, and asphalt in particular, we run that business on a margin basis. So it’s important for us certainly to have the quantum of liquid asphalt in the tanks in the off-season because of availability and surety of supply. So that’s the primary reason that we have and utilize kind of our storage capabilities. I think in broad terms, we’re from a quantum standpoint and a pricing standpoint, very similar to where we were last year. Again, there’s various ways that we grow and protect that margin with state indexes being one, contractual obligations to our third-party customers and then there’s a bit of it that’s kind of floater in the market.

So it’s almost one-third, one-third, one-third. But again, we manage that on a margin basis. And the backlogs that are associated with that, i.e., your question on paving, continue to improve, both in quantum of dollars but in margins. So it gives us a good indication of where we are. The first quarter is a relatively insignificant time period for us in paving, the season really kicks off mid-April through Thanksgiving, but we’re seeing that continued momentum even a month after the first quarter ended.

Will Jones: Thank you. And perhaps just to wrap up on Americas because I think you talked before about a flattish volume view for the whole year back at the Q4 stage. Does that still apply?

Randy Lake: I would say our thoughts at that time are reflected in what we’re seeing in terms of backlog and the output for the year. So, yes, and that backlog is really a six to nine month window in terms of demand.

Will Jones: Thank you.

Operator: Your next question comes from the line of Gregor Kuglitsch with UBS. Please go ahead.

Gregor Kuglitsch: Hi. Good morning. So two questions, please. So firstly, maybe a little bit on Europe. Could you sort of give us a bit of an update what you’re seeing there in terms of activity trends maybe a little bit into sort of the second quarter, some weather in Q1 and the pricing trends. And then maybe a second question, maybe a slightly longer-term piece, and there’s a slide on sustainability and carbon and so on in the pack. I guess I wanted to sort of get an update what you’re thinking on carbon capture. We’ve seen some announcements on both sides of the pond also in the US. You talked a bit about SCMs already, but your thoughts on those sort of things, please. Thank you.

Jim Mintern: Good morning, Gregor. Jim here. Yes, in terms of your — first, in terms of activity level, it’s still very early in the season for us. But to date, it’s really been a story of two regions. Firstly, in Europe East, a very strong start to the year, and that’s really been underpinned by kind of the — firstly, on the infrastructure side, where we’re still kind of in the early stages of a multiyear EU funding on that infrastructure across East Europe. Also, very good activity levels on the non-res, particularly into that kind of high spec industrial non-res, which is also strong in the region. And we also benefited in Q1 from some favorable weather out Europe East. Looking to Europe West, very different in terms of weather pattern.

In our main markets, which is UK, France and Ireland, really record levels of rainfall that we incurred in Q1. But now that we’ve moved past that into April and May, certainly, we kind of moved past that period of wet weather, we’re certainly seeing a good recovery in activity levels in those key markets. In terms of pricing in Europe, we’re getting good momentum. This will be our seventh consecutive year of pushing pricing on across Europe. Quarter One is ahead, but has been impacted pretty significantly by the kind of geographic mix of the business and particularly that strong performance in Europe East in the first quarter. In fact, when you kind of mix adjust the underlying pricing activity in Europe is kind of mid-single-digits positive year-to-date.

Randy Lake: And on the question around the sustainability, which I think it’s a broader question than just decarbonization. But in terms of our plans, maybe just to reiterate our 2030 ambition to reduce absolute emissions by 30% at Scope 1, 2 and 3. We made really good progress in 2023, an 8% decline in underlying admissions. We continue to be on the path — a glide path to meet that objective at 2030 and then ultimately, net zero in 2050. As you would expect, we say in the loop in terms of a variety of different technologies. That’s a changing world. That will continue to evolve, but you would expect us to stay on top of that in terms of execution in that area. But I think it is a broader conversation than just sustainability.

Albert Manifold: As you say the broader conversation, Randy, let’s talk about circularity within CRH. Remember, Gregor, CRH is the largest recycler of any product in the United States. And again, our recycling percentage will go up again this year over last year. So sustainability is not just about CO2. It’s about circularity as well. And again, we continue to make progress in that area there. It’s a key focus for our business going forward. And everything we do is about reducing our carbon footprint and indeed preserving the natural scarce resources of our world.

Gregor Kuglitsch: Thank you very much.

Operator: We have time for one more question. And that question comes from Arnaud Lehmann with Bank of America. Please go ahead.

Arnaud Lehmann: Thank you very much. I have two questions, if I may. Firstly, on US cement. Could you comment about the possibility of the second round of price increase later in the year, considering the positive momentum you’ve had so far? And secondly, I just wanted to come back on maybe a technicality, but on Slide 12, when you talk about net debt. You talk about the net M&A contribution of — or outflow of $1.9 billion. And I appreciate you had Texas which was, I think, about $2 billion, but you are expected to get some proceeds from the European Lime disposals, which I believe in total should be about $1 billion. I know there’s three phases and maybe you don’t get all of it, but is there — are there more outflows related to bolt-ons in this number? Thank you.

Randy Lake: In relationship to the question on cement, 9% ahead in Q1. I think if you look back over the last several years, really on a market-by-market basis, we evaluate where those opportunities are. Underling demand is good. It’s expected to be good. I think you would expect for us to be able to look at targeted opportunities as well for a second price increase in ’24.

Jim Mintern: Yes, Arnaud, just in terms of the net movement on the M&A, the $1.9 billion, yes, that’s just a makeup of the outflow on the Texas acquisition. Also the inflow from Phase 1 and 2 of the European Lime divestiture and then are just regular bolt-ons as well, which we reported at Q1, so it’s just the net of the three numbers.

Arnaud Lehmann: Thank you very much.

Albert Manifold: Thanks, Arnaud. Look, I’m afraid that’s all we have time for this morning. I want to thank you for your attention. And as always, if you have any follow-up questions, please feel free to contact our Investor Relations team. We look forward to talking to you again in August when we report our results for the second quarter of 2024. Thank you and have a good day.

Operator: Thank you. Your conference call has now ended. You may disconnect.