CRH : Full Year Results | 2020

2020 Full Year Results

Key Highlights

• • Robust performance in a challenging environment

• • Further EBITDA and margin improvement despite lower activity levels

• • Continued strong cash generation underpinning financial strength and flexibility

• • Net debt/EBITDA of 1.3x, lowest level in over 10 years

• • Strong acquisition pipeline; significant opportunities for future value creation

• • Full-year dividend per share up 25% to 115.0c; 37 years of dividend delivery

• • Recommencing share buyback programme with further tranche of $0.3bn

Summary Financials Sales Revenue EBITDA EBITDA Margin Operating Cash Flow

2020

LFL

• $27.6bn -2%

• $4.6bn +5%

• 16.8% +120bps

• $3.9bn +1%Albert Manifold, Chief Executive, said today:

"Our 2020 performance is testament to the commitment of our people and the strength and resilience of our business model. Through the repositioning of our business in recent years and our relentless focus on continuous business improvement, we have delivered record levels of profitability, margins and cash generation. Although the near-term outlook remains uncertain, our unique portfolio of businesses together with the strength of our balance sheet leaves us well positioned to capitalise on the growth opportunities that lie ahead."

Announced Thursday, 4 March 2021

2020 Full Year Results

Health & Safety

As many of our markets continue to be affected by the spread of COVID-19, the health and safety of our people remains our number one priority. In this regard, our primary focus is to ensure that we provide a safe working environment for our employees, contractors and customers, enabling them to carry out their activities in accordance with the various health and safety protocols currently in place across our markets.

Trading Overview

2020 was a challenging year for CRH due to significant COVID-19 related disruption in the economies and construction markets of North America and Europe. Notwithstanding the difficult backdrop, CRH delivered overall sales of $27.6 billion (2019: $28.1 billion), 2% behind 2019.

• • Economic activity in North America was impacted by the global pandemic, partly offset by government stimulus efforts. Like-for-like1 sales in Americas Materials declined by 3% compared to 2019, mainly impacted by COVID-19 restrictions, project delays in some of our key states and unfavourable weather in the first half of the year.

• • In Europe Materials, volume recovery in the second half of the year along with good price discipline did not fully mitigate the negative impact of COVID-19 related shutdowns earlier in the year and like-for-like sales finished 5% behind 2019.

• • Building Products benefited from strong residential repair, maintenance and improvement (RMI) activity in North America, offsetting lower activity levels in non-residential markets. Together with price progress across most platforms, the Division delivered like-for-like sales 4% ahead of 2019.

EBITDA of $4.6 billion was 3% ahead of 2019 (2019: $4.5 billion) reflecting a strong focus on cost rationalisation and actions taken to mitigate the financial impact of the pandemic. EBITDA was 5% ahead on a like-for-like basis, before one-off costs of $122 million primarily due to COVID-19 related restructuring.

• • In Americas Materials, good price progression, focused cost control, lower energy costs and operational efficiencies, delivered like-for-like EBITDA 10% ahead of 2019.

• • Like-for-like EBITDA was 7% behind 2019 in Europe Materials, primarily reflecting the significant impact of COVID-19 restrictions in a number of countries across Western Europe, only partly offset by price progress and cost control.

• • Good commercial management, profit improvement initiatives and disciplined cost control enabled Building Products to deliver margin expansion on increased sales, resulting in like-for-like EBITDA 8% ahead of 2019.

Excluding non-cash impairment charges of $0.8 billion (2019: $8 million) and the related tax impact, profit after tax of $2.0 billion was 18% ahead of 2019 (2019: $1.7 billion). Including these items, profit after tax of $1.2 billion was behind prior year (2019: $1.6 billion). Note 2 on page 16 analyses the key components of the 2020 performance.

Capital Allocation Summary

After another year of very strong cash generation in 2020 we are recommending a final dividend of 93.0c per share, resulting in a total dividend of 115.0c for 2020 (2019: 92.0c) which represents an increase of 25% on 2019. We also intend to recommence the Group's share buyback programme following a pause in response to high levels of market volatility in 2020, with a further tranche of up to $0.3 billion to be completed by the end of June 2021. In addition, our significant balance sheet capacity offers flexibility to capitalise on our strong acquisition pipeline and deliver further value to shareholders as visibility improves.

Sustainability

In 2020, CRH announced ambitious 2030 sustainability targets for the Group in the areas of greenhouse gas emissions, safety, inclusion and diversity and sustainable products. We remain committed to achieving these targets and continuously improving the sustainability performance of our businesses.

Trading Outlook

Although the near-term outlook for economic and construction activity across our markets remains uncertain, market recovery is expected to continue across North America and Europe as the health situation improves. Our Americas Materials Division benefits from strong market positions and a positive demand backdrop for the infrastructure and residential sectors. Although the outlook for non-residential activity remains mixed our Building Products Division is expected to benefit from positive residential demand. In our Europe Materials Division, we have significant exposure to growing economies in Eastern Europe and strong, stable markets in Western Europe. Overall, with the strength of our balance sheet and our unique portfolio of businesses, we are well positioned to capitalise on the growth opportunities that lie ahead. We remain committed to the execution of our long-term growth strategy and the delivery of further margin expansion, superior cash generation and enhanced returns for shareholders.

1 See pages 33 to 38 for glossary of alternative performance measures (including EBITDA, like-for-like (LFL)/organic, Net Debt/EBITDA, EBITDA net interest cover and pre-impairment measures (profit after tax, earnings per share and effective tax rate)) 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 13. All 2019 income statement comparatives are presented on a continuing operations basis.

Americas Materials

2019

ExchangeAcquisitionsDivestmentsImpairment/Organic

One-offs1

Sales revenue 11,626

EBITDA 2,194

Operating profit 1,423

-37 -2 +1

+43 +8 +5

-39 +2 +5

- -320 11,273 -3%

-24 +227 2,405 +10%

-25 +222 1,631 +15%

EBITDA/sales 18.9% 21.3% Operating profit/sales 12.2% 14.5%

1One-offs primarily due to COVID-19 related restructuring costs

Americas Materials generated EBITDA of $2.4 billion, 10% ahead of prior year and operating profit of $1.6 billion, 15% ahead of prior year despite lower sales which were 3% behind. COVID-19 restrictions negatively impacted sales volumes in the second quarter, particularly in the North division, with sales in the South division impacted by project delays in key states. Solid price progression, operational efficiencies, focused cost containment and lower energy costs drove margin expansion across all regions and product lines. Strong demand in the central and western parts of the United States (US) resulted in like-for-like sales growth across all lines of business in the West region.

Overall economic and construction activity across our markets was impacted by the global pandemic; however, government stimulus to help support the US economy was implemented, while infrastructure investment was underpinned by a one-year extension of the US FAST Act. During 2020 Americas Materials completed seven acquisitions in the US and Canada including aggregates, asphalt, readymixed concrete, paving and construction operations at a total cost of $163 million. These acquisitions in addition to several mineral reserve purchases in the US will continue to support future growth in key markets.

Building Materials

On a like-for-like basis, aggregates volumes were 2% lower but margins improved as prices were 4% higher compared to 2019. Volumes in the North division were predominantly impacted by COVID-19 restrictions in the second quarter of the year while the South division experienced lower demand primarily due to unfavourable weather in the first half of the year. Solid underlying business activity in the West division generated sales growth during the year. Prices were favourable across all divisions with the strongest contributions from the North and South divisions.

Asphalt volumes were 6% lower on a like-for-like basis due to the impact of COVID-19 restrictions on the North division and slower project bidding in key states in the South. Volumes in the West division were ahead of prior year with a strong order book of business supported by more favourable weather compared to 2019. Asphalt margins improved, benefiting from good commercial management, lower input costs, operational efficiencies and strong cost control.

Readymixed concrete volumes were 4% behind prior year on both a total and like-for-like basis as higher volumes in the South division during the second half of the year did not fully offset lower volumes in the North and West. Strong commercial discipline delivered total and like-for-like prices up 6%, more than offsetting lower sales volumes, resulting in improved margins.

Paving and construction revenues were 6% behind prior year on a total and like-for-like basis. COVID-19 impacted the North division through government mandated restrictions, while the South experienced delayed bidding on projects in key markets due to uncertainty in state and local funding sources. The West division experienced significant growth in revenues driven by strong demand in the Central West and Mountain West regions. Overall construction margins finished ahead of prior year.

Regional Performance

Like-for-like sales for the North division were 6% lower than 2019 as COVID-19 restrictions impacted volumes across the business. Favourable prices and lower input costs offset lower volumes and delivered operating profit improvements for the North division across the product range.

The South division's total sales were 7% behind prior year driven by lower asphalt and construction volumes in key states as projects were delayed. Like-for-like readymixed concrete volumes were higher than the prior year as growth in our core Florida and Texas markets continued. Commercial and operational excellence across all product lines supported strong operating profit performance.

The West division increased total sales by 3% by executing on strong backlogs with support from favourable weather in comparison to the first half of 2019. Good incremental volumes coupled with strong price discipline and cost control resulted in operating profit improvements.

Cement

Our cement business delivered operating profit growth in 2020, driven primarily by strong price realisation, performance improvement initiatives and cost saving measures. Sales volumes in the US operations were 2% ahead of prior year on a total and like-for-like basis as strong demand in the west more than offset COVID-19 related impacts in other regions. Volumes in Canada were behind 2019 due to the impact of COVID-19 restrictions, particularly during the first half of the year. In 2020, CRH adopted the Ash Grove brand for all its North American cement businesses, unifying 12 cement plants and 42 cement terminals under one recognised brand. Cement consumption in Southeast Brazil increased in 2020 enabling CRH to achieve volume growth combined with increased prices which resulted in operating profit improvements.

Europe Materials

2019

ExchangeAcquisitionsDivestmentsImpairmentOne-offs1

Organic

Sales revenue 9,509

EBITDA 1,208

Operating profit/(loss) 622

+105 +14 +5

+63 +7 +1

-27 -3 -2

- - -660

- -509 9,141 -4%

-83 -88 1,055 -13%

-83 -73 -190 -131%

EBITDA/sales 12.7% 11.5% Operating profit/(loss) 6.5% -2.1% /sales

1One-offs primarily due to COVID-19 related restructuring costs

Europe Materials experienced a challenging year as the recovery in the second half of the year could not fully mitigate the significant impact of COVID-19 related restrictions in the second quarter. Overall sales, EBITDA and operating performance finished below 2019 levels as strong performances in our Eastern European businesses were offset by a more challenging backdrop in a number of countries across Western Europe. A combination of volume growth, progress in pricing, good cost control and performance improvement initiatives drove some recovery in the second half of the year. Arising from the Group's impairment testing process and as a result of the combined economic impacts of COVID-19 and Brexit, total non-cash impairment charges of $0.8 billion were recognised in 2020. Europe Materials recorded impairment charges of $0.7 billion in its operating profit, primarily related to its United Kingdom (UK) business. A further $0.15 billion impairment charge was recorded on the Group's associate investment in China.

Tarmac (UK)

Strict COVID-19 restrictions resulted in widespread plant shutdowns during the second quarter which significantly impacted volumes during this period. Trading recovered as the year progressed, with increased paving activity in the second half of the year supporting improved aggregates and asphalt volumes; however, readymixed concrete volumes were slower to recover due to market uncertainty. Operating profit, impacted by the lower volumes, impairment charges and restructuring costs, finished below 2019 levels.

Europe North

In our UK cement and lime business, sales and operating profit were behind 2019 despite positive pricing as COVID-19 restrictions impacted activity levels. Ireland also experienced significant COVID-19 related restrictions in the second quarter of 2020; however, strong cement volumes in the second half of the year, cost savings initiatives and robust pricing across all product lines saw operating profit outperform 2019. Sales in Finland were ahead of prior year, but operating profit was impacted by less favourable product mix.

Europe West

In France, cement volumes recovered in the second half of the year and good pricing was maintained across all products; however, overall volumes were significantly impacted by COVID-19 restrictions in the first half of the year. Sales and operating profit in France were below 2019 levels despite ongoing performance improvement and cost savings initiatives. Like-for-like operating profit in the Benelux finished ahead of 2019, with a positive contribution from our Dutch structural businesses partly offset by lower cement and structural concrete volumes in Belgium.

In Denmark, sales and operating profit finished behind 2019, due to weaker new residential construction partially offset by strong cost control. Sales volumes and operating profit in Spain were affected by COVID-19 restrictions despite focused cost control actions. Challenging cement and readymixed concrete volumes in Switzerland were partially offset by cement price increases, good aggregates volumes and cost savings initiatives but operating profit finished behind 2019 levels. In Germany, sales were broadly in line with 2019 levels, as increases in cement pricing offset slightly lower lime volumes. Operating profit finished behind 2019 due to the impact of higher input costs.

Europe East

Cement sales in Poland were slightly ahead of 2019 as positive cement pricing more than offset lower volumes, and overall operating profit was ahead due to good cost control and lower fuel costs. Operating profit was also ahead of 2019 in Ukraine despite a challenging pricing environment as cost savings initiatives and lower fuel and logistics costs resulted in improved performance. In Romania, sales and operating profit both strongly exceeded prior year, as a continuation of infrastructure projects, the positive impact of local and national elections and increased residential repair works contributed to growing cement demand with pricing above 2019 levels.

Positive pricing in both Slovakia and Hungary coupled with good cost control contributed to operating profit ahead of 2019 despite both economies being impacted by COVID-19 and an overall decline in construction output. In Serbia, sales and operating profit were ahead of 2019 with higher cement volumes, positive pricing and business improvement initiatives.

Asia

Domestic demand for cement in the Philippines was severely impacted between mid-March and May as COVID-19 restrictions resulted in plant shutdowns. Despite this challenging backdrop and lower pricing, operating profit finished well ahead of 2019 due to cost savings, performance improvement initiatives and improved volumes in the second half of the year.

CRH's operations include a 26% stake in Yatai Building Materials in China where, despite a severe COVID-19 impact in the first quarter, full year cement volumes ended ahead of 2019. Pricing remained challenging in the region which, in addition to the non-cash impairment charge resulted in operating profit below 2019 levels.