CRH Plc Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Financial Performance: Robust third quarter with total revenues $10.5 billion (+4% year-over-year), adjusted EBITDA $2.5 billion (+12% year-over-year), and margin expansion. EPS up 10% year-over-year and 20% over 9 months.
• Capital Allocation: Year-to-date invested $4.6 billion on 35 acquisitions, with key acquisitions in Texas and Australia performing well. Divested $1.2 billion worth of assets. Ongoing share buyback program returned ~$1.2 billion, with a new $300 million tranche starting, and a 5% annualized increase in dividend to $0.35 per share.
• Integration: Integration of acquisitions like Texas and Adbri is progressing well. Europe Materials Solutions and Europe Building Solutions combined into a new International Solutions segment effective Q4.

Segment Performance

• Americas Materials Solutions: Third quarter revenues and adjusted EBITDA were 4% and 16% ahead of prior year despite weather disruption. Essential Materials had 5% revenue growth with 10% and 9% pricing growth in aggregates and cement. Road Solutions saw 4% revenue increase driven by pricing in asphalt and readymixed concrete, with contributions from acquisitions and 270 basis points of margin expansion.
• Americas Building Solutions: Building & Infrastructure Solutions had 3% revenue growth supported by IIJA funding and onshoring, while Outdoor Living Solutions was in line with prior year but profitability behind prior year. On a 9-month basis, adjusted EBITDA was only 2% behind.
• Europe Materials Solutions: Delivered strong performance with 7% revenue and 24% adjusted EBITDA growth in Q3, supported by pricing and Adbri acquisition. Central and Eastern Europe had infrastructure and nonres construction support, while Western Europe was impacted by soft residential new build.
• Europe Building Solutions: Smallest segment (less than 5% of group adjusted EBITDA), challenged by weather and soft new build residential market, focusing on cost-saving actions.

Guidance

• Reaffirmed midpoint of full year 2024 guidance: group adjusted EBITDA between $6.87 billion and $6.97 billion, net income between $3.78 billion and $3.85 billion, and EPS between $5.45 and $5.55 per share.
• Outlook for 2025: Americas represents ~75% of adjusted EBITDA, with infrastructure demand underpinned by IIJA rollout (less than 30% deployed so far). Nonres benefits from reindustrialization and onshoring, while residential new build in U.S. and Europe expected to improve gradually assuming interest rate normalization.

Risks

• Weather disruption impacting operations in certain regions.
• Macro-economic dislocations that could affect performance.
• Inflationary cost pressures in raw materials, labor, and subcontracting.

Q: Can you talk a little bit more about kind of the key drivers of the performance in 3Q, maybe kind of relative to your expectations given the weather challenges that you saw?

A: Albert Manifold stated CRH's differentiated solution strategy, diverse end uses, and comprehensive construction solutions make it less impacted by weather and cycles, leading to strong performance despite weather challenges.

Q: Could you give maybe some additional color on the reaffirmed guidance for '24 and maybe what are kind of the puts and takes within that compared to three months ago?

A: Jim Mintern said reaffirmed guidance reflects positive momentum, with net impact of M&A ~$150 million for full year, and excluding surplus assets/land sales, still expecting double-digit growth. It's the 11th consecutive year of margin expansion.

Q: Your American Materials aggregate cement pricing was particularly high compared to what we're seeing from some peers in the quarter. Could you just talk more about what you expect from pricing on those products in the fourth quarter? And really, my question is more towards '25. What kind of increase would we see then?

A: Randy Lake said volumes flat to slightly down in 2024 finish, but pricing momentum to continue, expecting mid- to high single-digit pricing growth in 2025, supported by backlogs and demand from infrastructure and nonres.

Q: Can you discuss the scope impact into 2025 given the M&A activity? And can you also provide us with an update on the M&A pipeline looking forward?

A: Jim Mintern said rollover contribution from 2024 M&A to 2025 is ~$250 million incremental adjusted EBITDA. There's a strong and active M&A pipeline across all platforms, focusing on fragmented markets and integrated solutions strategy while remaining disciplined.

Q: I wanted to congratulate Albert on his retirement... My first question is on the input cost outlook. Could you comment a little bit. You've given us some clues on price, but can you comment where costs are going? And, I guess, the interplay between price cost, if you could give us sort of your view of whether that can continue to be a nice positive spread? And then the second question is, I don't know if you've issued a net debt guidance for this year. Could you help us with that...

A: Jim Mintern said still in inflationary cost environment, expecting mid-single-digit cost inflation increase in 2024, with continued inflation in labor, raw materials, etc., into 2025. Expecting net debt to EBITDA to exit 2024 around 1.6x.

Q: I also wanted to echo the congratulations to Albert as well as Jim on your new role. Congrats about that. So a little bit -- well first, one point of kind of just on the Building Solutions, ABS was clearly impacted by weather and weaker new residential as you mentioned. But since weather has maybe started to cooperate a little bit more, at least through most of October, what are you seeing there? And how are you thinking about that line specifically as we kind of look into '25...

A: Randy Lake said Building Solutions in U.S. has good backlogs supported by energy, water, and IIJA funding, with strong underlying demand at federal and state levels, focusing on execution over the next six to nine months.

Q: In light of the election results a few days ago, any thoughts on what a Trump presidency, any changes -- and the changes we've seen here in Congress, any thoughts on implications that could have, if any, for infrastructure and maybe what that could mean for your business overall?

A: Jim Mintern said CRH is well versed in dealing with administration changes and economic cycles, having delivered consistent performance over decades, with a TSR over 16% over 10 and 50-year periods.