The first quarter showed growth in revenues, adjusted EBITDA, and margins, benefiting from integrated solutions strategy, positive pricing momentum, and benign weather conditions in key markets.
Full-year adjusted EBITDA guidance for 2024 reaffirmed to be between $6.55 billion and $6.85 billion.
Acquisition and Capital Allocation
Recent acquisitions include a $2.1 billion investment in cement and readymixed concrete assets in Texas and a materials business in Northern California. A proposal to acquire a majority stake in Adbri, Australia, is expected to close in 2024.
Approximately $600 million returned to shareholders through share buybacks this year, with a new quarterly tranche of $300 million announced. A quarterly dividend of $0.35 per share declared, representing a 5% annual increase.
Financial Highlights
Q1 2024 saw total revenues of $6.5 billion, a 2% increase, with adjusted EBITDA up 15% to $445 million, and an 80 basis point margin improvement.
Operating Performance
Americas Material Solutions experienced significant revenue growth due to positive pricing, favorable weather, and acquisition contributions.
Infrastructure and industrial/manufacturing sectors in North America showed robust demand, supported by U.S. federal funding.
Europe Materials Solutions adjusted EBITDA increased by 32% despite record rainfall in Western Europe, with strong performance in Central and Eastern Europe.
Europe Building Solutions had a challenging start due to subdued residential activity and adverse weather.
Financial Details
Organic growth and acquisitions net of divestitures contributed to a 15% increase in adjusted EBITDA to $445 million for Q1 2024.
Net debt position increased to $9.6 billion at the end of Q1 2024, with a net debt-to-adjusted EBITDA ratio of approximately 1.5x.
Active Portfolio Management
Divestitures and acquisitions are part of CRH’s active portfolio management, including the divestiture of European Lime operations and acquisition of Adbri and BoDean in California.
Approximately $100 million invested in seven strategic bolt-on acquisitions.
Synergies from Acquisitions
Approximately $60 million of run rate synergies identified from the Texas materials assets acquisition, expected to be achieved by year 3.
Market Outlook and Guidance
North America and Europe expected to see robust demand in infrastructure, supported by significant investment. Subdued new build residential activity is anticipated due to interest rate environment challenges.
Full-year 2024 guidance reaffirmed, with adjusted EBITDA expected between $6.55 billion and $6.85 billion, reflecting confidence in continued strong performance.
Question and Answer
Americas Materials Pricing Dynamics
Question
Can you discuss the pricing dynamics and price-cost trends in the Americas Materials segment, specifically for aggregates and cement, and whether the double-digit pricing guidance for the year still holds?
Answer
Q1 aggregate pricing was up 8%, influenced by geographic mix and seasonality, but on a mix-adjusted basis, pricing was up double digits, in line with the full-year guidance.
Cement pricing was up 9% across the group, supported by strong underlying demand, and positive pricing is expected to continue throughout 2024.
Texas Cement Market and Pricing
Question
Can you provide an update on cement pricing in Texas, particularly in the southern part of the state where imports may be impacting the market?
Answer
Cement pricing in Texas is similar to the national trend, with good support and no concerns.
Positive pricing is expected in Texas for cement, as well as other downstream businesses like aggregates, asphalt, and ready-mixed concrete.
U.S. Market Demand and Backlog Trends
Question
The U.S. market saw stronger-than-expected volumes. Can you elaborate on the drivers of this demand, including fundamental factors, weather, and the backlog trends for the year?
Answer
The strong demand in the U.S. market is attributed to a mix of favorable weather and the execution of significant projects in the backlog, particularly in the Great Lakes region and out West.
While weather may have had some impact, the absolute volume shift is relatively low, less than 10% of total aggregate shipments for the year.
Backlogs reflect early momentum and are supported by federal and state funding initiatives, with margins improving across all lines of business, including Roads and critical infrastructure projects.
Fly Ash Supply and Impact on Cement Business
Question
Can you discuss the potential impact of fly ash shortages on the cement business, both in the short term due to recent supplier issues and in the longer term as coal-fired plants are phased out?
Answer
CRH has been proactive in addressing fly ash supply challenges by actively exploring and utilizing alternative materials like pozzolans and SCMs in its markets.
The company has the capabilities to blend and integrate these materials for customers and has access to alternative sources, mitigating the impact of fly ash shortages.
The experience and expertise gained from dealing with similar issues in the European market provide a significant advantage in addressing fly ash challenges in the U.S.
2024 Guidance and M&A Activity
Question
Can you elaborate on the factors influencing the 2024 guidance, including the positive Q1 performance, new synergies, further M&A, and the impact of recent divestments?
Answer
While the year has started well, it is still early, and the company has been active in M&A, with eight bolt-on acquisitions completed and the announcement of Texas synergies.
The contributions from bolt-ons and Texas synergies are largely offset by the divestment of cement and materials assets in Quebec, resulting in a minimal difference from the previously stated guidance.
The company remains confident in its full-year guidance and highlights its focus on operational execution, strategic investments for future growth, and disciplined capital stewardship.
Hunter Cement Plant Synergies and Integration
Question
Can you provide an update on the integration of the Hunter cement plant in Texas, including progress on achieving synergy targets and any insights gained from the initial phases of integration?
Answer
The company is satisfied with progress on the Hunter cement plant integration, with $60 million in synergies identified so far and ongoing evaluation of additional opportunities.
Key value drivers include the plant’s position as the largest building materials supplier in Texas, its unique downstream businesses that consume cement, and the potential for network optimization with other CRH assets in the region.
The experience gained from the successful Ash Grove acquisition, where profitability was doubled in six years through operational improvements and best practice sharing, provides a valuable playbook for optimizing the Hunter plant.
Additional opportunities lie in procurement and leveraging CRH’s size and scale to drive cost efficiencies.
M&A Pipeline and Valuations
Question
Can you provide an update on the M&A pipeline, including visibility and valuations?
Answer
Valuations in the M&A market continue to be high, but CRH’s ability to deliver synergies and drive shareholder returns justifies these prices.
The M&A pipeline is strong, with approximately $4 billion in deals expected to be completed this year, and the company will continue to focus on building out its footprint and reallocating capital to higher-growth areas.
U.S. Index Inclusion and Americas Building Solutions
Question
Can you provide an update on the timing of potential U.S. index inclusion and comment on the early demand trends in Americas Building Solutions, particularly Outdoor Living, and how they inform the organic growth outlook for the group?
Answer
While inclusion in U.S. indices is at the discretion of individual providers, CRH is confident in its eligibility and will seek inclusion as soon as possible, with significant progress made since the relisting.
Early demand trends in Outdoor Living, particularly in hardscape and paving products, have been better than expected, indicating strong underlying demand and positive momentum for the group.
Asphalt and Paving in Americas Materials
Question
Can you provide an update on the winter fill program for liquid asphalt and asphalt, and how it positions the company for the summer season, as well as insights into the significant growth in paving revenues and the role of the solutions approach in gaining market share?
Answer
The company manages its liquid asphalt and asphalt business on a margin basis and maintains storage capabilities to ensure availability and supply chain resilience during the off-season.
The company is in a similar position in terms of both the quantum and pricing of liquid asphalt compared to last year, with a focus on margin protection through various strategies.
Backlogs for paving, which provide a good indication of future performance, have improved in both dollar volume and margins, indicating positive momentum as the season progresses.
The solutions approach, which integrates materials and construction services, is contributing to market share gains in the paving segment.
Full-Year Volume Outlook for Americas Materials
Question
Does the previously stated outlook for flattish volumes in the Americas Materials segment for the full year still apply?
Answer
The outlook remains consistent with the previous guidance, with the company’s expectations reflected in the current backlog and demand outlook for the year.
European Market Activity and Carbon Capture
Question
Can you provide an update on activity trends in the European market, particularly into the second quarter, and comment on pricing trends? Additionally, can you share your thoughts on carbon capture technology and its potential role in achieving sustainability goals?
Answer
In Europe, activity levels have been strong in Europe East, supported by infrastructure projects, nonresidential construction, and favorable weather, while Europe West experienced record rainfall but is now showing a good recovery.
The company is seeing positive momentum in pricing in Europe, with the seventh consecutive year of pushing prices up, although Q1 results were impacted by geographic mix and strong performance in Europe East.
CRH remains committed to its 2030 goal of reducing absolute emissions by 30% at Scope 1, 2, and 3, with an 8% decline in underlying emissions achieved in 2023.
The company continues to explore and stay informed about various technologies, including carbon capture, to support its sustainability goals, but emphasizes that sustainability encompasses a broader range of initiatives, including circularity and resource efficiency.
U.S. Cement Market and Net Debt Calculation
Question
Can you comment on the potential for a second round of price increases in the U.S. cement market later in the year, considering the positive momentum and underlying demand? Additionally, can you clarify the net M&A contribution to net debt and whether there are additional outflows related to bolt-ons beyond the Texas acquisition?
Answer
Given the strong underlying demand and positive market conditions, the company is evaluating targeted opportunities for a potential second price increase in the U.S. cement market in 2024.
The $1.9 billion net M&A contribution to net debt includes the outflow from the Texas acquisition, inflow from the European Lime divestiture, and regular bolt-on activity.
