CRH plc (CRH) Q1 2013 Earnings Report, Transcript and Summary

Good morning, everybody. You're very welcome this morning to CRH's webcast, which is being held in conjunction with the release of our results for the first half of 2013. I'm joined this morning by my colleagues Albert Manifold, our Chief Executive Designate; and by Maeve Carton, our Finance Director. And together, we will run through a brief presentation at the beginning of the proceedings before moving on to questions-and-answers. So without more ado, we'll get into the presentation. And first of all, I'd just like to give you a brief overview of the results across our main business segments in the first half of the year. As you are aware, from the results announced already in the sector, it was a testing first half for the building materials industry, continuing economic recovery in the United States but a continuing challenging backdrop, on an economic front, in Europe and, also, some particular challenges relative to 2012 in terms of a poor weather backdrop in Europe in the early months of the year and a pretty erratic weather pattern across the United States through the first half of 2013. Nevertheless, the results that we have announced today have shown EBITDA in line with the guidance that we would have provided to you at our Annual General Meeting in the early part of May. Looking at the key figures on this particular slide here, you can see total first-half revenues of EUR 8 billion, 3% behind the equivalent figure for 2012. On a like-for-like basis, our revenues were 6% behind. And that combined, a Europe decline of 10% with a modest 1% decline in the Americas in the first half of 2013. We did see a moderation in the rate of sales decline from roughly 7% in the first 4 months to 3% in the period May and June. So an improving trend in -- as we move through the first half of the year. As I mentioned, EBITDA in line with the AGM guidance at $397 million. Our margins were lower overall for the group in the first half of the year. In the Americas, slightly ahead, with good performances in products and distribution offsetting a decline in materials. But in Europe, all 3 business segments, with challenging backdrop, some margins declined compared to the first half of 2012. Total development activity in the first 6 months was just under EUR 500 million. And that's after the rolling 12-month spend in the 12 months to the end of June to roughly EUR 800 million. Our net debt at the end of June at EUR 4.2 billion was EUR 400 million or so higher than it was at the same point in 2012. And once again, we have maintained our dividend, with a dividend of EUR 0.185 for the first half of the year. Moving to look at the results by business segment, and starting as usual with Europe. You can see on this particular slide, the results for our Europe Materials business. In 2012, we benefited from significant gains in Europe Materials from pension curtailment and also from CO2 trading, a total of EUR 44 million. The equivalent sum from those 2 captions in the first half of 2013 was just $5 million. So when we adjust for that, the like-for-like decline here that you see on this particular slide of 54% EBITDA decline reduces to a 36% decline. And the margins, excluding pension and CO2, show a decline from 7.4% to 5.4% in the first half of this year. And thus, margin decline reflects the very tough volume backdrop that you can see, shown for our principal markets at the bottom left-hand side of this particular slide. Good volume outturn in the more stable economies, obviously, of Switzerland and Finland, but that was massively outweighed by very sharp declines in Poland and in the Ukraine which, again, you can see in the bottom left-hand side of the slide. And that contributed to an overall 14% volume decline. And with that volume decline, significant, obviously, operational inefficiencies whether with lower throughputs but, also, with that backdrop in Europe, the pricing environment across many of the countries and, particularly, in Poland was tough. And as you can see, again, on the slide, our like-for-like pricing in the first half of 2013 was about 2% lower than it was in the equivalent period last year, again, a common thread across the industry in the first 6 months of the year. We continue to work hard on restructuring and also on getting benefits from our various operational excellence programs. We saw a further increase in our usage of alternative fuels, benefits from procurement. But obviously, given the scale of the volume decline that we faced in the first half of the year, these had only a minimal offsetting impact on first-half results. Looking at the product side of our business, again, the footprint here was in some countries that are facing some tough challenges and, also, the weather impacted on this particular business. As you know, the Netherlands accounts for about 20% of our turnover in this particular segment and the Dutch housing market is in a difficult situation at the moment, significant lack of confidence, low levels of activity and also the level of public spending in the Netherlands continues to be trimmed. So a difficult backdrop in this particular business and a 9% like-for-like sales decline overall for Europe products in the first half of 2013. Again, more severe decline in the early months moderating later. And I'll come back to that in one of my later slides. In Germany, another significant country for us, the underlying backdrop, obviously, economically, is more positive but the reducing demand levels in neighboring countries means that many exporters of building materials from Germany to neighboring countries are finding less opportunity in neighboring countries, which is adding to the competitive dynamic in the German market, and that was one of the factors also impacting on our first-half results in our German products operations. More positively, for our Products business in the first half of the year, the U.K. is seeing some good benefits from the government's "Help to Buy" scheme, which is stimulating housing demand in the U.K. and which has delivered a good increase in our BRIC volumes in the first half of the year and, also, in some of our other products in the U.K. market. And that's been a very welcome development on our -- the U.K. was the only major products market to show like-for-like revenue growth in the first half of 2013. Turning to Europe distribution. And again, here are similar effects weighing on this business as weighed on our Products business in the first half of the year where, with it, significant repair and maintenance and improvement orientation. The decline in like-for-like sales at 7% was not as severe as the decline that we faced in our Products businesses. All of our builders merchanting activities were impacted by tough weather conditions. And again, the Netherlands was most affected in this regard. On our DIY business, again, it has a heavy footprint in the Netherlands, very dependent, obviously, in consumer confidence, which is weak in the Netherlands and, also, in the key spring refurbishment and gardening season in March and April. Again, the weather did not support good activity levels in this DIY business. And we saw a sharp decline in its profitability as well in the first half of the year, but moderating impacts as we move into May and June. Our SHAP business, our sanitary, heating and plumbing business in Europe has been a strong area for us in recent years despite some of the wider challenges in the market and it, again, performed well in the first half of this year, aided by some good acquisition contributions from a number of transactions which we completed in 2012. So overall, across Europe, as you can see, a tough picture for the first half of 2013. Moving to the Americas and starting with our Americas Materials business. As I mentioned, weather patterns here were quite erratic through the first half of the year, very much dented our operational efficiency and also contributed to a very slow start for the highway paving season. And you can see that reflected in the volumes at the bottom-left hand side of this particular slide. You can see there the modest declines for aggs and readymixed but quite a sharp decline for our Asphalt business, reflecting the difficulties caused by weather conditions. Pricing, overall, in this segment, that was positive. We had a good price increase in aggregates. We were very successful in recovering higher raw material input cost, which are feeding through into the readymixed business. In asphalt, we saw a decline of 5% in our bitumen cost which, obviously, is a positive factor for us overall, but some of that fed through and was passed through pricing mechanisms into the market. And that's reflected there in the slight decline that you see in our asphalt prices in the first half of the year. And most positively, I think, on the pricing front is that our construction margin, which has been an area which has been under pressure since 2008 and which began to stabilize and tick up in the second half of 2012, has continued our positive margin dynamic into the first half of 2013, notwithstanding tough operating conditions and their construction margins were ahead for the first half of 2013, and knowing that's a good indicator of recovering pricing ability coming through in our infrastructure markets. We continued here to, obviously, to work hard on increasing our throughputs of recycled asphalt to minimize our energy cost. And overall, our energy costs were lower as a proportion of sales than they would have been in the first half of last year. So I think that is a good factor as well to have that sort of modest and fairly stable energy cost backdrop, particularly going into the busier second half of the year on the infrastructure side. Turning to Americas Products, and after a somewhat slow start, we saw good rebound in this particular business through May and June. And that has continued into the early months of this year, driven, obviously, very much by residential and also some nonresidential impacts. And again, you can see further margin improvement in Americas Products, building on the margin progress that we delivered in this particular business in 2012. 3 main businesses, obviously, in Americas Products, our Precast business was probably the strongest performer in 2012 as good utility spend began to kick in, in the U.S., particularly out west. That continued in the first half of 2013, strong activity out west but offset somewhat by some weather-affected areas in our eastern Precast operations. But nevertheless, good solid performance for Precast in the first half of this year and good order books, again, going into the second half of the year. Our Architectural Products business, its home center activity was somewhat quiet in the early months due to the seasonal effects. But since the end of April, that has picked up very strongly for us. And I think we've had a good first-half performance in our Architectural Products business. And again, in our BuildingEnvelope business, which many of you will know as our glass business, a very good start to the year here. We've seen continuing good small-scale refurbishment and small-scale construction, which is feeding into our Architectural glass business, and we're very successful in passing on float glass price increases, which hit the market in the earlier part of the year. More positively here, we've seen some further good recovery in major project work, which is benefiting our top and our bottom line in Oldcastle BuildingEnvelope. And that's after a lull in major project activity over the last couple of years. So a very good performance year from Oldcastle BuildingEnvelope and, indeed, from Americas Products overall in the first half of the year. And the margin recovery -- and the further margin recovery that you see in Europe Products -- our Americas Products is also sustained in our Americas Distribution business as you can see on this particular slide here, driven very much in the first half of the year by our interior products segment. And you're aware that our Distribution business is comprised of an interior product segment, which is about 40% of revenues, and the next area, Roofing & Siding business, which is about 60% of revenue. So strength in the first half of the year was in interior products. As you've seen from other reports in the sector, a more difficult first-half for roofing again, weather conditions much more difficult than a benign start in 2012, which favored early reroofing activity. We, however, saw very good and continued reroofing activity in the eastern part of the U.S. particularly in the states of New York and New Jersey, which continue to clean up after Hurricane Sandy. And that offset some softness elsewhere in reroofing activities, in other parts of the U.S. which was mainly as a result, I think, of the tougher winter this year. But overall, a good performance from distribution in the first half of the year in the Americas, and we would expect to see that continuing in the second half as well. So that's a quick run through the 6 business segments. I'm conscious that there's a lot of data in each of those business segments in the formal release, which we issued this morning, and also in what I've just run through. So before I hand over to Maeve to deal with some aspects of the financials, I'd just like to maybe try and draw it all together for you and briefly recap with this particular slide. And what we've done in this particular slide is to show the like-for-like sales trends for the various businesses for the period January to April and then from May/June. And then to give you some indication of how the activity is trending in the second half of the year, we've also given you the like-for-like sales indications that we've seen in the month of July. So as you can see, on the particular slide there for Europe Materials, a very tough start of the year with the like-for-like revenue declines that we saw in the period January to April, moderating somewhat in May and June, which continue to be quite difficult in terms of year-on-year comparisons in Poland and the Ukraine with 2012. Plus, as we highlight in the statement this morning, since the end of June, we have seen our volumes in both Poland and the Ukraine running ahead of last year's levels. And that's reflected in the improving sales and the reducing sales decline that you see there in July for our Europe Materials business. On Europe Products, you can again see the very negative early trend in like-for-like sales, a more positive evolution in May and June. And then you can see that actually on a like-for-like basis in July, our Products and Distribution sales in Europe were 2% ahead of the equivalent period last year. Now I would just caution not to read too much into that 1-month indicator. The summer months in Europe Products and in Europe Distribution can be quite variable depending on holiday patterns and, particularly, holiday patterns in the construction industry across the various markets. So when we try and assess what happens in the summer months for Products and Distribution, we generally pool July and August together to get a trend. But -- so I just caution against reading too much into that, the backdrop is still tough and challenging in Europe but it is, obviously, a more positive indicator that what we saw in the early months. Looking at the equivalent picture for the Americas operations, you can see for Americas Materials again, the tough impact of weather in the early months moderating somewhat in May and June. And further moderation in July where weather patterns continue to be quite patchy, particularly, in the eastern part of the U.S. and we had record rainfall in many eastern U.S. states in the month of July. But again, an improving trend there. And you can see in Products and Distribution in the Americas, you can see how well the like-for-like sales has rebounded once we came out of the winter season at the end of April. So a good strong dynamic in terms of like-for-like sales in Products and Distribution in the Americas through May, June and July which, again, I think augurs well for the second half of the year. So I hope that this particular wrap-up slide for this section of the presentation gives you some sense of the top line challenges that our businesses have faced in the first half of the year, how those challenges there, very early on, have tended to moderate somewhat and then also to give you an indication of how we are in the first month of the second half. And I will come back following Maeve and Albert's slides to just wrap up for you in terms of how we see the outlook for the second half of the year. So Maeve, I'll hand over to you now at this stage.

Thank you, Myles, and good morning to everybody. I'm going to run through the financial numbers for the group as a whole, have a quick look at the cash flow movements for the year and, before I hand over to Albert, I'm going to look at the strong financial position of the group. Before going into the detail, I should say that all 2012 numbers presented for comparative purposes, both in these slides here and in the announcement this morning, have been restated for the change in accounting standards. The main effect of those accounting standards relates to the accounting for JVs or the presentation of JVs, which are equity accounted now. So on to 2013. This slide here shows the -- starts with the restated 2012 sales and EBITDA number and shows the movements from that restated 2012 to the numbers that we reported this morning. Acquisitions impact, just under EUR 300 million of sales from acquisitions that were completed since this time last year, so the 12 months to June 2013. And those were the 18 transactions completed this year, and whichever is completed in the second half of last year. The EBITDA impact of those -- that sales activity is -- reflects the seasonal impact of our business and the seasonality in the first half. By the time we get to the end of the year, I would expect to see a more normalized return and a more normalized EBITDA margins from that activity, probably, EBITDA margins in the 10% to 11% range. Myles mentioned the incremental impact that we have this year from the non-recurrence of pension gains and CO2 trading, so the impact of that is shown here at the EUR 39 million in negative. The organic sales decline is EUR 474 million and the profit impact of that sales decline reflects the impact, as Myles was talking about earlier, of the lower volumes and lower production levels in the first half which result in very significant throughput inefficiencies and also a limited ability to recover our fixed cost. So that organic impact also reflects a significant weather-related impact. We've estimated that at an EBITDA level, that impact in the first half of the year was in the order of EUR 80 million EBITDA impact. That number is after getting -- receiving the benefit of the cost savings during the first half of the year, which amounted to EUR 111 million incremental savings. So obviously, without those savings, that EBITDA decline would have been significantly worse. This slide here shows the movement in the profit items or the income statement items below our operating profit. Again, a number of individual moving parts, which I'll touch on briefly. When you -- the impact of this -- the pension gains and the CO2 gains show up here again at EUR 39 million. The last year's profit on disposals included significant gains from the disposal of Secil, our joint venture in Portugal; and of Magnetic Autocontrol, our Access Control business in Germany. That gain was EUR 183 million last year and that -- there was no equivalent number this year. Last year also reflected an impairment charge of EUR 130 million for our associate, Uniland, in Spain. So the combined effect of those items was EUR 97 million of benefits in 2012. If you exclude those, the underlying 2012 number was a EUR 5 million PBT. So the combination of those changes and the organic EBITDA decline that we talked about resulted in the decline in PBT that we've seen there of $173 million. Next to our operating cash movements, you can see here there's quite a lot of numbers showing the movements in the operating cash. And we've talked about some of the factors feeding into that. So I'm just going to focus on working capital and capital expenditure now. The working capital number for the half year, as always, is a significant outflow that reflects the buildup of working capital for the group as trading activity gets underway from the quiet start from the winter period. We would expect that outflow to reverse in the second half of the year as it has done in the past. The capital expenditure number reflects a continued focus by CRH on capital expenditure as we deal with the backdrop that we're in. Capital expenditure levels for the half year kept in line with last year's level and also well below the depreciation level for the half year of EUR 334 million that's included in the depreciation and amortization figure you see there. When you look at the impact for net debt then, the other moving parts after operating cash flows are the acquisition spend which, for the first half of the year, amounted to EUR 470 million. That figure is the 18 acquisitions or the transactions that we completed in the first half of the year, including the acquisition of Cementos Lemona in Spain. The disposal figure for the half year of EUR 202 million equally includes the swap of our investment in Uniland, which was the consideration for that Cementos Lemona. And as you can see, a significant reduction compared to last year because last year included the growth proceeds of approximately EUR 600 million from the disposal of Secil and Magnetic Autocontrol. So all of that adding up to a net increase in net debt, compared with this time last year, of about EUR 400 million and an increase of EUR 1.3 million compared to year-end last year. And now the financial position of the group. Firstly, the net debt figure of EUR 4.2 billion is made up of gross debt of EUR 5.4 billion and cash of EUR 1.2 billion. I've shown my usual chart there of the maturity of that gross debt over the next number of years at the gray bars there. You can see there's no undue bunching of the repayment schedules or maturities over the next few years. However, there are some amounts maturing in the second half of this year and early next year. And in good CRH fashion, we have addressed that financing early on, well ahead of time. And in April this year, we raised EUR 750 million in the Eurobond market at the lowest ever coupon for CRH, a bond issue that was very well supported by our debt investors and I think is a really good testament to the financial strength of CRH. And I think that's a good moment to hand over to Albert. Thank you.

Thank you, Maeve, and good morning to you. Over the past 5 years, we in CRH, in response to weakening markets, have been focusing very much on streamlining our businesses, that is, very much lowering our overheads and focusing on improving the operational efficiencies within our business. What I want to do is put up a slide here that we showed you in our Capital Markets Day last year where we set out for you a 4-year program of cost reduction to 2015, which totaled EUR 450 million. And that brought our total reductions since we started in 2007 to EUR 2.5 billion over the lifetime of these programs. Now in explaining that EUR 450 million program, we broke the cost reductions target down into 3 main categories: structural, process and procurement. In structural, we're looking at cost reductions that occur as a result of reorganizing our businesses, looking at how we can centralize functions, in particular, back-office functions and how we can also close on multiple locations and operating units. In our process improvements, process reductions, cost reductions, we're looking at cost reductions in the actual production cost of our businesses itself. Looking at how we use consumables, making ready use of recycled materials and, crucially, how energy is utilized and optimized within our businesses. And finally, procurement. In recent times, we have taken a more coordinated approach to procurement in our businesses. Looking to leverage the size and scale of our group and also share the knowledge and best practices across our businesses to ensure that we reduce our total procurement costs. Now as Myles has explained this morning, unfortunately, we have seen a further deterioration in European market in the first half of 2013. And we've increased our program of targeted cost reductions in response to these slowing markets. Specifically, we are targeting a further EUR 75 million of cost reductions in our European businesses, primarily in restructuring those businesses. And as always, within CRH, these cost reductions are built from the bottom up, identified and delivered by those who are closest to the business because they are the ones who understand the businesses best and the ones who are best able to reset capacity and adjust the cost base. Moving on to the next slide, this slide shows you how we -- the cost we reduced in 2012 and also our targeted cost reductions for 2013. On the left-hand side of this slide, you can see that our actual cost reductions last year were EUR 166 million, which is EUR 16 million ahead of what we had targeted in the Capital Markets Day last year. As Maeve has already said to you this morning, in the first half of 2013, we've also reduced our cost base by a further EUR 111 million. And for the full year 2013, we are increasing our targeted reductions to EUR 185 million, which is EUR 60 million above what we'd originally targeted at our Capital Markets Day last year and brings the total cost savings achieved and targeted in 2012, 2013 to over EUR 350 million. Now looking behind some of these cost savings to give you a sense of where they're coming from, and how they're going to be achieved. You can see that over 50% of these achieved and targeted cost savings are coming through the actual restructuring and reorganization of our businesses. That is, as I say, mothballing, closing, merging production operations and centralizing functions. You can also see another 30% have come through process improvements, reducing the cost of the builds that we produce. In this year, 2 big targeted areas for us are increasing the amount of alternative fuel usage in our cement operations in our Europe materials division. And in the U.S. in the current season, we're extending the use of warm mix and recycled asphalt in our Asphalt businesses, which allows us to move away from expensive virgin bitumen. And you will note, on the bottom left-hand side of the pie, that over 70% of the cost takeout are permanent in nature. And just before I leave this slide, on the right hand side, you'll notice, not surprisingly, that over 75% of the cost takeout in this program is coming and be delivered by our European businesses. I don't think anyone can doubt that CRH can stand on its track record of cost reduction delivery. We acted early and decisively at the start of this crisis. And since 2007, to date, we've taken out EUR 2.3 billion of costs. And in the current year, we have shown no hesitation in acting if markets deteriorate. Our plans are in place for 2014 and 2015, but we're monitoring markets very carefully. And if the situation changes, we will be ready and able to react accordingly. And now, I will pass it back to Myles who's going to wrap up this part of the presentation.

Thank you, Albert. Just to say a few words about the outlook as we see it for the second half of the year, which we've obviously set out today in the interim release. Obviously, recent weeks have seen more positive indicators coming from the Eurozone, but obviously it will take time before they feed through into our particular activities. If we look at the sector and the results that we've seen over the last number of weeks, you can see that the weak early volumes have constrained the pricing plans for many across the sector and the pricing environment in Europe continues to be tough. And as a result, we expect that the second half of the year will be a challenging one for our European operations. In the Americas however, economic growth continues and it continues to progress. We have seen a good start and we see continue positive dynamics in our residential and in our nonresidential businesses, which we expect to be strong in the second half of the year. We have been constrained in the first 6 months and indeed, into the early part of this second half by weather conditions in our materials operations. But in the recent weeks we have seen better operating conditions, and we're getting benefits from our good backlogs in highway work. So we would expect that notwithstanding that slow start on the material side that our U.S. dollar operating profits and our U.S. dollar EBITDA, will be ahead of the second half of last year. Putting that together, we expect that overall for the group, second half EBITDA will be in line with the second half of 2012. And as Albert has said, we continue to be very proactive right across the business and continuing to address our cost base in those areas, which are continuing to see a difficult operating environment. And we believe that we are well positioned in the U.S. now particularly to take advantage of a growing economy, and that we will be well positioned as well when the European economies begin to gather a bit more momentum and when that feeds through into our particular markets. So that concludes the formal part of the proceedings this morning. We now move to questions-and-answers. We would like to wrap this session up by 9:45. So there will be plenty of time for your questions. We'll start here with questions from the floor here in Dublin, and we'll then move to take questions over the phone lines and then wrap up with any questions that may have come in over the web. As usual, I would ask you all, in posing your questions to state your name and the institution that you represent. So we'll take the first question from the floor here in Dublin.

It's Barry Dixon from Davy. Couple of Questions, I suppose it wasn't -- that, that slide's very interesting, where you look at the like-for-likes in July, both positive in Europe and in the Americas, and maybe just to get a better sense as to how you can come out with the guidance for flat EBITDA year-on-year, is just that it is too early to tell, or are there other factors involved in you coming with that, looking at that flat guidance for the second half of the year? And second, and I suppose, related question is in terms of looking at the performance or the improvement in the performance in Poland in particular, and Ukraine, how much of the Polish thing is just easy comps versus last year? Do you think, in terms of the improvement you've seen in recent weeks, or is there any sign of a structural improvement in that market? And then I suppose a final question for clarification more than anything, for Albert, in terms of the cost-cutting program, just to be clear, is the target for that 12 to 15 program still EUR 450 million of savings? Or is that now increased by EUR 75 million?

Thanks, Barry. Three questions there. I might give the Polish question and the detailed cost saving question to Albert, but first of all, maybe address your initial question there, on the guidance side of things. I think if we look at the indications we gave at the beginning of May, with regard to the outlook and the outturn on EBITDA level for the first half of the year, we've obviously delivered in line with that. But the components of that delivery are probably somewhat different than what we might have anticipated at the early part of May. Certainly, we found the going a bit tougher in May and June in Europe than we would have anticipated in early May. And I think pricing has been one of the factors as part of that. Also, obviously, the seasonal, sort of, operating conditions for our Materials business were more difficult in May and June in terms of very erratic weather patterns and lots of rainfall in the eastern half of the U.S., so that wasn't as strong as we expected for the first half of the year. But on the other hand, our Products and Distribution businesses in the Americas performed very strongly, and better than we would've anticipated in early May in the months of May and June. So I suppose that -- those sort of trends that we saw in May and June have also begun -- have influenced our guidance for the second half of the year. We do think that it'll be a tough second half for everybody in the European theater. And despite the improvement in GNP figures and all the rest, that will take time to feed through, provided it's sustained, which hopefully it will be. We do have, obviously, some catch up to affect in our Materials business in the U.S. We need some good operating conditions over the next 12 weeks or so, as the season closes by mid-November. And -- but we think our P&D business in the U.S. would probably be stronger than we might have anticipated in the middle of the year and the second half of the year. So all of those things go in to frame our guidance for the second half. So I hope that answers your question. Albert?

With regard to the cost reductions, that EUR 75 million across 2012-13 is incremental to the overall program. So the EUR 450 million now is upgraded to EUR 525 million. We haven't really addressed '14 and '15 yet. We're focused on '12 and '13. But as the year rolls out, we'll look at those again. With regard to your question on Poland, I mean, a very dramatic fall in volumes in Poland, the first half of the year, and not only ourselves, you would've seen a very patchy volume performance across our peers in the Polish market, and it really leads down to the footprint, more than anything else, and the weather impact on that footprint. And of course, the Polish market you're aiming 2/3 of the volume there, done in the second half of the year, as opposed to the first half of the year. So any slowdown at all, with regard to weather, makes a very big percentage decline. In saying that, there's no doubt the Polish market is weaker than last year, and the point you make on the comps probably becomes more relevant as you get into sort of the end of quarter 3, quarter 4, rather than at this stage of the year. I think what you're seeing in Poland then, I suppose, I would indicate Ukraine and indeed, other surrounding countries, although we're not in the Czech Republic or Slovakia, also in Western Russia. You're seeing this is the busy construction season. The weather is good. If you don't do it now, you'll never do it. So this is the busy time. And I think we're seeing a continuation across all those regions of good volumes during the course of the summer months. So we'd have to see how it rolls out, in terms of comparison to last year but overall, year-to-date, the market is down, not just well. Tom Holmes - Investec Securities (UK), Research Division: Tom Holmes from Investec. Just 2 for me, please. In U.S. materials, asphalt volumes seem to have improved in Q2 versus Q1. Could you give us an idea of the trend you're seeing over the summer months there? And just in U.S. nonres, indicators have been positive for some time now, but we're yet to see any concrete evidence of this feeding through, are you seeing any signs of sustained uptick in this market?

Tom, I think on the nonres side in the U.S., I mean, we saw good feedthrough in some segments of nonres in 2012, particularly on the utility segment and also in terms of good demand from some of the energy markets, wind farms, also from the shale gas regions. I think if you look at our performance in the first half of the year, we are seeing that beginning to widen out a bit more into segments such as warehousing, small offices, refurbishment and that. So it is beginning to broaden. Obviously, still not back anywhere near what it would have been in the past. There still is a dearth of, sort of major development projects, although we have seen a few as the ones I mentioned, for instance, which have been benefiting our BuildingEnvelope, our Glass business, we have seen some major headquarter projects coming through, as U.S. industry begins to feel more positive again about the economic environment over there. So I think we are seeing it continuing to progress and to broaden. And hopefully, as we step out into next year with sustained economic momentum in the U.S., we'll see it gather more legs. I think we're well positioned to benefit from that, given our particular product portfolio on the product side, and also indeed, on the interior products element and distribution where we have seen, as I mentioned, some good like-for-like sales growth from a lot of small scale commercial activity, as well as from the multifamily aspect of things. With regard to the asphalt side of things, I mean our like-for-like volume declines in the first 4 months would've been of the order of 20% plus, we've seen that moderate in May and June, but still be heavily in negative territory. July, we were getting closer to flat with last year, in terms of like-for-like activity. But again, as I mentioned earlier, in July, we had record rainfall levels in many of the eastern states, which are obviously very strong states for us, in terms of asphalt delivery. More recent weeks in the U.S., the weather condition seemed to have settled down, but I'm beginning to feel like a weather forecaster, but -- with the references to weather, but it is vitally important to us now, particularly for our Materials business over the next 12 weeks. And being what it is, we will have good weeks and bad, but hopefully, more good weeks than bad, as we move towards the end of the season rather than the early part of the season, in the first half of the year, where the bad weeks very much outweigh the good weeks, in terms of the operating backdrop. I think we seem to be out of questions here in Dublin this morning, so maybe if we would move to take questions from the phone lines? So if we can open those up?

[Operator Instructions] Paul Roger from Exane is online with a question.

A couple of questions. Actually, first relating to European pricing. Firstly, on European products, obviously, you have talked about competitive pressures for a while now, I wonder if that's the main dynamic, in terms of why you're not able to pass on import costs in that business? I wonder if it's just about weak demand? I wonder if you could talk about the pricing outlook for the European products in the second half? And then secondly, on the European Materials, you've already provided a breakdown of your volume performance by country in the first half. Wonder if you can give us the same information in terms of pricing and coming from the price outlook in European Materials as well?

On the price outlook in Europe materials, Paul, we got some price increases here in the domestic market in Ireland. We also achieved some price increase in Finland and in Ukraine on the material side. But as for, I think again, as you've seen from the first half sector results, a very difficult pricing environment generally across the piece in Europe on the heavy side in the first half of the year. On the product side, in Europe, it is very competitive, even as I mentioned in countries such as Germany, where the underlying backdrop is solid, the lack and the reduction in people's export potential to some of the neighboring countries is making people sharpen their pencils on the domestic market. And also in the distribution side, again, there are 2 with significant volume declines. The ability to move pricing ahead is very much constrained. And for instance, in a country like Switzerland, particularly in border areas, the dynamic that we saw in 2012 of people shopping in the neighboring country and taking advantage of the strong Swiss franc, that continued in the first half of this year. I don't know, Albert, if you'd like to add to -- any comment on pricing side?

No, I think we've said for a number of years, Paul, volume will have to turn first before pricing does. And you can see that actually happening in the United States. The volume starts to move a wee bit last year, and you start to see it moving further ahead this year, and you see pricing moving with it. I think that we'll see a more positive dynamic, or at least a stability in volumes in Europe, I think it will be challenging on pricing.

And just one very quick follow-up. So have you announced any price increases sequentially in any of your European business lines, since the end of the year?

Since the end of 2012?

So sorry, since the end of the half year, this -- since the end of June.

No, nothing of any significance. I think our general pricing campaigns would be launched, if you like, in the period January to April. I think it's very difficult to try, unless markets are growing very strongly, to try and implement midyear price increases. I mean that's been our experience.

Yes, and of course, people are bidding on jobs and tending for work. They need to know those prices before they do that, so you need to have your pricing information out there in the early part of the season, you can't just drop price increases on top of your customers in the middle of the season. They've got to price their products accordingly.

Luis Prieto from DB is online with a question.

Luis Prieto from Deutsche Bank. I had a couple of questions. The first one is, you provided us some divisional information, which is quite useful, but would you be able to give us an idea of what the group price increase has been in H1, and what the cost inflation could have been, at least a rough idea. The second question would be, in your cash flow statement, you talk about tight CapEx control, but I would assume you still have a target of investing well over EUR 1 billion over the next month, 18 months has been the target for some time. Has your investment strategy changed in any way? Are you going to refrain from doing anything in the next few quarters?

Thanks, Luis. No, our investment strategy, I think made the comment really related to capital expenditure, which we're obviously keeping under tight control. We continue to seek out good development opportunities. We have been quite active in the first half of the year. We do have a transaction waiting competition approval in the Ukraine, the purchase of Mykolaiv Cement from Lafarge, which will obviously be, hopefully all things going well, will be a second half transaction, and we continue to look at other opportunities that make sense for the business and that meet our valuation criteria. In terms of your question on pricing, I would say that the -- generally, if we look at the input cost side of things, the energy inputs are relatively stable compared with last year on the European front. There, as you've seen, and as we commented in relation to Americas materials, our energy-related costs were lower than last year, but not particularly evident in the margins in the first half because of the significant inefficiencies associated with the lower volumes. But I think that should be more evident in the second half of the year. On the pricing side in Europe, I think we've indicated a 2% price decline for Europe materials in the first half of the year. I think that's pretty indicative of the type of pricing trend that we've seen more widely across our European businesses. We are, obviously, getting price increases in the U.S. They vary, obviously, by product and by sector. We, in some cases, particularly in our Distribution business, we're passing through price increases, particularly for instance in wallboard. I would say overall pricing in the U.S. is probably ahead 2% to 3% in the first half of the year.

And regarding -- a follow-up question, you mentioned energy cost inflation, but overall cost inflation, including personnel and everything else, a little bit more than the energy you...

Personnel, I mean again, inflation is low, so wage adjustments tend to be fairly modest, low-single digits. Some inputs have declined in cost, for instance, steel-related inputs have obviously reduced in some markets. So overall, the sort of the input cost side of things is pretty subdued up 1%, and no more than that, and weighted more towards the U.S., obviously.

Gregor Kuglitsch from UBS is online with a question.

I've got a few questions as well. Just coming back to the point on the guidance, and the organic development. Can you just maybe give us a -- so you're suggesting roughly flat EBITDA, which all sort of, flat like-for-like EBITDA? Can we just get a sense of what kind of top line assumption you're making? Clearly, the July trend has been a little bit better, I mean, just a sense to hear what you think are sort of baking in for the second half of the whole? The second question is just on U.S. infrastructure spending, and maybe you could give us a little bit of an update or an outlook where you expect this to head? I understand that your business was impacted by weather patterns, and your state specific, but may be you can update us on if you feel that Federal highway side takes your spending if there is any, and then your individual states, obviously, state spending being the other half of the equation, and going into next year to the extent that some of the volume pressure really was on the weather issue or whether you think there's all some underlying issues going on here?

Okay, thanks, Gregor. I think, in relation to your second question there, I think it's primarily a weather issue in the first half of the year, that's our belief. And we are seeing, as I say, in recent weeks, we are seeing more better operating conditions, and our asphalt volumes are picking up. Our aggregates volumes, actually, we believe, given the weather backdrop, have been quite strong, as indeed has our readymixed volume, particularly in the context of some very large readymixed contracts that we had in the Western region last year on some very large public works that are no longer there for the current year. In relation to TIFIA, a lot of promise around TIFIA, in industry comments in the earlier part of the year. And on the impact that TIFIA would have in 2013. As you know, we have always welcomed TIFIA as being a good support for our infrastructure, but we've always been somewhat, if you like, reserved about its absolute impact on our industry, and I think, a lot of the sort of more positive comment about TIFIA has tended to wane a bit, as the year has progressed. I think it's a positive looking into 2014 and 2015. I don't see it as a being a big factor, in terms of the underpin on volumes in the current year. And we are seeing the States more widely, continuing to look at means of addressing some of their funding gaps for highway construction, and I think a lot of the measures that are underway at the moment are obviously progressing through state legislatures and all of the rest, and nothing is smooth on the legislative side in the U.S. But I would be hopeful that for 2014, we'd see a number of the measures that are on the books, in a number of states being realized and providing a better backdrop for 2014. But nothing particularly that's giving a big kick, if you like, in the current year. We said in March that we thought the underlying volume backdrop for infrastructure this year would be flat to slightly down. Now the weather has probably made us a bit more challenging to hit that particular volume level, and the weather conditions we've had in the first 7 months. But we still believe that the federal funding is pretty flat, and that the states are increasingly looking for ways, and in some cases finding small elements of funding to put into the pot for the current year. So, as I say, our backlogs are good, and we look to be able to take advantage of those over the next 12 weeks. On the like-for-like sales, Maeve, you'd like to...?

I think probably overall, fairly flattish as well, Gregor, that for the group as a whole, slightly more positive in the U.S. for our U.S. segments and a little weaker for Europe. But overall, it's fairly flat, too.

Robert Eason from Goodbody is online with a question.

Just a few questions for me. Just in relation to the Asphalt business in the U.S. and your -- particularly on the margins. Just a bit surprised, just given what your peers have reported, that you've reported a decline in margins in the first half. Can you just go through the [indiscernible] mass and your expectations for the remainder of the year and as assumption to do with your winter fail not being done as competitive rates, and just your general comments around that. Also, just a clarification, when you talked about flat EBITDA are we talking flat in total terms, or flat from an organic perspective? And my other question is in relation to what should we be putting into our models in terms of the total cost of restructuring for the full year? And my final question is on the dividend, and just the thoughts around that, given that from a traditional metric perspective, why your dividend cover, it looks very tight, given the revised guidance?

Okay, Robert, you have a number of questions there, I think 2 are particularly related to the restructuring costs, and so I'll let those deal with Maeve, or Maeve to deal with those. In relation to dividends, obviously, it's been a tough first half of the year. As Maeve has indicated, quite a significant impact, we believe, on the financials for weather. That's hopefully a one-off, given the severity of the winter. And as always, we look to the full year and obviously, we look to beyond as well too, in framing our dividend decision and in the context of a strong balance sheet, and what we believe will be a strong cash flow for the year as a whole. We have continued to deliver very strongly on the dividend front as we have over the last 5 years for our shareholders. With regard to your first question, on the asphalt side of things, I think you have to remember that other industry participants have very low exposure to asphalt overall, compared with ourselves. We are the largest provider of asphalt in the U.S. market. There can be quite varied patterns, depending on the geographic positioning. Some of our peers actually do quite well on the volume side in the first half of the year. There weren't subject to the weather patterns that we were impacted by, because of the states that they have presence in. So I think, not necessarily any good read across from anybody else, in relation to our particular asphalt operations, given their scale. We are very happy with our winter fill program, as we would've mentioned, when we announced the full year results, our winter fill was affected at a lower average cost than in the first half of 2012. We have continued to purchase well during the course of the year. The primary effect impacting our margins is the inefficiencies associated with very low throughputs in the early months of the year. I mentioned in answering an early question that, in some of the earlier months, our like-for-like asphalt volumes were down over 20%. And that obviously gives rise to significant inefficiencies. As our -- as those sort of rates of reduction have moderated, we've seen actually an improvement in our margins in asphalt. Not obviously evident when you combine the early months with the later months. And I think we would expect to see in the second half of the year an improved asphalt margin, compared with the second half of last year. But the precise scale of that will depend on the levels of throughputs that we have. But overall, we're very comfortable with our asphalt purchasing program this year, we'd think, overall, for the calendar year, it will work out quite well for us. And Maeve, if there are some technical [indiscernible]

Yes, on the cost to implement, Robert, the -- in the half year you saw that the costs to implement were fairly similar to last year's around the EUR 20 million mark. And our expectation for the year as a whole is that we will continue to be brought in line with last year. So probably somewhere in the order of EUR 50 million to EUR 60 million of cost to implement for the year as a whole. Was there a second question to go with that?

I think, in relation to the EBITDA level for the second half of the year, Robert, the indication we've given is at an absolute level.

Oh sorry. Yes, it's that -- that's the total EBITDA.

Ian Osburn from Cantor Fitzgerald is online with a question.

Lots of questions obviously being answered already, but just one on the investment in Belgium, and particularly in the Benelux region, and I guess, Europe in general, is that because you're seeing any signs of improvement? Or is that mainly because you're looking for a medium-term return on that investment, and it's more countercyclical investing. And I guess, slightly related to the dividend question is, you're making quite a healthy level of acquisitions at the moment, but the net investment is obviously fairly moderate, given the number of divestments we're seeing as well. Could we see the acquisitions continue at the current rate, but the divestments tail off, so that CRH's investment in growth actually returns to the more normal EUR 1 billion per year that we've seen for well, for the good decade before 2007?

Albert, would you like to respond to that?

Well, I think the issue of investing going forward is very much tied into the actual trading performance. We have a strong cash generation in CRH, and I think we've had a fairly resilient performance over the past number of years that has allowed us to continue to invest in our business and grow our business going forward. I think that will continue to be the case. But again, we monitor the trading operations of our business well, and that will ultimately determine our level of confidence that we feel about the pace at which we invest. We were under a lot of pressure, maybe 2 or 3 years ago to spend a lot of the money that we have in our balance sheet. But I think we would have looked very foolish if we had done so because markets were continuing to deteriorate. And we would have paid a very high price for businesses which ultimately we could have and indeed did buy at lower prices. So we monitor it carefully. However, I think where we see values that attract us and indeed, in particular, where we see operations that fit within our footprint and within our network, we're not afraid to move forward. And I think that was the case and is the case at the -- I think your question was behind Belgium and indeed the Benelux. The acquisitions you referred to were actually fitting into our network of businesses there. And we just felt the opportunity to do both, and also Belgium and the Netherlands have been very good businesses for us. Of course, Netherlands in particular is challenged at this moment in time, but I think in the mid- to long-term the fundamentals of those 2 markets are good, and our operations are well positioned there for the future.

And I think, Ian, if I could just add to what Albert has said there, I think the Belgium opportunity you referred to, I think, was in pre-stressed [indiscernible]. That was a bankruptcy situation where we were obviously able to step in and acquire a recently developed plant, state-of-the-art plant, which fit very well with our existing network and actually avoids us having to reinvest in one of our aging facilities in Belgium. So I think it was a very suitable and a very rewarding -- will be a very rewarding opportunity for us where we're able to take advantage of the particular situation in that particular business. And I'd also say that the Belgium has, as a market, held up much better than the Netherlands. It didn't have the particular mortgage structure that the Netherlands had that are now weighing on confidence in the Dutch housing market. And it has actually been one of the stronger regions over recent years for us, so we're very happy to take advantage of that particular opportunity.

Robert Muir from Berenberg is online with a question.

A question I just had on materials to start with in Europe. I think you've given us in the past the sort of EBITDA breakout for developing austerity in stable countries and I wanted to get some idea, maybe quantify the effects that the declines in the sort of developing economies have had on your EBITDA in the first half of the year. And then my second question, I think back in May, Myles, you said some of the structural funding was starting to flow again in Poland. And I wonder if are you seeing that or if that can be delayed until next year, kind of what's an update there? And then my final question is slightly technical in Distribution business in the U.S. If I look at organic EBITDA performance versus the revenue, it just looks a little bit light and I wonder, is that mix effect? What's kind of going on in that division over there?

Okay. Rob, thank you for those particular questions. Albert, you might talk about the structural funding in Poland, maybe some comment on that?

I mean, Poland unfortunately had a misstep with regard to the rollout of the structural funds with regard to infrastructure spending in particular last year where there's a significant slowdown. A number of the jobs had to be stopped and indeed re-tendered. As we've gone through 2013, that process had taken much longer than people have anticipated, and we had forecast and thought that at the second half of this year, we would see that work starting to recommence. I think it's clear to us now that, that's going to be much longer and it will be at least 2014 before we see -- start to see the volumes come back because if it was going to come back, they would have started now at this current time. And that's been a big contribution towards a slowdown in overall construction activity in Poland this year. So I think that has been pushed out into 2014. And those re-tendering -- and again, we're getting work restarted on those projects, which are supported by the structural funds.

Well, I'd -- there is -- in relation to the expiring structural funds, the money has to be allocated before the end of this year because there is a new structural funding program kicking in from 2014 to 2020, under which Poland does very well again with, I think, the total of EUR 70 billion of structural funding, of which EUR 25 billion or so is destined for infrastructure. So the expiring money have to be allocated, and it looks like the government is under pressure to do that before the end of the year. So I think that should be a positive for 2014. I think in relation to giving EBITDA splits for our Europe Materials business, Rob, that's something we would do for the year as a whole. I don't think it's particularly helpful, particularly given the seasonally affected start that we've had this year to be doing it for the half year.

Is it fair to say that the businesses you have in those developing markets by their nature are sort of higher margins so they would be affected by the kind of volume declines?

Well, those Asian markets are no longer now included in our segmented reporting for Europe Materials because of the change in IFRS. The Indian and the Chinese businesses now come in on the Associates line.

I was thinking more about Ukraine and Poland.

Yes, Ukraine and Poland are in there, obviously, and given the volume declines that we've shown, I mean, the significant element of the like-for-like EBITDA decline, excluding CO2 and the pension effects, were in Polish and Ukrainian operations in the first half of the year. The other businesses you've seen, Finland and Switzerland, actually moved ahead in volume terms. So again, that is -- they were the main areas effective in the first half. With regard to the Distribution business in the U.S., there are mixed effects at work there. As we said, the Roofing and Siding business, profits are broadly flat in the first half of the year. Revenues were somewhat higher, so margins were under a little bit of pressure there. But things have improved, and most of the delivery was in the interior products side of the business, which does tend to be a less capital-intensive and therefore a lower-margin business than the roofing side of things. So there are some mix effects there in the first half of the year.

John Fraser-Andrews from HSBC is online with a question.

The first question is regarding U.S. materials. Just noting the differential between East and West in your statement, and it looks like the asphalt volumes were under more pressure in the West than the East, and I wondered if that weather -- if that was purely weather effect. And related to the Asphalt and your Paving business, you've made comments about a catch-up. To what extent do you see 2014 benefiting from these weak volumes? I mean, can you recapture all the business you've lost in the following 12 weeks? And do you think that the weakness in businesses led to some stockpiling in asphalt and to that price weakness? And then the second question, could we have an update on India and China, please?

Okay. I'll maybe pass India and China to Albert, but first, John, I'll deal with your questions on the U.S. asphalt piece. And particularly, your first question there about the differential and the volume performance between the West and the East. We had some very large contracts in the West last year. We had a particularly large contract on the main North-South highway through Utah, which consumed quite a lot of asphalt in 2012. We also were quite active in terms of asphalt work at a number of Air Force bases in the northwestern part of the U.S., which contributed strongly to volumes last year. That was always something we knew wasn't going to repeat, and it's fed into the asphalt comparisons, particularly in the first half. There are some weather effects in there, but the weather effects in asphalt are primarily impacting on our Eastern business. And as you know, about 2/3 of our asphalt is actually generated within the eastern half of the U.S. So there are some sort of specific job issues there related to that. I think we have good backlogs for the remainder of the season to the extent that we're not able to get at that work in the current year, it will flow into 2014. But obviously, our desire and our ambition would be to get that work done before the end of the season. I don't think, though, it's going to be -- we're going to be able to fully catch up on the 16% like-for-like asphalt volume decline that we've had in the first half of the year. I think it will be an exceptional pattern of weather conditions that would allow us to fully catch up on that. So I think on a like-for-like basis, we're probably looking at a mid-single digit decline in full year asphalt volumes. But we are seeing our margins improving on that, and our energy cost backdrop is favorable. And so we have built that type of like-for-like volume decline into our guidance for the second half. I think in relation to India and China, Albert, you might comment on those 2 areas.

Yes. If I can take China first. Overall, our business -- and just to remind everybody, our businesses are located in the Northeastern China, at the 3 Northeastern province of Heilongjiang, Jilin and Liaoning. Our investment there is a 23% -- 26% investment, excuse me, in the largest cement manufacturer in that region with an option to increase that to 49% over the next couple of years. Our volumes this year have been about 10% ahead, which is unusual because most of China is down. But heritage volumes are slightly down about 1%. We did the big acquisition last year and saw the most problems in Liaoning, and that's beginning to kick in and contribute. But overall, we've had a more favorable volume outturn than most other parts of China, and that really is because that part of China is the old rust belt of China and is benefiting from a lot of central government expenditure. Pricing has been down a bit, but we've offset that with fairly good cost initiatives over the past 2 years or so and they're delivering. So overall, I think that the overall results in China should be brought in line. I should say that I think there's an interesting adjustment going on in China with regard to the overall economy. It's being very carefully managed down. I think for perhaps a more sustainable growth model going forward, and I mean, at the end of the day, remember, Chinese GDP, despite all of the talk about it, still over $1 trillion every year, and growth this year will be north of 7%. So still quite a strong performance but a change going on with the new administration and you'll see that coming through over the next number of years. With regard to India, a different story. Our business in India is located in Andhra Pradesh, which is the largest state in India. We have a 50% stake in My Home Industries, which is a 4.8 million tonne cement operation base just southeast of Hyderabad with another operation [indiscernible] plant up the coast in Visak in the northeastern part of Andhra Pradesh. And we've just signed a deal, although it's yet to be completed, to buy through that joint venture another cement facility just under 3 million tonnes called Jayajothi Cements, which is about 250 kilometers located down towards the Karnataka border. That really is to complement our network and allow us really to give full coverage across the Southern Indian market. This year, our operations in India have been well ahead on volume. Pricing has been very challenged throughout all India this year, and I don't see that changing anytime soon. There is significant overcapacity in the Indian market, and with overcapacity in any cement market, that tends to lead to pricing pressures. And as I said, I do not see that situation being resolved anytime soon. What we are doing is trying to improve our efficiencies and then improve our market reach, which we have done over the past couple of years by extending up to the northeast part of India from our production plant. And with this new acquisition, that will allow our stretch to Karnataka, Kerala and down to Tamil Nadu to give complete coverage of the Southern Indian market. I think that it's too early to absorb some of the shocks that we're seeing going through India at this moment of time, but I'm so much surprised that people are surprised about what's happening in India or indeed any emerging markets. They are volatile in nature. And whilst we all like to ride the rollercoaster on the way up, we shouldn't be surprised that it can be a fairly scary ride on the way down. They are volatile in nature, and what you're seeing in India is an adjustment taking place due to, obviously, a long-standing current account deficit that hasn't been addressed, which is as the result of the lack of structural performance within the Indian economy itself. And you see it happening in -- same problems there in Indonesia and Thailand and other markets out there. I think that's the nature of the emerging markets, which is why we've always taken a very measured and careful approach. We do invest in these for the longer term. We do believe in them for the longer term. But to over-commission on the short term is somewhat of a gamble rather than an investment.

Just a couple of supplementaries on India. Could you indicate the pricing erosion year-on-year in the first half and also the contribution from that joint venture, whether that's EBITDA or PBT, would be useful.

Well, the -- it comes in -- associate levels come in at the PBT level with regard to that. Actually, pricing year-on-year is broadly flat. It dropped last year and just didn't recover.

All right. And the PBT?

PBT impact was about, I think, EUR 4 million or EUR 5 million in the first half of the year -- our PAT [ph] rather, PAT [ph], which comes in at the associate line.

Will Jones from Redburn is online with a question.

I've got 3, if I could, please, unrelated. First, just around the paving margins in the U.S. Obviously, you've commented that they've got slightly better first half year-on-year. Can you give us any kind of quantification of the change you saw and maybe just try and put those margins in some kind of historical context relative to the peak or trough and just to give us a flavor please? And just how do you think those margins -- or why do you think those margins are kind of confounding the weaker weather that has impacted the rest of the Materials division? Is that just a function of the low level you've got down to? Secondly, in Europe -- in Distribution, can we just maybe get a bit more color around the gross margin pressure you may have seen in the first half? I think the operating margin was down 160 basis points. Can you give us any help as to how much of that was just the impact of lower volumes and how much was the more competitive environment? And then just finally on second half acquisition impact, apologies if it's been mentioned, but is there any kind of guidance around the second half and second half impact from M&A?

Maybe I'll ask Albert to comment on the Distribution margins, and Maeve might give you some indication of the likely impact of acquisitions in the second half. Our construction margins in the U.S., we're under continuing pressure from 2008 right through to the first half of 2012. Our margins probably declined by the order of 40% on that particular aspect of the business over that particular period. We did see the move ahead slightly in the second half of last year. I think there was a realization across the industry that people had cut things beyond the bone, if you like, and we're seeing the -- after a number of years of that type of dynamic, we're beginning to see the pain that, that caused and the pressure it's put on. Also, I think we saw a number of failures among small- or medium-sized players who had to encroach on the public works side of things from their natural areas of expertise, which would have been more in the private asphalt type of market. I think also perhaps, some of the private asphalt work beginning to come back has helped to relieve some of those pressures. We've seen an improvement in the first half of this year. It's a bit stronger than that, which we saw in the second half of last year. And I think we are waiting to see what works out for the year as a whole, but we think it's on the positive trajectory. But like all things in recovering situations, it's probably going to be a slower uphill climb rather than a sharp bounce back. But I think it is encouraging after such a long period of decline to see a recovery. On the Distribution business, Albert, in Europe?

With regard to Europe and Distribution, the overall top line is down about 7%. The volume proportion of that is -- about 9% of that comes from volume and about 2% of it coming back on price.

I think the operational leverage that we see in our Distribution business is probably not dissimilar from the type of leverage we've seen from others in the sector who perhaps don't particularly have the big exposure we have to the Netherlands, which is one of the tougher markets. On the acquisition impact, Maeve, second half of the year?

Yes. You saw from one of the slides earlier on the acquisition impact in the first half of the year was about EUR 22 million, and we expect -- that reflects the seasonal bias of the business. I'd expect the second half figure to be about double that first half.

Howard Seymour from Numis Securities is online with a question.

A couple for me, if I could, please. One specifically just on the Irish market, Myles, because obviously, of the austerity economies, there have been a few commentators suggesting that, that could be the one that's perhaps starting to stabilize. Any thoughts on that?

Yes, we would obviously be hopeful, Howard, that after such a long period in such an extraordinarily sharp decline and going from almost 90,000 housing starts to 5,000 or 6,000 that we would be reaching the bottom. And I think there are increasing indications that, that is the case. I think there's quite a lot of refurbishment activity going on and quite evident, actually, in the Dublin housing market at the moment. There are some small developments which have reopened and which have been worked on. It is particularly, though, a Dublin phenomenon rather than one that's more widespread across the country where there continues to be significant overcapacity. We've also seen on the commercial side some of the unfinished commercial projects that, as the national asset management agency works through its portfolio of bad long-term property, that they are beginning to invest in finishing out some of these projects. So that is beginning to start. And also, there has been some quite considerable outside interest into commercial property in Dublin and in 1 or 2 of the major urban areas. Again, quite focused rather than widespread. But I think those are positive trends. I think also we've seen some additional funding coming from the European Investment Bank, which is actually going to kickstart to very major infrastructure projects, one actually on our doorstep near our headquarters in Dublin. So I think finally, we're beginning to see some life in the construction market. I think we'd be hopeful that next year could -- all things going right and with the backdrop in Europe continuing to evolve in a positive way, that we could see construction reaching the bottom and maybe even beginning to show some very selective elements of growth in 2014. And so it's better than it was, and I think given that we have done such enormous restructuring in our Irish operations, I think we're very well placed to take advantage of that. But I think it's going to be a slow climb back up, if you like, rather than any sort of rapid rebound. But nevertheless, some encouraging indicators though.

Okay. And second one is more general, just really in terms of the cost reductions that you're looking at. You obviously mentioned that Eurozone indicators are looking more positive, and there's been a big effect of the weather more than anything else. As you take more cost out, is it just a reflection of where you're currently trading as opposed to taking a more negative view of the Eurozone recovery prospects?

Albert?

I think it's really just a reflection of where we see current trading in 2013. And as Myles said, I think it's going to be a slow climb out of where we currently are in Europe and just taking a medium-term view of that and resetting our capacity accordingly. And most of the cost takeout that we're looking at in Europe is that Northern European across France, Benelux and Germany.

Our final question comes from Arnaud Lehmann from Bank of America Merrill Lynch.

I would have just one question, if that's okay. Coming back on the dividend, I mean, I understand you're hinting you'll do your best to keep the dividend stable this year. I'm just wondering on a more medium-term view if -- we're seeing at the moment relatively stable to slightly down outlook for your EBITDA generation and at the same time you keep fairly healthy spending on acquisitions. If you fail to see a proper recovery of your EBITDA in the next couple of years and if you keep spending on acquisition, that would mean you would have to finance your dividend through increase in net debt and financial leverage. So basically, the question is are you ready to increase your net debt to keep the dividend unchanged?

Well, Arnaud, you paint a particular picture there, obviously, which we wouldn't necessarily agree with all elements of it. Obviously, there has been a significant hit from weather in the first half of this particular year, which has weighed quite heavily on results for ourselves and for everybody else in the sector and that obviously gets reflected in the full year results. We would expect -- when you normalize for that, the higher underlying level of profitability than would be reported for the current year. We have significant capacity in our balance sheet. We are continuing, obviously, to look for additional acquisition opportunity, but we're also continuing to look at our own portfolio and have been quite active over the last 5 years in moving on assets that don't meet our return criteria or offer the growth prospects that we might have once seen in them. And I think the other thing we've demonstrated very consistently over the last 5 years is our commitment to the dividend, which has been very strong and which continues. We have one question, which is coming on the web, which I'll just address maybe before we wrap up, which is asking us to comment on the broader M&A strategy and the regions that CRH is looking at for potential acquisitions. Is the group now looking for opportunities in Europe? Or asset price is mostly the most compelling? Or is it still primarily focused on emerging markets, i.e., India, China and Russia? Albert, you've dealt with developments earlier, so maybe I'll ask you to comment on that.

Sure. Let me address the issue of emerging markets. And as I said earlier on, emerging markets are an important part of our development strategy going forward. But again, we cannot forget that when we invest money, it's the same dollar, whether we invest it in Ireland, whether we invest it in the United States, Europe or in Asia. So we have to get returns on that. If we can find returns and a consistency of those returns, we're happy to do so. Emerging markets do offer us growth going forward, and we will, over time, reposition ourselves as all our Construction businesses will do, with our larger emerging markets profile. But I think it has to be done in a measured way and in a controlled way. So I don't foresee any mad rush to emerging markets for CRH going forward. The core of our business has been at the United States and Europe, and that has consistently, over time, delivered superior returns over the years for CRH. We have a tremendous network of businesses in the United States with the largest Building Materials business there. And the United States is poised at the cost of what we think will be a strong recovery going forward. I think what we will continue to do is to support our businesses in the United States and build out because we actually showed and could -- and do deliver better returns when we add to the network of businesses that we have because we can get synergies and we can get commercial advantages, procurement benefits, whatever that may be. Within Europe, I think we have to look and slice and dice Europe between newbuild growth Europe, which tends to be -- going forward, we think it will be more Eastern European focus. So a lot of our heavier assets were focused on building our Eastern European footprint, which is very strong. We have a very strong knowledge and understanding of Poland, Ukraine and indeed Western Russia. And I think we will continue to build out that footprint, but also in developed Europe. Again, looking at the challenges going forward, I think that the increasing strength and importance of RMI as a part of the construction sector will attract us in more -- as we invest in those businesses. It's why we have, over the past 10 years, supported our strategy of investing in European Distribution, which is primarily exposed to that. I think we will continue to support our Products and Distribution businesses that are targeted at those markets.

Thanks, Albert. And I think we seem to have exhausted the questions. So I'd just like to thank you all for your attention this morning and for joining us here in Dublin and also for joining us on the webcast. As usual, with CRH, we have given you our frank view of the markets in responding to your questions, and I hope you have found that useful. I hope you've also got a sense of how we feel about the outlook for the second half of the year and looking even a bit beyond. We are encouraged, obviously, by what we see in the Americas. But there are challenges continuing in our European businesses. And as you've heard from Albert in talking about our additional cost restructuring plans, I think you get a sense of how we're addressing that, and also I think you get a sense of how proactive we have been in addressing the whole area of restructuring and rethinking our operations over the last number of years as we face very difficult environments across the globe. And I think we're very well positioned to benefit from the improving economy in the Americas, and I think we are taking every measure that we can at the moment to ensure that in Europe, we will be very well positioned when we do see more sustained GDP and GNP growth and when that begins to feed through into our operations. So thank you, again for your attention this morning. We will be talking to you again on November 12 when we will update you on progress through the third quarter of the year and give you a more granular outlook for 2013 as a whole. So until then, if you have any queries which we haven't addressed today or which we haven't had the opportunity to ask, please feel free to contact us through our Investor Relation website or through our Investor Relation department. The contact number and the website address is on the back of the release, which you have this morning. So thanks again for your attention this morning. Thank you.