CRH plc (CRH) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the CRH plc November 2022 Trading Update Conference Call. [Operator Instructions] The next voice you will hear will now be Mr. Albert Manifold.

Good morning, everyone. Albert Manifold here, CRH Group Chief Executive. And you're all very welcome to our conference call and webcast presentation, which accompanies the release of our trading update this morning. Joining me on the call is Jim Mintern, our Group CFO; David Dillon, Executive Vice President; and Tom Holmes, Head of Investor Relations. Over the next 25 minutes or so, Jim and I will take you through some of the main points of this morning's announcement, highlighting the key drivers of our trading performance for the first 9 months of the year, as well as providing you with an indication of our expectations for the year as a whole. Based on the visibility we have at this moment in time, we'll also share our thoughts on some of the trends we're seeing across our markets as we look ahead to 2023. Afterwards, we'll be available to take any questions you may have. And all told, we should be done in about 45 minutes. First, on Slide 1. I'd like to take a moment to mention a few of the key highlights from this morning's statement. From a trading perspective, I'm pleased to report that our business has delivered further growth in sales, EBITDA and margin during the first 9 months of the year. Total group sales of $24.4 billion were 13% ahead, reflecting resilient underlying demand across North America and Europe. This translated into EBITDA of $4.2 billion, 14% ahead and further progress in our margin, a good performance in the context of a challenging and inflationary cost environment. As a result of our continued focus on maintaining strong financial discipline, I'm pleased to report that as we sit here today, CRH has one of the strongest balance sheet in its history, and we will expand on that in more detail shortly. Active portfolio management and the efficient allocation of our capital are core components of how we create value for our shareholders, and it has been a very active year in that regard. In the year-to-date, we have invested $3 billion on 21 solutions-focused acquisitions, reallocating the proceeds from the divestment of our Building Envelope business to further develop our integrated solutions strategy in the areas of road infrastructure, critical utility infrastructure and outdoor living. In addition, our ongoing share buyback program is on track to return approximately $1.2 billion in 2022. Looking ahead to the remainder of the year and based on the current momentum that we see in our business, I'm pleased to say we are confirming our previous guidance and expect to deliver full-year group EBITDA of approximately $5.5 billion, well ahead of the prior year and representing another year of progress for CRH. Turning to Slide 2. And before taking you through our divisional trading performances, I will briefly outline our thoughts on the market backdrop and trading environment across our major markets over the course of the year so far. Despite some economic uncertainties and inflation cost pressures, overall construction demand in North America and Europe remains resilient. Infrastructure, our largest end market, continues to be underpinned by increasing levels of government funding across our markets. In residential, we have seen an easing in the pace of newbuild construction activity across parts of North America and Europe as a result of rising interest rates. Remodeling demand, however, remained stable, supported by higher home equity buyers and an aging housing stock in growing need of repair, maintenance and improvement. As for non-residential, we continue to experience good demand in our key segments, including manufacturing facilities, data centers and critical utility infrastructure. These are typically large complex construction projects that fit very well with our capability to deliver fully integrated bespoke solutions to our customers. Turning now to our divisional trading performances. And first to Americas Materials on Slide 3. Our business delivered sales and EBITDA growth of 18% and 8%, respectively, during the first 9 months of the year, a good performance against a challenging input cost environment and some weather disruption impacting our operations in certain regions of the United States during the third quarter of the year. Strong commercial management continues to underpin positive pricing momentum across all product lines and together with disciplined cost control, we remain focused on recovering higher input costs to protect our profitability. As we look ahead to the remainder of the year, I'm encouraged by the positive momentum in our backlogs, which are now beginning to see the benefits of the uplift in US infrastructure funding. So overall, another good performance from Americas Materials, which continues to be underpinned by the benefits of our integrated end-to-end solutions strategy, delivering more value to customers and our business. Next to the performance of our Europe Materials business on Slide 4, which overall was impacted by some softer activity levels during the third quarter of the year, particularly in the residential segment as well as adverse currency translation effects. Against a challenging and volatile energy cost environment, I'm encouraged to see positive pricing momentum accelerating across all products during the third quarter as we continue to focus on cost recovery and margin management. In Western Europe, our businesses in the UK, France and Ireland, continue to benefit from solid demand in infrastructure. And despite the ongoing conflict in Ukraine, the rest of our Eastern European businesses remain resilient, with good delivery from our businesses in Poland, Romania, Hungary and Slovakia. Overall, our 9-month like-for-like sales and EBITDA were up 13% and 6%, respectively, and good underlying performance in the context of significant energy cost pressures and the impact of the conflict in Ukraine on our operations in that market. Moving now to Slide 5 and to Building Products, which continues to experience positive growth trends in utility infrastructure and outdoor living solutions. Our Infrastructure Products business delivered a robust performance with 9-month sales and EBITDA well ahead of the prior year period. This business continues to benefit from increasing demand for value-added products and solutions that protect, connect and transport vital utilities such as water, energy and technology infrastructure in North America and Europe, an area where we see significant opportunities for further growth going forward. Against a stable demand environment in residential RMI, our Architectural Products business also delivered further growth, benefiting from the steps we have taken in recent years to provide a complete offering of industry-leading outdoor living solutions to professionals and retail customers. Overall, 9-month like-for-like sales were 12% ahead, while EBITDA increased by 17%, reflecting good operating leverage and further margin expansion. You can also see the strong contribution from recent acquisitions coming through, as we continue to develop our integrated solutions offerings in the area of outdoor living and critical utility infrastructure, with total sales and EBITDA 27% and 57% ahead, respectively, during the first 9 months of the year. At this point, I'll hand you over to Jim to take you through our recent acquisition activity and year-end balance sheet expectations.

Thanks, Albert, and good morning, everyone. We've completed a significant amount of portfolio activity in the year-to-date, reallocating the proceeds from the divestment of our Building Envelope business to support further growth and future value creation for our shareholders. So far this year, we have invested $3 billion in 21 acquisitions. The largest of these was Barrette Outdoor Living for $1.9 billion, representing a multiple of less than 8x EBITDA after the savings and synergies we have identified to date. I'm pleased to report that the integration of this business is progressing well, with some good early wins on synergy delivery and trading to date has been very much in line with our expectations. We've also invested $1.1 billion on 20 solutions focused bolt-on acquisitions. The average multiple on these deals was 8x EBITDA pre-synergies, reflecting our disciplined and value-focused mindset. Since the last update in August, we have completed 5 further bolt-on acquisitions. The largest of these was Normandy, an integrated provider of pipe products for sewer and drainage applications in North America. Combining this business with our existing Infrastructure Products business will strengthen our capability to provide integrated value-added solutions to our customers in the important and growing area of water management. All of these acquisitions reflect the continued build-out of our integrated solutions strategy, enhancing our customer offerings and road infrastructure, critical utility infrastructure and outdoor living. And we will continue to develop our capabilities in these areas going forward. Turning now to Slide 7. And here you can see the key components underpinning our expectations for our year-end net debt position. I am pleased to report that we expect to end the year with the strongest balance sheet in our history as a result of our relentless focus on disciplined capital allocation and continuous business improvement to deliver higher profits, margins, returns and cash for our shareholders. Let me briefly take you through the key components working from left to right on the slide. We ended 2021 with a net debt position of $6.3 billion, representing a net debt-to-EBITDA ratio of 1.2x. We expect 2022 to be another strong year of cash generation for the group. This has enabled us to continue to invest in our business for future growth, while also returning significant amounts of cash to our shareholders through dividends and share buybacks. As I mentioned, in the year-to-date, we have spent $3 billion on 21 solutions-focused acquisitions. We have also received significant proceeds from divestments, approximately $4 billion, primarily reflecting the divestment of our Building Envelope business earlier in the year. We expect to invest a total of $1.5 billion in capital expenditure in 2022 to support further growth in our existing businesses. In addition, we expect to return approximately $2.1 billion to our shareholders through dividends and share buybacks. Our ongoing share buyback program is on track to return $1.2 billion for the year. The current tranche of our program is well underway and will be completed no later than the 16th of December. Taking all of this into account and assuming no further material development activity for the remainder of 2022, we expect to finish the year with net debt of approximately $5.2 billion, or approximately 1x net debt to EBITDA based on our full-year EBITDA guidance. The strength and flexibility of our balance sheet provides us with significant optionality for further value creation going forward. And as a CFO, I can assure you that we will maintain our disciplined approach and our focus on shareholder value when it comes to the allocation of our capital.

Thanks, Jim. A good summary there of our financial strength and discipline, which has been the hallmark of CRH for many years. At this point, I'd like to briefly update you on the progress we are making on some of our key sustainability focus areas. First, to decarbonization, where we are continuing to lead the industry. Earlier this year, we announced ambitious new targets to reduce our absolute group-wide carbon emissions by 25% by 2030. This target covers all our activities across the group, and it keeps us on a pathway to achieving our ambition to becoming net-zero business by 2050. We have a detailed bottom-up road map in place across all of our businesses, and we are delivering in line with those plans. We are now in the process of raising our ambition even further and have submitted an updated 2030 carbon reduction road map to the science-based targets initiative for validation, in line with the new 1.5-degree framework. And we'll keep you updated on our progress in that regard. We're also continuing to advance our contribution to circularity, preserving our scarce natural resources and using more recycling materials in construction. Today, our low-carbon ready-mixed concrete product represent over 25% of our concrete sales, and it's our ambition to increase that significantly going forward. In North America, we are the industry leader in the use of recycled asphalt, where approximately 25% or 1 out of every 4 miles of road we built is built with recycled materials. Our ambition is to increase that to 50% within the next decade. And we continue to work with governments, regulators and contractors to further develop policies, guidance and specifications that promote the use of more recycled materials in construction. We're also accelerating investments in innovation to develop a higher-performing and more sustainable built environment, one that improves the efficiency and the safety of buildings, reduces construction times and prolongs the life cycle of structures. Over the last decade, we have invested approximately $1 billion in innovation across our businesses. And through our new $250 million innovation venture fund, we are supporting further research and innovation in sustainable construction across multiple platforms. Turning now to our outlook for the remainder of the year on Slide 9. Overall, fundamentals across North America and Europe remain positive, supported by robust infrastructure and non-residential demand, which is offsetting a softer residential level of activity. Based on the momentum we see across our businesses and despite adverse currency translation effects in recent months, we are confirming our previous guidance and expect to deliver full-year group EBITDA of approximately $5.5 billion, well ahead of 2021 and representing another year of progress for CRH. As Jim has outlined, our strong and flexible balance sheet provides us with significant optionality to create further value going forward, and we are relentlessly focused on continuous business improvement to deliver higher profits, margins, returns and cash for our shareholders. Now before I hand over to Q&A, I'd like to take a brief moment to share our thoughts on some of the trends we're seeing across our major markets as we look ahead to 2023. First, to North America and to infrastructure, which at approximately 40% of sales represents our largest exposure in the region. The outlook for US infrastructure is robust, with demand underpinned by the significant increase in federal funding, following the passing of the $1.2 trillion Infrastructure Investment and Jobs Act last November, providing an approximately 50% increase in the federal funding over the next 5 years. State budgets are also strong. And in recent weeks, we have seen positive momentum in state and local transportation ballot initiatives to support further investment in this area. We are now beginning to see these additional funds flowing through the system, with positive momentum in bidding activity, contract awards and indeed, our backlogs. This is a supportive environment for further volume and pricing improvements. And with the benefits of our integrated solutions strategy, we are well positioned to continue to deliver superior profit and margin performance for our shareholders. Moving to residential demand on Slide 12. And as I mentioned earlier, the pace of newbuild construction has eased in recent months as a result of rising interest rates and affordability constraints. We have seen a softening of demand in large-scale single-family homes, while activity levels in other segments of the market such as multifamily and starter homes have been more resilient. Remodeling demand is also expected to remain steady, supported by record levels of home equity and aging housing stocks, with homes built in the early 2000s now entering their prime years for further investment in repair, maintenance and improved. Overall, we expect a near-term slowdown in residential demand, but we expect that slowdown to be short and shallow. Let's be clear, we are in a very different place today compared to the significant levels of overbuild we've had in U.S. housing back in 2007. The long-term fundamentals of this market remain very attractive, supported by population growth, low inventory levels and a significant level of underbuild over the last decade. Next is nonresidential on Slide 13, which represents approximately 30% of our North American sales. Demand in this market has been more resilient than many expected over the course of the year. Here, we are beginning to see the benefits of strong government support for increased investment in clean energy, utilities and semiconductors, following the recent passing of the $370 billion Inflation Reduction Act and $280 billion CHIPS and Science Act in addition to significant offers in funding provided by the Infrastructure Investment and Jobs Act for water, power and technology infrastructure. We also continue to see growth in manufacturing activity and higher levels of onshoring as companies focus on simplifying their global supply chains. Our integrated solutions strategy is well positioned to benefit from these trends. In fact, we are already supplying a number of these projects, including the initial phases of our multibillion dollar investment by Intel and Samsung to construct new semiconductor plants in Ohio and Texas, respectively. And in North Carolina, we hope to deliver Toyota's new $4 billion battery plant facility, benefiting from our relationship, which was established through the delivery of a previous solution to them in Michigan. These are large complex construction projects, which fit very well with our unique capability to provide our customers with the materials, products and services in one seamless integrated solution over the entire project life cycle. Moving to Europe on Slide 14. In Central and Eastern Europe, construction demand is expected to continue to benefit from strong infrastructure activity supported by good levels of government funding and more continued EU support of construction. In Western Europe, while the pace of newbuilding residential demand is expected to slow, RMI activity remains resilient, supported by the growing need to retrofit urban markets to deliver a higher performing, more sustainable building environment. Construction demand is expected to slow in the UK, but we currently have good visibility out to the third quarter of next year, supported by a solid pipeline of infrastructure projects. This should help offset lower activity in the residential market, which is a smaller part of our business there. The pricing environment in Europe is also expected to remain positive in the near term, and we are continuing to focus on cost recovery across our businesses to protect our profitability. So in summary, notwithstanding some near-term slowdown in parts of newbuild residential activity, the overall trend is positive for our businesses heading into next year. In North America, our largest market, representing approximately 75% of group EBITDA, infrastructure demand is expected to be robust, while the non-residential sector is expected to remain resilient with potential for further upside. In Europe, we expect positive pricing momentum to offset slower volumes in the Central and Eastern regions, with our businesses in Western Europe supported by resilient RMI and stable infrastructure demand in the UK. So that concludes our presentation this morning, and we're now happy to take your questions. May I ask you please to state your name and the institution you represent before posing your questions. In consideration for others on the line and to make best use of the time we have, could I please ask you to limit your question to one each where possible. I'll now hand you back to the moderator to coordinate the Q&A session of our call.

[Operator Instructions] And the questions come from the line of Ross Harvey from Davy.

So, my question relates to margins and there appears to have been some margin contraction in Q3 as you'd previously flagged. Can you just talk us through some of the relevant drivers there and how we should think about it into Q4 and 2023?

I'll ask my colleague, David, to chat about Europe and say what's drove the top margin situation in quarter 3. Maybe Jim, you might talk about the Americas. But as you said, Ross, we spoke about this at the interims. We saw a second wave of cost increases coming through during the year on the back of the higher energy cost, in particular, at the start of the year. We saw logistics costs, we saw services costs and wage costs coming through and they really roll through -- all through quarter 3, which made it very difficult for us to recover those cost increases because it takes us a while to recover price increases as we go forward, probably be half 1 next year before we get them done. But maybe, David, you might talk specifically about Europe, which is probably more [indiscernible] of the inflation and maybe Jim, you might just talk about the cost base you're seeing in the US.

Yes. Look, I think if you look at this, we've had a big increase in energy as Albert called out over the last number of months, also logistics and raw materials, wages as well. We have had a lot of dynamic pricing in place over the last number of months as well. We've had second price increases in many cases, third price increases towards the fourth quarter. And we're very focused on that over the next while in terms of pushing those through and into next year as well to recover that wave of cost increases as Albert called out.

Yes. And maybe just to give a bit of color on the US, really the same cost inflation drivers, as David called out in Europe, really logistics, labor and energy costs. However, maybe in the US not as significant in terms of pressure on margins as Europe. In fact, we're building products with a very strong Q3 on margin expansion. And then our AMAT business, what we saw was really a price acceleration coming out of H1 into Q3 and indeed into Q4, and that really continued, as Albert said into H1 2023 as margins recover.

And the question has come from the line of Gregor Kuglitsch from UBS.

Can you hear me well?

All well.

Yes. Gregor Kuglitsch from UBS. So, I guess I want to kind of come back to the '23 outlook a little bit more and I guess I want to explore where you think the risks are. I mean, you talked about some of the positives. I mean -- but can you just sort of tell us what worries you most? What's the thing that you think could go wrong into '23?

Okay, Gregor. Look, obviously, we tried to put some dimension of what we're seeing in 2023 in our presentation and our announcement this morning to give people a sense of what we see. We spent a lot of time talking to our customers in the marketplace and again, just given an expectation with regard to that. I think that when I look at our business, we're a 75% US business, and US is in a better place than Europe. It only has to deal with one issue, which is inflation and the exceeding higher interest rates. The fundamentals are very strong in the United States. It's strong in Europe as well, by the way, but Europe has got more challenges. And so when I look at the complexity of challenges, I see Europe probably being more challenged than the United States. There are the issues, obviously, with energy costs and inflation, et cetera, et cetera. But maybe, again, what I might do is I might ask my colleague. Maybe, Jim, you might just talk about what risks do we see going forward in 2023? Then maybe, David, I'll ask you to come back at the end with Europe again. So maybe Jim?

Sure. Yes. I think, overall, as we set out in the presentation, we look into 2023 in the US, we see volume and prices outlook quite positive in the US. However, Gregor, if you were to look, I guess, for downside risks in the US, which we don't actually see, I guess one of them would be a risk, maybe the infrastructure funding getting pushed out because of the continuing wave of inflation that maybe some of the individual states might hold back on the leasing projects, awaiting in anticipation of maybe inflation coming back. The [ second risk ] might be if we see a sustained period of high interest rates that we may see, I guess, a continuation of softness in the new res building sector. But overall, as I said, in the US, we actually don't see that just to reiterate that at the moment for '23.

And just turning to Europe. Clearly, we still have conflict in Ukraine, which creates a lot of uncertainty around the geopolitics and maybe impacts on energy through the winter time. Costs, we called out already and managing those costs would be a potential downside risk. And we've been very successful in pricing over the last 5 years, not just this year. But we worry about these things about whether we can get those through over the next. What I will say, however, we've been through this a number of times, we probably lived through 3, 4, [ vibrant ] sessions as a management team. And as we see it right now, we're pretty confident in our pricing momentum that we've established through Q3 into Q4, and we'll be focusing that right through Q1 and Q2 next year as well.

And as you heard me say, David, I mean, we have had 5 years of progressive price increases in Europe. And I think it will push on again next year as well. But if you're asking the question -- we're going to give you downside, but that's, I guess, what we see at the main markets.

The question has come from the line of David O'Brien from Goodbody.

Sorry. It's David O'Brien from Goodbody. I might focus on building products, if that's okay. I think you described it as robust in the presentation, Albert. 21% organic EBITDA growth points to really strong activity and fairly exceptional operating leverage. I just wonder if you could give us a little bit more color about what is allowing CRH to deliver such consistently strong performance there? And how should we think about this on a more medium-term type of outlook leaving aside whatever could happen at '23?

Thanks, David. Yes, you're right, building products has continued yet again to deliver for us, the lead performer, but it's very much the point of the spear. Probably it's the spear that is delivering more than anything else. But maybe, David, again, you [indiscernible] what managing this mean might just put us in terms of what's driving the performance of the products business.

Yes, we had a good Q3, a solid Q3, following a very good H1, obviously, David, and good undergoing demand. But if you go back into the -- what we've been talking about for a while now, it's the Building Products solution strategy really is what's driving our performance in Building Products. What are we doing there? We're supplying critical infrastructure for utilities and our outdoor solutions and business as well. And some of that then is focused on the RMI market. Actually, a lot of it is focused on the RMI market, which is, again, helping to balance demand. And we are bringing a lot of our innovation into that. We talked about innovation a number of times in the presentation. That's feeding through in terms of the quality of the solutions we're providing to our customers. And we have really transitioned over those years from being a commodity producer of base materials into a fully integrated provider of end-to-end solutions. And what's that doing, it's better serving our customers' needs with better service at CRH, and we're delivering value both to our customers and to ourselves and we're pricing based on value-added full service offerings. So, you're seeing that coming through. It happened not just this year, not just last year but the years previous. And we're continuing to build that business as well with the deals we've done and the acquisitions you've seen; Calstone, Normandy, which was in the last while, Rinker Materials and et cetera, this year. So continue to build that out, continuing ambitions ahead and I'd say we are pulling through.

And [ in addition I would say ] as well as -- as David said as well is the way that our product business integrates so well with our materials businesses, obviously, it comes through with excellent performance in our products business, but the pull through in our materials business is very strong as well that helps in materials business as well, both of them in the future.

And the question has come from the line of Arnaud Lehmann from Bank of America.

My question is regarding, I guess, past and future M&A activity. So starting with the contribution for this year, it's clearly a boost to the top line and also the margin in particular for Building Products. So could you comment on any particular deal in building product that is contributing more than expected for the year? And the second part of the question is regarding your M&A pipeline. We are at the moment in the cycle where I would expect more M&A opportunities to emerge. The environment is still good, but the outlook is more uncertain. Do you see a lot of potential deals, in particular, in the US coming your way and what's your appetite for it?

2 questions there. One about the pipeline, what we're seeing in deals and the second question about the contribution of our M&A activity, particularly I think you mentioned on products with this current year. I'll pass that to Jim in a moment. Look, it's been an active year for us on the M&A front. Obviously, we had a very significant disposal early this year with our OBE business. But we also spent a further $3 billion, or we'll spend a further $3 billion this year on M&A. And I mean, that has been building on our franchise and it's been largely focused on the solutions business for sure. We've built some nice materials business. That's just the way the cookie crumbles. Actually just the deal that came in front of us. And our M&A pipeline is very strong. And we choose to execute against deals where we see value and what it adds to our story. I don't feel any pressure. I don't think we feel any pressure with regard to M&A at this moment in time. We just continue to progressively move through it. I mean the $1.9 billion Barrette deal was nice, it was new, but I'm more impressed by the $1.1 billion of the 20-some small M&A bolt-ons that we did because that's how we really drive value at CRH going forward. At this moment in time, there's probably a greater level of uncertainty than it has been for the last couple of years. And just our experience tells us maybe perhaps we could adjust a little bit and just wait until we see a little bit more certainty in the activity levels in 2023. And we have lots to execute against and prices are always too expensive, Arnaud, I always keep saying that no matter what happens. But we managed to do the deal this year at 9x EBITDA, 8x for the $1.1 billion of small add-on deals at 8x average synergies. So, we still are very value focused. The pipeline is good, and we could execute on twice the amount of deals if we really, really wanted to. I don't think we need to or want to. I think we want to keep our balance sheet and keep capacity there because actually the timing for me to do deals is actually when we start to exit any phase of uncertainty. We were all here in 2011 and '12 when we hit the pause bottom to some extent, but we had very strong progressive M&A from 2013 on to 2016, 2017. And that helps build out considerable growth for our business and deliver significant shareholder value. And as markets start to recover, that's when I feel will be the opportunity to move ahead with significant M&A again. And I want to keep the balance sheet ready for that. But I said, we're happy with the deals we did this year, and we're just watching to see if the situation evolves in 2023. Jim, with regard to the contribution of the current year?

Yes. Total contributions from the acquisitions from the second half of last year '21 and deals of this year, Arnaud, 22 is approximately around $350 million for the full-year 2022. If you look at the 21 deals, the national pipe deal, which has really played in our infrastructure utility space, former management, that mainly plays down the East Coast of the US, but also strategic deals we would have called out, the APA dealer paving business and also the Pebble Tec, which was a nice infill business into our outdoor living solutions business. Again, this year, I think that the Rinker, $2 billion [indiscernible], which is a precast concrete business, again, in the pipe and Fort Worth area, and it's got 3 facilities in Houston, Dallas and San Antonio, 3 of the fastest-growing metropolitan areas in the US. So being able to pluck those solution deals back into our kind of legacy asset positions and really pull forward early some of the synergy delivery, that's what's really driving the performance of those businesses.

We are now going to proceed with our next question, and it's from the line of Elodie Rall from JPMorgan.

So first of all, if we could just summarize the views on each of the 3 divisions, given your outlook, already commentary for '23? Is it fair to say that for Americas Materials, you would expect volumes to be up, for European materials going to be down and the highest impact you would expect is on Building Products, given the higher exposure to the residential outlook? And second, given the question just now, if you don't do a lot of acquisitions in '23, given the uncertainty, would you step up in buyback?

I like the way you asked the question. You asked to me your forecast for next year. So, I'm just going to dodge it as best I can. Look, I don't know what the answer to the question is in terms of where we're going with regards to volumes. All I can do is talk to you about the backdrop in the market that we're in. But you're right. Let's just talk about the Americas Materials markets. In the Americas, we're very clearly seeing, as everybody is seeing, there's a significant amount of funding coming through with regard to IIJA. And there's 2 further acts, which are important in terms of the CHIPS Act and Inflation Reduction Act, both of them adding a further $670 billion on top of the $1.2 trillion for the IIJA over the next coming years. So it's a very supportive funding environment for publicly fund infrastructure in the US. And that's a sweet spot for us. We have designed and shaped our business to play in that space. It contributes about 40% of our activity levels across the United States. And so it should be good. The extent of how good it's going to be and what the funds will be, we'll have to see how the year rolls out. And that supports not only our materials business, but also our products business in the US. Across Europe, I have to say, again, looking at what we're seeing, our 2 main pools of profit, which are Central and Eastern Europe, again, significantly helped by EU funding that will continue to flow into that part of the world for a number of years to come. And we've seen it delivering that this current year, and we expect to see that in the next year. And happily as well, look, despite the challenges that the UK faces with regard to public financing, happy to say that there's not quite ring-fencing, but the infrastructure, the major infrastructure projects getting continued support that should offset any slowdown in res across the UK. So when you put that into the mix, it's hard to see anything other than kind of sort of a reasonably positive aspect in regards to volumes next year. We'll see exactly what that means. I don't see us being collapsed in any sense at all. This is not 2008-2009. We're facing a slowdown. But I think the space that CRH plays in and the markets that it serves are well set, particularly with the publicly funded infrastructure. Resi, on both US and Europe will be back a bit, but I think infrastructure will offset that. And I suppose a surprise for us, in particular in North America, as we highlighted this morning, has been the resilient performance of non-residential. Now it seems to be helped greatly by some of the big projects we mentioned this morning, which is this onshoring of manufacturing semiconductors into the United States, which is building out manufacturing facilities and that's very helpful because they are large complex construction projects, which take on multiyear projects. We mentioned some this morning, very significant projects, would play right into our solutions sweet spot and we're delivering against those and we're building real credibility in volume. And that looks like it's going to continue for many years ahead. So broadly speaking, happy enough to be where we are with regards to that and in terms of our business going forward.

On share buyback, Elodie, maybe yes, you're right, we're going to exit this year with one of the -- with the strongest balance sheet in the history of CRH, just at 1x net debt to EBITDA. As you said before, we're comfortable kind of letting that move up towards 2x through the full cycle. With that strength of balance sheet, we've certainly got capacity to do more M&A deals. We have a good pipeline. We've had a very good year. We've had, called it out this year, $3 billion done so far, 21 deals, including Barrette pipeline into 2023 is good also. The share buyback at the moment, we're running at about $1.2 billion per year. The current tranche will finish. It's a $300 million tranche. It would finish no later than the 16th of December, and we'll update the market then. But certainly, with the strength of balance sheet, we have that capacity to also in the future maybe increase cash returns to shareholders also. What we do is to keep all our options under review. And what the strong balance sheet is going to enable us to do it really gives us optionality about creating further shareholder value into the future. But you can assure that all our capital allocation decisions are always through that lens of maximizing shareholder value.

And the question has come from the line of Cedar Ekblom from Morgan Stanley.

Just one question from me. I wanted to understand the operational synergies a little bit better between the Building Products business and the materials businesses and specifically drilling into Architectural Products, which clearly seems to have a bit of a different end market versus the utilities or Infrastructure Products businesses within Building Products. And the reason I'm asking the question is, obviously, year-to-date, the business has done very well and we can see that in the performance today. But yes, the multiple that the market is willing to pay for the wider business has de-rated. And I just wonder if you have any views on CRH ultimately being valued as a holding company, or if there are actually some real operational synergies between these businesses that the market doesn't understand?

Get the essence really of what solutions actually are, I mean the synergies within our materials business to our products business as such. Our materials business basically is we produce commodity materials, so aggregates, cements, concretes and that's what they largely do. What our products business does, it takes those commodity-based materials, and it converts them into actual products that people use to construct buildings and infrastructure. Now as you construct buildings and infrastructure, you have different requirements with regard to the strength, durability and use of that particular infrastructure. And the very essence of that infrastructure, it needs to ensure that the materials that they use in actually putting together those products are the correct mix and type of materials. And that's really where our technology and our design people and also where our technical expertise comes in to help here. Our design and structural engineers work with our materials people and indeed, our customers to help use the right materials and the right mixes, to design the actual materials that we use to build the projects. So the products we produce are key and the materials are crucial on how we do that. We also have the issue with regards to the increasing need for -- to be more sustainable in our types of construction. So with more and more, we're getting demand, particularly across North America and publicly funded infrastructure is to increasing the amount of recycling we use in our actual products that we produce. So circularity is key. And I think if you watched our Capital Markets Day earlier this year, it's still online, you would have seen that the Department of Transportation in Michigan and that particular client talked about the importance of circularity and recycling. So at this moment in time, 25% of every road that we build in North America and we are the largest road builder in North America by country mile, is through recycled material. So, our ability for our materials people, our material scientists and our design engineers to work with our people in our products business to design solutions that our customers want is absolutely crucial to the solution story as we go forward as it is, of course, the whole reduction in terms of CO2 and emissions with regards to that. So it's that seamless knowledge transfer between the materials and products business that allows us to execute against the solutions business as we go forward. With regard to your question on whether we're designed to be a holding company as you call us or a valuation, CRH has been changing the shape of its business for the past decade, and we are now a business that is a much simpler, tighter, narrow focused business, focused on delivering integrated solutions across a wide range of applications, but primarily focused on infrastructure, complex construction projects in non-residential and residential. And I think that the real beauty of CRH is actually as we come together, we are producing higher profitability, higher rates of growth, higher rates of cash generation and higher margin improvements than anybody else in our industry. And that's caused by being focused industrial players who are focused on tapping into a market, which is the growing trend for sustainable construction going forward. I think that's our game. That's where we position ourselves, and that's what we've been delivering for the last year. And again, another record year of growth for CRH, another record year of profitability and that's driven by being a solid industrial business with a clear strategic plan to build the business going forward.

We are now going to take our last question. The question has come from the line of Harry Goad from Berenberg.

Yes. I just wanted to come back, Albert, on your comment on US non-residential, which I think certainly sounded more upbeat than I would have expected, and you've referenced a couple of sort of subsectors within that, that are driving high levels of demand. But if you think across the wider piece of non-residential and maybe some of the more traditional as you think of like offices, commercial, tourism, hotels, what sort of trends are you seeing there? Are they slowing down? Or they still remaining quite resilient?

Harry, I mean, the areas that you refer to office space and commercial and hospitality, they've been weak for quite some time, particularly the office space and hospitality and retail because since COVID, they actually -- they slumped quite a bit and they haven't really recovered since then. So, they've been at low levels for the last 2 or 3 years anyway. Really, what I think and it surprised us as well what happened, it's been a nice surprise. For the last 12 to 18 months, we've seen this gradual increase in manufacturing and so the data centers and distribution have been strong anyway. But the manufacturing that's what's coming back to the United States, both nearshoring and particularly onshoring and that's what's been very significant. We've seen a very strong growth. Like this year, almost 30% growth across manufacturing facilities. And in addition to that, also with regard to the Inflation Reduction Act, a significant push on looking at sustainability and in particular, the area of water and utility transportation. Again, that's up almost 20% this year. So there were 2 areas that are really driving it more than anything else. And so happy to see it coming through. The traditional areas that you mentioned, what would have been strong for non-res, they've been down for the past 2 or 3 years and they're just staying down at low levels. But the real growth is coming through in utilities, in terms of water and power technology and so we built the infrastructure in around that. And that's going to be, obviously a long story for many, many years and also about manufacturing facilities and some of the big companies bringing back to the US onshore manufacturing and building the plants [indiscernible] projects come again. We want to see it play right to our solutions sweet spot of large complex construction multiyear progress. Okay. Well, ladies and gentlemen, we come to the end of our time slot, our time slot this morning. And look, thank you for your attention. And look, I hope that we've managed to answer all of your questions. But as always, if you have any follow-up questions, please feel free to get in touch with our Investor Relations team. And we look forward to talking to you again on the 2nd of March next year when we report the full-year results of 2022. Thank you. Have a good day.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect your lines. Thank you.