CRH plc (CRH) Earnings Call Transcript & Summary

Good morning all, and welcome to the CRH 2023 Full Year Results Presentation. My name is Lydia, and I will be your operator today. [Operator Instructions] I'll now hand you over to Albert Manifold, CRH Chief Executive, to begin the conference.

Hello, everyone. Albert Manifold here, CRH Group Chief Executive. And you're all very welcome to our 2023 full year results presentation and conference call. Joining me is Jim Mintern, our Group CFO; Randy Lake, Chief Operating Officer; and Tom Holmes, Head of Investor Relations. Now before we get started, I'll hand you over to Tom for some brief opening remarks.

Thanks, Albert. Hello, everyone. Before we begin today's proceedings, I'd like to draw your attention to Slide 1 shown here on the screen. During today's presentation, we'll be making some forward-looking statements relating to our future plans and expectations. These are subject to certain risks and uncertainties, and actual results and outcomes could differ materially due to the factors outlined on this slide. For more details, please refer to this slide, our annual report and other SEC filings, which are available on our website. I'll now hand over to Albert, Jim and Randy, to deliver some prepared remarks. After that, we'll open the line for a question-and-answer session.

Thanks, Tom. Over the next 30 minutes or so, we'll take you through a brief presentation of the results we've published this morning, highlighting the key drivers of our operating performance over the course of 2023, as well as providing you with an early indication of our expectations for our business in the year ahead. We're also going to spend some time discussing our capital allocation priorities going forward and how we're positioning our business for the next phase of performance and growth to deliver further value for our shareholders. After that, as usual, we'll have plenty of time for Q&A. And overall, we should be done in about an hour or so. So first to Slide 3, some key messages from today's results. I'm pleased to report another year of record financial delivery for CRH, with strong growth across all key metrics and adjusted EBITDA ahead of our previous guidance. Despite contending with some continued inflationary cost pressures across our markets, we've delivered further improvement in our profitability, represented the tenth consecutive year of margin expansion for the group. We ended the year with our strongest balance sheet in our history, supported by our relentless focus on cash generation and the disciplined approach to capitalization that you've come to expect from CRH over many years. The capacity we have on our balance sheet represents the rewards of all our efforts, providing us with tremendous optionality to create further growth and value for you, our shareholders. All of this financial delivery reflects the continued benefits of our differentiated customer-focused strategy, providing integrated solutions to solve the increasingly complex challenges of our customers and generates higher growth for our business. So it's clear that our strategy is delivering, and we're now focused on accelerating the development of that strategy. We've been very active on the acquisition front, increasing our exposure to attractive high-growth markets and further developing our solutions capabilities in materials, road and utility infrastructure and outdoor living. We also announced a proposal to acquire a majority stake in Adbri, a leading provider of building materials in Australia, and I'll expand on all of this in more detail a little later. In 2023, we reached an agreement to divest of our European lime operations for a total consideration of $1.1 billion, demonstrating the clear execution of our strategy of active portfolio management and reallocation of capital to maximize value for our shareholders. In advance of our transition to quarterly dividend payments last November, we announced an accelerated payment of our 2023 dividend, representing a 5% increase compared to the prior year and our 40th consecutive year of dividend growth and stability. Today, we're announcing our first quarterly dividend, representing an annualized increase of 5% on the prior year, in line with our strong financial position and policy of delivering consistent long-term dividend growth. In March of last year, we announced a significant step up in our ongoing share buyback program, returning $3 billion over the following 12 months. That program is now complete. And today, we are announcing a further quarterly tranche of $300 million, representing an annual run rate of approximately $1.2 billion. So overall, our business is in a good place. And looking forward, we are well positioned to deliver another year of performance and growth in 2024, supported by the continued benefits of our differentiated strategy, good underlying demand across our key end-use markets and further commercial progress. Assuming normal seasonal weather patterns and no major dislocations in the macroeconomic environment, we expect full year group adjusted EBITDA to be between $6.55 billion and $6.85 billion, which would represent another strong year of delivery for CRH. Set out here on Slide 4 are some of the financial highlights for 2023, and I think this slide really speaks for itself. Overall, a strong performance. Total revenues of just under $35 billion, 7% ahead of 2022, reflecting good underlying demand across our key end-use markets in North America and Europe as well as further commercial progress across our businesses. This growth, combined with the continued benefits of our strategy, enabled us to deliver $6.2 billion of adjusted EBITDA, 15% ahead of the prior year. We delivered a further 120 basis points improvement in our margin, a good performance in the context of some inflationary cost pressures. As you can see, all of this translates into strong growth in our earnings per share, up 30% on the prior year. I'm also pleased to report another year of delivering $5 billion of cash from our operations, highlighting the quality of our earnings and our relentless focus on cash conversion and of course, returns, a key performance metric across all our businesses, 15.3% in 2023, up 200 basis points compared to 2022. A good performance that builds on the progress we've made in recent years, but there's plenty of room for further improvement. So as you can see, we're a growing business, and we're growing profitably. We're also becoming more efficient, demonstrated by the further improvements in margins and returns that we are generating for you, our shareholders. Now at this point, I'm going to hand you over to Randy to take you through the performance of each of our businesses. Randy?

Thanks, Albert. Hello, everyone. Turning to Slide 6 and beginning with Americas Materials Solutions, which delivered a strong operating performance in 2023. Total sales and adjusted EBITDA were 8% and 16% ahead of the prior year, despite contending with some weather disruption, which impacted our operations in parts of the United States. We also demonstrated strong commercial discipline to manage some of the inflationary cost pressures we faced throughout the year. Our teams on the ground secured double-digit price increases across aggregate, cement, ready-mix concrete and together with strong cost control, this enabled us to deliver further improvement in our underlying margin performance, 150 basis points ahead of the prior year. All this really reflects the benefits of our integrated strategy by combining the breadth of our materials, products and services with our capabilities in design, innovation and engineering, we're able to provide a complete solution for our customers for their specific project needs, from designing and manufacturing products right through their installation, maintenance and recycling. This removes a significant amount of complexity for them and allows us to price based on a value-added full service offering. Infrastructure represents our largest end market in North America. And in the United States, the funding backdrop is robust with demand underpinned by the historic increase in federal funding through the IIJA. State budgets are also strong. And here, we continue to see good momentum in transportation funding initiatives, which supports further investment in the U.S. infrastructure network. In nonresidential, we continue to experience good demand in our key segments, particularly in new build industrial and manufacturing facilities, supported by significant federal funding and increased on-shoring activity. These are typically large complex construction projects, which fit very well with our integrated strategy. As we look ahead, I'm also encouraged by the positive momentum in our backlogs, both in terms of bidding activity as well as margin. We're now seeing the benefits of the IIJA funding that I mentioned earlier. Next to Americas Building Solutions on Slide 7, which has also delivered strong profit growth and margin expansion in 2023, supported by further organic progress and good contributions from recent acquisitions. Our Building and Infrastructure Solutions business continues to benefit from significant public investment in Water and energy utility infrastructure, as well as higher levels of on-shoring activity in the manufacturing sector. Despite new build residential demand being impacted by affordability constraints, our outdoor living solutions business also continues to perform well, supported by a more resilient and less cyclical residential repair, remodel demand, good pricing momentum as well as the contribution from our acquisition of Barrette Outdoor Living in 2022. So for Americas, Building Solutions overall, total revenue growth of 13% translated into an 18% increase in adjusted EBITDA and a further 90 basis point improvement in margins. Moving across to Europe now on Slide 8 and first to the performance of our European Materials Solutions business. Notwithstanding the impact of some unfavorable weather in several markets, our business delivered a strong performance with adjusted EBITDA 17% ahead of the prior year. Infrastructure demand continues to be underpinned by government and EU funding programs, particularly in the U.K., France and Poland, really big important markets for us in this region. 2023 also represented the sixth consecutive year of positive pricing in Europe with pricing ahead across all product categories. This, together with disciplined cost control, delivered further margin improvement, 160 basis points ahead of the prior year, reflecting good operating leverage across our businesses. Next to the performance of Europe Building Solutions on Slide 9. This is our smallest business, representing less than 5% of group adjusted EBITDA, and it's much more exposed to residential new build construction than the rest of our businesses. Overall, a challenging year, as you can see by the numbers on the slide, impacted by subdued residential activity across many of our markets. However, demand in infrastructure and key nonres segments remained resilient, supported by good levels of public funding and higher on-shoring activity. Looking ahead, we continue to focus on good commercial management, price progression and cost-saving actions to mitigate the impact of lower activity levels and to protect our profitability. So overall, good delivery from our businesses in 2023. At this point, I'll hand you over to Jim to take you through our financial performance for the year in further detail.

Thanks, Randy, and hello, everyone. Before I take you through our financial performance, I would just like to briefly update you on our transition to U.S. GAAP on Slide 11. Following the successful transition of our primary listing to the New York Stock Exchange last year, we have transitioned from IFRS to U.S. GAAP reporting. And this morning, we filed our full year 2023 results on Form 10-K. For further detail on the transition from IFRS to U.S. GAAP, full reconciliations are available on our website. There are some areas of differences between the 2 accounting standards. But overall, there is no material net impact on our earnings per share and clearly no underlying impact on the cash generation capabilities of CRH. Going forward, we will be reporting on a quarterly basis, starting with our Q1 2024 results, which will be published in early May. Now turning to Slide 12 and the key components of our adjusted EBITDA delivery for 2023. For me, the real highlight of our performance is $573 million of organic growth. That's a 10% increase compared to the prior year, reflecting good underlying demand, further price progress and the continued benefit of our differentiated strategy. Acquisitions, net of divestitures, delivered a further $287 million of adjusted EBITDA, reflecting strong contributions from recent acquisitions as we continue to build out our solutions-focused strategy. Turning to the impact of currency translation on our business. It was a small tailwind for the year, primarily the result of a slightly weaker U.S. dollar relative to our other currency exposures. And finally, here, you can also see the impact of the group's transition from IFRS to U.S. GAAP, which is primarily a result of the reclassification of operating lease expenses. So overall, a strong performance with total adjusted EBITDA of approximately $6.2 billion, equivalent to $6.5 billion under IFRS, which is ahead of the guidance we provided to the market back in November. Next move to Slide 13. And here, you can see how our continued focus on cash generation and financial discipline enabled us to maintain our strong balance sheet position in 2023. Looking at the key components of this performance. Firstly, on the left-hand side of the slide, you can see we reported 2022 net debt of $5.1 billion under IFRS. From an M&A perspective, we invested in '22 strategic bolt-on acquisitions during the year. The largest of these was the acquisition of Hydro International a leading provider of storm water and wastewater solutions and an excellent strategic fit with our existing utility infrastructure businesses in North America and Europe. Acquisitions net of divestitures and other items resulted in a total outflow of approximately $700 million. We also invested $1.8 billion in capital expenditure to support further growth in our existing businesses, and we returned $4 billion in the form of dividends and share buybacks, demonstrating our commitment to returning cash to our shareholders. All of this is enabled by the strong level of cash we are generating, $5 billion in 2023, which represents an 80% conversion from adjusted EBITDA. Taking all of this into account and together with the impact of the group's transition to U.S. GAAP, we are reporting year-end net debt of $5.4 billion, representing net debt to adjusted EBITDA ratio of 0.9x. And I'll hand over to Albert.

Thanks, Jim. A really good update there highlighting the financial strength and discipline of the group. Now at this stage, I'd like to turn our attention to capital allocation and the opportunities we have in front of us to create further growth and value for our shareholders. Turning to Slide 15. Capital allocation has been a real strength of CRH over many years. Every dollar we deploy, whether it's an acquisition, CapEx investment, dividend or buyback, is analyzed and assessed through the lens of maximizing value for you, our shareholders. It's core to what we do. When we look at the strength of our business today, our growth profile, the level of cash we're generating and the strength of our balance sheet, we believe that we will have at our disposal financial capacity in the order of $35 billion over the next 5 years. And here, we've set out some of the opportunities to allocate that capital over that time frame. First and foremost, we are a growth company. We want to continue to grow this business for the benefit of our shareholders. We have a strong and active pipeline of acquisition opportunities. Our industry is still very fragmented, and we have multiple avenues for further growth and value creation, thanks to our integrated strategy. We also have a strong pipeline of expansionary CapEx opportunities to accelerate organic growth in our existing businesses, expanding capacity in markets where we see attractive future growth prospects. These are high-returning low-risk investments, which will deliver value in the years ahead. Of course, we will remain disciplined and value-focused applying strict performance and returns criteria to every investment we make. Overall, we expect to have the capacity to allocate up to $24 billion or approximately 70% towards acquisitions and growth CapEx, investments that will support future growth and value creation for years to come. We also expect to have to return significant amounts of cash to shareholders. We have a proud track record of consistent long-term dividend growth, and our current dividend run rate returns approximately $1 billion on an annualized basis. We also view share buybacks as an efficient means of returning cash to shareholders. And similar to our dividend, our ongoing share buyback program is currently running at an annualized rate of approximately $1.2 billion. So as I said, we have tremendous opportunities for future value creation. And I can assure you that we will remain disciplined and value focused in the allocation of that capital. We will either invest it for future growth or we'll return to you, our shareholders. But as I said, we're here for growth. And now let's take a brief moment to discuss our growth investments in further detail. Turning first to M&A on Slide 16, where we have a proven track record of value creation over many years. Active portfolio management is a continuous process in CRH. We're constantly allocating and reallocating our capital to create value for our shareholders. In fact, over the last decade, we've significantly reshaped and repositioned our business divesting $13 billion of businesses and acquiring $24 billion of business. In doing so, we've built a structurally better business, a simpler, leaner and more focused business that's less cyclical and less capital intensive, generating higher margins, cash and returns for you, our shareholders. We remain focused on reallocating capital into attractive high-growth markets and areas where we can further develop our integrated solutions strategy. We've had another active year on the portfolio front. I referred earlier to the divestiture of our lime operations in Europe and our 22 strategic bolt-on acquisitions. But here on Slide 17, let me take you through 2 of the larger transactions that we recently announced. First, to our $2.1 billion acquisition of an attractive portfolio of cement and reading with concrete assets in Texas, a significant investment, which will further strengthen our position as the #1 building materials business in the fastest-growing state in the United States. The assets are primarily located in the high-growth markets of San Antonio and Austin, 2 of the fastest-growing cities in Texas, and will really complement our existing network of businesses across Central Texas. Of course, Texas is a highly attractive market from a construction standpoint. Strong population and GDP growth continue to drive newbuild activity, and it will also be the largest recipient of federal highway funding. As a result, the demand outlook is robust, underpinned a strong pipeline of large multiyear infrastructure and nonresidential projects. By integrating it into CRH, we believe we can create a tremendous amount of value under our ownership. We've also recently announced a proposal to acquire a majority stake in Adbri, a leading provider of building materials in Australia. We've held a long-term interest in the Australian construction market, which are stable market dynamics and robust growth prospects similar in many ways to the southern region of the United States and Central and Eastern Europe. We are delighted that this opportunity has presented itself to us and it represents the next logical step to expand our existing presence in this market, where we've been operating for 15 years. Adbri is an attractive business with high-quality assets, complementing our core competencies in aggregates, concrete and cement. There are significant opportunities to enhance the performance of the business, leveraging our scale, industry knowledge and technical expertise to improve long-term growth and operating performance. The acquisition would also enhance our existing Australian businesses and create a new platform to expand our existing solution strategy in this attractive market. Active portfolio management is about buying and selling businesses. I'm now going to hand you back to Jim, who will expand on how we intend to allocate our capital internally through growth CapEx investments. Jim?

We are entering a golden age for construction with unprecedented investment in critical infrastructure and reindustrialization across our markets. And through our integrated strategy, we are uniquely positioned to capitalize on this significant growth phase for our industry. This presents tremendous opportunities for us to accelerate growth and value creation in our existing business, expanding capacity to meet growing demand, strengthening our market-leading positions in high-growth markets as well as further developing our footprint and solution strategy. Albert mentioned our track record in M&A. And here on Slide 19, we have outlined our track record of value creation in internal growth CapEx. Investments that we make in our business to accelerate organic growth and further improve our profits, margins, cash flow and our returns. We have a long history of successful execution in this area. In fact, over the last 3 years, we've invested approximately $2 billion in growth CapEx, generating an average return on net assets of over 20%, an excellent use of capital. Turning now to Slide 20. And going forward, we intend to significantly increase our allocation to grow CapEx investments to enable us to fully capitalize on the growth opportunities that lie ahead. We are investing in our largest, most profitable and fastest-growing markets, markets such as the Southern and Western regions of the United States and Central and Eastern Europe, leveraging our footprint, size and scale to maximize growth. We have a strong pipeline of opportunities. And on the right-hand side of the slide, you can see some examples of the types of investments we have in the pipeline. We are expanding our production capacity to meet demand in high-growth markets, and we are investing in an innovation and product development to remain at the forefront of our industry. We are continuing to improve our efficiency and sustainability performance, investing in increased automation in our manufacturing facilities which will reduce costs, enhance operating performance and improve lead times. And the investments we're making in energy optimization will increase our use of nonfossil fuels such as recycled waste, biomass and renewable energy sources. They will also increase our contribution to circularity as well as reducing emissions. These are the right long-term investments to make for our business and our shareholders. They are low risk, high-returning investments that enable us to accelerate our growth, margins and returns.

Thanks, Jim. That's a really compelling pipeline of growth opportunities ahead of us. Now before I discuss our expectations for the year ahead, let me share our thoughts on the outlook across our markets. Turning to Slide 22. North America represents approximately 75% of our adjusted EBITDA with the remaining 25% in Europe. First to infrastructure, which represents the largest exposure for our business. Here, the outlook is robust with demand in the United States underpinned by the continued rollout of once in a generation federal and state investment. Certainly in Europe, we expect robust demand in infrastructure activity to continue, supported by significant investments from government and EU funding programs. In nonresidential, we expect key segments to continue to benefit from the increased reindustrialization and on-shoring activity. In the United States, this is supported by $650 billion of federal funding for increased investment in clean energy, critical utilities and high-tech manufacturing following the passing of the Inflation Reduction Act and the CHIPs and Science Act. Europe is also benefiting from increased on-shoring activity well over $200 billion of high-tech manufacturing projects in the pipeline. In the residential segment, we expect newbuild activity in the U.S. and Europe to remain subdued due to the affordability challenges caused by the current interest rate environment. Now this is not a demand issue, and we believe the long-term fundamentals for residential construction to remain very attractive, supported by favorable demographics and significant levels of underbuilt. So in summary, the overall trend is positive for our business, supported by robust demand in infrastructure and key nonresidential segments, while new build residential construction is expected to remain subdued. Regarding the pricing environment, we expect positive momentum to continue across our markets, supported by disciplined commercial management as well as the benefits of our integrated and value-focused solutions strategy. Turning to Slide 23, and against that backdrop, Here, we've set out our financial guidance for 2024. Assuming normal weather patterns for the remainder of the year and no major dislocations in the macroeconomic environment, we expect full year group adjusted EBITDA to be between $6.55 billion and $6.85 billion. We also expect net income to be between $3.55 billion and $3.8 billion, and earnings per share to be between $5.15 and $545, all representing another strong year of delivery for CRH. Now it's still very early in the year, and we will, of course, update you on our expectations as the year unfolds and the construction season gets fully underway. This now concludes our prepared remarks for today. Thank you for joining us, and we're now happy to take your questions.

[Operator Instructions] Our first question comes from Anthony Pettinari of Citi.

I'm wondering if you can talk about the volume and price assumptions that underline your '24 guidance across the businesses?

Okay. We seem to lost Anthony there. I heard the first part of his question, which was volume and price assumptions. So sorry, Anthony, you're back with us. Go ahead, please. Go ahead.

Yes. Sorry, I don't know if you're hearing an echo. Apologies for that. But just price and volume assumptions for the guide.

Yes. So look, I'm just going to repeat the question, because the quality of Anthony's line in was quite poor. So the question was with regarding what our volume and price assumptions, I guess, across our major markets for 2024. What I'll do is I'll pass this to Randy to talk with the U.S. and Jim to talk about Europe as well. Look, clearly, we had a strong end to the full year. Hence, our outperformance against our previously year guidance. Quarter 4 exit volumes were good. The underlying trends in all markets, we got the fundamentals are quite good. But maybe Randy, I might pass it to you first, the exit volumes are good. Pricing is good. But maybe talk specifically about the U.S. and our expectations for 2024. And then Jim, I'll ask you to talk to us a little bit about Europe, please.

Yes. So when we think about the U.S. in particular, to Albert's point, we came out of Q4 relatively strong. So good pricing momentum as well as volume momentum as we finished up the season. When we look at the key market segments in the States, certainly infra and non-res kind of moving forward in a positive manner, residential being relatively subdued. But when we think about the pricing and volume opportunities, we look at our backlogs. Backlogs are up in dollar terms and margin terms. So the underlying assumption, as we can call it today, looks to be volumes relatively flat but double-digit pricing in our essential materials business. So a positive backdrop overall.

And in terms of Europe, yes, if you look at the end-use markets for us in Europe, we're seeing, particularly in our key markets across Europe, we're seeing good, strong, robust infrastructure and also on the nonresidential side, kind of high-tech manufacturing costs or key markets. Residential remains subdued across Europe. And as we look into '24, we're looking at kind of flattish volumes in Europe. We think it kind of trough in '23. So for '24 kind of flattish volume outlook, but for another year of positive pricing. We had a good strong pricing in '22 and '23, and we're looking forward to another year of positive pricing in '24 as well.

Yes. Anthony, it's Albert here again. I know your question was related to volumes and prices. But against that backdrop, as Randy, Jim have outlined of relatively flat volumes, but good pricing. I think you've also got to look at the performance of last year, which we hope will continue into next year, which is really the solutions model that's delivering sort of higher margins within our businesses and more profitable businesses across the whole group and indeed stronger cash generation. So that is an important dynamic when you factor in the outlook for the full year for 2024.

And I don't know if you can talk about the M&A pipeline. Hopefully, you don't hear this echo again, but I don't know if you can comment on M&A?

Anthony, I'll just repeat the question again. I'm not too sure well people I can hear you okay. But as we just as a follow-up question, was the M&A pipeline like within our businesses. Look, CRH, we have a long track record of creating value through acquisitions and not just by buying the businesses we buy, but it's also how we create value through those businesses in terms of improving those businesses and the synergies that we create within those businesses. There's a strong pipeline of opportunities out there. The U.S. and European markets that we play in our major markets, they're very fragmented. And of course, our differentiated solution strategy provides us with much more optionality. I mean, quite frankly, uniquely in our industry. Our sandbox is just much bigger than everybody else. That allows us to be more selective in terms of the business we buy in terms of the value we buy, but also in terms of fitting into our model. Of course, we'll continue to maintain the discipline in patients that you would expect from CRH. But as I said to you, I think when you combine our track record, a unique model that we have, our proven capabilities in terms of generating value from our acquisitions. And also the highlight, the cash generation within our ability, it's a very powerful model we have where we've got unique acquisition capabilities, strong cash, and we're very strong and fearless allocators of capital to acquisitions has been the fundamental part of our growth and we'll be going forward. And no change to the model. No change toward outlook. No big deals on the outlook, but a strong pipeline of deals. I think as we've demonstrated over the last 18 months and hopefully, over the next 12 to 24 months, that will continue.

Our next question comes from Ross Harvey of Davy.

So my questions both relate to capital allocation. Firstly, can you elaborate on growth CapEx. I guess, why step it up now and where will it go? Secondly, can you describe the share buyback strategy? Should we assume a $1.2 billion run rate moving forward?

Ross, 2 questions there. One about our capital expenditure. And obviously, as we outlined looking at a step-up in that the second one on share buyback. Perhaps I might just take the start of the question in terms of growth CapEx and then maybe I'll ask Jim and indeed Randy to comment on that, and then maybe I'll ask you Jim to carry on with regard to share buyback. And why the step-up at this particular time, Ross? We've often talked about this being the golden age of construction. Well, what is the evidence of that? Well, across our 2 major markets in Europe and the United States, we are seeing unprecedented government support for infrastructure, which is 50% of total construction in our largest market in the United States. It's over 1/3 of construction in Europe, and that's going to continue on regardless for the rest of this decade. Secondly, when I look at the nonresidential sector, which makes up 25% of the market here in the United States and 1/3 back in Europe. That also we're seeing a very significant shift to more and more high-quality activity in the area of the reshoring and the on-shoring of critical manufacturing activities but some of the largest private companies, public companies in the world in terms of biotech, pharmaceuticals, semiconductors, chip manufacturers, electric vehicles, batteries, the list is endless. And there is a significant amount of high-quality work that plays right into our sweet spot of solutions. So those 2 areas are what's driving construction at the moment. And of course, we know that the long-term fundamentals of residential are there and strong across both our major markets, but it's just a question timing and interest. So that's why we talk about the gold native construction. So with that unprecedented level of support for construction as we go forward and us having the #1 market position, both in Europe and the United States, it makes sense for us to double down and improve our footprint and really express our power cost of footprint. And remember, as we say, our internal investments, our capital expenditure are consistently the highest returning investments we make across CRH. You can talk about the 20% returns over the years on our CapEx. But maybe I'll turn it to Jim first in terms of maybe just your sense in terms of where that money might be spent in the area, specifically within a business where it might be spending, Randy, you might just give us some specific examples of what's on the slate for 2024?

Sure, absolutely. Ross. Yes, I think regionally, it depends on the opportunities we see ahead of us. But today, our footprint, as you know, Ross, is kind of 75% U.S., 25% Europe. So that will give you some sense of where we'll allocate that capital. As for the product split, we are uniquely placed to invest across both our materials and our solutions platform, which really reflecting our differentiated strategy. We're not just selling rocks as a business. And if you look back over the last number of years, in fact, we've acquired some fantastic material platforms, the like large hold some assets in Central and Eastern Europe, the Ash Grove assets we acquired in the U.S. and most recently, the new material assets we've acquired in Texas. These upstream acquisitions enable us to further develop our downstream solutions businesses. And a really good example of this is what we did in 2022 with the Rinker acquisition in Texas, where immediately, we were able to start pulling through our ags from Austin and indeed our cement from Dallas into that particular business, that downstream business. Another good example is kind of the national pipe and hydro deals, where we're expanding our water management capabilities across the business. And that's why our integrated solutions strategy will always pull through and sell more aggregates than having a pure-play equivalent. And as we look out, we're going to continue to build out our solutions offering going forward across both our essential materials, our roles in critical utility infrastructure and also our outdoor living. And what that is doing is really reflecting the strong growth we see ahead in the years, ahead of us in our key markets.

Maybe just building on that, Jim, just some tangible examples. Certainly, be well familiar with the acquisition of Ash Grove. We have a very nice position, I'll call it the Mountain West, to the Pacific Northwestern part of the United States. We're expanding capacity in our Lemington plant in Utah, all the way up to Durkee, Oregon really to get ahead of the underlying demand dynamics that we're seeing in those particular markets. not only capacity but also improving underlying efficiency, which is tremendous. In our critical infrastructure business, underground utility, North and South Carolina expanding the product range, the capacity for our Water Solutions offering. We talk a lot about roads and highways, but certainly, the underlying demand for telecom, energy and water movement is strong, population growth is significant in North and South Carolina, so investing in capacity expansion there has been critical. And I think one of the things we talk about as well is that Eastern European market, and I'll call out Romania in particular, we're investing in underlying efficiencies of Medgidia, one of our cement plants in Romania, driving kind of underlying energy consumption with renewable energy. So it's investments like that, that put us in a position for not only growth, as Jim talked about, but underlying performance.

And Ross, just coming back on the share buyback. Yes, we have a buyback strategy, but it's not our strategy. I mean, as Albert said, we're a growth company, right? But the buyback is an important part of our capital allocation framework and it's an ongoing program. Since we started, in fact, back in 2018, at this stage, we've returned just over $7 billion, which is actually we've retired 20% of our equity stock. But when you look at it, we're -- ultimately, we're a highly cash-generative business with very significant optionality and capacity, how we deploy capital both organically through the kind of organic CapEx we're talking, but also inorganically to our M&A whilst also continuing to reward our shareholders. However, going forward, as we just set out, we're really prioritizing our growth investments, capitalizing on that significant growth opportunities we see in our markets. But we're not going to lose our financial discipline and our value-focused attention to creating shareholder value. We announced this morning a quarterly share buyback of $300 million. That's an annualized run rate of about $1.2 billion for the year. And when you take that together with the dividend outlook, we also stepped out a quarterly dividend of 5% increase this morning. That means that in total, we expect to return up to just under $3 billion in dividends and buyback again in 2024, which is a very strong return of capital to shareholders.

Our next question comes from Brent Thielman of D.A. Davidson.

Great. Albert, could you just talk about the underlying trends you're seeing and expecting within Americas Building Solutions? I guess, especially outdoor living solutions on an organic basis? And I presume they are, but can you talk about whether these high teens, low 20s EBITDA margins are sustainable into 2024 as a group or segment overall? And are there upside levers to that?

Brent, I mean, the dynamic of our outdoor living solutions is that it supplies products, a whole range of products to the outdoor living sector. And it's mainly a people that repair and renovation business to existing homes. At times, when you find a slowdown in new build residential construction, people tend to spend more money on their existing homes and improving and enhancing the existing homes. Now the flip side to the slowdown of the subdued nature of residential construction in the United States that people are not buying and selling as many homes. And therefore, they are spending more money on their existing homes. And outdoor living is an area, as we all know, anybody spends time here in the U.S. It's a big part of what people do It's part of the American culture and psyche, particularly as our footprint head South and West, where one gets better weather for longer through the year. The other dynamic within that is that we have been, over the years, expanding our footprint of products that we sell. I mean the Barrette deal was a very significant step-up for us in terms of filling out our product line with the major big box stores here in the U.S. and also the pro channel. So there's 2 dynamics happening there. In this current environment, there is a strong push and continued drive on the repair and maintenance and improvement market, which is where over 80% of the Outdoor Solutions business is focused. And in addition to that, we're starting to get really full leverage from some of the deals, the fill out deals that we've done in terms of the overall package that we deliver into that sector. It's one of our fastest-growing businesses. It's one of our highest returning businesses. It has got great cash generation. And when I look at the dynamics behind that, I look on that to continue ahead into 2024, yes.

Very good. And then, Randy, I believe you had mentioned. Just any additional color you can offer around the margin improvement you're currently seeing within U.S. backlogs in Americas Materials. And it would seem that with inflationary trends at least somewhat tame here, there should be some good opportunities for margin expansion in that business group in '24. If you could just expand on that prospect.

I think in most regard, it has to do with the offering that we provide. When you think about our Road solutions business, we're talking about not just the hard product of aggregate and asphalt. It's really the beginning of that construction value chain. So it's the engineering, design capabilities, the manufacturing, the installation, the maintenance and ultimately recycling of that product back into new products. So it's a unique position that we have in terms of the engagement with the customers, which the customer in this particular case are federal and state government. So that allows us to really price based upon value versus an individual component part. I see that continuing on as we move into the year. You talked about inflation. Inflation is still there, the rate has just slowed a bit. And so there's a bit of catch-up to do, and that's why we talk about our expectations on pricing. But the demand environment is strong and the desire from customers to have one point of contact to offer that solution really puts us in a unique position to continue to drive margins.

And Brent, just to backup what Randy is saying there. I know we're talking here to you today and one day, it's a snapshot in time. But if you look -- go back over the last 2 or 3 years at the American Materials business specifically, as you asked the question, we have seen. This has been an unprecedented period of cost inflation, and yet we've managed to improve margins in that business across that backdrop, which, as Randy says, it's more about the differentiated solution and offering we have to customers rather than I can do a price of. And that's really the story of what we're doing across areas and in particular, Americas Materials Solutions.

Our next question comes from Paul Roger of BNP Paribas.

Congratulations on the results. Maybe just 2 questions. And the first one is on guidance. I wonder if you can talk a bit about the key variables that you think will determine when you end the year at the top or the bottom end of the range? Are there any big sweet factors? And then maybe secondly, one for Jim. Can you also give a bit more detail on the various scope impacts that you're included in the guidance? And specifically, does it include Adelaide Brighton?

I'm going to repeat those 2 questions, Paul, because the audio quality was not sound. So the first question -- and correct me if I have this wrong, Paul, was, could you just give us the guidance on the key variables around the top and bottom part of the range that we guided for 2024? And secondly, it was a second question to Jim, which prior phrase, which really was what are we including for acquisitions that we made last year in the current year guidance and also doesn't include anything for Adbri that we announced a couple of days ago. I'll pass -- Yes. Thanks, Paul. I'll pass both of those to Jim in just one second. I mean with regard to the guidance, it's very early in the year at this moment in time, Paul. So obviously, it's our best guesstimate as what we think is going to happen within the marketplaces. However, we do have visibility on backlogs. We do have visibility in demand and the business that we're in is construction. So it's not a week ahead or a month ahead, it works at times several months ahead. So -- and also, in particular, here in the United States, where the government support we're seeing for infrastructure and indeed some of the large nonres, these are multiyear programs that we're delivering against. So we have pretty good visibility across that, which is why the range is quite tight actually. And there are the variables within there, I would suspect will be more macro than micro. But I'll pass it to Jim just in terms of looking at the things the sensitivities we have across those businesses in terms of volumes, price and particular markets.

Yes. Yes, in terms of what we're assuming on the midpoint, actually, on the guidance is that we said that earlier in terms of the U.S. first, is kind of flattish volumes across the business with good and use in terms of infrastructure and nonres, but residential remaining subdued. But looking for another year of double-digit pricing across our essential materials, in particular, our Aggregates and Cement business in 2024, and that kind of gets you towards our midpoint. In terms of Europe, again, flattish volumes and another year of positive pricing. Very strong pricing in '21 and '22. -- sorry, '22 and '23 rather, and that won't be at that level of strength, but another year of positive pricing. I think that the kind of questions are related when you take the midpoint guidance is about 8.5%. When you take out the scope impact of that, which is kind of consistent to what we said in November, which is around $80 million to $90 million. So what's in that is that the recent acquisition in Texas, which closed in the first week, the 9th of February is in that guidance. The disposal of the Lion business, which will happen in phases. Phase 1 is complete, and then there's 2 more phases to complete throughout 2024 is in, but Adelaide Brighton is not in that guidance. So the scope impact will be in the range of about EUR 80 million to EUR 90 million. And what that means on the midpoint, which is about 8.5%, is that most of the growth that we're guiding at the midpoint is actually organic growth coming through strongly in 2024.

Our next question comes from Keith Hughes of Truist.

It is a little bit of a continuation of the last question, but if we look at that 8.5% growth by segment. Which segments do you think will be a little bit above that average, which could potentially be a little bit below in the guidance framework.

Keith, it's Albert here. I'm going to repeat that question again, the audio may be a little bit difficult. Keith's question was looking at the 8.5% growth at the midpoint, what parts of our business do we think will be ahead and which points of business will be behind that. Maybe all 3 of us can come in here. But I think, obviously, we're seeing a strong dynamic across U.S. infrastructure here. And you've seen from our peers in terms of what they've talked about with regard to overall revenue growth in this year, and we pretty much endorsed that number and see that's where it would be. Non-res, we think will be strong across North America again, probably at the top end of that range in terms of deliverability. And again, that's made a slightly a little bit of a difference from what you've heard elsewhere. But then again, we play at the higher quality. And the less we don't really focus on the lower end of commercial and large warehousing. We're very much at the top end, the more involved project work there of the non-res work where it goes. And we're seeing that. So the U.S. is broadly stronger than Europe with regard to in and around that range. Randy, you might just comment in terms of the U.S. business and what you're seeing particular as of strength of particular regions maybe as well?

Yes. Well, I'd say one infrastructure, you called it out, so the support of IIJA in the states, obviously, I think everybody is well familiar with that. But I do think it's worth calling out in the nonres segment. You talked a little bit about it, which was this move we've certainly seen from in the U.S. kind of distribution and logistics centers, less of those to a shift over to that more bespoke type projects in and around manufacturing at onshoring and reshoring. So chip manufacturing plants, battery plants, pharmaceuticals, high-end projects that tend to be unique in nature. And so we play very early on in terms of the engineering and the design segment of that all the way through the manufacturing and then in the installation. So it gives us a really unique perspective there in nonres. But I'd say that's the biggest shift in the U.S. in terms of underlying demand.

Maybe if Jim and I can maybe [indiscernible] in Europe. Maybe, Jim, you might just comment on Central and Eastern Europe in a moment. If I just talk about Western Europe, I would say, at the lower end of that range, you see countries such as Finland, Switzerland and France still showing overall revenue growth, but at the lower end. Quite pleased, by the way, with our -- with the U.K. and Ireland, actually, and shown fairly resilient performance across our businesses there, primarily on the back of strong infrastructure spend, which again goes out a number of years and a great performance in my own country in Ireland as well, strong performance across Ireland as well. But with regard to the central and eastern in Europe, Jim?

Yes. Looking in '24, the outlook is good. I mean, again, it's very heavily underpinned with a lot of very significant EU infrastructural funds into the main countries, which for us are obviously Poland and Romania and Hungary and Slovakia. So strong infrastructure underpinning. That region as well has also seen some strong investment in the number as high tech sector, particularly around EV plants, again, but also data centers. And actually, we're already beginning to see some kind of early green shoots on the residential side out in some of those bigger markets as well in Eastern Europe, which have been led by some government stimulus packages to try on the residential side. So looking for a good year in terms of activities in Central and Eastern Europe and also another year of positive pricing in that region.

Just one comment I'll come back with Keith here is that we're seeing a slightly unusual dynamic across our 2 major markets than I've been around a long time. But we're seeing now at the moment, our business has been reshaped and repositioned over the last decade to focus on the less cyclical parts of construction. So if you look at what we talk about all the time, we like large-scale complex infrastructure. We like it because it plays to our solution strategy, where we get extra value and [indiscernible] we sell for value, we get higher margin and higher cash. But crucially, crucially, we get government support, which is less cyclical than other parts of construction. So if we look at the United States, our biggest market, we pretty much get underpinned at the end of this decade, strong construction growth in infrastructure. Secondly, again, we reshaped and repositioned our business through solutions to focus very much on the higher end of nonresidential construction. This on-shoring and reshoring of these critical utilities and high-spec manufacturing. Again, some of the largest companies in the world, they're working 10-year multiyear projects to build out large production facilities, again, reducing the cyclicality. And that's why we can talk with pretty strong confidence about 2024 and indeed beyond. The part of cost, which is most cyclical, of course, is residential. And over the years, that has reduced as a level of importance. We're very happy to be a supplier to that market, but we don't depend upon it. What delivers the books for us year-on-year is infrastructure and nonres, and long may that continue.

Okay. And Just one quick follow-up. Can you talk about subdued housing activity in the United States. I was a little surprised that I comment, given we have starts moving up pretty nicely here to end the year. And are you -- is there something specific there that you see that would not cause some level of growth in your new U.S. housing?

I'm right to mine with you. The housing issue, both in the United States and Europe, has nothing to do with an underlying fundamental problem. It's just an affordability issue. I mean interest rates just for those listening on the line here, I mean, 30-year rates here at the moment are over 7%. They were 4% 2, 3, 4 years ago. So people are keeping their hands in their pockets. The same way across Europe. It's an affordability issue. And -- but what we're seeing is a continued buildup of the backlog of housing. It's actually a societal question as much as it is a question for people like ourselves involved in the industry. And when interest rates come down and when affordability eases, we expect to see strong continued growth in residential construction here in the United States and indeed in Europe. And in fact, that will be the third cylinder for us to fire our engine on because the industry, our company is firing 2 cylinders at the moment, being infrastructure and nonres, residential pretty much is very subdued. When that comes back that will give us great confidence in growth in the years ahead.

Our next question comes from Gregor Kuglitsch of UBS.

I've got 2 questions, please. The first one is on CapEx. So you flagged your returns, which look pretty attractive. The level has gone up. I guess I wanted to sort of check whether that new $2.2 billion, $2.4 billion is sort of the new run rate in your view, or whether there's anything specific in '24 that you want to call out? And then second question is on margins. So you had a nice 100bps odd, 120 bps improvement in margin, you're now close to 18%. I guess the bigger picture question is what's sort of your view, what this business should and could generate on a sort of medium-term view in terms of margin level?

Yes. Maybe Jim will come in just maybe at the back end, maybe with regard to the CapEx. Of course, the CapEx number we're recording that. That's growth CapEx. That's not just CapEx. That's growth CapEx. It's investment in terms of going forward. As we said earlier on, Gregor, I don't know if you heard the commentary. This really investing in the future of our business. It's the highest returning investments we make. And given our footprint is the largest building materials player in Europe and the United States, we should use that strength. So we're building out our capacity, building out our capability, filling in very much the jigsaw for us to sell more and more products to our customers, which is the solution story. And that's what our CapEx story is all about. I'll ask Jim to comment on the end. But maybe if I'll just come back and talk about in terms of where margins are as well. You've been a long-term follower of the stock and of our business. Over the last decade, we have sold $13 billion of business, and we bought $24 billion, $25 billion worth of businesses. I mean the business has been completely reshaped and repositioned. That means it's a different business with a different margin profile. And we have talked about -- I talked about during the presentation, how active portfolio management is a key part of what we do. That will continue. And we will continue to adapt and shape our business for the future needs of our industry and for the future needs of our shareholders, which is to improve and increase shareholder value. So I don't know where we are on that margin journey. I know the direction we're on. I don't think we're capped out or anywhere near it. I think the best years for CRH are ahead of us, not behind us because I can see the demand in our industry, I can see the demand for the solution story and that just gives me encouragement in terms of where we can take this business. Crucially, it's not just about the margins, it's also about cash and returns. And for me, the story of CRH is not just about the really strong performance we had in 2023. It's the cash generation, that $5 billion in cash. And as I talked about in the presentation, the $35 billion of cash we're going to generate over the next 5 years. Now you know me well. Firstly, Jim, Randy, you know all of our senior team here, not everybody on the call knows us, but we are very focused and disciplined allocators of capital. That's our brand. That's what we do. And we've set out our focus on that $35 billion is going to be firmly focused on disciplined, value-focused growth across our business. And I think that's what's going to be a key driver of our business going forward, not only just with CapEx, but also with regard to acquisitions, and that's going to have a significant impact upon solutions. Jim, I don't know if you want to just maybe think about it in terms of how that timing of that CapEx might roll out, CapEx.

Sure, absolutely. Firstly, Gregor, I mean, we called it out in the presentation, go back over the last 3 years that it was up to about $2 billion on that development growth CapEx with returns of over 20%. What we guided for this year is a CapEx number of $2.2 billion to $2.4 billion. And at the moment, that kind of looks like it's going to split 50-50 between kind of maintenance CapEx and development CapEx, right? And then when you kind of project that out, we see a runway on growth development CapEx alone of up to $8 billion over the next 5 years, right? Now again, from my perspective as CFO, as we said, they are some of the highest returning and lowest-risk projects that we have and we tend to get really good visibility and transparency in terms of the returns profiles on those projects. So we won't be losing our financial control and discipline as we work our way through those growth CapEx projects. But for 2024 specifically, it is a step-up from the rate we've seen over the last 3 years and it's kind of -- in the kind of $1.2 billion range in terms of development CapEx for '24.

And our final question today comes from Kathryn Thompson of Thompson Research.

And congratulations on solid results this year. As we look into '24, it's been a big year since you shifted from the LSE to the NYSE. And one thought that's on many investors' minds are when is CRH going to be included in the U.S. index? So could you give your thoughts on the U.S. index inclusion and the rerating potential as we see as a result of this.

Maybe I'll come back at the end. I'll come back at the end to Jim just to talk about in terms of what we see our timing was and all that, but maybe just come from myself. Look, it's been an interesting 6 months for us for sure in terms of leaving the Euronext and leaving the LSE, and we get lots of questions on index inclusion and indeed rerating. But index inclusion in itself doesn't mean anything. It has to be matched with highly performing business within any index. And our focus today, as you will have heard this morning, is very much on the continued performance and growth of our business. I mean, 2023 was our tenth consecutive year of profit and margin improvement. We've had a really strong performance over the past few years. And yet we're only filing, as I said earlier, on 2 of the 3 cylinders being infrastructure and need nonresidential, residential sale hasn't come back. When I look at our position as the #1 player in building materials in Europe, #1 player in our most important market in the United States and actually, we're the #1 player in the top 10 fastest-growing states here in the U.S. combining that with the solutions model and our ability to deliver profits and returns and cash. And if I talk about cash, I can think it's one that I want to keep coming back to, that $35 billion that we talk about, how we will generate cash for our shareholders, and we're focused on growth. And I think that we have a very good reputation of being fearless allocators of that capital. I think all of that against the backdrop and the strong outlook for our markets for the next few years, I think, really positions us very well. And I think we will be the #1 beneficiary of this growth over the next prolonged period of time. So I think against that backdrop, I think index inclusion is a very interesting question. From our point of view, we're actually index orphan at this moment in time. You're right, we left the Euronext and we stepped down in the LSE. So there's no access to passive funds in Europe or the U.S. for us at this moment in time. we had significant flowback, when we left the Euronext and when we stepped down the LSE, it was about 12% of our stock flow batters over those 2 days when we left those indices. We expect, as we step up into Indices across in the United States. We expect to experience good flow forward. You can work out the math as much as I do, but it should be about 2x the flowback coming to us and flow forward, and that will, in time, increase demand for the stock, which should be strong for the stock, and there would be as that dynamic control should be a positive for us. But Maybe, Jim, I might ask you just to comment on the timing and where we are in that whole process.

Sure, absolutely. Yes, I mean, today is an important day, obviously, in filing our first U.S. GAAP accounts on our first 10-K. So that's an important milestone for us. And if you look at some of the key indices in the U.S. in terms of S&P, Russell, Chris and MSCI, they all have different eligibility criteria. And ultimately, inclusion is at the discretion of the index providers, but we're confident when we look at all those admission requirements that we're going to meet all the criteria. And after today's [indiscernible], we'll be seeking inclusion as soon as possible across the various indices.

And thank you for everybody who dialed into the call, and that's all...

That concludes the Q&A session. Mr. Manifold, I turn the call back over to you.

Thank you. Look, as I was saying that that's all we have time for today, and I want to thank you for your participation and your time. I hope 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 or our Investor Relations team, and we look forward to talking to you again in May when we report our results for the first quarter of 2024. Thank you, and have a good day.