CRH plc (CRH) Earnings Call Transcript & Summary

Good day, and welcome to the CRH 2024 Full Year Results Presentation. My name is Christa, and I will be your operator today. [Operator Instructions] At this time, I'd like to turn the conference over to Jim Mintern, CRH Chief Executive Officer, to begin the conference. Please go ahead, sir.

Good morning, everyone. Jim Mintern, here, CEO of CRH. And you're all very welcome to our fourth quarter and full year 2024 Results Presentation and Conference Call. It's a great privilege for me to be here on my first earnings call as CEO, and I look forward to seeing many of you in the weeks and months ahead. Joining me on the call is Alan Connolly, our Interim CFO, Randy Lake, Chief Operating Officer; and Tom Holmes, Head of Investor Relations. Before we get started, I'll hand over to Tom for some brief opening remarks.

Thanks, Jim. Hello, everyone. Before we begin today's proceedings, I'd like to draw your attention to Slide 1 shown here on 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 you back to Jim, Alan and Randy to deliver some prepared remarks.

Thanks, Tom. We have a busy schedule for you this morning. Over the next 30 minutes or so, we will take you through a brief presentation of our fourth quarter and full year results, highlighting the key drivers of our operating performance over the course of 2024 as well as providing you with an early indication of our expectations for our business in the year ahead. We are also going to spend some time discussing our capital allocation activities and how we are strategically positioning CRH to continue to deliver industry-leading growth and value creation for our shareholders. After that, we will have plenty of time for Q&A. And overall, we should be finished within the hour. First on Slide 3, I'm pleased to report an industry leading performance for CRH in 2024. But before we get into the detail of that performance, I want to take a step back for a moment and discuss what's been driving the consistency of our financial delivery year in, year out over the last decade. We are the leading provider of building materials solutions in North America and Europe, operating across 3,800 locations. The size and scale of our business carefully constructed over the last 55 years is simply unmatched and impossible to replicate. That scale, combined with our customer-connected solution strategy enables us to better serve our customers' increasingly complex needs as well as delivering higher growth and value for our shareholders. Our core philosophy of continuous business improvement and best-in-class operators is deeply embedded in the DNA of CRH. We are relentlessly focused on performance across the business, but not just performance, performance with purpose, delivering improvement each and every year and I am pleased to report that we delivered our 11th consecutive year of margin improvement in 2024. The disciplined and value-focused allocation of our capital to support our strategic growth initiatives has been a cornerstone of CRH over many years. We have acquired over 1,200 businesses throughout our history, including 800 in the United States alone building market leadership positions in the higher-growth regions of the U.S. We have decades of experience identifying, acquiring and integrating businesses and a proven track record of value creation and synergy delivery. We remain focused on investing in higher-growth markets, benefiting from secular growth tailwinds, and over the course of 2024, we invested $5 billion on 40 value-accretive acquisitions across our business. At CRH, we have a uniquely connected portfolio of businesses. By integrating our materials, products and value-added services across the construction value chain, we are able to maximize growth, profitability and cash generation by also delivering less volatility and more consistency through the cycle. These are the components of our differentiated and customer-connected solution strategy. That is what has driven our consistent financial performance over the last decade as well as another year of double-digit profit growth in 2024. Turning to Slide 4, where you can see some of our key financial highlights for the fourth quarter and full year, and I think this slide really demonstrates the strength of our performance. We had a strong finish to 2024 with Q4 revenues, adjusted EBITDA and margin growth trends consistent with the overall full year outturn. Total full year revenues of $35.6 billion, 2% ahead of prior year, reflecting resilient underlying demand across our key end-use markets. Further commercial progress as well as contribution from acquisitions. This enabled us to deliver adjusted EBITDA of $6.9 billion 12% ahead and a further 180 basis points of margin expansion. A robust performance, which also reflects continued operational excellence and strong cost control across our business. As you can see, all of this translated into strong growth in our earnings per share, up 18% on the prior year. I'm pleased to see another year of improvement in our returns, a key performance metric across all our businesses, 15.5% in 2024, 20 basis points ahead building on the progress we have made in recent years and an area that we can continue to improve upon. Now at this point, I will ask Randy to take you through the performance of each of our businesses.

Thanks, Jim. Hello, everyone. Turning to Slide 6 and beginning with Americas Materials Solutions, which delivered a good fourth quarter as well as strong profit growth and further margin expansion for the year as a whole. Total full year sales and adjusted EBITDA were 5% and 22% ahead of the prior year primarily driven by price increases across all lines of business and further operational efficiencies. In Essential Materials, revenues were up 5% supported by pricing growth of 10% in aggregates and 8% in cement. In Road Solutions, revenues also increased by 5% driven by improved pricing in asphalt and ready-mix concrete. All of this was delivered against the backdrop of some challenging weather conditions, which impacted activity levels in many parts of the United States during the year. Looking through the impact of adverse weather, however, I'm pleased to report that the underlying demand backdrop across our key markets remains positive. Infrastructure, our largest end market, continues to be underpinned by robust levels of state and federal funding through the IIJA and only a third of highway funds in the IIJA have been deployed to date highlighting a significant runway we have ahead of us. We also continue to see good levels of activity in certain segments of non-residential construction including new build manufacturing facilities and data centers. These are often large highly specified construction projects that fit very well with our differentiated strategy, a real sweet spot for our business that generates higher profits, cash and returns while providing more value to our customers. Our results also reflect contribution from acquisitions, primarily our $2.1 billion acquisition of material assets in Texas and we continue to make good progress on the synergies we've identified to date. I'm also pleased to see a strong improvement in our margin, up 340 basis points compared to the prior year, reflecting disciplined cost control further operational efficiencies across our business as well as the impact of a gain on certain land asset sales during the year. As we look ahead, I'm encouraged by the continued positive momentum in our backlogs, reflecting the robust infrastructure funding environment I mentioned earlier. Next to America's Building Solutions on Slide 7. where our business delivered a resilient fourth quarter and full year performance. As you can see on this slide, our full year profitability was slightly behind a strong prior year comparative, a good performance in the context of some challenging weather conditions impacting our operations in large parts of the United States and subdued demand in the new build residential segment. Our Building & Infrastructure Solutions business continues to be supported by good underlying demand in the manufacturing sector and significant funding for critical infrastructure as well as contributions from acquisitions. In Outdoor Living Solutions, our business benefited from its exposure to more resilient residential repair and remodel activity and good demand in the retail channel. Moving to International Solutions on Slide 8, where our business delivered further profit and margin growth in both the fourth quarter and the full year. Overall, we delivered a 7% increase in full year adjusted EBITDA and 120 basis points of margin expansion, supported by a positive pricing momentum and disciplined cost control. In Central and Eastern Europe, demand continues to be supported by good levels of public and private funding for infrastructure and nonresidential construction activity. While in Western Europe, activity levels were impacted by subdued but stabilizing new build residential demand. Our results also reflect contributions from acquisitions, most notably our investment in Adbri, a leading provider of building materials in Australia. The integration is progressing well, and we're excited about the opportunities it presents in this attractive market. So overall, good delivery from our businesses in the fourth quarter as well as on a full year basis, and I'll hand you over to Alan to take you through our financial performance in further detail.

Thanks, Randy, and hello, everyone. Turning now to Slide 10 and the key components of our adjusted EBITDA performance. As you can see on the left-hand side of the slide, we had a strong finish to 2024, delivering fourth quarter adjusted EBITDA of approximately $1.8 billion, 12% ahead of the prior year period. Looking at our performance for the full year on the right-hand side. For me, the real highlight is that $603 million organic growth we achieved, a 10% increase compared to the prior year, reflecting resilient underlying demand across our key end markets, further pricing progress, operational efficiency and cost control. Acquisitions net of divestitures delivered a further $142 million of adjusted EBITDA, primarily reflecting the contribution from our acquisition of materials assets in Texas and Australia as well as the impact of the divestiture of our European lime operations. In terms of the impact of currency translation on our business, there was a small tailwind for the year, primarily the result of a slightly weaker U.S. dollar relative to some of our other currency exposures. Overall, we delivered approximately $6.9 billion of full year adjusted EBITDA 12% ahead of the prior year. Next to Slide 11. 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 2024. Looking at the key components of this performance, we ended 2023 with net debt of $5.4 billion. Our business generated $5 billion of operating cash during the year, and this strong performance underpins our ability to invest in our business for further growth, while also returning significant amounts of cash for our shareholders. As Jim mentioned earlier, we completed a significant amount of portfolio activity in 2024, investing $5 billion on 40 strategic acquisitions. We also received over $1 billion of proceeds from divestitures, which net of other items, including net debt acquired as part of our investment in Adbri in Australia, resulted in a total increase of approximately $4.5 billion. We also invested $2.6 billion in capital expenditure to support further growth in our existing business and we returned $3 billion to our shareholders in the form of dividends and share buybacks. Overall, this resulted in net debt of $10.5 billion at year-end, representing a net debt to adjusted EBITDA ratio of 1.5x. I'm also pleased to report that in line with our strong financial position and policy of consistent long-term dividend growth, the Board has declared a new quarterly dividend of $0.37 per share, representing an annualized increase of 6% compared to the prior year and continuing our proud track record of delivering over 40 consecutive years of dividend growth and stability. In relation to our ongoing share buyback program, today, we commenced a further quarterly tranche of $300 million to be completed no later than May 2. Now at this point, I'd like to turn to capital allocation and the opportunities we have to create further growth and value for our shareholders. On to Slide 13, and on the left-hand side, you can see the capital allocation framework that we communicated to the market last year. At that time, we said we expected to have at our disposal financial capacity in the order of $35 billion over the next 5 years. This was a reflection of our growth profile, the level of cash we were generating and the strength of our balance sheet with approximately 70% expected to be allocated to acquisitions and growth CapEx and the remainder returned to our shareholders through dividends and buybacks. As you can see on the right-hand side of the slide, we made good progress in 2024 allocating approximately $8 billion of capital in net M&A, growth CapEx, dividends and share buybacks, demonstrating our efficient and disciplined approach to capital allocation to maximize value for our shareholders. Now at this point, I will ask Randy to take us through our growth investments in further detail.

Thanks, Alan. First, M&A on Slide 14, where we have a proven track record of value creation over many years enabled by our unmatched scale, breadth and financial capacity. As you can see, 2024 was an active year from an M&A perspective, with approximately $5 billion invested in a total of 40 acquisitions equivalent to 1 every 10 days across our strategic focus areas of Essential Materials, Road Solutions, Critical Infrastructure and Outdoor Living. In addition to the acquisitions in Texas and Australia, I mentioned earlier, we invested $2.1 billion in 38 strategic bolt-on acquisitions, which really highlights the fragmented nature of our industry and the multiple avenues we have for further growth as a result of our differentiated strategy. For example, in California, we acquired BoDean, a materials business with a substantial hard rock reserves as well as integrated asphalt and ready-mix concrete operations. This was followed later in the year by our acquisition of Dutra Materials, bringing additional strategic aggregate reserves and asphalt production capabilities. These acquisitions represent a strategic entry into California for our Americas Materials Solutions business, and we're excited about the opportunities to create a new platform for growth in this attractive market. We also acquired Geofortis in Utah, a leader in the U.S. cement binder market, complementing our existing cement operations and enhancing our ability to provide more sustainable products for our customers. In the fourth quarter, we acquired Diamond Concrete, a manufacturer of reinforced concrete pipe and storm water management solutions in Georgia represents an attractive geographic infill or our Americas Building Solutions business in the area of critical water infrastructure. From a materials perspective, we added over 1 billion tons of aggregate reserves to our business in 2024 further strengthening our market-leading minerals reserve positions. So a busy year on the acquisition front, demonstrating our commitment to the disciplined allocation of capital into attractive high-growth markets with secular tailwinds in areas where we can further develop our customer connected solutions strategy. Turning to Slide 15. We also had a busy year investing in our existing business, leveraging our footprint, size and scale to fully capitalize on the attractive organic growth opportunities that we see across our markets. During 2024, we invested $1.1 billion in growth CapEx. And here, you can see some examples of the type of investments we made expanding our production capacity to meet demand in high-growth markets while investing in innovation and product development to remain at the forefront of our industry. We're also continuing to improve our production efficiency and sustainability performance, investing in increased automation, which will reduce costs and enhance operating performance as well as investments that will reduce our reliance on fossil fuels to optimize our energy usage, increasing our contribution to circularity and reducing emissions. For example, we are modernizing and automating our Cape Sandy Quarry in Southern Indiana, 1 of our largest quarries in North America, strategically located along the Ohio River, our operations have an expansive geographical reach serving customers across 5 states. The investment will drive further operational efficiencies as well as increasing capacity to support future growth. In North Carolina, we're building an automated manufacturing facility to meet demand for our water infrastructure business, enabling us to capitalize on the strong growth opportunities we've identified in this market. These type of investments are an excellent use of capital, low-risk, high-returning investments that will enable us to accelerate our growth, margins and returns.

Thanks, Randy. A great update there on a busy year of investment activity. It's a very exciting time for CRH. And at this stage, I would like to take a moment to discuss how we are strategically positioned going forward. Turning to Slide 17. And as you can see, we are uniquely positioned to benefit from key secular growth tailwinds, including urbanization, transportation and critical infrastructure. Mega trends that will support significant above-market growth and value creation for years to come. As I said earlier, we are the largest building materials business in North America and Europe, 2 of the most attractive construction markets in the world, no one comes close to the size and scale of CRH. In the United States, we have a national footprint with an attractive mix of regional, sector and end-use exposures. We have also focused on higher-growth markets in the South and West, with states such as Texas and Florida, our 2 largest markets, benefiting from higher rates of population growth and inward migration, which drive new build construction demand. We also benefit from attractive geographic footprint in Europe, with some of the most demanding building specifications in the world, Western Europe is an important hub for construction innovation, design and new technology. And here, our strong market positions allow us to remain at the cutting edge of our industry developing new products and techniques, which we can then transfer at scale across the entire group. In Central and Eastern Europe, our business benefits from significant long-term construction needs much like the southern and western regions of the United States. As you can see on the right-hand side of this slide, we have leading positions in these markets, including being the #1 aggregates producer in North America. So in summary, we have positioned our business to capitalize on key secular tailwinds in higher growth regions, and we have developed leadership positions in these markets to our uniquely connected portfolio of businesses. All of this represents a powerful combination to deliver consistent compounding performance through the cycle. Turning now to Slide 18. And here, you can see what consistent execution of this strategy has produced over the last decade. In addition to growing our top line, we have delivered strong double-digit growth in adjusted EBITDA and earnings per share, equivalent to compound annual growth of 15% and 17%, respectively. We have also significantly improved our margin, up over 900 basis points, reflecting the relentless focus on continuous business improvement I mentioned earlier. On Slide 19, you can also see that on a relative basis, we have delivered an industry-leading performance in 2024, particularly in terms of profit growth and margin improvement, outperforming some of the best in our industry and delivering superior value for our shareholders. So we outperformed in 2024 but let's take a look at Slide 20 and our performance over time. Over the last 1, 5, 10 or even 50 years, the answer is the same, industry leading total shareholder return. A performance that really highlights CRH as the leading compounder of capital in the industry. 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. Today, the Americas represents approximately 75% of our adjusted EBITDA, with our International division representing the remaining 25%. First, to infrastructure, our largest end market. Here, we expect demand in the United States to be underpinned by the continued rollout of state and federal funding. As Randy mentioned earlier, only 1/3 of the IIJA highway funds have been deployed so far, highlighting the significant runway that lies ahead. In our international markets, we expect robust demand in infrastructure activity to continue, supported by significant investment from government and EU funding programs. In nonresidential, we expect our key segments to benefit from secular growth tailwinds as well as increased industrial manufacturing and onshoring activity. In the residential sector, we expect new build activity in the U.S. to remain subdued, while repair and remodel activity remains resilient. As we have said in the past, we believe the long-term fundamentals for residential construction remain attractive, supported by favorable demographics and significant levels of underbuilt. In our international markets, we expect residential activity to stabilize with structural demand fundamentals supporting a gradual recovery. 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 differentiated strategy. So in summary, the overall trend is positive for our business, and we are well positioned to capitalize on the strong growth opportunities that lie ahead. Turning to Slide 23. And against that backdrop, here, we have set out our financial guidance for 2025 assuming normal weather patterns for the remainder of the year and no major dislocations in the political or macroeconomic environment, we expect full year group adjusted EBITDA to be between $7.3 billion and $7.7 billion. Net income between $3.7 billion and $4.1 billion and diluted earnings per share between $5.34 and $5.80, representing another strong year of delivery for CRH. It's obviously still very early in the construction season, but we feel good about 2025, and we will, of course, update you on our expectations as the year unfolds. As I mentioned earlier, our differentiated strategy, relentless focus on performance disciplined capital allocation and uniquely connected portfolio are the fundamental drivers of our outperformance in recent years, and they leave us well placed to deliver another year of growth and value creation in 2025. So that concludes our presentation this morning. We look forward to spending some more time with you later in the year when you will have the opportunity to meet the wider leadership team and hear more about the significant growth and value creation opportunities we see for our business in the years ahead. I will now hand you back to the moderator to coordinate the Q&A session of our call.

[Operator Instructions] Our first question comes from Anthony Pettinari with Citigroup.

Good morning. I'm wondering if you can give any additional color on kind of some of the moving pieces for the '25 outlook in terms of end markets, segments and if that's changed at all from kind of the preliminary guidance that you gave late last year.

Anthony, good to hear from you, Jim here. Maybe I might ask Alan to come back at the end and maybe just to step us through maybe some of the puts and takes on the guidance. But maybe just to give a bit of additional color on the guidance. We're stepping off an industry-leading performance just in 2024 and yet another year of double-digit growth for CRH. It's clearly very early in the year. We're still in February. But right now, I'm feeling positive about 2025. And I think most importantly, a lot of the building blocks that we need to have in place for another year of growth and margin expansion for CRH are in place. And it's really the positive market backdrop across our key markets in both the Americas and International, which has given us this confidence. And maybe, firstly, looking at U.S. Infra. It's really underpinned by the continued rollout of the state and the federal funding. We mentioned earlier there, there's only 1/3 of the IIJA funding has actually been spent to date. And we are actually the biggest beneficiary of the IIJA in areas such as roads, water, energy and all of which are trending positive. In terms of nonres in the Americas, we certainly continue to be supported by continued onshoring and reindustrialization. New build in the Americas remains subdued. We think it's really in the short term. It's not a demand issue but really an affordability, and we are bullish about the medium to long-term outlook. Looking across the teams, similar teams across our international portfolio, again, a good underpin and robust on infra and non-res. New build res activity is stabilizing at low levels in Western Europe. However, we're beginning to see some signs of improvement, some green shoots some early green shoots in Central and Eastern Europe and the long-term demand remains underpinned well. So overall, I think an encouraging end-use market backdrop. We're well set up for 2025, and I feel positive about another year of progress and growth for CRH.

Yes, I'll just pick up there Jim on that. Just a couple of additional things over and above what Jim mentioned with regard to the trends and trading that we see really 3 notable items I'd like to highlight when you're bridging between or up to the 2025 guidance. First up would be the impact of M&A. As we noted, 40 deals, $5 billion spent in 2024 and our significant lime divestment. Altogether, that leads to a positive net scope contribution of around $280 million. Added to that, we have currency exchange headwind by $50 million at the moment compared to current exchange rates. That's due to the slightly stronger dollar. Finally, you'll have seen in the results there today that we -- 2024 benefited from higher-than-normal land or long-lived asset sales. Now recycling capital through asset sales is of particular focus for us and an ongoing focus for CRH. But it's not linear. And so for 2025, we'd expect more normal year together with that, with the other 2 items, there are the real 3 items we'd highlight bridging to 2025 guidance.

Your next question comes from the line of Jerry Revich with Goldman Sachs.

Good morning, everyone. I'm wondering if you could just talk about -- I'm wondering if you could just talk about what the guidance embeds for U.S. aggregates volume and pricing over the course of the year. And any comments around timing of price increases and volumes in the first quarter versus second quarter? Curious where you folks shake out.

Yes, Jerry, Randy here. Maybe I'll take that one on. Maybe if we just take a quick look back for a moment. Coming off a strong 2024, I think we highlighted as others have in our sector have as well, kind of the challenges of weather, but volumes in '24 down roughly 3% but pricing up 10% and kind of similar impact in and around our cement business. Volumes up 1% and pricing plus 8%. So a real positive, and I guess, I would say, momentum as we lead into '25. Jim talked about the backdrop, kind of the positive backdrop both in infra and non-res and we're seeing that as it relates to our backlogs as well. So that's the greatest indicator to us in terms of future performance. That gives us, I'll call it a 6- to 9-month window in terms of what we should expect. And so when we look for ags in particular, next year, we're looking at volumes in the low single-digit range in terms of improvement over '24 and pricing in the mid- to high single digits. So again, it's supported by the backlog of business. And I'd say -- I know you didn't ask the question, but I offer up cement as well as we look into cement another year of positive growth in terms of volume, low single digits and we're expecting pricing in the mid-single-digit range versus 2024. But again, I guess that's supportive from the backlogs and the underlying, I'd say, work that we continue to bid and secure.

Thanks, Randy, and I appreciate the bonus answer to in there as well. Can I ask in terms of M&A. So typically, we see outsized commercial synergies and acquired assets a year after acquisitions. And so I'm wondering if you could just talk about the assets that you folks acquired over the past year plus. Are you expecting outsized margin improvement on the acquired assets, '25 versus '24.

Yes. I guess when we look at -- I mean, obviously, that's part of our DNA. The expectation is as we acquire companies, we bring certain things to that business that they didn't have, right? So it's everything from operational performance, commercial engagement with the customers, procurement synergies to name a few. If you look at the businesses that we bought in '24, I think we actually call it out through the Hunter acquisition, and we raised our expectations in around synergies, and that continues to progress. That deal, in particular, was a core asset in a market that we have particular strength and really added to the network of cement-producing facilities as well as logistic capabilities. So it's really a combination of all those things that go into driving underlying performance. And our expectation -- and you can name any of the deals, right? We did 40 deals you should expect from us kind of what we've historically done, which has added value and improvement in all of those businesses. And I think as we're laying out as Jim talked about, the expectation is for another year of growth in terms of underlying margins.

Your next question is from the line of Trey Grooms with Stephens.

So maybe a higher-level question for Jim. With your new position as CEO of CRH, should we expect any changes in the strategic direction of the company under your leadership?

Trey, good morning, good to hear from you. Trey, as you know, CRH is run by an experienced senior leadership team. And as CEO, I'm privileged and excited to be asked to lead this strong team into the next phase and the next year of CRH growth. We worked very closely over the last decade, formulating and successfully executing on our differentiated customer connected solutions strategy. So you should expect a continuation of this successful strategy, but also leaning more into the areas of innovation and technology, trying to making construction quicker, simpler, safer and driving continued industry-leading performance. Going forward, you should also expect us to maintain a relentless focus on performance, delivering consistent double-digit growth and margin expansion through the cycle. Now also, as you know, in CRH, we have an industry-leading and proven track record of compounding growth, but it's not just growth, but quality growth. And whilst maintaining our financial control and discipline, and of course, with all capital allocation decisions assessed through that lens of maximizing value for shareholders. Now last year, remember, Trey, we had the opportunity, we spoke about the strength of our balance sheet and the $35 billion financial capacity we had for the next 5 years. And we're off to a great start in 2024 with $8 billion deployed, investing across the construction value chain and increasing our exposure to higher growth markets with secular tailwinds. Now we will continue to proactively manage our portfolio recycling and reallocating capital into higher growth and high returning opportunities. And for me, that's the real strength to CRH. When you combine our differentiated strategy, our unmatched size and scale, our uniquely connected nature of the portfolio, we drive consistent outperformance and superior returns for our shareholders. Now as I mentioned earlier this morning, we're going to have the opportunity later in the year to discuss all this in more detail to outline our growth ambitions for the business and also the opportunity for everyone to meet the wider management team.

Your next question comes from the line of Keith Hughes with Truist.

My question is on M&A, obviously, a big part of the story with CRH. But as you look into '25, is there certain areas you're focusing on and really what I'm getting on the question, a lot of peers who just want to buy aggregates or mostly aggregates. Talk about how you view targets in terms of the mix of aggregates, ready-mix and asphalt, what you can do that others can't do with M&A.

Keith, yes, I think, as you know, with CRH, we're really uniquely positioned from an M&A perspective. And really, nobody else in our industry has the scale, the breadth or the financial capacity to grow like we can. And really it's the connected nature of our portfolio that we have provides multiple avenues for investment, really multiple optionality driving higher growth and superior returns. Now in 2024, we had a really good year. Randy mentioned a $5 billion invested in 40 acquisitions. That's almost 1 every 10 days. That's not unusual, Keith, for us in CRH, and we have a long and successful track record of M&A, dating back over 50 years. I think looking into 2025, we certainly see it as an opportunity-rich environment, and we have a full and active pipeline supported by significant financial capacity. And I think it is that connected nature of the portfolio, Keith. When we can -- where we really outperform is where we can build out across our existing footprints in platforms, in businesses, which has megatrends, supported megatrends in the areas of roads, in energy, in water. And when we invest in those businesses in some higher growing regions, higher population growth, and where we're really outperforming when we connect those acquisitions into our existing platform, that's when we can get real early acceleration on synergies, and that's what's been driving a lot of that outperformance in the last 5 or 6 years in CRH. So I hope that gives you a bit of color what we're thinking. The pipeline is good into 2025, I'm feeling positive.

Okay. One other M&A, this is finished. In America Building Solutions, you built a very large outdoor living really the whole complement products for outdoor living. Is there another step here to something that's similar that you would go into with kind of the theme as you do M&A in that sector?

Yes, Keith, I think if you look at the outdoor living, it's actually the area when we entered the U.S. almost 50 years ago, that's where we stepped out first in fact. So that's a business that we've built up over the last 50 years, a really fantastic business, one of the best-performing parts of CRH in the last 5 or 6 years. It's a business which is fundamentally based off concrete and aggregates, right? The vast majority of the business is it links back. That's the blood line for the business. So it really is connected. It's a connected part of that folio of our portfolio rather. And going back to the earlier question, it's opportunities like that. When we can acquire businesses like that in fast growing regions and connect it back into our existing footprint, that's what really makes -- that's where we outperform.

Your next question comes from the line of Ross Harvey with Davy.

I wonder, can you provide an update on the cost environment and how you see that playing out over 2025?

Ross, Alan here. And yes, I'll take this one. We are still operating in an inflationary cost environment. We see it particularly in the areas of labor, raw material and subcontractor costs. When you put all that together, overall, we expect mid-single-digit cost increases. And as Randy highlighted earlier, this highlights the importance of our continued pricing momentum in the business. And in that context, I think we should reiterate that underpinned by our customer connected solution strategy, continued focus on commercial excellence and operational excellence, we see 2025 as another year of margin expansion.

Your next question comes from the line of Kathryn Thompson with Thompson Research.

I wanted to focus on the infrastructure end market. You highlighted your top 2 states, Texas and Florida. [ TxDOT ] remains a leader with state funding with billions of projects later to the start of the next 4 years. And Florida DOT has a 10-year construction only spending forecast of a little over $100 billion. Against that backdrop, a bit has changed since November with the elections. And there's some rumblings about concerns with U.S. infrastructure funding. What are CRH's thoughts balancing very strong state funding measures along with your thoughts on federal funding for infrastructure.

Yes. Thanks, Kathryn. It's Randy here. Well, you presented the facts well, right? Real strong underlying investments, certainly in key states for us in Texas and Florida. But I guess if you take a step back, and you've been around as well for a while covering the sector for sure. Infrastructure investment has historically been bipartisan and I think there's nothing going to change in terms of our view in regards to the current administration. As you call out, it's the combination really of the investment through IIJA plus the states that gives us a lot of encouragement. I think there's -- it's a beautiful combination between kind of the underlying activity to maintain the existing infrastructure, but also what we're seeing is longer-term projects, multiyear projects that deal with capacity expansion in states like you called out. So it's that underlying investment, the understanding -- I mean look, the current administration has a history of understanding what it takes to build and move economies along. So I don't think we see anything changing. In fact, if you listen to what the new transportation secretary says around wanting to go after big infrastructure projects and eliminate the red tape which will speed up execution. I think that's obviously a supportive comment. But we're coming off and certainly at historic levels of state and federal funding but it's just the beginning. I called out just a commenting around only 1/3 of the underlying funding has been deployed. I think we're in a terrific position to take advantage of that longer term. I think we maybe you said it last year that we thought this was -- this 5-year bill was actually going to take 7 years. I'd say it's probably still trending that way. And our top 5 states will be the net receiver of about 20% of the overall funding in IIJA so I think we're strategically well placed. And I guess for us, and I mentioned it earlier in and around kind of the pricing environment, the backlogs would be indicative of that kind of momentum. So we're bidding more. We're securing our share of work so volumes, dollars and most importantly, margins are improving. So -- but I think generally, there's an understanding with this administration or others are the state levels that when the U.S. infrastructure is strong, the overall economy is strong.

We have time for 1 more question, and that question comes from the line of Gregor Kuglitsch with UBS.

So my question is on margins. So last year, I think it was up another sort of nearly 200 bps, very strong. So my question to you is where are we on that journey? And how much more upside do you think there is in the margin trajectory for the business?

Gregor, yes, last year 2024, yes, another strong year for margin expansion, up 180 basis points. And in fact, what we're most proud of is that, that's the 11th consecutive year of margin expansion over that period, we've delivered 900 basis points of improvement, effectively doubling our margin over that period and really benefiting from our differentiated and customer connected solutions model and that ability we have to play across the construction value chain. Over that period, we've been leveraging the scale and scope of the organization, delivering consistent year-on-year improvement. And as you know, in CRH, we have a really deeply embedded culture of continuous business improvement right across the business, right? And that entails really a relentless focus on operational and commercial excellence, really strict cost control. And particularly since the great financial crisis. We've had a real strong focus in trying to variabilize as much of our cost base as we can over the last decade. That, together with really active portfolio management, reallocating capital to higher growth and higher-margin businesses, and as we announced last year, the very significant step-up in our growth CapEx, which is also helping to drive further margin expansion. So a lot of progress made, stepping off a good year again in 2024. But we certainly, by no means, have reached the limit of our margin ambitions. It's really -- this is a journey we're on Gregor. It's not a destination in terms of margin expansion. Well, I think that's all we have time for today. I'd like to thank everybody for your participation. I hope we've managed to answer all of your questions. But as always, if you have any follow-on questions, please feel free to get in touch with our Investor Relations team. We look forward to talking to you again in May when we will report our first quarter results.

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