Since taking over the reins at CRH in January, Albert Manifold has concentrated on getting on with managing the business. This, understandably, has meant that the group chief executive of Ireland’s biggest company, with its global interests, has spent much of his first six months in office travelling extensively.
The diversified international building materials group was informed, formed through a 1970 merger of two leading Irish public companies, Cement Limited, established in 1936, and Roadstone, established in 1949; the newly-formed group was the sole producer of cement and the principal producer of aggregates, concrete products and asphalt in Ireland. Today it is a leading international player in its industry, with operations in 35 countries; it is the largest building materials company in North America; a regional leader in Europe, and has a growing presence in the Asian economies of India and China.
Fittingly, the group headquarters is at Belgard Castle, a three-storey 18th century house attached to a medieval tower on the outskirts of the Irish capital Dublin.
The group has 3,400 locations; employs 76,000 people worldwide; has €18 billion sales revenues, and some 300 million tonnes of products (including equity accounted investments).
As an example of its reach,
Equally as impressive are its 15+ billion tonnes of proven and probable reserves; around the globe. In Ireland it has over 128 million tonnes of cement reserves and 892 million tonnes of aggregates reserves, in Poland 209 million tonnes; Finland 174 million tonnes and Ukraine 162 million tonnes. In Eastern Mediterranean and Asia, CRH’s 50% share of equity accounted investments has 155 million tonnes of reserves in Turkey, and 105 million tonnes in India. In America, aggregates reserves are substantial at over 13 billion tonnes, with annual production volumes in 2013 of 122.6 million tonnes. In addition, asphalt volumes were over 37 million tonnes while ready-mixed concrete was nearly 6 million m³.
Products are used for both new-build and repair and maintenance construction needs in the residential, non-residential and infrastructure sectors.
The group’s full year results for 2013 show sales of €18 billion, down 2% on a like-for-like basis, reflecting a slow first half (down 6%) and an improved second half (up 2%), although estimates for 2014 are for sales nearer €19 billion, according to a Bloomberg chart from an interview in February.
EBITDA came in at €1.475 billion overall, a decrease of 6% from 2012. Sales increased in America, but decreased in Europe. In all, the group reported a net loss before tax of €215 million in 2013 compared to profit of €646 million in 2012, due principally to a non-cash impairment charge of €650 million, arising from the comprehensive strategic portfolio review that CRH is currently undertaking.
This gives some idea of the magnitude of the company to which Albert Manifold succeeded Myles Lee as Group Chief Executive on 1 January 2014.
He also serves as managing director of CRH Europe. Prior to this, he served as the Chief Operating Officer of CRH from January, 2009 and as Group Development Director from 2005. He joined CRH in 1998 as finance director Europe Materials, and subsequently held various senior management positions within the division. An accountant and MBA, Manifold, 51, as CRH COO is said to have “played a significant role in CRH’s response to the challenging economic and trading conditions of recent years and in furthering CRH’s development in emerging markets, particularly in Asia.”
Indeed, CRH says that from a strong developed world base, it is growing its presence in emerging regions. “Part of my job is to position us best for growth” says Manifold.
In the early 2000s, CRH started a detailed review of Asian markets to identify possible opportunities to enter the building materials sector in this region. Market size and scale, population growth and GDP per capita were identified as key leading indicators for the industry.
China, the largest cement market in the world, and India, the second largest, were identified as being of particular interest. With strong population growth in both countries, GDP growth of 7-9% per year and progressive urbanisation, the development potential was clear and CRH focussed on these two countries as the primary targets for entry into Asian markets.
In February 2007, CRH completed its first transaction in China with the purchase of Harbin Sanling Cement Company in Heilongjiang province, north-east China, and in January 2009, it established a more significant position with the acquisition of a 26% associate shareholding in Yatai Building Materials Company, the leading player in China’s north-eastern provinces (Heilongjiang, Jilin and Liaoning) and a top 10 cement supplier in China.
In May 2008, CRH entered the Indian building materials market through the acquisition of a 50% stake in My Home Industries, a cement producer headquartered in Hyderabad with modern production facilities, strong market positions and excellent reserves in central and eastern Andhra Pradesh. In August 2013, My Home Industries, CRH's joint venture partner in India, acquired Sree Jayajothi Cements, a 3.2 million tonnes/year cement company based in southern India.
In October 2013 CRH announced the official opening of its regional headquarters in Singapore, to oversee the expansion of its existing interests in India and China, and to pursue further development opportunities in the wider Asia region.
CRH has traditionally been a very acquisitive group, and continues to plan for further acquisitions, although this is likely to be in parallel with the sale of some of its impaired assets.
The proposed
Indeed, since the start of 2014 CRH has spent €60 million on acquisitions and investments covering seven “small” transactions. In 2013, the group spent €720 million on acquisitions.
As for the potential opportunities arising from the merger between Holcim and Lafarge which will see around €5 billion worth of assets sold off in order for it to meet competition approval, Manifold said that CRH is always looking at business opportunities, but did not disclose any firm interest in this particular transaction, although admitted they would watch the progress “very carefully.”
He said the Holcim deal would be "very significant" for the global cement industry, but noted that cement only makes up 15% of CRH’s broad-based business and the Irish group will continue to grow from its existing platforms. CRH is undertaking its own asset disposal round, as part of its strategic portfolio review.
In February, the company said it would be selling 45 subsidiary companies or 10% of its asset base with another 20% to be reviewed. A number of sales processes, regarding the initial 10%, are already under way. Of the remaining 20%, Mr Manifold said that half will be kept, with the other half (representing 7% of annual group earnings) still under review.
In addition, the Group was targeting for €450 million in savings between 2012 and 2015 but Manifold said this figure had now been increased to €535 million between those dates. CRH is on track to deliver the incremental savings of €100 million targeted for 2014, which would bring cumulative savings since 2007 to €2.5 billion by the end of 2014.
In a TV interview with Bloomberg following the company’s annual results announcement in February of this year, he said: “I think what we saw in the second half of 2013 were new trends coming forward both in the US and in Europe.
“We saw stabilisation in Europe thankfully after five years of very tough declines. In the US we saw a continuation of the recovery we saw in the second half of 2012. So, good momentum coming into 2014, which allows us to make that statement that we see this as being a year of growth.”
“The US is easier to read. It is a more sustained recovery there. Although it is not a fully-fledged recovery, it is more sustained and easier to read. In Europe it is still very much a patchwork quilt. I think there are certain countries that are still challenged and on the downside there are issues still with unemployment and high debt levels. Generally speaking some of the core parts of Europe are seeing stabilisation, eg Germany and the Netherlands, although France is a bit of worry. There is certainly good momentum in Eastern Europe.”
As for emerging markets, which account for 15% of CRH earnings before interest, taxes, depreciation and amortisation (EBITDA), he put China and India together although they are two “very different dynamics.”
“India really has not pushed on as it should in the last couple of years and the fruits of that are coming home now. They have not made the fundamental changes in their economy over the last three or four years,” he told Bloomberg. CRH is now waiting to see what moves the new Indian government makes.
“China is a different story. China is much more of a carefully managed story and they have got the difficulty there of trying to rein in spending and at the same time keep growth going. They seem to be managing it well and it seems to be under control but it needs to be watched.”
He said that CRH will keep its eye on costs but “we are focussing now on growth going forward.”
