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Institute of Chartered Accountants in Ireland CRH Acquisition Success Myles Lee Finance Director CRH plc October 2007 PowerPoint Presentation
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Institute of Chartered Accountants in Ireland CRH Acquisition Success Myles Lee Finance Director CRH plc October 2007

Institute of Chartered Accountants in Ireland CRH Acquisition Success Myles Lee Finance Director CRH plc October 2007

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Institute of Chartered Accountants in Ireland CRH Acquisition Success Myles Lee Finance Director CRH plc October 2007

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  1. Institute of Chartered Accountants in Ireland CRH Acquisition Success Myles Lee Finance Director CRH plc October 2007 Institute of Chartered Accountants in Ireland, October 2007

  2. CRH Origins • 1970 merger of Cement & Roadstone formed Cement Roadstone Holdings, later CRH • Rapid Irish growth in 1970s but CRH a big fish in small pond – 95% of business in Ireland • Experienced and ambitious management team with strong cash flow to deploy • Strategy evolved - invest at home to be the low cost producer; grow by acquisition o/seas • In late 1970s – began to actively seek opportunities outside Ireland Institute of Chartered Accountants in Ireland, October 2007

  3. 1980s €325m €440m 49 acqs €1.3Bn 19 : 64 : 17 1990s €1.3Bn €3.8Bn 189 acqs €6.7Bn 9 : 36 : 55 2000s €6.7Bn €10.9Bn# 402 acqs Now €20Bn+ 7 : 41 : 52 CRH Growth % Balance* IRL:Europe:US Sales Acquisition Activity Sales 1970s €26m €43m 16 acqs €325m 62 : 33 : 5 M&A part of CRH DNA Institute of Chartered Accountants in Ireland, October 2007 * Basis: Sales # 2000 – H1’2007

  4. Delivering Superior Performance …. PBT +20% EPS +17% DPS +12% 20% CAGR in Total Shareholder Return since 1970 Institute of Chartered Accountants in Ireland, October 2007 Growth Index: 1989 = 100

  5. CRH Today • International Building Materials Group; Market Cap c.€14bn; Top 6 in sector • Now in 30 countries; 3 continents; 3,300+ locations; 80,000+ people • Annualised Sales over €20bn focussed on three core businesses • Primary materials • Value-added building products • Building materials distribution • Evenly balanced across geographies, products and sector end-use • Listed Dublin (CRH.I), London (CRH.L), NYSE (CRH); Eurotop 300 stock Institute of Chartered Accountants in Ireland, October 2007

  6. Three Core Businesses – Focused Diversity Primary Materials Building Products Distribution 2006 Sales €7.7Bn Cement/RMC/ Concrete Products 31% Aggregates/Asphalt 36% Contracting Revenues 33% 2006 Sales €6.8Bn Concrete Products 60% Clay Products 9% Glass Fabrication 9% Insulation 6% Const Accessories 6% Building Envelope 10% 2006 Sales €4.2Bn B Merchants - Europe 47% DIY - Europe 19% Specialist Dist - US 34% Institute of Chartered Accountants in Ireland, October 2007

  7. Geographic Presence 30 Countries All 50 US States Broadly 50/50 balance between Americas & Europe Institute of Chartered Accountants in Ireland, October 2007

  8. Development Strategy Institute of Chartered Accountants in Ireland, October 2007

  9. Clear Strategy • Stick to core businesses in building materials - but broad • Invest at “home”; be the low cost market leader • Develop “overseas”; create platforms for future growth • Generally mid-sized deals with some larger transactions • Negotiate deals that meet sellers needs ... and our needs • Rigorous approach to evaluation, approval and review • Objective is to maintain and develop a balanced portfolio • All underpinned by strong governance, prudent financing, transparent reporting Twin imperatives ... performance and growth Institute of Chartered Accountants in Ireland, October 2007

  10. Development Teams • Multiple development teams embedded within existing operating units • Each team has a mix of professional skills and operational experience • Reporting to and directed by long-serving senior line managers • Responsible for identifying, evaluating, concluding and integrating opportunities • “Living with the consequences” drives rigorous evaluation • Central HQ-based team targets new regional and product opportunities Institute of Chartered Accountants in Ireland, October 2007

  11. Courtship/negotiation • Patient approach recognising evolving owner circumstances • Deals tailored to meet varying owner (and our) needs • Upfront clarity with regard to post-acquisition priorities • Integration • Approach tailor-made for each deal • Implement CRH MIS, reporting, budgeting, cash and capex controls • Transition to CRH Best Practice • And then pursue growth plans • Evaluation • Rigorous qualitative operational review process and due diligence • Evaluation based on prudent margin, cash flow, term value assumptions • Strict Board approval process, with subsequent 3 year look back Acquisition Approach • Identifying deals • Ongoing contact with extensive 25 year+ target database • Each deal done opens doors to further opportunities • CRH scale ensures access to all larger industry transactions Devolved process - but rigorous and controlled Institute of Chartered Accountants in Ireland, October 2007

  12. Acquisition Process - Key Guidelines • Seek well managed businesses with good market positions • Maintain continuity of contact with potential targets • Communicate upfront CRH post-acquisition objectives • Set realistic timeframe and targets – no blue skies • Maintain control of process and advisers • …….Always remember #1 priority is to create shareholder value ……. ……. Post acquisition - Above all don’t make it worse ……. Institute of Chartered Accountants in Ireland, October 2007

  13. Americas Materials Strategy in Action Institute of Chartered Accountants in Ireland, October 2007

  14. Americas Materials – Growth Story • First US acquisition in 1978 in concrete products in Western states • Though US aggregates/asphalt sectors a natural focus given Irish expertise • Took till 1985 to find a suitable entry point with acquisition of Callanan • Significant position in Albany region of Upstate NY, sales US$77m • Production of 2m tons aggregates with 289 employees Institute of Chartered Accountants in Ireland, October 2007

  15. Americas Materials – 20 Years of Growth Mt Hope NJ Shelly Ohio US Aggregates West/Central Thompson McCully Michigan Mountain Companies Kentucky Tilcon New England NY/NJ SE Johnson Ohio/Michigan Callanan NY # of Deals 1 1 0 1 0 00 1 2 46 6 4815171620 1012 13 1985 – 2005: 137 acquisitions at a cost of US$4.3Bn Institute of Chartered Accountants in Ireland, October 2007

  16. New England $0.6 Bn Sales Since 1988 New England $0.6 Bn Sales Since 1988 New England $0.6 Bn Sales Since 1988 New England $0.6 Bn Sales Since 1988 2005 Volumes Aggs 147mt Asphalt 37mt RMC 6.5m m3 NY / NJ $0.7 Bn Sales Since 1985 NY / NJ $0.7 Bn Sales Since 1985 NY / NJ $0.7 Bn Sales Since 1985 NY / NJ $0.7 Bn Sales Since 1985 NY / NJ $0.7 Bn Sales Since 1985 West $1.4 Bn Sales Since 1995 West $1.4 Bn Sales Since 1995 Central $1.2 Bn Sales Since 1993 Central $1.2 Bn Sales Since 1993 Central $1.2 Bn Sales Since 1993 Americas Materials – End-2005 • Sales $3.9Bn from 4 regional divisions; strong market shares and aggs reserves • Vertically integrated; highway construction activities as an outlet for aggs/asphalt Institute of Chartered Accountants in Ireland, October 2007

  17. Americas Materials – APAC Opportunity • APAC was a division of Ashland Inc, primarily focussed on chemical sector • Ashland commenced a silent auction process in late ’05 / early ’06 • We engaged and signed a exclusivity agreement in mid-June 2006 • Then mobilised CRH resources and undertook extensive due diligence • Concluding CRH’s largest ever acquisition by end-August 2006 Institute of Chartered Accountants in Ireland, October 2007

  18. APAC – New Americas Materials Platform • Major expansion into midwestern and southern US states • Significantly increased US aggregates and asphalt positions • Substantial scope for administrative, operational and purchasing synergies • With selective disposals to increase the materials focus … • … and aggregates/other downstream acquisitions over time Institute of Chartered Accountants in Ireland, October 2007

  19. New England $0.6 Bn Sales Since 1988 ‘05 Vols + APAC Aggs 176mt Asphalt 65mt RMC 7.3m m3 NY / NJ $0.7 Bn Sales Since 1985 West $1.4 Bn Sales Since 1995 APAC $2.4 Bn Sales Since 2006 Central $1.2 Bn Sales Since 1993 Americas Materials – End-2006 New England $0.6 Bn Sales Since 1988 New England $0.6 Bn Sales Since 1988 • Annualised sales now c.$7Bn across 5 regional divisions • 1985 to 2006 – 157 deals at a combined cost of $5.7Bn NY / NJ $0.7 Bn Sales Since 1985 NY / NJ $0.7 Bn Sales Since 1985 West $1.4 Bn Sales Since 1995 West $1.4 Bn Sales Since 1995 Central $1.2 Bn Sales Since 1993 Central $1.2 Bn Sales Since 1993 Institute of Chartered Accountants in Ireland, October 2007

  20. 2006 Development Spend • APAC just one element of a record €2.1Bn 2006 development spend • Also completed 68 other deals across CRH operations €Bn Europe Americas Total Materials 0.1 0.2 0.3 Products 0.3 0.4 0.7 Distribution 0.1 0.1 0.2 Total 0.5 0.7 1.2 Institute of Chartered Accountants in Ireland, October 2007

  21. H1 2007 Development Spend • Further €1Bn spend on 35 transactions in H1 2007 across CRH operations €Bn Europe Americas TotalMaterials 0.2 <0.1 0.3 Products 0.1 0.2 0.3 Distribution 0.4 <0.1 0.4 Total 0.7 0.3 1.0 • And c.€0.3Bn announced to-date H2’2007 for 4 Americas Materials businesses Institute of Chartered Accountants in Ireland, October 2007

  22. Going Forward Institute of Chartered Accountants in Ireland, October 2007

  23. Acquisitions Market Today • Recent trends and challenges • Large Industry transactions and Private Equity interest in sector … • … drove higher acquisition multiples over recent years, however, … • … M&A appetites and multiples have cooled with recent market turbulence • CRH Going Forward • Changing market backdrop likely to lead to increased opportunities • Still lots to achieve in our existing markets and products … • … plus opportunities in developing regions Institute of Chartered Accountants in Ireland, October 2007

  24. Overall • Sustained focus on operational performance is the foundation for growth • CRH Development Strategy continues to evolve and deliver ….. …. our clear and consistent strategic vision …. “to be a leading international building materials group delivering superior performance and growth” Institute of Chartered Accountants in Ireland, October 2007

  25. Institute of Chartered Accountants in Ireland CRH Acquisition Success Myles Lee Finance Director CRH plc October 2007 Institute of Chartered Accountants in Ireland, October 2007