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CASE STUDY

CRH plc: dimensions of successful corporate strategy

Mike Moroney

Even with a small corporate headquarters in a challenging industry, corporate strategy can be the engine for growth and development, generating substantial value-added. However, such dimensions of this level of strategy remain arcane. These issues are explored in this case study on CRH, which is an exemplar of corporate management.

In February 2013, CEO Myles Lee announced full-year results for 2012 for CRH plc, an international leader in building materials. Since 2007, in common with its peers in the sector, CRH had been hit by the severe global recession in construction, unprecedented in its scale and synchronised nature since the 1930s. Between 2007 and 2010, CRH suffered a peak-to-trough decline in earnings of three-quarters. However, the outturn for 2012 confirmed a level performance over four years, tentatively indicating a cyclical floor. Moreover, by adapting its business and port- folio to new realities, CRH had positioned itself for cyclical recovery and to capitalise on acquisition and other oppor- tunities arising from over-leverage in the industry. As ever, Myles Lee and his management team knew that success depended on CRH’s own corporate-led strategy and actions.

The building materials industry

The industry involves the extraction, manufacture and supply of building materials, products and services for con- struction activity. These include primary materials (such as cement, aggregates, ready-mixed concrete and asphalt products), heavyside building products (e.g. concrete prod- ucts, road vaults and bricks), lightside building products (e.g. plumbing, heating, electrical and lighting products) and distribution (‘merchanting’ and DIY). Sectors served are residential, industrial/commercial and infrastructure/public works. End-uses comprise early-cycle new construction work and late-cycle repair, maintenance and improvement (RMI). Building materials are characterised by several distin- guishing features. Cyclicality derives from the fact that con- struction cycles reflect general economic cycles. However,

construction cycles are longer in duration and larger in amplitude, while their timing varies between countries. In developing economies, construction demand tends to lead GDP growth, in contrast to a lagged relationship in mature economies. In particular, capital-intensive, heavy- side investment is characterised by long-term, large-scale commitments, significant lead times and, therefore, ‘lumpy’ additions to capacity. In terms of structural growth, building materials manifest a dual mature/dynamic character. In developed (Western) markets, with most buildings and infrastructure already built, construction is stable and largely RMI-based, with population and public investment prime drivers of activity. 1 By contrast, in developing markets (Asia, Eastern Europe and Latin America) and in some Western countries at an earlier stage of economic development, long-term construction demand is closely linked to economic growth. In general, building materials and products are com- modities, have long life cycles, and are similar across markets and largely stable over time, with price-based competition predominant. Production processes are standard. Technology is non-proprietary and, for some products, relatively un- sophisticated. Innovation centres on the enhancement of manufacturing processes, improvements in the ease of use and installation of products and the provision of value- added services and solutions to the customer. Traditionally, the building materials industry has been fragmented. Production is linked to the location of appropri- ate reserves, with proximity to the end market being a key factor. Because building materials and products are charac- terised by a high weight to value ratio, high transport costs rapidly outweigh scale economies, with the result that the radius of economic activity and competition often can be

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150 kilometres or less. In addition, markets are local in nature due to differences in building regulations, con- struction practices and product standards. Success is often determined by micro-market factors like locality, quality, reliability of service and price. 2 As a result, the industry developed over time as a large number of small and medium-sized firms, often family owned and run. Structurally, consolidation is an ongoing trend (par- ticularly in primary materials and merchanting) reflecting supply-side concentration and significant merger and acquisition (M&A) activity. During almost two decades to mid-2009, there were 20 large corporate deals involving total consideration of US$125 billion (£82.4bn; €97.5bn) 3 and an average value to EBITDA 4 multiple of 10.3 times. 5 In addition, large international building materials compan- ies, including CRH, had over time leveraged strong local market positions and/or product competences to expand into other regions and areas of activity. Furthermore, local differences between geographic markets were erod- ing, driven by institutional harmonisation of regulations, standards and tendering, convergence in building prac- tices, consolidation of customers and homogenisation of their needs. None the less, the underlying logic of frag- mentation prevailed. Globally, the top five producers sup- plied only one-fifth of demand for cement, and one-twentieth for aggregates. 6 In the USA, while the top 10 concentration ratio was 75% for cement, in aggregates it was 30% and in asphalt 25%, with two-thirds of capacity privately held. 7 Against the macro backdrop of weakening consumer and investor confidence in the Eurozone balanced by an improving outlook in the Americas, the outlook for building materials remained cautious. Notwithstanding cyclical falls of over a quarter in construction output in both the USA and Europe, the prospects were for an ‘L-shaped’ recovery of sub-trend growth. 8 Structurally, overcapacity and low utilisation rates prevailed in certain mature heavyside markets, particularly in Western Europe, with the prospect of consolidation, including closure of older, less efficient facil ities. 9 Such restructuring was likely to be exacerbated by the hangover from the M&A boom, as heavily indebted firms sought to deleverage by selling assets. 10 Nor could it be assumed that developing markets would continue to pro- vide a growth stimulus. Some China commentators were signalling a property correction in the short term and a peak- ing of cumulative cement consumption from mid-decade. 11

Profile of CRH

Headquartered in Dublin, Ireland, CRH had annual revenues of €18.7 billion (£15.8bn; $24.0bn) in 2012 and employed 76,000 people in 3,500 locations in 35 countries worldwide. The Group enjoyed strong positions in developed markets in Europe and North America (85% of EBITDA)

and a growing presence in emerging economies in Asia, Central and Eastern Europe and Latin America (15% of EBITDA). CRH’s prominence was recognised by many industry awards for corporate governance, 12 financial reporting, investor relations, and excellence/innovation in environmental and safety practices.

History, growth and development

CRH was formed in 1970 following the merger of two leading Irish public companies, Irish Cement Limited (established in 1936) and Roadstone (1949). At that time, CRH was sole producer of cement and principal producer of aggregates, concrete products and asphalt in Ireland, with Group sales of €26 million, 95% in Ireland. The Board of CRH set a clear strategy for the development of the Group:

to seek new geographic platforms in its core businesses and to take advantage of complementary product opportu- nities in order to achieve strategic balance and to establish multiple platforms from which to deliver performance and growth. In 40-plus years of operation, the Group has undergone major growth through several phases of devel- opment, as described below. In general, change has been evolutionary, involving a managed, learning process of building, augmenting and layering competences.

Organic market penetration in Ireland (from 1970). During the 1970s, Irish construction enjoyed a boom on the back of a modernising economy. The newly merged CRH capitalised on this favourable environment through its vertically integrated and leading positions in heavyside building materials and products.

Acquisition-led overseas expansion (from the late 1970s). In the late 1970s, with a view to spreading risks and opportunities more broadly, CRH made a strategic decision to invest in familiar business areas overseas, through bolt-on acquisitions. Early expansion was in Western Europe (1973). The second domain of geographic growth was North America. In 1977, Don Godson (later Chief Executive, 1994–2000) went to the USA with ‘a telephone and a cheque book’. By 2000, the Americas accounted for over half of Group turnover and profits. CRH’s presence in emerging regions gathered pace from the mid-1990s. Initial steps in Latin America were followed by more substantial investment in Eastern Europe (notably Poland and the Ukraine) and, latterly, in Asia (China, India).

Product focus, larger acquisitions (from the late 1990s). CRH also expanded in a limited, but highly rewarding, way into new product areas, including merchanting and DIY, security fencing, clay brick products and glass fabrication, evolving to a more product-based organisa- tion. At the same time, leading industry consolidation,

the Group began to supplement its traditional mid-size deal flow with larger acquisitions. Developing value-based growth platforms (from the early 2010s). By the early 2010s, CRH’s proven business model had established a global footprint and a diverse product template. The Group adopted a more nuanced and value-focused approach to strategy, emphasising accelerated integration, greater coordination, enter- prise management and portfolio rationalisation. This approach combined the capabilities of large company disciplines with local company entrepreneurship.

Strategy

CRH’S strategic vision is to be ‘a responsible international leader in building materials delivering superior perform-

through the business cycle’ 13 with

the focus on achieving superior long-term returns. Strategy was manifested through three core principles:

1 Strategic balance. CRH was assiduous in sustaining a diversified, broad-based exposure to all segments of con- struction demand (see Figure 1 ). This strategic balance encompassed dimensions of geography, product, sector, end-use, stage of the cycle and intensity of investment. This unique approach smoothed the effects of varying economic conditions and provided multiple platforms for growth. An indication of the severity of the industry downturn since 2007 is that, while CRH consistently outperformed peers through previous cycles, in the most recent down-cycle both balanced and single-product companies had been affected similarly. 14

ance and growth

2 Build and grow. Particularly in developed markets, CRH’s strategic emphasis was on creating clustered groups of businesses, encompassing vertically integrated material positions and scalable products and distribution networks.

3 Value-based development. Focusing on superior short- and long-term returns, CRH emphasised continued bolt-on and larger acquisitions combined with resource-backed market entry points in emerging economies.

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CRH’s strategy was underpinned by a proven business model providing a disciplined approach to long-term value creation, and by a supportive strategic architecture (struc- ture, people and processes). CRH served the breadth of construction activity, pro- viding exposure to multiple demand drivers. Related core businesses spanned major primary materials (excluding steel and timber), building products and services for con- struction solutions (primarily heavyside concrete-based, with selected lightside) and specialist distribution (through builders’ merchants and DIY stores). In the long term, CRH’s businesses were underpinned by a high level of increasingly scarce reserves. In aggregates (sand and gravel, crushed stone) CRH’s reserves of 15 billion tonnes were equivalent to over 80 years of production and were among the highest in the sector. 15 In 2011, CRH had 690 quarries/pits in the USA and 350 in Europe. 16 A notable characteristic of CRH’s product/market portfolio was leadership ( Figure 2 ). Achieving product/ regional leadership in its chosen markets was a deliberate core strategy of the Group. Reflecting the commodity and fragmented nature of the building materials industry, CRH focused on securing and maintaining leading posi- tions in local or regional (and national) markets and in a number of product segments or niches. For certain product categories, CRH was a leading player on the global stage, ranking numbers two and three in aggregates and asphalt, respectively. 15 Unlike its peers, CRH operated a federal structure, com- prising a small central headquarters and four regionally focused product divisions ( Figure 3 ). To capitalise on local market knowledge, a high degree of individual responsi- bility was devolved to experienced operational man- agers, within Group guidelines and controls. According to Dr Jack Golden, Human Resources (HR) Director: ‘While the local operating units have operational autonomy, they do not have independence.’ At the same time, a strong team emphasis and collective identity prevailed, reflecting a robust corporate culture.

Figure 1 Products and markets

team emphasis and collective identity prevailed, reflecting a robust corporate culture. Figure 1 Products and markets
team emphasis and collective identity prevailed, reflecting a robust corporate culture. Figure 1 Products and markets
team emphasis and collective identity prevailed, reflecting a robust corporate culture. Figure 1 Products and markets

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Figure 2 Management and organisation

642 CRH PLC Figure 2 Management and organisation Figure 3 Group organisation schematic CRH adopted a
642 CRH PLC Figure 2 Management and organisation Figure 3 Group organisation schematic CRH adopted a
642 CRH PLC Figure 2 Management and organisation Figure 3 Group organisation schematic CRH adopted a

Figure 3 Group organisation schematic

and organisation Figure 3 Group organisation schematic CRH adopted a rigorous approach to evaluation, approval and
and organisation Figure 3 Group organisation schematic CRH adopted a rigorous approach to evaluation, approval and
and organisation Figure 3 Group organisation schematic CRH adopted a rigorous approach to evaluation, approval and
and organisation Figure 3 Group organisation schematic CRH adopted a rigorous approach to evaluation, approval and
and organisation Figure 3 Group organisation schematic CRH adopted a rigorous approach to evaluation, approval and
and organisation Figure 3 Group organisation schematic CRH adopted a rigorous approach to evaluation, approval and
and organisation Figure 3 Group organisation schematic CRH adopted a rigorous approach to evaluation, approval and

CRH adopted a rigorous approach to evaluation, approval and review. The twin requirements of per- formance and growth were continually reinforced, with entities having to earn the right to grow. Planning was formalised and interactive, with stretch targets for financial and operational output measures. Performance measure- ment was timely, formal and rigorous, facilitating early critical review of underperformance, allowing appropri- ate corrective measures to be put in place and enabling senior management to draw broader lessons. Continuous improvement was relentless, as demonstrated by ongoing programmes of benchmarking and best practice. Products and processes were continually re-engineered to yield higher returns, primarily through greater efficiencies, but also from selective expansion into related products and

but also from selective expansion into related products and regional markets. Ongoing development investment was roughly
but also from selective expansion into related products and regional markets. Ongoing development investment was roughly
but also from selective expansion into related products and regional markets. Ongoing development investment was roughly

regional markets. Ongoing development investment was roughly equivalent to the level of depreciation through the cycle 17 and incorporated new plant, capacity extensions and plant upgrades. The value of CRH’s rigorous management processes was evident in its internal response to the severe industry downturn post-2007. CRH put in place a broad-based, multi-year programme, focused on reducing the cost base, a sharpened commercial focus involving resizing businesses and resetting capacity, optimising cash generation and maintaining a strong balance sheet. 18 In the five years to 2012, CRH delivered industry-leading cumulative annual- ised savings of €2.2 billion across structural, process and procurement components, of which over 40% was per- manent in nature. 19 These measures offset around half the

adverse profit impact of volume declines and cost inflation over the period. 20 CRH’s management were characterised by experience, stability and continuity. In over 40 years, there had been only six chief executives, all of whom (like many senior managers) were internal appointments. In 2012, key corporate, divisional and operational managers numbered around 400. Managers were drawn from internally devel- oped operating managers, highly qualified and experienced professionals, and owner–entrepreneurs from acquired companies, providing a healthy mix and depth of skills and backgrounds. Management turnover was low. Such con- stancy reflected long-term success through industry cycles, CRH’s market-driven, performance-related remuneration policy (comprising variable compensation, manager share options and employee share participation) and a range of formal and informal mechanisms to promote integration (see below). Collectively, low turnover, rotation and pro- motion from within resulted in a wealth of in-house indus- try knowledge and expertise.

Finances

Finance was an important component of CRH’s strategy across sector cycles. The Group was noted for its finance function, which was characterised by extensive business knowledge and operational contribution, as well as dili- gence, conservatism and prudence. Its contribution was evident in tight performance management, strong cash generation, a low Group tax charge, careful financial governance, diverse funding sources, and strategically timed equity funding to underpin subsequent develop- ment activity. CRH was widely recognised as having the best balance sheet in the sector, reflecting strong debt metrics, significant liquidity and a well-balanced profile of future debt maturities. With typical, healthy values of 6 to 7 times EBITDA/net interest cover and below 40% for net debt to equity, CRH possessed the highest long-term investment grade credit rating in the sector: BBB+ (Standard & Poors). 21 Two hallmarks of CRH’s financial management were a rigorous approach to capital allocation and a strong focus on cash generation. Operations were required to earn a mid-teen per cent return on invested capital (ROIC) through the cycle. Newly acquired businesses often found such financial rigour challenging. A cash-generative mentality pervaded all operations and was central to the Group’s evaluation and control processes. Steady-state cash earn- ings were at least two-thirds higher than reported earnings per share (EPS). Such strengths enabled CRH to fund sub- stantial development activity of reinvestment in existing assets and acquisition-led expansion without compromis- ing its core financial principles.

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Corporate strategy at CRH

Consistent with its federalist philosophy, CRH’s corporate headquarters was small, employing fewer than 100 people in Dublin. Including support staff in the four divisions, around 250 people were engaged in headquarters-type activities. Central functions comprised finance, investor relations, corporate social responsibility, compliance and ethics, internal audit, HR and business development, the last of which also acted as a resource on cross-divisional deals, strategic planning and opportunities in emerging regions. CRH’s senior executive management team of eight was similarly small and tightly focused. It comprised the CEO, COO, finance director and HR director located in Dublin, together with the CEO and COO of CRH’s Americas opera- tions and the managing directors of CRH’s European operations. Notwithstanding the centre’s small size and limited range of functions, corporate strategy was pivotal to value creation, growth and development in CRH.

Scope and diversification

By 2012, CRH was a world-leading, diversified international building materials company with extensive and integ- rated exposure across the breadth of construction activity (Figure 4). CRH’s main product concentration was in prim- ary materials and heavyside products (cement, aggregates, asphalt, RMC and concrete products). Geographically, the Group had extensive operations in the developed markets of the USA and Western Europe. CRH also had a growing presence in emerging economies, some of which were highly prospective. Principal in this regard were Central and Eastern Europe (CEE), China and India, while Latin America and the Eastern Mediterranean also fea- tured. In most cases, CRH occupied positions of market leadership, often with substantial market shares (ranging to the mid/high teens nationally and over 50% in the case of cement). CRH’s diversified scope had developed gradually over time. A preferred method of entering a new market involved an initial position in primary materials, backed by sizeable reserves. In developed economies, this was achieved pri- marily through bolt-on acquisitions which enhanced ver- tical integration, bolstered long-term reserves or filled out regional and product positions. In emerging markets, CRH targeted premium assets as an initial footprint, usually in cement and often in partnership with strong local estab- lished businesses. Over time, the combination of acquisitions, develop- ment capital expenditure and selective product extensions resulted in an integrated, complementary and scalable cluster of businesses. The same process and outcome were

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Figure 4 Balanced exposure to multiple demand drivers

PLC Figure 4 Balanced exposure to multiple demand drivers repeated across geographic markets, occasionally with
PLC Figure 4 Balanced exposure to multiple demand drivers repeated across geographic markets, occasionally with
PLC Figure 4 Balanced exposure to multiple demand drivers repeated across geographic markets, occasionally with
PLC Figure 4 Balanced exposure to multiple demand drivers repeated across geographic markets, occasionally with

repeated across geographic markets, occasionally with additions to the product portfolio. In this way, CRH typic- ally expanded from a local position to a regional presence and often a national profile. Poland represented a classic and successful case study of diversified scope. In 1995, CRH acquired an initial market presence in cement, ranking first regionally and third nationally. Subsequent capital investment of €200 million added 1.8 million tonnes of cement capacity per annum. In 1998, CRH purchased an aggregates business, diversifying further over time into RMC, pavers, asphalt, aerated con- crete, lime and bricks. By 2010, CRH was the biggest and most profitable building materials company in Poland. 22 Establishing an initial presence served another valuable function in emerging economies where a very different business and institutional context presented challenges. For a relatively low investment, the Group could learn about how the market functioned, the competitive envir- onment, the nature of government–business relations and employee skills and expectations.

Corporate parenting

Senior management were active, externally and internally, in explaining and promulgating CRH’s strategic stance, which was explicit, enduring and continually reinforced. Over time, the broad thrusts of the Group’s strategy were progressively articulated and refined. Management train- ing and meetings were used as opportunities to restate key messages, from reinforcing the performance-based ‘right to grow’ strategic mantra, to the minutiae of operational

best practice. Communications opportunities were exploited to the full. CRH’s excellence in external relations was mirrored internally, utilising communications technologies such as the website, email, intranet and bulletin boards. Regular editions of the internal news magazine Contact were read avidly by managers and employees alike. CRH operated a Group-wide management development

system to develop the critical experience base of managers, particularly when they were more mobile, in their twenties and thirties. As CRH grew bigger, this system had become more formal and structured to ensure the systematic requisite exposure to the wide range of CRH’s operations.

A key element was the management database, on which

the core 400 managers in the Group were formally profiled. In addition, there were a variety of formal development

programmes for managers, many of which involved inputs and presentations on strategy from senior manage- ment, including the chief executive. These included the Management Seminar, Development Forum, Leadership Development Programmes (one and two) and Business Leadership Programme. Promotion, rotation and mentor- ing were also instruments of manager development. HR measures to ensure greater cohesion and consistency of

policies were designed to foster coordination and a culture

of interdependence.

At division level, integrated product management had become progressively strengthened over time, led by the USA. Coordinated divisionally, ongoing best-practice activ- ities involved meetings by small teams of experts at local, regional and international levels facilitated by technical advisors. These resulted in highly innovative ideas and

exchanges of products, delivering significant synergies. There were several best-practice programmes in each of the four product-based divisions. Best practice was supple- mented by benchmarking exercises and the development of common systems platforms. In addition, divisions spon- sored formal systematic programmes to improve opera- tional performance and increase efficiency in a range of areas, including health and safety, recycling and energy recovery. Informal mechanisms underpinned integration. Corporate culture was nurtured and sustained constantly. The supportive team orientation was evident in informal mentoring, hands-on assistance and individual and team coaching common within and across entities. Flexibility prevailed, particularly as regards hierarchy and job descrip- tions. HR Director Jack Golden was involved in Group issues pertaining to France, based on his previous experi- ence as country manager there for another multinational. The Group continually reinforced its core values in formal statements of strategy, in external and internal commun- ications and through corporate folklore. More subtle mech- anisms also existed, including leading by example and clear norms of acceptable behaviour, such as the ethos of taking responsibility in internal reporting. Strong informal net- works existed among managers, even between far-flung regions of the Group’s activities, arising from organisa- tional mechanisms of interaction and from a social dimen- sion to formal events, notably the ceremonial occasion for inducting new managers accompanying CRH’s AGM and the annual Management Seminar. Finally, reflecting CRH’s performance orientation, strat- egy was buttressed by formal and rigorous measurement, evaluation and control processes, ensuring early interven- tion and appropriate corrective measures.

Acquisition-led expansion

Acquisitions were the engine of corporate growth and

development: ‘CRH has the best track record of its peer

of growing returns through acquisitions.’ 23

Historically, acquisitions accounted for 70% of CRH’s profit growth, with organic growth contributing one-quarter and currency movements the remainder. 24 In the 13 years to

2012, CRH completed almost 630 deals, spending €15.5 billion. Prior to the severe downturn from 2008, acquisi- tion spending averaged €1.5 billion annually, falling to around €600 million per annum as the recession took hold. Traditionally, CRH’s acquisitions were bolt-on in nature (three to four deals per month at an average cost of less than €20 million), augmented from time to time with larger deals where there was compelling value and a strong strategic rationale. (No single deal amounted to more than 10% of the Group’s capital base.) In general, CRH

group

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acquired on favourable terms, reflecting the Group’s ‘valu- ation discipline’. Purchase price/EBITDA multiples ranged between 6 and 7. CRH’s rigorous and comprehensive acquisition strategy was singular in conception and execution and had ‘proven very difficult to replicate’. 25 For identification of prospects, CRH resourced multiple development teams spread across the Group (including in India and China), seeking opportu- nities and maintaining contact with an extensive data- base of potential targets accumulated over 30 years. At any one time, a considerable number of acquisitions were under active consideration, ensuring a steady deal flow. Each purchase gave rise to further opportunities, in other (occasionally new) markets. Courtship involved a patient and often long process of familiarisation and coaching. CRH took time to assess suit- ability and strategic fit, and to know management and their evolving needs. Much effort was spent appraising the target of CRH’s strategy, management, values and expectations, including upfront clarity on post-acquisition priorities. It was not unusual for CRH to walk away from a deal, on grounds of timing, price or compatibility. Sometimes, acquisitions were completed at a later date. To aid negotiation, CRH had codified, in a classified, proprietary document, the best practice, knowledge and processes involved in making an acquisition, gleaned from many years of experience. This was full of collected wis- dom and practical advice on deal-making. An experienced operational manager guided each acquisition team. At the appropriate time, a senior-level ‘ambassador’ was intro- duced to close the deal. Before completion, each deal under- went rigorous evaluation, including qualitative operational review, due diligence, strict cash-flow testing and Board approval. Traditionally, CRH’s acquisitions shared many common characteristics:

medium-sized, private, often family-run businesses

geographic/product market leaders, with potential to enhance existing Group operations, fill a gap or provide a platform for growth

careful structuring of deals, often involving initial stakes with buy options (and/or joint ventures) in new regions/ product areas

retention of owner–managers to ensure continuity and maintain human capital.

Post-acquisition integration to boost returns was rapid and well practised. From an estimated level of 10% on pur- chase, ROIC typically rose to 12% within the first year and to the benchmark level of 15% within two to three years. 26 Group financial, MIS and control systems were implemented immediately. Revenue and cost synergies were captured as benchmarking, best-practice programmes and (if

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warranted) targeted capital investment were put in place. The central expertise and coordination of CRH’s super- structure delivered procurement economies of scale, enhanced customer access and greater network density and synergies. After three years, a formal look-back review was carried out. Although more complex and expeditious, the acquisition process for larger deals was similar in principle.

Outlook

As CRH grappled with the fifth year of a cyclical downturn, caution remained the watchword. On the other hand, pro- gressive actions in recent years had adjusted the Group’s cost base, sharpened its commercial focus and optimised cash-generating capacity, while maintaining a strong and flexible financial position. Moreover, as the Group had learnt during its 43-year history in a cyclical sector, collec- tive crises presented individual opportunity. A protracted downturn would put pressure on over-leveraged peers, while CRH retained the capability to ramp up acquisition spending to €1.5 billion over an 18-month period 27 should appropriate value-enhancing opportunities arise. Fortune would favour the brave. The issue was the balance of cau- tion and daring and, more pertinently, knowing when the tipping point came.

Notes and references

1. J.P. Morgan Cazenove, ‘On the turn. We initiate on the Sector’, 21 April 2011, p. 128.

2. Bank of America–Merrill Lynch, ‘Cement Handbook: Time for more selective stock picking’, 22 June 2009, p. 14.

3. $1 = £0.65 = €0.77.

4.

Earnings before Interest, Tax, Depreciation, Amortisation and

non-operational items (EBITDA).

5.

J.P. Morgan Cazenove, ‘On the turn. We initiate on the Sector’,

21

April 2011, p. 27.

6.

J.P. Morgan, Building Materials, 10 September 2008, p. 22.

7.

Black, D. ‘America’s materials’, CRH Investor Day 2010, slide 22.

8.

Exane BNP Paribas, Building Materials, 12 January 2012, p. 10.

9.

Deutsche Bank, ‘Global cement trends: 2012–2015 outlook’, 19 December 2011.

10.

Credit Suisse, ‘Building materials 2012: Another challenging year’, 5 January 2012.

11.

Deutsche Bank, ‘How relevant is China for the European cement industry?’, 27 January 2012.

12.

UBS, ‘European building materials: Significant upside to mid cycle valuations’, 13 July 2009, p. 7.

13.

CRH Annual Report on Form 20-F in respect of the year ended

31

December 2011, p. 10.

14.

Lee, M. ‘Introduction’, CRH Investor Day 2010, slide 9.

15.

J.P. Morgan Cazenove, ‘On the turn. We initiate on the Sector’,

21

April 2011, pp. 108, 109.

16.

CRH Annual Report on Form 20-F in respect of the year ended

31

December 2011.

17.

Goodbody Stockbrokers, ‘CRH: Material upside’, 28 June 2007, p. 16.

18.

Lee, M. ‘CRH plc Overview’, Société Générale Premium Review Conference, 28 November 2012, slide 30.

19.

CRH Full Year Results 2012, 26 February 2013.

20.

Lee, M. ‘CRH Presentation’, Sanford C. Bernstein Strategic Decisions Conference, September 2012, slide 20.

21.

Lee, M. ‘CRH Presentation’, Sanford C. Bernstein Strategic Decisions Conference, September 2012, slide 3.

22.

Morris, H. ‘Europe materials’, CRH Investor Day 2010, slide 15.

23.

Goldman Sachs, ‘CRH’, 18 October 2005, p. 3.

24.

Goodbody Stockbrokers, ‘CRH: Still to play its “Trump Card”’, 13 July 2005, p. 7.

25.

Merrill Lynch, ‘Adding value or hot air?’, 25 October 2005, p. 12.

26.

Goodbody Stockbrokers, ‘CRH: Still to play its “Trump Card”’, 13 July 2005, p. 10.

27.

Manifold, A. ‘CRH Presentation’, Pan European Building & Infrastructure Conference, Bank of America–Merrill Lynch, London, October 2010, slide 29.

CRH plc: dimensions of successful corporate strategy

Questions for discussion

1.

Describe and evaluate the strategy directions pursued by CRH.

2.

Describe and evaluate the corporate parenting roles employed by CRH.

3.

Discuss CRH’s acquisition strategy and its contribution.

4.

Discuss how the Group’s corporate strategy creates value for CRH.

6.

In the light of the environment facing CRH in 2013, suggest a plan of action for Myles Lee

and CRH corporate management.