Hi, ladies and gentlemen. Welcome to CRH November 2019 Trading Update Call. For the duration of the call, you will be on listen only. However, you may submit your questions at the end of the call by pressing star 1 on your telephone keypad. I will now hand you over to your host, Albert Manifold.
Good morning, everyone. Albert Manifold, Sewich, Chief Executive here. And you're all very welcome for a conference call and webcast presentation which accompanies the release of our trading update this morning. I'm joined on the call by our group current director, Senin Murphy, David Zillan, President of Global Strategy And Business Development. Paul Minchin, Executive Vice President and our Head of Investor Relations, Frank Heichkamp.
Over the next 15 minutes or so, NII will take you through some of the main points of this morning's announcements. The key drivers of our trading performance for the 1st 9 months of the year as well as providing you with indication of our expectations for the year as a whole. Afterwards, we'd be available to answer any questions you may have All told, we should be done in about 40 to 45 minutes. So looking at Slide 1. First, I'd like to
take a moment to mention
a few of the key highlights from this morning's statement. I'm extremely excited and pleased to report a good performance in the 1st 9 months of the year. Our sales in EBITDA increased by 9% to 27% respectively compared to the same period in 2018. On a like side basis, our sales of 4% ahead, but EBITDA increased by 7%, reflecting improved momentum and operating margin expansion in the third quarter, 3rd first half trends. As you look ahead to the remainder of the year, underlying construction demand across our core markets in Europe and North America remains positive.
Based on the current momentum that we see in our business, following the completion of the divestment of our Europe distribution business at the end of October. We expect full year EBITDA to be in excess of 1,000,000,000, right ahead of 2018 and reflecting end of the year of progress for CRH. As you know, the disciplined management of our capital to maximize value for our shareholders is a key focus in CRH and 2019 has been no different in that regard. Our active approach to portfolio management, which generated over 1,000,000,000 proceeds from investments in future space. This includes 1,000,000,000 for our Europe distribution business, an exit box of over 10 times EBITDA.
In addition, we have spent approximately 1,000,000 of 44 small and medium sized bolt on transactions, and those are completed at an average multiple of 8 times EBITDA. Before any savings or synergies, we will generate as we integrate these businesses into our portfolio. Finally, our ongoing share buyback program has returned EUR 750,000,000 cash to our shareholders in the year to date. With up to 1,000,000 expected for the year as a whole. Before I take you to our traditional trading performance, I'd like to turn it over to us on the overall market backdrop and trading environment across our major markets over the course of the year so far.
In the United States, we continue to experience good momentum in underlying construction activity, particularly in the infrastructure market. High Wind Street Construction Spending is well ahead of prior year, our latest contract awards data point data points to a continuation of this public tender cost footprint. In the residential markets, despite a slower start to the year, unit affordability and industry supplies our constraints, the current improved in the third quarter. And we've seen good growth across our more residential focused businesses. On the non residential side, good growth in the office and transportation sectors continue to be supported by a generally favorable economic backdrop.
In Europe, Western European Construction Markets are performing well. But Eastern Europe continues to benefit from higher levels of growth, particularly
in due
to the construction activity. In the United Kingdom, ongoing political and Brexit related uncertainty continues to impact construction demands. Our pricing environment in both Europe and North America remains favorable. And we continue to focus on good commercial management to fully recover cost increases and drive margin expansion across our businesses. Turning to Slide 3.
At first, the performance of our Medical Materials division for the 1st 9 months of the year. Volumes recovered well in the 3rd quarter, following some significant weather disruption across parts of my business during the second quarter of the year. Pricing environments all to remain stable with good delivery across all project categories. For the addition as a whole, our 9 month like for like sales and EBITDA were 4% and 9% ahead, respectively, reflecting a significant improvement compared to the first half trends and good operating leverage as we continue to focus on performance improvement, commercial discipline and cost reduction initiatives across our business. I'm also pleased to report that the integration of last growth into our existing portfolio is progressing well synergies tracking ahead of our original expectations.
Over half of Ontario's businesses exposed to infrastructure and here we intend to see a positive funding environment underpinned by federal and state governments. The fast tax funding remains in place with steep level increases coming in from gas taxes, infrastructure bonds, and various other funding mechanisms. An example earlier this month, voters approved over 250 States in Development Transportation Valestinations, raising approximately $10,000,000,000 of additional funding to maintain and improve US transportation networks in the years ahead. Turning to the performance of our Europe Materials business on Slide 4. In overall, we experienced a continuation of First half trends, like like sales of an 8.6% and 2% ahead respectively for the 1st 9 months of the year.
Green markets in Western And Eastern Europe continued to perform well we commend volumes well ahead for the prior year period in country such as Ireland, France, Poland, and Romania. Connecticut and however, remains challenging impacted by the ongoing political uncertainty in that particular market. For pricing, well, we continue to make good progress with a strong focus in commercial investment supporting costs associated across our businesses. Overall, cement pricing was 6% ahead for the 1st 9 months of the year and continuation for the first half trends with increases in all our markets. Next, turning to the selling products on Slide 5, which also experienced a continuation of the positive momentum we saw in the first half of the year.
The 9 month Black sales in EBITDA were 3% and 7% ahead, respectively. Benefiting from a solid demand backlog in both Europe and North America as well as good pricing developments across all the markets. This translates into continued margin expansion, reflecting strong cost control and performance improvement initiatives across the business. As part of margin improvement has also been supported by significant international portfolio activity in beer innovation, resulting in a narrower, deeper and more focused group going forward. Moving to outlook on Slide 6 and our full year EBITDA expectations.
In the Americas Materials, we delivered a positive performance during the 1st 9 months of the year. Broadly speaking, we expect to see a similar case of like for like EBITDA growth for the full year. Europe materials, and indeed in building products, we also expect a continuation of the 9 month trends. So for full year like for like EBITDA, stood 52% 7% ahead specifically. So for the group as a whole, following the completion of our Europe distribution divestiture in October, We expect full year EBITDA to be in excess of 1,000,000,000, representing another full year of progress for CRH.
At this point, I'd like to hand you over to our year end balance sheet expectations. Thanks, Albert. Good morning, everyone. So on Slide 7, you can see the key components underpinning our expectations for our year end net debt position. I'm pleased to say that as a result of our continuing focus on strong financial discipline, we expect to deliver on the guidance we set out earlier in the year.
And in 2019 with a very healthy balance sheet position. Let me take you through briefly some of the key building blocks on this chart. Ended 2018 with a net debt position of just under EUR7 1,000,000 and a net debt to EBITDA of less than 2.1 times. For the year's age, we have generated over 1,000,000 of proceeds from divestments. We have invested close to 1,000,000 this into 44 value accretive bolt on acquisitions across the group, resulting in net proceeds of 1,400,000,000.
As you can see on the slide, these net proceeds have provided vast majority of the funding for 1,000,000,000 cash return to shareholders. Through both dividends and share buybacks. We also expect 2019 to be another year strong cash generation for the group, resulting in a significant reduction in our year end net debt position before the impact of the group's transition to IFRS 16 is taking its look at. Including this transition impact, we expect our reported net debt position to finish 2019 at close to EUR 7,000,000,000 or well below 2 times net debt to EBITDA. Thanks, Anna.
A good example thereof the financial discipline of what and a reflection of the balance sheet strength in cash generating capability of the group are giving you the hires in 2019 in many respects. So before I turn to Q And A on Slide 8, I'd like to leave you with a few key takeaways from this morning's presentation. You've spoken about our financial performance in the year today and how based on the current momentum in our businesses, we expect full year EBITDA to be in excess of 1,000,000,000 Our margin and profit improvement program is also progressing well and very much in line with expectations. We are seeing the early benefits of the program coming through the second half of this year, I may expect further progress in that regard as we look ahead to 2020. In the area of capital allocation, we remain absolutely focused on the efficient management of our capital to deliver improving returns and cash permission for our shareholders.
We continue to refine and reshape our justice to active portfolio management, generating over €2,000,000,000 of divestment proceeds, and it totals to 700,000,000 0s on bolt on acquisitions in the year to date. Ongoing share buyback program has returned $750,000,000 of cash to shareholders in the year to date, with up to 900,000,000 expected for the year as a whole. Finally, now, though it's still too early to say with adequate certainty, as we look ahead into 2020, we expect positive underlying momentum in our businesses to continue and we look forward to that of the year of progress of CRH. Hello. This concludes the presentation.
Parts at this morning's call, and we're now happy to take your questions. May I ask you please state your name and the institution that you represent for furthering your questions? I'll now hand you back to moderator to coordinate the Q And A session of our call.
Thank you. As you will be advised and to ask your question. Our first question comes from the line of Robert Gardiner calling from Davy. Please go ahead.
Hi. Good morning, gentlemen.
Two questions for me, please. You talked in the in the United States. It's pounds of aircraft on the infrastructure side. I guess, we've all seen the contract awards data.
So I'm just wondering if
you could give us a sense of how you say that market in 2020 based on your backlog and what you can see in the year ahead. And then second, again, debt coming down rapidly, So, if I reviewed you with a good balance, I mean, 1220 in terms of capital allocation. So I'm just wondering if you could give us, again, a sense of,
how do you think about
the spread of CapEx acquisitions for everybody back in 2020 as net debt reduces? Thank you.
Good morning, Bob. I have two questions there. I'll just be with both of them asking us as soon as you comment both on that allocation and need to get a sense of US
in terms of how we see
the market going forward. With regard to capital allocation, we've been, if you look at it on this year, we've allocated our capital based on the opportunities seen in front of us We've done quite a significant amount of CapEx. That's a good M and A. It's a different one. And, of course, we have our own share buyback program.
I would expect to continue on more of the same. The only thing that would possibly change us will look at the opportunities that we see in front of us for further value creation change that dynamic instance if we see, you know, more acquisitions that we see, we should be doing for the less packages that we should be doing. But broadly speaking, looking at the moment, think this is what did we have in regards to the buyback program and maybe for the buyback program from Ford and the traffic market, maybe tell you might just come in terms of what we're seeing in the US in terms of the debt position just to close that one out. I mean, the guidance that you have to the end of the year is to be close to $7,000,000,000 in terms of net debt. Can you look at that net debt compared to the 4,100,000,000 of EBITDA as a guiding object
to that page as well below 2 times?
Thank you. The main takeaway is that gives us optionality as we go into 2020. I think optionality to to allocate that capital the way Albert is just across there. Specifically around the U. S.
Problem in terms of your question around infrastructure there. I mean, there's a couple of pages to bear in mind. First thing is you look at fact that this is, like, the highway funding is, it's underpinned at both the federal levels in the past act, but also in terms of state bank stage initiatives. And just just to recall that, fast assets in place until the end of 2020. You know, there's a 3% faggot in that.
In addition, there's allocation in the general homes. So in the year, Joseph Cohen, there was additional allocations to the, to the pass backs. And as you go into next year, obviously that continues the case in terms of having a funding under commit on our commitment there at the federal level. Also at a state level, and Calvert mentioned is in in in the slides there. You know, 270 additional initiatives that was just passed with raised about $10,000,000,000 funding at the state level.
That's on top of the 7 and a half 1,000,000,000 of additional revenues, not the fleet of have, committed to you during 2020 as well, or during 2019 as well. Again, specifically, I think it would be easier to our business in terms of looking at backlogs, then we look at our own backlogs in terms of what we're seeing on the ground. So if you look at any of the next 12 months, let's say positive momentum some, backlogs are plugged, healthy position. Our backlogs are ahead of where they were last year on what's particularly pleasing within those backlogs is that the margin element of those backlogs are ahead of last year.
Next question comes in from the line of Gregor Kurnish calling from UBS. Please go ahead.
Hi. Good morning. Thanks for the, patience. A few questions, particularly you give us sort of an early look, on on what you're thinking about in terms of pricings, for next year, perhaps both in Europe and the United States is the kind of time of the year we start sending out batches, particularly on cement, but perhaps also on some of the downstream products? And then secondly, if you care to elaborate a bit on the margins, I think this year you'll
have a latency meaningful up despite the UK headwind that I
think has been well flagged, how do you see that trajectory of
margin improvement into 20 please.
Thank you. Okay, Gregor. Good morning. 3 questions, pricing in Europe and the U. S.
And then just in terms of by the step up as you go forward here. Maybe what I and I just talked about pricing generally. I talked specifically to US Davidson for the family. You're asking to talk to your in Europe and maybe kind of you mentioned that regard to margins at the end. I think the backdrop we have seen over the last couple of years is very significant cost increases in our businesses.
And while it's across the United States, in most of our parks, we've had good success in getting price increases through to offset some of those cost increases. There's still work to be done. And I would expect going into next year with regards to North America, both the United States and Canada. That way we would see a continuation of the pricing environment necessary to recover the cost headwinds that we have suffered this year. We've had delivery this year, and I would expect to see it coming through in the United States next year with regard to us.
What about the euro, David, you might as well? Yeah.
And you're, Gregori, are you still in our statement that the European pricing was up around 6% for the 9 months to hear today.
So I think we're
seeing that momentum continuing at the end of this year. Think, to talk about it
online, I think you've seen
a lot building over the last few years to try and build that momentum into the next few years. We cannot mention continuing because good solid demand backdrop in, excuse me, UK, Western Europe, and, but also particularly in Eastern Europe. So we see the momentum there for price increases and continue to make progress in 2020.
Well, just in terms of margins, it's higher. Think you saw the half year of what we talked about in our margin performance, not just the absolute margin improvement, but also the like for like improvement. At the half year, we were 10 basis points ahead. You can see based on our 3rd quarter numbers there that we're obviously further ahead. And if you look to the end of the year, this year, I would anticipate that our margins on a like for like basis.
Will be 40 to 50 basis points ahead of where they were last year. So that gives us good momentum going into next year. We talked about the components that drive that margin obviously, there's a number of items that are there in terms of cost improvements in our business, production efficiencies, and obviously pricing, strong prices, etcetera, in terms of how we drive forward. And, if you look ahead to next year, I think, you know, we'd expect to see that all the items that we're driving forward will all come through. Remember, we talked about the fact that a lot of the initiatives we're driving will have, you know, further delivery in 20 21.
So you're seeing the start of it coming through in 2019.
Excellent. Thank you very much.
Your next question comes in from the line Paul Rogers calling from P And P. Please go ahead.
Hi. Yeah. Good morning, everyone. So congratulations on the results. I just have two questions, if I may.
The first one is just a follow-up on capital allocation. We understand there's quite a strong pipeline for getting particularly in the US. Obviously, you're not gonna comment on specific targets, but maybe you could just talk a bit about your general view on big M and A at the moment. Whether you were considered a large transaction in the next 12 months. And then the second one is just from the UK.
So we heard some breathing, what we did a few days ago, that the market is showing signs of stabilizing to 2020, and also your view.
Hi, Paul. Good morning. Two questions there. 1 in the UK, which Jim is not the furthest time we'll do, but we'll deal with the EMA at the market in the UK and how we're seeing your but start to the pipeline for deals, specifically in North America you referred to, the industry over there is still very fragmented. We see a lot of deals come into across our table on a monthly basis.
Some of them quite significant. And and I think the key character specific to a series of years is the discipline we've shown to ensure that any deals that we do fish with our businesses And we we believe we can create value when we buy those deals. And I think that's still the case, and there's still a lot of opportunities out there. And I think that our footprint, obviously, probably in Portugal, but more than anything else. Regardless of the question on big deals, the focus very much we have on our business at this moment in time is we've done a lot of acquisitions over the last couple of years.
They are in the process of being vetted down and and we are looking to continue to deliver value creation through those acquisitions and the integration of those deals. Secondly, we have a very significant program running within our business of internal profit improvements, which is doing the most squealing around as much as we can to get as much juice out of it. It still has ways to go And I don't really want the distraction of taking on too many big deals out there. However, Sea rates have had a deliberate strategy of of keeping optionality and keeping capacity to do deals and strategies. And that's been a a hugely successful strategy for us over decades.
So I'm never going to say never because you just don't know what's around the corner. If the deal of compelling value presents itself to us, and we felt it was the right thing to do for shareholders and meet the capacity and capabilities to do that deal. We should do that deal. But I have to say our focus is very much on continue to integrate the big deals that we have done to continue to deliver the value we have and improve the margins through that. We continue to focus internally on improving our business through the profit improvement program that we have in place and to sustain the improvement of the cash generation, the improvement of returns and accretive margins.
That's our key focus within our business. But we'll keep our eyes open and we remain opportunistic, but that's probably where our focus is at this moment.
And can I sorry, Albert? Can I just have can I just have a quick follow-up on that? I mean, how how important is your your loan multiple when when you come to looking at deals? I mean, in other words, you know, you're offering at one of our eight times easy EBITDA. You've got something you have in mind when you look at these transactions, and it's it's just a sort of capture the type of multiple you're prepared to pay?
Honestly, Paul, I can still have any other multiple, share price. What I can do is is something we can help as a team drive the profitability of our business. And through credibility, dependability, transparency, communication and clear strategy, the multiple sorts. That's all we can do. I've had to influence mortgage workers.
When we look at the business, we look at the business and our ability to buy that business and create value beyond the profitability that it currently generates either through the market opportunities or integrated with our Resideo business. That's where our focus is more than anything else. And that it's focusing on a profitable, profitable acceleration. And if I do so on a consistent basis, and above what we do in our industry, We hope 10- over the practice contributes to overall value creation order hours. I'd like to pass over to Jim with regard to just to give us maybe Wanda Bellendly has this comment on our own comments, human, have we you're seeing the UK market in 2019 early 2020?
Morning, Paul. Yeah. Certainly the Brexit related uncertainty continues
to negatively impact typically levels in the UK. For us, the UK represents out 7% from our total group EBITDA. When you look at this, that business line of the UK, certainly the infrastructure market remains weak There is a very good pipeline of projects as we know. However, they continue to get delayed and pushed out. The non residential sector in the UK, again, also remains weak, particularly in Southeast of the country and residential, a bit more resilient, particularly outside the Greater London area.
We continue to monitor the situation very closely and adjust our costs accordingly But, we would see maybe that the UK has bottomed out at least as we start to stay very low activity levels. Looking forward, But we were very well positioned to take advantage from, when the market does recover particularly infrastructure side, we should get good cost leverage and they're in a very good position actually
to deliver on some of
the larger infrastructure projects going forward.
The next question comes in from the line of Tobias Newman calling from Morgan Stanley. Please go ahead.
Hi. Good morning, gentlemen. Thank you very much
for taking my question. I have 2 if I may. Firstly, in the escrow for Philips, you mentioned, in your presentation earlier, they are ahead of expectations, tons of follow ups only in terms of timing or if this is in terms of the total amount of synergies, and maybe quantify this for us. That's the first question. The second one, in terms of your strategy, 321, could you give us an this year where we sent in terms of the 300 basis points margin improvement target.
And maybe you could give us a couple of examples what changes in the group over the year and also share your view, how much you pay on replacement plans we could see next year already? Thank you.
Two questions there. One on our profit improvement program, which David is is gonna, yeah, take up and and take international opportunities, which I'll, to pass on them to deal with. Again, just to, just to mark on the point that sent in made earlier in the question, we spoke earlier this year that, that we the back end of this year 2019 before we see any improvement coming through in terms of our profit improvement program. At the half year, we had we had shown 10 basis points of improvement we had seen at that time, we spoke in August, so that we're approaching that a lot of funds that as soon as indicated, we were looking at probably back to sort of 40 or 50 basis points of group, which is ahead of where I thought, generally speaking, we would be at the end of this year. I definitely would be able to hear that.
But David, maybe you might just talk in the next couple of years as well, therefore, see if one of the areas what we're focusing on and then make a sense to make sure that the actual synergies which are part of our workforce.
Yeah, not to be too repetitive, but I think we've always said that we're we're building momentum as you go into this. And a lot of this is, but but first of all, realized the benefits of our portfolio, changes, which else is to deliver the interfaces points. I think the real thing is where the areas are, it's 70% internally delivered. And across some range of categories, structural process, procurement. If you pick out something like process, you know, things like operational excellence, across a range of businesses.
And so we have 3000 locations where, you know, we're looking at best practices in one location, bringing them to the next That builds over the 1st year of building 2nd year and and when we go forward. I would say very pleased overall with the momentum that's across all businesses within CRH. I think we've really put our effort into this, and you can see it coming through in our 1st year delivery with 40
to 80 basis points this year.
I think we'll be looking into next year. We'll be looking at all of our commercial managing you again into the year in terms of pricing, and we look forward to further deliveries with a little bit of the next year.
Just in terms of synergies, you've mentioned Ash Grove, but it's actually part of the Ash Grove. Can we talk about Ash Grove now Ash Grove. It's fully integrated into our North American cement platform. So that includes the assets, the 20 assets we we bought in Florida, including the assets where we already own the aircraft, the assets we
own in Canada. So when you look
at it on a North American platform basis, and the opportunity for synergies there. We identified synergies at the time of the acquisition. So more recently, Colorado, the amount we to pay earning over the 1st 3 years of ownership is about 145,000,000. And that's well underway in terms of delivery. This year, the amount we'll deliver would be in excess of 50,000,000.
Calendar year. And that is effectively a range of delivery items from as David talked about operational excellence, we talked about procurement, talked about the aspect of our commercial discipline in terms of the way we operate. So we're very pleased performance in that business and you're seeing that coming through and it makes a contribution to our basis points improvement in terms of the overall improvement. Thank you very much.
From Fads America. Please go ahead.
Thank you very much and good morning gentlemen. A few questions on my side. Firstly, I mean, you gave a relatively positive message regarding the 2020 pricing outlook for both Europe and the US. Could you also commands on the cost side. We've seen, I guess, international coal prices, you know, staying at relatively low levels.
So do you do you intend tailwinds on P and L decide whether on the other same times, or are you also facing a meaningful wage inflation? So what's your 3 to 20 cost out at this stage. That's my first question. My second question is related to, CO2. We've seen some of your cement competitors make announcements in terms of extra CapEx
for reducing emissions in Europe or projects
in Canada, which I guess are the are the focus of new regulation at the moment. Have you committed to incremental or operating spending on your plants in Europe and Canada to improve your CO2 performance? Thank
you. Morning, Arnaud, and thank you for those two questions, on CO2, last year, who's usually involved in that particular idea with the issue of costs and our expectations. For 2020. Broadly speaking, energy costs across CRH generally would be at around the 9% of the revenues, currently at the We've obviously already been slashed. It's slightly declining next year.
Other than that, we don't see any huge change out there. And with IMO 2020, which we're gonna have to digest. And I think not fully understood, but we have various strategies committing in government, which I think is an opportunity for us going forward. And specifically, you mentioned wage inflation. We do see the profitability of wage inflation rising in United States next year.
I think it could be in the region of 2 to 3%. We've factored that into our cost structures going forward and it'll be factored into our pricing methods as you go through the year and you get that from the Tivity with it. It has me in there for the couple of years. Surprisingly, but I think it's coming there now. I think a number of people are seeing us.
With regard to CO2, Jim, in terms of whatever what we're doing in terms to reduce pass on the plans of guys?
Yes. Firstly, maybe CO2 for us is a row small costs. I think compared to some of our peers, a little bit of the material effect it represents a little bit less than maybe 1.5% of the total energy bills in 2019.
We, as you know, had shown
a proven track record over many years of setting targets and delivering on targets in terms of emission reduction. The current target we have out there is for 2020 is a 25% reduction in terms of CO2 emissions per ton of cementitious product we are going to achieve that target for 2020 and we're currently finalizing the target out to 2030 in terms of our mission reductions and our target will be a best in industry, standard in terms of what's out there in terms of cementitious, the emissions for the program of cementitious product. That target is going to be achieved through a combination of process improvement, but that's a raw material additives, alternative fuels, I think our substitution reduction in the people ratio. So a number of process changes, which is going to help us deliver a best in class standard out to 2030.
There's no major significant CapEx at you coming forward as a result to drive up those new relations either.
No.
Thank
you. The next question comes in from the line of a loadie roll calling from JP Morgan. Please go ahead.
Hi, good morning. Two questions first. If I may follow-up on the question on the 300 basis points target. So you gave us your progress so far. But could you help us, recalculate if I may ask the basis start point typically of this guidance given the many changes, that the group went through structurally and given the IFRS changes.
So that's my first question. And second, maybe a follow-up as well on consolidation, but more precisely on disposals, would you actually consider further disclosures at this stage. I mean, they request articles talking about potential disposal of the shipping. So I don't know if you could comment on that. Thank you.
Thank you, Alexander. Good morning to you. I have two questions there. One follow-up on the cost improvement program that I sent to just take us through the And the first question on capital allocation is specifically on further disposals. I think this is our 6th year now of continued portfolio refinement and disposals.
And I think you can accept now that this is an embedded part of how we do business in CRH. And we are looking to refine and reposition our business based on the opportunities that we've seen in front of us, which are focused on number 1, greater growth opportunities in better markets, And number 2, our ability to perhaps sell businesses and buy businesses that more closely align and fit with our strategy of the business that we have. Because as he's become a more deeply and more focused business, we find that allows us the ability to drive margins and cash returns That is what underpins our delivery again in Israel. And this results we talked about this morning. It's that focus and that strategy.
So we, of course, we will continue to do that. It's hard to the specific, asset you mentioned. The rest of the week goes by when our name is not linked with something under disposal or an acquisition. I'm sure we're not going to comment on having right or wrong arrangements. There's a lot of, scientific work that we connected for, the last month where we're supposed to be buying or selling.
So we're not going to help with adding anything to do with everything. With regard to just in terms of the churn base points in terms of your stock availability, that point is changing all the time. So what we have done on one side is to do in the interest of transparency is actually look at the like for like performance year. So year on year, and that's the conversation we had earlier on, which is if you look at our performance next year relative to last year on a like for like basis, you're basically all the noise, whether it's your accounting changes or acquisitions divestments are taken into account and help you with that. So I don't think at this point, it makes sense to, we continue to repay the star points every every 6 or 12 as activity levels change in the business.
The next question comes in from the line of Tobias Warner from MainFirst. Please go ahead.
Yes. Good morning, gentlemen. Thanks. So a few questions, 3, if I may. Number 1, housing seems to be recovering or reaccelerating in the US.
So you have a reasonable exposure there through building products division. Maybe you can give us some, color on how you expect it to impact your business and more broadly the profitability and operating leverage going into next year. Secondly, EBITDA margin, when you look at the 1st 9 months, And you adjust for the IFRS 16 seems to have moved up 70 basis points. You you're also consolidating distribution should give us $600,000,000 on revenue line and $40,000,000 of EBITDA line. So a lower margin business.
So your 40 to 50 basis points guidance, how do I have to see that in that context? And then just lastly, probably 1% and 50% gain from the European distribution. Maybe you can give us some guidance there. Thank you. Yes.
Thank you, Clive, and good morning to you. Trying to comment on the EBITDA margin and laterals in terms of being covered at the end of the year of distribution. Just specifically on the residential market, US. And in fact, media, I might just come to a little bit on the overall resume. The the overall market in the US, and the countries that I've talked where we see U.
S. Residential, we had a lot of fingers in the market, which gives us a pretty good reads of where the market is in 2019 and where we think it's going in 2020. I think the few to share them with you. Look, I wouldn't say I only have a positive outlook on the current UF cycle. Now clearly it's been more protracted than previous years, but that's probably surprising given the depth of the recession we saw before that.
And the 23 main subject component parts of the U. S. Construction product driving growth continued growth going forward. 1st of all, infrastructure, which which leads to 54 is more than half full construction of the United States, that's underpinned with the fast action we've paid for me. Over the next 3 years, it so 192021, that is going to grow by about $14,000,000,000, about 12% over the previous 3 years.
So that underpins half of construction growth going forward. Even in the depth of the financial crisis that keeps going. The funding was there. So that gives us a relative sense of security with half of the market growth coming through. 2nd employer is a residential and non residential growth.
At majority of dosing, the solid underlying demand in both post markets. I'll try as I have a big, big, big team number, sir. The population will be in the United States. The population is closed by 30 days from every 10 years. There's net job creation in United States, 2,000,000 net new jobs at the end of the year in Creative United States.
We see now rising wages and rising income right, wages probably go 2% to 3% next year. We see U. S. Economic growth in the region of 2% plus low interest rates especially with regard to your question on housing, we said we'll have almost record low inventory levels and there's resilient demand out there. So all of those factors come in together, give us a sense that the U.
S. Construction market is pretty much solid for 2030 in terms of solid demand going forward. I think beyond that in 2021. With regards to the margin, this is a margin and maybe your capital gain questions for IFC, so in terms of the margins, think one of the things that you referenced there was 0 distribution. So 0 distribution was disposed on the 31st October that means we will have 10 months of sales and 10 months of earnings from it this year.
The I'll call it the last sales and lost earnings for the last 2 months of the year are about $600,000,000 in sales and about $40,000,000 of EBITDA. So when we're looking at our guidance for the end of the year of 40 to 50 basis points of margin improvement. We're doing that on the basis of 10 months of ownership with European participation in both years So if you look at it, 10 months last year, 10 months this year and look at the portfolio that we own this year compared to last year. And as I said, take into account the accounting changes, take into account the acquisition investment periods, and look at the performance year on year, that's why we're adding the
40, 50 basis points of improvement. There.
The question about your distribution in terms of capital gain, yes, you see, obviously, we've got our proceeds north of 1,600,000,000 that we have received from the closing of that deal at the end of October. We've highlighted the financial statements, I think, covering our, you know, guidance there that we anticipate that the gain the county gain on sale will be about 200,000,000 this year, which obviously will enhance our earnings per share. And the tax position on that will be close to neutral in terms of we have a pretty effective tax structure in terms of rates operated. So you should expect that the pre and post tax gain would be pretty similar.
That's great. Thank you very
question comes in from the line of Will Jones calling from Martin. Please go ahead.
Morning, though, if I could as well, please. Before I was just, fixing it on American Cereals and the the details behind the 12% you could dark red light for like in q 3. Was there any particular region and or kind of meticulous materials that contributed to a more or less than that in terms of understanding that divisional performance. The second was just a year around pricing, but I was focusing on the majority of your sales that are not cement. Can you just comment perhaps on how pricing steering in in those products as well, please.
And then just finally on on the balance sheet and then what fees are you used to talk pre IFRS.
It's somewhere in the order
of 2 times net debt to EBITDA. I think the IFRS adds around point 3 obstacles to the multiple. If you think about 50.3 on a, on a equivalent basis going forward, it was your first in Vulcan Services and just still talk around the kind of So for too, Mark, even with IFRS. Thanks.
Thank you, love. Good morning. Three questions there. 1 on the balance sheet with regard to net debt to EBITDA. I'll read that one at the end.
2nd note, I'll come down to match pricing in your, the last day of I'll just take the first question with regard to the U. S. Materials in the quarter 3 performance. And primarily our quarterly performance was driven by our heritage businesses, and really, really good strong delivery across our businesses in, in the north part of the country. Strong vertical integration business that
we have there allowed us a
very good pull through, allowed us a very good balance, production in our quarries, which low as our unit costs. I should say as well that of course, we have the contribution of Ash Grove company and the ability to integrate Ash Grove not only it's a big business, but it's an absolute business with our existing footprint. It has been a very big help to performance of our preference in quarter 3. So We have had those 2 areas. The north part of the region where we see the benefits of purchase goods with good volumes coming through into our asphalt.
This is particularly very good profitability, very good returns and the delivery of escrow really contributing now to, right, in which we say to us changed North America and the business center of the material sector. With regard to pricing across Europe, Davis, submittal incident areas.
Yes, and also materials, I think overall, I think in in aggregates across Europe, we've up around 4% here today, September. And if you look at our ready mix also up, around 3% and asphalt, 22%. So good coverage for us all products. And just depending on which markets look, generally the pros here.
And generally speaking, of course, there's an overall comment with regard to pricing where where you see good cement pricing, that should transmit all of it down to change the pricing, all the products on the chain. That's what it's that's that's normally what happens. I think on the balance sheet Yeah. I think in terms of the balance sheet, just your commentary around IFRS, it does add about 30 basis points to the leverage method that you mentioned there. Absolutely.
I still wouldn't change the the range in terms of the kind of one 0.8 to 2.2 times in terms of what we know. The other thing I'd highlight is we don't just look at that metric as you well know. You look at the absolute amount of debt as well. So I think in terms of looking at, the the overall balance sheet position, Correct. In terms of IFRS still add some additional, you know, values to the balance sheets, but I don't think it changes our view in terms of looking absolute quantity there or the range that we talk about.
The final question comes in from the line of David O'Brien calling from Goodbody. Please go ahead.
Hey, guys. Just just one for me. I guess, hopefully in the first half, you have some detail around the European Materials division. If we stripped out the UK performance, just to give us a sense of how Continental Europe has performed. So if you could give us some color on how crop of performance has evolved from the first half into Q3.
And maybe any individual markets will shift as either positively or negatively from an activity point of view.
Good morning. Thank you for the question. Just on the overall market in terms of where they're going, I would say that the real strength about this us, and the backbone of our business has been our Central European areas, which have shown very good volume growth. And on the back of that volume growth, the performance of cost and also in terms of good pricing, I think that will continue into next year. There's a bit of weakness in Switzerland, but that's just parking significant minor issue.
Plans has remained fairly robust, Germany's been solid. Ireland has been good. Finan, okay. And the UK, as Jim has mentioned, early run. We think it's kind of hit 4 now at this stage.
If one stripped the UK out of our European numbers, probably the best thing I can take is we're very much focused on profitability in CLH. Is the margin performance, which is negative 40 basis points, would actually be a positive plus 40 basis points. So it's an 18, 18 basis points swing for us by forms of the UK industry. That just shows you how top is there. But I have to say that overall trend in the market, no real major trend, changed in trends in our European businesses, in the 2nd quarter, 3 ahead of even quarter 4 option.
Super. Thank you. Okay. Look, we've come to the end of our call and that's all we have time for him. Great.
I want to thank you for your attention this morning. Hope it's nice to answer all of your questions. If you haven't, Frank, hired the Capital's team, they're available to answer any follow-up questions you may have throughout the day. That would have forced talking to you again in the 20 minutes will be next year when we report our preliminary results for 2019. Thank you, and good morning.
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