Good day, and welcome to the CRH third quarter 2026 results presentation. My name is Krista, and I will be your operator today. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question, please press star then the number one on your telephone keypad at any time. If you would like to withdraw your question, it is star followed by the number one again. At this time, I would like to turn the conference over to Jim Mintern, CRH Chief Executive Officer, to begin the conference. Please go ahead, sir.
Hello, everyone. Jim Mintern here, CEO of CRH, and you are all very welcome to our Q3 2026 results presentation and conference call. Joining me on the call is Aylwyn Bryan, our CFO, Randy Lake, our COO, and Danilo Juvane, our Head of Investor Relations. Before we get started, I will hand over to Danilo for some opening brief remarks.
Thanks, Jim, and hello, everyone. I would like to draw your attention to slide two, shown here on the screen. During our presentation, we will be making some forward-looking statements relating to our future plans and expectations. These are subject to certain risks and uncertainties, and actual results and outcomes could differ materially due to factors outlined on this slide. For more details, please refer to slide two and to our filings with the SEC, including our annual report on Form 10-K and our quarterly reports on Form 10-Q, which are available on our website. We will also refer to certain non-GAAP financial measures. Definitions and reconciliations are included in the appendix to the presentation and in our earnings release. I will now hand it back to Jim.
Over the next 20 minutes or so, we will take you through a brief presentation of our results for the third quarter of the year, highlighting the key components of our operating performance, our recent capital allocation activities, as well as providing you with an update on our expectations for the year as a whole. We will also spend some time discussing the continued execution of our strategy and Velocity, a recently launched transformation initiative that will help us build a better CRH and deliver further value creation for our shareholders. Based on the visibility that we have at this moment in time, we will also share our thoughts on some of the trends we are seeing across our markets as we look ahead to 2027. First, on slide four, let me take you through some key messages from our results.
Overall, we delivered a resilient third quarter performance despite contending with a challenging cost environment and subdued residential activity across many of our markets. Looking ahead to the remainder of the year and based on the current momentum that we see across our business, we are updating our financial guidance and now expect full-year Adjusted EBITDA to be between $7.8 billion and $8.0 billion, representing another year of growth and value creation for CRH. The strength of our balance sheet and cash generation capability enables us to invest for future growth while also delivering significant returns to shareholders.
Today, we announced a new $6 billion share buyback program to run to the end of 2030, demonstrating our continued focus on disciplined and efficient capital allocation. Our ability to deploy capital in high-growth markets, integrate at scale, and deliver unique synergies through our connected portfolio is a key differentiator for our business.
We recently announced the completion of our $8.5 billion acquisition of Arcosa, a significant investment which will reinforce CRH as the leading aggregates and critical infrastructure player in North America. We have also invested a further $1.9 billion in 27 value-accretive acquisitions in the year- to- date. We have an attractive pipeline of further growth opportunities in front of us, supported by our unmatched scale, connected portfolio, and proven growth capabilities. During the quarter, we launched Velocity, a focused initiative to deliver an enhanced scalable operating model for CRH. Velocity will underpin our growth objectives and enhance operational efficiency, thereby delivering a structurally higher-margin business. We expect Velocity to generate $400 million of annual Adjusted EBITDA run rate benefits by the end of 2028, and I will take you through that in more detail later in the presentation.
Looking ahead to 2027 and based on the visibility we have across our key markets, the outlook for our business is positive, supported by our strategic alignment to growing infrastructure megatrends. Turning to slide five and our financial highlights for the third quarter. Overall, we delivered a resilient performance despite subdued residential activity and a challenging cost environment. Total revenues of $11.4 billion were 3% ahead of the prior year, reflecting good underlying demand across our key markets, positive pricing momentum, and contributions from acquisitions. We experienced significant cost inflation during the quarter as sustained increases in oil prices flowed through to key inputs, particularly energy, raw materials, and haulage. In response, we implemented further commercial and operational actions to mitigate the impact. This enabled us to deliver Adjusted EBITDA of $2.7 billion, in line with the prior year, representing a margin of approximately 24%.
Our third quarter margin was 80 basis points behind the prior year. Our in line, excluding the impact of some one-off gains in the prior year, which demonstrates the resiliency of our connected portfolio in an inflationary environment. All of this translated into diluted earnings per share pre-impairment of $2.09, which includes the impact of transformation-related costs associated with Velocity. At this point, I will ask Randy to take you through the performance of each of our businesses.
Thanks, Jim, and hello, everyone. Turning to Slide seven, and starting with Americas Materials Solutions, which delivered a resilient performance despite subdued residential activity and input cost pressures. Total revenues and Adjusted EBITDA were 6% and 1% ahead of the prior year, reflecting positive pricing momentum, contributions from acquisitions, and the benefits of our connected portfolio. In Essential Materials, third quarter revenue were 19% ahead of the prior year. Our aggregates volumes increased by 2%, while pricing was 5% ahead or +6% on a mix-adjusted basis. Cement volumes were in line with the prior year, while the pricing declined by an average of 2%. Our performance also reflects contributions from acquisitions, particularly Eco Material, which I'm pleased to report continues to perform well with volumes and pricing both up mid-single digits compared to the prior year period.
In Road Solutions, Q3 revenues were 2% ahead of the prior year, supported by growth in asphalt and ready-mix concrete pricing. As Jim mentioned, we experienced some significant input cost inflation during the quarter, which impacted our margin performance, and we focused on cost recovery through further commercial actions and operational measures. While housing activity remains muted, overall underlying demand remains supported by our exposure to growing infrastructure megatrends. Transportation continues to be underpinned by federal and state funding, while reindustrialization activity is being fueled by large-scale manufacturing and data center investments. Overall, a solid performance for our Americas Materials Solutions business. Looking ahead, I'm encouraged by our backlogs, which are in line with the prior year.
Next to Americas Building Solutions on Slide eight, where our third quarter performance reflects the impact of divestitures, subdued residential activity, as well as the non-recurrence of a prior year gain on the sale of certain land assets. We also experienced an inflationary cost backdrop, particularly in relation to elevated haulage rates, and have now implemented ongoing operational and commercial initiatives to mitigate those costs. In our Building and Infrastructure Solutions business, we continue to experience strong growth in data center, water, and energy infrastructure markets. For Americas Building Solutions overall, total revenues and Adjusted EBITDA were 3% and 18% behind the prior year period. Excluding the impact of land sales, third quarter Adjusted EBITDA and margin were ahead of the prior year.
Moving to International Solutions on Slide nine, where our business delivered further growth and margin expansion, supported by increased activity levels in certain markets, positive pricing momentum, and disciplined cost control. Total revenue growth of 1% translated into a 6% increase in Adjusted EBITDA and a further 110 basis points of margin expansion. In Europe, demand remains underpinned by good infrastructure and reindustrialization activity. While in Australia, our business continues to benefit from positive underlying demand, operational efficiencies, and contributions from acquisitions.
Thanks, Randy. Turning to Slide 10, reflecting our third quarter performance and expectations for the fourth quarter, we are updating our financial guidance for 2026 to reflect a softer residential market, inflationary cost backdrop, as well as a partial year contribution from the Arcosa acquisition. Assuming normal weather patterns for the remainder of the year and no further major dislocations in the geopolitical or macroeconomic environment, we expect full-year Adjusted EBITDA to be between $7.8 billion and $8.0 billion. Net income between $3.1 billion and $3.3 billion and adjusted diluted earnings per share between $5.37 and $5.59, representing another year of growth and value creation for CRH. At this point, I would like to discuss the continued execution of our strategy.
Since setting out our strategic roadmap and ambitious 2030 growth targets at our Investor Day last year, we have continued to strengthen our portfolio and increase our exposure to attractive markets aligned with growing infrastructure megatrends: transportation, water, and reindustrialization. We have been proactively shaping our portfolio to capture secular growth, recycling capital into higher value strategic opportunities through acquisitions such as Arcosa, Eco Material, and Axius Water, as well as completing over 60 value-accretive bolt-on acquisitions and $2.1 billion of divestitures. Alongside portfolio strengthening, we are now evolving our operating model through Velocity, a focused transformation initiative that will underpin our growth objectives and enhance operational efficiency, thereby delivering a structurally higher margin business, all powered by our winning way. Together, these actions will build a better CRH and support the next era of growth and long-term value creation for our shareholders.
First, I will ask Aylwyn to take you through our recent capital allocation activities.
Thanks, Jim, and hello, everybody. Turning to slide 13 and first to M&A, where year to date, we have invested $10.4 billion across our four connected growth platforms of aggregates, cementitious, roads, and water. We completed our $8.5 billion acquisition of Arcosa ahead of schedule and invested a further $1.9 billion on 27 additional value-accretive acquisitions in the year to date. Notwithstanding an active year so far, we have a strong pipeline of further M&A opportunities in front of us, supported by our unmatched scale, connected portfolio, and the fragmented nature of our industry. We have also completed three strategic divestitures of non-core businesses in the year to date for a total consideration of $1.9 billion, demonstrating our commitment to active portfolio management and the reallocation of capital into higher growth connected businesses.
In addition, through our third quarter, we've invested $1.2 billion in growth CapEx, leveraging our size and scale to fully capitalize on high-returning, low-risk investment opportunities to expand capacity in high-growth markets, improve operational efficiency, increase automation, and optimize our energy use. All of which will deliver long-term shareholder value. Turning to slide 14 and to shareholder returns. Following completion of the Arcosa acquisition, we are pleased to announce a new $6 billion share buyback program, which will run to the end of 2030. The share buyback program we're announcing today is in line with the $40 billion capital allocation framework we set out as part of our investor day last year. In addition, in line with our policy of consistent long-term dividend growth, the board has declared a quarterly dividend of $0.39 per share, representing an increase of 5% on prior year.
All of this is underpinned by the strength of our balance sheet and the significant financial capacity we have at our disposal. We remain committed to maintaining our strong investment-grade credit rating, which we've held for over 20 years, and we expect our leverage ratio to normalize towards approximately two times over time. Overall, these actions highlight our continued focus on disciplined capital allocation and delivering long-term value for our shareholders.
Thanks, Aylwyn. A good summary there of our recent capital allocation activities. Turning now to slide 15 and our recent acquisition of Arcosa. Arcosa comprises two infrastructure-related businesses, construction products and engineered structures. Construction products is a high-quality, connected, aggregates-led materials business serving 13 of the 50 largest MSAs in the U.S., with leading positions in Texas, New Jersey, the Southeast, and other high-growth regions. And with 35 million tons of annual high-quality aggregates, it will reinforce our position as the leader in U.S. aggregates with over 265 million tons of combined annualized production. Engineered structures is a leading U.S. manufacturer of critical infrastructure products in the high-growth energy transmission market. This business is supported by robust long-term demand, underpinned by grid modernization, electrification, and data center construction.
Overall, the acquisition represents a compelling growth and value creation opportunity for CRH, and I will ask Randy to provide a brief overview of the strong synergy opportunities we have identified so far.
For this acquisition, we're uniquely positioned to deliver significant value creation for shareholders, thanks to our proven ability to acquire and integrate at scale. As you can see on slide 16, we currently expect approximately $175 million of run rate cost synergies to be achieved by year three, with $60 million anticipated in the first year of ownership. We've identified significant opportunities across operations, integration, and procurement, including production efficiencies, network and logistics optimization, increased material self-supply, and the streamlining of administrative and support functions. We're delighted to have Arcosa as part of the CRH family and really looking forward to updating you on our progress. Turning to slide 17, let me briefly take you through our combined energy and data portfolio with Arcosa now under our ownership.
As you can see on the map, we now have an extensive nationwide manufacturing footprint across the U.S., which will enhance our existing connected portfolio and expand our addressable market. It is highly complementary to our existing offering. By combining our leadership positions in energy distribution and data centers with Arcosa's strength in transmission, it will enhance our capabilities in the fast-growing U.S. energy infrastructure market. It'll also deepen our relationships with leading utilities, hyperscalers, and telecom carriers through our early engagement in the design and specification process, allowing us to deliver more tailored, high-value solutions for their specified needs. Overall, our combined energy and data portfolio represents a scaled high-growth platform.
Thanks, Randy, and turning now to slide 18. The outlook for this business is robust as reindustrialization continues to drive demand for power, grid, and data center infrastructure. For example, as a result of the structural deficit in power supply, U.S. utilities are expected to invest approximately $1.4 trillion in grid infrastructure through 2030, representing the largest grid expansion and modernization in decades. At the same time, the rapid growth of data centers is creating significant long-term demand for power and utility infrastructure, with the North American data center pipeline now exceeding $2 trillion. As a result, transmission has become the fastest-growing segment of the energy market, expected to grow at approximately 10% per year through 2030 as grid capacity continues to expand. Together with our leading market positions and nationwide coverage, we are well-positioned to capitalize on this strong growth opportunity.
Now, at this point, I would like to turn to Velocity on slide 20. Velocity is a two-year initiative focused on delivering an enhanced, scalable operating model for CRH. At its core, Velocity streamlines our organizational structure, fostering greater agility and entrepreneurship across our business. By delayering decision-making, we will bring management closer to our customers and end markets, enabling faster decisions, more effective execution, and greater economies of scale. Overall, Velocity underpins our growth objectives and enhances operational efficiency, thereby delivering a structurally higher margin business. Moving to slide 21, we have set out the expected benefits. Through simplifying organizational structures and processes, optimizing core business operations through technology, AI, and data, and accelerating decision-making, execution, and the deployment of best practices, we expect Velocity to deliver annual Adjusted EBITDA run rate benefits of approximately $400 million by the end of 2028.
Reflecting, among other factors, the opportunities identified through Velocity, we are pleased to update our 2030 Adjusted EBITDA margin target to the upper end of our previously guided range at approximately 24%. With that, I'll ask Randy to take you through some of the key initiatives already underway across the business.
First, simplification. We are restructuring and modernizing our organizational structure to achieve permanent cost efficiencies, while also delayering management levels to accelerate decision-making. This will result in a more efficient and agile organization that is closer to the customer. Next, an example of optimization. Across our global asphalt plant network, we're leveraging real-time fuel management, mix analysis, and enhanced monitoring capabilities to drive more data-driven decision-making. These initiatives are expected to deliver significant natural gas fuel savings of between 10% and 15%. Finally, acceleration. We're rolling out a next-generation connected quarry platform across 42 of our largest quarries, each of which produce more than one million tons of aggregates annually. Supported by a data-led digital performance hub, the platform enables real-time optimization across the production process, from mine planning and blasting through to crushing and load-out, and is expected to deliver a 7% to 10% reduction in variable cost.
These are just a few examples of the initiatives underway so far, demonstrating our ability to leverage technology, data, and best practices at scale to deliver improved performance, and we look forward to updating you on our progress as Velocity is fully deployed across our business.
Thanks, Randy. Before I hand over to Q&A, I would like to take a moment to share our thoughts on some of the trends we are seeing across our markets as we look ahead to 2027. First to the Americas and transportation, where we continue to see a supportive backdrop underpinned by state and federal funding, with approximately 40% of the IIJA funds yet to be deployed, highlighting the significant runway we still have ahead of us. While a multi-year reauthorization of highway funding remains outstanding, we believe we are headed in the right direction, supported by continued bipartisan momentum for increased infrastructure investment in the years ahead. In reindustrialization, we expect continued strong demand for large-scale manufacturing and data centers.
With a $2 trillion pipeline of data center projects either announced or under construction in North America and the benefits of our unmatched scale and connected customer offering, we are very well positioned to benefit in this area going forward. We also expect to see continued investment in critical infrastructure, including water, energy, and data investment. As for the residential sector, we expect activity to remain subdued in the near term as a result of the ongoing affordability challenges. As we've said in the past, this is not a demand issue, and we believe the long-term fundamentals in this market remain very attractive, supported by favorable demographics and significant levels of underbuild.
In our international business, we expect positive momentum to continue across Western Europe, driven by good growth in Ireland, the Nordics, and Spain, stability in the U.K. and France, and some early signs of residential improvement in certain markets. In Eastern Europe, our businesses are well positioned to benefit from a significant pipeline of infrastructure investment supported by EU funding programs. In Australia, the outlook also remains favorable, underpinned by the ongoing infrastructure activity and major project work. Regarding the pricing environment, we expect positive momentum to continue across our markets. In summary, notwithstanding a subdued residential market, the overall trend is positive for our business heading into next year. Turning now to slide 25. CRH will enter 2027 from a position of strength.
We are taking decisive actions to recover the impact of cost inflation that we have seen in the second half of the year and expect the benefits of further commercial and operational initiatives to deliver positive price cost spread in 2027. We will also benefit from the full-year contribution from Arcosa and the associated synergies. Through Velocity, we are focused on building a better CRH, evolving our operating model, and raising our margin ambitions. We have announced a new $6 billion share buyback program to 2030, underpinned by our superior financial capacity and cash generation, and we continue to see a healthy pipeline of acquisition opportunities alongside continued portfolio optimization initiatives. Together, all of this supports delivering further growth and value creation for our shareholders and reinforcing our position as the leading compounder of capital in our industry. That concludes our presentation today.
I will now hand you back to the moderator to coordinate the Q&A session of our call.
Thank you. As a reminder to those on the phone, please press star one if you would like to ask a question. We will now pause briefly while we register questions in the Q&A roster. We do ask kindly that you limit yourself to one question. Our first question comes from Angel Castillo with Morgan Stanley. Please go ahead.
Hi. Good morning, and thanks for taking my question. Jim, I was just hoping you could maybe talk a little bit more about the reasons for the kind of fiscal year 2026 guidance cut and maybe just kind of unpack a little bit more kind of the drivers, particularly maybe with the weakness in Americas Materials Solutions and as you think about kind of the range that you provided, just what would get you to the low end versus the high end of the guide?
Hi, Angel. Good morning. Yeah. Maybe I might ask Aylwyn to come back at the end, maybe just to comment on some of the puts and takes in the guidance we've reissued. The revised guidance this morning, Angel, really reflects the Q3 performance that we reported and also our estimates for the last quarter of the year. It's building on what was a very strong first half, which really I think showed the benefits and the resilience of the connected portfolio, and we actually delivered margin expansion through the Q2 and the H1. However, since we entered July, we've seen a sharp and sustained increase in energy costs, particularly diesel, but also other costs, including haulage and distribution. We've also noticed and seen residential demand has softened further across the U.S., and that's really against the backdrop of rising interest rates.
So in broad terms, this guidance reflects the impacts from diesel, haulage, other related raw material costs and assumes, in the Q4 forecast, that we remain at these elevated levels of energy for the fourth quarter. Now, specifically on the question on Americas Materials, obviously these impacts were most pronounced on the U.S. material business throughout Q3. Notwithstanding that, we delivered a solid underlying performance against what was a very challenging cost backdrop. From actually the low point of energy prices in kind of early mid to July, we've seen a sharp increase with diesel up 40% in a short period of time, and that has had a knock-on impact into other areas such as haulage. Now, for us, at this time of the year, it's difficult to recover that kind of cost inflation late in the year and also in what are some of our busiest activity months.
I mentioned it also, residential weakness was also a factor. Activity softened throughout the summer and impacted volumes across many of our markets, and we felt the combined cost inflation and residential impact across all our products. We felt that across the AMS business in the quarter. Despite that, when you look at it, encouraged by the activity we see on the key infrastructure and non-res markets, our Road Solutions business is busy and continues to perform really well, and we see good momentum in reindustrialization, particularly in the data center space. What have we done to, I guess, address that inflationary cost backdrop? We are taking decisive actions, adding fuel surcharges, and pushing pricing late in the season. We see that in terms of our mix adjusted aggregates price was 6% up in the quarter.
I am confident when we look across the business and across the group, our teams are executing well and getting on top of what is in effect a temporary timing issue. So we are well positioned heading into 2027. Our backlogs are in good shape, and we expect a positive price cost spread and a return to margin expansion in 2027. Aylwyn, do you want to comment on the puts and takes?
Good morning, Angel. So maybe just a couple of comments on scope. As you will be aware, it has been an active year in terms of M&A and divestments for us. So, with $10.4 billion of acquisitions year to date and $1.9 billion of divestments. There are lots of puts and takes there, but we expect the overall net incremental contribution from acquisitions for the full year 2026 to be in the region of $300 million. Obviously, that includes the contribution from Arcosa for the final two months of the year in what is a seasonally quiet quarter for the business. Other than that, as Jim mentioned, we are assuming energy constant at the current levels.
I guess finally, in terms of the quarter in general, as you will be aware, Q4 is a smaller quarter for us and so can be impacted by weather if we get an early winter or vice versa if we get a mild benign winter. So guidance assumes normal weather patterns.
Very helpful. Thank you. I know it's a little bit early here, maybe into fiscal year 2027.
I wanted to touch on the comments you made about commercial actions or initiatives toward the end of the year to really try to recover some of this cost inflation into next year. If you could comment maybe just as we think about the price that is required to ultimately recover this and return back to price cost growth into next year, what kind of pricing actions should we be expecting across aggregates and cement or realized price into next year?
Yeah, sure, Angel. I'll maybe give a kind of bigger macro picture backdrop and might ask Randy just to comment specifically on some of the kind of assumptions and what we're thinking on volume and prices as we enter 2027. Overall, if you look at it, the underlying demand backdrop is positive, right? We got good pricing momentum as we're exiting 2026. If you look at the building blocks, U.S. infrastructure remains positive, right? We have a continuing resolution, which is going to be in place in mid-December. We've got good visibility on our backlogs, and they're solid. State and federal funding remains favorable. State tax receipts are up kind of mid-single digits in the first half of 2026, right? Already, the kind of highway reauthorization conversations are underway, and we're exiting this year with about 40% of the IIJA still unspent.
I touched on it. We're busy in the reindustrialization space, and demand remains robust. We got good backlogs and good visibility across what are the large multi-year projects. Not just data centers, but complex manufacturing, chip plants, energy and LNG plants. That gives us really good visibility, and I think we'll see continued growth in that space into 2027. U.S. residential remains subdued, and we think that's going to be continued softening through 2026. It's not a demand issue, it's an affordability issue. With the 30-year fixed now at 7.4%, we don't really see any res recovery probably until mid-2028 at best. Moving across to the international business, there's a number of drivers for growth in 2027 across the international business. We've got very similar end market dynamics across all our international footprint. We got strong infrastructure demand across Western and Eastern Europe and Australia.
Positive reindustrialization demand across our footprint. Strong data center build-out across that footprint. Also, particularly in Central and Eastern Europe, defense spending is notable, in terms of the activity levels across the Eastern part of our portfolio. We are seeing some signs of residential recovery in some of our key markets. We are operating in an inflationary backdrop, and as we enter 2027, we kind of think that we are looking at mid-single digits in terms of overall cost inflation. Maybe on volumes and prices specifically, Randy, would you like to give a color?
Yeah. I guess just building on that. I think you did a good job kind of laying out the overall demand environment, which continues to be pretty positive. Coming out of Q3, I think Jim mentioned it, good pricing progression in aggregate 5%, total 6% on a mix-adjusted basis. As I look into next year, and we get pretty good visibility, obviously because of the backlog of our work, 2027 is going to be an exceptionally strong year on the aggregate side of the equation, obviously with a full-year contribution of Arcosa. That is going to bring about really a positive momentum there. I would say more broadly, the market is probably flat to slightly positive in regards to demand. From a pricing standpoint, the expectation we have is for high single-digit pricing as we get into 2027.
That work is already underway and beginning to make its way through the marketplace. I think just building on that, when you look at our cementitious portfolio, again, the demand drivers are in place. The visibility is good. We are looking at volumes up low single digits in the U.S. and pricing to follow in low single digits for the cementitious, which would be inclusive of our Ash Grove business and the Eco Material business. Again, a strong contribution as we look into next year. The international, Jim called that out as well. They are building off another strong year. You saw the performance in Q3. The demand environment is such that I think the volume expectations there for cement would be low single-digit volume growth and mid-single digit pricing into 2027 for our international cement business.
All in all, when you factor that in, the expectation is for us to have margin expansion as we get into 2027.
Your next question comes from the line of Trey Grooms with Stephens. Please go ahead.
Hey, good morning, everyone. Thanks for all the good color there. I guess shifting gears a little bit to capital allocation, with the recent closing of Arcosa, now the announcement of the new $6 billion share buyback program, can you talk about your capital allocation priorities looking into 2027 and on the buyback specifically, could you help us understand the expected cadence and timing of the buyback, how you expect to balance M&A with the buyback, and why now?
Hi, Trey. Good morning. Yeah, and I might ask Aylwyn maybe to come back to on the specifics around the new $6 billion buyback that we announced this morning. But overall, heading into 2027, there's no real change in our capital allocation framework, right? We remain disciplined and value-focused, and as we say, every capital allocation decision we make is looked through that lens of maximizing shareholder value. This year has been a busy year, right? $10.3 billion in terms of acquisition, 27 value-accretive deals, but also almost $2 billion of divestments, right? So a good year in terms of optimizing the portfolio. Our M&A pipeline remains strong. We've got attractive opportunities across all our connected growth platforms, but we're going to remain disciplined in terms of valuation and returns. That healthy pipeline brings optionality and with optionality comes discipline, and that's very important for us.
Our balance sheet level gives us flexibility. Just to put it in context, Trey, every $1 billion of bolt-on deals is about 0.1 times on our leverage as we enter into 2027. Maybe just to remind, we set out in our Capital Markets Day in 2025, we highlighted a $40 billion financial capacity through 2030. We're allocating about 70% of that to the growth side of the equation and 30% in terms of shareholder returns.
Yeah. Good morning, Trey. Just following on from the completion of Arcosa, I guess we are also pleased to announce the multi-year, $6 billion share buyback, which will run through to the end of 2030. As Jim outlined, that is fully aligned with the $40 billion capital allocation framework that we announced as part of last year's Capital Markets Day. As well, shareholder returns obviously continues to be a really important part of the overall capital allocation priorities. One component of that clearly is the progressive dividend policy. We have over 40 years of growing dividend that we are very proud of. In addition, as well to date, we have had a very successful share buyback program. We have retired close to 25% of our stock at an average price of just over $50. So, very successful program to date. Buyback remains an efficient way for us to deploy capital.
We believe our stock represents clear value at these multiples and does not represent the true potential of CRH. So, I guess in that context, we expect to be active in the market in the immediate future, and we will update you with progress in terms of how we are doing as part of the Q4 results. Then maybe just finally, if we step back, we remain committed to our investment-grade credit rating, which we have retained for over 20 years, and this is a really important part of our balance sheet strength. In saying that, CRH is a cash generation platform of scale, and so we continue to have capital available, and as Jim mentioned, we will continue to use that optionality to drive maximum value for our shareholders.
Your next question comes from the line of Adrián Huerta with JP Morgan. Please go ahead.
Thank you. Good morning, everyone. Thank you for taking my call. Jim, can you elaborate a bit more on this new Velocity program? Probably giving us additional details or examples, why now, and any additional color on implementing these cost initiatives and the pacing of the benefits.
Yeah, sure, Adrián. Good morning. Good to hear you. I might ask Aylwyn at the end just to come back in terms of the size and Velocity, the kind of run rate we're seeing and the cost implementation in 2027 and into 2028. It's been something that we've been working on for some time, Adrián, and it's underway, and it's really something that's been enabled by the CRH winning way that we set out at last year's Capital Markets Day. On that day, I clearly set out our updated strategy and our vision, and indeed, our capital allocation priorities for CRH. I think we've been really successful executing on that strategy over the last 12 months.
We've continued to work on optimizing our portfolio, as I mentioned, $2 billion of divestments, and also recycling that capital into the likes of Arcosa, into Axius and Eco Material of last year. I think you should expect us to continue to work on optimizing our portfolio as we enter into 2027. Velocity is the next step. It was a natural evolution of our operating model. What's it about? It's about building a better CRH. CRH is the leading and largest company in our space, and size matters, but it's actually, it's scale that ultimately drives shareholder value, not size, and it's that focus on scale. Velocity, maybe as well, just to clarify, is incremental to our 2030 targets we gave last September, and we're raising our ambition for the company across the entire group. You kind of said why now.
It's really the coming together of a number of factors. We've had a very active period of M&A over the last two years. We've also had the acquisition of Eco Material, Axius, and now Arcosa. As we planned and integrated those businesses, it really gave us food for thought and acted as a catalyst for us to rethink our organization structure and also our operating model. Those kind of events, together with really leveraging the latest technology, is really what's enabled us to deliver these scale benefits. The benefits are coming across a number of headings. Randy mentioned it earlier on the call. He just gave an overview of some of the projects that are already underway. They're mainly coming from a combination of labor savings and efficiency and cost savings.
What we're doing is that we're simplifying, delayering the organization whilst critically retaining our unique entrepreneurial customer-focused mindset. By simplifying and delayering, we're bringing our senior managers closer to the frontline operators and crucially closer to the customer, and that's going to deliver quicker and more efficient decision-making. It's a group-wide initiative, one that's going to bring us, as we said, to the top end of our guidance in terms of margin for 2030, which is around 24%, and one that's really going to underpin the next era of growth for CRH.
Yeah. In terms of the benefits and costs, we are confident of delivering at least $400 million in terms of the annual run rate benefits by the end of 2028. Maybe just on phasing of that, we expect approximately 40% to be delivered in 2027, and the balance by the end of 2028. In order to deliver those $400 million of run rate benefits, as you would expect, we will incur some one-time transformation costs in the region of $400 million as well. Approximately two-thirds of those costs will be incurred in H2 2026 and 2027, and the final one-third across 2028.
Your next question comes from the line of Kathryn Thompson with Thompson Research Group. Please go ahead.
Thank you for taking my question today. Certainly, a lot of focus on higher energy cost, and you outlined the impact with diesel. Looking forward, when you are planning forward, particularly heading into the winter months, and given current elevated oil prices, how does this impact your Winter Fill program as you enter the purchasing season? How does that compare this year versus prior seasons? Strategically, how do you think about managing or expanding this program, or your Winter Fill programs, going forward? Thanks very much.
Yeah, maybe I will take that, Kathryn. Good to hear from you. Maybe just taking a quick step back. The reason behind this broad network of terminals across the U.S. is really around the surety of supply. We have the capacity to house about half of our yearly demand in our Winter Fill program. Critical element, gives us a competitive advantage, obviously. We are the, as you know, the largest road paver in the U.S., north of five times the number two player. So it really offers a compelling competitive advantage, not just from the procurement side, but the ability to customize mixes in the marketplace. So it is a critical element that we want to make sure we leverage that size and scale.
Coming out of 2026, it was a very successful business. We were able to secure product at good pricing, and that made its way through the system.
When I look at the Winter Fill program in general, it begins typically in November, runs through April. Certainly you are well aware in the summer, as we saw liquid costs kind of rising with the movement of oil. Actually, something unique has happened as of late, right? The underlying demand and increase of output from the refiners to deal with the demand for diesel has created really a supply-demand imbalance, which is creating an opportunity for us. As I look going into the balance of this year, one, we will get the product quantity that we need, and because of that scale and national reach of our terminal network, we are going to be able to get that cost advantage. When I look into 2027, it is going to be another year of margin progression.
We are going to see profit improvement in that line of business as well as our asphalt line of business. Then just building on your comment, I think that is something when you look at, and Aylwyn called it out in terms of the capital available to deploy at scale, the continuation, the expansion of our asphalt footprint in the U.S. will follow the expansion of our build-out of our asphalt network. So it is a critical enabler and one we continue to invest in. But fundamentally, as we look into 2027, our margins will expand.
Your next question comes from the line of Colin Sheridan with Davy. Please go ahead.
Thank you, and good morning, guys. Thanks for the presentation. My question is around Arcosa. I am just wondering how your thinking has evolved around the company's engineered structures business and how you see it fitting in with the existing group businesses. Also whether or not there has been any divestitures or antitrust points of note on the closure of that. Thanks.
Hi, Colin. Good morning. Listen, delighted to see Arcosa close at the end of last week. We are just getting our feet under the table at this point. Day one was just actually Monday of this week across all of the Arcosa operations. We obtained the regulatory approval ahead of our expectations timing-wise, with some very minor conditions, to divest a few asphalt plants which were not material to the transaction. What that has done, Arcosa overall, when you look at it, has really strengthened our exposure to critical infrastructure and has significantly enhanced the quality of the portfolio. You mentioned the engineered structures. It is actually the fastest growing part of the Arcosa portfolio, and it is also going to be the fastest growing platform within CRH, and we expect top-line growth of double digits for the next three to four years.
Right now, because of the demand and the build-out of the transmission network, we are looking at strong order backlogs with lead times out to 12 months across the engineered structure business in Arcosa. And when combined with our existing activities that we have in this space, it significantly expands our energy and data offering. It is deepening our relationships with the utility customers that we are already working with and serving. It is creating a leading nationwide platform serving attractive growth markets linked to energy infra, electrification, and grid investment. And it is also interesting in that 90% of the funding into this space is privately funded. More broadly, when you stand back and look at Arcosa in total, what it has done, it has strengthened our aggregates position, and reaffirmed our leading aggregate position in the U.S., and it is expanding our critical infrastructure exposure.
And it really, as we get into it in early week one, it gives really significant opportunities for us as we integrate the business into the wider CRH connected portfolio.
We have time for one more question, and that question comes from the line of David MacGregor with Longbow Research. Please go ahead.
Hi. Good morning. This is Joe Nolan on for David MacGregor. I just wanted to dig in a little bit more on the infrastructure outlook. With the U.S. midterm elections around the corner, can you provide an update on highway bill reauthorization and the infrastructure funding backdrop as we head into 2027?
Yeah, maybe I'll just kick off with that in terms of what we're seeing. I think first, and Jim did a good job outlining what we see today. The current IIJA, 40% of that funding has yet to be deployed. So there's a tail, as we called out, in regards to that funding. I think probably an important element is the role obviously that states have played, they continue to play. They account for 60% of the underlying investment in the infrastructure. That's really been a flip over the last 10 years. I think the way that they focus on that, the way that they apply the resources to project has given them comfort in terms of outlook, and it's given us comfort as well.
For us, when we look at underlying activity, we look obviously at bidding on a weekly basis, and we see that on par with last year. So a continuation of the deployment of not only federal but state funding. We're winning our fair share, so our backlogs are very similar position to where we were last year, which is encouraging. We're under a continuing resolution. I'd say that's more the norm than the exception. We've seen that with every piece of multi-year highway legislation dating back into the early 1990s, so it's not an unusual position for us to be in. I think what's encouraging, though, is the continued bipartisan support in and around the need for investment in infrastructure. What we've seen come out of the House with the BA250 is encouraging. It's a return to kind of core infrastructure.
It's a real focus on kind of permitting delays, just creating better efficiency from the deployment of the capital in regards to the investments, and it's beginning to address a funding mechanism. So there's a lot to like in the BA250. We'll see what comes out of the Senate in the end of November. But overall, when we talk to people on Capitol Hill, there's alignment around the need for underlying investment. So when we look at the outlook for the year going into next year, we're very positive just based upon our backlogs and the underlying bidding activity.
Yeah, thanks, Randy. Maybe just to build on that. If we step back for a moment, I think as we enter into 2027, the broader outlook remains positive. Infrastructure is strong and our backlogs are supportive. Our reindustrialization, we called it out, continues to drive significant project activity, and we see good momentum carrying into 2027. Residential is expected to remain subdued, particularly in the U.S. The pricing backdrop heading into 2027 is supportive. When you step back overall, looking into 2027, CRH is in good shape. Our Arcosa deal is closed, so we have a full 12 months clean contribution from Arcosa. Velocity is underway and is already delivering benefits, which is going to underpin our future growth. We're building a better CRH, one that's going to have structurally higher margins. We're pleased today to announce the recommencement of our new $6 billion share buyback program.
Now, as we enter 2027, our focus is really about execution on our strategy, execution on Velocity, integrating Arcosa and delivering on the synergies. So putting it all together, I'm confident that the building blocks are in place to deliver another year of growth as we enter into 2027. Well, that's all we've time for today. Thank you for all your attention. As always, if you have any follow-up questions, please feel free to contact our Investor Relations team. We look forward to talking to you again in February next year when we will report our full year results for 2026. Thank you. Have a good day and stay safe.
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