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CRH PLC (NYSE:CRH)
Q3 2020 Earnings Call
Nov 24, 2020, 3:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Albert Manifold -- Group Chief Executive

Good morning, everyone. I'm Albert Manifold here. CRH Group Chief Executive. And you're all very welcome to our conference call and webcast presentation, which accompanies the release of our trading update this morning. I'm joined on the call of our Group Finance Director, Senan Murphy; Frank Heisterkamp, Director of our Capital Markets & ESG; and Tom Holmes, Head of Investor Relations. Over the next 15 minutes or so, Senan and I will take you through some of the main points of this morning's announcement harnessing the key drivers of our trading performance for the first nine months of the year as well as providing you with indication of our expectations for the year as a whole. Afterwards, we'll be available to take any questions you may have. And all told, we should be done in about 45 minutes.

Turning to slide 1 and before we begin, I would like to take a moment to acknowledge that our strong financial performance is the result of the extraordinary efforts and commitment of our teams on the ground right across the Group. The underlying strength of our business model and the decisive actions we have taken to adapt to the evolving demand environment across our markets. As we continue to navigate these challenging and uncertain times, the health and safety of our people remains our number 1 priority and is a core focus for us in each and every day. With regards to our trading performance, I'm pleased to report that the good delivery in the first half has continued into the third quarter. And for the first nine months of the year, our businesses delivered profit and margin improvements despite lower overall activity levels across our markets.

Group's nine month EBITDA of $3.4 billion, 2% ahead on a like-for-like basis with the further 100 basis points improvement in our underlying margin, all delivered against the 3% decline in sales. Turning to slide 2, and notwithstanding the uncertainties that persist in relation to the impact of the COVID-19 pandemic across our markets going forward, I would like to update you on our thoughts regarding the overall market platform and the trading environment as we sit here today. In North America and Central and Eastern Europe, underlying construction demand remains resilient. While in Western Europe activity levels have improved despite the continuing health crisis across our markets. Infrastructure and residential demand remains positive, but certain non-residential sectors, particularly office, retail and hospitality have continued to experience lower levels of activity. Despite these lower overall activity levels and notwithstanding the relatively benign energy cost environment good commercial practices and pricing discipline are continuing across our businesses.

Turning now to our divisional trading performance and first to Americas Materials on slide 3. During the third quarter, weather disruption in part of the south and west of the United States and a strong prior-year comparative resulted in volume declines across all product areas. Despite these lower activity levels, disciplined commercial management across our businesses continues to underpin positive pricing momentum in aggregates, cement and ready-mix concrete. While our asphalt business have delivered further margin expansion, our strong focus on cost control helped us to deliver improved profitability across our business. Against a 4% decline in like-for-like sales for the first nine months of the year, our business delivered a 9% increase in EBITDA and a further improvement in margin.

Next to the performance of our Europe Materials business on slide 4, where we delivered a significant improvement compared to our first half performance reflecting the continued recovery of activity levels across a number of our key markets and strong cost management across our businesses. In the absence of nationwide restrictions on construction across much of Central and Eastern Europe, demand remained resilient with our business in Switzerland, Germany, Poland and Romania continuing to perform well. In Western Europe, activity levels have recovered to approximately 90% of normal with improving trends in cement volumes across France and Ireland during the third quarter of the year. In the United Kingdom, activity levels are also recovering, albeit from a lower base and today are operating at approximately 75% of normalized levels.

Despite these lower levels of activity, I'm pleased to see good pricing discipline continuing across our markets. Overall, cement pricing in Europe is 3% ahead for the first nine months of the year with improvements across all our major markets. Pushing this altogether, our overall third quarter and like-for-like EBITDA was 2% ahead of the prior year period representing good margin improvement of slightly lower sets. Turning to slide 5, on our Building Products division which experienced a continuation of the strong delivery we saw during the first half of the year. The performance of this business affect its significant exposure to residential and non-residential markets, and the contrasting trends we've seen in the year to date.

Our Architectural Products business for example, continue to benefit from strong residential repair and maintenance demand in both North America and Europe through the third quarter. Our Infrastructure Products business continue to deliver a resilient performance for the first nine months of the year despite pandemic related restrictions impacting activity levels. And finally our Building Envelope business primarily exposed to US non-residential construction continue to be impacted by lower levels of activity in that particular market. Overall, nine months like-for-like sales were 3% ahead, while EBITDA increased by 9%, a robust performance, reflecting strong operating leverage through our continued focus on cost control and pricing discipline.

At this point, I'd like to hand you over to Senan to take you through our cash performance and year end balance sheet expectations.

Senan Murphy -- Group Finance Director

Thanks, Albert and good morning, everyone. On slide 6, you can see the key components underpinning our expectations for our year end net debt position. And I'm pleased to say that despite the significant volatility our business has experienced over the course of the year so far, we expect the year end with a very healthy balance sheet position as a result of our continued focus on financial discipline and strong cash generation.

Let me briefly take you through some of the key components working left to right on the slide. We ended 2019 with net debt position of $7.5 billion and a net debt to EBITDA of 1.7 times. We expect 2020 to be another year of strong cash generation and indeed, strong cash conversion across the Group resulting in a significant reduction in our year end net debt position. In the year-to-date, we've generated over $260 million of proceeds from divestments and reinvested approximately $180 million on 14 value accretive bolt-on acquisitions across the Group and that results in a net proceeds of over $80 million. And notwithstanding different management of our capital expenditure over the course of the yea, we expect to invest a total of $1 billion to support growth in our business in 2020.

In addition, we've also returned approximately $1 billion to shareholders in the form of dividends and share buybacks earlier in the year. Taking all of this into accounts, we expect our net debt position to finish the year at close to $6 billion or approximately 1.4 times net debt to EBITDA, a very strong results and provides us with significant optionality for future value creation as visibility improves.

Albert Manifold -- Group Chief Executive

Thanks, Senan. Another strong cash performance really highlighting the strength and resilience of our business model, and as you say, providing us with significant optionality going forward. Now before I turn to outlook, on slide 7, I'd like to briefly update you on the progress we have made on our strategic objectives. During our interim results in August we presented you with a slide that reflected on the strength of our business through the continued execution of our long term strategy, enabling us to deliver even in challenging and uncertain times. We've highlighted that through the active management of our portfolio in recent years, we've become a simpler and more focused business, and we said that we will continue to reshape and refine our portfolio to deliver superior growth, margins, returns and cash generation for our shareholders.

As an example, in October, we reached an agreement to divest our cement business in Brazil for over $200 million, providing us with the opportunity to reallocate those proceeds into higher growth areas with more sustainable returns. The goal is to continue to adjust our asset base. In light of the changing market environment and as a result of the combined economic effects of COVID-19 and the uncertainty surrounding Brexit, we expect to recognize a non-cash impairment charge of approximately $800 million in the fourth quarter of the year primarily in relation to our operations in the United Kingdom and our associated investment in China.

As you heard us say many times we are relentlessly focused on continuous business improvements. Deeply and better practice of making our businesses better through incremental improvement initiatives to structurally improve our margins, cash and returns year-after-year. Against a very challenging trading environment, we made further in this regard, during the first nine months of the year. Delivering an underlying margin improvement over 100 basis points. And as Senan mentioned, we expect 2020 to be another year of strong cash generation and improved cash conversion for the Group.

And now before we turn to over to questions-and-answers, let me finish with a word on outlook on slide 8. In Americas Materials, we expect a solid underlying demand to continue for the remainder of the year and for pricing to remain supportive despite lower energy costs across our business. In Europe Materials, we're expecting improved levels of activity despite the continuing health crisis across our markets. In Building Products, we expect good demand in residential and repair and maintenance and improvement activity to continue for the remainder of the year, partially offset by more mixed environment in non-residential construction.

Taking all of this into account for the Group as a whole, we expect full year EBITDA to be in excess of $4.4 billion ahead of the prior year on a like-for-like basis, representing further margin improvement and another year of progress for CRH. As we look ahead to 2021, while the pace and shape of recovery across our markets remains uncertain, we are confident that the strength of our business is as well positioned for the challenges and opportunities that lie ahead.

So that concludes our presentation this morning. And we're now happy to take your questions. May I ask that you please state your name and the institution that you represent before posing your questions. In consideration of others in the line and to make the best use of the time we have available, I ask to please limit your questions to a maximum of 2.

I'll now hand you back to the moderator to coordinate the question-and-answer session of our call.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] Our first for today is from Robert Gardiner from Davy. Please go ahead.

Robert Gardiner -- Davy -- Analyst

Good morning. Robert Gardiner from Davy here. Hope all well. Two from me. So one obviously, balance sheet is in fine shape. So how should we think about capital allocation in 2021? Do you see, that'd be a resumption of the buyback and the bolt-on strategy or would you be prepared to step into bigger deals as visibility improves? And then two, I'm just wondering if you could expand on your outlook comments, especially for the different end markets that you serve and then kind of thinking in terms of the different businesses, where you have a pipeline of backlog such as Americas Materials? Thanks.

Albert Manifold -- Group Chief Executive

Hi, Bob, good morning. Two questions there. First question on capital allocation, which I'll ask Senan to talk about at the moment. And the second one is just to give us perhaps you asked me to a bit more granularity about the outlook for the markets that we're servicing and what we're seeing in front of us. And I take the second one and then I'll pass over the capital allocation to Senan. And, in our main markets in North America specifically in the United States I suppose the three sub sectors that other market that make up the construction market is at, obviously infrastructure is the biggest area and coming off the back of at least reasonably robust at quarter 3 and continuing on through quarter 4 actually, I have to say, we think that demand levels are pretty slow as actually. And we have a clarity now with regards to the fact that we have a continuing resolution of the FAST Act, which gives the federal support for the funding going forward into 2021. And in the election on November the 3rd about the -- we're about 344 different initiatives across the United States across different states and localities to support increased state funding, of which about 95% of them are passed, committing another $14 billion of state funding to infrastructure going forward.

And against that backdrop, and also from our own sense, on our own network talking to our customers, I think there are mechanisms to currently be put in place not only as a federal level that we've seen, but also on a state level to ensure that funding will be there to support activity levels going forward into 2021. So I think we feel fairly OK about 2021 is going to continue on at the pace of growth that we've been thinking over the last couple of years. Residential markets have actually been quite robust hardly surprising that in quarter 2, there was a slowdown, but rebounded well in quarter 3 and we're looking now on a rolling sort of an annualized basis. We're looking at our housing completions at close to 1.5 million new homes in the United States. And significantly for that we're seeing a -- quite a shift in mix toward using a family home share of almost 10% on last year as compared to multifamily homes.

And that's again is a better mix for us, because they're more maturity intensive. And the non-residential markets are clearly more mixed and the retail and commercial would make up about 50% of that, and it tends to been hurt most in the North and the Northeast and the Midwest, stronger down South and definitely stronger out West and stronger in areas such as education and medical clearly and warehousing and having to do with technology -- technology centers as well. So, a bit of a mixed bag, overall down, and non-res this year are expected to continue down, but maybe perhaps at a slower pace for next year. So overall, I think the US markets next year broadly, I think will continue to see flat to slightly ahead next year with regard to activity levels and we'll see where pricing goes on top of that.

If I switch a candidate by the way of a -- particularly challenging quarter 2 again, very significant impact of the pandemic, but actually performing reasonably well in quarter 3. And again if we return to more normalized environments, significant pent-up demand particularly in and around our target was the core of our business in Canada. And coming across the Europe and without going through it in too much data, broadly speaking, excuse me, a recovering situation across Europe. The core of our businesses are mainly in Central and Eastern Europe, and they've been relatively unaffected during the course of this year with the pandemic keeping activity levels, pretty much at normalized levels and we see that continuing forward with a bit of a patchwork includes, that many different countries in Central the Eastern Europe, but broadly speaking, continuing the progress that we saw in the first half of the year during quarter 3 and quarter 4, and we expect that to continue into next year.

And Western Europe is recovering and getting back to normalized levels. And we think there will be specific support going through that next year 2022, for instance, is the year of the French presidential elections. The moment expected to see as we always do, significant support for social initiatives and social housing in particular in France in 2021 to support our market, Ireland [Phonetic] doing well, fairly solid as well. And UK probably the one area which perhaps is slower than anywhere else. And we'll talk about that, they've -- I'm sure recovering, but at a slower pace than everywhere else. But broadly speaking, solid, steady as we go as far as we can see out. And I think we are looking forward to continue our progress in 2021 going forward.

Senan Murphy -- Group Finance Director

And then Bob, just in terms of capital allocation as you pointed out, obviously we intend to end 2020 with a very strong balance sheet that gives us plenty of options as go into 2021. And I guess if we look at the usual check list starting with capex, obviously, we'll continue to invest in our business, but it will continue to be a disciplined approach as you saw from us in 2020 and we did reduce the capex spend in response to lower activity levels in some parts of our business. And then in another parts of our business where we had said very strong activity levels, we continue to invest. So we should expect to see a continuation of that approach from us into 2021.

In terms of dividends, obviously, we have 30 years, 36 years of a very proud track record in terms of a stable or increasing dividend. We continue to have a progressive approach to dividends, and you should expect to see a continuation of that as we look forward. And I think in terms of the next lever, it's obviously M&A, looking at that, M&A is a very and remains a very key part, an important part of our growth strategy as we look forward. Typically in any year as you know, we would do somewhere between $500 million, $600 million and $1 billion of bolt-on deals. And that number obviously is much lower in the current year as we pointed out to date. We've done about $200 million in bolt-on deals. So it's quite unusual. I guess that's a reflection of the uncertain environment, we've been operating in. But the pipeline looks good and looks healthy, today as you look into 2021. And as some of that uncertainty starts to recede, then you should expect to see an uptick in activity levels in terms of allocation of capital toward the M&A side.

And then I would say, finally then, looking at buybacks, I mean buybacks we know are an important part of our capital allocation strategy. We caught -- we paused our current program back in March due to the unprecedented volatility we saw in the markets at that point in time. As I said, thankfully, the worst of that seems to be behind us at this point in time with regard to volatility, and given our strong balance sheet, obviously we're very aware of the attraction of share buybacks to our shareholders. And obviously we'll update you further on that during the first quarter of next year.

Robert Gardiner -- Davy -- Analyst

That's great. Thanks very much.

Albert Manifold -- Group Chief Executive

Thanks, Bob. Have a good day.

Operator

Our next question is from Gregor Kuglitsch from UBS. Please go ahead.

Gregor Kuglitsch -- UBS -- Analyst

Hi, good morning. Thanks for taking my questions. I think to approach the two questions similarly. Maybe if I can explore your outlook on pricing into next year. I guess we're quite late in the year. So perhaps some of that have gone out. So if you can give us a sense what you think, the likely price increases are and maybe put it into context for us, what you're expecting to costs? In other words, do you think pricing could be net accretive or is it going to be basically inflationary? And then coming back on M&A can you just maybe explore a little bit more. There you talked about bolt-ons. I guess the question is what appetite, if any, is there for a larger transactions? I think previously you kind of suggested you're less keen on very big transactions. If you could just give us a sense what you're seeing in your pipeline and whether you're prepared to do something bigger? Thank you.

Albert Manifold -- Group Chief Executive

Hi, Gregor. Good morning to you. And hope you are well. And two questions there. First one on outlook on pricing. And just a sense of where we are with regard to cost next year given at least some sense of that to early in the season. And the second one, regard to M&A, and just a bit more granularity about our update and where we are. And with regards to pricing, I look -- we haven't started the pricing season yet. We're finishing up this year. So it gives us a chance to do that. We've come off the back of what I would consider to be our solid pricing environment both in North America and Europe. And I mean our costs go up and our costs have gone up over the last number of years, and in particular in Europe, we are paying catch up for quite a number of years and we will continue to pay catch up for a number of years. So I would expect across Europe to see progressive pricing continuing on during the course of 2021. And not because we're sure that we need it. And the assets we invest in, our expense of assets, they need to be maintained. And we need to get paid for the products that we sell, so a high quality of product, that needs very tight specifications. So we have to continue to invest time, people and resources to do so. And of course we've got increasing cost with labor and logistics and fuel cost as well. So from my point of view, across Europe, I expect to see a continuation of a positive pricing environment in 2021.

With regard to the United States, I think it's well embedded now at this stage for a number of years and that pricing is something that we should expect across our businesses. And I would expect it to continue there. In both markets, I would expect it to be in or at the same level as we saw in this current year, Gregor.

With regard to costs and cost -- input costs, obviously, our main input costs are labor and logistics, fuel costs. I would expect labor cost during the course of next year. Labor is still tight, quite and even though unemployment has risen both in the European Union and in the United States, but of course it's specific labor we need, we're still quite tight. And that so I'd expect labor cost to be up to maybe 2% to 3% depending on your specific regional focus. And logistics cost and energy cost, I think they're broadly stable from where they are now at this point of time. Looking at that, we would cover forward a lot of our cost and energy in particular. So we're always rolling forward. So we have probably about a third of our cost covered voting as we go into next year, but I think we've done for quite some time. It's just part of the price of what we do. So that would be the pricing and cost environment, as I would see it here today. Obviously will be much better informed as we move into quarter 1 next year.

With regard to M&A I think Senan said it very well, we -- with the pandemic that hit us in the first half of this year, clearly, everybody just took a pause and we did hit the pause button. The main items in the CRH for 20 plus years now at this stage, I don't ever call spending $180 million of M&A at November in any year, but this has been an extraordinary year. And but we deliberately held our hands. It's not because we lacked appetite, it's not because we lack the capital, it's because we just -- will actually, the visibility. And when you got no visibility it's very difficult to plot the way forward in terms of looking our forecast. And also this year and charges have actually physically meeting people, we've seen over several months in terms of the restrictions of traveling and that goes with that.

However in saying that I have to say that certainly over the last two to three months that has started to ease somewhat in terms of the travel within Europe, Continental Europe and within the United States made this easier. Also, I think the fact that is -- the fog of uncertainty is lifting somewhat in terms of what next year looks like. I'm just giving you our thoughts in terms of how we think next year is going to play out and that's just not a CRH that view, that's an industry view. And with that in mind, we can start to see greater clarity where and opportunities may abound. We have capital, Senan has said M&A has been a significant part of the value creation story for CRH going forward, we want to do M&A. we want to do disciplined M&A and I think we would expect to see a progressive increase in our activity levels there during the course of the next couple of quarters. I don't think we're going to hockey stick up from where we are now at the moment, but I would expect it to progressively improve as we return to that particular game.

And with regard to large M&A, there is nothing specifically planned with regard to large M&A. If we take a progressive careful approach as you know, CRH will do, it's highly unlikely we're going to be doing sort of multi-billion dollar deal tomorrow. At the same time, we keep our eyes and ears sharpened and open for value opportunities and you would have seen that in the past. Just, cash flow came along, that was a $3.5 billion deal, it was a big deal, but it was a very fine deal and it was a good deal for CRH, it was a good deal for Ash Grove. And I think we've always keep our eyes and ears open to that.

Our industry is very fragmented, both in Europe and in the United States. As you would well know there are a number of deals of the $1 billion plus that people haven't even heard of private businesses, making $100 million to $150 million of EBITDA, every year and all of a sudden there are succession issues or there are issues with regard to expansion or they want to move on the business. And it's our job as part of what we do is keeping in touch with these people. This is our -- this is our job and I know, we keep a very careful eye. So, I wouldn't rule out anything extraordinary large. I wouldn't say that I think probably in the coming quarters quite frankly, I think we're still build up, back from where we are at the moment. But we always keep an eye on value and we know that if we do execute disciplined M&A, that usually ends up delivering value for our shareholders and that's what we're here for.

Gregor Kuglitsch -- UBS -- Analyst

Thank you.

Albert Manifold -- Group Chief Executive

Thanks, Gregor. Have a good day.

Gregor Kuglitsch -- UBS -- Analyst

You too. Thank you.

Operator

Our next question is from the line of Paul Roger from Exane. Please go ahead.

Paul Roger -- Exane BNP Paribas -- Analyst

Yeah, good morning, guys. Hope you people are -- hope everyone's well. So, just two questions, then going back to the capex point, Senan, you've obviously given guidance for this year. You mentioned a bit about next year as well. Some of your competitors have talked about the need to start high sustainability investment potential and things like carbon capture, but just general CO2 reduction is not a view you share, and maybe also if you can give us some indication of how much of that $1 billion capex is going to reducing CO2 this year. And then the second question also on CO2, clearly, a few of your large cap peers have gone quite aggressive on targets for 2030, you're at $520 million for 2030. Any plans to revisit that? And then finally on -- also on sustainability, are you thinking about starting any green sources of finance?

Senan Murphy -- Group Finance Director

I'll start with the capex and then Albert, you want to say a few words on sustainability targets. Paul, just in terms of the capex point, yeah, I think as you pointed out, first thing I would remind you of is that, 85% of our business is not cement or said another way, 15% of our business is cement. So, when you're comparing our capex numbers to some of our peers, you should bear that in mind, this year, obviously our capex spend is $1 billion, it's down to about 75% of depreciation. But as I said earlier, and some of that spend obviously we've obviously spend more than previous years where we've had parts of our business, particularly on the repair and maintenance side, some of our products businesses as where we've actually expanded our capacity to be able to cope with growing activity this year.

And then there are other areas, we've obviously got back. When I look at the sustainability to spend, I mean the sustainability spend is embedded within that number. And as you look to 2021 and beyond, there is a portion that is related to obviously driving our sustainability agenda. I would say it's a -- it's say an affordable part of that as opposed to calling out a specific number. And I would expect that when you go into '21 that with activity levels as you see activity levels improving again, the capex spend would increase across in the parts of our business that need it. And I think that's probably what I would say, really about it in terms of ESG, Albert, you want to add something there?

Albert Manifold -- Group Chief Executive

With regard to the ESG, I would say first of all, I think Paul I know where your question is coming from, because a lot of our peers that you're talking to are 90% plus cement players. And as Senan has said to you, I mean concrete, aggregates, asphalt, building solutions concrete products, infrastructure products they make up 85% of our revenue. So cement is only 15% of what we do. And uniquely among that as well almost all our cement is in the developed world. So we have been -- we have been operating and manufacturing to the most stringent standards that have been around the world for the last decade as such. And as Senan has said, most of our of our targets are within the capex numbers that are there, but actually in terms of improving at CO2 targets most of time actually the work is done within the process itself, so it's changing process technology rather than buying in new equipment.

If it was easy to buy a new equipment, we'd all do it, but it's actually changing process technology which we do at the chemistry of the raw materials and modernize the raw materials types of fuel that we use, all of those types of cement, that you produced and indeed the type of cement, the type of concrete. So it's all interlinked and it's all circular. So it's more to do with how you work rather than what you spend, that's the first thing. Except in some businesses where there are particularly in the emerging markets where you haven't had those standards embedded in your business and you'll find those of our peers who have greater exposure developing markets have not had those standards embedded in their business for the last 10 years and hence they got to dispense to do that. We don't have that situation.

Also I have to say that within the targets you talk about, people move these targets around the place. We're not -- want to bring targets at every three months. And if you compare apples to apples quote, none of us are smarter than anybody else. We all went to the same universities, we all have the same engineers. And broadly speaking, all of the targets are in line for the industry to 2030. We didn't see at rates what we do actually. We give targets to 2025, and we're very happy that our targets are absolutely at the very leading edge of what our industry is doing. And everybody is working very, very hard on this whole area.

With regards to the broader set to your view is see, and how important this was, I have to say you, that, when I look at CRH, that's not really fully understood, of course. We are the largest recycler of building materials in North America, we're the largest producer of concrete in the world. And that is the world's most sustainable product. A lot of people focus on cement, but we're not a cement company actually, we're concrete and aggregates and asphalt company. We have done some as well. And concrete is the most sustainable building which we -- in the world, in terms of durability, energy, efficiency, strength, safety, it absorb CO2, it's 100% recyclable, and again in the neighbor of the ability infrastructure that we need to build the world that we live in, is the indispensable part of our modern way of life. And what we have much to do is, we've got to look at that and see if we could do it in a more sustainable way, which is exactly what we're doing.

So we're very proud of having a strong ESG credentials. It's a very important part of what we do. And I think it's really about just making sure people understand what CRH are as compared to our more cement focused competitors.

Senan Murphy -- Group Finance Director

And just Paul you had a question about green finance there at the end. I mean, look, it's something we'll continue to evaluate, but let's look at CRH's position. We issued bonds earlier this year at a very attractive rates, obviously investment grade rating. There is no plenty of appetite for our paper in the market. So it's not something that we've obviously considered or have to consider at this point in time to date, but obviously we'll keep it under evaluation. But I would say, balance sheet is in a very healthy place, raising debt at this point in time, obviously is not a significant priority given our healthy cash position. And obviously the term of our outstanding debt looks very healthy when you look at it. So there is no refinancing that's imminent either. So it's something we'll keep on the radar. But bear in mind that our existing funding capability is already in a quite an attractive place.

Paul Roger -- Exane BNP Paribas -- Analyst

Yeah, that's great. Thank you.

Albert Manifold -- Group Chief Executive

Thanks, Paul. Have a good day.

Operator

Our next question is from the line of Arnaud Lehmann from Bank of America. Please go ahead.

Arnaud Lehmann -- Bank of America -- Analyst

Thank you very much. Good morning, Albert. Good morning, Senan. If I could, on my first question just come back on your Q3 trading update on the minus 7% like-for-like sales for Americas Materials, could you please confirm whether this is mostly reflecting the base effect? Maybe also some new retain activity rather than a meaningful downturn in the underlying market trends that would be my first question, or maybe a little bit of both. And secondly, I guess congratulations to Senan for his planned retirement, maybe you could give us a little bit of idea of the timing of the transition next year, that would be helpful.

Albert Manifold -- Group Chief Executive

Thanks, Arnaud, two questions there. I'll take both of those. First of all, with regard to, at the quarter 3 and the reference, you have to the minus 7% of volume decline, our top line decline in Americas Materials. That really is a function of two things, first of all, we had a very strong quarter 3 in 2019. You may remember, Arnaud, was very difficult to West quarter 2 in 2019. And it was a strong rebound. So the actual quarter, the three month period in 2019 was very strong. So we had a strong comparison number 1. And number 2, we had some very challenging weather in our footprint in North America for our Materials business, is very much of course the South Texas and Florida. We lost more than a week in both of those big states for us. We also -- was also very West up in the Northeast, New Jersey, Pennsylvania, Ohio, again very well, and we had some of those terrible fires up in the West Coast, the Pacific Northwest.

So it was those two factors more than anything else, the tough comparison, some difficult weather that hasn't been there in the past, but no underlying slip at all whatsoever. And if I look what's happened in October, November, we've returned back to more normalized pace as we would have seen in the nine months. And with regards to Senan, well the -- your congratulation, he has not gone yet, you know. He is still sitting here opposite to me, and he was sitting here opposite to me for many months, yes. But as you would expect, in any public company, succession planning for any senior executives part and parcel of what we do as a management team, and indeed as a Board. And with regards to Senan, specifically, there is no immediate rush here. Senan is fully committed to his role here and he is not going anywhere anytime soon.

Our priority as a management team, I know Senan's priority is to finish out 2020 and to help complete our planning for 2021 in terms of how we're going to progress the business and that's our focus. I know that's his focus right now. We have commenced the process and we'll be considering both internal and external candidates, and after what you would expect with CRH typical service would be a smooth and carefully managed stage transition and exactly as you'd expect. And as soon as we have any update we'll update the market when we know that. But for the moment, steady she goes, focused on delivering this year, and planning for next year.

Arnaud Lehmann -- Bank of America -- Analyst

Excellent. Thank you very much.

Albert Manifold -- Group Chief Executive

Thanks, Arnaud. Have a good day.

Operator

Our next question is from the line of David O'Brien from Goodbody. Please go ahead.

David O'Brien -- Goodbody -- Analyst

Good morning, guys. Good to hear from you and thanks for taking my questions. Firstly, just the margin performance in Q3 has been very strong. I just wonder, could you give us more color in terms of what has been the help from raw materials versus the actual sales help you've put in place, your sales during the period, and maybe you could update us on where do we exactly lie now in terms of the margin improvement plan that you outlined to the market, and number of years ago, what kind of an advancement and all things being equal environment, 2021, should we expect. And if I could tag on one final one, just in terms of Europe, it's been a really impressive recovery. I think Q3, have we exited with like-for-likes turning into positive territory at this stage?

Albert Manifold -- Group Chief Executive

Hi, David. Two questions there. And two different questions there. Let me just address the issue with regard to cost and margin improvement of where we are on that particular journey. Look, I think it's been very difficult year with regards to trying to manage our costs, not just with the volume declines, but the fact that the world just ended, almost in mid margin everything went off the edge of a cliff. And no one knew whether this was for three months, three weeks, three months or three years. And on top of that, we received a lot of inbound from various governance to older hand and not to be cutting jobs, which we didn't. That's a whole back and holding cost, basically kept people on at our own cost through the businesses. So we have people on during quarter 2 and quarter 3 in the hope that business will come back.

And happily business has come back, and it's starting to come back. And so I think having carried that cost base in the -- in the number here to still deliver a 100 basis points of improvement this year is a very good delivery, because we like to act -- cover a lot of cost. There has been a big drag on cost this year that we wouldn't. If you were just being really talk about you wasn't encouraging, you would have made some decisions, but we didn't do that and happily, we didn't, because, our teams we deliver across the range we can we get our most valuable asset. We actually have. And so in terms of where are we, to deliver with us, actually, quite frankly, we don't know, because it's very -- it's contingent upon the volume levels we're going to see during 2021.

I know where we are now currently and I'm happy that we've continue to deliver good improvement in terms of cost take up this year and it's more of the process and how we improve our businesses and how we look at our logistics and all of that. With regard to how much of it is self help and how much of it is coming from the sort of raw materials costs, I'd say about two-thirds of it is self help, and one-third that comes from energy quite frankly. So about two-thirds of it is what we're doing within the business ourselves, and that would endure into next year. But next year represent new opportunities and new challenges and we -- rather than making proud boast about where we'll deliver in 2021, I'd like to hit that situation evolve and see where it is, given what we have seen this year and given what we expect for next year. I answered the question at the very start to Bob that, Bob from Davy. I was talking about the fact that I expect to see price expansion to continue both in North America and in the United States and in Canada and expected a fairly flash environment with regard to energy and some inflation cost of the guard to logistics and labor. That should be a scenario, if we continue to work at the problems we haven't inside of business, that should lead to continued margin expansion.

And I have said to you before and I'll say it again. I think you should expect CRH to be delivering continued margin improvement year-after-year as we continue to reshape our businesses. By the way, it is not just down to how we run the businesses. I think if you just go back and reflect that. It's down to how we manage the business to manage the portfolio and this continuous process of the evolving portfolio, which we've been at since 2014. I think it's worthwhile reflecting since then, we've sold $9 billion worth of business at 11 times EBITDA and we've acquired $16 billion of businesses at 8 times EBITDA. But not, it's not just the numbers. It's the fact that we've come a narrower, deeper and more focused business focused on our core capabilities, focused on the developed world. And that use of capital, that direction capital has allowed us drive operational performance and improve margins as much as the operational effort itself. So the reshaping has been behind that. And of course it's been behind improvements in returns and has been behind the improvements in cash. That's a key part of what we do and the benefits of that will ensure and will continue.

And with regards to your question on Europe, in terms of where we are, run rates and where it's going, I think broadly speaking, what we would see in 2021, if that was your contact, I can't recall if you were referring to this exit, you -- actually to your comment was exiting this year, but I'll extend on into next year, my own view is that we'll see a continuation of a fairly solid and stable position with regard to Central and Eastern Europe. I think it's fairly OK there, in terms of I know what the order books like. I know, what the funding looks like, and it looks to be pretty OK. I think we're going to see a continuation of improvement in Western Europe based on the fact that you know, like but how are -- we're doing here, I think we do OK. I think will push money into stimulus packages to lift economies, hopefully science is going to save us all next year to -- at some point during the course of the year.

And there are some specific factors with regard to elections that I referred to earlier on that should push government -- government funding into infrastructure to support employment. And broadly speaking, I expect Western Europe to continue progress during the course of 2021. And UK, I think we'll continue to lag, quite frankly, our expectations are lower there. It's clear to me now, at this stage all exit at this stage that we look at the UK, the expectations we have for the UK, a number of years ago, I'm not coming through and the long-term profitability of that business, it is below our expectations, and long-term activities are below what would have been our previous expectations for various reasons.

So with regard to your best, the way I would see is leasing Europe solid and steady Western Europe continue to advance, UK continues to advance, but perhaps at a slower pace than in the more challenged and macro environment.

David O'Brien -- Goodbody -- Analyst

That's great color. Thanks very much. Take care.

Albert Manifold -- Group Chief Executive

Okay. I think we have time of one more caller. And just thinking about, looking at the -- last call please.

Operator

Of course, our last question for today is from Will Jones from Redburn. Please go ahead.

Will Jones -- Redburn -- Analyst

Thank you. And just a couple from me, please if I could, just coming back to the restructuring charge savings into play please, can you just confirm the $65 million is put up with second half, is that new versus your plan as it were, when you spoke to back in August? And if so, what areas we focused on? And when we then take that forward and think about next year on the whole bucket of savings. I guess you've got some costs going to against you like travel or maybe the absence of furlough, perhaps some new savings kicking in. And how do you see the net of those factors please as we look into '21? And then just, perhaps you can explore a little bit more around the UK performance please, either market dynamics or company level, and thinking, particularly when you refer to market activity at 75% of normal at the moment are you happy that the business is holding its market share? Thank you.

Senan Murphy -- Group Finance Director

So just in terms of the restructuring charge, to begin with, Will, obviously what we highlighted in the announcement is that and we saw that the half year as we encouraged $65 million that we called out as COVID related restructuring cost across the business. And we're guiding for a similar charge in the second half of the year, so an incremental amount and really what that relates to is obviously restructuring opportunities across many parts of our business. And the -- you will expect and should expect to see benefits from that next year in the sense that obviously the restructuring costs, you wouldn't expect them to be incurred again, but also you start to see some benefits in terms of some permanent savings coming from that.

Particularly given the nature of some of the costs coming or some of the restructurings coming in the second half of this year, then the timing of savings on that will certainly run into '22 rather than all be achieved in '21 in terms of timing. I think the other thing to call out just when you talk broadly about cost base. Obviously, as Albert mentioned earlier on, there has been a significant amount of cost taken out of the business during 2020. And most of it in response to a significant decline in volume in the second quarter. And I think the one big item I would call out is that during 2020, I think one of the big items that we've made progress on is to continue to variabilize, if that's -- if that is a proper word, but you continue to variabilize our cost base.

And so as we go into '21, I feel confident about the fact that the -- the level of cost we have in the business will fairly reflect the activity levels. And we should be able to increase that, decreased that in line with activity levels as they player out in the year ahead. So I think that's probably the big feature in terms of the progress we made in the past nine months.

Albert Manifold -- Group Chief Executive

Thanks, Senan. And Will, and just to comment, through the work furlough in there in terms of the absence in furlough next year. The absence of the furlough this year, just to be absolutely clear CRH was in the early stages of that. We did take up some of the furlough. All furlough payments at all locations around the word, were not received of money thrown out going forward. We decided that all the extra cost that we've had to cover, we will cover that ourselves. I think business has a role to play in society and we thought that was the right thing to do.

With regards to the United Kingdom, in terms of performance, but that's there. As I said earlier, look, I think that the -- the long-term profitability of the business in the UK is below what our previous expectations were. And our previous expectations were formed for me. We effectively stepped up our involvement in UK in 2016 when we acquired the Tarmac and the cement assets from the far part of the parcels. And that was at that time, that was against the backdrop of what we're looking at, significant construction activity in the 5 to 10 years ahead of us. But I think that the -- a number of factors, clearly Brexit has been a very significant issue with regard to impacting confidence levels in the UK, and that has impacted the construction significant. And of course COVID as well.

I think the -- a combination of a number of factors there with regard to, there's been a deterioration of the overall macro environment going forwards. The countries are better than I do in terms of what that looks like that's impacts upon construction in a very significant way. And your question was do we feel that we're losing market share. Well, look, it will be very well, market share is blood and you defend your market share. The thing about defending market share costs and not only has the activity levels in the UK market. So though what it should have been profitability is, but where it should be, because we defend market share. when there is less activity to go round and at the same level of supply in the market. Well, the law of supply and demand kicks in at that stage.

And we've been, we -- and like everybody else that we've all been hurt significantly by the slow down in the Southeast, the non-residential market, the high-rise towers that were built in London were high specified high cost materials went into those businesses. And of course that's slowed quite significantly, and that's reduced the profitability of our business there. Of course, infrastructure growth in 2016, we hold our market share, but there was, there was GBP500 billion [Phonetic] of infrastructure programs announced for 2016. As we sit here today, four years later, only about a third of those are actually working and up and running. And of those that are actually up and running there, a lot of them are behind or being put back.

So I don't think we've lost market share. I just think that the ambition for the UK market has been reduced. That's not to say, it's not an important market for us. We have got significant assets in the UK. We've got very profitable business in UK. This is just a realization and reflection of what the reality of activity levels are going forward. UK still remains an important market for us. We'll move to focus on and concentrate on and which we will continue to build a profitable business going forward.

Will Jones -- Redburn -- Analyst

Great, thank you.

Albert Manifold -- Group Chief Executive

Thanks, Will. Nice talking to you [Phonetic]. Well, look -- gentlemen, that's all we have time for this morning. I want to thank you for your attention. I hope we've managed to answer some or all of your questions. But as always if you have any follow-up questions, please feel free to get in touch with our Investor Relations team during the course today or the remainder of the week. And we look forward to talking to you again on the 4th of March next year when we report our full year results for 2020. Thank you very much and have a good day.

Duration: 48 minutes

Call participants:

Albert Manifold -- Group Chief Executive

Senan Murphy -- Group Finance Director

Robert Gardiner -- Davy -- Analyst

Gregor Kuglitsch -- UBS -- Analyst

Paul Roger -- Exane BNP Paribas -- Analyst

Arnaud Lehmann -- Bank of America -- Analyst

David O'Brien -- Goodbody -- Analyst

Will Jones -- Redburn -- Analyst

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