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CRH PLC (NYSE:CRH)
Q1 2021 Earnings Call
Apr 30, 2021, 9:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, welcome to the CRH PLC trading update. For the duration of the call, you will be on listen-only. [Operator Instructions]

The next voice you will hear it will be Albert Manifold.

Albert Manifold -- Chief Executive Officer

Good afternoon, everyone. Albert Manifold here, CRH Group Chief Executive and you're all very welcome to our conference call, which accompanies the release of our trading update earlier today. Joining me on the call is Senan Murphy, our Group Finance Director; Jim Mintern, our Finance Director Designate; Frank Heisterkamp, Director of Capital Markets and ESG; and Tom Holmes, Head of Investor Relations. Following some short opening remarks, we will be available to take any questions you may have on our announcements and all told, we aim to finish up in about 30 minutes or so.

Now, before I take you through the key points of our announcement, I'd like to take the opportunity to recognize the dedication and resilience of our people across the Group, as we continue to navigate the challenges and uncertainties arising from the COVID-19 pandemic. As always, the safety of our employees, contractors and customers remains paramount serious [Phonetic] and has a core focus for us in everything we do.

Our announcement today provides details of our trading performance for the first three months of 2021, as well as an update on our recent capital allocation activity. We will also provide you with an indication of our EBITDA expectations for the first six months of the year and our earnings reports on the outlook for the second half.

So, beginning with our first quarter trading performance, on overall, it's been a positive start to the year for CRH. Group sales for the first quarter of the year were 3% ahead on a like-for-like basis. A reflection of good underlying demand across core markets and further progress on pricing and commercial management. Let me briefly take you through the trading trends for the first quarter of 2021 across our individual businesses.

Starting with our Americas Materials Division, first quarter like-for-like sales were broadly in-line with the prior year. Our business has experienced some extremely cold and disruptive weather conditions in the month of February, impacting our operations in the Northeast, Midwest and Texas in particular.

For the division as a whole, first quarter aggregates and asphalt volumes were behind a strong prior year comparatives. In contrast, our cement and ready-mixed concrete volumes were 5% and 2% ahead respectively, with good demands particularly in the western regions of the United States.

Of course, it's worth noting that our Materials business is particularly seasonal and the first quarter typically only accounts for between 10% and 20% of our annual volumes. With the continued focus on strong commercial management, we made good progress on pricing in aggregates, cement and ready-mix concrete.

Despite lower pricing in our asphalt business, margins expanded due to lower input costs. Although it's still very early in the season, the bidding environment remains broadly stable and there is positive momentum with regard to further infrastructure stimulus measures in the United States.

Infrastructure funding remains a bipartisan issue and while there are some uncertainties regarding the quantum and the timing of any such funding plans, we're confident that a viable multi-year program can and will be put in place.

Turning to Europe Materials. Our like-for-like sales were slightly ahead of the prior year as more seasonal weather patterns during January and February were offset by improved trading conditions in March.

In Western Europe, our like-for-like sales were broadly in-line. Volumes across most products in the UK and France were ahead of the prior year, which was heavily impacted by COVID-19 related shutdowns as Germany, Switzerland and Finland were impacted by adverse weather and more resilient prior year comparatives.

In Eastern Europe, more normal weather conditions impacted volumes in Poland and Romania, partially offset by resilient demand in Hungary and Serbia. In The Philippines, cement volumes were well ahead in the first quarter in the competitive pricing environment. With regard to pricing for the division as a whole, we continue to deliver improved pricing during the period with good progress across our major markets.

And finally to our Building Products business, our like-for-like sales for the first quarter were 12% ahead of 2020, reflecting strong demand for residential construction, particularly in North America, partially offset by lower activity levels in the non-residential sector.

Like-for-like sales in Architectural Products were 27% ahead, reflecting strong underlying demand for outdoor living products and good early season purchasing by home centers in advance of key spring trading period.

In our Building Envelope business, like-for-like sales were behind as a result of lower non-residential activity due to the impact of COVID-19 related uncertainty and lower backlogs entering the year. In our Infrastructure Products business, like-for-like sales were ahead as a result of good demand in the telecom and energy sectors in both Europe and North America. So for the Group as a whole, it's been a good start to the year notwithstanding the impact of more normal seasonal weather patterns across many of our markets compared to the relatively mildly conditions we experienced in 2020.

Before I go into our outlook and for other detail, let me touch briefly on a few other items from today's announcements. First to our development activities and in the year to-date, we have completed four bolt-on acquisitions, a total consideration $180 million. The largest of which was a pre-cash continuous [Phonetic] business which expands our Infrastructure Products footprint in the U.S. Midwest. Our acquisition pipeline remains robust and the strength of our balance sheet combined with our continued focus on financial discipline will enable us to capitalize on these opportunities to create further value for our shareholders. We've also completed the divestment of our Brazil cement business. The total proceeds of over $200 million, representing a good outcome for our shareholders and further progress in becoming a simpler and more focused business going forward.

In light of our robust balance sheet and continued strong cash generation, in March, we announced our intention to recommence our share buyback program with further tranche of up to $300 million. The current tranche is now well under way and will be completed before the end of June.

So now turning to our outlook and following a positive start to the year, we expect first half profitability to be well-ahead of the prior year period, which experienced a heavily disrupted second quarter due to the pandemic related restrictions across many of our key markets. Sitting here on April 20 with our most important trading period ahead of us, it's very difficult to be more specific at this stage, but we will of course update you on our expectations as the year unfolds.

As we look into the second half, we expect further normalization in our markets as the health situation continues to improve. There remain however significant near-term uncertainties that we need to be mindful of, particularly the complex unwind of COVID-19 across our markets. We must be patient and we must be careful. There is light at the end of the tunnel, but it will take time.

Looking beyond the near-term uncertainties however, we expect significant public and private support for construction activity going forward. And given the resilience of our business model and the strength of our balance sheet, we remain well positioned to benefit from the growth opportunities that lie ahead. As always, we remain resolutely focused on the continued execution of our long-term strategy to deliver higher margins, returns and cash for our shareholders.

Now, before we turn to over to Q&A, let me take a moment to update you on a few items that have been in our minds, since we last spoke to you in early March. First, with regard to U.S. Infrastructure. We have seen further developments in recent weeks with a number of proposals input for consideration and discussion. As I mentioned earlier, although there are uncertainties around the scale and timing of these trends, we believe we are headed in the right direction and that a solution can and will be found. Clearly there are policies involved, so it's very hard to predict how to play out, but we believe it was broad-based bipartisan support for increased infrastructure investment, which will be very beneficial for CRH as the largest building materials business in North America.

Another important development arises from last week's climate honors with the United States committing over 50% reduction in carbon emissions by 2013. These are critically important commitments and are to be welcomed. We are all citizens to this world and delivering on these commitments is essential for the future society. Not only is that the right thing to do, but from a business perspective, we also think these commitments should be embraced. And as North America's largest recycler and as a leading provider of integrated building solutions, the global technical expertise in these areas, we believe this climate commitments represents significant opportunities for CRH.

As you know in our industry, there is a lot of focus on carbon emissions particularly in cement. But cement is only part of the story and as such, I, as President of the GCCA, the Global Cement and Concrete Association represents not only CRH, but the largest cement companies in the world, including the Lafarge, Holcim, Heidelberg, Xenex and almost half of the cement and concrete industry around the world, let me just lay out a few simple facts.

Cement is used for only one purpose, that is to make concrete and cement is a significant emitter of CO2. However, the product that it makes, concrete, is a carbon sink. It actually absorbs CO2 like Trees absorb CO2. In fact, all of its lifecycle, approximately 20% all the CO2 emissions, during the manufacturing process is actually reabsorbed back from the atmosphere by concrete.

Of course, reducing the carbon footprint of cement is crucial for our world and significant progress has already been made by the industry today. All across our industry, there are specific plans in place for further reductions out to 2030. And as an industry, through the GCCA, we are committed to further reducing emissions to ensure we will all be producing carbon-neutral concrete by 2050, in-line with commitments made to the primary support.

This is an industry effort. Nobody is ahead of the game. But let me assure you that as an industry we take this matter very seriously and we are all working together in collaboration to address this specific challenge. But as I mentioned earlier, it's not just about carbon emissions, it's about reducing the impact of construction on our environment and our world. It's about improving the quality of construction, building safer, cleaner and better improving the terminal efficiency of buildings, prolonging their lifecycles, increasing the use of recycled materials and becoming a greater contributor to the secular economy.

This is where the world is going and over the last number of years, we at CRH have significantly shaped, repositioned and that's with our business in-line with these trends. We have been working in partnership with our customers to better understand their individual needs and over time, we have developed a much more integrated offering, uniquely combining base materials, value-added products and innovative solutions to better-serve our customers' needs while capturing more value in the process.

Our integrated offering, makes us more deeply embedded with our customers, creating long-term partnerships and building buyers to switching; this change strategy has been fundamental to delivering increased profitability, improved returns and higher cash generation. It is less capital intensive requiring less capital expenditure and bring this both reduced cyclicality and higher growth opportunities. The world of construction is changing and by providing more integrated and innovative solutions to our customers, we are playing our part in helping to reinvent the way our world is being dealt. So with that I will now hand you over to Q&A. I believe we have some questions on the line.

May I ask you to state your name and the institution you represent when posing your questions? In consideration of others in the line and to make best use of the time we have available, could I ask you to please limit your questions to one each where possible.

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, sir. [Operator Instructions] Our first for today is from Robert Gardiner from Davy. Please, go ahead.

Robert Gardiner -- Davy -- Analyst

Hi, good morning, Al. Thanks very much for taking my questions. I'll be quick. One, I was just wondering, could you give us a sense of the momentum in the business after the weather cleared up? So, how you kind of traded through March and into April in both Europe and North America? And two, I was wondering, could you talk about your acquisition pipeline? What kind of opportunities you're seeing and how perhaps we should think about your comments just there around integrated building solutions? How should we think about that in terms of acquisition or growth capex? How does that fit into the capital allocation strategy? Thank you.

Albert Manifold -- Chief Executive Officer

Hi, Bob. Two questions there. I'll take both of them. We've set up this morning how the first quarter has done and you've seen the numbers there. With regards to the current run rate and how business is trading, actually we've had a good April and if I just start in the United States and look at the overall market there with the improving health situation in the United States, the economy has starting to move over, and the three sectors that we serve -- the residential, the non-residential, the infrastructure and moving ahead quite well. I'd have to say the residential sector has gone from strength to strength at good demand, low interest rates and housing stocks are at probably as low as I've seen them and that is underpinning good strength into the residential markers and that's being seen by coming to parts of our business that are most exposed to us, primarily at this time of the year, it's the APG business.

Non-res is actually is turning out to be a better story than we had anticipated. We felt that last year was a decline would continue into this year and it will sort of bottom-out this year, which I think it will do, but it seems to us at this stage now that it's probably a shallower and shorter dip this year than we would have [Indecipherable] and I think that we'd be returning back to growth in non-res by the back end of this year at the latest. So, a nice surprise there -- a positive surprise. With regards to infrastructure, early seasoning yet and it was slow during January and February. Of course it very, very quiet time of the year. I have to say activity levels are starting to build in the order books, it's still quite early in the season in the U.S., but activity levels are beginning to build and we're quite pleased with the pace of the take-up. I'm quite pleased with the margins in that so U.S. seems to be in fairly good and robust shape. Switching back to Europe and with regard to Europe, again there were some significant weather impacts both in East and Western Europe in February in particular. But again, good momentum once the weather shifted and April, again, we've had a good month across pretty much all markets. And again as the situation starts to recover and the shutdowns have been lifted, people are getting back to work and you're getting that catch-up effect, but also underlying activity is good, and pricing is good in Europe continues on ahead. So, quite pleased with the performance as we sit here today in April 28, for the month of April and the momentum looks fairly good in Europe as well. And with regards to the M&A pipeline. I mean four bolt-on deals are done at the first quarter of the year; $200 million and as I said, we have pipelines quite strong. We're just keeping our discipline and we're looking at a number of deals. Most important is to do deals that not only bring value to our shareholders, but fit with our overall long-term strategy and that strategy as you know is focused very much on North America and in Europe. So, the areas we're looking at, clearly, we're not looking at the developing world. And also as you rightly indicate, the builders of the bidding products and the extension of our product solutions, which has been a key driver of not only pull-through of our materials, but also the continued success as you see again of the building products business.

And following that trend where we can effectively extend our based materials into the manufacturer of products and the delivery of the services with those products. Well, that extension is where construction is going and we will tap into those areas that again -- and again a lot of deals there. I'd expect to see a ramp up in our M&A during the course of this year. And also, I think we're getting to the point whereby we're looking at the opportunities where we're seeing growth of development capex effectively, capital expenditure, which we're actually rolling out rather than going and buying businesses with expansion in capex, particularly in some of our growth markets in Eastern Europe and across the U.S., which will be higher than normal and probably will lead to us having a higher capex than you would normally expect by a couple of hundred million at least in this year and it's just a question. We can either do M&A or we can do into our capex and expanding our existing capacity and existing locations. It's cheaper for us to do this, it's higher returning, it's more reliable and we've always said that the best returning investments we make are into our capex.

So, this increased expansionary capex, M&A pipeline is good and strong and we just need to hold our discipline and roll it out over the next few years. This is a multi-year program. We're not going sit any light switches in quarters here, just take strong progressive year. But pleased about the form in the first quarter, pleased about the run rate, M&A pipeline is good and the participant, I would expect it to move on and accelerate during the course of this year.

Robert Gardiner -- Davy -- Analyst

That's great. Yes, thanks. Makes sense.

Albert Manifold -- Chief Executive Officer

Thank you.

Operator

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

Gregor Kuglitsch -- UBS -- Analyst

Hi, guys. Thanks for taking my question. I'll limit myself to the one I think I'm supposed to ask. So, I'm going to ask your sort of final comments there on the sustainability card and I guess I'm interested specifically what you think will happen in the U.S., which obviously has been lagging behind compared to Europe. So, do you think there will be changes to regulation, the building codes, perhaps to lower clinker ratios. What are your plans, if any, for carbon capture? I think the U.S. is relatively suitable for that. So it would be interesting to set up your strategy on so that decarbonizing the American business please? Thank you.

Albert Manifold -- Chief Executive Officer

Thanks, Gregor. Yes, I -- and I totally agree. First of all, as I said to you, as individuals. As a corporate, we welcome the announcement that the United States by President Biden to obviously cut emissions by 50% at 2030. It should be noted of course that already, the reduction from the 2005 base here is already been 21%, so the further 29% to go in that. And I think it will bring significant changes in the way of life in the United States and in particular with regards to building materials, not just on CO2, which we talked about, but specifically to your question, I think it will use a different type of regulation will come into it, permit different types of cement. That's largely speaking in the United States. They use one type of cement, the cement that uses the most clinker. And of course, in Europe we have sometimes two, three and even four different types of cements, probably as lower clinical ratios which lowers the CO2. And I expect that they will be brought in progressively over time. I think the other thing that will happen is, there will be a greater focus on using alternative fuels.

We tend not to use alternative fuels in the United States because the customer practice is not to use them. There is no advantage using them, but by putting targets in place, that's the regulators and the cement companies and associations have agreed to in Europe by doing something similar in the United States. That also will reduce down the CO2 footprint. I think that's very important with regard to that. And thirdly, I think actually the way we are actually using and constructing buildings. I think that also further regulation, which is coming in Europe, which is where our product solutions are going. I think that, too, will also reduce the CO2 footprint. So, as part of that, the PCA is part of the Global Cement and Concrete Association. We're right in the middle of the mix, working with regulators to help shape the next stage of increased regulation or increased modernization of the industry here and we're very large cement business across not only Canada and the United States, as well as Europe and I think the experiences that we have in Europe will really stand to us as we roll out these plans across the U.S. because effectively, we will be doing much as we did when we bought the Ash Grove business. It's taken the expertise and experience that we have for the last 15-20 years in Europe and bring it into North America. And I think that will bode both for the company, but also in terms per society [Phonetic] here as well.

Gregor Kuglitsch -- UBS -- Analyst

Thank you.

Albert Manifold -- Chief Executive Officer

Thanks, Gregor.

Operator

Our next question is from Paul Roger from Exane BNP Paribas. Please, go ahead.

Paul Roger -- Exane -- Analyst

Hi, good afternoon, Albert. Hello, team. I hope you're well and congratulations on the start. So, I'll also limit myself to one question then and focus on the Building Products division. Obviously, you've had a really strong Q1. I'm just trying to understand really the sustainability of that growth momentum. I guess the extent to which is benefiting from things like people doing up their gardens when they're working from home and whether that type of tailwinds could have sort of stayed as we go through 2021?

Albert Manifold -- Chief Executive Officer

Paul, good question. I might be worried. But if we look at the facts, it doesn't bear as up because the building products has been growing -- it would sustain growth maybe for the last six or seven years at this stage and it's not only been top line, it's been bottom line, it's been margin, it's being cash and it's been led by the three legs of the stool. All of them with different markets but actually the principal that we say are delivering that value is in this way of providing a broader solution and services to our customers. So the APG business, you're absolutely right, has been focused on the outdoor living. But outdoor living has been a growing space in the United States, maybe for the last six to seven years and our role and our parts not have been providing the products, but also working with our customers to broaden out the offering to our customers with a full product range and then working with the professional installers as to how they should put that in one of the best solutions for them and that didn't just start when COVID hit last year. That's been going on since 2014 and 2015 and it continues to go on. The footprint expands.

Likewise, with our Infrastructure Products again that tag up, it's nothing to do with COVID and all. It's to do with the idea of the transportation of bike and utilities, particularly storm water and water management. And again, that's the problem in all of the developed world because we have not invested as we have as we've built up our urban environments and water is a vital scarce resource; so the protection and transportation of it is as hugely important. So, that's been a strong growth; that's not a COVID item, that's a strong trend that will continue on for decades. And likewise, the OBE business where again looks very similar, the strategy whereby we started out which is basically being a glass business, but now there is a much more integrated offering to the glazing customer providing all the products they need. Not only the hardware, the glass, but also the aluminum to hold the frame, frame the windows and all the associated products to go with this. So, you become the one-stop shop. I'm looking at further plans as to how to expand and build out our platform. So it's more of the success of the business model, the integrated solution while that has nothing to do with COVID because all of those trends have been evident. You could go back to the numbers, Paul, since 2013, 2014, when we started out on this road.

Paul Roger -- Exane -- Analyst

That's great. Thank you very much.

Albert Manifold -- Chief Executive Officer

Thanks, Paul.

Operator

Our next question is from Elodie Rall from JPMorgan. Please, go ahead.

Elodie Rall -- JPMorgan -- Analyst

Hi, Albert. Thanks for taking my question. So, I'll limit one as well. Maybe on pricing, since we haven't discussed that yet. So you've had a good start of the year in the U.S. with pricing up 3%, 4%. I think you said on aggregates and cement and you mentioned good pricing development in Europe. Pretty much everywhere except I think Asia in Q1. So, how do we think about pricing for the rest of the year? Do you see more increase to come in any region? And how do we think about that in light of cost inflation which is ramping up as we all know?

Albert Manifold -- Chief Executive Officer

Thanks, Elodie. Nice to talk to you. Elodie, I'll talk on behalf of U.S. and Jim Mintern, our Finance Director Designated from [Indecipherable]; Jim will work closely within our European business over the last number of years and he's got a good handle on the European pricing in advance. So I'll ask him to comment after I do on European pricing. The market in the U.S. is well-seasoned to having normal regular and necessary price increases to offset cost increases as they come through and we manage our business very much on a margin basis and underpinning the strong demand and the sustained strong demand over the last number of years has underpinned good pricing. I don't see that dynamic changing in the current year. Again, I think it has been modest and sensible. I see that across all businesses. The cement and concrete as well flagged and I think that will be solid and steady along the lines that we've spoken about that you've mentioned, the 4% to 5% Agress probably in at the 2% to 3% and of course pricing is not the correct measure in our stocks, it's about how you manage our margin and we're very pleased to see an expansion in the margin in the first quarter of the year although with only at very early days. Yes, so we will do that. So, the U.S. perspective looks fairly solid. With regard to European, you might you give us your thoughts on that?

Jim Mintern -- Finance Director Designate

Yes. Hi, Elodie. Europe, as I said in the past, Europe is really in a catch-up phase. When we compared to our business in North America and building on a couple of good years in 2019 and 2020. We've had a good pricing season in Europe and we're actually seeing positive direction in 13 out of 15 countries that we're operating in. Specifically asked about recovering cost side of the two, Elodie. The pricing will be confident. We are seeing some cost inflation. It's small, but we are confident in terms of pushing on and expanding margins and getting the pricing to offset that cost side of it also. So, a good pricing discipline in Europe. Good start to the season.

Elodie Rall -- JPMorgan -- Analyst

Okay, thanks a lot.

Operator

Thank you. The next question is from Cedar Ekblom from Morgan Stanley. Please, go ahead.

Cedar Ekblom -- Morgan Stanley -- Analyst

Thanks very much. Hi, Albert. If we think about the changing demands of the building industry that you alluded to, can you talk about what you're actually observing. And then if there are any parts of your portfolio of business areas that you feel you may be underrepresented in, in terms of going into that changing market environments and if you'd need to fill those gaps with M&A? Thank you.

Albert Manifold -- Chief Executive Officer

Thank you. A good question. First of all, like the changes that we're seeing are being forced on our customers and contractors by the changing needs of the world. And with increased urbanization, we're starting to see the fact that people want less impact in terms of how construction impacts upon their day-to-day life. So, people wants construction to be quicker, number one. Number two, we're saying people wants to see less construction done actually on site and they want to see more of the materials used in construction pre-fabricated in designated safer and specific environment. So, manufacturing environments that are built to deal with noise waste films and then brought the construction side, so much more modular type assembly. So, not only quicker but, offsite modular type construction. And underpinning that, they want less dirt, less impact on the environment. So, they want to see less noise on the environment that's actually there have been building housing. Also, the type of material being used, more and more specification is to have materials that are less-intrusive on the environment as they're being constructed. Hence, of course, the push to obviously reduce CO2 used in cement and also to increase the use of concretes, the air which has lower levels of CO2 cement within as such and that got deals in some of the questions I dealt with earlier on with regards to the changes that will come in the United States. And then I think the last thing is the ability for you to provide more of an integrated service and solutions. So you're not just a provider of materials, you're involved in helping to design and engineer the materials to specific circumstances and then to deliver and put in place with partners and how you did that. So we find ourselves more and more, although not in actual commercial partnership in the business-type partnership with some of the major contractors whereby we are working hand-in-hand with them on major projects of delivery, of specified type materials specified type products. Now, we tend to focus more on large horizontal or heavy construction projects and most of our materials actually go underground or once you go one meter above the ground, that primarily will be the most of our work. It's only specified -- it's only really when we get into some very high-rise, that we use concrete in high-rise. So most of the stuff we do is you don't necessarily see the specification required, but it's quite highly specified. So what I would say to you very quickly. the changes are people, we have to work hand-in-hand with architects and engineers and customers to help find a solution an engineer a solution to their problem and we're part of that solution -- not the only part, but we are part of it. They want construction, it has to be done quicker, it has to be done cleaner, it has to bit safer and more and more has been done in all size. What that means for us is that it's more and more pushes down the route of turning our base materials into an interim value-added product and the service we provide with that in helping to design that product for the specific application because we have the advantage in that, plus we may get in one customer, one specific application we have may seen that application 25 times in the previous year and can bring our expertise and knowledge to that. So we're not only a manufacturer, we being our engineering skills and expertise to provide those services to them, and that's the direction that we're building out our business. There are many new trends that are opening and are evidence to us as well where we think it's attractive and in 20 years' time, Cedar, it may be a different-shaped business. But for this moment in time, I think the core business that we are in are known technology to us, we see strong growth in these areas and we have a long way to run within our current sandbox and I don't anticipate any huge build out into new platforms in new areas. I think the extension of what we do offers us ample opportunities in strong growth markets and the focus is to follow that growth, but also to maximize performance in terms of profitability, high returns and cash.

Cedar Ekblom -- Morgan Stanley -- Analyst

Great, thank you very much.

Operator

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

Arnaud Lehmann -- Bank of America -- Analyst

Thank you. Arnaud Lehmann from Bank of America. My question is on I guess cement as a product. As I'm sure you've seen, it's not the most popular product anymore with investors due to its high CO2 emissions and I appreciate you're doing already quite a lot to improve that. But how does this kind of investor perception to ensure capital allocation strategy? Do you still consider buying more cement plants if there were some opportunities to consolidate or some of your markets are in core vertical integration? Or on the other hand, would you consider some capacity closure or even some disposals in the system on business to reduce the share of its sales or profit in the overall group?

Albert Manifold -- Chief Executive Officer

Good question, Arnaud. First of all, cement in itself is nothing. You can't anything from cement. Cement is only inter-material that is used to produce concrete and one must look at the entirety of the complete product cycles, not just look at cement. Because actually, as I said in my introduction that concrete itself -- I suppose people don't really know -- is actually a carbon sink. It actually reabsorbs back in 25% of the CO2 and this is under the current production process. And if there was an alternative out there to cement when we'll go and look at and at this moment our novel terms to cement; so it's not going to be tomorrow, the regulators were to say, 'Okay, I'm going to make the production of cement illegal because it emits CO2.' What would we do? Is there another product we can use off the shelf, but isn't. Unfortunately, we need cement, we need concrete in our work to live because we have to build shelter, we have to build modes of transportation, for our modern life to exist. The plan that is in place, which had been agreed with the regulators -- and there is a plan in place to take us to 2050 where we will have carbon-neutral concrete, which is the main deposit core and now it's a two-degree scenario cases there.

So the key plan is to ensure that we work to reduce the CO2 in process and [Indecipherable] the amount of CO2 -- sorry, the lines have been dead for a second there. The amount have CO2 that is reabsorbed by the concrete will be greater than the actual CO2 that it emitted during the cement process. So the real focus has to be on reducing the CO2 that is emitted during the manufacturing process of clinker and/or cement and in the time frame that we have we believe we will get there. There are specific plans in place to continue to reduce it to 2030 specifically in place. All were all the cement companies will get there and over time we believe ultimately, you will turn this into a scenario whereby the whole cycle cement to concrete will be carbon-neutral, which will take away and remove the risks associated with this.

Arnaud Lehmann -- Bank of America -- Analyst

Thank you very much.

Albert Manifold -- Chief Executive Officer

Your last point sorry, is it a core product for us? I mean, it's something we would sell? Cement is very important to us as is concrete, were a key material that we use in our manufacturing process and we think we are far better off embracing the challenge and looking for the opportunities in that than running away from this. This is an issue, which is involved at the moment, it's an issue in which the industry is dealing with and the industry will solve.

Arnaud Lehmann -- Bank of America -- Analyst

Very clear. Thank you, Albert.

Operator

And our final question for today is from Will Jones from Redburn. Please go ahead.

Will Jones -- Redburn -- Analyst

Thank you. Good afternoon. Perhaps I could just ask for a general update on your margin improvement savings program, please? I appreciate till now rolling program as appropriate into the fixed time line Are there any areas you might highlight to us that are particular focus in 2021? An initiative you've got on thinking the process, puts you in a bucket from a couple of years ago? And if you could help us understand, that would be great. Thank you.

Albert Manifold -- Chief Executive Officer

Hi, Will. Clearly work continues on and we've put targets in place a few years ago. Of course the business' shape and size was the business shape and size for those targets and we are not entirely dependent upon ourselves to deliver those margin increases. We've shown good margin improvement over the last couple of years and I'm very pleased with that and there are a number of things impacting upon that, of course. It's not only in terms of producing more efficiently, lowering our unit costs, working on pricing and reshaping the business. The macro environment is very important to us as well. And last year we haven't anticipated COVID, we have not anticipated to take a step back in revenues and that impacted upon things for us for sure in terms of our growth rate. But the one thing I would say is that we'll just continue to think about CRX [Phonetic] of the business that year-on-year improves at the margin in this business and becomes more efficient and more effective. But we also have to be sensible about the conversation. Say, the strength of the housing business is not just measured by margin, it's measured by growth in the topline, it's measured by improved profitability, the conversion of profitability into cash, the increase in the margins and crucially, the improvement in returns, and also being transparent with shareholders, 'Here is our plan. Here is our strategy. Here is what we're doing'.

So, shareholders can understand exactly what you're doing through the years and we communicate that in a transparent and managed way. So, all of those things we think are important in delivering the overall by the shareholders margins one's component and a more important part of that, it will continue to increase as I would expect our cash, our top line, our bottom line and our returns to increase and I hope the transparency and the clarity with which we communicate our plans as we go forward. Hence, we talk so openly and often about the product solutions offering us the greatest growth opportunities going forward for our shareholders.

Will Jones -- Redburn -- Analyst

Thank you.

Albert Manifold -- Chief Executive Officer

Okay. I think we've run over our time there at the moment for quite a few minutes here. So that's all we have time for this morning. I'd like to thank you for your attention and as always, if you have any follow-up questions, just please feel free to get in touch with our Investor Relations team, and we look forward to talking to you again on August 26 when we report our interim results for the first six months of 2021.

Thank you very much and have a good day.

Operator

[Operator Closing Remarks]

Duration: 38 minutes

Call participants:

Albert Manifold -- Chief Executive Officer

Jim Mintern -- Finance Director Designate

Robert Gardiner -- Davy -- Analyst

Gregor Kuglitsch -- UBS -- Analyst

Paul Roger -- Exane -- Analyst

Elodie Rall -- JPMorgan -- Analyst

Cedar Ekblom -- Morgan Stanley -- Analyst

Arnaud Lehmann -- Bank of America -- Analyst

Will Jones -- Redburn -- Analyst

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