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Morningstar | CRH's Americas Businesses Continue to Grow While Europe Improves and Asia Stabilizes

CRH operates in six reporting segments: heavyside, lightside, and distribution in Europe; materials and products in the Americas; and Asia. Materials produces building materials, products creates value-added concrete products, and distribution sells building products to contractors, builders, and individuals. Despite customer and product diversity, we think performance is ultimately driven by construction activity as a whole, which itself is determined by the economic health of each segment’s geography. As such, CRH is well positioned for economic recovery across sectors (residential, nonresidential, and infrastructure).Nearly 40% of the firm's EBITDA comes from Europe, where construction demand remains middling. This has particularly been the case in materials, which has heavy exposure to developing and austerity economies. Residential is the largest source of European demand, accounting for about half of CRH's exposure. In terms of end use, almost two thirds of the European segments’ exposure is to new construction. We expect results to improve, but low capacity utilization to weigh on the pace of the recovery.More than 60% of EBITDA comes from the Americas, where construction continues to grow. The infrastructure sector is the largest source of demand, accounting for roughly half of all Americas segments’ exposure. The passing of a long-term highway bill should bolster demand for infrastructure projects for the next few years. More than half of end-use exposure for the Americas is repair, maintenance, and improvement. CRH’s exposure to infrastructure and RMI depends heavily on government spending, which is subject to political risk. We expect strengthening demand from infrastructure projects as spending levels increase to halt deteriorating conditions. Although we expect robust near-term recovery for nonresidential construction, we forecast more modest growth in the long run, as many key sectors make more efficient use of construction spending.Less than 1% of EBITDA comes from Asia via cement operations in the Philippines. Given its relative size, the Asia segment's importance to companywide results is limited.