CRH's CEO Hosts Interim Management Statement Conference (Transcript)

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CRH (NYSE:CRH)

Interim Management Statement Conference

May 08, 2013 3:00 am ET

Executives

Myles Lee - Group Chief Executive Officer, Director, Member of Acquisitions Committee and Member of Finance Committee

Albert Jude Manifold - Chief Operating Officer, Director and Member of Acquisitions Committee

Maeve C. Carton - Group Finance Director, Director, Member of Acquisitions Committee and Member of Finance Committee

Analysts

Paul Roger - Exane BNP Paribas, Research Division

Luis Prieto Bartolome - Deutsche Bank AG, Research Division

Yuri Serov - Morgan Stanley, Research Division

Aynsley Lammin - Citigroup Inc, Research Division

Robert Eason - Goodbody Stockbrokers, Research Division

Howard Seymour - Numis Securities Ltd., Research Division

Gregor Kuglitsch - UBS Investment Bank, Research Division

William Jones - Redburn Partners LLP, Research Division

John Messenger - Redburn Partners LLP, Research Division

John Fraser-Andrews - HSBC, Research Division

Tom Holmes - NCB Group Limited, Research Division

Myles Lee

Good morning, everybody, and welcome to this conference call which accompanies our interim management statement issued today in advance of our Annual General Meeting. Myles Lee speaking to you from Dublin and I'm joined on the call by Ms. Carton, our Finance Director, and also by Albert Manifold, our Chief Operating Officer.

I'm very conscious that this is a busy day for the sector, quite a number of first quarter releases this morning from others, and also we have some time pressures due to our AGM. So we have approximately 45 minutes to deal with your questions.

You've seen the management statement, which gives details, as usual, of the like-for-like sales trends across our 6 main business segments for the 4 months at the end of April. And the highlights in the statements, the indicated trends show a difficult start in Europe due to much more adverse weather than in the opening months of 2012 and also due to a weak economic backdrop.

In the United States, the economic backdrop is much more positive, although the impact in construction markets has been tempered by a much less benign weather than in the early months of 2012. You'll also see some boarding in the statement with regard to our development activity in the first 4 months. So as you can see, we've been quite active on a variety of transactions across the business and we're continuing to look at further opportunities as we move out further into 2013.

So I won't -- take up much more time with opening comments. We're happy to respond to your questions this morning, but obviously, it's still early in the season. And with the weather-related comparative effects, if you like, still to be fully analyzed and work through many of our responses are likely to be directional rather than conscious of nature and concentrate [ph] you'd appreciate the reasons for this.

So happy now to throw the call open to questions, and we'll deal with those as we move through the next 45 minutes or so.

Question-and-Answer Session

Operator

[Operator Instructions] Rohit Bhatia from Exane is online with a question.

Paul Roger - Exane BNP Paribas, Research Division

It's actually Paul Roger from Exane. Just a couple of questions, the first one on guidance. I wonder if I can ask you a bit of clarification. You're no longer talking about a year of progress. Just wanted to -- how we should interpret that? Are you actually saying that for the full year, EBITDA could be down? And linked to that, can you give us some idea of the potential growth we could expect from the second half? And then secondly, can you say a bit more about the pricing environment in Americas Materials and what you are able to pass on cost inflation in businesses like asphalt and concrete in particular?

Myles Lee

Okay. Thanks, Paul. 2 questions there. Obviously, we've given you this morning in the statement our indication of the EBITDA charge for the first half of the year, which was obviously significantly affected by the poor start weather-wise. For the second half, obviously, we do expect, as we've said, that EBITDA will be ahead in the second half of the year. We're certainly more positive than we might have been a couple of months ago in relation to the U.S. and the trends we're seeing there and we think that will move ahead. What's difficult to just to discern at the moment is with regard to the European trading patterns over the last 4 months is how much has been weather and how much has been due to economic circumstances, if you like, and some further, if you like, softness in the macro days that we've seen coming out of Europe. And that's just difficult to, if you like, analyze and be definite of those given weather impacts over the last 4 months. We're looking to the next couple of months to get a better indication of that. We do though believe that the second half EBITDA will be ahead of the second half of last year, but quite quantifying by how much is just so much challenging at the moment just with the weather impacts that we've had. But we've given you the guidance for the first half and we do believe that second half EBITDA will be ahead of the second half of 2012. With regards to pricing, early -- obviously, in the season, in U.S. Materials particularly, we do about 10% of our annual asphalt volumes in the first 4 months and about 20% of our rights in readymixed. But we have seen positive pricing movements to date. And I think certainly, we'd be encouraged that we will be able to recover costs, be it increases in the course of the current year in the U.S. Certainly, there will be some cement price increases. We've been confident that our readymixed business can recover those. I think the cost factor up on the asphalt business, and again, it is early in the season, but the energy backdrop is encouraging to date. So again, we feel positive based on what we've seen today with regard to the pricing and the margin outlook for the asphalt business in the U.S.

Paul Roger - Exane BNP Paribas, Research Division

Okay. So just to clarify, your full year guidance that you commented a year of progress a few months ago, that -- you're not reiterating that today?

Myles Lee

Well, I think what we see -- what we're saying is that we just have yet to fully assess what is the backdrop in Europe. I think certainly, you've got to look at the restated numbers for last year in EBITDA which is EUR 1,563 million. We do believe the second half will be ahead of last year's, and second half last year was EUR 1.04 billion. Quite quantifying the extent to which things will be ahead, as I say, has been clouded by the weather patterns and the economic trends in Europe. And I think we will have a clearer view on that in -- at the interim stage.

Operator

Luis Prieto from Deutsche Bank is online with a question.

Luis Prieto Bartolome - Deutsche Bank AG, Research Division

I had a couple of questions. You mentioned, for the second half outlook, you mentioned that you are -- you seem to be considering increasing your cost-saving efforts. I just wanted to get a feel for how much this could contribute additionally in total to what's been announced already and to what extent that contributes to that positive growth year-on-year in the second half EBITDA? And then you also referred to, in the second half outlook, you referred to measures in several states to enhance revenue streams in the U.S. Could you be a bit more specific on that?

Myles Lee

Okay. Albert, maybe deal with the cost savings.

Albert Jude Manifold

Well, in response to what we're seeing, a slower-than-expected activity levels in Europe, we have moved ahead and started some further cost reduction initiatives across our European businesses. I think it's fair to say, we -- once we have identified some, this is still very much work in progress, and we're working at the full extent of where we -- what we -- we need to roll these out and the cost to implement these. So it's still being worked on at this moment in time. So we're not providing any further guidance on them at this moment, but we will do so, both the extent of those and the cost of the implementation of those with our interim statement in the midyear.

Luis Prieto Bartolome - Deutsche Bank AG, Research Division

But are you going to feel the impacts of these initiatives in the second half of the year or not yet?

Albert Jude Manifold

I think it's fair to say that we actually fully look and see exactly the extent of what it's going to cost. We won't be in a position to say that. But I think it's likely to say that the cost to implement, it's sort of likely to have a significant impact this year given that they are getting more expensive to do at this stage.

Myles Lee

Luis, on your second question, with regard to the measures. I mean, we're seeing states, for instance, Pennsylvania, Ohio, Michigan, all, if you like, addressing the issues of deteriorating infrastructure by -- with proposals for our particular bond issues, some additional taxation being applied. And this is a trend which still seem to be spreading out to other states as well, so we're encouraged by that. We don't see any significant change to our guidance from earlier in the year on the material side of if you like, modest uptick in public works' volumes. Well, I think it's an encouraging sign as we look out further into 2014.

Operator

Yuri Serov from Morgan Stanley is online with a question.

Yuri Serov - Morgan Stanley, Research Division

Two questions. One, continuing on the U.S., you're also mentioning encouraging -- or what's the statement, trends in nonresidential or signs in nonresidential markets? Could you give us some more details on that place?

Myles Lee

Yes, certainty, Yuri. Thank you. I think on the nonresidential, we're seeing, our distribution business, for instance, has a significant element of its business which sells into the commercial space for -- and that's particularly new commercial oriented. And we've seen some good trends in that particular business. We saw that in the back end of last year and we've seen that continuing to grow in the current year. In our Precast business, again, some indicative trends there last year as well. And that's continuing in the current year on our glass business as well, have a lot of -- our smaller-scale glass activities is tied into retail and commercial. And we do see a positive dynamic there as well. And it does seem as if finance in the U.S. for nonresidential construction commercial retail has easing up under the bit more money flowing into that sector, which, again, is encouraging that things are broadening out beyond the residential side, if you like. That's [indiscernible] in the coming months and as well, that's being supported to an extent as well by the start of the consistency of the ABI numbers over the last 8 months or so.

Yuri Serov - Morgan Stanley, Research Division

Although we've seen some fairly subdued numbers coming out to residential construction, although granted as backward-looking information, but I mean, we heard comments that because of the sequestration and the uncertainty about the fiscal situation, there was a bit of a hesitance by investors to put money into nonresidential projects. You're not seeing that, right?

Myles Lee

We're not. We wouldn't get carried away about nonresidential because it's not, by any means, sort of a full-blown recovery. But I think we did indicate in our call in February that we had seen profits of recovery in our business in the second half of last year and in some of our nonresidential segments. And I think we've seen that widen now a bit further over the last 4 months.

Yuri Serov - Morgan Stanley, Research Division

Okay. And another question, since you're talking about distribution. Residential are my -- again, looking at the construction numbers reported, the residential are, my numbers shown, for the first quarter of this year, were deeply negative. Is that -- are you seeing that? Is that reflective for what's happening on the ground actually?

Myles Lee

Well, I think what we said and we said it in our statement, hopefully, recently, clearly, is in the exterior products side of our distribution business, which is with the roofing and siding. The severe winter has impacted reroofing activity across large parts of the U.S. in comparison to the mild winter last year, when we have a very strong start to the year in reroofing activity. What still, to us, thus far, in the year, in the reroofing side, has been just to clean up from Hurricane Sandy, which has continued despite the start of winter months in the New York-New Jersey region. But it has been so much slower in the first 4 months in reroofing, in residential as well because of the winter, but I think that winter will have created quite a lot of damage, which will need to be repaired over the coming months. So I think there may be some seasonal factors involved there. We've also seen as well, too, in some of our -- we mentioned that as well in the statement, our architectural concrete business, the home center, patio and garden products, they have been affected by a pretty tough weather pattern in March as well when people couldn't, if you like it out, to do the sort of work they would have done in the much lighter conditions in 2012.

Yuri Serov - Morgan Stanley, Research Division

Yes, and interior products?

Myles Lee

Interior products, good demand. Our interior products distribution, as I mentioned, very much tied into to commercial and that's being strong. And that's not as weather affected. Obviously, it's indoors.

Yuri Serov - Morgan Stanley, Research Division

Yes, okay. And just very quick technical question. Your report EUR 385 million in acquisitions, however, that includes a swap deal that you had for Cementos Lemona. How much of that demand was Cementos Lemona? I mean, should we assume that it's equal to what you received for Uniland of EUR 180 million or not?

Myles Lee

Maeve, you may comment on that.

Maeve C. Carton

The Uniland project was closer to EUR 150 million to EUR 180 million and includes the other plant equipment disposals in the meantime, so the cost of Lemona was roughly the same.

Yuri Serov - Morgan Stanley, Research Division

What, EUR 150 million or EUR 180 million, was there about?

Maeve C. Carton

Around EUR 150 million.

Myles Lee

And of course, there -- probably it's not included in that spend to date is the recently announced deal with Lafarge to acquire Mykolaiv cement, which hopefully will complete once the regulatory approvals are received in the next couple of months.

Operator

Aynsley Lammin from Citigroup is online with a question.

Aynsley Lammin - Citigroup Inc, Research Division

Firstly, just couple of trading ones on Europe, if you could give a bit more detail around kind of your expectations for the underlying trends in Benelux, particularly in the Netherlands, you actually begin to see that market bottom. And I think you talked about, in the products, European products, a weakening of Germany for a competitive and trading environment there, if you just elaborate on that. And then secondly, if you are right with just to provide the kind of increments, what EBITDA do you expect from acquisitions in the second half?

Myles Lee

Okay. Thanks, Aynsley. There are 3 questions. I think, just maybe as I comment on products on Germany, I might ask Albert to comment on Benelux and Maeve just on the EBITDA from acquisitions. I think in Germany, we have seen, as we said, what we think is a little bit of softening there. Our businesses in Germany, particularly our Builders, Distribution, DIY and our big paving business Neo [ph], do -- are geared somewhat into the spring selling season, particularly for -- as people begin to, if you like, on the take, refurbish and work on homes and also begin to, if you like, work on outdoors and gardens and in patio areas, and the weather did undoubtedly have a bit of an impact on that. And again, I suppose this is one of the areas where it's -- we're trying to discern, what's weather and what's underlying, but it does seem to us, in looking across the business in Germany that there does seem to have been a bit of a softening in terms of activity, which maybe a little bit of maybe consumers resistance. We're not quite sure. I think the next couple of months will show us what the true trends are there. On the Benelux side, Albert, again?

Albert Jude Manifold

Yes. On the Benelux side, with the Netherlands, again, a very similar story to Germany. A lot of impact with the severe winter weather coming through here, plus clearly, a softer demand appearing at the winter. So it starts to ease off. The full extent that have softened that demand is when you're going to become clear to us the season starts to wind up over the next couple of months. So we don't really have a full picture as what extent that is in the Netherlands. In the Belgium, it's a little bit better. But again, softer again, how much of that is weather, how much of that is volume. We don't think it's as soft as the Netherlands, but again, we won't get a full view of that until we see that half year numbers coming through.

Myles Lee

I think it's probably fair to say that just the Belgian housing market isn't much better health, if you like, than the Dutch housing market because the Belgian market would've had so much more traditional mortgage backdrop and a much more instance of one-off housing, I think, Albert, and Netherlands would have that.

Maeve C. Carton

And in terms of acquisitions, I think there's probably an incremental EBITDA of about 45 million or so, somewhere between 45 and 50 million in H2 and that's the incremental element from acquisitions completed at the end of 2012 and also the acquisitions to date in 2013.

Operator

Robert Eason from Goodbody is online with a question.

Robert Eason - Goodbody Stockbrokers, Research Division

My question just relates just to general energy costs, and just -- can you give us a flavor of how the company is positioned across its different divisions? Particularly in relation to the asphalt operations, can you just give us an indication of how your winter filler [ph] went relative to last year in terms of year-on-year change? And just also my second question is just in relation to CapEx. Just given the uptick in the U.S. in terms of activity levels, do you see CapEx will have to increase to fund us [ph] increased activity?

Myles Lee

Thanks, Robert. A couple of questions there. Maybe if I deal with the energy side in the U.S. and ask Albert to deal with it on the European side of the business and then Maeve to handle the capital expenditure question. Just in the U.S., we've seen obviously positive energy trends over the last number of months. Our diesel costs continue to ease on a weekly basis, which is encouraging in terms of transportation and haulage cost, which are obviously an important element of our business there. On the liquid asphalt side, we've had a good winter buying season. We would've mentioned in February with the full year results that the average price of what we had in stock for the season was somewhere between 4% to 5% lower than the average cost per ton at the same point in 2012. And obviously, the key thing is where the liquid asphalt price is moving in the main construction season as we move out into the third quarter. But at the moment, the backdrop looks pretty positive both on the liquid asphalt side and also on the diesel cost side of things. So I think energy cost backdrop, at the moment, looking fairly benign for the business, but there -- as we have yet to move into the main busy season on the asphalt side of things.

Robert Eason - Goodbody Stockbrokers, Research Division

I'm sorry, Myles. Just a follow-up question there on the liquid asphalt. Just given the easing input costs -- I'm sorry, on the input cost, do you see any resistance in the end markets in terms of pushing through asphalt price increases?

Myles Lee

Again, it's very early, Robert, and that we only do about 10% of our asphalt volumes in the first 4 months. But I think the combination of the input cost and the sort of pricing trends, as we see them at the moment for this year, should be positive for overall asphalt margins. On the European side, Albert?

Albert Jude Manifold

The European side, Robert, most of our energy exposure comes through our spent operations, which is mainly the fossil fuels and our cement kilns and obviously, the power in our plants. And again, the energy, for the current year, prices [indiscernible] flash when we look at the mix as spot and forward-bought contracts for our energy going forward. But with the ongoing work we've been doing now for the last number of years and improving the efficiency in our cement plants, we would expect to see an overall drop in our unit costs -- reduction of energy consumption for our unit costs in our cement plants.

Maeve C. Carton

Okay. And just on CapEx, Robert, we -- last year, we spent about EUR 575 million on CapEx. Given the outlook for this year, we don't see any major need for increased spend for 2013. So we're still expecting spend to be in the region of EUR 600 million.

Operator

Howard Seymour from Numis Securities is online with a question.

Howard Seymour - Numis Securities Ltd., Research Division

A couple for me, please. Just on Myles, just on Poland, because obviously the number is lower and again, you've sort of mentioned the weather. But at the Capital Markets Day, you -- we were sort of suggesting that you talk the structural grants in the EU. Perhaps what's that for the interim, the current year? Has there been any update on that?

Myles Lee

Thanks, Howard. Yes, Poland has been tough thus far this year. Weather has been pretty difficult. And also you'll remember last year, there was quite a lot of activity earlier in the year in finishing off the various infrastructural elements for the football championships. While the comparisons, volume-wise, in Poland get easier as we move through the year. And there had been a withholding of structural funds by the EU from Poland, arising out of some concerns the EU had at how Poland had handled many of the major infrastructure projects that had been underway. Those funds are now flowing again. And we look to the next few months to see projects being rebid and coming back out to tender. But I think it will -- the weather effect has resulted in quite a shortfall in volumes in Poland in the first half of the year. And again, it's hard to see that being recovered in the second half of the year.

Howard Seymour - Numis Securities Ltd., Research Division

Second question, just on Ireland, you mentioned the condition is still difficult, challenging market conditions. Obviously, there's a bit more speculation in the press that the Irish economy has bottomed. Any thoughts on that?

Myles Lee

Albert?

Albert Jude Manifold

Well, I think that the forecast -- GDP growth is forecast about -- to be 1.5% for Ireland for this year, and although -- and the construction sector, for us, of course, we still see continuing challenges that are out there. But generally speaking, I think our [indiscernible] with the problem as well. It's reducing its cost base and being responsible how it does change. But the challenge, of course, now is get that backdrop to try and drive growth. So we'll have to see how the year goes overall within the economy. But I think the construction sector has done the right things, it's taken a lot of cost out, a lot of restructuring and to try to right size for the anticipated levels going forward. So we're doing the right things and I think we need to wait and to see if we can try and get a bit of lift in the general economy, which will lift general confidence. In that certain time, hopefully it's affluent to the growth in the construction sector.

Myles Lee

There has been, just in the recent weeks, there has been 2 major infrastructure projects. Finally, got the go-ahead from government with the support of the European Investment Bank. One of them involves a major interchange right on our doorstep here of our headquarters and the other involves, I think it's a 20-kilometer extension of one of the other main road routes from Dublin down to the Southeast. So that is small and the overall content might -- but it will be helpful to see that flowing again, particularly in terms of employment generation and construction. So hopefully we were moving into -- nearing the trough on the construction side in Ireland. This year, as Albert said, things will be down again here. And our cost base is very -- it's been caught very sharply. Here in Ireland, we have a very efficient business, and when things do turn, it should get good benefits from that.

Operator

Gregor Kuglitsch from UBS is online with a question.

Gregor Kuglitsch - UBS Investment Bank, Research Division

I got a few and they're mostly technical questions. When you give your EUR 400 million EBITDA guidance, can you just sort of give us a rough idea in terms of what you're thinking about in terms of restructuring charges. I know you sort of, I think suggested, it could be up a little bit from what you previously said for the full year, which I believe was EUR 50 million just for your first half guidance. I mean, coming back to the M&A comment, am I right in understanding, if you're seeing EUR 45 million, EUR 50 million incremental EBITDA in the second half from M&A, are you therefore suggesting that there's virtually nothing in the first half? And then maybe a second question, which is a little bit more generic, I think you did allude to the pipeline of M&A still being relatively solid, could you maybe elaborate a little bit what do you think about the -- whether the deals sold is actually picking up from here or sort of we should be thinking about the same type of pace as you've been doing sort of for the last few years?

Myles Lee

Okay. Thanks, Gregor. A number of questions there. Maybe I will deal with the EBITDA question and contributions from acquisitions and ask Albert to handle just on the cost effects and Maeve may deal with your final question. Gregor, which one is related, sorry, just again?

Gregor Kuglitsch - UBS Investment Bank, Research Division

I'm sorry. The final question was on the pipeline of M&A, that progressing whether you sort of see pickup of valuations?

Myles Lee

Okay. Obviously, in the business, the seasonal effects in the business, obviously, that mean that EBITDA contributions from a lot of the acquisitions tend to be rather small in the first half of the year and the main contribution comes in the second half. So looking at the current year, we're probably looking at a first half EBITDA contribution from combined acquisitions in 2012 and 2013 of somewhere in the order of EUR 15 million or so, 1-5.

Gregor Kuglitsch - UBS Investment Bank, Research Division

Okay. So do I add that to the EUR 45 million, EUR 50 million? Or was that an all-in number?

Myles Lee

Yes. If you would have, [indiscernible] the figure made would have given you -- would have been for the second half impact, yes.

Myles Lee

Okay. With regard to the cost -- further cost achievements and restructuring efforts.

Gregor Kuglitsch - UBS Investment Bank, Research Division

The restructuring costs, yes.

Albert Jude Manifold

Albert here, Gregor. As you know, when we announced our results for 2012, we showed in 2012 we had gross cost savings of about EUR 165 million and the cost to implementals was approximately EUR 60 million. And at that time, we had anticipated and we set out in our Capital Markets Day further cost savings of about EUR 125 million for 2013 and we indicated the cost implementals would be about -- fairly about 35% to 40%. I think it's fair to say, given the slowdown we're seeing in Europe, which is beyond what we've initially anticipated, that there would be further cost to implement and it's likely that the overall costs to restructured issue will be ahead of what it was last year. Although the exact figure, we couldn't really say yet because we're working through those programs at this moment in time. But last year was EUR 60 million. It's likely to be ahead in this current year.

Myles Lee

With regard to development opportunities, Gregor, yes, I think we're seeing a good flow of opportunity at the moment, obviously, concentrating very much on getting good value as always in those particular transactions. And again, if you like, concluding transactions that give us some good early contribution as well, too, on the earnings side. So there's quite a bit of activity around at the moment. And I think what's notable, I think, if you look at the pattern of our acquisitions over the last 18 months, there has been a good flow of opportunities generated by the deleveraging of some of the larger players across the industry and hopefully, we'll continue to take some further opportunity from that segment as well as our own normal of progress bolt-on activities.

Gregor Kuglitsch - UBS Investment Bank, Research Division

Okay. So could I have small follow-up questions on sort of the other P&L items, particularly interest? I think Maeve previously suggesting sort of EUR 300 million type number. And then finally, as the mix of business goes into more and more into the U.S., I'm guessing, given Europe still is under pressure, are you thinking that tax rate should go up as well from the sort of 19% to 20% guidance you've previously given?

Maeve C. Carton

I think our guess at the moment is still in the order of about 20% for the tax rate for 2013. But obviously, as -- to the extent that the profits in the U.S. are higher, that will have the effect of the nudging up the tax rates, effective tax rates as the proportion of profits in the U.S. is higher. On the interest side, EUR 305 million or so is the restated 2012 number. And we would expect all of the things to be equal -- the 2013 number to be slightly higher with the cost in 2013 of the recent bond issue being -- adding a little bit to the interest cost for 2013 also.

Operator

Will Jones from Redbird is online with a question.

William Jones - Redburn Partners LLP, Research Division

The first, just -- in Europe, you gave us a healthy split that's in the 3-month like-for-like and the 4-month like-for-like, is it possible at all to give us an indication on what that might have been across in the Americas? Second was staying in America, because I think back at the 3 results, the comment was made by divisional management that products may be able to meet or beat the 7% like-for-like sales growth we've seen last year. Obviously, plus 2 years to date, is that still the aim or is it too early to tell? And then just on maybe a bit more detail if you could please on European pricing across materials, or I think you're making a big push at the start of the year and products where I think there are couple of references to a little bit more competition out there?

Myles Lee

Thanks, Will. I think on the products business there, we were -- the plus 2% is dampened by quite a tough weather backdrop in the U.S. in March. We have been running at a faster rate than that through January and February, and that would have fallen back in March because of tough weather conditions and also in the early months -- of early weeks of April, but that picked up in the second half of April. And I think again, it's early in the year. But I think I'd be hopeful that for the products overall can certainly do mid single-digit like-for-like sales growth in the U.S. for the current year. With regards to European pricing trends, Albert, deal with that.

Albert Jude Manifold

Yes. Well, I think again early season, so difficult to call it, yes. But we're seeing some good signs where the markets are a little bit better, pricing ahead in Finland in pretty much all products. And in Ukraine, again, pricing moving ahead. In Poland in our main cement business, head on where they finished at the end of last year, but then slightly down on quarter 1 2012 as would be across the industry, but in some products, in line, and asphalt pricing moving ahead. So as the volume start to pick up when you start to push on pricing there. And although strong volume growth in Switzerland, the pricing is back a bit, but you would've seen that some of our peers reporting that as well. But I would expect those trends to soften through the course of the year. So I think there's a determination in the industry to get pricing across the industry in Europe. And whether opportunities that exist. So far, we don't, so -- but I think in the bigger markets, it'll be -- again, it will be the full season before we -- the mid season before we see exactly how they roll us.

Myles Lee

And just on your question with the 3-month growth versus the 4-month growth in the U.S. and the product that have taken. I mean, we would be averaging about 4% or 5% through January and February like-for-like growth. That would've been flashed in March which got us to around the 2%. The first 2 weeks of April were pretty severe on the weather side in the U.S. would've been flat again there. But we've seen a bounce back to the January, February raise over the last couple weeks of April, underlying the sort of mid single-digit growth of your estimate at the moment.

Operator

John Messenger from Redburn is online with a question.

John Messenger - Redburn Partners LLP, Research Division

Just 2, if I could, really, Myles. First one was just on Ukraine and [indiscernible]you kind of have given some broad comments, Albert, on pricing. But I'm just looking at Heidelberg this morning, not so much in Ukraine, but in Poland, [indiscernible] the prices have moved forward about 5% from the year end point. Would that be a kind of a similar scale to what you've actually seen in Poland, first of all, just in terms of that pricing moves to try and restore some of the pricing lost during 2012? And I know it's difficult because of the weather. But are you thinking the Polish market underlying, is it kind of similar to last year? Do you think maybe behind all these, as in we're talking about a 20% of thereabouts decline in underlying or is it just impossible to tell right now? And on Ukraine, can I just ask, on the new [indiscernible] that you've taken over, or proposing to take over from Lafarge, is the intention there to basically close part of that plant and use it for grinding just in terms of rationalizing in the Ukraine industry? Just a little bit of flavor as to what you're proposing to do with the EUR 96 million kind of acquisition there.

Myles Lee

I'm glad to see Redburn are having 2 bites at the cherry. I'll hand those questions to Albert.

Albert Jude Manifold

It's Albert here. John, with regards to pricing, yes, I endorsed the comment of our peers this morning with regard to pricing movements from the year end. We've seen positive development in Poland in the first quarter versus where it finished up last year, which, of course, was much weaker than it was in the first quarter of 2012, but yes, in around that price increase of 5% year-to-date. And of course, the key challenge to all of us in the industry is to progress that on to a new course of the year. And we get a better picture with regards to where that's going to be as the season unfolds. And that's impacted by your second question about where the volumes for Poland will be this year. It's just too early to say and to tell. We'll get a much better sense as we get the more important May and June months to come back. That's exactly where the volume trends are, by the half. We should get a good view when we talk to you about the range with regard to where we see Poland for the full year. So it's -- at the moment, I couldn't say where the volumes are going to be, and so we'll wait and see how it unfolds. With regards to Ukraine, obviously, we'll wait until the deal is closed and we have a number of options as to what to do. This obviously is a fully functioning standalone production unit by itself. At the same time, down the road, we have the lowest-cost, most efficient cement plant in the former Soviet Union. And so we will have to look as to how we would combine the network of production facilities we have now in Ukraine within Odessa, Mykolaiv and Kamyanets-Podilsky, the most efficient low-cost production and also to service the market not only with regards to logistics, but also with different types of cements as well. So it's not just a case of purely productive capacity and utilizing that, the types of cement we can offer to markets and the logistics involved. We do this everyday of the week, so this is our bread-and-butter and then, when we close the deal, we'll move forward with that.

John Messenger - Redburn Partners LLP, Research Division

Sorry, just coming back on Poland, when we think about the price decline last year and the kind of -- it is plus 5% or thereabouts. What does pricing actually look like year-over-year right now? Is it down by the order of 5%, Albert? Is that a fair number or is not quite that?

Albert Jude Manifold

No, it's down year-on-year quarter 1 2012 versus quarter 1 2013. It's down on quarter '13 over the first quarter of last year. In around where you're saying, yes.

Operator

John Fraser-Andrews from HSBC is online with a question.

John Fraser-Andrews - HSBC, Research Division

Two questions in the America Materials business, please. Myles, could you give your views on the higher obligations that were up nearly 30% in the first quarter? Do you think that is a bringing forward of demand? And what's your outlook for space spending on roads this year? And connected to that within your contracting margins in that business, the improvements that you're seeing in nonresidential, does that mean that contracting margins appears to be bottoming out as you approach the season?

Myles Lee

Thanks, John. Yes, I think the -- obviously, the awards are well up in last year, but I think we -- I think part of it is doing and we already said this in February. It's reflecting a more normal pattern of awards such as we would've seen when we had the committed 6-year programs. So I think the comparisons are with the period, if you remember back in late 2011 and early 2012, when we were still operating under very short-term extensions of the Highway Bill. And I think following the 2-year extension out to September 2014 that we got under MAP-21, we have seen awards now reverting more to the normal pattern because the states have certainty with the levels of money that they have from the federal government to spend. So I think it's good in terms of, if you like, the psychology in the marketplace early in the season to see these awards coming through. It makes people less anxious about what work will actually be there. I think that's helpful in terms of pricing and also in terms of margins at which contracts are bid. I think we have seen, last year, the contracting margin stabilizing. We do think that it hit bottom. I think it's a bit too early in the season to say what the pattern will be for the year as a whole. But I think the trends, in terms of the early contract awards, what we saw in terms of margins bottoming out last year, I think it's encouraging that we can see hopefully some recovery in contract margins for 2013 as a whole.

John Fraser-Andrews - HSBC, Research Division

Right. And are you seeing anything in the bidding season so far that is incremental to your outlook at the beginning of the year for America Materials for the year as a whole?

Myles Lee

I think we're encouraged by the states -- where it has been -- it's a bit more proactive in terms of trying to get some additional funding in place, and I think we'll just have to see what the full impact of that is as we move out through the year. I think if the private side is a bit more encouraging as well to in terms of some of my comments earlier about slightly widening out of activity in nonresidential, which hopefully will contribute to overall volumes. But I think at this stage, we're still early in the season. We prefer to get a couple of normal months under our belt in May, June and July, and then be able to give a more firmer prediction of the full-year sort of volume patterns when we announce our half year results.

Operator

[Operator Instructions] Tom Holmes from NCB is online with a question.

Tom Holmes - NCB Group Limited, Research Division

Just one for me, if I could. One of your peers has reported mixed [indiscernible] in Switzerland this morning with good growth in aggregates and weakness in cement. I'm just wondering what your view is on Switzerland at present and the outlook for the rest of the year in there?

Myles Lee

I think Albert will handle that one.

Albert Jude Manifold

It's Albert here. Tom, I think we're positive on Switzerland for the year. And we have recently good visibility with regard to infrastructure projects in Switzerland for this year anyway and with large road contracts, [indiscernible] projects. So I think overall, when I look at that depending on the business, I'll also say, reasonably good residential numbers, we think it will be okay across the businesses.

Operator

Sharon Chan [ph] from MetLife is online with a question.

Unknown Analyst

I've got a quick question on your balance sheet here. You stated before that you think you still have EUR 1 billion to EUR 1.5 billion capacity for acquisitions. Is that still the case and how does that impact your ratings, because it appears that you don't have much headroom under either the S&P or Moody's ratings?

Myles Lee

I think Sharon that probably we just said back in March that we had the capacity over an 18-month period or so to spend up to EUR 1.5 billion on acquisitions. I think while we indicated while that, that spend pattern was likely to be a spread out over a period rather than on any single identifiable acquisition. And obviously, what you've seen in the first 4 months of the year is a series of deals spread through that period. We obviously continue to focus very much on cash generation across the business. We're keeping a good control, as Maeve has mentioned earlier on our capital expenditures, focusing very much on working capital. Also continuing to look for additional disposal opportunities, which obviously provides flexibility in terms of acquisition spend, but also very conscious of the investment-grade credit ratings that we have and which we've maintained through a very tough period in the industry and not something we'd want to be sacrificing.

So I think we seem to have come to the end of any questions queued up here. So I thank you all for your attention and attendance to our call this morning. Obviously, I know it's a very busy day for you with a lot of news flow in this sector. If there are any questions which you'd like to follow-up with, you know the contact points here in our Investor Relations department [indiscernible] and we'll be very happy to respond to them.

Our interim results will be released on Tuesday, the 20th of August, so we look forward to meeting you and hearing from you again in the web as part of the webcast associated with the interim results announcement. So until then, I'll say goodbye, and thank you, again, for listening in and calling in this morning. Thank you.

Operator

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.

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