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Europe Materials EBITDA fell by 7% to €0.41 billion; the decline primarily reflected the disposal of our stake in Portuguese joint venture, Secil, which was effected in May 2012. Good operational and restructuring efforts saw margins broadly maintained at 2011 levels. Particularly tough trading in the Netherlands impacted reported EBITDA in Europe Products  (€0.15 billion, down 22%) and in Europe Distribution  (€0.23 billion, down 14%). Although the second half of the year saw some margin stabilisation, most especially in Distribution, full-year margins fell in both segments. 

During 2012 we continued to advance the significant cost reduction initiatives which have been progressively implemented since 2007 and which by year-end had generated cumulative annualised savings of €2.2 billion. Total restructuring costs associated with these initiatives and reflected in reported EBITDA, amounted to €60 million in 2012 (2011: €61 million) and were once again heavily focussed on our European Divisions (€43 million versus €47 million in 2011). 

Of particular note during 2012 was a substantial step-up in alternative fuel usage in our European cement operations and increased usage of recycled asphalt in our paving activities in North America. These initiatives mitigated cost inflation in energy-related inputs. 

While overall cost inflation was not as severe as in 2011, recovery of cost increases continued to be challenging. This was particularly the case in European markets as economic growth weakened through the year. However, on a more positive note, we saw an improving price/cost dynamic in our operations in the United States as the year progressed. 

## Group Strategy and Business Model 

The Group has built, and continues to develop, a portfolio that is balanced by geography, by product and by end-use sector – across residential, non-residential and infrastructure – with a good equilibrium between new build and RMI segments. 

In developed markets, our build and grow approach aims to create clustered groups of businesses with significant local market positions, augmented from time to time by larger step-out transactions to create new platforms for expansion. 

For our  Materials  operations, the foundation is in extensive reserves of stone to feed our cement, aggregates, asphalt and readymixed concrete activities. We seek to build vertically-integrated operations generating significant in-house demand for our resource-backed outputs while leveraging capabilities and expertise across local, regional and national markets. 

For Products  our focus is to optimise our production networks in core regions through selective acquisition activity, capital investment and, where necessary, restructuring. This involves an ongoing portfolio review process aimed at identifying those businesses which we wish to actively develop, those we wish to sustain for their ongoing cash generating characteristics and those which it is appropriate to divest. Product innovation and sustainability is a key consideration in this review process. 

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For Distribution , the strategy is directed at building size and scale in core RMI markets; driving value through scalable processes, enhanced procurement opportunities and building new channel opportunities. 

In developing markets, we see Materials opportunities as providing the most suitable initial entry point for CRH given the basic building needs in these regions. However, as these markets become more sophisticated our development horizons will expand to consideration of Products and Distribution opportunities but this takes time and will depend on the pace of maturation of individual national and regional markets. 

Across the various business segments our approach is to combine the large scale disciplines of CRH with the entrepreneurial skills of our local management. 

In building the Group we have always prioritised financial returns both in CRH’s bolt-on development activity in existing markets and in our step-outs into new product segments and into new markets. 

## Strategy in Action 2012 

Development activity completed during 2012, which amounted to €0.65 billion, was very much aligned with the strategy outlined above. 

Of the €0.33 billion of Materials development activity, roughly 70% arose in the United States where we added a total of 0.6 billion tonnes of strategically located aggregates reserves most particularly through the acquisition of a majority share of New Jersey-based Trap Rock Industries. In Europe, we substantially increased our presence in the Finnish readymixed concrete and concrete products market, strengthening CRH’s vertically-integrated cement and downstream positions in this resilient market. 

