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## Americas Distribution 

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Americas Distribution, trading as Allied Building Products (‘Allied’), saw contrasting patterns across its main trading activities in 2012. Our Exterior Products business had a strong first half due to an unusually warm winter and momentum from prior year, but experienced a more challenging second half as re-roofing demand weakened and competition for work intensified. In contrast, the Interior Products business showed continuing improvements in both volumes and pricing throughout the year. With total like-for-like sales up by 2%, and incremental contributions from acquisitions completed in 2011, overall US Dollar sales and operating profit were ahead of last year. 

The ongoing evolution of Allied’s organisational structure provided further consolidation and efficiency opportunities. Management maintained its focus on logistics, pricing initiatives and administrative rationalisation to enable greater control and scalability. As we continued to simplify our branch operating structure, smaller regions were merged in order to improve acquisition integration and enhance operating synergies. The result of the ongoing efforts in these areas is evident in the improvement in both EBITDA and operating profit margins. 

Development activity in 2012 was quiet following a busy year in 2011. Two greenfield locations were added to strengthen existing market positions and provide scope for further growth. The acquisition impact shown above primarily reflects the 15-branch Minnesota-headquartered Exterior Products distributor that was acquired in December 2011. 

TriBuilt, Allied’s proprietary private label brand (5% of sales), continued to show strong growth in 2012. In addition, new customer service initiatives were implemented to further differentiate Allied in the marketplace. Overall, progress was made in 2012 to increase brand recognition and build strong customer loyalty. 

## Exterior Products (75% of EBITDA) 

Allied is the third largest roofing and siding distributor in the United States. Demand is influenced by residential and commercial replacement activity (75% of sales volume is RMI-related) with key products having an average life span of 25 years. All regions within the Exterior Products business were profitable in 2012 and the full-year impact of 2011 acquisitions added to the sales and operating profit of the northern plains/upper midwest markets. However, competitive pressures across the industry in the second half of 2012 impacted margins in both acquired and heritage businesses. In late-October 2012, our operations in the New York/New Jersey area were severely impacted by Hurricane Sandy but December saw some benefit as post-hurricane repair and refurbishment work commenced. 

## Interior Products (25% EBITDA) 

Allied is also the third largest Interior Products distributor in the United States. This business sells wallboard, steel studs and acoustical ceiling systems to specialised contractors, and has low exposure to weather-driven replacement activity. It is heavily dependent on the new commercial construction market which has been at historically low levels in recent years. Activity in this business finished the year on a strong note. Wallboard volumes and prices increased in 2012 which resulted in higher sales across all regions and, combined with the benefits of cost reduction programmes undertaken in previous years, contributed to an improvement in operating profit. 

## Outlook 

The overall outlook for 2013 is encouraging as commercial and residential construction is expected to show improvement. While the full effect of Hurricane Sandy on our business in New York/New Jersey is not yet known, we do expect it to give rise to increased activity in 2013 as repairs to the extensively damaged residential areas in coastal New Jersey, New York and Long Island gather momentum. Another year of growth is expected in the Interior Products business, as wallboard volumes and pricing are expected to increase. From a development perspective, our deal pipeline remains robust in both segments of the business. Overall, with the continued benefit of consolidation and cost reduction measures, we are looking to a year of further progress in 2013. 

