CRH plc

The stable outlook reflects our view that CRH should exhibit gradually strengthening margins and benefit from continued robust free cash flow generation, enabling the group to gradually recover its credit metrics, even with shareholder remuneration sustained at a high level. We expect conditions in CRH's core markets--North America and Europe--to remain broadly supportive over the coming two years. In our base case for 2019-2020, we assume that CRH's EBITDA margin will be between 14% and 15%, and that FFO to debt will be about 31%-34%. While we expect CRH to remain very acquisitive, we do not include in our base case any further debt-funded acquisitions. However, divestments could provide the group with further financial flexibility, which we assume the group

... limited headroom at the current rating level.CRH's financial policy should remain shareholder-friendly in 2019-2020, following the group's April 2018 decision to introduce share buy-backs as an ongoing part of its capital allocation. We expect CRH to continue the share buy-backs, meaning that total shareholder remuneration should stay higher than 1 billion--significantly above what was distributed prior to 2018. Consequently, we assume that it is unlikely that the group's adjusted funds from operations (FFO) to debt will exceed 35% over the rating horizon. In our view, this may not leave the group with significant rating headroom if there is an economic downturn, in light of the cyclicality of the building material business. Diversified product portfolio and cost efficiencies support level and stability of margins.CRH Group benefits from a highly diversified portfolio across heavy materials, building products, and product distribution in...

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