The global economic crisis of 2008 and 2009 that destabilised markets, reduced consumer confidence and tightened credit around the world, impacted almost every company in Europe and North America and CRH was no exception. Our results reflect the weakest economic environment in over half a century. To mitigate the impact of these conditions, we acted aggressively to manage our operations, focussing on action items that were directly within our control.
Cost Reduction
As markets declined we were quick to remove excess capacity from our manufacturing and distribution networks and we scaled our operations to market demand. We were proactive in cutting costs and continued with the implementation of cost reduction programmes that are expected to produce more than €1.65 billion of savings in the four years to 2010, of which approximately €0.85 billion was realised in 2009. Some 40% of the gross savings of €1.65 billion is estimated to be permanent in nature.
Restructuring costs of €205 million to implement these programmes have been expensed in 2009 and we anticipate a further €45 million of implementation costs in 2010. Incremental savings in 2010, after implementation costs, are estimated at €260 million. These initiatives have regrettably necessitated a reduction in staffing levels as we structure our operations to the new market demand environment.
Operational Excellence
Commitment to operational excellence has been a core value of CRH for forty years. In these challenging times, we continue to focus across the Group on initiatives that maximise our operational effectiveness and eliminate inefficiencies. We will continue to concentrate on setting key performance indicators for the operational elements within our control that contribute most to our performance. In this way, we aim to manage our costs and improve CRH’s competitive positions.
Safety
Our commitment to safety is unwavering. In 2009, our operations continued to improve their overall safety performance with record results achieved on the key safety metrics. However, there were regrettably eight fatalities in Group subsidiary companies during the year. We have, therefore, launched a specific CEO-led plan to eliminate fatalities. This plan was rolled-out across all locations in 2009 and is being implemented and monitored with the highest level of commitment from management at all levels. Safety remains a key priority for the Group and will continue to receive strong focus and attention at all operating locations.
Overall
We have, in 2009, shown our willingness to make difficult decisions and to react rapidly to changing trading conditions. For 2010, we continue to focus on the essentials of managing through these difficult times, scaling our operations to the market, managing our capacity and controlling our costs. We are concentrating on the elements within our control that contribute the most to our performance, including customer satisfaction and operational excellence. The challenges we face today are significant – but so too are our strengths. Over the medium term, we look forward to accelerating our growth and to building our leadership in low-cost efficient operations, employee development and customer service.