Europe Materials continued to benefit from strong economic conditions and increased its profitability significantly during 2007, primarily through organic growth.

In Ireland we benefited from the high levels of infrastructure and non-residential activity which compensated for the decline in the residential sector that has emerged following record house completions in 2006.

The Finnish economy performed well with strong construction growth, particularly in the nonresidential sector which posted a double-digit advance. The Baltic States eased in the second half, but St. Petersburg continued to grow at pace.

Strong growth in foreign direct investment led to high demand for construction materials in Poland, particularly in the industrial and commercial sectors. While there was a good level of activity in roads, this will grow in the years ahead as substantial European Union funding flows through into construction projects. High levels of demand helped the pricing environment for all products.

Following some difficult years, the Ukrainian economy grew strongly and construction activity benefited resulting in a significant increase in cement demand.

Switzerland continued on a stable path and CRH operations benefited from infrastructure projects in its regions.

In Spain housing demand eased, particularly in Madrid and the South. While volumes were weaker generally, good cost control led to better margins and profitability.

Portugal again saw a lower level of construction despite a recovery in the economy. Downstream activity, exports and a good performance in operations outside of Portugal resulted in an overall improved performance.

In August we bought out our partners in the Benelux cement trading, readymixed concrete and aggregates joint venture, Cementbouw bv. The company was reorganised to report under the Europe Materials Division and has performed to expectation since acquisition.

2007 saw the commencement of three major cement projects aimed at modernising and expanding our cement facilities in Ireland, Poland and Ukraine. With a combined value of approximately €0.6 billion, this investment programme demonstrates CRH’s commitment to investing for the future.

The focus on developing and emerging markets continued and the Division’s acquisition of a 100% stake in Harbin Sanling Cement, China and a 50% stake in Denizli Cement, Turkey, has created new platforms for growth.

Ireland

In Ireland construction demand continued to grow in the first half of 2007; however, the second half saw an accelerating decline in residential output. The National Development Plan continued to underpin demand in the road sector, while private investment remained strong particularly in commercial and retail projects. Agricultural construction recovered well, supported by environmental improvement grant aid. As a result overall demand for our products was at a similar level to 2006. The Northern Ireland business, particularly quarry products and construction, benefited from the general sense of optimism in the economy.

Ongoing programmes to reduce operating costs and improve efficiency delivered further savings in 2007, particularly in the area of energy cost reduction. Commercially, the emphasis on cost recovery through price improvement continued. Profits were ahead of 2006.

Irish Cement commenced a €200 million investment project to modernise its Platin Works. The investment will create an ultra-modern, energy-efficient plant meeting world best practice emissions standards. It is due on-stream towards the end of 2008 and demonstrates CRH’s commitment to meeting the longterm needs of the Irish economy and construction sector.

Finland/Baltics

The Finnish economy grew by 4% in 2007. Broad-based strength in construction activity contributed to strong advances in cement, aggregates and readymixed concrete volumes. There was a particularly strong increase in new non-residential construction, which grew by over 20% when compared with 2006 levels. Ongoing investments in infrastructure such as the Helsinki-Turku motorway and Vuosaari port, combined with a stable residential construction market, also underpinned volume growth. All products achieved improved pricing and this resulted in a very good uplift in operating performance. The new clinker line at the Lappeenranta cement plant, commissioned during the first half of 2007 has performed satisfactorily to date.

Sales volumes in Estonia, Latvia and St. Petersburg were generally ahead of 2006. Higher input costs remained a challenge, particularly in Russia, though good cost control and better pricing held overall profits in line with 2006 levels.

Overall, good volume growth and better pricing delivered improved profitability in the Finland/Baltic region in 2007.

Central Eastern Europe

2007 was another good year for the Polish economy with GDP growth at 6.5% and unemployment falling to a new low of 11.4%. Inflation, although low, rose to an average 2.5% while overall construction output increased by an estimated 16% on 2006. The unusually mild first quarter set the tone for cement demand with annual volumes up 17% on 2006 levels. Our concrete businesses performed extremely well with improvement in both volumes and prices across all product groups. Despite some delays in the road programme our aggregates and blacktop businesses performed well with a significant increase in hardrock aggregates sales. The lime group continued to perform satisfactorily with lime product volumes up 7%. Overall, profits in Poland improved significantly on 2006 levels.

In Ukraine GDP grew by 8% with increased demand for cement. Higher cement pricing in Russia and other neighbouring countries had a positive knock-on effect on pricing and profitability progressed significantly to record levels.

Work has commenced on both the 1.8 million tonne Ozarów cement capacity expansion in Poland and on CRH’s Joint Implementation Project JI-0001 to convert its Ukrainian cement plant from wet to dry process with associated environmental and operational benefits. These two projects, totalling approximately €0.4 billion, demonstrate CRH’s commitment to meeting the growing construction materials needs of these rapidly developing economies, which in 2007 accounted for approximately one-third of Europe Materials operating profits.

Switzerland

The Swiss economy grew by 2.8% in 2007 with continuing strong private consumption and substantially increased exports. Inflation and unemployment rates remained at low levels. Construction grew by 1.4%, with residential activity reaching its peak mid-year and levelling off in the second half. Growth drivers were infrastructure and industrial construction. Startup infrastructure projects led to an increase in cement sales while excellent weather conditions in the first quarter of the year, as well as strong construction activities in all the regional markets, led to better profitability in downstream, aggregates, asphalt and readymixed concrete operations.

Iberia

Although the Spanish economy continued to grow, our volumes in Spain were a little down on the record levels achieved in 2006. Nevertheless, better pricing and improved cost control led to higher margins and increased profitability. Activity remained strong in our main markets with the exception of Madrid. Corporación Uniland, the Group’s 26% cement associate, recorded a strong increase in profitability.

The Portuguese economy grew by 1.9% in 2007; however, construction had another difficult year with activity decreasing 3.9%, reflecting reduced activity in housing. Secil’s three cement plants operated at full capacity taking advantage of strong export markets. Overall, Secil recorded a satisfactory year due to a good advance in profitability in its Tunisian cement operation and in its downstream activities in Portugal. Ciment de Sibline, the cement and concrete business in Lebanon in which Secil acquired a controlling stake in January 2007, performed in line with expectations.

Eastern Mediterranean

Our investment in Denizli Cement in Turkey provides a platform for growth in the Aegean region of southwestern Turkey, which is an expanding construction market. Denizli is one of three large cement producers in the region and is vertically integrated downstream in readymixed concrete. The performance of the business since acquisition has been in line with our expectations and ahead of prior year results.

In Israel, Mashav, in which CRH holds a 25% stake, performed slightly ahead of 2006.

China

Our purchase in February 2007 of Harbin Sanling Cement in Heilongjiang in northeast China represented a first step for CRH in the Chinese cement and building materials market. Economic and construction growth in the target region continued as anticipated and the performance of the company and its integration into the CRH Group is progressing well. In January 2008, CRH signed an agreement for the acquisition of a 26% shareholding in Yatai Cement with capacity to produce 9 million tonnes of cement per annum which is currently being expanded to 18 million tonnes per annum. This transaction, which is subject to Chinese regulatory approval and which is expected to be completed later in 2008, is a further step in our strategy to build a regional position in cement in northeastern China.

Outlook 2008

Construction demand in Ireland is expected to decline in 2008 as housing output adjusts to a more sustainable level. Both infrastructure and commercial investment are expected to continue at current high levels, and will help to moderate the demand reduction. Cost reduction programmes are expected to reduce the profit impact of lower overall activity.

Finland’s economy and construction demand are anticipated to grow in 2008, though at a slower pace than in 2007. A decline in new residential construction will be more than offset by continued strength in non-residential and infrastructure investment. The Estonian and Latvian economies face a more uncertain period, although we expect demand in St. Petersburg to remain strong. Overall, we expect to see a further advance in profitability in the Finland/Baltics region in 2008.

Polish GDP is forecast to advance 5.6% with construction output expected to grow by over 10%. The continued availability of European Union funding coupled with strong foreign direct investment will underpin growth.

In Ukraine GDP is projected to grow by 6%. Expanding private sector investment and ongoing rehabilitation of infrastructure are expected to be the major drivers of economic growth with increased demand for all our building products.

GDP in Switzerland is forecast to grow in 2008 by 1.9% driven by a strong export performance, tourism and good internal consumption. Construction activity is anticipated to remain stable with further small declines in housing offset by growth in industrial and commercial work and a stable infrastructural sector.

In Spain a further decline in housing activity is anticipated. We expect volume reductions in all regions across the country with the exception of our principal market in Catalonia where road and rail infrastructural projects and commercial activity are expected to mitigate the impact of the housing decline. In Portugal construction is expected to show a modest recovery in 2008 due to an expected increase in public capital expenditure.

Continued growth is forecast for construction in Turkey next year with cement volumes rising accordingly. Denizli should once again operate to full capacity.

As in recent years, the home market in Israel should show modest growth but significant progress will depend on the political environment.

Cement demand in China is again expected to grow at close to 10% in 2008 and we believe that Harbin Sanling Cement will operate at full capacity.

Overall, the market outlook for 2008 is good. While organic growth is unlikely to be as strong as an outstanding 2007, we will benefit from acquisitions completed during the year, and the major cement capital expenditure projects underway will contribute strongly to the development of the Division in 2009 and beyond.

The Europe Materials Division is a major vertically integrated producer of primary materials and value-added manufactured products operating in 19 countries and is actively involved in the Group’s development efforts in Asia. Its principal products are cement, aggregates, readymixed concrete, concrete products, asphalt and lime. Ireland, Poland, Finland, Switzerland, Spain, Portugal and Ukraine are the major markets. In total, the Division employs approximately 14,500 people at over 540 locations.

*CRH share of annualised production volumes. Cement and readymixed concrete volumes above exclude CRH share of associates Uniland in Spain (26.3%) and Mashav in Israel (25%). CRH’s share of annualised production volumes for these businesses amounts to approximately 3.1m tonnes of cement and 0.8m cubic metres of readymixed concrete.