A Concrete Beneficiary

 

In a market obsessed with the next Artificial Intelligence (AI) winner, one of the most overlooked beneficiaries is not a technology company at all, but rather, a company that makes cement. While investor attention fixates on chipmakers and hyperscalers, much of the lasting opportunity lies in the physical foundations of an American building boom – the roads, water systems, and data centres that AI and re-industrialisation demand.

Every road, bridge, water main, and data centre is built on one or more of the following materials: aggregates, cement, ready-mix concrete, or asphalt. CRH plc, North America’s largest supplier of these building materials, sits at the centre of each of these trends. Government-backed investment in roads and bridges from the Infrastructure Investment and Jobs Act (IIJA) continues to flow, even as its renewal is debated in Washington. More than a third of US water infrastructure is over 50 years old, driving a multi-decade replacement cycle. CRH further compounds this organic demand through acquisition. Over the past decade, it has completed 320 bolt-on deals, a pace set to accelerate, as it continues to consolidate a fragmented industry. The result has been twelve consecutive years of margin expansion, a rare record of consistent execution.

Additionally, there is the AI data centre boom. Each new facility requires significant volumes of aggregates, cement, and ready-mix concrete, not just the building itself, but the roads, substations, water systems, and power infrastructure around it. Here, CRH’s footprint is striking. According to the company, around 80% of the $690 billion of announced US data-centre projects sit within 25 miles of a CRH operation, and it is already involved in more than 100 projects.

Importantly, our investment case is not only about growth. During the 2022 European energy crisis, CRH demonstrated resilience relative to its peers. Despite the difficult operating environment, CRH was an outlier as its gross margin expanded while its peers’ margins contracted, supported by its pricing power and disciplined acquisition activity.

For us, CRH combines two increasingly rare characteristics: exposure to a long-term structural growth trend and resilience during uncertain periods. That combination has made CRH a defensive, high-conviction holding across three of our four funds. In our view, this balance of durability and structural growth makes CRH a defensive name which should support long-term value creation over time.