Welcome from our Chief Executive Officer
I am delighted to welcome you to Tarmac's latest Sustainability Report for 2011/12. It gives me great pride to be able to say that, over the past months, we have continued to deliver strong progress against our tough sustainability targets. This is testament to our approach and our belief that sustainability is fundamental to the way we operate, and to the way we develop and steer Tarmac's strategy.
Over many years, we have worked hard to ensure that Tarmac further embeds sustainability within our business principles and acts with integrity and transparency. This approach means we continue to operate efficiently, safely and honestly, delivering a strong financial performance while giving the utmost consideration for the environment, our employees and local communities. It is also helping us to demonstrate best-practice and show leadership in our industry, while supporting the UK in meeting Government targets.
During 2011, we have continued to move our business forward and make progress against the four core elements of our Sustainability Framework – Climate Change, Sustainable Products, Natural Resources & The Environment and People & Communities. This Framework provides us with guiding principles and targets to drive performance and monitor progress.
For me, safety is a fundamental principle for all the businesses that I look after within Tarmac’s group of companies. I set a great deal of personal belief that everyone within my care should expect to be kept safe in the work they do. Therefore, it is heartening to report that, in 2011, we further improved our safety performance with a 44% reduction in workplace injuries (Total Recordable Case Frequency Rate).
During the past 12 months, we have also continued to listen to our customers and lead the way in demonstrating that our high-quality products are made to rigorous standards of responsible sourcing. As such, all of Tarmac’s products are now independently certified as being responsibly and ethically sourced.
As you would expect from a company of our scale and nature, we are also acutely aware of our responsibility to use natural resources wisely and to cut wastes, wherever possible. During 2011, we achieved a 95% reduction in the amount of waste we send to licensed disposal and reduced the amount of potable water we use in concrete and mortar production by 33% since 2004*.
We are also making good progress in ensuring that Tarmac operates in an increasingly energy efficient manner. Since 2004, we have reduced specific energy consumption across our whole business by 15% and cut specific CO2 emissions by 12% over the same period. Our work in the field of carbon reduction has led to an exciting new development for our industry. In 2011, Tarmac became the first major firm to launch a comprehensive Carbon Footprint Calculator. This service is helping us to further support our customers in achieving their own sustainability goals by providing a carbon quote for any Tarmac product, from any of our UK sites. I am immensely pleased to note that the calibre of work in this field is being recognised externally by leading organisations. In 2011, Tarmac was granted the prestigious Carbon Trust Standard across our entire UK organisation, in recognition of our work to manage and reduce carbon emissions.
In addition to the hard work that has gone into delivering against our Sustainability Framework targets, we have, at the same time, kept a firm hand on our financial performance. Many parts of the construction industry are still feeling the effects of the economic downturn and Government cuts; we have had to navigate these difficult waters and adapt to market challenges. In 2011, Tarmac’s directly comparable earnings before interest, taxes, depreciation, and amortisation (EBITDA) performance, (underlying profits), was 36% lower than in 2010.
Tarmac has concentrated on improving profit generation and cash flow, and is achieving strong results on both of these fronts. Despite difficult trading conditions, with reductions in public sector spending, and declining expenditure in some private sector markets, the company increased sales in several product areas. The decrease in EBITDA is reflective of external impacts, such as increases in key costs, particularly bitumen and fuel, as well as exceptional charges relating to pension fund transfers and the sale of Tarmac’s remaining European businesses. Cash flow remains good despite a very difficult trading environment, and Tarmac remains in a good position to drive forward and attain its financial targets in 2012.
Despite these market challenges, we have maintained our focus on sustainability and continued to draw on our strengths to deliver value, quality and expertise that our employees, customers and shareholders expect.
Tarmac’s long and successful history can be attributed to our ability to adapt our business to changing times. This attitude of evolution is relevant today, because, at the time of writing, we are awaiting a ruling from the UK’s Competition Commission on a proposed joint venture between Tarmac and Lafarge UK. In 2011, our parent company, Anglo American plc, and Lafarge SA announced their intention to form a 50:50 joint venture company (JVCo)** to merge Tarmac’s UK aggregates, asphalt, ready-mixed concrete, cement and lime operations, with Lafarge’s UK cement, asphalt, concrete and aggregates operations.
The Competition Commission ruling is expected by 1 May 2012. If approved, the JVCo would represent an exciting opportunity to develop a leading UK construction materials company and would generate many benefits for customers.
I know that, despite market challenges and changing times, we will maintain our dedication to delivering our sustainability commitments, and uphold the integrity and leadership expected from Tarmac. Whatever the shape of our company in the future, I am confident that we will continue to grow and evolve in a sustainable manner, while retaining the strong principles that our company was founded on.
Terry Last
CEO, Tarmac
* Per unit of production
** The proposed JV does not include Tarmac Middle East, any of the remaining Tarmac International businesses or Tarmac Building Products Limited. Neither does it include Lafarge’s UK Plasterboard operations.
