Amrize Ltd Ordinary Shares

Good morning, ladies and gentlemen. We're welcome on behalf of Lafarge Holcim to our first half results, analysts and investors call. With me in the room are Mr. Jan Jenisch, the CEO of Lafarge Holcim, and Mrs. Geraldine Picot, the CFO of Lafarge Holcim. Now, it's my pleasure to hand over to you, Jan.

Yes, good morning, everyone, and special welcome from my side. I Maybe more than usual, appreciate the opportunity to talk with you today in these very extraordinary times of COVID-19 pandemic, which can impact your business on different ways. And sectors are influenced differently from impact size, from timing. And I think it's a great time to talk. And I will give you a bit of an intro presentation. how the COVID-19 has impacted the business. And then I will hand over to Geraldine for more details on the performance before we go to the outlook and to the Q&A. When you look at our monthly sales volumes, which we provided to you to explain a bit what has happened, you see that we had an excellent start to the year. with ahead of last year in sales volume, both in January and February. And this was despite the fact that we already had COVID-19 disruptions in China, which we could not only counterbalance, but also China gave us a good early start into the crisis management globally. We were already then at the beginning of January going into global health crisis measurement and crisis management. And we also started to develop our crisis action plan health cost and cash, which is showing now very strong results in Q2 already. And you can expect here much more from us. So you see our sector, the most heavily hit in April with a sales decline of 37%. I think this has never happened before in such a in a single month. I think the very positive news is here that how the crisis has curved. You see in June, we even were 5% ahead of previous year. And this not only in a few of our markets, but we basically had all regions above last year. Only Asia Pacific was slightly below last year. So this is very good news. We saw that curve already in China. We are already in April. We were reaching last year volumes. So we had kind of an opinion that how fast the rebound can be here in our industry. Now, I think we handled this as rapid and as good as we could. We have our action plan in place. You see the results, not so much in Q2. You will see it much stronger in the months to come. We had already in May and June a cost development underproportional to sales. So that is very excellent and both on fixed and on variable costs. So very happy to see that. And also at the same time, we really focus on the cash. And you see the result, we almost tripled the cash flow in the first half of the year. And you can expect from us that we will continue here with this very strong cash focus, which is key in the crisis. But even so, in a crisis with such a fast and early peak, it's important to focus on cash and keep your resources intact for a faster rebound in the recovery phase. I think you see from the slides also here, we go forward very strongly. I'm very happy we have the company well under control from a health side. We started in January. There was a big learning, I think, in the entire construction industry to make the construction sites safe or let's say to adapt to COVID-19. And I think that was well done. This also makes us confident for the upcoming months that I think while we will see maybe waves or hot spots coming up, I think our customers in Lafarge Holcim is now well prepared with all the precautions and the measures that we will not run into major lockdowns or major disruptions. Okay, I think with this I'm happy to turn over to or hand over to Geraldine and she will give us a bit more insight in the financials of the second half of 2020.

Thank you, Jan. Good morning, ladies and gentlemen. I'm happy to take you through our H1 results in more detail. We are proud of the figures you can see here on slide 9. Of course, lockdowns at construction sites in some of our larger countries impacted our sales and profits, but we finally report a sales decline of only 10.8% like for like. This translates into a decline of 12.8% like for like of the recurring EBITDA after leases. We will dig into this later, but this reflects that we have been able to reduce our operating costs by 10.8% fully in line with the decline in sales. Recurring EBIT was mechanically more impacted due to the depreciation and amortization on which there is no immediate flexibility. We have continued to reduce our tax and financial expenses and as a result, the earning per share reached 80 cents. On top of the strong cost savings achievement, we have also been very successful in implementing the cash protection measures, the third element of our health, cost, and cash program. In the context of the crisis, and despite a negative currency translation effect on our business, on which I will comment later, the free cash flow reached 749 million Swiss francs, which is almost three times as much as we achieved in H1 2019. This comes mainly from intense focus on our working capital and close management of our capex. Let's now move on and look at the chart slide 10. This chart shows how all regions have been affected by the lockdowns which were implemented by governments in response to the pandemic. You can clearly see that the maximum impacts were felt by our business in April for all of our regions. In total, our sales in April decreased organically by 37%, with cement volumes down by 44%. North America has been less impacted, while Asia-Pac sales were down by 62% in April as a result of very strict and sudden lockdowns in India and in the Philippines. In June, almost all regions have recorded positive net sales growth like-for-like compared to June last year, and our business fully recovered its normal level of activity. Group sales growth in June is close to 5% like-for-like, with underlying growth of cement volumes above 2%. We will now look at the volume trends by region. Cement volumes declined by 13%, like for like on average at the group level over the half year. Europe recorded minus 7%. This reflects highly contrasting situations between the countries. In France, the UK, Spain and Italy, the lockdowns have been severe. On the contrary, Germany, Romania, Russia, which has maintained construction activities, showed positive growth. In North America, cement volumes fell slightly by 1%. U.S. activities were only very lightly impacted by COVID-19. Canada faced local lockdowns and an unfavorable market in the West. In Asia, packed cement volumes declined by 21% due to the heavy and sustained lockdowns in India and in the Philippines. Latin America's cement volumes were globally down by 14%. Lockdowns heavily impacted some key markets, including Brazil, Ecuador, and Argentina. But at the same time, Mexico, Costa Rica, and Nicaragua recorded growth. In Middle East Africa, cement volumes declined by 12%, impacted in all markets except Nigeria. Globally, aggregates volume declined by 6%, mainly attributable to the UK and France. Ready Mix volumes declined by 16% like for like, mainly due to the lockdowns in India and in Europe, and more specifically in the UK and in France. We now move on to our sales waterfall. Our H1 2020 net sales stood at 10.7 billion Swiss francs, down 18.1% compared to H1 2019. On a like for like basis, Sales reduced by 10.8%, driven by the volume decline on which I just commented, and that was partly offset by the price increases. The negative scope effect derives from the divestment of Indonesia and Malaysia, which closed in H1 2019. The forex has a negative impact of 6.2%, and this stems from all currencies, which have depreciated compared to the Swiss francs. primarily the Indian rupee, the euro, Mexican peso, and the US dollar. If we now go to our recurring EBIT waterfall, we see here that our recurring EBIT has declined by 28% in total, of which the like-for-like decline is 22%. The currency translation effect of minus 6% is consistent with the impact on the net sales, and as you can see, the scope effect is negligible. The volume effect is calculated based on the margin on variable cost achieved in 2019. It explains the decline of 41% of the EBIT. However, our health cost and cash program has led to strong fixed cost savings of 275 million Swiss francs, with reduction mainly in maintenance, third-party services, and SG&A. We have also benefited from a favorable market price for energy and have increased our average selling price by 1.3%. All these actions have allowed us to significantly mitigate the impact of the volume loss. In total over H1, operating cost declined by 10.8% like for like, exactly the same proportion as the decline in net sales. The contribution of our JVs declined by 82 million Swiss francs, mainly due to washing, impacted by the COVID-19 lockdowns that we've seen in China. Let's now turn to the results by segment. For all three main segments, sales have declined less than volumes, benefiting from an average price increases of 1.3% in cement, 1.2% in ready mix and aggregates. Thanks to the cost savings mentioned earlier, the decline in recurring EBITDA in cement has been lower than the decrease in sales. Aggregates and ready mix margin have not yet fully benefited from the reduction of the operating costs. For ready mix, the lockdowns have been more severe in the big cities and in the countries where the margin are higher, which impacted the profitability of this segment. Our solutions and products Business line decline, mainly due to precast paving and asphalt business in the UK. After the segments, the slide 15 provides an overview of the results by region, on which I will now comment in detail. So let's start with North America. Operations delivered strong performance in the quarter. North America showed the most resilience of all regions. despite the prevalence of COVID-19 cases and restrictions in some U.S. states and Canadian provinces. Construction has been deemed as essential in the large majority of our markets. Our customer order backlog remains strong without cancellation of major projects. Volumes impacted by COVID-19 were slightly negative in the quarter. Nevertheless, thanks to effective price and cost management, the region managed to deliver an over-proportional growth of recurring EBIT and recurring EBITDA over net sales. The Latin America region showed a mixed performance in Q2 with severe COVID-19 lockdowns in some markets. You can see our net sales are down 23% like for like in Q2 and our recurring EBIT down 21% like for like in Q2. On one hand, Mexico delivered particularly strong results. Our participation in key infrastructure projects helped to partially compensate the negative impact on demand at urban job sites in the country. On the other hand, strict government lockdown measures imposed in Ecuador, Argentina, Colombia, and El Salvador affected our business. Excellent execution, however, of our health cost and cash action plan allowed us to expand the recurring EBIT margin in the region from 26% in Q2 last year to 28% in Q2 2020. Let's now move to Europe. The second quarter in Europe has seen abrupt impact from COVID-19 lockdown, in particular in Western Europe. Net sales down 14% like-for-like in Q2, a recurring EBIT down 28% in Q2. Some major markets, such as France, the UK, Spain, and Italy, were heavily impacted by strict lockdowns. The markets in Central Europe, such as Germany, Switzerland, and Austria, proved resilient as construction activities continued during the crisis. In Eastern European countries, demand remained solid and contributed positively to the quarter. After a sharp drop of volumes in April, healthy signs of recovery in demand have been visible in May and June. In the majority of all markets in Europe, we are very pleased to report that we have been able to exit Q2 with volumes above the level of last year. Let's now look at Middle East Africa. COVID-19 lockdowns also took their toll. on the Middle East Africa region with a steep volume drop in April. As a result, net sales were down 22% like for like in Q2 and the recurring EBIT down 46% like for like in Q2. Salmon volumes declined by 18% in the quarter compared to last year. The decline has been mainly driven by heavy restriction placed on construction activities in certain markets such as Algeria, Egypt, Lebanon, South Africa, and Iraq. Nigeria, on the other hand, recorded resilient performance supported by cost-saving initiatives. And with Ramadan in May, the first signs of recovery in the region were witnessed mainly in June. The APAC region experienced the most adverse impact from COVID-19 in the group, with net sales down 26% like-for-like in Q2, and recurring EBIT down 34%, like for like in Q2. The volume dropped drastically in India due to a heavy and sudden lockdown from late March, which was more than offset by effective price management, agile execution of cost-saving action plan, and lower input cost. The swift response allowed the recurring EBIT margin to expand in the country. China recovered from its lockdown and experienced a rebound with monthly sales volumes exceeding the prior year's reference in the second quarter. Australia suffered relatively minor impact from COVID-19 as construction sites remained open. However, the overall economy remained slow. After a sharp volume decline in April in the region with net sales down by more than 60%, We have seen an encouraging recovery in May and June, with volumes nearly back at last year's level. Let's now move on to our P&L, slide 21. As usual, we present here the P&L excluding impairment and excluding the capital gain realized on the divestments. The reconciliation table with reported numbers is available in the press release and the half-year report. The net income before impairment and divestment has decreased by 268 million Swiss francs. The decline of the recurring EBIT has amounted to 473 million Swiss francs, as presented to you in slide 13. Below this line, there has been an improvement in all major categories of expenses. We have further reduced the restructuring expenses. In H1 2019, this line was slightly impacted by our 400 million cost saving plan. Then we have managed to reduce our financial expenses by 51 million Swiss francs, thanks to deleveraging and refinancing. Finally, our effective tax rate has further reduced to 26%. These savings have partly mitigated the impact of the crisis on the earning per share, which amounts to 80 cents. Let's go to free cash flow. The free cash flow has almost tripled compared to H1 2019 and increased by 498 million Swiss francs despite the decline in the recurring EBITDA after leases by 522 million Swiss francs. This record performance has been primarily achieved thanks to the strong improvement in our management of inventories which was already reflected in our December 2019 free cash flow. Compared to June 2019, inventories have reduced by seven days of sales to reach 35 days, one day below December 2019. Compared to June 2019, we also reduced our receivables in terms of days of sales by eight days. This reflects the strong focus we have on cash collection at this time of crisis and as part of our health cost in cash action plan. In total, the net change in working capital improved by 653 million Swiss francs versus the half year 2019. Income tax paid reduced in value by 91 million Swiss francs, almost proportional to the net profit before tax decline, although A part of the cash out is related to the results of last year. Finally, in line with our health cost and cash program, our capex reduced by close to 200 million Swiss francs. That leads me to the net financial debt you can see on slide 23. This chart shows that our net debt has reduced by 2 billion Swiss francs over the last 12 months. The free cash flow generated over the last 12 months amounted to 3.5 billion Swiss francs, 57% of which has been used to deliverage, which has been a priority in the current context. Consequently, despite the crisis and the seasonality in our business, we ended the half year with a leverage below 1.8 times. And before handing back to Jan for the outlook, let me give you a few words on the liquidity and balance sheet strengths, as this is obviously key in the current environment. We have around 8 billion of Swiss francs of liquidity, which results from cash and deposits on the one side and on the other from secured committed facilities. These committed lines are currently undrown and have no restrictions attached to them. Thanks to the level of financial strength that we have reached since 2019, or two rating agencies have confirmed our strong investment grade rating at BBBA2 with stable outlook despite the crisis. The attractiveness of our debt has allowed us to successfully continue our refinancing transactions with the issuance of two bonds amounting to more than 750 million Swiss francs at attractive interest rates and maturities. Ladies and gentlemen, I now pass you back to Jan. Thank you.