Amrize Ltd Ordinary Shares

Hello, everyone, and welcome to our 2020 Results Analysts and Investors Conference. I'm very happy that you could all connect today, and then we can have our presentation and discussion online today. I have with me Geraldine Picot, our Chief Financial Officer, who will explain the financial performance for the past year in more detail with us I would like to start to talk about the highlights and the conclusions of the year. Then Geraldine will explain the results in more detail. I will close with the outlook, and then I think we have around 60 minutes for your questions and comments as usual. Let me start to give you a summary of results. 2020 highlights and key developments. As we all know, it was a very challenging year for all of us. And I think we mastered this very well. We had a situation where our business was basically disrupted from mid-March to end of May. So for a time period of around three months, we were disrupted by the first wave where construction sites were closed and then we had a very fast rebound of demand for our products already in June back to 2019 levels and that is a trend which kept going until the end of the year. We had basically no more closures of construction sites globally even in the second or third waves construction is declared as essential business activity, and so was our business running quite well. You can see the buildup of our momentum in the second half of the year, and the fourth quarter even saw net sales growth again. And more than that, with our very fast and disciplined action plan, health, cost, and cash, we were able to improve our bottom line significantly in the second half of the year. And even for the full year, we have increasing margins in all of our five regions. Together with the margin increase and our action plan, we were able to achieve a record free cash flow of more than 3.2 billion Swiss francs. This for me was very fulfilling as we had the last record just A year before, in 2019, then, for the first time, we achieved a free cash flow of $3 billion. And I think it's very now convincing that we were able to repeat such a performance. And that gives us also great confidence now to have reached a new level of financial performance at Lafarge Holcim. We have coming with this, of course, we strengthened our balance sheet. Furthermore, we have now a net debt leverage which improved to 1.4 times, which is also a record low and very happy here. That gives us a lot of room and space to do meaningful investments like we did with the acquisition of Firestone Building Products, which is really a milestone in transforming Lafarge Holcim into the leader. in innovation and sustainability. We made big progress also on sustainability. The latest one, we made the A-list at the CDP, at the very recognized organization of CDP. That is also what we want to see, and you will expect and see from us further acceleration in sustainability. Outlook looks good. We talk about this later. Before I pass to Geraldine, I want to share a few more details with you here regarding my remarks. You see the demand situation we described. When you look at the quarters, we had a big COVID-19 impact already in quarter two, and then we had a fast recovery. and in Q4 already back to growth, and especially second half of the year, very satisfying margins and over-proportional growth in operating profit and improvement of all the key financial figures. We were, at the beginning of the pandemic, we were worried about the emerging market a bit. A lot of people believe they will be hit harder. This didn't happen for Lafarge Holcim. We have very resilient business, and this is based on our strong branded product sales, our strong positions in retail. And distribution, you see the result here. Globally, in the second half, the cement bag business increased by more than 4% in volume, which is very significant. And you see here some selection of our brands, which we have here in the emerging markets. On the health cost and cash action plan, we have shared with you already as early as March what we want to do to safeguard the liquidity, to safeguard the cash flow, but also to achieve significant cost saving. And you see here our program. We fulfilled all the targets. We are ahead in fixed cost and third-party products and services cost savings. We are, interestingly, on the CapEx side. We are a bit short of the promise of 400 million, which has a positive explanation. We were well ahead after three quarters, and then the fourth quarter was so good in demand levels that we didn't want to stop our people in doing the right thing. investments to make sure 2021 will be a good year from the volumes. So we left that target. We interpreted that not so strict. And that's why we are not at 400 million CapEx reduction, but at 370 million, I think, for the right reasons. Then all the improvements in networking capital, but also all the other levers of free cash flow have improved. And we come to this record free cash flow of more than 3.2 billion Swiss francs. Let me say a word about Firestone. I'm very excited. This will have a great future at Lafarge Holcim to take this roofing platform now global and benefit from this growing and very sustainable solutions they are offering in the market. Today, I'd like to give you a bit of a progress report. We are almost close to closing the deal already. We just signed about seven weeks ago. Looks like we can already close end of March. And from April 1, this will be fully with us. The numbers look good. 2020 numbers are better than communicated before to you. And also the outlook for 2021 is very good today. also based now on the new President Biden program to build back better. That's all full territory of Firestone to make better insulated roofing and other sustainable solutions. So we're very excited here to start with Firestone on the financing side. We did a good job. We had $2 billion in cash we used or we're going to use to pay Bridgestone for the deal. And then we financed already the remaining $1.4 billion by two bonds. So that goes very well. And I would say we are ahead of plan and expectations. On the bold on acquisition side, we have further increased the number of deals. Even so, we were held back by the pandemic. We couldn't do as many deals as we wished. Nevertheless, we did eight. You see they are all in concrete and in aggregates. Very, I would say, satisfying that half the deals are aggregate deals. And you see they are across here from North America to Europe and to Australia. We did eight, I would say, very fast value accretive deals. And hopefully we can increase the number of deals here further in this new business here. With this, I talked about sustainability. That's really one of our main focus for the future. We make here big progress. I just entered as a founding member for the new MIT Climate and Sustainability Consortium. And also, for me, the most exciting is the global launch of our eco-products. which we launched globally. And I like to share with you that the demand and the interest in the products are way ahead of our expectations. And we are basically sold out at the moment. And we do everything now to make sure we are ramping up the capacities here to fulfill the customer demand for EcoPact and these largely CO2-reduced products. Good. Then we come to Geraldine, who gives us now more details on the performance.

Thank you, Jan, and good morning, ladies and gentlemen. Before going into our full year 2020 result, we feel it is important to give you another view of the Q4 performance, which better reflects the prevailing positive business trends. So as you can see here, the cement volumes were almost stable compared to Q4 last year. On a like-for-like basis, we were back to growth on net sales at plus 1.5%. This was driven by a price increase of plus 2.6%. This price increase more than covered the cost, allowing for an outstanding and over-proportionate improvement in our profitability. Indeed, the recurring EBIT exceeded 14% on a like-for-like basis, and the EBIT margin of the group improved by 170 basis points in Q4. Let's now turn on to our 2020 full-year results, which are a resilient set of results. Of course, our activity and profits have been impacted by the lockdowns of some construction sites in some of our markets. But as Yann explained, we have been constantly able to adapt our cost in spending as well as to manage effectively and actively your pricing to compensate for much of the volume loss. So finally, we report net sales decline at 5.6% on the like-for-like basis. This translates into a recurring EBITDA decline of 0.9% like-for-like. And we will dig into this later, but this is a result of our ability to reduce our operating costs by 7.2% on a like-for-like basis, more than the volume decline. Mechanically, the recurring EBIT is slightly more impacted at minus 1.9% like-for-like. We have been able to further reduce our financing expenses, the restructuring expenses as well, even in the context of a crisis, the tax expenses, and that allows us to publish an earning per share before impairment and divestment of 3.07%. Swiss francs. Pushed by our discipline and the cash protection measure, we have recorded our best free cash flow ever at above 3.2 billion Swiss francs. And this is a result of our intense focus on working capital as well as the close management of our capex. Let's now turn on to our volumes. And here the recovery in H2 is visible. So firstly in cement, overall the decline has amounted to minus 7% after a sharp decline in H1 due to the lockdowns of minus 13%. The situation improved in Q3 and the decline was limited to 1%. And then as we've seen, we were almost stable in Q4. So if we look at Europe first, Europe cement volumes declined by 4% and this is mainly due to the strict lockdowns we have in Western European countries, such as the UK, France, Italy, Spain, from March to May. The situation has fully recovered in H2. On North America, cement volumes declined by 5% as the business experienced a prolonged effect of the COVID-19 in the US and in Canada. If we turn to APAC, the cement volumes declined amounted to 10%. And this is due to the heavy and sustained lockdowns in India and in the Philippines. The situation fully recovered in H2. In China, the volumes were positive in 2020, thanks to the strong rebound when the operations resumed at the beginning of the year. In Latin America, the cement volumes decline amounted to 3% only after 2020. a sharp decline in H1 due to the COVID-19, where the cement volumes of Latam were down 14%. This is a strong performance, as in H2, Colombia, Argentina, Ecuador fully recovered. Also, Mexico recorded an excellent growth in 2020. In Middle East Africa, the cement volumes were down 6%, as many countries suffered from COVID, but actually Nigeria recorded... a positive volume growth and a strong growth for 2020, and countries such as Kenya and Iraq had a double-digit growth in Q4. Overall or aggregates volume for the group were down 5% due to the COVID-19 in the US and the lockdowns in the UK. Already mixed volumes were down 10% globally, also due to COVID-19 in some key markets such as the UK, such as India and such as France. If I now turn on to our net sales, our net sales stood at 23.1 billion Swiss francs, down 13.4%. On a like-for-like basis, the decline amounted to 5.6% under the volume effect I just commented, which was partly offset by a positive price increase. The scope effect results from the divestment of operation in Indonesia, Malaysia, and Singapore that we have divested in H1 2019, partly offset by the Bolton acquisition that we have closed during the last 12 months. The conversion currency effect is strong at minus 7.4%. It represents close to 2 billion Swiss francs, and this is stemming from all the currencies that have depreciated against the strong Swiss francs, primarily for us, the Indian rupee, the US dollar, and the Mexican peso. If I now move on to a recurring EBIT, a recurring EBIT was down 10.4% in total, out of which the like-for-like decline amounted to 1.9%. The scope effect is negligible, and here again, here, the currency conversion impact is negative at minus 8.6%. So the volume here, the volume impact represents minus 775 million Swiss francs. It has been more than offset by a positive price of a cost of plus 793 million Swiss francs, which is coming from a fixed cost saving of 385 million Swiss francs. Of also all the operational efficiencies that we have generated in all the variable unit cost, we have benefited from a favourable energy market, and we have increased our prices by plus 1.8% on average. The contribution for joint venture has declined by here 73 million Swiss francs, and this is primarily coming from our joint venture Washington, which suffered from the COVID-19 at the beginning of the year. Let's now move on to our margin per segment. So here you can see that our cement net sales declined by 4.7% on a like-for-like basis, and this was partly offset by a price increase of plus 2%. This business unit improved its margin by 2 percentage points, thanks to the good execution of the cost-saving programs. Our aggregates business lines net sales declined by 6.7%. That was offset by price increase of 0.8%. The ready mix business net sales were down 6.7% like for like, and that was also partly offset by price increases of plus 1.6%. For these two business segments, the cost structure is less flexible as they are more exposed to fixed cost. The solution and product suffered from a lower activity, notably in the UK, in Australia, and in Canada. This slide gives you an overview of the margins and of the performance of all the regions. And I will now comment into more detail. So let's start with North America. As said, North America suffered from COVID-19 and is presenting here a fairly resilient situation. set of results with net sales down 3.3%, but a very good execution of the health cost and cash plan, allowing for the recurring EBIT of the regions to go up 5.8% like for like. So the main contributors to this performance are Canada East and the U.S. That was mitigating the impact of Canada West, where there is still an economic slowdown in the prairies. Please note that this region has improved its EBIT margin by 160 basis points. Let's now move on to Latin America. Latin America had an outstanding quarter, an excellent year with net sales at plus 2.4% and a recurring EBIT up 13.4%. So even if in H1 the region was impacted by some lockdowns, the recovery was very strong in H2, notably in Colombia, Argentina and Ecuador. The Mexico country has performed very well with an excellent growth and benefited from iconic projects such as the Dos Pocas refinery in Tabasco and the Santa Lucia airport in Mexico. And all the demand in H2 were really driven and sustained by our branded products in all distribution channels, including our own descenser. And that leads to this excellent performance. So Latin American margins are up 3.8%. This is the highest in the group. I now move on to Europe. Europe has been impacted by strict lockdowns from March to May. And in this context, the region has demonstrated a good resilience in 2020, with net sales down 4.2% on a like-for-like basis and a recurring EBIT down 2.5% like-for-like. So again, here the region witnessed a good recovery in H2, with volumes stemming from residential and infrastructure sector. And the volumes really reached 2019's level in Q4. And again, in Europe, the cement prices remained strong throughout the year. If I now turn on to Middle East Africa, here the net sales were down 8.9%, like for like, and the recurring a bit down 4.7% on a like for like basis. Many markets of the region suffered from COVID-19 here. Nigeria recorded a strong volume growth throughout the year, And Iraq and Kenya, for instance, had a double-digit growth in Q4. The region delivered a higher EBIT margin, as you can see, and this is stemming from also here all the strong branded product sales, as well as successful turnaround actions. If I now turn on to APAC, globally in APAC, the net sales were down 9.1% and the recurring EBIT down 12%. India delivered a very solid performance in the context of the strict lockdown experienced in H1. The volumes came back at last year's level in H2. And the strong performance also here is supported by our branded products. And it helped to mitigate the softer environment in the Philippines and in Australia. As you know, China was the first to emerge out of the crisis. and recorded a strong volume growth in 2020. Let's now move on to a full P&L, and as usual, we present here the P&L before impairment and before the capital gain realized on the divestments. So here, on the net income group share, we have a decrease of 155 million Swiss francs, So let's start with the recurring EBIT. You can see the recurring EBIT is actually down by 426 million Swiss francs, and this is largely attributable to the currency conversion effect as presented. And then we have been able to mitigate this. We have lowered our restructuring expenses by 101 million Swiss francs. We have also lowered again our net financial expenses by 89 million Swiss francs. And we have further improved our tax rate by one point. So our effective tax rate is now 25% versus 26 last year. So all of this helped to mitigate the impact of the crisis and allow us to report an earning per share before impairment and divestment of 3.07 Swiss francs. Let's now turn on to our free cash flow. And here, despite the crisis, we have been able to generate our best free cash flow ever. It's a new record level above the 2019 level by 230 million Swiss francs. 2019, which was already at an exceptional level. So here, if we start with the recurring EBITDA, you can see that it has declined by 561 million Swiss francs. And this is almost entirely attributable to the currency conversion impact. But we have been able to fully mitigate that. How? Firstly, we have further improved our working capital beyond the excellent levels of last year at plus 146 million Swiss francs. This thanks to a constant monitoring of our inventory and also a very good monitoring and follow-up of our receivables This is key in the context of a global crisis. We have also been able to reduce our restructuring expenses and litigation expenses. Also, this in a context of crisis is quite remarkable. And in line with our commitment, we have reduced our capex by 370 million Swiss francs. Let's now turn on to our net debt. So to start with here, and despite the crisis, we have been able to constantly reduce reduce our net debt. So firstly, the free cash flow. It's what the business has generated. It's more than 3.2 billion Swiss francs, as already presented. It's after all capex and after all leases. So we have expense 124 million Swiss francs net of disposals for or bought on acquisitions, mainly. And then we have distributed in total 1.5 billion Swiss francs of dividend, out of which 1.24 are LH shareholders. And the minority shareholders of our control subsidiaries have received 280 million Swiss francs. 280 million Swiss francs. So that leads us to a net debt at the year end of 8.5 billion Swiss francs. We're very proud of that. to report this level of debt. Let's now go to our leverage. And here, as an introduction, I would like to remind you that our leverage here is computed with a net debt that includes the lease liability for 1.3 billion Swiss francs. So it's basically this net debt divided by the recurring EBITDA before lease. And this is valid for 2019 and for 2020. So as you can see here, we have further reduced the leverage by 0.1 times, which leaves us plenty of headroom to finance the Firestone acquisitions and to remain below 2 times. This is our return on invested capital, and we are very proud, despite the crisis, to have maintained our return on invested capital at the same level as in 2019. at 7.4%. So we have been able to fully offset the negative impact on the EBIT thanks to the work done on the operational efficiencies, also the good monitoring of the working cap and the capex, and the further improvement of the tax rate. So this, with now better market conditions, we are fully confident to be fully on track to reach the above 8% in 2022. This is without the impact of Firestone, for which we have given a specific guidance. Let me now move on to sustainability. Our sustainability KPIs are part of the metric that we follow as close and as regularly as the financial KPIs. So in 2020, our CO2 emission amounted to 555 kWh. of CO2, a ton of cement, and this is an improvement compared to last year. How have we obtained such improvement? Well, we have several levers. Firstly, we have further increased the use of alternative fuel. To give you an example, we have 20 plants today that are working with more than 70% of alternative fuel versus fossil fuels. Secondly, we have increased the use of mineral components to lower the portion of clinker in the cement. And finally, we have developed a full range of green cement product and green concrete, and Jan has given EcoPact and EcoLabel as an example. Beyond the CO2 emission, recycling, the waste recycling, and the water reduction, of course, are major sustainability metrics that we follow closely. And talking about people in 2020, we have provided COVID support to our communities, reaching more than 6 million beneficiaries. Well, now before handing back to Yann, I'm very happy to confirm that we will propose to the AGM a dividend of 2 Swiss francs per share. Despite the crisis, we stick to our commitment, announcing the strategy 2022. So it will be a cash dividend and will be fully paid out of the foreign contribution reserve, and therefore it is exempt of the Swiss withholding tax. Thank you.

Very good. Thank you, Géraldine, for the details on the performance. I now like to make a few comments. on the outlook and the guidance 2021. We enter the new business year with a great momentum. You have seen the good numbers we had for quarter four. Not only the growth comes back, the volumes are back, but also the over-proportional operating profit margins and the cash flow is fully there. So we expect a very solid quarter. 2021. We enter with good confidence when we look at the order books. And then in the second half of the year, we believe that a lot of the stimulus programs announced by the government will also hit our order books. Let's look a little bit in the details. We have one, I think, exciting chart with some selected stimulus and infrastructure projects that Everyone talks about President Biden's program in the U.S. now, Build Back Better. I think these are fantastic programs, not only for infrastructure and roads, but also especially to make housing and buildings more sustainable. This is the home turf of our new company, Firestone Building Products, and we are very excited here to see more growth coming in the U.S., You look at the other stimulus programs and you realize they basically are in all our key markets. We have the selection here from North America to Latin America, from Europe to India to Australia. So it looks like we're going to be a big part of this Build Back Better program and of the stimulus to have the economies in the countries back running well. And we are looking very much forward to that. to be part of that. So with this, we have, I would say, a very good outlook for the year. We think the volume is going to be somewhere close to 2019 volumes tonnage-wise. And then on the other hand, we're going to have very good margins. When I look at the cost position, we have now improved so significantly in 2020. We enter with a very healthy price over cost ratio into the new year. So we are quite excited here to execute a very successful year 2021. On top of that, we want to have more growth now. I want to start now with Firestone, April 1st, and really unleash here the full potential globally of this business. In addition, we have a full pipeline of Boldon acquisitions, and I wish that we do more deals than last year. Hopefully, we will have a run rate of one acquisition deal per month. This is our target here. So in summary, then, on the return side, we stick with our guidance for strategy 2022. And at this point, we guide that the EBIT should be at least 7% or above. Cash conversion will stay above 40%. We will be disciplined on the finance side. Our debt leverage will stay below two times and also the capex lower. will be less than 1.4 billion Swiss francs. I think with this, I'm happy now to open the floor for your questions and comments. Let us stay a little bit disciplined with maximum two questions per person so that we can allow everyone to have a question or a comment.