Amrize Ltd Ordinary Shares

Ladies and gentlemen, welcome to the Holcim Q3 2021 Trading Update Conference Call. I am Paul, the course co-operator. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Ms. Svetlana Jotko, Head Investor Relations. Please go ahead.

Thank you, Paolo. Good morning, everyone, and welcome to Holcim Q3 Trading Update Call. Thank you very much for taking the time for us. With me in the room, we have Mr. Jan Jenic, CEO of our company, and Mrs. Géraldine Bicot, our CFO. As usual, we will start with the introduction of our results by Jan, and following to more financial details by Geraldine. We will take some time for your questions, as usual, also afterwards. Now I hand over to you, Jan. The floor is yours.

Hello, good morning, everyone, and thank you very much for joining our call this morning. I'm very excited to talk about our Q3 update with you. I think it has been a very satisfying quarter. You saw the numbers. We have a good sales growth in Q3, like for like, but then also with our successful portfolio transformation, we are almost 13% up in Real Swiss ranks. So I'm very satisfied. with what we see on the demand side and our supply side. We have focused very much this year to keep fully running and supplying our customers. There are many disruptions in supply chains, and we are very happy that we prepared the company very well to be able to supply all needed Holcim products also in Q3. That's, I think, very good. Then the margins. We have a record Q3 on the EBIT, so we were again able to have a positive price over cost. Many people are worried. We have some significant cost inflation, as you all know. I think the energy cost alone was up 28% in Q3. Also, logistics is up in other areas. cost buckets. Nevertheless, it's our job to manage this by cost mitigation, so we strongly change our fuels to alternative fuels. We have many, many positive aspects here on the factory side to be more efficient, and then at the same time, we have a good pricing result with a 5% effective increase in 2021. So very satisfying. And again, we are proud that we are able here to navigate through this pandemic or post pandemic with good volumes and very good margins. I think on the strategic side, I'm very happy with the portfolio moves we could complete this year. We just announced a month ago the divestment of Brazil, I think, for quite an attractive enterprise value. At the same time, we also signed Zambia and Malawi divestment. Indian Ocean divestment was actually closed this week, so we have the proceeds here in our accounts. That has been completed, so very happy. More excited, I'm on the buy side. As promised, we accelerated the Bulldog acquisitions. We promised one bulldozer per month and we are exactly on that line. We have nine bulldozer acquisitions for aggregates and ready mix in the first nine months. So that's very good. And then our big Firestone acquisition, which is now half a year with us. That is giving us a lot of pleasure. Business is running very well. We are growing double digits. more than 10% organic sales growth. I think it's the single highest growth we have in our business segments and that brings us to this movement we want to make where solutions and products, our fourth business segment becomes a reality and already for Q3 16% of our sales is here with solutions and products. Very, very happy about this and we will continue here to make this a big part of our future. Many progress being made in sustainability. You have this in the presentation. I'm extremely happy with the success of the rollout of EcoPact, EcoPlanet, but also our clear path for net zero, and now approved by science-based target initiatives. So here, I think we all move in the right direction, and this is all good. We come to the guidance later, but you see we are confident to further upgrade our guidance to now at least 22% of EBIT growth for the full year. With this, I will come to Geraldine, and she gives us more details on the results.

Thank you, Jan. Good morning, everyone. Let's start with the volumes. In cement, we recorded a small decline of 3% versus Q3 2020. If our trading business is excluded, the volume decline becomes only 1%. North America's cement volumes showed positive growth in Q3 2020, which results primarily from the good trend in Canada, which started already in Q2. Similarly to recent quarters, LATAM continued to record outstanding performance, achieving growth of 3% in Q3. This is all the more remarkable given the high base of Q3 2020, which experienced growth of 6% versus Q3 2019. Asia-Pac reported a small decline of 2%. Excluding China, the region recorded positive cement volume growth. Of particular note are India and Bangladesh, both of which recorded solid growth in volumes. europe increased its cement volumes by one percent on average some western european countries were softer compared with q3 2020 mainly due to the return of demand seen after last year's lockdown eastern europe so very good demand marking double digit growth in the quarter middle east africa declined by three percent like for like due to the tough environments in Algeria and the introduction of quotas on cement output in Egypt. Our biggest market, Nigeria, so growth versus Q3 2020. Aggregates volumes grew by 1% driven by good market trends in China, Australia and Poland. Ready Mix volumes increased by 2%, boosted by a number of countries and with the growth led by recovery in Indian urban markets and a strong Poland. Let's now move to slide 10 with our sales. Our Q3 2021 net sales stood at 7,286 million Swiss francs, up 12.9% compared to Q3 2020. The positive scope effect amounted to 524 million Swiss francs and is mainly attributable to the consolidation of Firestone building products from the beginning of the second quarter. It also includes the effect of bolt-ons acquired during the last 12 months. The like-for-like growth brought an additional 326 million Swiss francs in net sales, an increase of 5% on 2020. This excellent number mainly reflects the strong pricing which has contributed to net sales growth of 5% on average. Recurring EBIT now. Our recurring EBIT has increased by 6.2% in total, mainly reflecting the like-for-like growth of 4.7% or 68 million Swiss francs. This growth overcomes a slightly negative volume effect of 23 million Swiss francs with very solid pricing and cost management. Our strong pricing has exceeded the increase in operating costs by 105 million Swiss francs. despite energy inflation of around 28% in the quarter. The contribution from our joint ventures decreased by 29 million Swiss francs, which is mainly due to Washington and China. The currency translation had a small negative impact of 1.8%. And finally, the scope effect has brought 47 million Swiss francs of additional EBIT, largely due to the consolidation of Firestone. Now let's go to slide 12. And to summarize the performance, since the beginning of the year, we have recorded a huge growth of 33% of the recurring EBIT, of which 35% is like-for-like. This corresponds to a like-for-like growth of 26% compared to the first nine months of 2019. And this demonstrates that we are not only talking about fast COVID rebound here, but also about true growth based on strong pricing and industrial cost monitoring. Looking at the results of each business line on slide 12, you can see that they all recorded organic growth in sales with over-proportional recurring EBIT growth. Siemens sales grew by 14.8%, like for like, mainly driven by a volume increase of 7.3% and an average price impact of 6%. This positive pricing combined with cost control allowed the EBIT margin to progress by 2.6 points. Aggregates recorded 4% volume growth and an average pricing impact of plus 1%. ReadyMix volumes grew by 9.5% and price by 2.5%. The recurring EBIT margin of both business segments improved respectively by 3.6 and 2.6 points. With the acquisition of Firestone on solution and product business segments, so its shares of sale increased to 16% of the total group sales in Q3, reflecting significant steps achieved in the building of our fourth pillar. For the nine-month period, the historic business recorded strong like-for-like growth, driven primarily by the rebound of activity in the UK and Canada. After the segments on slide 14, you can see that the slide here provides an overview of the results by region. And all regions demonstrate excellent margin expansion, driven by cost discipline and effective pricing management. I will now comment on each region in more detail. So let's start with North America. Good market momentum here continued in Q3 with net sales up 3.4% like-for-like and recurring EBIT growth of 5.9% like-for-like over proportional to net sales. In the U.S., the underlying demand trends remained very solid with good pricing dynamics. Good demand growth continued in both Canada East and Canada West. Performance was further supported by strong pricing. The region demonstrated its strong ability to offset cost inflation and deliver positive price over cost. If we now turn to Latin America, the region achieved a strong set of results in Q3, with net sales up 16.3% like for like. Recurring EBIT increased by 19% like for like, over proportionally to net sales. Strong volume growth across all business segments, stemming from robust demand in Mexico, Argentina, and a good rebound in Ecuador. We are very pleased that we supply large infrastructure projects in the region, such as the Anacua Dam in Argentina, as well as a number of key sites in Mexico, including the Dos Barcas refinery, the new airport, the Libertad Dam in Monterrey, with more exciting projects in the pipeline. Let us move now to Europe. For Q3, the region recorded net sales growth of 2.8% like-for-like and recurring EBIT increase of 1.5% like-for-like. Good demand momentum continued in the UK and Eastern Europe. Western Europe was impacted by the strong comparison base effect in the quarter. The region generated a positive price over cost in the quarter, demonstrating our ability to offset cost inflation. Middle East Africa delivered a solid performance in Q3, with net sales up 10.7% like for like and a recurring EBIT up 8% like for like. We observed favorable demand trends in Nigeria and Kenya and encouraging conditions in South Africa. Algeria faced a soft market in the quarter, and Egypt saw the introduction of quarters on cement output also driving better pricing. The region recorded a positive price over cost. Let's now move to Asia-backed. In Q3, the region delivered net sales growth of 3.1% like-for-like, Recurring EBIT recorded a decline of 6% like-for-like. India achieved a solid performance despite a prolonged monsoon, with good traction continued in Australia backed by stimulus programs. China was impacted by heavy rains and cost inflation. Price increases were realized toward the end of Q3, which weighed on the performance of China. Excluding JVs, the region delivered a slightly positive price of a cost, proving our resilience to offset inflationary pressures. And now with this, I hand over to Jan for the outlook.

Yes, thank you. So we have upgraded our outlook. We see the growth momentum will continue in all our regions. So we are positive on the demand side and also positive on the pricing side. So our special highlight is Firestone, which grows more than 10% also for the full year. And then we have good progress for our sustainability targets towards 2030. And all this together, we confirm our capex that it will be less than 1.4 billion. Cash conversion looks good like the last two years. So we will also be here above 40%. and our return on invested capital will be above 8% for the first time. On the EBIT side, we have upgraded from plus 18% to at least 22% for the full year. In total, we will achieve our targets of strategy 2022 already one year in advance in this running business here. With this, I'm happy to give the floor to you, and we are ready to have your comments and questions, please.

The first question comes from Elodie Rahl from J.P. Morgan. Please go ahead.

Hi, good morning, Jan and Geraldine and Vitlana. Thanks for taking my question. So, limited to... Let's talk about near-term trends there. I think Q3 volumes were slightly negative. So what are we seeing at the moment in October? That would be my first question. And my second question is on Q4 in general. You've had a positive price cut in Q3. You've increased your guidance, but the 22% bottom of the guidance still implies a mid-single-digit decline for EBIT in Q4. So what are you seeing in Q4 in terms of for growth at the moment? Thank you.

Hi, good morning, Elodie, and thank you for the question. Yes, I think we have good volumes. I think we are down 1% in pure tonnage in Q4. Q3, I think about ready mix and aggregates is even up and firestone is up. So I think we have good volume trends. We see that continuing in quarter four. I think in general, the construction sector, building materials, and especially Holcim is in a very good long-term cycle now. And we were going to see very strong demand, I think, for quarter four, but also for the year's to come. You made the math that maybe our upgrade could be different, but we said we make at least 22% growth. So it's now a bit left to everyone's imagination. We made a conservative guidance like we always do, and we always achieve our guidance. And I think you should take this a bit into account. On the outlook, again, we are very positive with the price over cost that we did it in every single quarter this year. And we also are positive going forward that we will be able to mitigate any cost inflation which might lie ahead of us.

Okay. Thanks very much.

The next question comes from the line of Yacine Touari from On Field Investment Research. Please go ahead.

Yes, good morning. So I would have a question as well. My first question would be on your hedging policy and your expectations for cost inflation in the coming quarter and in 2022. Could you give us a little bit of color on how much energy and freight have you hedged for next year? And do you already have a sense of what could be the the cost inflation that we would see in next year, or maybe in the first part of 2022. And then my second question is on the margin. I think margins were a little bit under pressure in the third quarter. Do you expect the European margin to remain under pressure in the fourth quarter and in the first part of 2022?

Thank you for your question. Charlene will give a bit more detail. Just as a general comment, I don't believe in hedging too much. You have a rather small fraction of our cost which could be hedged, but I think always the hedging makes the company a bit slow. I prefer that we have fast reactions and you can see that from our results that we are doing price over cost positive also when the environment becomes a bit more difficult. And again, We have a positive outlook. We see the hikes in energy and transportation in all sorts of materials. But again, we have a clear roadmap how to mitigate cost and also how to have a strong pricing also going forward. Charlene, you would like to add a bit on hedging and on the margins in Q3?

Yes, sure. Sure. Good morning, Yacine. I think it's... fair to say as Jan said that hedging financial hedge could potentially apply only to energy and that's very small portion of the energy energy consumption that that we have is hedged we do have fixed contract we do have regulated market and then there's a variable portion of as well, but we want to remain flexible and agile, optimize our fuel mix, develop the alternative fuel. That's where we want to be agile and continue on this. And look, we have been able to keep our margin intact, almost intact, that's our goal. And that's what we're doing with the successful price increase that we've done throughout the year and that we'll continue to do in Q4 and next year.

Thank you very much.

The next question comes from the line of Gregor Kuglic from UBS. Please go ahead.

Hi, good morning. I'm afraid I'm going to push you a little bit more on the cost point. So you just had 28% energy cost inflation, I think you said, in the quarter. Can you give us sort of a broad idea how that trends, assuming kind of current pricing prevails? Does it kind of go up a lot or is it sort of the peak? I struggle a little bit to model that sort of externally, obviously net of all the self-help that you're doing. Then on the sort of asset rotation side, you've done a couple of divestments. It would be interesting if you could just maybe share quickly with us what the proceeds were. That would be interesting. But I guess more broadly, could you comment if there's anything else that you're working on on either the acquisition or disposal side, please? Thank you.

Yes, Gregor. I think on the energy side, we had quite a hike in Q3, as I shared with you. our current expectations for Q4 is around the same. Maybe even slightly better, but let's say around the same. Again, I think we are doing our homework and we are quite confident that we will go through all the challenges here with a good margin and a good result. With the proceeds also, I'm quite happy. We divest about for the same enterprise value or especially cash proceeds as we are investing in Boldons and in the Firestone acquisition. So very happy to see that. We also expect another strong free cash flow like the last two years. So we have quite a strong balance sheet. And with the Firestone acquisition happening in April, the leverage came a little bit up, but now with the proceeds of the divestments, but also especially the strong cash flow, we will be back to the old levels soon. And then we are ready. So basically you see our pattern. So we are shaping the company a bit with... selling emerging cement markets, Indonesia, Malaysia was sold, now Brazil. You see our deals in Africa, Zambia, Malawi, but also Indian Ocean. So that's a little bit the pattern. We don't do this in, I think, in the highest numbers. We review this very carefully. And on the same side, we have gold on acquisitions for our segment aggregates. and ready mix concrete and then we like to have more transformational acquisitions for solutions and products where we made quite a big step with the Firestone acquisition.

Thank you.

The next question comes from Jean-Christophe Lefreve Moulin, the CIC.

Please go ahead.

Good morning. I have two questions. First one, could we quantify In Swiss francs, the impact of Firestone acquisition both in sales and EBIT over the fourth quarter. Secondly, Asia Pacific, you told us that you were able to mitigate the cost inflation. However, your recurring EBIT is slightly down. Where does it come from? Many thanks.

Yes, hey, Jean-Christophe, good morning. Thank you for the question. I think on the Firestone side, we are happy to share for the full year more details. Now, we don't want to start on the quarterly update now to give more numbers, but we're just very excited to share the growth with you because this is also a growth platform, so we are really happy that taking over the business and it grows fast. growth from day one. So that's, I think, very reassuring that we bought the right company and also we were able to start with it, not only with any disruptions, but even with growth from day one. So this is, I think, very reassuring for all of us. On the margin side, I give to Geraldine, there's just a few technicalities, I think, with joint ventures and so, but I think she's happy to give you more details here.

Yes, absolutely. Good morning, Jean-Christophe. So on APAC, if you exclude the Washington lower performance for Q3, you know that we incorporate our portion of net income in the EBIT of Asia PAC. And, you know, with the heavy rains in China, actually, they have a lower performance than last year. And that accounts for about $23 million.

Okay, many thanks.

The next question comes from the line of Luis Prieto from Kepler-Chevreux. Please go ahead.

Good morning. Thanks a lot for taking my questions. A couple for me. The first one is, could you please describe a bit more the main levers used in the third quarter to mitigate cost inflation beyond, obviously, the price increase lever? You seem better positioned than others. and I would like to understand why. And my second question is, what does your potential large acquisition pipeline in LightSight look like at the moment? In other words, is it densely populated and is it therefore just a matter of identifying what adds the most value, or are you struggling to find potential candidates with sufficient critical mass? I know it's difficult to answer, but any light would be very welcome. Thank you.

Yeah, Luis, good morning, and thank you for the question. I think on the Q3 performance, just maybe a few comments, what we tried to do. So when we went into this pandemic crisis back in March last year, we said from the beginning it's a tsunami crisis with the biggest impact right at the start. And you remember we had a 40% volume decline in April. And in April last year, you know, that was amazing tsunami. At the same time, we said the recovery will be very fast too. And that's why we didn't take any shortcuts like headcount reductions and all that things. So we are entering this year in a very healthy condition. We didn't reduce the workforce. That's why we are also able to deliver to all the customers. We had a very proper warehouse management. So while With the tsunami volume decline, of course, we kept the silos empty, but then later we ensured that we have proper warehouses on both sides, raw materials and finished products. I think, honestly, we didn't take any shortcut or sugar coating going through the pandemic, and this pays off now in Q3 and also the following quarters that we have a very healthy situation. On the cost side itself, I think we are also proud that we did a lot of good decisions from increasing alternative fuel rate to mitigate fuel mix. So many actions behind also efficiency of plants. Also here, we didn't take any shortcuts in the pandemic to look better or something. We made sure that we get the factories ready for full volumes again. And I think you see that now strongly in the Q3 results. And then last but not least, we have very good pricing. We have an effective sales price increase of 5% for 2021. And we're preparing now to set the right pricing for next year. So your question on the acquisition pipeline. Here, I'm happy to see that our hold-on acquisitions are running well. You recall with the strategy 2022, we basically started in 2018 to do Boldon acquisitions. And I think in the first year we did four deals and our ambition now for this year was to do one deal a month. So at the moment we are right on track. We did nine deals in nine months and we have a pipeline to also maybe deliver another three Boldon acquisitions to complete here the year successfully. And you can expect that also from us going forward, these very value-accretive, smaller local acquisitions, especially in North America and Europe, that will also continue next year. On the transformative side, we just did our Firestone half a year ago. That was, again, as I said, I think it's very... Very fulfilling to see that we can build up here this new segment for the company. And we have here also, I would say, more to come. And let's see what deal we can do next for solutions and products. But also here we have a pipeline which might be very interesting.

Thank you very much.

The next question comes from the line of Matthias Pfeifenberger from DB. Please go ahead.

Good morning, Charlene and Jan. Thanks for taking my questions. Only one. I want to dig in a little bit more on pricing. You said the cost inflation will level out in the fourth quarter, but you're preparing the price hikes for next year. We've heard a couple of your competitors talk about additional price increases after the very successful summer price increase for the fourth quarter and into 2022. So do you need more pricing on the current spot cost inflation or is this enough for now in terms of 5% or will you launch more for 2022? Thanks.

Yeah, Matthias, thank you. And yes, I think we have similar plans. We will set the right pricing. Every market is a bit different. We have the local supply chains and so on, so we don't have general global price increases, but we are preparing now for each market, and the trend is clear. We will have another round of successful price increases going into 2022. Okay, thank you.

The next question comes from the line of Lars Kjellberg from Credit Suisse. Please go ahead.

Thank you and good morning. I have a couple of questions. So I just wanted to get back to your comment about good momentum in the business. Of course, you saw a decline, a moderate decline in the volumes in Q3. So I just wanted to think, you know, get better informed, I suppose, what you mean by good momentum in and where you're seeing that, and also if there's been any impact of supply chain constraints, specifically think about the U.S. and maybe also the U.K. And also then on Firestone, of course, you have ambitious plans to roll out the flat roofing business, so a progress report there. And then finally on Firestone as well, then it seems on the scope that you're seeing some margin of ocean growth based on what you had in half year point and now in Q3. So can you comment about your pricing ability there on Firestone on that apparent margin erosion?

Yes, Lars. So first, I think, again, when you look at our volumes, you have, I think, on slide number nine, we have a bit of a decrease in cement, which mostly comes from our trading activities where we have... refocus trading to service more our own operations and don't go for volumes. So the real difference to Q3 last year is I think 1%. And keep in mind that we had a very good Q3 last year. So we had back to the old volumes last year. And then you see very happily that aggregates and ready mix is up in volumes 1% and 2%. And then the fourth segment is even up much more. so uh so i think we have a good momentum good situation um you mentioned some supply chain constraints this is we have also in cement our own operations we had we had a little bit short issues in some markets in the us and also a little bit in the uk and other local markets in general i think this is a good problem to have and we are working here very focused to make sure that In quarter four, we can supply full volumes also in these challenging geographies. But overall, it's a very good momentum. Also for next year, the construction market is running well. We have a very good order book, and I'm very confident that we will see also here very solid volumes going forward. You had a question specifically on the pricing for Firestone. Well, I think we have a value-added system here for Firestone, so we have here significant pricing power, and we also need to use it as you have raw materials from the chemical industry, which have quite a huge cost inflation, so here the price increase has to be far more significant than for our other products, but we are able to do that.

Okay, thank you.

And on the rollout, on the growth ambitions, are you making progress on Firestone in line with your ambitions?

Yes, I think that's very pleasing. So first of all, the business has already an organic growth rate, which is well above 10% for the year. And then second, we started already to sell products into Latin America. So we made a special range of liquid applied waterproofing technology where Firestone is a leader. And we made this special product range now available in our Descensa stores in Latin America. If you remember the sensor, this is more than 2,300 retail outlets we manage as a franchise and this is really exciting now to introduce those products and then you will see from us many more growth initiatives. We have already plans for new factories to get to the full potential also in the US market. We have a lot of blank spaces with Firestone. So we have plans here to add some supply chain and then we will do also the same for Europe.

Thank you very much.

The next question comes from the line of Robert Gardiner from Davie. Please go ahead.

Morning all. Thanks for taking the questions. Just two for me. So one, maybe could you give us some more color on your Asian markets? I think Cheryl Dean referenced weather in China, but obviously the result from your subsidiary Hua Xin was weak. Any color as well in India, especially on cost would be helpful. And secondly, obviously you've reiterated your targets are in cash conversion. Is that another kind of 40% and you're going to be above and beast or where do you see that landing by year end?

Okay, the last question, Geraldine, can take over in the moment. But, you know, we stick to our strategy of above 40% cash conversion to EBITDA. And you see, I mean, I'm very happy we promised this in the old strategy. And then in 2019, we were above 3 billion Swiss francs. Last year, we were above 3 billion Swiss francs. And, you know, we come from a baseline of 1.6, 1.7 billion Swiss francs. So I think we are running this very successfully. And then for this year, we confirm once again that it's above 40%. And now you can do the math a bit where we land. It's also with the free cash flow with the year and closing. It's one of the more difficult KPIs to say exactly where you end up. But it will be a very satisfying year. also from the free cash flow. You have seen, unfortunately, we don't give a number for Q3, but we gave one for the half year, which was ahead of the previous year. So we are well on track here for the cash flow. Your question, Charlene, you would like to add?

No, no, totally. Our commitment is to deliver at least 40% of cash conversion coming from EBITDA after lease. So that's what we're fully committed to deliver.

On your Asia question, we are also happy here. You see from the volumes, we had a bit of challenge. The Chinese market, I don't think, cooled off in Q3. You read a bit the problems. So that was a market still on high demand level, but with a certain market decline compared to Q3 last year. But here in this market, we also make inroads state-of-the-art concrete products, but especially with aggregates where we have a huge growth here in our aggregates business in China. So nothing to worry about and we expect here a good Q4 and also we expect a good next year. On India also here the same situation. You have seen the margins have improved significantly as super the last two years, and we continue also here to be successful price over cost, and we will see a very satisfying fourth quarter.

That's great. Thank you.

The next question comes from the line of Harry Goad from Burenberg. Please go ahead.

Yeah, good morning. Thanks for taking my question. One question, please, on cement pricing in Europe and specifically on carbon. Can you let us know what, as things currently stand, do you think the carbon-related sort of surcharge will need to be for European cement pricing next year? And then when you think about that number in the context of, let's say, a, call it 5% price increase to reflect the normal cost inflation you're bearing, are you concerned that that you will get some pushback from customers on the extent of that price increase. Thank you.

Yes, Harry, that's a great question. And, you know, the pushback on the pricing comes if your pricing is not competitive. Let's put it this way. And you mentioned a very important new pricing factor for Europe. This is the C2 scheme, CO2 scheme we have in Europe. And I think this is very positive for the pricing. We saw this already in the last two years that the CO2 costs, which are now hitting a lot of cement players in Europe, that's a positive thing because that gives a certain pricing power. I think the trick in CO2 is you have to be ahead of the competitor if you are able to mitigate the CO2 costs better than others. you are the winner in the market because you enjoy strong pricing but you don't have the same costs. This is what we try to do and obviously when you look at our numbers also for Europe we are successfully doing that we have a strong CO2 reduction program in Europe so I think we are ahead of many others and at the same time we have very good pricing environment so this all goes well together for us.

OK, thanks.

The next question comes from the line of Nabil Ahmed from Barclays. Please go ahead.

Good morning, Jan. Good morning, Geraldine. I have two, actually. I think, Jan, you mentioned this morning at a press conference that Holstein is ready for another Firestone. So, Kelly, it looks you are pleased with how things developed and this acquisition was digested very quickly. Could you please help us understand where you stand right now versus your synergy targets? How much is already realized and how much is still ahead of us? And also, does the disposal of Brazil maybe change a little bit your plans in that time and how much you can achieve in the region? And my second question, actually, sorry for that, but I can't resist asking about the capital market day on the 18th. I'm assuming you will update financial targets, so I won't ask about these, but is there something in particular we should expect in terms of focus of the day? I don't know, like new products, sustainability? Thank you.

Yeah, Nabil, thank you. I think on Firestone is correct. I think this was a big... acquisition for us, a transformative acquisition and also one which cost us 3.4 billion dollars. So I think we had to make sure this is working and now the result we have makes us very confident. First of all, I think we bought Firestone for a very reasonable price and second, we closed the business very fast with no disruptions for anyone. And thirdly, we are ahead of business plan already with this growth we are seeing now. And that's just the start. Like I shared with you before, we have big growth plans. We will see new factories in the US, especially for insulation boards to support our roofing system sales. We started already to introduce Firestone products into Latin America. And then we have an open market for us in Europe where we have around 200 million euros of sales already. And now we have to build on top of that with new facilities, but also with M&A. So we're very excited for Firestone. Then also the second part of the equation is our balance sheet, our ability to do another Firestone. That's also something we needed to gas proof first. And now you see with another good year on cash flow, but also with the divestments in Africa and in Brazil, our balance sheet is ready to take on the next Firestone. So we are very excited to look out for opportunities. And I think we are ready here from our ability to finance it and our ability to execute it. On the target side, also here, I think it's a positive situation. We set the targets in 2018 for 2022 with the growth target, the EBIT target, but especially with the cash flow conversion target and with the ROIC target and with the deleverage target. And I'm really happy that we have achieved all those targets already this year. And I think that's a great time now to... define the next set of targets for the company, which I guess I expected to be more ambitious and build on the success we had now and give us the next challenge and the next ambition.

So maybe just to follow up on that, does Brazil, the disposal of Brazil, change anything in your plans for Fire and Steel? I mean, was that included in it?

significant market for your ambition in that time for person ah look um brazil is a special case for us i think latin america are the markets we are in so mexico ecuador colombia argentina but also the smaller markets of El Salvador, Costa Rica, and so on. These are fantastic markets. We have very strong positions. And you see the margins, you know, when you look at our Latin America business, it's the highest growth region for us and is also with continuing margin increase. Latin America is a core region for us. Brazil is a very different market. It's highly competitive with more than 20... cement companies being there, and we didn't have satisfactory results. So we were happy to give this to a better owner in Brazil, but that's it for Latin America. We are extremely excited. It's actually our number one region when you look at growth and you look at margins.

Okay, thank you.

The next question comes from the line of Martin Huesler from CKB.

Please go ahead. Yes, good morning and thank you for taking my two questions. First of all, I read in a press article this morning that you said that you would expect organic growth on EBIT for next year as well. I just wanted to double check if that's true, even considering the high energy inflation that we see at the moment. The next question would be, It looks like the share price doesn't really reflect your strong improvements that you do on operating side. And I was just wondering whether you would consider share buybacks because, you know, instead of maybe investing into new businesses, you could also invest in a very attractively valued whole SIM.

Martin, thank you very much for your a positive comment on our attractiveness. I highly appreciate it. I think on the margin comment you made is, I mean, it's correct. Our current strategy wants to see overproportional EBIT growth compared to sales. And that's the strategy. And we confirmed this already for the full year 2021. Despite significant cost inflation, we will deliver this. Next year, let's talk about this when the year starts. I'm positive. Just the markets on energy and other costs are very volatile at the moment. You see that with many businesses strongly interrupted. And I think we have a better situation. We are not disrupted. Our supply chain is working. Our mitigation is working. So I'm very positive for next year. But let's see when the time comes to discuss in more detail. But for now, I'd just like to confirm our strategy is to have profitable growth, and this also we want to see next year. On the share price, I think we have to deliver our strategy, become the leader in sustainability, in innovation, and we have to transform the company that we make a significant part of our business in solutions and products. And I'm convinced if we deliver this transformation and maybe continue with our strong financial performance, the share price will go into the right direction. For the time being, there's no plan for share buyback. And so I have no possibility to comment here what could be the case in the future. But for now, we have no plans for share buyback.

Okay, thank you.

The next question comes from Ekblom Seder from Morgan Stanley. Please go ahead.

Thanks very much, Seder Ekblom, but I won't take that personally considering my funny name. Just a question, Geraldine, on the energy cost points for this year. At the semiannual numbers, you said that you'd expected energy cost inflation of around 340 to 350 million Swiss francs, which I think at that time was about a 16% increase versus the 2020 base. Has that number changed at all with what's gone on with energy costs over the last three months? And I also think it would be helpful in terms of thinking about the base as we move into 2022 and what's going on in the spot market. And then the second point, Jan, you alluded to the fact that you've been using energy or fuel switching more alternative fuels to mitigate some of the cost inflation. Can you give us a bit of color on where you think your alternative fuel mix sits today and what that number was 12 months ago? Thank you.

Yes, good morning, Fedor. So effectively, the energy prices are quite volatile and have sharply risen into threes. So year-to-date, the increase is around 18%. But with what we've seen in Q3 and what we can expect, and we don't know how the prices are going to evolve, because as I said, they're very volatile, but we could expect another 25% increase in Q4, and that would lead us to more 500 million, that is 350 million. So that's to answer your question about energy.

As I said, on alternative fuel, we have our strong plans to increase everywhere. We can go beyond 90% in our plans. It always depends on the local situation, what is possible, what is available. But that strategy is fully intact. I think we report on this for the full year to show our improvement. So for today, for Q3, I don't have an update on alternative fuel for you, but this is a key strategy for us going forward.

Great. Thank you very much.

The next question comes from Reno Rosnau from Helvetica Bank. Please go ahead.

Thank you. Good morning. On the price over cost effect of 105 million in Q3 net Could you give us the growth numbers here of costs and prices which lead to these 105 million? That is my first question. The second one is, I mean, I was very glad to hear that you're already working on the new strategic financial targets potentially for 25 or 26. Now, I will ask you, when are you going to communicate these?

Already in November at the Capital Bank of Australia or rather at the full year results?

Hey, good morning, Demo.

I think for the target, it's clear we need to set new targets now going forward. We have the Capital Market Day, November 18. I think that would be one of the next and the earliest opportunities, but we have no announcement yet what we exactly will do, but you can expect from us in the very near future that we operate. Oh, sorry. Oh, sorry. Sorry, the mic was off. So, Ramu, yes, on the targets, so we will upgrade the targets as promised. The next opportunity to do that would be the Capital Market Day, November 18. I cannot promise today that we will do it, but you can expect in the very near future that we give you a full and precise set of targets for the next years.

And Raymond, if you want more granularity on the 105 million price of a cost per Q3, you can first start with the price, the price of 5% price increase that represents 326 million Swiss francs. Then you have the energy increase of about 170 million, that's a 28% increase that Jan mentioned. Then you have a bit of increase in distribution cost. We're about 17 million. And then we have savings that we've done on fixed costs in SG&A that complete the picture.

Okay, that's great. Thank you for that. And Jan, Geraldine, Svetlana, I wish you a very nice weekend.

Thank you. Thank you. The next question comes from the line of Yuri Serov from Redburn. Please go ahead.

Hi, good morning. I have just one, and it's not really a question. It's more an expression of wish, if you will. You have started and you talk about your bolt-on acquisition strategy, which I think is a fantastic way to spend the money and the right strategy for a company like Holcim. I think that what would help investors much better appreciate what you do is if you can improve the disclosure and actually show the impact of scope effects by segment rather than just for the whole company, which many other companies do. I wonder whether you're considering doing that in the future.

Thanks. Yuri, thank you. That's a fair comment. Let's look at this and maybe we can give you some more granular background on M&A. I think at the Capital Market Day, this is on our list. We are happy to share a bit more insight how we do it and what the result is.

I actually think it will help the investors significantly going forward, especially as you roll this program more and more out.

Yeah, no, I agree. Yeah, thank you.

The next question comes from Arno Lehmann from Bank of America. Please go ahead.

Thank you very much. Good morning. Two questions, please, related to ESG, although in a different way. Firstly, I'm sorry to ask about an update on the Syria litigation, either in France or in the U.S., in your first half. We are talking about trying to settle with the U.S. authorities on this topic. So is there any update there? And secondly, I just wanted to come back on your Ecoplanet green cement that I think now you're rolling out in several markets. In simple terms, would you mind explaining what is different about this? cement? Is it the clinker content? Is it the formulation, the type of energy you use? And also, how is it received by customers? Thank you very much.

Thank you very much. So first, on the Syria topic, we made a proper detailed disclosure on the half-year result. So we have nothing new to add there, really, but just maybe for for everyone to remember properly. So we have this legacy issue from Lafarge and we take this very seriously and I think very responsibly. So for the court procedure in France, we are fully cooperating and we do everything to have there some sort of result going forward. The same for the inquiries here from the US. as we said we are in early stage discussions and we have to see uh how this might be resolved resolved in the future but nothing new to add we made a detailed information up here reported nothing nothing new has happened since then on the eco planet um so eco planet is what we're just launching now globally that's our green range of cement which has at least a 30% reduction in CO2 footprint compared to traditional cement. So the biggest lever you have here, of course, is the clinker factor. And to get to lower clinker factor, so simply to reduce the new cement and then use a lot of mineral byproducts. Our most favorite one is now to put demolition waste back into the product. In Switzerland, we already have a cement product which has 20% demolition waste. So we literally recycle old houses, the concrete, the bricks, and that can be used to 100% back into our new product. Really exciting. This is going to be a big part of our future. And maybe because you said what's new, what's the real benefit, for the first time, we really make this a choice for our customer. While we had low clinker products in the past, maybe, but for the first time, we asked the customer, you can make a greener choice today, and you buy Eco Planet instead of a standard cement. And I think that's great, that's huge. And we see now from the customer such a big interest from the house owner, but also from the builder, to use here these greener products, which is EcoPlanet for cement, but also EcoPact we launched already more than a year ago. This is the green range of concrete and very exciting. We have huge demand and we are now getting our sites ready that we have these products available in all local markets and demand is very big and we are upscaling now and this will be a big part of our future. To give you a bit of a background, like the EcoPAC, the green concrete range, we just started a year ago. We have already very good run rates. I think we're going to share that with you at the Capital Market Day in three weeks' time. And we have quite an ambition that within the next four to five years, this has to be a main product in our range, maybe accounting for 20% or 25% of our sales in those business segments.

Thank you very much.

The next question comes from the line of Tobias Werner from Stifel Europe. Please go ahead.

Yes, good morning Jan, Gerhardi and Svetlana. Thank you very much for taking my two questions. Question number one relates to India and the question there really is with the infrastructure plan there and historically actually inflation being offset by higher prices, i.e. creating real price inflation. What do you expect there in the near term, but also in the medium term around pricing and volumes? And the second question relates to your comment earlier where you said you're ready for your next Firestone building products deal. It seems to me that light side businesses, ESG friendly businesses are more likely highly valued than emerging market businesses, which are just about seeing their earnings recover. How will you manage this dichotomy in terms of valuation going forward? Thank you.

Yes, Tobias, to start with your last question, I think we are able to divest with quite good multiples. So when you see both deal size acquisitions, but also divestment we are around on, say, multiple levels, maybe even slightly favorable for our divestment. So we do this, I think, in a very disciplined way. You are, of course, right. The light side has higher multiples. And this is also why we want to invest and grow on the light side. And you can expect that we will do that. But we will do that very financially disciplined. achieving very good divestment prices and also being disciplined on the buy side. On the India question, you have to be optimistic. That's a growth market, as you mentioned, with the infrastructure, but also the very resilient high demand for residential housing. So here we are very happy to see that the pricing came along, that our margins here improved here the last few years to a satisfactory level and in India will be a Super good growth market, but also with very solid returns Okay, thank you very much The next question comes from the line of our no peanut health from on field investment research, please go ahead Yes, good morning

I have two questions also, again on pricing and cost. First on pricing, we have seen in 2021 lots of government interventionism to contain the cement pricing inflation, especially in Africa and in India. So I guess for 2022, it's quite critical for you to push prices in the environment you face for cost inflation. So to what extent you can really push prices in this region without provoking the intervention of governments. And my second question is on cost. We talk a lot about energy, but we see also labor shortages in different markets. And I just wanted to ask you if you could share what is your assumption for the labor cost inflation in your budget for 2022?

Thank you. Thank you, yes. Again, we come back to the cost side. We are confident. We have shared with you the 28% increase in energy costs for Q3. We can also share that the logistic increase with the record levels in diesel, but also shortages on the labor side, driver side, We have, I think, a 5% increase in logistic costs for Q3. And again, it all comes back to the importance of managing the company by price over cost. And we've done that successfully in Q3. And this is what you should expect from us also going forward. We have then some markets. There's a bit of discussions on what you said, that some governments are talking about regulating the price or something. This is in a very few markets, and we don't believe that this will be a bigger problem for us. Currently, we prepare the pricing for next year in all our key markets, and I think that's going ahead as planned. On the labor shortage, maybe important to really mention we didn't make any shortcut on the headcount here. For Holcim, we went through the crisis. We didn't make a headcount reduction restructuring program. Instead, we were aware of the fast recovery in volumes. So we have no labor shortage at Holcim. We can really run here at full volumes. And then on the supplier side, driver side, we talked already. There is some constraints, but we will manage this like we managed in Q3.

Jan, just to clarify, your answer on government is also valid for India. You are confident that in India you can push prices in 2022?

Yes, no doubt, yes.

Okay, thank you very much.

We now have a follow-up question from Jean-Christophe Lefreve-Moulin from CIC. Please go ahead.

Peter Lefrague, additional question if you don't mind. Could you please quantify your energy bill for the year 2020 in Swiss francs? Many thanks.

For 2020, Jean-Christophe?

Yes, for 2020.

Okay, including the diesel part, we were at 2.4 billion Swiss francs.

4 billion Swiss francs. 2.4. 2.4. And so in 2021, roughly.

But in 2021, it depends on Q4, probably 500, on the like-for-like basis, 500 million more.

Many thanks.

And then you have to add the volumes effect and then the scope and the forex. But on the pure price, as I said to CEDAR, 500 million.

Excellent. Many thanks. Merci, Jardine.

Welcome, Jean-Christophe.

Good. I think we are at the end of the questions. And once again, I'd like to thank you for your participation and also for the good discussions we had. And again, I'm very satisfied how our business is running. I think we took the right decisions throughout the pandemic, and we will have, I think, a continuation of this very good momentum for closing the year, but also for next year. We have a very positive situation. I thank you very much. I hope I see you all in person. We have November 18. We have an exciting Capital Market Day. We will talk about a lot of secrets. And I really hope you can come and meet us in person again. There will be a great change from all these videos and telephones and Would very much appreciate if we can see us and if we can discuss the future in more details on November 18th. Until then, please stay safe and healthy and look forward to seeing you very soon. Thank you.