Amrize Ltd Ordinary Shares

Ladies and gentlemen, welcome to the Holcim Q1 2022 Trading Update conference call. I am Sandra, the course call operator. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Svetlana Jotko, Head of Investor Relations. Please go ahead.

Good morning, everyone, and thank you very much for taking the time. Welcome to Holcim Q1 Trading Update call. We have in the room our CEO, Jan Jenisch, and our CFO, Géraldine Picot. As usual, we will start with the opening remarks done by our CEO and followed by more financial details by our CFO afterwards. As always, we will take time for your questions as usual. Now, without any further ado, I will hand over to our CEO. Jan, the floor is yours.

Good morning, everyone, and thank you for joining our Q1 call. Very pleasing results. I think we had a super start to the year with a plus 20% sales growth and also the EBIT growing over 16%. While I'm, of course, very excited to talk more details about the results, I think it's a great combination of operating excellence or very proactive managing these challenges we have in cost inflation and so on. And at the same time, you see already now our strategy to expand into solutions and products, showing great results here. And I think I'll leave it to Geraldine to go a little bit more in details later on the business segments and the countries. And I would like to mention a couple of important points here. Maybe the first one is that we continue with our acquisition strategy as one core element of our And this, of course, is true for here becoming the global leader in roofing systems with the Firestone acquisition, I think, well integrated already. And also the Malachi acquisition was closed in a record time, only in two months. So already in March, we had the Malachi sales here in our accounts. Very pleasing to see that, what great results we have here. Both companies really hit the ground running. We have high double-digit sales growth with both companies and already an EBIT margin of 17% here in Q1. So I think hitting really all the right buttons you want to have here in solutions and products with high growth and also superior profitability. Besides the big acquisitions, we continue the Bolton acquisitions and you notice that we had already four Bolton acquisitions here starting the year. This is reinforcing our aggregates and already makes concrete business here in Europe and also in North America. So very pleased to see that. You saw that also Standard & Poor's took note of our a strong balance sheet. They upgrade us to BBB+. That's a credit rating we feel, of course, very comfortable with. And we also launched here our first climate report, which will be voted on at the upcoming General Assembly. I think it's exciting to note here our acceleration here in the green growth. We have launched the EcoPact, our range of green concrete, about last year. And already in March, we achieved 10% of the entire ready-mix sales with this global product range of EcoPact. So very exciting to see that, and we are well underway here to basically transform 25% of ready-mix sales here into this new sustainable EcoPact range. If EcoPlanet are the same for green cement with a minimum of 30% CO2 reduction, we also introduced this here globally. We have it already available in 15 markets and we also will report here great progress here in the months and years to come. We have on the financing side with our sustainability link bonds also here we made progress. We launched the first one in Swiss franc and this is another element here of our sustainability strategy. And now all of this you can read in our climate report, which we now launch, I think, probably the first in the sector. And we'll be here up to vote by our shareholders in the upcoming General Assembly. I think with these quick highlights, I would like to pass now to Geraldine, who gives us a bit more detail on cost inflation, on pricing, on geographies, and I will come back with the outlook later.

Thank you, Jan. Good morning, ladies and gentlemen. I will now comment with more details on the Q1 financial results. So as you know, our target is for 30% of our sales to be realized in the solutions and product business segment by 2025. In order to provide full clarity on how we progress, we now report separately the net sales growth drivers of our cement aggregates and ready mix businesses, and those of our solutions and product segment. So the net sales stood at 6,440 million Swiss, plus 20% in total compared to Q1 2021, of which 11.4% of the growth is like for like. Cement aggregates and ready mix sales increased by 501 million Swiss francs, excluding Forex, of which 520 million Swiss francs is like for like. Such increase is almost entirely attributable to the strong price increases, which stood at 10.7% over the quarter. The negative scope effect results from the divestment we have executed in Africa in late 2021 and in Olsen Island in January 2022, partly offset by bolt-ons. Solutions and product net sales increased by 687 million Swiss francs, excluding Forex. The scope effect corresponds mainly to the sales of Malarkey from March 1st and to the Q1 sales of Firestone, which we have consolidated from April 1st, 2021. The Forex had a slightly negative impact of minus 2%. This stems mainly from the Euro, the Nigerian Naira, and the Argentinian peso. The recurring EBIT now. The recurring EBIT shows total growth of 16.3%, of which 2.1% like for like. The EBIT of the cement aggregates and ready mix business segments was impacted by a negative scope effect of 11 million Swiss francs, mainly due to the divestments executed in the last month of 2021. The volume effect was positive across the three business lines, generating 36 million Swiss francs. Despite general inflation, and in particular inflation in energy costs, the price of a cost was negative by only 53 million Swiss francs, thanks to excellent pricing. All in all, we are proud to report a positive like-for-like growth of 2.1%. The solutions and product segment recorded strong scope effect of 100 million Swiss francs attributable to the acquisition of the roofing businesses. Forex was small at just minus 14 million Swiss francs. Let's move to the slide number 10. The slide here provides an overview of the results by region. It provides total growth in Swiss francs of sales and EBIT that we will now comment into more detail. So let's start with North America. The region had an outstanding Q1. Market dynamics were especially strong in the US and Canada West, driving volume growth across all business segments. Our newly acquired roofing business made a significant contribution to the performance of the region, achieving high margins. Price momentum remained very positive and we continued to benefit from a full order book. Overall, the region delivered a significant margin expansion. Let's now move on to Latin America. The region continued to deliver strong performance with good volume development in Argentina, Colombia, and El Salvador in the quarter. The region achieved a positive price over cost led by strong pricing. Additionally, we have added a new production line in El Salvador, and we continue to leverage on our Desenza retail network for the rollout of roofing products across the different markets in the region. If we turn next to Europe, the region also recorded a strong set of results. We observed good level of market demand, especially from Eastern Europe, driving volume growth across all business segments. Strong price trends helped to contain the cost inflation. Overall, the region achieved a recurring EBIT margin improvement in Q1, and we continued to fuel growth with bull-turn acquisitions. Moving on to Middle East and Africa, the region delivered a solid set of results with good market trends, especially in Iraq and Kenya. Price over cost was positive in the quarter, supported by strong pricing in general and significant price increases in Egypt and in Nigeria in particular. The region again demonstrated a strong ability to offset cost inflation. Let's turn now to APAC. The region faced challenges in the quarter amid cost inflation and especially energy inflation. Cement demand was softer in India and China with an improving trend since March. Profitability improved in Australia, driven by positive market dynamics and our effective commercial strategy. Positive prices helped partially offset high-cost inflation in the quarter. With this, I now hand over to Jan for the outlook.

Thank you, Geraldine. So I think we can look now with some confidence into the full business year of 2022 we have a good demand in all regions which is also based for the underlying trend of more buildings for the increasing world population we need to refurbish repair infrastructure in many parts of the world we have to make buildings more energy efficient with more firestone roofing insulation so I think we have very, very positive underlying trends and you can see that in our results and we expect this now to continue. Based on this, we have upgraded our growth outlook for the year now to at least 8% like-for-like growth and in Swiss francs, then including the acquisitions, we are confident that we will grow 10% or more for the full year. We also give a new bit of background here on our solutions and product segment, our new fourth segment here of our strategy 2025. And we are now confident that we will already achieve 5 billion Swiss franc of sales in 2022. We have extremely big order books here for our roofing business. And I think Firestone and Malachi alone will already have $3 billion of sales this year. and plus the latest acquisitions of PRB in France. Here we will have a very dynamic development here of solutions and products. On the sustainability side, we accelerate in all the initiatives you have seen for us. For me, always a bit exciting now the green products and I think EcoPact has already 10% of concrete sales for March. really accelerating here, and we will see this also further gaining momentum throughout the year towards our goal to achieve 25% with this product by 2025. We have on the EBIT of the operating profit, I would say we are professional cautious a bit here. We believe we will see growth here, positive growth, and in like for like, but also in Swiss franc. also new because we see now the big contribution we have from our acquisitions. So we believe we're going to have a good year, just a bit cautious. It's still April, so be a bit cautious, but we can already guide that we will have an increase here in operating profit. And also we are, of course, happy here to confirm our free cash flow target, which is above 3 billion Swiss francs for 2022. I think with this presentation, we would now like to go with your comments and questions.

The first question comes from Cedar Eklund from Morgan Stanley. Please go ahead.

Thanks very much. Morning, Jan. Morning, Geraldine. In the Q1 result, we can see that M&A was obviously a big driver for the strong outcome. Can you talk a little bit about how you're seeing both the bolt-on pipeline and the more platform-type deals? A bit of color on how that's evolved over the last three months would be useful. And then just on the price cost, it looks like Europe was a strong positive surprise. Can you talk a little bit about, or not the price cost, the like for like growth at EBIT? Can you talk a little bit about the outcome there? How much of that was volume driven? How much of that was about price cost? Did you actually get a positive price cost in the region in the first quarter? and then maybe a little bit of color on how you see that price-cost developing at the moment in the second quarter. Thank you.

Yeah, as I said, good morning, and thank you for the questions. Yes, I think on the M&A, if you recall, when we came out with the first new strategy in 2018, we made M&A a part of the strategy to grow the company profitably, and then we have to restart, especially the Bulldogs, which are coming from the markets itself. And I remember in 2018, we had four acquisitions, four bulldogs in the full year. And now you see the momentum building up. Now we have already four in the first quarter. So this will be a higher number than in recent years for the full year. And the pipeline is very well filled. I think to share a small secret with you, I think at the moment we have about 10 both on acquisitions which are in due diligence or in the offer phase. So you can expect a bit more action from us here over the next months. On the bigger ones, again, we made this super inroad into roofing in the last 12 months with these two meaningful big acquisitions, Firestone and Malarkey. And we also have some ideas what could be next here. So Maybe we can be also here positive on the future M&A outlook. I think Geraldine will tell a bit more us about the cost situation. I just would like to make a short introduction to the topic because besides the cost inflation has already hit us last year, right? And we were in the second half of 21. We already had the challenge of big cost inflation and I would like to talk a bit about the disruptions we see in many sectors so while of course to mitigate cost inflation and make sure the company has the right margin level we did everything last year and especially this year to supply our customers this is super important they have their construction projects running and you know we have a scarcity of certain materials also in building materials. And for us, number one priority is to supply the customer sufficiently. And this is also a big reason why I think our customers are very happy with our service and our supply, which is not a normal in these volatile times. While we did this very well, I think, Geraldine, you give us some more insights on cost inflation, price over cost, and how we are doing that.

Sure, absolutely. And look, Cedar, the objective is really to be positive on the price of a cost for the full year, thanks to our pricing and our good cost management, obviously. So for the quarter, more color, we had overall, as you can see on the EBIT bridge, a price of a cost that was slightly negative at 53 million Swiss francs. Here we have a good price impact of 10.7% that I mentioned, which represent a 527 million Swiss francs. And you've got then a strong inflation on energy of about 41% for the quarter. And all the other costs represent about 9% of inflation. So that gives you a bit of the the picture of what composes the 53. Good volumes in Europe, good volumes in North America, good volumes as well in LATAM, a bit slightly less than Europe and North America. But all these regions look at NEA as well, price of the cost positive. So overall, you know, I think we did quite well in all of our regions.

Great. Thanks very much for the color.

The next question comes from Paul Roger from BNP Baribla. Please go ahead.

Hi. Good morning, Jan. Good morning, Geraldine. Congratulations on the results. So two questions then. The first one on India. I mean, clearly I don't expect you to comment on the articles. But maybe you can comment more generally on your view on the market's long-term prospects, just to give us some color about how core India actually is in your portfolio. And then on the other side of the coin, on M&A, clearly you're focusing on solutions and products. You've mentioned verticals like roofing, special chemicals, I think mortars as well before. But I was just wondering what other light side industries might be on the radar. Would you, for example, think about things like wallboard or insulation?

Thank you. Paul, good morning. And thank you for the question. On the India question, nothing really to add from our side. There are some rumors in the markets. We don't want to comment on that. And there's nothing to be commented at this point. I think India, you know yourself best. It's a market which will grow the next 20 to 30 years. They have a huge demand for building materials. So anyone serious about building materials in emerging markets, India is the top pick. So we are very happy. We have seen that we have improved our performance in India significantly over especially last year. And so we are quite happy with the progress we are making. I think on M&A, yeah, so again, we are very happy to make the inroads in the roofing systems. which, you know, is a huge market. This is a market of, if you look at our Firestone business alone, this for flat commercial roofing, that's like a $15 billion market in the U.S. alone. You look at our Shindle, which we ended with Malaki. This is also another $15 billion market. So we're talking really about segments of the market I like very much because they are on the refurbishment side, on the repair side, They have growth potential, innovation potential, and a lot of pricing power. At the same time, they are not niche markets. They are really volume segments of building materials. So very happy to enter that. And the beautiful thing is, you mentioned insulation materials. We entered into insulation with these acquisitions, and we already have eight acquisitions. insulation board plants, the Firestone 7 in the US and one in Germany. And this is an area we also like to participate more in the future. You can imagine that everything has to be insulated better in the future for new build, but also especially for refurbishment. So we're really excited. Based on this, we have... bought a prb that's a french company specialized in facade renovation and with their mortar system but also with insulation so you're going to see huge synergies here also with the roofing companies so um so this is an insulation is another segment i love because it's not only growing it's a big segment so uh and then we have plenty of different ways to insulate in the future so Very, very exciting. So we entered already two big segments, and then with Mortos, PRB, and then we made a follow-up acquisition in Belgium, which is basically a similar company than PRB. So you can see we are putting the things together and very excited to grow. Now, what's next, Paul? We have to always do the things we have started to do best, right? So I would love to grow in roofing as much as we can. Same for insulation, same for mortars. But these are already three big segments of the market. So if we enter into something additionally, it depends on the opportunity. But for the moment, we are quite busy.

Thank you.

The next question comes from Luis Prieto from Kepler Chevrolet. Please go ahead.

Good morning, Tim. Thanks a lot for answering my questions. I had a couple of them. The first one is if you could please update us on the deployment of EcoPlanet. You mentioned 15 countries in the presentation, but how is it really being received by customers? And in this context, could you please give us any pricing and or margin references that would be extremely useful? And the second question is a competitor of yours recently stated that the industry could again be somewhat behind the cost curve in Europe as we speak and that another wave of price increases is needed for the industry to catch up. Would you share this view? And if so, what sort of price increases do you think would be needed incremental to what you already have on the table? Thank you.

All right, I got that. Gerardine is happy to answer the second part of the question. On EcoPlanet, the customers are really excited. You have to imagine that until we launched EcoPact for green concrete, EcoPlanet for green cement, we have not really positioned products to be more sustainable. We have not given the customer the choice to make a more sustainable choice. And the customers are really excited. And we see that customers being excited. Of course, homeowners, you know, maybe if If I was to build my next house, I'm sure my children, my wife, they will all ask for the most sustainable solution. And this is why it was so important for us to make this a unique selling proposition and not only in a local market, but in a global context. And then beyond this residential homeowners, we have now a big push for green procurement. We see that with the big companies, companies like Holcim, you know, we are trying now to electrify all our trucking we have, all our equipment we have. We are going for sustainable energy for all our plants. And we also see that with our customers, big customers like Amazon. You know, we were proud to supply to their new headquarter in Seattle, EcoPlanet Cement with an 80% CO2 reduction. And you see that happening now with really lightning speed that green procurement becomes a reality from big corporations to smaller ones. We see the same from the city councils. I think the city councils are much more active in green procurement compared to country governments having more difficulties to make, let's say, big reforms. But it happens in the cities, city of London, city of Singapore, city of Zurich. They all require now green procurement, and some of them have already prescribed EcoPact as the choice for concrete. So very exciting. EcoPlanet was launched a little bit later than EcoPact, but we are on the same slope. So you can imagine that EcoPlanet will have the same momentum as EcoPact. When it comes to margin, we have better margins with these products than we should have because it's a higher value product. However, we decided for Holcim that these products have to be our volume products. So we don't want to offer sustainability as a niche product for the people who can afford it. We want this to be our main volume products, and basically we want to transform our product range into sustainable product range with all products we are having.

Yes, and let me take your second question about the cost curve. You remember in 2021, we've not been behind the cost curve. We've been quite fast to implement the necessary price increases in order to protect our margins. And we continue. And with the price increase you've seen for Q1, which is quite high, double digit, 10.7%, the one that we are planning to come in Q2 and the quarters after, well, actually, we are confident that that we on the full year basis can be effectively ahead of the cost curve and have a positive price of a cost for the full year. And this even assuming the current situation and no relief on energy prices.

Very useful. Thank you very much.

The next question comes from Yuri Serov from Redburn. Please go ahead.

Yes, hi, good morning. I'm looking at your presentation on page 9, and I'm looking at EBIT growth, and you show like-for-like EBIT growth, which is 2.2%, and I can't help noticing that a much higher number on that page is shown from lower depreciation, 3.4% coming from lower depreciation. Obviously, I understand that there are many moving parts, but Visually, it looks like all like-for-like growth came from lower depreciation. Can you comment on that, please? I mean, with so much higher sales, why is this happening?

Yes, this is, I think, part of our strategy that we are doing investment in capex at lower costs. So that doesn't mean we do less. We do at lower costs. I have talked about this a bit in the past, especially when it comes to cement manufacturing. We have now much more standardized processes and equipment so actually the investment cost per ton of cement has more than halved over the last 15 years or so and we are still in the process to make this a reality at Holcim for new investment but also for all the maintenance we are doing. So this number should go down year on year and I think Charlene can give us a bit of magnitude because When you look at our capex spend, $1.4 billion last year, you know that's significantly lower than our capex we spend maybe average over the last 20 years. But this is the new reality. So this is something we want to keep there and should lower here the depreciation cost.

Absolutely. On the traditional business of ready mix, aggregates, and cement, totally right, there will be a downward trend year on year. Now, here it's a small quarter, Yuri, as you know, and in the 18, a favorable 18 million that you see is also coming from the high base last year. So that's a point.

So does that mean that there is some one-off effect there?

There was a one-off in Q1 last year, yes. Exactly. That's now generating this positive and favorable 18 million you see. Again, the Q1 is a small quarter as you know.

Okay, I understand. Secondly, energy costs. So last year, I remember at the end of the year when you were presenting the results, you said that for the full year energy increased in cement by I think 23 or 25 percent and This time you're already talking in Q1 41%, which I'm finding surprising because you bought your energy forward some time back. And given the evolution of energy costs in the market and the spike after the conflict in Eastern Europe began, I'm wondering what the end result for this full year is going to be. Is it going to be 40% for the full year or maybe higher? Or do you think it's going to be lower?

Yeah, it's always a bit difficult to fully forecast the energy. We see it on this kind of 40%, 40%, 45% plus for the full year is highly probable. And look, you know that we can hedge only a part and that we cannot hedge the full energy bill for Holcim as well. But we do have a lot of positive measures in order to mitigate. And you know that we are accelerating on our alternative fuel usage, that we have a lot of green capex to implement waste heat recovery in order to lower the electricity bill. And all this is having very positive impact in a context where you see the energy market prices that have more than doubled compared to pre-COVID time.

Yeah. Okay. No, you gave the answer. I understand. Okay. Listen, is it possible to check in a third question quickly, please? I guess no.

Sure. Go ahead quickly.

Yeah. Just to get on India. So Paul asked you whether India is part of your strategy. And you said that for anyone who is in the emerging markets, it should be part of their strategy. but you didn't answer whether it's part of your strategy. Is that something that you can comment on? I mean, I've seen some headlines today, but is this still correct?

Yes. Look, at the moment, there's nothing to comment on the portfolio other than what we are doing. So let's leave it there and let's leave it there for now, I think. Maybe just a comment here on the price. I think price over cost is the important measure here. And I think the energy costs, while they were a big challenge last year, they continue to be a challenge, increased further. So mathematically, the increase is higher. For me, that's not so important. For me, it's important that we cope it, right? That we have the right pricing in place. And this we have in place. We have double-digit price increases effected per start of the year. So we are in a good position. And we should not think too much about what's mathematically how much this is a burden because it will be solved by us. That's the challenge we have and that's the challenge we will accept and we will succeed here in our key markets for 2020.

Thank you all very much.

The next question comes from Sia Brijesh from HSBC. Please go ahead.

Hi, good morning. I do as well. So the first one is on solution and products. you have a 2025 target of reaching 30%, but looking at your comment and enthusiasm, it looks like you want to overachieve that. Is that something you are looking at, or is it, I mean, over time, would you prefer solution and products going to around 50% and the legacy business comes down below it? That was my first, and the second was, again, coming to India, You comment that you are happy with the performance over the last few years, but looking at your performance and comparing with the domestic peers, it looks like you have lost capacity markets there and your growth is lower than what the competitors are doing. So considering how your focus has been shifting towards solution products, would you still prefer investing in India and risk of having higher carbon emissions? or would you rather prefer a better owner to take over it?

Again, thank you, everyone, for the high interest of the Indian market. But I have nothing to comment today, and also we have no specific strategic outlook for India specifically today, only that we are quite satisfied how we improved the business, especially last year. And as you can imagine, we caught up from performance to share price, everything. So we are We are very happy and proud of our Indian operation. I think on the solutions and products, we are very happy that we are now really kickstarted this segment and we will already achieve 5 billion Swiss francs in 2022. And we promised 30% of our sales being done in 2025. So that's still a a way to go. You can already see this in our U.S. business where solutions and products is actually already our biggest segment, bigger than cement, bigger than aggregates and concrete. And this is, you know, where we like to be. But this has all to be done, so we need a few more acquisitions. And, of course, we have to keep up with the double-digit growth. But I think for now your comment is correct. We are well on the way to achieve the target.

Thank you.

The next question comes from Gregor Kugli from UBS. Please go ahead.

Hi, good morning. Thanks for taking my questions. I want to come back to the roofing segment, and I guess I think in the text you kind of talk about some growth rates, and obviously we can infer a little bit from slide nine on that bridge with 100 million. But I guess my question is, when you say the margin is 17%, can you give us a sense of how that compares to the prior year. I guess it's complicated, giving you both some of the assets, but sort of maybe underlying improvement. And maybe asking the question slightly differently, because I think Malarkey was only in for part of the quarter. What's sort of your quarterly earnings run rate in the roofing segment, if you kind of add the two up? So Malarkey and Firestone combined. So that's sort of my first question on roofing. The second question is maybe just on price over cost. Obviously, you were negative in Q1, but against a very, very challenging comp. Do you think that from now on for the remainder of the year, you can be at least neutral? I think obviously you're saying neutral for the year, but I'm thinking Q2 is still relatively tough. So just so we get the sequence on how those two lines of price over cost cross each other over the next few quarters, please. Thank you.

Good morning, Gregor. And to start with your last question, I think Geraldine has already pointed out that for the full year, we want to make it price over cost. So that is answering your question that we also believe the first quarter or the first half of the year is maybe the biggest challenge, but we are confident we're going to have a good year here, price over cost, and obviously also then for the total operating profit. On the roofing side, yeah, your observation is correct. We have increased the margin quite a bit. If you take... And we published the numbers when we took over Firestone, announced it in January last year, and we closed it on 1st of April last year. I think the full year we bought the business for was $1.8 billion of sales. And the EBITDA margin, I think, was... It was $270 million. And you can see now that we're going to have a significant increase. I think on the EBIT side, our margin is up five full percentage points on Firestone. Sales is largely up. So I think we made a very good transaction and maybe also with a good timing, so very successful. Malarkey has pretty much the same operating numbers. They have also high double-digit growth. and around the same EBIT margins. So we're looking forward to a very healthy 2022 with these new businesses and a lot of joy we're going to have for the years to come.

Thank you. The next question comes from Elodie Rao from JP Morgan. Please go ahead. Oh, hi.

Thanks for taking my question. Can I ask, first of all, if you've seen some impact from stock or inventory in the quarter because we've seen some companies getting gains on that. And so I was wondering if that played a role in first quarter volumes for you. And second, worth asking if there is an update on timing of the DOJ on regarding the CIR case. Thanks very much.

Hi, Elodie. Good morning. I think we have nowhere with the stock or something. There's nothing special. Our numbers are straightforward. Beginning of the year, we have to make sure to have full availability for the customer. I talked about this before. This is really key now in construction that we are ready to supply, so we made no special... special things there, all normal business. I think on the DOJs, nothing new to report. We have already disclosed that some discussions are ongoing, and at this point we have nothing new to report here.

Okay, thanks very much. And if I can squeeze a third one, out of the 100 million scope impact you reported in Q1ab, would you be able to give us the split for Firestone?

It's mainly Firestone. It's really the huge portion, very huge.

So basically we have... We have the full quarter Firestone and then we have one month of Malaki all around the same margin level.

The next question comes from Jean-Christophe Lefebvre-Moulin from CIC. Please go ahead.

Yes, good morning everyone. Good morning, Geraldine. Good morning, Jan. I have two questions if you don't mind. The first one, can you quantify the the energy bill of 2021 and giving a split between electricity and combustible? And secondly, can we assume that we will have a larger cost rise of electricity bill in 2022, greater than for combustible? especially in Europe, and maybe giving us some flavor on the electricity cost in the U.S. I think that they are now, the unity electricity costs are lower in the U.S. than in Europe. Is that correct? Many thanks.

Yes, Jean-Christophe, so I take your question. So we had an energy bill, as you know, for around $3 billion in 2021. So if we apply the percentage of increase we had in Q1 for the full year, then you can make the math and you see it would be $1.3 to $1.4 billion more, actually $1.3 billion more in price effect for 2022. And that's about the same proportion when it comes to fuel or power, actually. We are having a bit more increase in fuel and a bit lower increase in power thanks to, effectively, the power costs in North America that are lower than the one in Europe due to the conflict we are facing in Russia. Look, that's about it. We have higher power costs in Europe that we're fairly well mitigating. And in North America, we're pushing all our program of alternative fuel and all our green capex to mitigate that energy bill increase.

Just a follow-up question, Geraldine. Are you able to hedge your power cost in Europe, and especially in southern Europe, whereas we have a very sharp rise in power cost in Spain, in Italy, and partially in France, after dismantling the so-called nuclear electricity contracts? Many thanks.

Yes, yes, Jean-Christophe, we're able to hedge and that's been done, so all good. That's why we're confident on a price over cost to remain positive for the full year.

Okay. Many thanks, Geraldine.

The next question comes from Matthias Zeisenberger from DB. Please go ahead.

Yes, good morning, Geraldine and Jan. Thanks for taking my questions. It's basically on demand destruction. What do you see on the ground? I mean, your volume numbers suggest otherwise, but maybe going forward, rising rates, rising building costs, especially also with regards to U.S. housing into next year, any color there would be appreciated. And maybe you can give us a number of your hedging, energy hedging. How much does it cover for the rest of the year? Is it like something like, I don't know, 60, 70 percent for the rest of the year? Thanks a lot.

I think on the demand side, I have started to re-travel, so I was in our key markets, and we don't see any weakening of the demand. We have even quite a backlog in projects due also to the scarcity of some other building materials. We even have some slowdown in execution. So I'm very confident that the numbers you see now for Q1 with us are the numbers we're going to see throughout this year and also next year. I think all the building trends are fully there, right, to build more for more people, but build better and build with less. The whole sustainability of our building materials will drive further our demand. So we have no sign here of weakening. We have talked already that in Asia Pacific, we had a bit of a slow start to the year in January and February. but already in March, catching up. And again, if you see our demand levels here for the other regions, they are all positive, not only on sales, but also on volumes. And this is what we see at the moment and makes us quite confident for the year.

On the energy, again, we continue working really to secure our energy cost and limit our exposure as much as possible for 2022. As I said, we're accelerating all our alternative fuel projects. We also execute on our waste heat recovery to limit the electricity consumption. We are developing long-term power purchase agreements for renewable power We also have fixed price contracts, and we do for a small portion some financial hedges when it makes sense.

The next question comes from Tobias Werner from Stiefel. Please go ahead.

Yes, good morning. Jan Geraldine in Svetlana. Thanks for taking my questions. Two questions, if I may. Number one, the typical Q1 question, Recurring EBIT represents about 7% to 11% if you look at the range over the last few years, 11% last year. Now, clearly, your business has changed as well. What do you think is the range for your historical businesses, i.e., the Heaviside businesses, and what do you think it is for a typical business First, Firestone Building Products or Malarkey or PRB business in terms of that percentage, I suspect it's higher than what the heavy side is. The second question is around the Firestone Building Products and Malarkey breakouts. You've already said mostly 100 million comes from Firestone Building Products, but may I press here and ask you what Malarkey products should be on the run rate. Are we talking 10 million per quarter or less? Thank you very much.

All right. Hey, Tobias. Good morning. Yes, you noticed correctly that, of course, the solutions and products have a bit less weak wind advance, maybe, especially for the businesses we entered. So very happy to see that. And you noticed in Q1, I think, the roofing business alone was like 16% of group EBIT. We will not be able to keep for the full year once the big months kick in, but nevertheless, I think this is a good development. And I think for the remaining of the year, we are happy to see this strong start of the year with demand in place, but also with our pricing in place. So we are really happy to see that we believe we have done the right thing We push the right buttons for the full year when it comes to pricing, when it comes to cost mitigation, but also when it comes to our strategy of building and growing solutions and products. On the Malacca side, I think we shared already that we expect $600 million of sales for the full year, and we expect $120 million of EBITDA. Depreciation is like it is in these businesses is huge. around 3% or less of sales. So we have a very healthy EBIT there, which at the moment is pretty much in line with the Firestone EBIT, so the 17% EBIT margin. That's a bit what we expect also from Malaki for this year.

And in terms of phasing, your first question, Tobias, roofing is more balanced in phasing. That's what we see. And you're right that the traditional businesses, it's a small quarter in Q1, about 12% of the full year.

Thank you. If I may just follow up on Malarkey. I mean, we were aware of that guidance, but are you seeing it run ahead of that guidance in the months you've got in your books now?

Well, we are in a good position, I think, The first month was fully in line with the guidance, I would say, the March, all from sales and margins. We're super happy for the start, and we have some good plans. Also, we want to scale up the capacity because we have a huge demand. At the moment, we have three plants with Malachi, and we want to scale that up and build a new plant, a fourth one, in the very, very near future. So we have good plans ahead, but the numbers are fully in line with the guidance. Okay, thank you very much.

And the next question comes from Ahmed Nabil from Barclays. Please go ahead.

Yes, good morning. Congratulations for the good numbers, and thanks for taking my questions. I had two, actually. First one, maybe a follow-up on demand. Are you starting to see demand into the very high price in cement And I'm thinking here in particular, it's your vaccine and business in emerging markets. What makes you confident demand will hold despite inflationary pressures? And the second question I had was maybe if you could talk a little bit on the other side of higher energy prices, which is the stronger economy for energy exporting countries. Did you make the math on how much exposure you have volume wise to those markets? And, you know, any sort of color you could provide, I think, belonging to West Canada where you've been relatively vocal about on, you know, improved demand pattern in those markets. Thank you.

Yes, good morning. And we see at the moment, you know, to talk about the weakening of demand. We don't see that. As you point out, we have various segments of the market from residential to infrastructure to industry. Now we entered into the refurbishment we have from our very successful emerging markets in Latin America and India to the most developed markets in the US and in Europe. So we have quite a range of different market situations and we don't see any particular slowdown at the moment. If you ask me personally, I think the infrastructure in North America has not even hit our order books yet, right? So this is something which will come, which was decided by the US Parliament to implement. So we're very excited for that to hit us. On the residential side, a lot of people discuss about... residential slowing down if interest rates are raising or if now the cost inflation. But we don't see that. I was traveling in Canada and the U.S. in the last four weeks, and order books are full. Even the house owner has significant cost increase because that's what people want. People want to have better housing, and that's a big trend. And we have not seen any weakening. Also, your question for back cement versus... bulk cement. Also, we cannot see any trend there going negative at the moment.

The next question comes from Walter Barmert from Zürcher Kantonalbank. Please go ahead.

Hello, everybody. I have a small technical question on the Russian operations. Is it correct that these are deconsolidated and considered as held for sale from March 1. And the second question is, are there intangible amortizations in the roofing margin? So is the 17% after amortization sound, how big are those?

Okay. Hey, Marcel, good morning. And first of all, I think on the Russian operation, this is less than 1%. of our company. So if you look at sales or EBIT or assets, it's below 1%. So it's not a big part. We have announced in March already that we will exit the Russian market and we have initiated the steps to do so. So this is nothing special to report. We have for March already, we have taken the Russian results out in our results. So you see already a in Q1 pretty much how it looks without Russia. This is, I think, all going as planned. I think the margin, Charlene, you want to add something on the margin, on the 17% EBIT margin for the roofing?

Yes, this is, of course, after the purchase price allocation depreciation. So it's after PPA. It's all including.

Okay, then it looks very great. Is it rather volume or pricing that led to this high margin?

Marcel, it's both. For us, it's important. We have high value adding systems on the roof. So usually our roofs are insulated now. They can be reflective, so they can be climate controlling. They can be green. They can be solar. So we are really here in a very good spot. We have also, which is helping a lot, the margin. We have At Firestone, more than 60% is re-roofing of the sales and Malachi even more than 90% is re-roofing. So we have this very stable repair refurbishment market which also has a lot of pricing power based on the quality and innovation of your system and of course the brand name.

Could you remind me how important are the weather conditions for the roofing business?

You can see in the Q1 that we have such solid results. Of course, if it's icy or something, you don't really roof. So you have some weather dependability. It's more connected to rain than it's to temperature, compared maybe to cementitious building materials. But overall, you can see from this strong start of the year that this is a very resilient business over the full year.

Perfect. Thank you very much.

The next question comes from Arnaud Binadel from On Field Research. Please go ahead.

Yes, good morning. I have one main question, if I may. You see no slowdown in demand. And in the USA, we are hearing already that concrete producers are on allocations. So if the construction season is starting to at the moment with spring and the demand is still so strong as you said. Can you just explain to us how you are going to supply your clients and is it by importing more knowing that at the moment the imports are not really profitable or do you have a local spare capacity to supply this demand?

Anu, thank you for the question. I would say allocation is always a strong word. So basically what you are saying is the market is the capacity utilization in the US market is quite high in building materials per se, not only in concrete or cement, but also in roofing and other related products like insulation. So the market is a bit disrupted in supply chains. This is why I wanted to share with you that we can talk about price over cost and how we successfully manage it. And another big focus for us is to supply the customer reliable. And this is a key focus for the year. And we do everything to make our customer running and building what they are building. And it will be a challenge. We have a For the U.S., we were not happy with the volumes last year, to be a bit honest with you and give you some background. So we believe we have quite some deep bottlenecking stories for this year. So we believe our volumes in U.S. will be increased above market because we were not happy with the volumes last year. We had two or three hiccups, which were unnecessary. And so this we want to catch up this year. Thank you.

And perhaps a second question because you see no slowdown and you have very healthy backlogs. But do you see any, I don't know, cancellation or postponement in order books? And what is the momentum on the new orders?

Again, I have really nothing negative to report. I'm sorry if you were expecting it, but but you can see from our numbers, if you go across the regions, the only, if you want to say, slow start was in Asia. Our main markets are China, Australia, and India, and here we had a slow start to the year, but already the March came back, and I have really nothing negative to report. When you go through our volumes, you see also the very healthy levels we have on aggregates and concrete. Roofing is not mentioned in volumes. If it was In there, it's even double-digit. It's our highest volume growth of the four business segments. So we have nothing negative to report. And then we have infrastructure, which could be a bit icing on the cake for this year. It should come. So again, at the moment, we see also no impact in Europe. If this maybe is another question you might have, we have no negative impact. There's a lot of talk, of course, what can happen with this terrible war in the Ukraine. But from our side, there is nothing to report. Even the neighboring countries, Poland, Romania, and so on, they run on very healthy demand side and there's no disruption at this point in time.

That's very clear. Thank you very much. The last question for today's call comes from Henry Goat from Bernberg. Please go ahead.

Good morning. Thank you for taking my questions. I've got two, please. So firstly, you gave some pretty helpful guidance on your expectation for energy cost bill for the year running at, I think you said, 40% to 45%. Can you give us an indication of what you expect in terms of inflation on the other parts of the cash cost phase? I guess I'm thinking sort of distribution, labor, or I guess inflation is probably running above trend. And then the second question would be, Given these levels of significant inflation and price growth, particularly in emerging countries, is there any evidence of government intervention to try and put some sort of cap on the extent of price increases? Thank you very much.

Yes. No, absolutely. Look, on the rest of the cost We see an inflation at the same level that we've just experimented in Q1, so around 9% to 10%. That would be about the inflation we see for the other cost buckets in addition to energy. That would be our best guess at the moment.

Thank you. And Henry, what's really key for us here is that we believe we started the year in a super healthy position. With the pricing, we have across all business segments, our sales price is more than 11% higher compared to last start of the year. And that is important to us. So we believe we really positioned ourselves very nicely for the year, and this will go through. And as Cheryl Dean, I think, informed earlier, we believe we can achieve that. positive price over cost, even for the full year, besides all the other positive effects you have seen now with the acquisitions, but also with the very good demand levels we see in our key markets. Good. I think this was the last question. Then again, I really appreciate your feedback today and your time you spent with us. I have a super wish that maybe for the half year latest we can meet in person again. These were tough for more than two years in the pandemic. We had some moments I think we could reconnect a bit for the Capital Market Day where we had some window in between Corona waves and I hope we can connect now soon in person and have a bit more time to discuss and meet each other which we shouldn't forget is much more exciting than to have videos or phone conversations. So I I hope you stay safe and healthy for the next few weeks or months. And I'm asking the investor relation team that we schedule some personal meetings in the coming months. Thank you so much for joining and have a nice weekend ahead.