Amrize Ltd Ordinary Shares

Ladies and gentlemen, welcome to the Q3 2022 results conference call. I am Sandra, the call school operator. The presentation will be followed by a Q&A session. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mrs. Svetlana Jotko, Head of Investor Relations. Please go ahead, madam.

Thank you, Sandra. Good morning, ladies and gentlemen, and welcome to Holcim Q3 trading update call. As usual, we start with the opening remarks by our CEO, Jan Jenic, following by more financial details by our CFO, Geraldine Picot. Afterwards, we'll take time for your questions. The call is limited to one hour, and therefore, to give everybody the opportunity to ask a question, please limit yourself to two questions only. Now, without any further ado, I would like to hand over to our CEO, Jan. Go ahead.

Good morning, everyone, and thank you for joining. I'm very excited today to share a bit more background information on our excellent results and then also to have a good discussion with you. You have seen the results already. We are very happy that we continue the excellent momentum of the first half into the year, also for the third quarter. And again, we're achieving a new records for sales, for operating profit. I think we couldn't really ask for more. What is more is that a big part of this success is based on our transformation of Holcim, transformation into the new fourth segment solutions and products, which is now already showing significant results and result contribution. Also our successful transformation the geography where we very fast expand in North America which already makes 40% of our sales and even more on the profit side and then also the sustainability profile has changed very positively and I will speak about this in a minute so all together we are pleased we have good order books we don't see We don't see a decline in demand for Holcim also in the fourth quarter or for the start of the year. So we are confident to do the upgrades in the outlook, which we did, upgrade on the net sales, upgrade on the EBIT, then of course the new exciting low level on the debt leverage. So I'm very happy we could do that. Let me just point out a bit on a couple of the slides. I would just like to comment on slide five, where you see this high activity level we have on the transformation of the company. With the first nine months of the year, we did 16 acquisitions, and we did the two significant divestments of India and Brazil. So very remarkable how much speed we have on the expansion of solutions and products with another six acquisitions to further strengthen our roofing and insulation systems, but also to enter here into tile adhesives and into per se systems. On the other side, we did 10 so-called bolt-on acquisitions to further strengthen our business segments of aggregates and ready mix. And very happy to see that. And this will also be our focus. for the future. We want to continue with this activity level. We have a super strong balance sheet and cash position. And we will continue here to acquire and to transform Holcim here for solutions and products and also for the geographic focus. You have then on page seven, you see how we progressed. So from originally 8%, Solutions and products, we are now already at 25% in 2022, if you account for all the changes being made on a full year basis. So we are, I would say, ahead of our target of 30% for 2025. So I look forward to hopefully overachieve the strategic target when it comes here for the expansion of solutions and products. Most exciting for me is on slide eight, how this is already contributing. When you look at the four business segments, you see that a big part of our success is now based on solutions and products or is based on the growth. So the first nine months, we had an EBIT growth of 390 million Swiss francs. And that's fantastic to see that how fast the growth This segment became already our second segment in the Holcim Group after our business segment of Cement. And this is, as you can see from the numbers, the reason why we have a growth in operating profit. Even despite the strength in Swiss francs, we were able to have new records. And this is due to this transformation, more solutions and products, but also more North America. Talking about North America, we have on the next slide, number nine, this impressive geographic transformation of Holcim. You see the numbers, how we were based in five different regions back in 2019 before the pandemic, and now through all the portfolio changes, now North America is 40% of our company. Also, Europe has improved to 32%. And then our super strong foothold in Latin America makes these three regions now more than 80% of whole SIM. And this is what we want to see in the future here, to have these regions where we have strong market shares and excellent earnings profile, which you see on the next slide, number 10. You see the earnings profile. slightly over proportion in North America, largely over proportion in Latin America, and also the same picture. These three regions now make more than 80% of our earnings. So that's very great. We could do this in such a rather fast period of time, and I'm happy that our strategy works, also works already into the numbers. On sustainability, a lot of excitement from a new science-based framework for 1.5 degree scenario. I'm personally the most excited about our green product range, eco-packed, eco-planet with sales growth beyond our expectations. And we have included a new slide for you, slide number 12, where you see now that the decarbonization of Holcim but also the growth in solutions and products leads to a totally new sustainability profile of the company, where in this year we reduced our CO2 per dollar of sales by 30%. So very impressive, I think. And I think with this background on transformation and a bit background on the results, I hand over to Geraldine. who gives us more details on the result and performance.

Thank you, Jan, and good morning, ladies and gentlemen. So we'll start with our Q3 net sales, which reached 8 billion Swiss rings, up 16.3% like-for-like compared to the same period last year. Cement aggregates and ready-mix recorded a like-for-like growth of 14%, attributable to a 16% price increase. The negative scope effect mainly comes from Russia and the divestment of India and Brazil, which were closed at the beginning of September. Solutions and products recorded a huge growth of 46%, attributable to both like-for-like growth of the roofing business and the acquisition of Malarkey, PRB, and other bolt-ons. Let's now move on to the nine-month net sales bridge. Over the nine months, the Like4Like growth reached 13.9%, also driven by the outstanding performance of Elevate and the strong pricing on our cement aggregates and ready-mix business. In total, the scope effect amounted to a net positive of 500 million Swiss francs as a consequence of the group transformation. Effectively, on the one hand, we have 1 billion Swiss francs of acquisitions in roofing and and specialty building solutions like mortars. And on the other hand, we have half a billion of divestments in cement. We delivered a record-recurring EBIT of 1.6 billion Swiss francs for the quarter, with a strong like-for-like growth of plus 7.7%. The recurring EBIT of cement, aggregates, and ready mix decreased by 109 million Swiss francs almost entirely due to the divestments. As in H1, we managed to achieve positive price over cost, reflecting our ability to offset inflation through strong pricing, successful sourcing strategies, and cost discipline. The recurring EBIT of solutions and products grew by 134 million Swiss francs, boosted by the outstanding performance of Elevate. The nine-month recurring EBIT waterfall shows the same trends as for the three months, with a positive price-over cost in cement, aggregates, and ready mix. Our JV contributions have declined under the China's lockdowns. The outstanding performance of Elevate remains the number one driver of our EBIT like-for-like growth this year. This demonstrates that our new solutions and products business segment in which we invest is already our number one growth engine. Before getting into more detail, this slide, the slide 18, provides an overview of the regional performance. And all the regions grew in recurring EBIT except Asia-Pac, which was impacted by high inflation in India with limited ability to increase prices. and by the lockdowns in China. So let's begin with North America. The region continued to deliver an outstanding performance in the quarter. Market dynamics remained very positive. Our traditional businesses benefited from strong market growth, excellent price momentum, and continued positive market acceptance of our low-carbon building products. Led by the strong growth of our roofing business, and the recent acquisitions, solutions and products have now reached 38% share of net sales in the region. If we go next to Latin America, the region recorded another quarter of strong performance with volume growth, especially in Argentina, Colombia, and El Salvador. The region achieved a positive price of the cost led by strong pricing. We maintain an excellent pipeline of infrastructure projects in the region and in Mexico in particular, including the new projects refinery Salina Cruz on the Pacific coast and an additional section of the Tulum airport. The region also advanced well with the expansion of EcoPact and EcoPlanet products. Significant investments were made in materials recycling, supporting further increases in the usage of alternative fuels. Let's now move on to Europe. The region delivered a resilient performance. We observed softer volumes on the back of project delays. Strong price trends continued and helped to contain the cost inflation, enabling the region to achieve a positive price over cost. The region made further progress in our sustainability journey with a significant increase in green capex driving the increase in materials recycled and the usage of alternative fuels. Turning next to Middle East and Africa, the region recorded another quarter of profitable growth. Price of the cost was positive in the quarter, driven by strong pricing, especially in Egypt and in Nigeria. We saw robust market trend in Nigeria and in Algeria. Egypt had a successful turnaround with good volume growth and a successful price management. The region improved margins, another quarter of clear achievement against the backdrop of high inflation. Let's now move on to APAC. The region continued to be challenged by the inflationary environment. We saw a significant negative price overcost in Q3 as price increases where not enough to negate inflation. We further observed a softer level of demand in China, largely due to COVID lockdowns. The successful divestments of India marked another milestone in our portfolio transformation, in line with our strategy 2025, accelerating green growth. Finally, this slide focuses on solutions and products, where strong momentum continued in Q3. Solutions and products now represent 25% of the GroupNet sales on a performer basis. In North America, we accelerated growth with a successful acquisition of SES Foam and Polymers Sealants North America. That broadening our offerings in insulation, waterproofing, and coatings, which are highly complementary to our roofing business. In Europe, we acquired Cantiliana, a leading specialty building solutions provider in Belgium, to complement the recent acquisitions of PRB, PTB, and Isobelt. In Q3, solutions and products EBIT doubled compared to the prior year, and our roofing business reached 20% EBIT margin thanks to strong demand and improved raw material supply. Let's now go to our capital allocation strategy. As we just reviewed it, the group transformation continues to be executed successfully and remains our key priority. Solutions and products now represent 25% of the group net sales on a pro forma basis. The debt leverage is far below our 2025 commitment of 1.5 times. Therefore, we are delighted to announce the launch of a share buyback program, which will allow our shareholders to share in our success. The program will start next month and run until May next year. Depending on market conditions, we expect to buy back shares for a maximum amount of 2 billion Swiss francs. With this, I hand over to Jan.

Thank you, Geraldine. As this is a trading update, so we only go down to