Amrize Ltd Ordinary Shares

Welcome to our analyst conference regarding our 2022 results of Holcim. Very delighted to have many analysts and investors present today. Thank you for joining. And also welcome for those of you who join us via the webcast. We're very excited to share more background with you on the results. I will give you some highlights and I wanted to point out a few of our successful elements of strategy execution and Geraldine will give us more details then on the financial results and then we come to the outlook together and of course have time for your questions and comments. 2022 for us was, I would say, a very satisfying year. We, on the one hand, we continue to deliver, deliver record results, first time above 29 billion Swiss francs. At the same time, we could offset this enormous cost inflation pressure we all experienced, and come also with record numbers for the earnings for and the free cash flow again. And I'm personally very pleased that also our whole transformation led to even a stronger balance sheet with now a debt leverage of below one time. So I think this is all well delivered. At the same time, we have big success from our strategy. already contributing significantly to the results with solutions and products already at 19% of group sales with the rapid expansion in North America already 35% of sales and will reach 40% in this year. On the CO2 side also very proud that we could significantly reduce our footprint by decarbonizing our existing products and solutions, but also by the fast growth of our new segment solutions and products, leading here to a reduction in CO2 per net sales of 21% this year, and this will continue here in rather large steps also in the future. If I continue, I will leave the record results to Geraldine later to comment a bit more. and would like to point out a few things. First of all, our strategy involves a lot of transactions. We did 23 transactions of acquiring or divesting businesses, and I think we are doing this in a very value-accretive manner, buying six businesses for solutions and products, four reasonable multiples, having then bold on acquisitions 13 to further strengthen our aggregates and ready mix concrete business and at the same time our divestments have been very value accretive because we sold them for very attractive enterprise values and to put these elements together we were despite the biggest sales ever, we were able to strengthen the balance sheet and reduce our net debt by four billion in 2022 alone and achieve a net debt ratio of only 0.9 times. So I think these are really excellent results and I'm very happy we execute with such a value discipline in mind. The year has started very dynamically, so we are not stopping with the profitable growth. It looks like we are rather here gaining momentum. We have already seven acquisitions in the first two months of the year, another three for our roofing business, and another four bolt-ons for aggregates and ready mix. The latest one here, Durolast, we are very excited. We have bought already in roofing several companies. We were starting with Firestone, if you remember, this iconic company for flat commercial roofs. Then we continued with Malarkey, another iconic company for the residential roofing and now we're very happy that we could acquire Durolust, another leading company with sales of over 500 million dollars and very well positioned with premium solutions, system selling and with special contractor association they serve basically exclusively with their solutions. This is a fantastic fit with our established roofing business in terms of technologies but also in terms of channels and customers and we are very happy We could do this. If you look now at the roofing business, how strong it became already, it's a $4 billion business now for us. However, in a large market, it's a $40 billion underlying market, so we have plenty of room to continue to grow. We have plenty of plans to grow, and this will be very satisfying for us also in the future. You look at all these success factors we have with the business, more than 70% of the sales is in re-roofing, so we're not depending on new build, we have high margin re-roofing, which is also growing, because all the roofs need not to be only replaced, the new roofs need to be insulated, they need to be green, they need to be solar, so there's a lot of value for us. We do already, 80% of our sales is complete system selling, so we're not only selling a waterproofing membrane, we're selling a full system, with insulation, with the design for the installation, with all the parts for the installation and just by doing so you triple the sales per square meter and of course you achieve a much higher loyalty with your customer, you have a higher importance and you obviously have a very good pricing power at the end. Also very happy that our team executes so well. We bought the business, if you recall, we had between 11 to 12 times multiple when we bought the roofing companies. And already last year, basically in the first full year of operation, that multiple came down to seven times. simply because we are growing the bottom line and we achieved 19% EBIT margins in the roofing business last year. So this is a fantastic accomplishment and shows the great fit these businesses have for Holcim from the supply side to the distribution side and very happy we could be here so successful with roofing and already such a contribution for the Holcim Group. We look at North America with this, we come from 24% of North American sales just before the pandemic and this is already 35% last year and will reach 40%. Very important to us, we are very bullish on the North American market. You can see we have already strong results in North America from growth and from margins. And when you look at all the new infrastructure bills which have been passed, Anti-Inflation Act and so on, we're going to have for the years to come a very healthy order book here in North America. And I think we make this strengthening of North America at the right time. see also the profile of whole sim now we do north america europe and latin america is now over 80 percent of the company and middle east africa asia is less than 20 percent this is a geographic profile we wanted to have for much better growth and better earnings you also see that when you look at the ebit north america is already over proportional also in march and so uh I'm very glad we could establish now this very strong earnings profile for Holcim. With this, I would like to talk lastly now about the sustainability. It's on top of our strategy. We want to be part of the solution for decarbonizing not only Holcim. We want to decarbonize buildings, the construction industry, and here we make big inroads, you see, by decarbonizing the buildings. established products and systems, but also by this rapid expansion into solutions and products where we are talking about some of the most sustainable solutions for the built environment. You see the amazing results. We were already in 21 minus 8% CO2 per net sales. Last year we achieved 21% minus and also for this year we target more than 10% CO2 reduction for the Holcim Group. And I think this is very great news that the roadmap in sustainability we have started years ago is now showing such good results. I think with this I make a quick summary what you can expect from us now ongoing. We believe our transformation is not only successful, it will give us now great results into the future, basically on three pillars. Profitable growth, we want to grow Holcim by growing solutions and products, our fourth segment. We had 19% of group sales. We promised 30% by 25, so I think we're well on track, but this is something you can expect from us. At the same time, we have our highly synergistic board on acquisitions to strengthen ready mix and aggregates, and you can also expect here we will continue this year with a high number of transactions also in this year and the years to come. expansion in North America. You see also in the documents we had a high organic growth rate in North America in addition to the acquisitions and this is also something you can expect from us for the coming years. Then we have a growing demand for the sustainable solutions. If you look at our low carbon solutions, we have been introducing EcoPact for concrete, EcoPlanet for cement. They are in high demand. We are literally sold out and we have to scale our production capacity to be ordered to follow up with the high customer demand and this is something where we'll see a lot of growth, a lot of value coming for Holcim. You can expect superior performance ongoing, so we expect the record results to continue for this year and the years to come. Our Free cash flow around three billion has been well established now for the past four years. This is something we want to deliver also into the future. And you can also expect from us that we make smart choices for the balance sheet. We make smart choices when we buy or sell and please expect that the balance sheet will remain strong and will give us a lot of freedom, a lot of firepower to make the right choices for Holcim's future for investments, for acquisitions. Sustainability I talked already about. This is on top of our strategy and this will give us a lot of opportunities for growth and we will talk about this in detail later, but from new application segments to carbon capture, we are really well positioned and we execute here at high speed to lower the footprint of Holcim year by year. I think with this highlights on strategy execution and what you expect from us ongoing, I think I pass over to Geraldine.

Thank you, Jan. Thank you and good morning, ladies and gentlemen. I'm very pleased to share with you more details on our achievement in 2022. It has been another record in terms of financial performance. Our net sales grew by close to 13% like for like, benefiting from the strong pricing in our historical businesses and the huge success of our roofing business. Our recurring EBIT grew by more than 7% despite the significant inflation. Both our earning per share and free cash flow have been impacted by the settlement with the DOJ, resulting in a payment of $778 million in Q4. But without this extraordinary expense, Our earning per share before impairment and divestment would have increased by an impressive 25% at 4.96 Swiss francs per share. And similarly, our free cash flow would be above 3.5 billion Swiss francs, a new record. Let's now move on to our sales. On a full year basis, our net sales amounted to 29.2 billion Swiss francs. This is up 8.8% versus 2021. And this reflects a strong organic growth of the business at 12.9%. The portfolio transformation brought us new sales for 4.7%, stemming from the acquisitions and solutions and products. The divestments in cement reduced ourselves by 6.1% and this number mainly stems from the divestment of India and the de-recognition of our Russian sales since March 2022. So here, our cement ready mix and aggregates business segment grew by 12% on a like for like basis, benefiting from a strong pricing of about 14% on average, slightly offset by a small negative volume impact on the back of soft markets in Europe and in China. or solutions and product segment grew by 18.5%, benefiting from the outstanding success of our roofing business. The currency translation that you see here is slightly negative at minus 1.8%, and this is mainly due to the depreciation of the Euro, partly offset by a strong dollar. Let's now move on to our EBIT. Our recurring EBIT amounted to 4,752 million Swiss francs, up 3% compared to 2021. The scope effect had a negative impact of 2.5% on our EBIT, but this was more than offset by the strong organic growth of 7.2%. The volume impact that you can see is slightly negative at 41 million Swiss francs, but the price of a cost was positive throughout the year. And this price of a cost is coming from a strong pricing of 14% on average. which together with efficient energy sourcing and cost management more than offset inflation. The contribution of our joint ventures slightly declined because of washing which suffered from the lockdown in China. Solutions and product had a like-for-like growth of 99%. This is clearly coming from our roofing business, which demonstrates here that it is a key growth engine for the group. This slide shows an overall picture of the performance for the five regions. Four out of five regions grew there a bit. APAC suffered from the high inflation in India and the lockdowns in China. Let's go into more detail and we will start with North America. The region delivered here a record performance in 2022 with impressive results. demonstrating the effective implementation of our transformation strategy. Market demand remains strong with an attractive outlook driven by all the federal funding, the infrastructure investment and job acts, and all the planned spending on energy and climate change. This makes us well positioned going forward with our unmatched footprint and well accepted low carbon product portfolio. As explained by Jan, North America is the most attractive market for building solutions. And therefore it has been our priority to develop roofing a profitable and fast growing business in such an attractive market. And you can see here how successful the execution of the strategy has been as we are moving from 5.7 billions of revenue in 2020 to 10 billion in 2022. We almost doubled here the revenues. And you see as well the solutions and products now represent the biggest segments in the region as we continue our journey to further expand in this segment. Let's now move on to Latin America. The region delivered strong profitable growth in 2022. We observed robust dynamics in Mexico and Colombia and El Salvador. growth continued to be fueled by a healthy pipeline of infrastructure projects, especially in Mexico. Price of the cost was positive in both the full year and in Q4 2022, led by strong pricing. The region further progressed on its sustainability journey, achieving significant improvement in both materials recycling and alternative fuel usage. Let's go next to Europe. The region delivered strong results, achieving good profitability, and this amid softer volumes since mid of the year. Price momentum was excellent. The region clearly demonstrated its strong ability to contain cost inflation and optimize energy, achieving a positive price over cost for both the full year and for Q4. The region is at the forefront of Holcim's net zero journey by systematically accelerating the use of alternative fuels, expanding green sales from eco-pack to eco-planet and making fast progress in green energy sourcing. Turning to Middle East Africa, the region has consistently delivered good set of results during the year on a like for like basis. We observed good demand across key markets. Price momentum remains strong, especially in Egypt and Nigeria. The region achieved a positive price of a cost in both the full year and in Q4. Moving to APAC, Australia delivered a good performance on the back of healthy market dynamics and positive price momentum. In China, we saw a softer demand due to the COVID lockdowns, but if we exclude China, the region recorded a positive price over cost in Q4. The region also made good progress in improving its clinker factor and accelerating the usage of alternative fuels. Finally, these slides focus on solutions and products where we continued to improve our margins in Q4. Solutions and product now represent 19% of the group net sales. In North America, we accelerated growth this year with the successful acquisitions of SES, foam and polymers sealants North America. This and Malarkey, obviously. This allows us to offer a complete product range to deliver sustainable and energy efficient solutions. Let's now look at the full P&L. We've already commented the recurring EBIT that is growing at 3%. Next line, if you go to restructuring, litigation and others, actually contains the resolution with the DOJ and its related legal cost for about 779 million Swiss francs. Then, as you can see, we have managed this year again for the fifth consecutive year to reduce our financial expenses. or effective tax rate appears at 30%. But this is entirely due to the payment that we made to the DOJ, the $778 million, which is obviously not tax deductible. And if you take that out, our effective tax rate amounts to 25%, like in previous year. Due to the divestment of India, the net income attributable to the minority shareholders has significantly declined. So all in all, our earning per share before impairment and divestment amount to 3.66 Swiss francs per share, including the resolutions with the DOJ. But if we exclude it, our earning per share is up 25% and amount to 4.96 Swiss francs per share. This year we have chosen also to comment the EPS reported on an IFRS basis due to the materiality of the impairment and the capital gain, the net capital gain on the divestments. Indeed the impairment amounted to 673 million Swiss francs and this is mainly due to Russia where we have impaired completely the assets, depreciated all assets due to the current situation. The net capital gain on the divestments amount to 1.8 billion Swiss francs, and it comprises the capital gain on India, which is a bit more than two billion Swiss francs. So that leads us to a reported earning per share of 5.48 Swiss francs per share. Let's now move on to the free cash flow. We are very proud and very happy to report a free cash flow above 3.5 billion Swiss francs if we exclude the resolution with the DOJ and the related legal costs, 779 million Swiss francs. Despite the unfavorable change in working capital, the impact has been contained to 300 million in the context of growth. the profit or the contribution to our cash of our GVs has increased thanks to higher dividends received. We had incurred some non-recurring expenses in 2021 that did not happen in 2022 apart from the DOJ, which also we're benefiting in our cash this year. So all in all, our free cash flow, including the settlement with the DOJ amounts to 2.8 billion Swiss francs. And that leads me to the debt. Our net debt has reduced by 4 billion Swiss francs and now amounts to a very low amount of 6 billion Swiss francs. Obviously, we have benefited from the free cash flow that you can see for 2.8 billion. And then the portfolio transformation had a net positive impact of 3.7 billion Swiss francs thanks to the high value obtained and the high valuation obtained in the divestments. Indeed, the proceeds amounted to 7.2 billion Swiss francs, less the cash disposed of one billion Swiss francs, and the new acquisition, you can see, of 2.6 billion Swiss francs. Gives you the net of 3.7, positive net. We have also paid dividends for 1.6 billion Swiss francs to all our shareholders. We have bought about half a billion of treasury shares, and we have started a share buyback program. that represent 400 million Swiss francs of spending as at year-end. So with such a very low debt and excellent leverage of 0.9 times, Jan mentioned it, we are actually far beyond or well beyond the objective of being below 1.5 times that we set to ourselves for 2025. So with such a strong balance sheet, we felt it was important to go through our capital allocations principle. And the first priority is for the portfolio transformation and to invest in acquisitions and projects that will bring growth, profitable and sustainable growth. With such, and as long as our balance sheet remains strong, we are of course very happy to share our success with our shareholders. This is why we continue the execution of the share buyback program in 2023, which will lead to either 40 million shares bought or a maximum of two billion Swiss francs. The shares will be proposed for cancellation at the next AGM. On top of this, we are also increasing our dividend by 14% to 2.5 Swiss francs per share. And you remember that this is also exempt from Swiss withholding tax. So before handing over to Yann, I want to thank the teams for the hard work and the good team spirit along these five past years. Over to you, Yann.

Thank you, Geraldine. And we come to the outlook. We are able to give you a very confident outlook for this year, 2023. We have good order books across our key markets. We have in the European market, which has been softened since May last year by 3% to 5%. Nevertheless, we are able to have good margins. We are able to improve a lot with our sustainable products now where we get good pricing and high demand. So also for Europe we expect a very solid result for this year. And then we have our growth regions of North and Latin America where we have very good order books and a lot in the pipeline to be very successful this year. So, we are guiding for a positive growth. Three to five percent is what we say in our strategy 2025. So, at this point, we want to leave it there. At the same time, we believe our margins are at the right level for this year. So, we believe you're going to have over-proportional increase in EBIT for this year. And also for the cash flow, we want to confirm that this will be also a satisfying year of around 3 billion cash flow. And then, of course, we're going to see a further reduction of the CO2. As we discussed before, we have a concrete target of more than 10% of CO2 reduction per net sales, what we want to achieve this year. Year has started well, you have seen seven acquisitions already in January and February, so we are not only off to a good start, we have a lot in the pipeline, so every quarter we talk about the outlook and every quarter we, have rather increased the outlook and I think I was saying that there is no recession at Holcim and this is what we still see today. Holcim gonna have a strong 2023 for volume sales and then especially also for bottom line and especially for strategy execution, more solutions and products, more North America, more sustainability. I think these were the highlights and the overviews we would like to share with you, and now we are very happy to have your questions and comments.