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.

Thanks very much. It's Sida Ekblom from Morgan Stanley. I've got three questions. Firstly, Jan, can you talk about your transition to the chairman role? How is that going to change your day-to-day involvement in the business? And then two questions on the US solutions and products and roofing market. It's been a fantastic growth story for the business. There is, however, a little bit of concern out there in the market about that business and that industry over-earning and whether Wholesome is acquiring assets at the peak of the market. Can you tell us how you see that business today, the market backdrop? And then secondly, when we think about the right margin for roofing over the next three to five years, you talk about the upselling potential, solar roofs, green roofs, cool roofs, et cetera. And you're also buying more products into the business. DuraLast is obviously a great example of this. How high can that margin be? How do we think about the margin transition for roofing? Thank you.

All right. Thank you so much for the questions. I'll start with the second one. Look for solutions and products we have just started. So while we are very happy to report already such convincing results, and while solutions and products has already such big impact on our growth and profitability, we just started two and a half years ago. And I'm very happy. that the team around Jamie has put together such a winning formula to run the business, to benefit from our synergies as the largest building materials company from supply chain to the customer. So I'm very happy and we just started. We have achieved 19% EBIT margin in this now $4 billion roofing business already. I think that's very remarkable. But I think our targets go beyond that. How far beyond? We will not make any precise number today. You can also see some of the peers who have numbers out there for North America. You will realize it's a very attractive market from the returns. And we are very happy we could enter there. We just started, you can see now also ongoing. And regarding a peak of market, I don't think we have a peak of the market. We had super disruptions to deal with in roofing over the last two years. We're coming from corona, from the corona lockdowns. We had a lot of challenges and our teams have managed this very wisely and very successfully. And we look forward to very strong roofing market ongoing. Regarding our organizational changes, first of all, maybe let me start by I'm committed to Holcim 100% for the next 10 years or whenever someone will decide. It's not necessary anymore. But for myself, I'm motivated and I always share that with everyone. WorldSim is my mission to make the transformation into the most sustainable and innovative company. And that's what I want to do till I retire. Now, regarding the position, I was very happy now to succeed as our chairman has decided not to stand for reelection. So the board decided that I'm the natural a successor there for continuity and to ensure that we continue as strong as we are. At the same time, we have the situation that we have the highest speed ever in our execution with seven acquisitions in the last two months. So the board at the same time has asked that this very successful team we have today continues for this year to make sure we're not losing any speed. So for me, not much is changing. I will run the company for this year and then we look forward after that to have a very strong succession for CEO. Look forward to that, hopefully a smarter person with a lot of energy and then I will be around and I will make also my mission beyond my CEO term because that's what excites me and that's where my passion is. Why don't we continue with bound in here?

Thank you. You mentioned that you are sold out for some products in some regions. Could you talk a little bit about your CapEx plans, CapEx priorities, roughly how much will be dedicated to the Americas, for example? How much will be dedicated to solutions and products? How much will be dedicated to green products? Just to give us roughly an idea. Thank you.

First of all, I'm very happy to invest in the business. This is key. This is key to make our products decarbonized, decarbonize the process. So very happy to continue to invest. However, we found a very good level of CapEx for all those years around 1.4 billion Swiss francs. And we found that this is sufficient to, of course, maintain the company at the highest level, but at the same time to make all the green investments. And we have Just I think also in the presentation that we are now at, I think at 400 million plus CapEx already simply for decarbonization, which is a very good number. And this will continue to grow. At the same time, our company will be less capital intense. So the businesses like roofing, they have much, much lower investment needs in percentage of sales. So we have very exciting projects going forward. Now, specifically to your question, there are two answers to your questions. The first one is that of course North America is a super attractive market and we want to make sure not to miss out on all these opportunities. And when I listen to my team in North America, The opportunities are just starting. You see our high growth numbers also organically, but you see for the future with this anti-inflation act and so on, that is huge demand for us. So we want to make sure we are ready for that. So we invest, of course, in the business. At the same time, we have in Europe, but also in Latin America, very exciting opportunities for decarbonization investments. and they have very high returns. So that's the second part of my answer. It's not that we now shift all the CAPEX to North America. We have very attractive CAPEX also for the other regions. And we do that very simple. We don't even do much budgeting for by country or by region because we budget project by project. We want to see the most attractive projects get the money no matter if they are in this region or that region.

Thank you.

We have a question coming from the webcast from Miss Elodie Hall with JP Morgan. Please go ahead.

Hi again. One question from the webcast. Come back to you. Hi. Oh, Elodie.

Hi. Can you hear me?

Elodie, we hear you well.

Okay, great. Well, congratulations on your new moves to both of you, so best of luck. I have two questions, maybe the first one on your guidance, the three to five percent like-for-like sales So if you could develop a bit on where you see pricing in there, the carryover from what has been announced already, and the further price increases that I suppose you're trying to push through. And volumes, so what should we expect for volumes generally for the group in 2023? and if you could give us the big trends by division, that'd be helpful. And then I just have a follow up on the margin question on roofing. So you are at 19% margin, but your solutions and products is at 12%, so I was just wondering what's diluting that margin overall, and where do you see that 12% going into 2023? Thank you.

Thanks, Elodie. We give at this point not the precise guidance on the targets, of course, but obviously we are very confident. And where does the confidence come from is that we had this huge hyperinflation challenge last year. and we had to raise the sales prices by 14% in the last year to make ends meet and come out with a record result. And that was not an easy task and I'm very proud about our regions and our key countries to make this happening. We only had a very few markets who couldn't offset the cost inflation, but we could offset it in most of our markets. So I'm very proud of that. And now we go with some hangover into this new year. And of course we have a very strong, shouldn't say hangover, but we had a very strong situation now on the pricing. And at the same time, we have now a decrease in costs since December from energy and others. And no matter how the cost situation, plays out this year, we are very confident that we are in a very sweet spot for the March and for 2023. Your more detailed questions on countries or where it is, I'm a bit hesitant to answer now. I think we can talk about this more after Q1 reporting. For now, maybe just take back that we are very confident in the outlook, and that's why we guide not only for growth, but also for over-proportional margins and EBIT. This is a bit the same for the solutions and products business. Of course you see we have mortars, we have facade, we have other segments in solutions and products and obviously they need to catch up now with the roofing business and there we have a very big upside potential here in solutions and products to increase the margins already this year.

Thank you.

Thank you. Going back to corporate governance, you just said that you're committed to Holcim for, you know, 10 or whatever years. So should we think about your new role rather being kind of an executive chairman role or just the chairman role? First question. Second question. Is there any preference about your successor as a CEO in terms of internal or external solutions?

I think Holcim has been committed to highest levels of governance for the last years and is committed to do so in the future. So you noted that even in today's press release, we wanted to share how we have Hannes Sörensen, who is already our vice chair, becomes the lead independent director with Holcim. large competencies to make sure we have the checks and balances. I think this point in time we have to take care of Holcim and the shareholders and you can always think about governance, what box to tick, but we're gonna tick all the right boxes and do what's the best leadership for Holcim. I think this is what the board had in mind and this is why they also took the courage to say, you know what, this year we want the team to run. We don't want to, disrupt now with a change. So for me, that's all well organized and I look forward to be doing that this year. For the succession, let's wait for the succession. We have fantastic people in the company. We have great talents and I don't think we will have an issue to appoint the CEO succession.

I don't have any issue with this double mandate for, you know, 12 months or so. My question was just when that is over, when there is a new CEO and you will be the chairman, will you be a more active chairman than, you know, Beot Hesse, kind of an executive chairman or just having a, you know, a similar role as Mr. Hesse in the past?

You know, I want to talk about future and past chairman positions. I'm committed with Holcim and I will put my experience and my energy in for Holcim in a positive thing. This is not something about ego or something. This is about Holcim and my own success is only measured in the success of Holcim and that can be assured that we will have harmony, teamwork and a lot of success in the future.

Okay, then let's leave it at that. Something totally different, you mentioned this 21% reduction of CO2 footprint relative to sales. Of course, most of that is due to the structural changes. I mean, you sold India, that alone is changing this ratio a lot. Do you have also kind of an organic number? How much did you reduce the CO2 footprint with not including all these changes?

Of course, we have that, and again, this number is a combination of various things. First of all, the strict decarbonization of, let's say, cementitious products, which was around 2% last year, plus the sales growth, so the number will be higher for this calculation. And then, of course, we have decarbonization through these lower-carb products we are introducing to the market, and then we have, of course, big transformation by expanding into sustainable solutions like roofing like insulation and facade so it's a combination and the larger part of this reduction comes from the second part of the equation but nevertheless i think that's the right strategy for the company and i'm very happy we make such significant progress but there is no concrete number kind of you know

There is in the annual report? Of course, of course.

We continue to publish our kilos of CO2 emitted by per ton of cement and on a like-for-like basis. It has reduced. It has reduced by two percent.

Last question. Without any additional pricing actions, what would be the spillover effect from all you have done already into 23?

You know, the question is, how is the cost inflation turning this year? On the pricing, we are confident we have a good pricing in place. We have especially the good new products in place. The question is, is energy costs rebounding back up high? Are they staying where they are? So that's the thing we don't know. For us, honestly, after managing the hyperinflation last year on a weekly basis, However, the cost environment will curve out this year. We are prepared. So that's why we give the guidance that we're going to have an over-proportional increase in margins for 2023. Okay.

The next question comes from the webcast and is from Mr. Tobias Berner with Stifel. Please go ahead, sir.

Yes. Apologies directly from my living room. Two questions, if I may, Jan and Geraldine. Number one, you've been quite active in terms of divestment. Should we expect more here, especially on the emerging market side and in context of listed entities where you can't get the cash out via dividends? And if so, do you feel that this could be a more difficult process Secondly, then moving on to the other side of the M&A, i.e. the acquisitions, a number of your peers are sort of more cautious on the first half and possibly for the full year 23 in terms of doing more sizeable deals. Does that also apply to you? Or are you simply focused on the opportunity rather than the timing giving you a strong balance sheet? Thank you.

No, look, I don't want to comment on others, but look, we come from a record year. We're coming from a strategy which works and shows results, so we have no reason now to change strategies, and you can expect more of that from us in the future. We demonstrate already that the year has started very active with seven acquisitions, and we have a few more in the pipeline. We might read about it in the weeks or months to come. So we are very positive and of course have no reason not to be. The same on the markets. We give a very positive outlook because it's positive for us, especially with the country profile we now have established in Holcim. And talking about the country profile, we have the profile we wanted to achieve with a bit less emerging markets. Now more than 80% of the sales is in North America, Europe, and Latin America, and that's the profile we wanted to have. So we have no immediate divestment needs from any other countries. There might be some decisions in the future where we divest a few businesses, but I think the profile we now establish in terms of geography, that's what we wanted to achieve.

Thank you very much.

I have two questions. Ask them one by one. First of all, I was surprised by the quite low energy bill, 22. Can you say what's your view for this year? What's your hedging strategy? And do we see incremental increase in the overall energy bill for this year?

I think I give that question in a second to Geraldine because she is very rightfully very proud of the, I would say, smart contracting we are doing. I told him we never make a shortcut in the supply chain. We always make sure we are properly supplied. We believe in long-term contracts with utility companies. We believe in smart pre-buying. not hatching and pre-buying of products we need or energy we need. And we have been doing that for all the recent years. And you remember, we never talk about hatching at Holcim because that's something we do quite well over all those years. We've done well in 2022 and we've done it now. Geraldine told me we've done it exceptionally well for this year, but...

Yeah, no, absolutely. So you see it. I mean, the markets have increased about 80% in 2022 and our energy bill has only increased by 40%. For 2023, we don't have any dogmatic approach on hedges, as Yann mentioned, so we are trying to keep opportunistic views and having a pragmatic approach to our energy cost for 2023. We see that it could increase, you know, flat to, High single digits, that's about the range because we don't have crystal ball for the reason also we are not fully hedged. We are about two-thirds of the hedgeable part is hedged, to answer your questions.

Thank you, and the next question turning back to the CO2 development, and obviously in Europe the legislation gets tougher, allocation has become smaller, so what's your, do you have a, obviously you have, but will you share this, a reduction plan in Europe? And how does this compare to what the trading scheme wants you to do? Can you fulfill that? And do you still have excess emission rights in Europe?

So, yeah, thank you. First of all, I'm excited about the CO2 scheme in Europe. And I always said that when the CO2 price was at 20 euros, I think I said, I wish it's 100 euros. because that gives us the needed return on our investment. I think it's now around €100 or something and that's a good price that gives us a lot of return on the sustainability investments because nowadays everyone is short in our industry on CO2 certificates. So now, and you can see that now in the strong pressure we have in the pricing, we have a significant, we had the biggest sales price increases in our traditional business segments were in Europe last year. And one of the key drivers or the key driver is sustainability and the CO2 scheme. And CO2 scheme has two fantastic mechanisms. First of all, it's an incentive scheme to reduce your emissions because we directly save the CO2, so it's very high return. And secondly also because it's difficult to produce extra tons which are not covered by certificates, you have also a limitation in market volumes. And both led to extremely strong pricing in the European market and the one who's running faster than the competition is the one benefiting and we have the clear target to run fast in the further reduction. of this decarbonization race.

The next question comes from the telephone and is from the line of Yacine Touari with Onfield Investments. Please go ahead.

Yes, good morning. So two questions first. What would be the key pieces of advice that you would consider giving to the next CEO of Olsim based on the successful growth and transformation strategy that you've implemented at Olsim and at SICA before? And what do you think will be the key challenges for your successor? And then the second question, which is maybe a little bit more technical. It seems that you've stopped disclosing volumes in your presentation on your annual report. Is there any explanation for this decision?

So, Yacine, you're right, we don't disclose the volumes in details by country with regard to cement anymore. You're totally right, but we disclose the impact of the volumes for this activity. And also I presented it during the financial part. But you're right, with the portfolio transformation, we have decided not to give specific details on the volumes of one segment per country. That's right.

On the succession, it's very simple. If you have the best in mind for Holcim, we hope that the next CEO will be better than the current one. with high energy, smart, and while we all like the current strategy and it shows results, strategy has to be constantly developed and maybe there will be other segments we could enter in the future. So I'm the first one to be open to any strategic development and again, I hope the next CEO will be stronger and higher energy to bring Holcim then to the next level of performance.

Hello, I'm Samuel Weber. I'm an independent wealth manager. Given your impressive results and low leverage, it seems you have a lot of firepower financially. Do you think you can use that all for acquisitions, or if not, the window seems to be closing quite fast to be able to buy back undervalued shares, so how do you think about that in the future? And the second question would be, there is only one, I don't know the word in English, but in your impressive, otherwise very impressive operational results, and this is the six billion Swiss Franc ready mix concrete business, the EBIT margin. How should we think about the development of those 2.4% going forward?

Well, thank you for the question. I'll start with the second question first. So the ReadyMix concrete business is a business which is very low capital intense, but at the same time has very challenging margins. For us, why we always like the business is we are supplying our aggregates and our cement products inside that business, so we have a... some vertical synergies and vertical margins you cannot underestimate. Nevertheless, it's our big target to improve the profitability significantly also in this business segment. This is why we always show it separately and we also have established separate profit and loss leadership for this business segment in the countries. I think that segment will be also extremely important in the future for decarbonizing buildings and the way to build because to have lower CO2 in the final concrete is the real target. And that's why we believe this segment is also very important strategically for us in the future. Regarding our cash position and our debt position, first of all, we're very happy to be in this situation. Very happy we could make all this strategic shift with such a value creative momentum. So we are in a good spot. I personally was very excited to make the share buyback and then we decided to make it as an express buyback because we don't want to harm our future opportunities. So we said let's take now two billion but let's use them within five months and let's not have a long hanging share buyback because we want to sit together in May and see what are the projects in the pipeline, what are the investments, what are the acquisition opportunities and then we can take maybe the next decision. And then we have to decide at what level the stock is undervalued, you know, it's 60 Swiss francs or 70 Swiss francs. And then we have to put this all together. I think this is the way to do it. And first of all, we're very happy to have all that shareholder value we create also with an increase in the dividend share. And then in May we sit together and we see how much money we spend for acquisitions, what's in the pipeline. And that's a very, I would say, a very comfortable position of strength we are having.

The next question comes from the telephone and it's from the line of Ross Harvey with Davey. Please go ahead.

Hi, good morning. My two questions, the first one relates to return on invested capital, and clearly you've made a lot of progress there, not just this year, but in recent years. I'm hoping, Jan, you might be able to describe the impact of the shift to solutions and product as part of that. I know you mentioned that there's lower capital intensity in some of those businesses, but if you can address the point around maybe margins and asset turn and what the business would look like from a returns perspective. as that transition continues. And the second one is in relation to your outlook. I'm wondering if you can address North America in particular, given the size as part of the group. Just what are you seeing there across your different product lines and the degree to which the infrastructure funding can contribute to your 2023 financials? Thank you.

Thank you. If you look at the capital intensity of Holcim today, we have shifted already a lot. We are now on a new base of around 1.4 billion Swiss francs of CapEx, which is now below 5% of our net sales. That's a new level and that's thanks to to the shift to solutions and products, but also thanks to very smart investment and CapEx decisions in our traditional cement business. And you can expect this to continue with us. When you look at solution products isolated to your question, I would say this business has, we target about 3% CapEx for the business. which is plenty, plenty to grow. If I don't grow in that business, I can go below 2% of sales. And this is what you can expect from us. We are already below 5% of CapEx by net sales, and this will be further decreasing over the years to come. You had a question on North American outlook. We have our head of North America here, Tovig, with us. I don't let him speak. He's too bullish. But you can catch him maybe over lunch later. Look, the North American market is... in a very good stage. We are sold out still on certain products. We have good order books. At the same time, all these huge government bills, government initiatives have not started yet. So we expect them to come in later this year. And these programs, they are so significant for us. They will have a runway for us for the next five to eight years. So this is why we are so excited positive on North America and positive on all the investments we have done to expand this region falls. So we have very positive outlook, we're gonna have a very good result this year in North America and what's even more important is the outlook is even more attractive. Now I was also a bit bullish, Tufik.

Thank you very much Jan. Good morning, it's Holger Frisch from Zurich Kantonalbank. I have two questions. First, there was a statement this morning made by you that we should expect a couple of bigger acquisitions, but no blockbusters. So could you maybe give some flavor what this means in terms of size? Is this something similar like DuroPlus?

Yes, and we have been very good, I think, in our acquisition strategy. If you look in our materials, we give you an indication that, for example, in roofing, we are already from, we bought at 11, 12 times EBITDA multiple. Based on last year results, we are down to seven already. So obviously, we do this very well. And I think what is important to realize, the size of acquisitions, The small to medium ones, they are the ones rather easy to integrate, easy to lead. And when it gets too big, you have all these issues on timing, on who is responsible for that. And this is what I was a bit elaborating around. I mean, obviously we were having a two billion acquisition with Firestone and we made this very successful and we have Malachi and Duralast, two also significant businesses with five to six hundred million dollars of net sales from the start. So we feel very comfortable with those type of acquisitions and we feel also comfortable with the bold loans. They are in a range of maybe 20 to 200 million each and they are even the easiest on synergies because they are local, usually family owned businesses and they are rather fast in integration and in realizing synergies. So this is a bit the strength of Folsom. This bold on to medium size acquisitions, they work very well and the question this morning was about like a mega acquisition and I don't say no to this but But we have to realize that can be quite complex and lengthy process.

Okay, great. Thanks. And then maybe, Nadon, in terms of leverage with the 0.9, you're now at the lowest level for a couple of years. So is this a range that we should expect to keep or would you go back to the 1.5 or even two times?

Look, I think what is important about the strength of the balance sheet that you have the entrepreneurial freedom to do the right things, right? When you are at two times plus, you know, and you want to buy Duralust, you have to negotiate with some Banks to give you credit or something and and this is not the good position to be and I think it's a high value for a company Like us who's growing who is acquiring to have the firing power to do so and that's why I think two times is too high for us We had 0.9 times which I think we should be glad about that if we go up a bit Depends on the opportunities we have in the market but a strong balance sheet and a load depth leverage I think is key for success and

Thank you.

The next question comes from the telephone, and it's from Mr. Gregor Kuglic with UBS. Please go ahead.

Good morning. I've got three questions, please. The first one, I think you mentioned in one of your remarks sequentially energy costs are already declining. It looks like in general there's not much left there. So I guess my question is, do you think that cement pricing or aggregate pricing could sort of trend down with that, or do you think you'll, or perhaps you look at it differently and you look at sort of trying to capture positive price-cost spread of some sort. So that would be my first question. Second question is a relatively simple technical one. Can you just tell us the net M&A, EBIT, or revenue, ideally both, impact of all the deals you've done, so divestment and acquisition, sort of so we can have a sort of clean baseline, I guess, to think about your organic growth from for 2023, please. And the third question, and maybe it's a bit personal, but obviously, you know, the business is doing very well. You know, yet both of you are deciding to sort of, you know, step back or leave. So I kind of wonder why that is.

OK, I mean, look, I take the first and the third question, and then Geraldine takes the one in the middle. I look on the pricing. I said before we have excellent pricing in place. I think we are in a different cycle at Holcim now. Our pricing is not correlated with energy costs or something. And I know there was a lot of debate in the past about this, but if you follow us, we have been increasing sales prices for the past five years, every single year. And this is also what we're gonna see this year. So we are planning on price increases for all key markets for this year. And we're going to make that happen. And that's why we are so confident on the margin. And again, on the energy costs, they came down December until today. But we don't know what's going to happen tomorrow. But we will be in a good position no matter where the costs are curving this year. On the personal question, I'm not stepping down. I mean, I'm not stepping down. I'm the CEO of Halcyon for this year and then let's see who comes next. But this is very important to us. We have a winning formula and we have a winning team and we will continue. to do that and I'm not stepping down from anything. So instead I'm saying I will be close with Holcim for many more years to come.

Yes, and Gregor, you asked about the bid, the scope impact to take into consideration for 2023. You asked that for the EBIT level. So, obviously for the scope impact, it's easier. It's about 300 million that you have to subtract, and if you take into consideration all the EBIT of our acquisitions for 2023, you get something around more than 150 million Swiss francs of additional a bit. So it gives you a bit of a net scope for your modeling.

And that's with DuraLast in for how long?

Yes, it does include DuraLast.

Thank you.

Lothar Rubinetsky, Octavian. I want to follow up one of the questions before, but from a broader perspective. I remember when you announced the Firestone deal, you said the key element is to buy a platform and to develop the business from there. And I think you were very, very successful in doing that in North America. You also mentioned that you had two factories in Europe. You saw plenty of opportunities, but if I look at the acquisitions you did, it was in other areas. So, two questions. One is, do you still see the chance that you can consolidate the European roofing market? And second, do you still look for a second platform where you basically can repeat what you did with roofing?

Oh, look, first of all, we should be all very happy that we were able to establish that roofing business we did with $4 billion of sales, mostly in the US, totally correct. But I prefer this even of being spread out too much. So we are one of the... top three companies already in the US market. And when you look at, and I think we provided that information in the slide, that's a $40 billion market alone in the US. So we have plenty of room to space. I told the team there's no reason you shouldn't do $8 billion in the years to come in the roofing segment. and roofing with us comes with insulation, so it's super highly attractive. You saw the returns, so I think we did everything right there. Now, of course, we also are excited to grow in Europe. You said we have two factories, one in Germany, one in Spain, and we just announced the acquisition of FDT, Flachdach Technology, a German-based excellent company in roofing systems, so we also expanding in the European market. And so we're doing both. We have also establishing a second platform, what we call specialty building solutions, which are basically facade systems and mortar systems. We bought four companies in Europe. This is already a $600 million platform, which also has a big underlying market volume. So we have already two platforms and they by itself provide a lot of space to grow.

I'm not mistaking the roofing market in Europe is around 20 billion. So let's put it that way. You got a foot in the door, but not more. What is holding you back? Is it the lack of opportunities or what is it really?

We have a high speed. Imagine the number of cars. We just started in roofing in really in April 21, right? So we have a super high speed. But you know what? I will forward your message to the team and tell them. You did, you did. I will say you did okay, but we are not happy in Europe and we're not happy with the market share of America. And this is, that's great news, right? Because the market, even 20 billion, so we have a 60 billion market, we can grow. And that's what we try to do. And I will talk to the team and ask them to do a bit faster.

The next question comes from the telephone, and it's from Mr. Yuri Serov with Redburn. Please go ahead.

Hi, I just want to go back to the discussion about volumes. You said that there is no recession in Holcim. Can you please try to explain what you mean by that? I mean, what sort of volume growth? And I'm talking about the heavy side of your business. What sort of volume growth you're expecting in 2023 across the business and maybe by region? Thanks.

Look, we're not guiding on volumes. Even what Geraldine said before, we were guiding less and less on volumes because we are becoming a different company, which is not only just a supplier of tons, but it's a supplier of building systems. So having said that, there's no recession at Holcim because we're going to have profitable growth this year. And that's our definition of a recession. We're not going backwards. And you're going to see a good year for Holcim. And the volumes... And now before you will insist on an answer, we will have, and I said this after Q3 already, we have a softening in Europe, so if you go traditionally to cement volumes maybe for this year, three to five percent volume decline is maybe a realistic target or a realistic scenario, but then for Latin America we expect growth on volume plus strong pricing. And for North America, we have also the expectation that we will sell more volume in the classic cement segment. So when you put it all together, we are also on the volume side with a positive outlook, but no more details at this point.

Okay, thanks for that. And also pricing, maybe you already answered this question, but let me just ask it more specifically. Are you saying that you're expecting continued sequential price growth, not necessarily year on year, but from here, your prices are going to continue growing? And again, my focus is on the heavy side businesses.

No, look, the heavy side has one big advantage. It has a lot of room for price increases because the materials are literally very inexpensive. And if it is required to decarbonize further, if you have other costs and so on, there's a lot of pricing power to this segment and you can see it from this 14% price increase we realized in 2022 that there's a lot of pricing power coming with the business and we expect that the pricing will continue to be very positive for us based on smart products from our side, but also based on sustainability where decarbonized products, lower carb products are having higher values for the customer and we will make sure that we will price them on the right level.

Okay, and can I just ask one last thing? You said a few times that the year has started well, but then you say, well, we've been very active. We have seven acquisitions. If you look at how the year started from the market perspective, does that statement still apply? Are you happy with what you're seeing in terms of the demand and what you're selling?

But you know, January is maybe the lowest or second lowest month of the year for construction, for building globally. So that's why I don't want to burden you with a too detailed outlook. I think I gave already a lot of color on what we see for the order book, what we see happening for North America, for Europe, for Latin America. And I think for today, I would be very happy to leave it there. And then I think after Q1, we're going to give you a more detailed outlook.

That is fair enough, thank you.

Johannes Borner, Sound2Invest. Still a question on growth. Coming back to the product and solutions business, I'm wondering, I'm still trying to understand what happened in Q4 on a like for like basis. You had a significant growth of 19% full year. You barely grew in Q4. What's the reason? Please.

Look, we had in Q4, you saw the solutions products business is largely in the U.S. market and we had simply, we had this huge snowstorm. in December where we literally had a 10-day stop of all construction activity. You also saw for our other North American business was slow in sales in Q4. fully based on the snowstorm, and I think we lost around 300 million of Swiss francs of sales due to this. And that's not an excuse, that's why we didn't write it anywhere, but that just can happen any month of the year. But we had in quarter four, the weather was not favorable for us, but you can expect that this will be fully recovering for this year.

The next question comes from the telephone, and it's from Mr. Brijesh Sia, HSBC. Please go ahead.

Hi, good afternoon. I have two questions. The first one is on the low-carbon products. So, Jan, previously you talked about low-carbon products. You're pricing it in line with the normal cement because you want it to be... most sold after the normal product, but it seems you are talking about higher pricing and better margin. Could you please just clarify whether you've changed your strategy in terms of how you price this product, or it's that the carbon footprint is lower, hence you probably benefit with a higher margin because of the lower So that's my first question. And I think the second one is about cost inflation and the pricing. And you talked about cost inflation being practice to high single digits. And looking at how the pricing evolved last year and what you are indicating that you would be raising prices, it looks like you don't need any pricing changes unless the energy prices kind of start moving up again.

Look, we talked on the pricing a bit before, and we are in a good position. And we managed this huge mountain of cost inflation in 2022, and now I think we are in a much different scenario. And I think, again, we have a good position on the margins. I think all our key markets have further price increases for this year planned. So it's even that we go ahead here and the costs at the moment look like they came down. So that's why I have such a confident outlook for you today that we probably should not worry too much on the margins in 2023. If you allow me, then I would not like to say much more. And we talk about this after Q1. On these lower carbon products, we are very happy to have launched these global brands of EcoPact, where we have the promise that it's at least 30% CO2 reduced compared to ordinary products. The same for Cement, where the product name is Eco Planet, so very successful brands, and they make already a significant part of our sales in those two segments. Now, what we try to do, these products, they have higher sales prices, but let's say in the single digit percentage or something. And this is important for two reasons. The first reason is the customer, I would say, is well accepting sustainability when it comes with a moderate price increase. And second, for us at Holcim, we want those products to be our main products. As you know, we operate large scale supply chains and we want not to have niche products. So we want sustainability to be part of the main product range. This is why for us, those products have to be our blockbuster products and that's why we don't price them at 20, 30, 40% higher and they remain in the niche. We want them to be our main product. So these are the two reasons how we're gonna do that and working very well.

Yeah, just following up on the, sorry, a clarification on the EcoPlanet. You talk about you've launched in 27 markets. Could you give us how the market's there or what percentage of your products in Europe are EcoPlanet now?

So we have it now fully launched in all key markets. We first launched the EcoPact, the low carbon concrete, and then we launched EcoPlanet later. It is also on the same trajectory as EcoPact. EcoPact, I think we announced, is it 13% of sales now already? In concrete, and EcoPlanet is on the same trajectory, it's just with a bit of a time lag of a year behind. the EcoPAC launch.

All right. Thank you very much.

Last question from the webcast comes from Arnold Lehman, Bank of America. Mr. Lehman, your line is open.

Thank you very much. Hello, Jan. Hello, Geraldine. Thank you for taking my questions. Two questions. Firstly, on CO2, interesting that you're talking about CO2 per net sales. You mentioned the 20% reduction last year. I think you're targeting 10% reduction for this year. Firstly, could you give us the absolute number of CO2 per nut sales for 2021 and 2022 and in your target of minus 10 for this year? what is underlying reduction and what is related to change in scopes, for example, the recent acquisitions. That's my first question. And my second question is on currency. There's been a lot of devaluation in some African countries, in particular Egypt, Nigeria, or, you know, Zambia, Kenya, et cetera. Are you confident that you can protect your margins through price increases to offset the devaluation this year?

Thank you. So, Anu, on the first question, we have all the calculation in the annual report and I think we also have values to the numbers here. So, we talked about this a bit earlier. I think that a large part, of course, comes from our strategy to faster grow in solutions and products and other sustainable building solutions and another part comes from the decarbonization where last year we reduced CO2 per ton of cementitious by 2%. So that also plays into that and we have all the numbers available in the annual report and And again, I think this is a very strong strategy of Holcim to track all those decarbonization efforts from a product line like cement to the overall company. And this is what we will be doing ongoing.

And I know, yes, you're right to protect the margins in the countries with such currencies, where there is strong devaluation or hyperinflation, and you need to increase your prices. And our teams know it very well. And I can assure you that when you take the habit of these countries back in Swiss francs from one year to another, we find the same amount or higher which is a proof that we do effectively take care and pass on prices as often as necessary and sometimes it's quite frequent for the reason you mentioned.

Very good. Thank you very much. Thank you so much. I think we are at the end of the Q&A. It's my pleasure now for all the people who came here that we can have lunch together and some further discussions. We have all our executive committee members here, so the hat for... from Asia, Middle East, Africa, Europe, Latin America, North America, as well as our head of solutions and products and our chief sustainability officer. So please take the opportunity to engage in more discussions. And for those people joined by webcast, I wish you a good Friday and hope to see you very soon in person. Thank you very much for attending.