Amrize Ltd Ordinary Shares

a warm welcome to our Hafer 2023 results presentation. I am Benedicte Maier from the Investor Relations team, and I'm delighted to connect again with all of you today. Here with me at my side, I have our Chairman and CEO, Jan Janisch, and our CFO, Stefan Kindler. They will walk us through the company's highlight and performance of the last six months. After that, we will have the chance to take your questions. If you would like to ask your question, please click on the link which is visible on your screen and follow the instructions. If you're joining us by phone today, please press star one four if you would like to enter the queue. And if you would like to withdraw from the queue, press star one five. With that said, I will now hand it over to you, Yann. Please go ahead.

Good morning, everyone, and very welcome to have you all here for our half year report. Let me start with talking about some of the highlights of our strong performance in the first half before Stefan gives us more detail on the financials. The first half here was an excellent performance of Holcim. I'm very pleased that our organic growth has continued in the second quarter of the year with 7%, making more than 7% organic sales growth in the first half of the year. Then, as we promised in our outlook, we have an overproportional EBIT improvement by more than 13%, leading us to a new record EBIT margin of more than 21% in the second quarter of 2023. Very proud of this, and we will discuss many of the areas, how we can achieve now such a record-setting margin with our move into solutions and products, but also by decarbonizing our product range and receiving premiums for the products and getting into value selling, system selling. And this all shows now that the new Stronghold Sim will deliver much more increased margins now, but also in the future. We have continued with our speed in transformation. So we had 18 acquisitions in the first half of the year. Another eight acquisitions to strengthen our new platforms for solutions and products. And also 10 very value-accretive Boldon acquisitions to strengthen and grow our business segments in aggregates and ready-mix concrete. Our expansion in the most attractive North American market is continuing and we are on our way to make this region 40% of the group sales. On climate action, we have further accelerated. Very happy to report that our C2 per net sales has decreased by another 18% in the first half of this year. And also we have received further grants of the European Union Innovation Fund for our leading carbon capture utilization and storage plants, where we have now already five grants out of a total nine grants given to our sector. Overall, a very successful first half of the year and confirms our guidance for the full year where we are looking forward to have organic sales growth more than 6% and an EBIT growth of more than 10% and also delivering the cash flow and the other KPIs as promised and guided beginning of the year. Let's look into some of the details of our results. First, this is the overview now on the EBIT margin, where we achieved now a new level of performance, more than 21%. And we will continue here to set the benchmark here in billing materials when it comes to EBIT margin. We have on the acquisitions. I go to the second slide here. We have spent 1.8 billion Swiss francs in the first half of the year to continue our growth investments. Eight acquisitions for solutions and products, most prominently Duralast, one of the leaders in flat roofing systems. is already a member of the Holcim family as of April 1st, has started very well with also increased profitability in the first three months of being with Holcim and is completing our footprint in the U.S., We now have 30 production facilities to serve all the roofing needs from flat roof to residential housing, from insulation to spray from insulation. We have a complete range here of solutions for this very attractive roofing market in North America. We're also expanding the roofing segment in Europe. We could take over one of the leading manufacturers of thermoplastic roofing systems in Germany earlier this year. And in Latin America, we also enter the roofing, the waterproofing, but also the mortar market to build up also here strong growth platforms in solutions and products. Very happy that on the very value accretive bold on site, we had 10 acquisitions already in the first six months of the year. And you see the characteristics we look for. We treat those acquisitions as growth platforms, expect the minimum growth of more than 5% per annum. These local acquisitions are very highly synergistic. And the ROIC is already achieved within the first three years above 10 percent on group level. And all those acquisitions are value accretive from year one. The North American, a very interesting slide who shows our successful expansion. If you recall, four years ago, this was about 24% of Holcim. And now this is the biggest region, not only the biggest one, but also the region with a very positive outlook. We'll reach 40% of our group net sales. And you see here the fantastic balance we have among the four business segments. with solutions and products already being the biggest one, and then followed by cement, ready mix, and aggregates. And overall, we are one of the leading players now in North America, with expected net sales of around $12 billion already for 2023. We have a bit more details on North America on the next slide. You see our strong market positions. We are the number one in cement, already the number two in commercial flat roofing market. And also we are strong number five in the ready mix and the aggregate segment. What's very interesting here is we are best positioned now for all the upcoming growth in North America. While we have been already happy now with significant growth and margin expansion in North America, we have now all these new infrastructure bills coming in. We have the Infrastructure Investment and Jobs Act. the Inflation Reduction Act, and then not to forget, we have all these on-shoring investments from all those companies, from automotive to the white goods industry, from electronics to all the new industries, battery makers, Wind parks. We have a huge order book already of all these onshoring investments. And we are very happy to support our customers to make this happen over the coming years. All this extra momentum will just start now. Basically, we'll start next year or end of this year. And we have already secured more than 70 infrastructure projects. And we expect an additional boost of our organic growth by 5% per annum based on our targeting here those new growth opportunities. I talked about this. We have established now the leading roofing growth platform in the U.S. 30 production facilities here well-spent to serve all the mega cities, all the large metropolitan area in the U.S., covering from the residential market to the commercial market, from new build to especially refurbishment and to system selling. Going to have an exciting day ahead of us on September 21st. We're going to meet in Connecticut and want to show you more details on how this growth platform of roofing will be a big part of Holcim's future. And I hope many of you are able to join us in Connecticut, where we show you much more details on technologies, system selling, on geographies in the markets. And so on. You see this also on the second slide where you see that we have now the leading range of advanced roofing systems. And all this, you are very much invited to meet here the business and to meet our people in the field to do this every day. The innovation, the customers who are doing already 7 percent, 70 percent of the sales in a real roof, 80 percent in system selling. It's really exciting. And I hope many of you. will be able to join us in Connecticut on September 21st. We have the reduction in CO2. This is at the heart of our strategy of Wholesale Strategy 2025, accelerating green growth. You see here the very rapid reduction of CO2 per net sales, another reduction of 18%. We're doing this by decarbonizing our existing products and solutions, but also by introducing new low-carbon footprint solutions like our new brands, EcoPlanet, EcoPact. And of course, the new footprint we are having with more solutions and product sales helps us here to get a new profile of Holcim as the leader in decarbonizing buildings. You'll see some of the key initiatives here on the next page. I just want to mention maybe two or three aspects. I think the climate report is the leading roadmap in our industry, which describes how Holcim goes to net zero. I'm very happy we have this reporting and the roadmap in place, and our shareholders are supporting this strongly. They voted with more than 95% at our last annual General Assembly. We are in carbon capture. I think we become the leader in carbon capturing. We have another three projects selected by the EU Innovation Fund and makes a total of five projects. while only nine grants were given. So this is very promising. I think this shows our projects are very realistic. They have great roadmaps and have all the right characteristics here to be part of decarbonizing Europe and going for carbon capture utilization and storage. Lastly, I'm super proud of our branding. We have introduced the EcoPak brand, so the first global range of low-carbon concrete. We introduced that brand three years ago globally, and this is already a $1 billion brand in 2023. Very proud that we have been able to establish this lighthouse brand here for Holcim globally. We have on EcoPlanet, it's the same, at least a 30% CO2 reduction in cement. We've introduced the brand two and a half years ago, and this will already be a $2 billion brand in 2023. And this is fantastic. big part of the roadmap here of Holcim for sustainability, decarbonization, but also to achieve further margin improvements in our business. On the carbon capture I talked already about, we have more details in the slide deck. We're also going to do some capital market day here sort of in November. We want to show you this. So please also reserve some time. We want to show you those projects. going to most likely show you some recycling. We're going to be one of the biggest recycling companies in the world, building new from old. So literally taking all the construction demolition materials back and turning them back into products. And this is already happening today. We're very happy to share this with you later this year. With this, I'm very happy to hand over to Stefan for some more details.

Good morning, everybody. Very happy to be here and to present our very good half-year results to you. I'll start with the bridge on the net sales. What you see here is the bridge explaining the 7.4% organic growth. The acquisitions and divestments impact are mainly India. You remember we divested that last year, but also Brazil, which was divested last year. And acquisitions in solutions and products worth probably 450 million. The divestment of India is about 2 billion. Organic growth, you see here. The FX effect, this is translation effects from the ever-appreciating Swiss franc. About 60% of that effect here is from mature markets, about 40% from emerging markets. It's about 6% effect on FX, which seems to be what the global companies reporting in Swiss francs show. On the next page, I want to show you the EBIT growth. So overproportional EBIT growth of 13.4%. The explanations on the bridge from the reported to the organic are pretty similar to what I explained on the sales chart. It is India, it is Brazil, but it's also the acquisitions and solutions and products. And the FX effect here, similar story as on the chart before about 7%. This is the segmentation that we show you. We show the company in five segments. This is because Our five segments have different drivers of the business, different growth drivers and different dynamics in the markets. And we think the broad-based growth that this company shows, that Wholesome shows, is a real strength of this company. We are transforming this company, and we think this is part of the story we want to explain to you, how we drive growth and how we drive the transformation in the future. Now, what I would also want to say here is we're going to explain more of that in the two events that Jan already mentioned. We're going to have the solutions and products events in September, and we're going to have the decarbonization event in November. And I think it would be great if you can visit those events, because then you will also understand why we segment the company this way. Now let me go into a bit more detail on each of those segments. I'm starting with North America with an outstanding performance. We have almost 16% organic growth on sales and we have almost 26% organic growth on recurring EBIT. The strong demand in both the US and the Canada And Jan said it before, the growth is supported by onshoring activities and investments in the energy sector. There are several regions in the United States that are currently practically booming and where cement product is almost short. They have a significant overproportional organic EBIT growth here. And we also expect a good performance to continue into the second half. At least we built enough stock for that. Latin America, another quarter of profitable growth, almost 24% organic sales growth, 16% recurring EBIT growth. It is the 12th consecutive quarter of profitable organic growth with a broad-based performance. We have particularly strong performances in Mexico. I think we explained before that we have infrastructure projects. There's a big dam. There's a Maya train. There are refineries. There are industrial projects as well. And we participate in all of those. We have a significant improvement in alternative fuels and in low carbon solutions. And we also expect to continue the performance very strong into the second half of the year. Europe. Europe sees a strong increase in profitability. You see a net sales organic growth of 10 percent with a recurring EBIT growth of almost 33 percent. This is broad based across the countries in Europe. And we increase profitability across all key markets. We have a strong margin expansion, as you can see here, driven by high value solution and very disciplined cost management. We already completed seven bolt-on acquisitions in aggregates, ready mix and in recycling operations. And we expect a strong H2 with an acceleration in the progress in decarbonization. Hence also our event in November of this year. Asia, Middle East, and Africa, again, outstanding margin expansion, almost 10% organic growth on sales, with 15% organic growth on recurring EBIT. Profitable organic growth expansion with a margin expansion of 4.5 percentage points. The performance here was driven mainly by Australia and Nigeria. We announced the divestment of South Africa, which is signed, and we also continue the strong momentum into the second half. That brings me to roofing, where our destocking is completed and where we now have a solid outlook into the second half. We have a strong growth momentum in the residential roofing in Q2 already, and we completed the destocking in the commercial roofing, as I just said. We continued the expansion with eight acquisitions, and as I just said, we have a strong growth in roofing expected in H2. I want to go in the next page. I want to go in a slightly bit more detail. Why do I make the statement that we have a positive outlook? I would like first to focus on the left side of the chart, which shows you our Elevate business, formerly Firestone. And what you see here is the effects we saw in the second and third quarter of last year. You remember probably we already explained to you at that time raw materials for this business were short. Hence, finished product was short on the market. Hence, roofing companies and construction companies basically bought any product they could get. They stored it on construction site. They stored it in warehouses. And therefore, we saw elevated levels of sales in the second and third quarter of last year. When that ended, we saw in the fourth quarter and the first quarter of this year the opposite effect. But what you can also see in the right bar, that this is coming back. And when we look at the second quarter of this year, month by month, we would also see a strongly increasing trend. So we're convinced that this is complete. On the other side, on the right hand side of the chart, you see Malarkey with strong growth momentum in Q2 already. You see a very strong second quarter. And lastly, Duralast, our latest acquisition that we consolidate as of April. Strong order books, recurring EBIT of up to 20 percent. Very positive momentum in H1. Performer sales this year of about 540 million. Big synergies and an EBITDA multiple of 7.4% post the synergy. So we think roofing looks into a very good second half. This is a look at our P&L. Reported EPS growth by 15% from 1 Swiss franc 90 to 2 Swiss franc 19. When you look at the P&L, you see about 11% negative sales, 6% negative operating profit. Remind you, this is reported. So if you extract India divestment and Brazil divestment, you come back to the like-for-like numbers that we talked about before. Cash flow or cash flow stands at around 80 million. This is OK. As you know, our business is very seasonal as in terms of cash flow. And this is weighed very heavily towards the second half of the year. This has always been like that in the last year, in the years before. So we make almost all our cash flow in the second half. So being slightly positive in the first half is good. The chart, in order to really understand the chart, I should really exclude India in the first half of last year, because if I did that, you would see that the drivers for us being slightly below last year is higher stock levels in the United States in order to be able to supply the second half and a bit of anticipated cutbacks. That's it for me. With that, I would like to give back to Jan for the outlook and guidance.

Yeah, thank you, Stefan. And we are obviously happy that our H1 results are confirming our positive outlook for the full year. So we can fully confirm our guidance. We will see a continuation of the profitable growth that you have seen in H1. We see that also for H2. We have good order books. We have plenty of good projects. We are participating. So we believe that the net sales for the full year will grow for above 6 percent. The EBIT will be over proportionally to above 10 percent. And we are obviously on the way to have the industry leading EBIT margin well above 16 percent. On the cash flow, as Stefan just mentioned, we are confident that this will be another $3 billion cash flow year. And the reduction of CO2 per net sales is well underway and will reach more than 10% for the full year 2023. I think with this, I hand over to Benedikt for the Q&A.

Thank you, Jan. And we will open the Q&A session. I would like to remind you a few technical information. So if you would like to ask a question, you should click on the Q&A button, which is visible on your screen. If you are joining us by phone, you should press star one four to enter the queue and be able to ask your question. So the first question today comes from Paul Roger from Exxon. Good morning, Paul. Please go ahead.

Good morning, Benedict and Yann and Stéphane. Congratulations on the results. I just have two questions. I mean, the first one is on U.S. roofing. It was interesting. One of your competitors last week was talking about the commercial segment being down low teams this year. It sounds like you're a bit more upbeat. Can you just talk a bit more about the outlook and what gives you confidence? And then the second one is on European margins. I was looking at that detail in your report. It looks like margins in cement increased by about 400 basis points in the first half. And obviously that's before energy costs really declined. So what can we expect for the second half and how sustainable is that margin momentum?

Hey, Paul, good morning, and thank you for having the first question. So the roofing is an interesting situation. We never had such a stocking or a relevant stocking topic for as long as I'm in the industry, so more than 25 years, and that was something new. So we provide you some more transparency in the slide presentation. Which Stefan, maybe we can go there, Stefan, which Stefan has shared earlier that we really had an maybe extraordinary Q2, Q3 last year. And you see the stocking effect where literally the roofing companies, the distributor were trying to to have extra stock stock. And that happened. You see now we are back already normalized in Q2 2023. And the order books are excellent. You have to see that our customers, the roofers, they are fully booked for the next 12 months. So we have no worries here about this business. And of course, we are we are we are happy that the stocking is now over. That was something a new experience and not a positive one in one way. When you look at residential, the situation is a bit different. Our residential business is growing. You see the Malaki sales. We have a new record in the Q2 this year in sales and also good profitability. And the reason is that we are here 90 percent in re-roofing. And all these weather effects, you know, we had this bad weather in California, a lot of rain. We had a very intense hail season in the first half of the year. So many people had to refurbish the roof. And Malachi is the number one choice to do that. We have the special polymer modified shingles, which have the highest quality and the higher weather quality. So if you need to replace your roof after a hailstorm, you probably go for a higher quality of shingles, which come from Malaki. So in roofing, in residential, the destocking is not already back on normalized levels. This is a new good level. So overall in roofing, we're going to see a very good year for Holcim in the second half of the year. You asked about the EU situation and you, of course, you sneaked in a bit of margin question, Paul, but I'm happy to answer. You know, in Europe, we have a new reality for building materials where it's about decarbonization. It's about decarbonization, making construction and buildings sustainable. And we are here at the forefront. So when I look at my European business, You have to notice the markets are soft on the first half of the year. So whole sims volumes might be down something like 6% in the first half year. But our sales are up more than 10%, as you have seen on the slide. And the difference is selling more value-added products and systems. And the profitability is then up more than 30%, as you have seen in the chart. And this is not a short-term trend. This is a very sustainable trend. New reality in Europe where decarbonization is the key to avoid CO2 emissions in the plants and to provide more sustainable solutions and products for our customers, and that is highly rewarded. So you will see Europe at Holcim in the future operating on significantly improved margins.

That's great. Thanks, Jan. I'll see you across the pond in September.

Thank you. So we will take the next question from Yacine Touari from Onfield. Please, Yacine, go ahead.

Yes, good morning.

A couple of questions. First, on your solution and product business, organic growth was minus 14% in H1 2023. Could you give us a bit of a breakdown between the volume decline and the price effect? And also, could you give us a bit of an outlook for the pricing development in the second part of the year? I understand that there are additional price increases for asphalt shingles in August. What about the single-ply membrane? Do you expect to keep prices stable? Would you be able to increase prices sequentially? And then a second question about where do you see this solution and product business in the next five to ten years? Do you see the opportunity to do the acquisition? in Europe, could you consider a large private company in the roofing sector? And if you see a great fit, could you consider raising capital?

Thank you. Thank you for the questions. Look, first of all, you have more specific questions on pricing and roofing. First of all, we are satisfied with the current pricing and roofing. We have very good margins. Then you, I think, observed this well, that the shingle market is now in already way out of the destocking into growth. So it's a good momentum for the pricing, which also will do in a very responsible way for the customer market. On the flat roofing, we're very happy to continue with the good pricing. And now let's go into the new growth before we get too much dreams about further increased pricing. But overall, very strong for the segment. You will see growth, strong growth in solutions and products for the second half. We will finish this year well above 20% of group sales in solutions and products, well on track of our promise to achieve 30% of our sales in solutions and products by 2025. And on the way, you have seen we did eight acquisitions already in the first half of the year in solutions and products. So you can expect from us that we are here very active like we have been the last years and very successful. To raise capital, I think, is not really a topic for us, as we have done the transformation of Holcim in a very value-accretive way. You remember five years ago, our EBITDA to net debt was around 2.4, 2.5 times. Last year, we closed with a record of 0.9 times. We have significantly decreased our net debt at Holcim. which is a very good idea because that gives us the freedom to acquire companies whenever we find the right targets for the right valuation. And this year, we will also deliver a strong balance sheet for the year end. And this is how we like it at Holcim. No need to raise capital. We just finished our share buyback. And depending on the success of the second half of the year, I'm rather positive to discuss what we do for the shareholders to satisfy them.

On the split between price and volume for the first half, where you had a 14% decline organically, is it something that you can provide or give a little bit more color on?

I'm not comfortable because it's such a mix. As you have seen, we established now the roofing platform. Even our roofing platform is a full range. So from the shingles for the classic residential homes to the commercial flat roofing business. Here, in the meantime, you have all membranes needed from PVC to TPO to EPDM. You have the insulation material. We do system selling 80%. And we are following up on every segment. And every segment in these times is quite different. So we are not so comfortable now to make average numbers out there. But you can see that the destocking you see in the chart is a volume effect because we have been able to keep the prices or good prices into 2023. Thank you very much.

The next question comes from the line of Elodie Roll from JP Morgan. Good morning, Elodie.

Hi, good morning. Thank you for taking my question. First of all, sorry to come back on the building and solution business, but you seem to be very confident about the outlook for H2 after the disturbing impact in H1. So can I ask simply, do we expect, I mean, should we expect to see the segment up this year in operating profit, i.e., can you get back on the performance in H2 that you've seen in H1 recover from that? And second, if we move to Europe, just a simple question on prices at the moment, are you seeing any signs of weakness or still no sign of weakness in prices despite the challenging volume environment?

Good morning, Elodie. Thank you for the question. Look, I don't can give you another guidance now for solutions and products for the year, but I can promise you that I expect profitable growth in the second half of the year. So you will see sales growth and EBIT growth in the second half of the year to bring growth. Solutions and products back on the growth path we want to see organically. So this I can share with you. I can not give you now a guidance for the full year, but this happy to share. We were going to have a very good situation in H1, H2. On the pricing, we are. Very confident we have good pricing in Europe, as we talked about before, and we will stick to our pricing. And our pricing is based on many effects from our eco packed range to the eco planet range and a good discipline. So we don't expect prices to go in the wrong direction for the second half of the year.

Great. Thank you. And if I can just make a third one. I think you said you would give us the price, cost, and volume in terms of the organic growth in H1. Can we have that?

All right. Stefan, you want to speak about the reporting?

Yeah. Look, in the in the segment of cement, aggregates and concrete, we had a price increase of mid double digit numbers. So let's say around around around 15 percent to offset the massive increases that we have in the energy materials, raw materials and distribution costs. This is what we saw in the first half of this year, and Diane already commented on the pricing from solutions and products.

Okay, thanks very much.

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

Thank you very much. Good morning, everybody. I have three questions, if I may. The first two are regarding Middle East, Africa. There's a decent recovery in the second quarter in the region. Could you give us a bit of color? What are the drivers, and do you think there are sustainable improvements in the region? Related to that, I think you announced the disposal of South Africa. Could you give us a bit more detail on this transaction? Is it meaningful in terms of sales contribution and what are the proceeds? And more generally, should we expect more asset disposals going forward in Middle East and Africa? And my last question is on net debt. It's almost double, if I'm correct, at the end of June relative to the end of December, I think from $6 billion to about $11 billion. I appreciate there's been some acquisition and some share buybacks, but where do you expect the debt to land toward the end of the year, please? Thank you very much.

Good morning, Arno. Let me take the first two questions. So we are, of course, very satisfied with the results in Middle East, Africa, but also in Asia, the exception of China, where the market remained softer than most people anticipated. We have very good results in Australia, in the Philippines, and then As you mentioned, we have good results, Middle East, Africa. I think we have sharpened our footprint in this region and we have divested a lot of businesses. If you recall from Zambia, Zimbabwe, Malawi to other positions and we have strengthened also our operations. earnings and return profile in this region. So this is not a short-term trend. This is also very sustainable results. And I think you can expect also a strong second quarter in this region. From us, you mentioned the divestment. We will keep very active. We have 18 acquisitions in the first half of the year. Till today, we have one divestment, which is South Africa's a rather small position we had there. And you can expect that we're also going to shape the portfolio and the divestment side a bit over the coming months and years.

So I would take your question on net debt. You're right, the net debt at year's end was about $6 billion. And then the drivers that we had in the first half was we acquired DuraLast. We did several bolt-on acquisitions, as Jan explained in his part. We paid a dividend. We did a share buyback and that lands us at about 11 billion for the half year. Now, as I explained when I talked about cash flow before, those 3 million cash flow roughly are coming in in the second half. And so when you deduct that from our debt level that we currently have, plus some minor bold-ons and some debt redemption, you will find that at the year-end, we will comfortably land in the range of where we need to be for our current credit rating, and comfortably.

Thank you, Stefan. Very helpful. Thank you very much. The next question comes from the line of Gregor Kuglic from UBS. Good morning, Gregor.

Hi, good morning. I have a few questions. Maybe firstly, a technical one. If you could just update us what your latest thinking is on the Forex and M&A impact on EBIT for this year, considering your guidance obviously is like for like. Related to that is, you know, you're guiding for 16%, I think, that's in margin terms, but most, you know, most I think the consensus is quite, you know, north of 17. So I guess I want to explore why you were not comfortable kind of going a little bit higher. And then maybe the second question on carbon capture. So we saw the announcement the other day, and I think sort of the project, my calculation is that all the carbon capture projects have announced in Europe kind of cover 40% of the EU emissions. I want to check if that's correct. And I want to kind of understand, I don't know, I'm sure you've done the math, but roughly what you think your all-in cost of carbon abatement is compared to the carbon price of 90. What do you think you're paying on a sort of per ton basis?

Hey, Gregor. Yeah, thank you. Look on the EBIT margin. We can be very simple. We guided above 16 percent and we will make above 16. I think you point out right fully that we are ahead of this. So so let's see where we finally end. You know, I'm not a big fan of making small adjustments to the guidance. So above 16 is obviously still correct, but hopefully it will be quite significantly above 16. On the carbon capture utilization storage, I think the European Union has just started to deploy those grants. And they just started basically 13 months ago with the first batch of grants. And we were among... those grants and now came the next round and there will be many more rounds coming so we are not at 40 percent at this point in time but we are on a very impressive track now where the european union wants to make the decarbonization happening but where they provide the support for the companies like holcim to not only give the grants but also to announce what they did beginning of the year, the border adjustment for cement. So we have a very good framework which gives us enough certainty to invest in these projects. The projects are high return projects. You can imagine how much CO2 costs we will be avoiding with those projects. You can also imagine what a better product we produce, demanding probably higher premiums in the market for this net zero types of cement and other products. So we're very confident and I'm personally very happy to see that we are at the forefront because five of the nine projects for the sector are with Holcim. So that, I think, demonstrates that our people have rock-solid roadmaps and projects here to participate in this framework of the European Union.

Okay. Well, for your question... For your question on foreign exchange and scope, so as I said before, we had 6.1% foreign exchange impact in sales and 7.1% in EBIT due to the strengthening of the Swiss franc. Main impact is 60% is from mature markets, 40% of emerging markets. We do not guide on FX because I don't have the silver bullets to read the market. Where I can give you a bit more color is on scope. In sales, we had scope out of $2.3 billion. This is mainly India, as I said, plus Brazil. And we had scope in of about $600 million. this is mainly the acquisitions in roofing for the full year we would expect a net sales scope of about 1.8 billion due to the positive impact from the acquisitions in solutions and products and net scope in ebit of i would say below 500 million i hope this helps you excuse me you said what did you say for ebit below 500 million

Okay. Thank you.

We will now take the next question from the line of Cedar Egblom from Morgan Stanley. Good morning, Cedar.

Thanks very much. Good morning. I've got a question just on the decarbonization backdrop in Europe. If you look at it high level, it sounds a little bit too good to be true. You've got really strong pricing, which is proving to be sticky because players are acting rationally. You're cutting your costs as you are investing in alternative fuels and a lower tinker ratio. And at the same time, a lot, not all, but a lot of the financing for some of the big CapEx projects are coming from the European Commission, the taxpayer. So the question is, What is the current tone when we think about the commission? Are they looking at your very healthy margin recovery and cash flows and wondering how long they need to be committed to the big capex checks? Or is there a point at some point not in the too far future where the industry, yourselves included, will probably have to start thinking about accelerating some of those big capex projects in order to justify government support, or just taking a bigger slice of that capex yourself. I'm just trying to square how everything can be great. You make fantastic cash flows, and yet government funds a lot of the project. Thank you.

Hi, Sita. No, that's a great question. And I think it all comes back that in Europe we have a new economic framework for building materials, which are now heavily influenced by the framework of the CO2 certificates and all the regulation of the Green Deal. And this is a race. And the companies who are the fastest are rewarded. So Holcim is very fast in decarbonizing process and production, but also decarbonizing the customer solutions. So this is a race. If I'm able to decarbonize faster than others, if I'm able to have more promising projects to get even subsidies, I have the margin expansion I deserve. And then we have others who are maybe in a different and more difficult situation. So it's a new game. We see now in the last two years, we saw a heavy impact of the CO2 cost into building material prices, most prominently into cement, which basically made... inexpensive cement or cheap cement go away. So we have the classical markets where we have even cement prices below 100 euros per ton. Let's say in the southern parts of Europe, that's all history. There's no cement price below 100 euros per ton. And this is because we have the CO2 costs coming into the cement. Everyone is short in certificates. And now this incentive scheme is working. So it's rewarding the company who decarbonizes the best. The second aspect, besides the pure cost of CO2, is the influence it has on production capacity. because you receive the maximum amount of certificates for around 80% of your production capacity. So that means to produce above 80% of capacity is very painful, because then you have to cover the full cost of the CO2, which is almost unbearable in today's market conditions. So you have all that, and this just now is the new economic race for decarbonizing Europe. Lastly, I want to point out that the pricing for building materials, especially when it comes to cement, is on a level that we can have cement prices doubling or tripling, which will still have... same levels of demand as of today, because it's simply the highest performing material for many, many building material products. And that's why we have the price elasticity, which we need to make decarbonizing a reality.

We now take the next question from the line of Yves Bromhead from Societe Generale. Good morning, Yves. Please go ahead.

Hi, thank you very much for taking my questions. Just a few for me. Starting back to the volumes in Europe, I think your prior expectation was for some sequential improvement in the second half of 2023. I'm just wondering with the current backdrop if that's still the case. That's my question number one. Question two on the cost side, can you actually update us on your expectations regarding energy input costs and how you think they will develop in the second half of the year? And lastly, also on the cost of labor inflation, we've seen actually recent articles suggesting syndicates and different parties in Europe are chasing much higher wage inflation in percentage terms as corporate profit margins continue to expand. I'm just wondering if you're seeing these pressures and if it's changing your view of wage inflation as we migrate towards 2024.

Look, thank you. I think we are in a very good position for the second half of the year. I'm also reading the newspaper with all the recession aspects and all of that. There's no recession at Holstein for the second half of the year. We have good order books, so you can expect the profitable growth, which we have shown the first half will also continue the second half of the year across our business segments and across our geographies. So we're very confident to share this information with you. On the cost side, we still had very high costs in the second quarter of this year because the comparison base was still significantly lower. And now that will change for the second half of the year. It looks like our costs like energy, but also logistics will be below last year's level. And then, as you mentioned out, the labor costs will be higher. remaining on a high side. But if you combine the cost information and our discussion on pricing before, you will see that we are very confident on the margins for H2.

The next question is coming from... Sorry, Yves. Yes, please go ahead.

I just wanted to push you on the labour inflation. Are you seeing any incremental increases that exceed the mid-single-digit inflation that we've seen in Europe starting to be asked and demanded by your employees for 24? Or is the ballpark figure of low-single to mid-single-digit labour inflation still prevailing?

precise question you know i look it will not be in the low single digit i think it will be in the mid single digit and uh and for wholesome you know we we take care of our employees and we understand the inflationary cost environment and the difficult situation many of the wholesome employees and the family face so we are not trying to uh to be limiting proper salaries. And that's why we have budgeted for, I would say, significant salary situation or satisfying a set of situations in the countries, which will be more mid single digit, something like that. And and. You know, that's not a bad thing. I think properly priced salaries is a good thing. It forces you to be fast in digitalization, to be better in value selling, to make sure you create the eco-packed, the eco-planned products of Holcim to bring more value to your customers. So this, for me, is not a negative aspect. We have it well budgeted and we look forward to deliver strong margins in H2.

We will now take the next question from Luis Prieto from Kepler Chevreux. Good morning, Luis.

Good morning, everyone. Thanks a lot for taking my questions. I have a couple of them, if I may. The first one is if it would be possible to get an idea what your recurring EBIT margin for U.S. roofing alone was in the first half of the year and what it could look like for the full year 2023. I guess what I'm trying to get to is some kind of measure of synergy delivery so far. And the second question would be, What does the M&A pipeline look like now on the solutions and products front? Where should we see most of the firepower to go into? Is it mainly roofing? Are there other segments of increasing interest?

Hey, Luis. Look, we were very happy to report. I think we report the EBIT margin roofing for last year, if I recall. And we reported 19 percent EBIT margin. That was, I think, already quite a satisfying margin. You can imagine that when you look at the volume aspects we discussed earlier, the margin was not fully defendable in the first half of the year. But I'm very confident that For the full year, we're going to see a similar margin, and our margin target is maybe around 20% for that business because it's a great business with growth, innovation, system selling, refurbishment, sales. So that business should be around a 20% EBIT margin, and I think we are well on track to get there. M&A Pipeline, this is obviously we have been very active in the first half of the year. And we were able to acquire 18 companies, 8 for solutions and products, another 10 for the bolt-ons. Second half of the year will be interesting. The market has turned a little bit. We're trying to improve. to pay a bit lower valuations, which then sometimes an acquisition doesn't materialize. So I have no outlook for you. I can just confirm that this strategy will still be the same for us. So we look for bold acquisitions, so local family-owned companies in North America, in Europe, and selectively in Latin America. And then we also look for opportunities to accelerate solutions and products.

And Jan, if I may ask, regarding your first reply, that 20% EBIT margin, that's next year, following year? What's the timeframe for that?

Let's see. You know, I don't like to speculate. I'm just saying we provided the EBIT margin for last year, which was, I think, a satisfying 19%. So delivering already well, well ahead of the synergies and well ahead of the promises we made at the time of acquisitions. And you can regard the second half of the year. We are fully on track. And I expect EBIT margin for that business to be ahead of 19%.

Excellent. Thanks again.

We'll now take the next question from the line of Martin Hussler from ZKB. Good morning, Martin.

Yes, good morning and thank you for taking my question, Jan, Stefan and Benedikt. The first question would be maybe a top-downish view, but if we should expect price over cost to improve in the course of the second half of the year, I was just wondering what held you back to increase the full-year guidance on EBIT growth?

Martin, good morning, Martin. We discussed a bit before, you know, it's always a question a bit. We hear a lot of negative news at the moment about macroeconomics, geopolitics. And, you know, when you look at the Swiss media, you know, you feel like every second company makes a profit warning for this year. So it's an environment where I'm extremely conservative about. with the outlook. And I think you make the right math. We have been now above consensus, above expectations for the first half of the year. And we give you no reason in this call to think different from H2. But nevertheless, let's stay a bit conservative and let's talk after Q3 where our landing zone will be. And if things go well, maybe we have a different outlook. But for now, I think in this challenging macroeconomic environment, I think it's wise to keep it rather conservative.

Okay, thank you. And then my second question would be, If I look at solution and products, and obviously you also have non-roofing, non-insulation, non-martial business in there, which is diluting the margin of the whole solution and products division. Could there be any divestments in the cards? It's a bit of a burden that those high volume, low margin businesses affect actually the whole divisional margin.

you think about that that's a great question and and look we have obviously positioned this solutions and product segment for growth for innovation for more repair and refurbishment sales compared to new builds so i think that is all well positioned and your observation is correct that the margin is not where the margin should be That's the way how to look at it, because the other segments in there, we have some selected high technology precast business. We have water business in there. So all businesses which tick the right boxes for growth and for margins. And this is what we want to see. So we will not shape this, down shape this business. We will rather improve the margins for all businesses. platforms we have in solutions and products.

Thanks a lot.

The next question comes from the line of Brijesh Kumar from HSBC. Please go ahead, Brijesh.

Hi, good morning. I have two questions. The first one is on U.S. So you helpfully planned out the 17 projects you have won, and that has... in excess of 5% organic growth in the next four years. Those 70 projects, are they all, or do you expect many more to kind of come in the second half of year and early next year? So that would be, and what's the kind of run rate would you expect going into the next four years in the U.S. in organic growth? And within that, I understand these possibly are mostly related to the traditional business. we think that 5% would be higher for cement aggregate and ready-mix, and obviously we have a solution product with a little different trajectory. Now, the next question is to Stephen. That's on the EBIT. Scope impact, you talked about 500 million. Can you speak out the numbers? Because that's something different from what we heard in Q1, I guess. You were talking about 300 million divestment impact for full year and some 100 odd million coming in and then including dual assets. So if you can just give a little more clarity about whether what's the real number we're looking for full year, that would be helpful. And possibly the last one on the CCUS projects, which you have won already three last year in the pipelines. Can you give us a little more flavor about what's the kind of funding requirement from your side? And when you talk about $2 billion for up to 2030, in million terms, how much million ton of your capacity can be converted for the CCUS projects?

Thank you for the questions. Let me take the first and the last question before Stefan gives us more clarity on the second question. Look, you asked me for more outlook on the growth on the U.S. market. And I'm not able to give you a precise number, but we talked about three things. I think the first one is we are very bullish on. on the U.S. when it comes for the next 8 to 10 years. We have one slide in the deck, I think it's slide 8, where we talk about these impacts now from the Infrastructure Investment and Job Acts, the Inflation Reduction Act, and then also all the on-shoring investments from the companies, from automotive, electronics, to white goods, to all the new industries, from battery makers to wind parks. And this will be Very significant for us. And we shared in the presentation that this will boost our organic growth by another 5 percent. And this is not a quarterly thing. This is not something for next year. This is for the next eight to 10 years where we expect such a support by these programs. And we have been planning for these acts for the last two years very much in detail. And this is why we have already secured more than 70 infrastructure projects who came out of those bills and a lot more will come. So that's the first driver in the U.S. The second driver we talked about that the roofing platform we established is a high growth segment of the building materials market and why we had the destocking topic in H1 of this year. we should be back on track for H2 and back on track for the years to come. In addition to this, we have a big catch-up in residential housing. They don't have enough inventory in residential housing in the U.S., and this will also be a positive trend. Now, please allow me to stay right here and don't give you a precise number now or add up all these effects, but you can understand we are very... positive on the U.S., especially as we have established such a strong footprint, being the number one in cement, the number two in flat roofing, and also number five positions for the other two business segments. So very, very confident here going forward. But I cannot give you the percentage number you look for aggregated. On the CCUS, we made now huge progress. So we shared with you the five new grants. If you go to our climate report, you will see all the projects we have in CCUS, including Canada, including US. Very promising and excellent roadmaps. At this point in time, I cannot give you the precise dates. I think we wrote in the climate report we will capture more than 5 million tons of CO2 starting before 2030 annually. But I think the number, the real number, will be significantly higher. And we will update our presentations as we have more clarity on the start of production of these many CCUS projects we are having at Holcim.

Okay, so for your question on scope, I was giving you round numbers before, but to be very, very precise, the net scope on sales is minus 1.8 billion with scope out of minus 2.9 and scope in of plus 1.1. And the EBIT net scope is around minus 0.2 with scope out of minus 0.3 and scope in of plus 0.1. This is the numbers I think you got from our investor relations department. And these are still the numbers.

All right. Let's now take the next question from the line of Yuri Serov from Redburn. Good morning, Yuri.

Hello.

Hello, Yuri. Yes, good morning. I have two questions about solutions and products in the U.S. First of all, looking at Malarkey's chart, and it shows very good performance in Q2, but then you were talking about some factors that were driving that performance that sounded a bit one-off, plus it was distorting, so probably there is a refilling of the supply chain. I just wonder whether we can be confident that this is the new base for growth. This is not driven by some one-off impacts. Us outsiders, for us, it's very difficult to know when the supply chain is being overfilled like we didn't know last year in commercial, so I'm just curious what's happening there. Sorry, long question, but the only indicators for U.S. residential show decreases, new housing, obviously, renovation as well, and your performance is very good. So I'm just trying to figure out how to square those things.

Hi, Juri. Look, I think we can say roofing is one of the most attractive segments in building materials. And there is an ongoing, continuous growth going forward. So we have... Roofing is, first of all, one of the most important design elements for the architects. At the same time, it's key to achieve the energy and sustainability levels you want to achieve for all buildings in the future. So roofs have to be properly insulated. Roofs have to be green roofs or solar roofs or cool roofs. So roofing will have increased functions. Today, but even more so in the future. So we see an ongoing increasing demand through all these trends in roofing. All the new roofing will be insulated. To insulate a roof is already doubling our sales per square meter. To make a solar or a green roof is even more fruitful on the sales side. So you will see all that. At the same time, we have already... 80% of our roofing sales is system selling. So we're not just providing a waterproofing membrane. We provide the full buildup with insulation. With installation, we make the full calculation for the roof. So what type of wind load the roof needs to have? What's the durability of the roof? What's the maintenance concept of the roof? What's the efficiency benefit of the roof? So very fulfilling specification work from our sales force. And we're very happy to have 80% already of our sales in this category of system selling. At the same time, our roofing sales is already 70% in re-roofing. So only 30% new build. We like re-roofing very much because this gives you even the opportunity for a bespoke specification. You assess the roof and you make a proposal how to properly refurbish it with all the key characteristics from insulation to what type of roof durability maintenance concept. And then in addition, how you turn an old roof into a new one. So these are all the trends we love about roofing. So we should not be worried about the long term growth trend in roofing and also the long term trend for profitable growth. And we have now this first time in I don't know how many years, this stocking effect, and now this is over, and you will see an H2R, a different picture for our roofing business again.

Okay, well, listen, that's very helpful in terms of understanding the strategic outlook, and this is very positive. But I wonder whether it's possible for you to answer specifically about Q2 and Malarkey. I mean, the numbers that you're showing, do they contain any one-off effects that will come out of the numbers in the future?

No, I can just tell you that we have one offs. You know, we reported last year already the growth and especially the 19 percent EBIT margin. These were firm, real numbers. There was nothing adjusted. And this is what you can expect from us going forward, that we have a strong 20 percent EBIT margin for this business. It's it's quite similar among the segments. After the restocking and we can provide you more data, maybe at our roofing day, which we're going to have in September. But but it's a very healthy business and we like to be part of all segments. If you look at our charts, we are the most complete and most advanced roofing platform from residential to. to flat roofing. In flat roofing, we have all the systems you need. We have all the membrane types you need. We have the insulation, and we have the full specification selling. So we are very happy to be at this position.

Okay. Let me try a second specific question. In solutions and products, you said that in H2, we will see growth. I just want to clarify, are you talking about sequential growth or year-on-year growth?

Sorry, could you repeat your question, please? We didn't get that. The line is not great.

Yes, in previous conversations, answering previous questions, you said that H1 was difficult in solutions and products, but the second half of this year is going to see growth. I would like to clarify, when you say growth, is that year-on-year growth compared to last year, or is this sequential?

No, we will see a healthy second half of the year against last year. And this is what we expect from us. Profitable growth compared to age two last year. And then we see how strong we are for the full year. But you can expect a healthy second half for roofing, but especially also for the entire segment of solutions and products.

All right. Let's move now to the next question and take it from Tobias Werner from Stiefel. Good morning, Tobias.

Yes, good morning. Good morning, Jan and Stefan. Thanks for taking my question. Two questions here quickly. When we look at the recurring EBIT bridge, you no longer show price over cost, no volume. and also the net debt, which has gone missing in this presentation. Should we assume that these things are not going to come back in terms of reporting, or is there a specific reason why they have been omitted on this occasion? Secondly, you show a very positive reduction in CO2 footprint, 18% to 3,000 tonnes. which if you get closer to the 2,000 tons should be ideally helpful for your rating. Can you just remind us how much of that 18% is due to the deconsolidation of the cement businesses and how much is underlying? And also what your best sense is in terms of where you could get to on that measure, also factoring in the possibility of further 20% divestments on the cement side.

Thank you. Good morning, Tobias. Let me take the second question and then Stefan can talk about the reporting and why we have chosen now to do a reporting which actually reflects the way how we run the company. On the CO2, first of all, we're very happy that we have the right recipe of decarbonizing our existing processes, our existing products by then introducing new low-carb products like EcoPact, EcoPlanet, and then, of course, by adding the new solutions and product segment, which is on very low CO2 footprint. And we do all of this, and all of them have a significant effect. At this point in time, we don't share the exact split. You have, of course, you are right that India was some part of the reduction as that was a cement, heavy cement relying business with according CO2 emissions. But that's part of our portfolio strategy that we focus on. North America, Europe, Latin America, with decarbonizing construction and buildings. We will provide you more data at a later stage. For now, you see this very fast success we have here. And the journey is, of course, not over. And we have not set a target yet. We will probably do that in the near future to set ambitious targets here where we want to end up in the near and in the long term.

Yeah. So I had two questions. Let me first come back to net debt. It's very simple. So we explained it before the net debt bridge. So we come from six billion to 11 billion. And that is really a 80 million free cash flow. The zero last acquisition, a few bold ons, the share buyback. the dividend, and some forex. So this is a very simple net debt bridge. And into the second half, as I explained, we're going to have mainly the vast majority of our free cash flow with a few bold ones still to come. So this is on the net debt. On volume and price over cost, look, we don't see our business like that. We don't see our business in terms of volume, neither in North America nor in Europe. Jan explained at length also how our business works in Europe with more value-added products, with more branded products. The drivers of decarbonization that come into the pricing of our products... This is what drives our business, and this is also how we want to communicate our business, and this is why we dropped the volume. I answered to, I think, Elodie's question earlier on this call that we had in the business of aggregates, cement, and concrete, we had a price increase of mid-double digits, around 15%, and that significantly offset our cost. But we don't want to split our volume anymore, because also in other regions, like North America, Yes, we have positive volume there, but that's not the main driver of our business anymore. The main driver of our business is really the massive value we can generate in other fields of this business.

Okay. Thank you very much.

Thank you. We will now take the next question from the line of Bernd Pomerant from Fontobel. Good morning, Bernd.

Good morning, Benedict. Good morning, gentlemen. I appreciate the new segment reporting, but I just wonder why you put the asphalt and precast business into the solution and product segment. Because according to my understanding from a customer orientation standpoint, this segment is rather kind of a building solutions business, and it's also rather R&D driven. Or was the split rather made on your system selling approach and the different asset intensity of the business? Thank you.

Hi, good morning, Bernd. Thank you. Thank you for the question. We are very happy to have different platforms and solutions and products. And they all tick a bit the right boxes. They are all growing businesses. So you talked about precast. Precast will be a bigger part of for construction solutions in the future so we want to do more modular buildings easier to assembly with more secured quality and so on so we see that as a growth driver also for those products those products are produced in factories similar to the other solutions and products so we see a lot of similarities that's why we like those modular building elements to be part of our solutions and products. And we can look into more detail in all the different platforms. We have talked a lot about roofing, but we have now built up a mortar platform in Europe, which is already 600 million euros, mostly focused on renovation projects. on improving energy efficiency for houses to make proper insulated facade systems. We made big inroads now in Latin America to enter into sealants, to enter into mortars, also very, very successfully. So we are very happy to have not only the roofing platform, but... Roofing platform is our big dominant platform, but we have other smaller platforms and they all have the right criteria span. That's why we keep them in our special business segment to make sure they have the right attention for management to grow and to share the right characteristics of growth. but also of low capital intensity. So this is another important financial set of criteria for solutions and products. So that's why we keep it this way and grow them all for a big future of solutions and products.

Okay, thank you, Jan.

We will now take our next and last question from Remo Rosenau from Helvetica Bank. Good morning, Remo. The floor is yours.

Good morning, Riddick. Good morning, Jan. Thank you for getting me the last question. Speaking about this huge valuation discount all companies suffer from in the sector, don't you think that this will only disappear really when your sales within cement and aggregates will drop below 50% of group sales, which means that you're still far, far away from that. You know, the target is 25 in solution products within a few years. I mean, don't you need to get below 50% in cement and aggregates to really get the valuation up? What do you think about that topic?

Hi, Remo. Good morning. Look, I think cementitious products are the best solution for buildings, not only for the best performing buildings, for the highest energy efficiency, but also for sustainability footprint. for being able to recycle. We have now a big focus of us is to recycle all the construction demolition waste and put them back as new products. And we will see in the future how successful this will be for Holcim. And we believe in our current setup of the four business segments. And we have already high returns, high cash flows, high improving earnings per share. So we think while we fulfill already the financial side of the metal, we will also show that it's the right strategy. We are part of the solution to decarbonize construction and to decarbonize buildings. And that's our mission. And. To your 50 percent, if that means 50 percent or doesn't mean 50 percent, we will see that on the way. You see already in the U.S. our footprint, our solutions and products is already our biggest business segment. But we see also in the U.S. how well this fits together with our three traditional business segments. And this all makes sense, and we can see that in the U.S. that we will have even more success going forward. So we believe we have the right strategy to decarbonize construction and building, including cement.

Okay. But if the other businesses grow faster, if you acquire more in those things, it is, you know, at some point you will get in that direction, right?

Yes, you know, we're very happy with the progress and we are very happy we could make such inroads into solutions and products. And we think it's such a fantastic addition for Holcim. But to reduce cement is not a target we have. We want to decarbonize cement and enjoy very excellent returns in cement.

Okay. Fair enough. Thank you.

All right. We are now coming to the end of this session, and I will hand it over to you, Jan, for a few conclusions and last words.

Thank you, Benedicte. That was a great session, like always. Thank you so much for the Q&A. Don't forget, we all like to see you in Connecticut. in September 22nd. Please come. You get a lot of insights, maybe even some secrets into our solutions and products business, particularly into the roofing. You will see our state-of-the-art factories for roofing, for insulation, and we will have many inside discussions. So please make some time in your calendar to join us in Connecticut in September. Besides that, I hope in any case to meet you all very soon and have some very engaging personal contact like we always have. And until then, I wish you a good end of the week and look forward to seeing you very soon.