Cemetir Holding

Good afternoon. This is the Coruscall Conference Operator. Welcome and thank you for joining the Cementier Holding 2021 First Quarter Results Conference Call. After the presentation, there will be an opportunity to ask questions. At this time, I would like to turn the conference over to Mr. Marco Maria Bianconi, Head of M&A and Investor Relations. Please go ahead, sir.

Thank you. Good afternoon and good morning to everybody. Welcome to Chairman T. Holding 2021 first quarter results presentation conference call. You should have received a presentation material, so I'll go through the document. I'm here with Mr. Caltagirone, who is happy to take your question at the end. So the highlights taking page starting with page two. Q1 results were very good. Revenues reached over €300 million, up 12.6%, with volumes up over 17.5%, mainly driven by good performance in Turkey, Belgium and Denmark. EBITDA for the group was up almost 50% to €48.1 million. There was a higher contribution from Belgium, Turkey, Denmark and to a lesser extent, from the Asia Pacific and Egypt regions. EBITDA margin was up almost 400 basis points, and we have to see that the 2020 figures were impacted by COVID-19 figures in March, and there was also a €2.5 million one-off on the comparable figures. EBIT was also very strong at €21 million, up over 300%, from €5.1 million in Q1 of 2020. PBT reached €15.6 million from a loss of €5 million of last year after €5.4 million financial charges. Net financial positions reached €167.8 million, a reduction of €154.5 million year-on-year, including over €11 million of share buyback. This result represents a record historical record for the group for the first quarter. Going quickly through the different geographies, starting with Nordic and Baltic on page 3, Denmark reported good results with both grey and white cement volumes up due to increased market activity. White cement export was slightly down. Overall, RMC volumes were up 11% with prices moderately up. EBITDA was up 8%, driven mainly by the readymix business. In Norway, on the contrary, readymix sales volumes fell by around 3% due to generally lower construction activity and the postponement of some infrastructure projects. In March, there was a significant recovery. We have also to highlight that Norwegian krona appreciated by around 2% versus the Euro. In Sweden, there was a favorable weather and robust construction market underpinning of sales volumes up more than 20% in ready mix and 8% in aggregates with higher prices on average. The Swedish Krona appreciated by 5% versus the Euro. Page 4, Belgium and France accounting for around 20% of Group EBITDA in the quarter. Here, cement and clinker volumes were up 8% with prices up year-on-year. ReadyMix, we had 20% volume growth thanks to some important projects getting underway. Also, aggregate business was relatively strong with volumes up 4.5% and stronger export to France. EBITDA in the period was up over 89% to 9.8 million euro. And this is also due to weak March comparable figures due to the COVID-19 impact. North America, on page 5, United States posted a sustained volume growth, especially in regions like Florida and York, and there was also favorable base effect despite hurricanes and bad weather. There was overall a 4.2% decline in revenue, mainly due to currency translation and some soft pricing. There was a 9% devaluation of the US dollar versus the euro in the period. and the somewhat higher distribution and energy cost. Therefore, the EBITDA declined by 14.9% in the period. Moving to page six, Asia Pacific, accounting for 8% of group EBITDA. China posted very strong demand with wet cement and clinker sales volumes up 60%. Despite the rainy start of the year, EBITDA was up over 44%. The Chinese renminbi in the period devalued by around 1.5% versus the euro. In Malaysia, similar story with cement sales up by 40%, mainly driven by export. Export volume, in fact, increased in a number of countries, Australia, Vietnam, Philippines, and other Southeastern Asian countries. EBITDA was up 50%. Turkey on page 7. Here, rates and volumes increased by around 30%, with domestic sales up 38%, driven mainly by strong demand in the Marmara, Anatolia, and Asian regions. Exports were up 8%, with a more favorable sales mix. Average cement prices in local currency were up, with different trends. Ready mix volumes were sharply up by over 65%, with prices up. There was a 32% Turkish Lira devaluation versus the Euro in the period. Overall, there was a strong improvement in the EBITDA, which turned a profit from last year. Moving to page 8, Egypt, accounting for around 6% of group EBITDA. Here, wet cement domestic volumes were up by 35%. EBITDA was up more than 48%. thanks to higher volumes and prices and lower fuel purchasing cost. Overall, in the period, the Egyptian pound devalued by around 9% versus the Euro. On page 9, you see the reiteration of the four-year guidance, which is unchanged. We expect to reach revenues of around 1.3 billion Euro, down the range between 285 and 295 million Euro. net debt of around 30 million and capex of around 95 million. This clearly excludes any unforeseen event. This ends my short presentation. I leave the floor to our chief executive and chairman, Francesco Caltagirone, for many questions you may have. Thank you.

Excuse me. This is the Coruscant conference operator. We will now begin the question and answer session. The first question is from Matteo Bonizzoni with Kepler. Please go ahead.

Yes, good evening. I have just one question actually. My question is what is retraining you from the potential upgrade of the Fulia guidance given that you have already gained around 15 million euro of EBITDA in Q1, which is a small quarter.

I'm just curious to know what is your reasoning about the possibility to reach maybe the high part of the guidance or also to exceed it.

Thanks. Let's say that last year the full COVID impact for us finished in the second quarter. So Our present stance says that we want to see the full 12 months of recovery from COVID that will end in June. For sure, the first quarter has been quite strong, even above our forecast. All the markets are supported by good demand. going forward in the second part of the year we might see as we are starting to see some increase in input cost and also the freight rate so just to give you some figures we have this year in 2021 an increase an average increase of energy, both petcoke and electricity, that compared to last year is around 20-25%. Most of this is already included in our budget figures, but some of them, no. So today, let's say that we see a 10 million increase in cost, that is not included in our, let me say, budget, but we also see that this strong demand that is supporting our figures can outbalance this increase. So, I believe that If at the end of the second quarter we continue to see this kind of growth, probably we might update. But now, let's say that you are aware that there is also the outbreak of a different COVID variant in India. We don't know what will happen, let me say. So I prefer to keep this, let me say, prudent stance.

The next question is from Tobias Werner with Stephen Group. Please go ahead.

Yes, good afternoon, gentlemen. Can you hear me? Yes.

Good afternoon.

Thanks for taking my questions. I mean, I'm just looking at China. Obviously, one of the benefits here or the upside is that the comps last year were very weak, but you also seem to have jumped above quite nicely above 2019 first quarter results in China. Maybe give us a little bit more sense what you think is the normalized profitability in this market now as opposed to sort of normalization effects. The second question is around the maintenance benefit you're seeing in France, Belgium, Belgium, France. Can you just give us an idea how much that adds up to and when are you going to catch up with that maintenance delay? And then just the last question, because pricing is quite important, given what you said earlier around energy costs. What sort of trends do you see in your markets with regard to pricing, please? Thank you very much.

Let's start from, let me say, a picture of the price situation. As you know, we are mainly in a niche product that is white cement, and especially in Asia, where we produce only white cement, both in China and Malaysia. So what we see is that, as you can imagine, our pricing power is more efficient than probably most of the great competitors because of this niche product. So across all the geographies what we are seeing is that being a high value product and also a niche product and also another important thing is that most of our competitors compete In our market, by importing from far away and with a sharp increase in the freight rate, it's for sure more costly for most of them to reach our market. We see that we might, let me say, transfer easily, especially in white cement, the increase in price, especially coming from energy. So I believe that in China the situation is that we have as you said even better figures compared to 2019 and let's say last year the plant was stopped for five weeks from February to March so for sure now there is a sort of recovery of the market but we think that part of it can be sustainable even because for environmental issue mostly everywhere and especially in China the government is acting against the worst polluters and in China we have a lot of small plant especially in white cement. So we see that this constraint in supply might continue and also this gives us the possibility also to pass further increase of price. In Malaysia the situation is a bit different because today let me say, we serve mostly Australia and we are facing some difficulty in finding freight because China is holding all the containers. also for this reason in some market we are cautious about let me say because we are able to supply we have already let me say the cost structure that is let me say in place but we don't know at 100% if we can supply all the demand of the cement because there might be some disruption in some markets, especially due to the freight trade. In Belgium, France, I mean that the total delay of it's just, let me say, two or three quarters, so it's not as much as we say it also in the previous quarter release or full year release, we believe that we are, let me say, just six or nine months behind our schedule so this will mean that we will probably have this just two quarters of delay from the upgrade but looking at the full picture it is clear that especially in Europe where let me say, for both white and grey. In the last decade, most of the group has, let me say, restructured the business due to the lower demand. Today we have a strong demand in front of us. The CO2 price is around 50. It doesn't push any producer to increased capacity because as you know now we are in the third ETS scheme and every year for the next three years we will have a cut of 3% so nobody is willing to increase capacity or even to revamp Kiel or also to switch on Montbald kiln. So what I see and I expect is that especially going forward in this decade after let me say two or three years where we will have every producer a cut that will be more than 10% there might be a significant constraint in terms of supplying cement. If we cover this also with the border tax that you know is going to be approved in the next couple of years, this might, let me say, produce, from my point of view, this is our scenario, one of our scenarios, a supporting market for quantity and price, I mean, for the medium-long term, what we see. And also if we consider another thing, for example, last week it has been approved after 20 years in France a new channel that will, let me say, link the North Seine and the system of channel around Belgium and Netherlands. this channel will cost 5 billion euros and will take 12 years so it's a long but this just to cut half billion of tracks from the road to lower the emission so this means that the need of cement I believe will be much higher to complete all this let me say transition so even if Most of the players will see price, cost pressure from the CO2. I believe also that if the market will be closed from import and nobody is willing to increase capacity because to increase capacity you need to have 50 euro margin just to cover the CO2 and even higher if the CO2 will continue, I think that we might see a good time ahead of us.

That sounds very good. Thank you very much for this question. Much appreciated. Let's hope it is as good as it could be given 10 years of difficulty in post-global financial crisis. Many thanks.

The next question is from Emanuele Galazzi with Equita. Please go ahead.

Yes, good evening, everybody. Thank you for taking my questions. The first one is on the Turkish market. I was wondering if you can give us an update on the trends you saw in April and what do you expect on the evolution of domestic demand and export in the coming quarters. The second one is on the US market. You mentioned some price pressure in the first quarter due to competition. Can you just elaborate on it and on your expectation for the 2021 in terms of price evolution in the US? Thank you.

In Turkey, besides the strong devaluation that, as you know, is mainly for internal factor the appointment of the third central bank government in two years. But the trend seems to continue even in April. And as I also said in the previous call, when you have this kind of inflation patterns, the real estate is something that usually is appealing just to protect your investment and the value of your investment. So we continue to see a good pickup in demand and also we continue to see a strong demand for export due to this constraint, as I said, that we have in the whole Europe because of, let me say, in the last decade, every player just, let me say, shut down our closed plans and will continue to do that due to the environmental issue. So besides, I don't know, something that is not foreseeable from an internal politics point of view, We see and we expect that Turkey should continue. This is unfortunately might be balanced by the devaluation of the local currency. And this might be, let me say, partly affect, let me say, the good numbers coming to Turkey because when we translate in Euro, unfortunately, this is without them. In the USA... Let's say that the situation is a bit different. It's improving. As you know, in the first quarter, especially in Texas, we have a sort of, let me say, hurricane. And so the weather has been quite bad. But also, as you know, there has been the election. And so What we are seeing now is that due to the freight issue and the cost picking up, and we are active only with white cement, the picture is brightening in terms of, let me say, economic numbers. You know that the economy is picking up due to the COVID release. And also... the arrival of cement coming from other players is limited due to the, let me say, very high freight rate. So we are quite positive. It's just for internal market in dollars. Then, even here, as it happened compared to last year, if the dollar continues to devaluate, even this might affect the balance sheet in euros.

Okay, thank you very much.

The next question is from Bruno Permutti with Intesa San Paolo. Please go ahead.

Good afternoon. I have a few questions. The first one regards the growth of the first quarter. If you have a measure of what could have been and if there has been a restocking process in the first quarter. So what is the normal speed of the market and what is the eventual effect of a restocking process. The second one concerns the capacity utilization in Turkey. I would like to understand how much you can expand your volume production in Turkey should the market will continue to require volumes. And a third one, if I may, concerns the CO2 rise price. if I have well understood your idea is that the environment the economic environment the constraints and the border tax and so on should allow to pass to customers eventual increase and actual increase in CO2 rights. So I would like to understand if you have an idea of what could be the sensitivity of your guidance to the CO2 price, right, right, right. So if there is a risk that you see in the short term, in 2021, on this, and if this is part of your cautious attitude on the 2021 guidance, considering the good results of this proposal.

The question about restocking, I mean, usually in the first quarter, you know, most of the plants go under maintenance. And anyway, the restock in our market is not longer than 30 days. Let's say that from the moment that in our perimeter we started to see a normalizing demand starting from last July, I think that, I mean, in this quarter we are not seeing a restocking issue. So this is, let me say, genuine market that is coming from, let me say... household real estate infrastructure not so much because they are still in the process to be financed but as you know the money floated from the central bank and also the saving rate of most the household in Europe and especially in the USA is now starting to be released but it's brilliance and billions and billions so what we see is something that in some market there might be the issue to find cement let's say not only where we are but for sure there are the issue but the issue are also on steel in most of as you know also in copper so there is in ship but there is now let me say a demand that is picking up in a way that probably most of the producer was not let me say expecting especially for the first quarter so the first quarter is let me say a small quarter but anyway In some areas, it's quite significant. So even in April, we are continuing to see this. As I said before, also we are starting also to feel some, let me say, pressure in terms of input cost. But let's say that we are quite confident that especially for this year, because there are no alternatives, especially in the various geographies, to find cement from other counterparts. So this is quite clear. Even because, for example, from Turkey, now I'm not talking about ourselves, but most of the exporters are sold out to the end of the year, of this year. So this means that all the quantities are already booked. from Turkey for export. And compared to last year, we also have a very strong internal market. So there is also the question mark that if you have a good domestic market where you don't have to face freight rate, then you divert your quantity for the internal market. So going to your second question, so our capacity in Turkey Let's say we are spread more or less at the fourth corner of Turkey. So the part that is, let me say, affected by the export is mainly the Aegean one, the two plants, the one in Izmir and the other one that is close to Istanbul. So we have in these two plants a spare capacity that today is dedicated to export that is around 800,000 tons. So, this capacity, if, let me say, the internal market price, I mean, price in Euro, not in Turkish Lira, is more convenient, then we will divert these 800,000 on 4.5 million, that is the overall capacity that we have in the four plants. So, this is, let's say, is the buffer that today we have. On the CO2 price... I believe that for us till 2023 we have, let me say, enough free allocation or also the ability to import from ourselves. From Turkey we already started to serve the Belgian and the Danish market and to support the quantity. For this extra quantity, we are not, let me say, impacted by the CO2 because the cement is arriving from countries that are not under the ATS scheme. So what I can say is that on a sensitivity analysis, we are short around 600,000 baht for 2023. 2022. So let's say that then there might be a convenience that is different, that if the CO2 goes at 80 euro and I have a margin of 30 euro, I can decide, but the same will happen to the other producer to say, oh, I will sell the CO2 rice, so I will sell one ton less in the market because I have 80 euro of CO2 that I can, let me say, bank in the market. Also this, I think it's something that might affect the market. So if the price, as it's happening now, if the CO2 price is increasing too fast, there might be this, let me say, double option, let me say, for the producer, especially where you are not affected by the import. So you might decide that at a certain level it is better to sell or to keep the CO2 for the future and not to serve the market. Because this is, let me say, it's a completely new scenario. I think compared to the other, let me say, cyclical crisis that hit the cement every five to seven years, the up and down of the market, this time we have, let me say, a big constraint in, let me say, supply that is the AES system. So nobody will increase capacity. And so, I mean, if you have that, the demand, I don't know, is uncertain. And the pickup in demand, I don't know at what level will stop. But for sure, the supply is limited. It's just mathematics. Then, let's say, I don't want to... let me say, depict the scenario now because it's too early, but for sure, let me say, we have a strong headwind about the CO2 price. On the other side, we have a strong tailwind about, let me say, the constraint in the market and the fact that the demand, especially because probably you are aware, the average of the ATS for 2021-2025 is on the average of the years that goes from 16 to 18. That hasn't been the best year, for sure. So the allowance that everybody will receive, each market might be different, Italy will be different from Germany, the Scandinavian from Spain, but what we might receive, but we don't have received yet from the European community because the the final draft has not been approved might let me say be even let me say a little bit less than what let me say the market is expecting and for this reason I think that the CO2 price is increasing because most of let me say the segment of the market even steel even electric power it is measured by on a three years, that is not the last three years, but it's the three years, I mean, of two or three years ago. And this might distort the market, for sure. So I don't want to say that the scenario is, let me say, for sure 100% bright, but... I'm aware that in cement we don't have a substitute. And as you probably have already seen in the US market for lumber, where the price increased 400% in six months, or for copper, where the price increased two times in 12 months, if we consider that cement so far just increased compared to last year less than 10%, I think... There is even still is increased, I don't know, 30%, 40%, 50%. So I think that cement is far away to close the price gap that we are seeing in other, let me say, building raw materials. This is just a scenario, I say. But we have to consider this for everybody, not just for us.

OK. Thank you. And if I may, a last question on M&A. So I would like to understand if in this market there could be some opportunities for M&A, even considering that the scenario seems to be more normalized and perhaps much more positive than a few months ago. So if you have some, what is your ideas in this aspect?

Our balance sheet, as you know, we will have a net financial position at the end of the year that will be close to zero, let's say. So we have enough space even for, let me say, bold M&A. But today, frankly speaking, with the EPS schemes that is not fully approved, so we don't know, especially in Europe, what will be the allowance plan by plan. Then we don't know even... what will be the scenario of carbon capture and sequestration, especially from 2025 to 2030, because you are aware there are a lot of pilots, even we are developing two pilots, but before three, four years, we are not aware of the result of this pilot. So I am, let me say, fully aware that for the next five years, till 2025, the CO2 market, I mean, in terms of capacity to carbon emission will not be far away from what we have today. So the carbon emission will be just linked to the carbon in production. So this is the only way to carbon emission. and for this reason it's very difficult to give a value for the medium long term any kind of asset. And what I already said is that we are not ready to see and to invest in this kind of market because it's very uncertain the profitability. and even the technology because you know this is capital intensive and when you buy a plant you buy a plant for the next 30-40 years we are aware that we have from now to 2030 a certain scenario then that will change from 2030 to 2050 but we might have as everybody hope and expect a shift in technology that might help us, let me say, to carbon, to capture the CO2, and also the hydrogen, the synthetic methane. There are a lot of things, but today they are all pilot projects. So I'm not willing and not interested to invest in this scenario. And also, let's consider that today it's quite impossible to do any kind of physical due diligence because of the COVID limitation. So you cannot buy an asset if you cannot go in the plant to see. So we are aware that there are some, let me say, plant for sale in Spain, USA, but I don't know how this process will end up because for everybody it's impossible. Probably in the next month there will be, let me say, it will be more feasible to do physical due diligence but for now it's impossible. But anyway I don't see and I repeat that for us for 2021 and 2022 any major let me say acquisition. This doesn't mean that we might buy Thank you. The next question is from Alessandro Tortora with Mediobanca. Please go ahead.

Mr. Tortori, your line is open.

Okay, hi. Good evening to everybody. I have three questions for me. First one is a follow-up to what you mentioned before on the shortage of allowances, okay, the around 700,000 that you mentioned. Can you tell us how are you going to manage, okay, this shortage if you are fully confident, okay, to pass through? this shortage of allowances or I don't know, you have any measure in order to reduce this deficit on allowances considering that 2023 is not far and probably this shortage could even be higher considering the incoming EPS revision. So this is the first question. the second question is on you mentioned also before carbon border tax can you remind me what's your view on the steady impact on Turkey when and I don't know what will be the structure but when these carbon border mechanism will be set up for you so what is your scenario on that thanks about let me say to the

Today, as we already, when we released our industrial plan, this, let me say, shortage of 600,000 tons is already included in the balance in our budget industrial plan at 30 euros. So it's eventually the delta. So we have, let's say, to finance the delta from 30 to the price, at which we will buy, let me say, CO2 rights if, let's say, we keep this kind of, let me say, of, let me say, distribution models. You know that we are, let me say, implementing FutureChem and also importing... cement from abroad starting from Turkey so we feel that let's say we can cope even at 50 euros because what we see as I said before that the market is short in capacity and also short in willingness to increase or to revamp or to restart the the kiln. Most of the players, starting, for example, from Italy, where we left, let me say, two years ago, we are aware that the local producers, especially the big ones, are going to close some of the plants because today, let me say, it's not affordable to revamp with the CO2 at 50 euros. So this is what will the meaning of this is that the capacity in Italy like in a lot of other European countries will decrease gradually in the next few years and this means that if you cannot import or the freight rates are high and so the price or if you have a border tax I think that is like the value-added tax. If the value-added tax increases, then the final price to the customer will increase. For sure, for some, let me say, goods in the market that are sensitive to the price increase, you might have a decrease in demand, but you are aware that cement is quite, let me say... is rigid in terms of demand. So we don't think that a 10 euro increase will, let me say, lower, or 20 euro increase, I mean, in the next few years, will, let me say, lower the demand of the ready mix. About the implementation of the border tax for Turkey, it is clear that all Turkey in the next two or three years will converge to the same, let me say, emission scheme that we have in Europe, but this is for everybody, even for Morocco, Tunisia, Egypt. They will be charged for a price that will be more or less the price of the CO2. And this for sure will, if they don't converge, they will not be allowed to they can export to certain markets but they will charge this 50 euros so we have two scenarios part of this country I believe that not everybody every country will align in the Mediterranean so all the price will increase as much as to cover the full price of the CO2 so let's say a huge increase in the price of cement And so this can allow to import, let me say, cement. Otherwise, you are not allowed to import in Europe from this country. Or it's not convenient. So from the moment with 50 euro today, let me say, before, let me say, let's say, till 2019, if you were willing to export to Turkey, to Europe, including the 2019 freight rate, you can still have a margin of 10, 12 euros. Today, the freight is up 8 euros. You have just 4 euros left, and you might have to cover 50 euros. I think that there is no chance. So all the price will be 45 euros higher in Europe, Otherwise, from Turkey to Tunisia, it will be quite difficult, let me say. Or you converge to this, let me say, system, but at that time, then you will not be allowed to produce extra quantity because you don't have the free allowance. Let's say that it's a difficult scenario, but anyway... What happened in 1930 in the USA with prohibitionism about alcohol? That the price of alcohol soared a lot because the people continued to demand alcohol. And then we know what happened and what has been the end of this prohibitionism. So now we are entering in a sort of environmental prohibitionism but on the other hand I feel and I believe that we will need the cement to change our economy to go to a greener economy so I believe that the important things for a producer is that you are from an environmental point of view competitive with your neighbor player because otherwise they might heat up your market. If they have 10 euro less in terms of CO2 cost in the products, they might be tempted, let me say, to lower a bit the price and to heat up the market. But from the moment that we have today in the ETS system only two plants that are the Danish and the Belgian one. And I think that compared to our neighbors we are quite competitive not the best but for sure there are let me say more than 50% of the capacity that is weaker than us I believe that if the price in the CO2 will soar and will distort the market this might let me say hit the 50% let me say of capacity of the other before hitting us ok

Okay, I know that the situation clearly is not linear, okay, going forward. But just to have your idea, okay, because for sure carbon border, okay, could change a bit also the internal outlook, okay, for Turkey, considering that exports, let's say, towards ETS countries will be more problematic, okay, so that's probably the... Yes, this might... this might be for I mean that plant that can export by sea because then the remaining part of Turkey will not be affected because even today they cannot export ok and the last point was on your original target to reduce emission by 30% compared to the baseline considering now that we are basically reading every day that these targets from European Commission are set, the European Commission raised the bar on this side. What's your take on that? Do you plan, let's say, to at a certain point announce an additional set of measures in order to step up this, let's say, green target also for Cementira?

As I said before, today, I mean, in the world, there are no technical solution to carbon capture. We have a lot of pilot project for small quantities. And so from the moment that nobody is not like the vaccine where you have a patent and you sell and can allow the other to produce your vaccine everywhere in the world. So it's just then just cash flow that will arrive because you give the patent to the other. we are going to find a solution and then we might see an upgrade of 200, 300 plants around the world if you include Europe, USA, Australia. Even this will be a slow process. So I don't think that today nobody, not nobody, I mean I'm sure, has the solution. But when you, even today Germany say that they want to increase, let me say, by 2030 I think the 65% but they say net zero that means that they are already considering that in some sector you cannot go let me say below a certain threshold and in some sector you can go to negative probably emission because let me say you just not produce anymore let me say electricity but let's say if you want today to go probably to a certain level you must consider nuclear atomic power generation because for sure from the CO2 point of view it's free of emission. Then we have other issue but one thing is that you want to set the target. The other is that it is feasible to arrive. I believe that to change our economy everywhere You need a lot, a lot of cement just to revamp 100 of, let me say, building history in every country. So just to revamp, let me say, whatever we have in our city today, not the new building. What we have today, you need a huge amount of cement, a huge amount of steel. I don't think that today we have anything that can cope with We might have carbon capture that will arrive at, let me say, a certain level of cost sustainability, and so we can get rid of this issue by capturing not just, let me say, just deeply in the exhausted oil well, but also reusing with the hydrogen. So I think that technology... will have to provide the world with the solution. Today, I don't think that we have the solution. So what I see is that if we have an increase in the CO2 price, every producer will transfer this increase in price to the, let me say, end customer. I don't know if you know other players that have a solution. So we can continue, let me say, to work on, let me say... the short-term target that is about the cement receipt. You can work, and with FutureShare, we have started to work on it, like everybody. But then, at a certain point, you cannot substitute 100% clinker with other, let me say, by-products.

Yeah, yeah.

I believe today that it's like, let me say, value-added tax. If you want to increase value-added tax to finance, let me say, the new infrastructure by 30%, everything will cost 30% more. Then probably the economy will be hit. But for sure, if the other, let me say, second round effect that we might see, is the increase in inflation. It's not just the demand that might be lower because the increase of the raw material price. It is just what we see. If everything, and you are aware that mostly everything is starting to increase, then the issue probably is inflation, is the rates. It's not the CO2 emission. I think that the economy will be covered by a wave of inflation because nobody is considering that if the CO2 will reach 100 euro, not in 10 years, but in two years, you will have an increase in the building products of about from 30 to 50 percent. Everywhere, for everybody. And this will be transferred in the economy and will, let me say, produce inflation. So I think that from the moment that the ADSA system is an artificial system just to push and to curb the emission, if at a certain level we arrive at a certain level of price that is not sustainable by the customer or by the economy, as you know, they can say that we will release 10% more of free allowance. Not today. They won't tell today. But in 2024, if we are in a market that, let me say, starts to bite the economy, we might see that, because this is artificial, let's say, it's an artificial scheme. So if they want to give an allowance, 10%, 5%, whatever they think it is, just to cut the price, not to go to zero. because anyway they want to continue to support the CO2, let me say, emission card. But what I see is that we might see that the CO2 can be, like the interest rate, can be artificially pushed down. Also the CO2 cost can be artificially pushed down by the local administration, I think, especially from the euro.

Okay, okay, okay. Thanks for the answer. Thanks.

Gentlemen, there are no more questions registered at this time.

Okay, so thank you very much for your interest in Charmanty Holding and have a great rest of the evening or the day. Thank you. Thank you.