Cemetir Holding

Good afternoon. This is the Coral School Conference operator. Welcome and thank you for joining the Cementir Holding preliminary 2021 results and plan update conference call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Marco Maria Bianconi, Head of M&A and Investor Relations of Cementir Holding. Please go ahead, sir.

Thank you. Welcome, everybody. Good evening, and welcome to Cementir Holding's Preliminary 2021 Results, Highlights, and also some updates. I'm going to go through quickly through a presentation deck that should be distributed. And then I leave the questions for our Chairman and Chief Executive, Francesco Casagirone, who is here with me. Good afternoon. So moving on to the presentation, starting with slide number three, you can see that 2021 has been for Chairman's Year a record year with a historical record of revenues of €1.36 billion, up 11% year-on-year. Due to good performance in all geographies, volumes were up 4.1% in cements, around 15% in readymix, and around 8% in aggregates. Also, EBITDA set the historical record of €311 million, up around 18% year-on-year. If we strip out €11 million of net one-off positive impact, recurring EBITDA reached €300 million, up 14% year-on-year. Q4 EBITDA was up 12%, and recurring EBITDA was up 6%. EBIT reached 197.8 million euro up 25.8% from last year. Next financial debt declined by around 82 million euro to 14.4 million. including IFRS 16 impact, around 25 million euro of share buyback, around 22 million euro of dividend distributed, and 4 million euro of small aggregate acquisition in Turkey. I remind you the Chairman here has rated the investment rate with triple B miners rating and stable output by standard and force. Moving on to page number four, a guidance for this year, we expect to exceed one and a half billion euro revenues, reach an EBITDA range between 305 and 350 million euro, and reach a net cash position of around 60 million, with a capex of 95 million. This guidance refers to the life-for-life ongoing and recurring operations, bettering any further COVID outbreak. Moving on to the industrial plan updates for the year 2022-2024, referring to slide number 6 very quickly. As part of the strategy, there is no change from the past. We continue our virtuous path toward decarbonization with a 2030 roadmap and a 2050 ambition. We want to strengthen our Waxman global leadership, focusing on high value-added solutions, and we keep leveraging on the vertical integrated platforms we have in the Nordic, in Belgium, and in Turkey. We also want to keep improving profitability and operating efficiency. Just a few highlights on this slide. 97 million euro of cumulative green capex over the year of the 22-24 industrial plant period. It is around 7% of sales. We want to deliver on the science-based target initiative carbon reduction targets. And clearly we plan to roll out our future SEMMA technology across the product range, pushing towards circularity. We also want to keep increasing our competitive position. We want to decarbonize our drive across the value chain and point to a new manufacturing logistics and smart maintenance of the three focus areas. As far as growth, we want to optimize our industrial footprint, further develop our trading business, and keep being opportunistic on M&A transactions. Moving on to the next page, just on page 7, just a quick highlight about our journey on sustainability. We started with a new organization in 2019. We got the first recognition in 2020 with a D rating from CDB and a further upgrade to A- in 2021. We also got our site-based target initiative validated with a 25% GHG reduction, and we have a number of rating agencies following us on a regular basis. Moving on now to page eight, the path to reach net zero emissions remains unchanged with a net zero emission by 2050 as far as scope one, two, and three emissions. We want to roll out future STEM across every geography. We want to try to become 100% fossil fuel free as far as energy is concerned. We are exploring other technologies like carbon capture and storage. It's economically viable. We have a clear roadmap to 2030 with a commitment of a 30% reduction in our GAG Scope 1 emissions per ton of cementitious material compared to the 1990 baseline. In grey cement, the target is to reduce our CO2 per tonne emissions by 31% to less than 500 kg per tonne. In white cement, the reduction is 35% to less than 800 kg of CO2 per tonne of cement equivalent. In the industrial plan that we're just going to get through, we have set GHG emission targets on a yearly basis by plant and we have embedded into the organization incentive plans with ESG targets. Moving on to page 9, you can see here the reduction targets that I discussed before on the upper table gray cement, on the lower table white cement, 31% and 35% reduction respectively. You can see here that one of the drivers is going to be a clinical ratio reduction of 190 basis points in gray cement and around 40 basis points in white cement. Moving on to page number 10, you can see that there are main areas of decarbonization right across the value chain, starting from the last raw material, so we're clearly using a number of cementitious materials that we blend into cement. We want to spread some circularity using materials and waste recycling. In energy, we're switching to natural gas on a number of plants, and by 2025 this is going to happen in Aalborg and in Goran. We are pushing alternative fuels, district heating, and grid power. As far as the process is concerned, we are upgrading our plants. pushing for a clinical ratio reduction, overhauling our kill heat consumption levels, and pushing on waste heat recovery as well. We're also trying to improve our logistics with e-procurement, grid transportation, and modular logistics initiatives. Overall, Futures and Rollout across all geographies remains a key theme, as well as the development of all new technologies. Moving to page 11 and 12, just a couple of slides on Futuresim. As you can see, this is a proprietary technology that allows a 30% reduction in CO2 emissions. And the objective is for Futuresim to account for 51% of European volumes by 2030. As you can see on page 12, you have the roll-out plan where you can see that 51% of total volume sold in Europe and 60% of great event volumes will be sold through FutureSend technology. Moving on to page 13, our 2024 financial targets. You see on the left-hand column the 2021 preliminary figures and 2024 targets. You can see that we aim at the 1.65 billion euro revenue target. This is a 7% compound growth rate from 2021. You can see also that we expect single-digit buying growth across all product lines with private increases across all markets. Our recurring EBITDA target is around €350 million, which is a 5% EBITDA coupon growth. As far as CO2 shortage, we expect to have around half a million average yearly shortage with an index mechanism covering excess CO2 cost. As far as VAT capex, you can see that the average capex is around 104 million euro, of which 4-5% is ordinary capex and around 7% is green capex, which accounts for around 97 million cumulative investment for us. and includes future terms, disrepeating, wasted recovery, and a number of other initiatives. As far as net debt and net cash, from a minus 40 million of 2021, we expect to end 2024 with an excess of 300 million net cash position, which means A 340 million euro cumulative free cash flow generation over the period, assuming a dividend payout ratio between 20 to 25 percent, therefore a growing dividend over the three year plan. A couple of slides just to summarize the results. On page 14 you see the comparison between the new plan and the old plan. You can see that clearly the EBITDA growth rate is impacted by a higher 2021 base, a sustained green investment level with the Sun Initiative being just postponed by a few months, a continued significant cash generation and dependable EBITDA growth trajectory for the group. Page 15, you have the detail about our CAPEX. You can see here in green on the histogram on the right, the sustainability expanding, digitalization is in light blue, and then in gray you have the maintenance and expansion CAPEX. I think we've touched upon those areas already. So I'll finish off my presentation with the last slide. This is page 16. You have here the waterfall where you can visualize the gas generation that continues to be extremely strong for the group. shifting from a minus 40 to over 300 million euro of net cash by 2024. And you can see the cash flow generation of 876 million, over 100 million euro dividends paid in the period, a capex of around 312 million, and the rest being working capital and other. This ends my presentation. I'll leave the floor to Mr. Francesco Castagirone for any questions you may have. Thank you.

Excuse me, this is the Coruscant Conference Operator. We will now begin the question and answer session. Anyone who has a question may press star and one under touchtone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. The first question is from Emanuele Galazzi with Equita. Please go ahead.

Yes, good afternoon everybody. Thank you for taking my question. I have three questions. The first one is on the cost inflation, in particular on fuel and energy costs. Can you just better clarify the double-digit growth assumed in the 2022 guidance? And also in terms of cement pricing, can you discuss about your assumption in the business plan? My second question is on the CO2 cost. Can you help us understanding how the indexed mechanism between cement price and CO2 cost actually works? And my final question is on the capital allocation. Basically, you are guiding for over 300 million euros of net cash position in 2024. You rise the dividend policy, but what we should expect on potential M&A or greenfield initiatives?

Thank you.

Cost inflation, good afternoon.

We have seen an increase of nearly 50% of the market.

Yes, I can take this question. On the cost inflation side, I mean, the question is regarding what is embedded in our expectations. I mean, clearly we have seen a significant cost inflation over the course of Q3 to Q4 of last year, which is continuing. So we have embedded in our cost inflation a significant... Constitution in our figures, so especially for energy and electricity. So thermal energy and electricity are growing in our plan at high single-digit to double-digit level. Clearly, this though is compensated by an increase in pricing, which, as you know, is negotiated in our main geography over the course of the second half of each year. and which would allow us to recover with some timeline, but you can see from the number that we expect, fully recover the cost inflation in energy and internal energy and electricity. So this is the picture that we have in our plan. So as far as the the guidance for this year, for 2022. I mean, obviously, the rate that we have given takes into account these mechanics within our P&L.

Let's say that we have the highest price in all of our geography, depending on the type of cement, let's say from 12 to up to 20%. then you have to take into account that in some geographies you have some headwinds related to the devaluation of the currency but let's say that we see an increase of at least 10% of our revenues that should cover price increase in energy and also the CO2 cost that we already put at 80 euros and it is transparent to our final clients the cost so every month we pick the official closing and we will add the the the the the the the the the Declining profitability is not because I think we will be more or less profitable because we have a tax that we charge and then we have to deliver to the government. So this is the main... I don't remember the last quote. As I already said, today it's difficult to understand over 10, 20 years. So this is the minimum timeframe when you invest in a new asset in cement. As you know, the ATF system has to cut, as an average, 3% per year to reach, for the next 10 years, 30% of reduction. Then there will be the border tax adjustment, probably, that will kick in in 2026. So, also, the other market will be affected, especially for imports. Today, where we are, let me say, at the first year and the first month where this is applied, it is difficult. And so we are looking at some, let me say, opportunities, but the issue is the value that you can give and also the expectation of some of the sellers. because for sure you have some risk you know that a few months ago the co2 was at 60 euro today it was close to 100 we don't know what will happen in the next six to let me say a month or so If you apply a certain price instead of another price, you can end up with a completely different profitability. And also, the other big question mark is the availability of technology to cut the emission, especially in the second part of this decade, because if there will be some technology available, you can mitigate the, let me say, this extra cost, but if any of this pilot project will not be a winning project. We will just continue to be forced to, let me say, cut emissions and probably cutting the production. or buying the CO2 for the extra quantity that the market requires. And so it should be the price of the CO2 because today we have to sell one extra ton of cement besides our allowance we should add 100 euros of CO2. So, I don't think that the market today is ready to pay the cement more than 200 euros. But, you know, we are in an environment of skyrocketing price for everything that probably in a few years we might see the cement around 200 euros. So for this reason frankly speaking I don't see and I continue to don't see I see risk to evaluate Probably, yes. So let's say that we are not, let me say, close to any kind of a deal. We are just, let me say, see and also understanding the development of some assets in some key areas that are the areas where we are already present, that mainly are Northern Europe, Eastern Asia for wide cement, and the United States, you know, at least two inflated, let me say, the cost of the assets. So for the time being, and also the dollar is too strong.

Okay. Thank you very much.

The next question is from Matteo Bonizzoni with Kepler. Please go ahead.

Thank you. Good afternoon. I have a few clarification to ask on the CO2 cost. Precisely, I would like to know, in 2021, what was the shortage, so the delta between your emission and your clear location in Belgium and Denmark, and if the shortage in Vientiane was still entirely covered by the stock of rice which you accumulated in the past or not. This is something which you have never, I think, clarified. and I want to know if for 2022 the yearly shortage will be in line more or less with this 0.5 million ton or different from that. Basically, what I'm trying to understand is the delta CO2 cost between 2022 and 2021. Also, if you can clarify the role of Turkey, if you are helped, if you are being... Because this 0.5 million yearly emission is quite ambitious compared to the contract record. It's true that you have future SEMRAM patents on, but based on official data of the European Union, I mean, this is very ambitious, no? In the next three years. So what I'm trying to understand, if you have help... for example from the import of clinker from Turkey and what is the magnitude because all these data are helpful for us to understand the food picture apart from the state target. Then I would like to know on pricing if these 12 to 20 percent price increases which these are unprecedented price increases for cement now you will agree but also the cost increases on the other side which we are experiencing on fuel, energy and even more CO2 are unprecedented. So this is a new situation if you want for the cement sector market. I would like to know if these 12-20% price increases you think are in line with the price increases of your peers in different geographies? And now that we are in February, do you have any evidence if they pass or not pass? What is your feeling about the probability that they will pass? at nominal value or with some discount. And last question is Turkey, because there cannot be a conference call on Cementira without question on Turkey. But now it's even more, let's say, important to ask, because Turkey was strong in 2021. The margin, I think, also in Q4, we have not disclosed, but was probably solid in local currency. There is now a sort of inflation rate which is exceeding 40%. So my question is just to understand if you expect a new margin squeeze in 2022 because of the gap between price increases and imported cost inflation. Thanks.

Let's say that we, even if it seems ambitious, but let's say that the average of our shortage in CO2 will be around 500,000 tons per year in the next three years in industrial plants. So we end up last year with as small, we were as long not short of small quantities. For sure, we have the possibility to, let me say, leverage on our industrial portfolio because of the green care or cement imported from Turkey, especially the more the CO2 increase, the more convenient, even if you have freight cost, is to import where you can. So for sure it's part of our business plan until 2025 because without the border tax adjustment there is a trade-off importing any raw materials from outside Europe that is not charged with the CO2. But I think it's reliable and also the rollout of future shem is part of this and also taking account that in white cement we have a big position in Olbor but also we have a plant in Egypt that today is running at half capacity and also Egypt is out of the APS scheme so this means also that in our three years plan we might switch from Orban to Egypt depending on the cost of the CO2. Regarding the pricing I believe, or I can say that more than 80% of the clients today have already accepted the price increase, as I say, between 12 and 20%. It's unprecedented, but, you know, if you have to finish a house to complete an infrastructure, you need cement. And also, as I already said in the past, let me say, Today, cement like steel, glass and other are, let me say, you have to consider more like a utility where you have capacity and the possibility to find cement in some area, you have the system that is fully at full capacity. in terms of considering the capacity of output of the plant. Full capacity considering the limitation of the quota of the allowance that everyone allowed has. So today we are going we are having the sector I think in Europe more or less 100% of capacity linked to the APR system and for this reason I think clients are accepting price hike because otherwise they will remain without cement because in some areas like happened last year where I remember I told you that in some months we had 8 hours of tube of tracts outside our Belgian plant if the Demand is 110 and the output is 100 somebody will remain without cement and in some areas you cannot import from outside and even if you can import you need hardware and you need the dispatching facilities to do that. So you have to consider all this and also passing the CO2 So for us it's a tax that we revert in full to the client. So the client cannot say I don't want to accept. The client can decide to build in wood or with other materials, but let's say if tomorrow the CO2 costs will rise to €150, I mean with an algorithm, a formula, because it's not €150 that we transfer We will not take any kind of risk in CO2. will be short of 700,000 toasts instead of 500,000 or 300,000 toasts, the extra risk or opportunity will not end in our publishing. Because for us, in this situation, it's too risky. just to be a lump sum price for a quarter or for the time that you need to complete an infrastructure. It is very difficult for sure for the people that are on the buying side because an infrastructure, I can tell you something that happened a few weeks ago in Italy where we are not anymore active but we have other companies in the group that are active in infrastructure. They always ask for, let me say, a price for a part of infrastructure for a new high-speed train. They started at $220 million, and they didn't receive any offer. Now they are at $330 million after three months, and they continue not to receive any offer. So the reality is that this probably part of high-speed trains today will cost between $370 million and $400 million. and this is why because why probably today the Minister of Infrastructure said that part of the PNRR fund will finance the inflation of the cost because this is the reality. I believe that an infrastructure from now on compared to a couple of years ago will cost from 50 to 100% more because with the gas that costs 600% more, electricity 3 times more and also the CO2 you are aware that if you add all these things and now also we expect probably in the second half of the year to start to see some let me say inflation in wages because I believe that especially in Europe people cannot survive with Catering up to euros that we will approach soon or also let me say any other kind of price that involves let me say oil like plastic but is in cement if you have now we have to say that 20% between 12 and 20% is considering the CO2 at 80 because with the CO2 at 100 the price the final price will be much higher And it's crystal clear to the customer how this is functioning because we spent the last three months, we and all the other players, to explain how this is functioning. Regarding Turkey, that is the last question about inflation and also, we have a situation probably, well, we will have the election next year. We have everyone with, let me say, where the approach to the economy inflation I think is between 30 and 40 percent but also because Turkey is exporting more than let me say 30 million of tons of cement in some parts of Turkey there is lack of cement and for the reason that even if with this strong devaluation that we have seen until the end of last year, the price in Euro was, let me say, satisfying. And we see the situation that is continuing. So far, we don't see any slowdown in the activity, for sure, everywhere, even in Euro, if the price of everything will continue to increase 20% in the economy. will be hit for sure or the central bank will have to increase the hike rate not 25 basis points but I think much higher. I believe that today with this kind of inflation in Europe is around 8% to 10%. It's not 3%, 4%, or 5% what they are telling to the people. The real inflation, even because they are not considering that if you start with 20%, still at 50%, everything with this magnitude, how you can keep inflation at 5% with increasing the rate just a few basis but this is not the argument of our discussion. So I hope that's everything.

Thank you.

The next question is from Tobias Werner with Stifel Europe. Please go ahead.

Yes, good afternoon, gentlemen and Lisa. Just to clarify, the line's not very good, so I just want to clarify a couple of points. The guidance for 2022, as you rightly say, as we can see, is a 10% increase at the top line. Can you give us the split of the volumes you assume and prices you assume there to an extent. I mean, you talked about significant price increases. If I was to take the average, then that would imply a decline in volumes, which I struggle to see at this point in time. That's the first question. The second question relates to the pricing situation generally and where you think which regions you're better positioned than than in others i.e to give us a sense let's say the nordics are better than you know turkey or what have you but just a bit of a flavor there and then just lastly on uh future sem the the numbers are still very small um and you give us kindly a guidance on how this should develop what's been your experience so far and what's the price premium to existing products again if you could remind us

Okay, starting from the last question, I mean, last year we sold nearly 40,000 tons of fuchsia sand. This year we are planning to sell 300,000 tons. As I said, we have a price, a cost parity with the CO2 around 60, 65 euros. So now it's, let me say, in terms of feasibility, it's more profitable to sell fuchsia sand than normal cement just because you have less clinking of CO2 on the side. and in terms of revenues we are now telling about 1.5% because for sure we have some quantity increase that is between 1 and 2% but let's say that 70% of the price increase is related to cost inflation, another 25% is CO2, and the other 5% is a bit of inflation and a bit of margin. In fact, even with, let me say, considering this year, let me say, if we take the middle of the fork that is 310 we have just an increase of 10 million with an increase of the revenues that is around 150 million so it is because our main target this year is to recover the food cost is to let the customer understand how the CO2 let me say transfer let me say cost to the final cost of cement. And so, let's say, we are not pushing too much in terms of profitability. But we see, anyway, a good market, especially for pricing in Northern Europe, the USA, because we are the only wide producer. But more or less, except for Turkey that is impacted by, let me say, the local factor, almost everywhere from China, Malaysia, Egypt costs have been transferred and accepted by the customer and so at the time being we don't see any issue even because as I said there is no substitute for cement so the only issue is like any commodity is the price it's kind of like it can, let me say, produce a slower demand. But I don't know if, as you know, in the construction cost, the price of cement is around 3% to 4%. Even if you have a 20% increase, the house, the cost of building a new house increase of 1% so I don't think this is an issue for the infrastructure is a bit different but the main infrastructure are let me say financed by the government so here depends how the government will be able to finance or to reduce the scope of some of this infrastructure But let's say that for the time being, I don't see a big issue, especially because we are coming out of this longer, let me say, pandemic. Our view is mildly positive. We don't know where we will end up with the price of electricity. So this is when we say that the main probably wild factor that we see is that is the price of the electricity because coal or petco, car, let me say, increasing but not so much. Gas is skyrocketing, but so far we will start to use gas at the end of, let me say, this year, and we will fully use gas by 2025, both in all borders and in invention. So the price of this year or next year in gas will affect us very little. I don't know if I have answered all your questions.

Yes, thank you. One follow-up question. It was already asked about Turkey and the inflationary environment there. When you look at pricing we follow, it seems that the January crisis has already reflected inflationary pressures in local currency. It seems that between December and January prices are up in local currency by more than 20% versus the end of last year. Does this make sense? Is this something you're seeing as well?

Yes, even more. But you know, the issue for Turkey is that you have, let me say, an export price that is varying from, I don't know, 30 to 35 dollars. And so if you export 30 million of cement, the issue for the internal price is that if it is lower, people tend to export when they can. So the price then in local currency is more linked in terms of parity to the, let me say, price of export. So today, with the lira at 15 against euro, if you have 30, 32 euros, the price of cement is around 500 lira. So this is, I mean, the price that we see today. But if we continue, and also, Turkey is a net importer of energy. They don't have, let me say, internal resources. So, except for wages, but, you know, wages in a cement factory is between 10 and 15 percent. The other costs are imported costs, so it's very difficult, let me say, that I see besides The temporary shock that might arise is that the leader devaluates in one month 20% of it happens, but then it tends to re-adjust in full to the, let me say, export price in dollars or euros.

Okay. Thank you very much. You're welcome.

The next question is from Alessandro Tortoro with Mediobanca. Please go ahead. Mr. Tortor, your line is open.

Yes, thanks. Hi. Good evening to everybody. I have three questions, which are basically some follow-up or some questions already made. The first one is on Denmark. From what I understood, considering also the timing of the price increase in that country, you already made and implemented a price increase, as you commented before, of the acceptance from some clients there. Do you think it is possible at a certain point, how can I say, to adjust these prices considering the volatility on the cost side also in a country like Denmark? So this is the first question. The second question is on Turkey. So if I understood well reading the press release, basically Turkey will be the only country where you see, let's say, Nebida basically down over the plan. The third question is a follow-up on the shortage of CO2 allowances you mentioned before. I understood that the company is pretty confident to pass through any additional CO2 price, increasing CO2 price, but also any potential increasing deficit on the CO2 side. The question is, can you give us an idea of the level of Clean care import or shipment from Turkey to Denmark. Thanks.

Yes, in Denmark, yes, last year in Denmark, like, behind, let me say, the remaining part of our opinion, because we, let me say, signed, struck the deal during November, and so once a year. This year, they, I mean, the market has accepted, I mean, Probably not in full because let's say we contract nearly 85% and then the other 15% is in spot basis. So spot basis depending on the price of energy or other things. we have edged most of our energy electricity and coal prices so even if the price will continue to soar I don't think that we will see significant divergence in terms of cost and so for this reason we don't think that We need to adjust the cost except for the CO2 that is a variable input and so it depends on the cost of the CO2 that will be charged at the end of every month. In Turkey, you know, it's a cautious approach because of which would be the final value of the Lira because when you have a forward on the Lira with the rates of 20-25% and so in three years you have a devaluation that is nearly 70-80%, it is difficult, let me say, to say I am sure that in Euro I can reach this target. It's a wait-and-see approach every quarter. We are confident because it's 20 years we have been, let me say, selling and practicing in Turkey, but let me say, for the time being, we don't want, let me say, to blow up numbers. We want to have, let me say, a cautious approach because we have elections, because we don't know if inflation will end up at this level or much higher or lower. So the market, I think, is in good shape. They are, let me say, exporting nearly 40% of their capacity today and I believe that the border tax adjustment is not in place or at the most 30 will join the APS system. export as much as they can, because in Turkey today you have to pay energy in dollars. So you need to export, especially if you are not a multinational player, because otherwise you cannot pay energy. In terms of how much is the flow of cement from Turkey, let's say that from Turkey the cement can arrive both in Belgium and Denmark. I can tell you that there might be, or we have, let me say, scenarios that we can go from 400 to 800,000 tons of cement that is mainly coming from Izmir because we have a capacity, export capacity of 1 million from Izmir. But depending on the cost of CO2, the situation of the market, the cost of the freight, our scenario is between 400 and 800,000 tons of grey cement.

Okay, so sorry, just to sum up a point also on, let's say, Denmark, which is a key market for you. The education the company made with, let's say, the major client is, first of all, let's say, to support this monthly adjustment on the CO2 price fluctuation. And on the other side, considering the price increase the company already applied to, In theory, considering, let's say, the performance of Denmark last year, 2021, Denmark, let's say, should post an EBITDA growth, let's say, of the plan.

Yes.

You're right. Okay. Thanks.

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

Yes. Good afternoon. Thank you. a few questions. The first one concerns the U.S. market and the Asian market. If you can give us an idea of what is your view for the demand growth and the price growth in these areas, which are perhaps a little bit different from what is happening in Europe from a certain point of view of the of the CO2 costs. And a second question regarding the shortage of resources. If you have the, is there a chance that the shortage of people can change also the demand growth scenario that you have factory in your plan. So in some way, are you seeing that there are some delays, there are some slowdown in the project right now? or you see a quite normal advance of the infrastructure works? And the very last one, a general question. So regarding the If you see a chance that in Europe there could be a release of the CO2 reduction scenario, I mean that a more pragmatic approach could be adopted. And if there are discussions or pressures in this area, this direction, considering the problems related to the implementation of the current policy.

Yes, Bruno. It's Marco here speaking. I think the first question about U.S. and Asia. Let's remind everybody that in U.S. and in Asia, we sell like cement. Therefore, it's not a product geared to infrastructure, but maybe geared towards retirement maintenance and housing, this kind of market. is benefiting from a real effect of that. So we expect the U.S. from around the 670,000 tons of volume sold in 2021 to increase in the low single digit volume growth year by year. sound but stable growth trajectory with relatively solid pricing. You know that our market, we cover around 50% of the market in the U.S. and over half of our sales are imported. The competing products tend to come from exporting countries which are currently hit by an increase in freight rates. So we expect a moderately benign environmental pricing. So this is the US. As far as Asia, we have Malaysia, which, as you know, is mainly an export market. We tend to sell from Malaysia clearly to the domestic market, but the large proportion of our sales go into Southeast Asia and to Australia. After a few tough years in Australia in particular, we expect a recovery of that market. So again, in Malaysia we expect a mid-single digit volume growth with stable pricing and so an overall good Southeast Asian trading environment. In China, I would say this is probably one of the best performing We expect it to continue to do well. We clearly have a bit of a cap in volume growth because we are almost at full capacity, so we try to do everything we can. to optimize production in order to grow at least the volume by some percentage point, but we're close to full capacity, but the market is very buoyant. Our product is perceived, and it is, as a premium quality. We expect that there's going to be some price inflation in China, so the top line still we expect it to be in the digital growth range. So, overall, this is the picture for the countries that you asked for. Then, as far as the other question, I apologize, but if you could just repeat the other one and I'll go answer it.

Sorry. Sorry, I didn't catch. Yeah?

What was the second question?

Yeah, the second one was related to the eventual shortage. if you are experiencing, you see that there are some delays in infrastructure projects related to eventual shortage of people or other kind of inputs, production inputs. And the last one was related to eventual, if you see a chance in the discussion or if related to a possible delay, a possible relaxing, rather than relaxing, a possible delay of the stringent CO2 reduction requirement. I mean, if we can imagine that a more pragmatic approach will be adopted perhaps not soon, but in the medium term, considering that there are several problems and troubles related to all the factors that are impacting the economies in this moment. So is there a chance that, in your view, are there possible discussions on this, or is It is not something that is on the carpet.

Let's see. We are now in the very first months of this. This is an artificial system, as you know. The rationale of this test is to foster, let me say, a speedy transition to, let me say, other, let me say, greener technology. The issue is that in some sectors these technologies are not available and won't be available for sure in the next five to seven years. So, for the time being, this tax is just producing inflation because it's just fully reverted to the final client and adding to energy costs and all the other costs. So, I believe that from the moment that these activities have already started six months ago, that they might slow down the carbon of this, or they widen the window, not 2030, but 35. They won't tell you tomorrow, but even this year, I believe. But if everything will cost the double, and technology is not available, you just kill the economy. This is, I think, the real issue. On the other question about shortage of people or delaying in projects, it is difficult to, let me say, we sell white cement except in Scandinavia, Turkey, and Belgium. White cement is not used for infrastructure, so we don't see any impact on white cement. On the other areas, we are, let me say, I don't see for the time being for the next couple of quarters any kind of shortage of truck drivers or other things or any postponement of and infrastructure, even because you can understand that the post-pandemic that we suffer so far has been, let me say, produced by the COVID. So in this situation, it is difficult to say that an infrastructure can start three months or six months later, because if you have another wave of COVID in September, because I think now we are exiting, then everything will be, let me say, slow down again. So it's not in our scenario that this might have an impact this year or next year, but who knows because I don't know what will be the development especially of the COVID. And also the wage inflation that we might see after this huge increase in input costs everywhere. because the other issue is that if we are going to see a huge wave of strike in Europe, in every sector, from transport, industry, because life costs are soaring and there is not an automatic alignment, as you know, in most of the countries. So this, I think, might be a disruptive. So this is one of the risks that we might see, especially in the second half, Strikes that start to hit a lot of sectors because people want, and I think it is normal that they want, to have a wage increase to adjust, let me say, the last cost. This is the main risk that I see probably in the next six to 24 months. Thank you.

As a reminder, if you wish to register for a question, please press star and one on your telephone. The next question is from Michela Baldelli with BMP Paribas. Please go ahead.

Hi, good evening to everybody. I have a couple of questions. First one, because you pointed out I was wondering what could happen to your P&L if this penetration rate of CO2 will go above and beyond your expectations? If you can provide us some of the drivers, how much it could be the impact, probably like 10% better penetration that you expect, something like this. Second question relates to the aggregates in Turkey. If you can provide us a little bit of more color on how it's proceeding, the business sales and EBDA progression that you expect also in 2022 after the ramp-up is done.

Thank you.

Yes.

I think the first question, I mean, clearly, as was pointed out before, Futuresem still represents a small portion of our total sales. We have an ambitious rollout plan. As you know, in 10 years, a bit less than 10 years, we expect it to represent around half of our sales. If there were to be a meaningful acceleration, I would say it would not make a meaningful impact in the very short term, both because we are ramping up grinding and calcining supplies, and so it would be difficult to exceed significantly the targets also because we are getting ready to wrap up the production so there will be material available in the short term. But definitely, if you look at the medium to long term, if these were to exceed the target, we would be clearly seeing a push up of our profitability because the product is more profitable than the average of our product range. I mean, this is for sure. We have not quantified how much, because it would depend by how much we would exceed. But for sure, it would be a beneficial, so to say, product mix effect in the portfolio if futures somewhere exceed our expectations. I started to ask you, I think, is this a question regarding the growth trajectory of the country? Sorry, the line is not very good. Or you were asking about some other KDI,

Yeah, I was referring to the aggregate business in Turkey. Okay.

Okay. Understood. Yes. Thank you for the question because this has been more than any transaction that we've done in 2021. We bought for €4 million a business, an aggregate business in Turkey. So we continue to pursue our strategy of vertical integration in the three hubs that we have Turkey is one of them and the other two are Denmark and Belgium. So in Turkey we're very strong in cements and the red inks especially in the area but we were a bit short on the aggregate side. So I think this acquisition is quite important to fully vertically integrate upstream our model. So we acquired some important long-term reserves that would secure adequate supply of aggregates for our ready-to-eat business and also for third-party sales. So there is an enlargement of perimeter. We've highlighted the run rate of sales is around 3.6 million tons of aggregates at full capacity. full design rate of sales. So we think it's a very, I would say, profit-enhancing and strategically-centered acquisition in a country that we still believe is, for us, strategically important. And we reinforce our competitive positioning in a key sector that, for the future, secures a reported flow of materials for our clients.

anyway about 350 million tons of capacity of reserves, sorry, for 4 million. So today in Turkey, let me say, aggregates are still, let me say, very, let me say, more perceived by the market. But I think to secure this huge amount of reserves that can last 200 years at this very low price, Probably not tomorrow, but we'll enhance, let me say, the performance a lot because the cost is virtually zero and the reserves are, let me say, huge.

Thank you.

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

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