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.