Cemetir Holding

Good afternoon, this is the Corusco Conference Operator. Welcome and thank you for joining the Cementir Holding Preliminary 2023 Results and 2024 to 2026 Industrial Plan 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. Please go ahead, sir.

Thank you, and good afternoon, good evening, and good morning to those who participate from the U.S. Welcome to Chairman Tirole's preliminary 23 results and the industrial plan updates. I'm here with our chairman and chief executive, Francesco Cattagirone. And my name is Marco Bianconi, and for the first time we are in audio webcast, so I'm sure you will follow the presentation deck that's been distributed a few minutes ago. So I will introduce the results moving to page number four. And at the end, we will leave a Q&A session for our chairman and chief executive to answer your questions. So from page number four, few financial highlights. For the year 2023, revenues reached 1.69 billion euro minus 1.7% year-on-year. The non-GAAP revenues were 1.69 billion euro minus 1.5%. Cement volumes were down around 1.6% in almost all countries with the exception of Turkey and China. Ready Mix and Aggregates volumes were also down during the year by 11 and 10% respectively. EBITDA was a record 411 million euro, up 22.6%. The non-GAAP EBITDA was up by 25.4% to €421.9 million. This figure includes non-recurring income of €11.6 million, mainly related to gains on asset sales. So the non-GAAP recurring EBITDA is €410.3 million, up 22% on a like-for-like basis. The margin increased from 19.5% to 24.9% in the period. EBIT also was record to a 278.3 million euro, up 36% year-on-year. Non-GAAP EBIT was 299 million euro, up 39%. Profit before tax was up 23% to 290 million. Non-GAAP pre-tax was €315.8 million, up 39%. Important to underline the net cash position reached the record of €217.6 million, an improvement of €122 million year-on-year, including €34 million of dividend distribution. Remind you that of these €217 million, the FRS-16 impact is around €82.3 million. Moving on to the guidance for 2024, this is a like-for-like non-GAAP recurring guidance. We expect to reach for the year around 1.8 billion euros of revenues and EBITDA around 385 million euro, a net cash position of around 300 million euro and a capex of about 135 million euros Moving to a few slides about the industrial plans. You know we have a rolling industrial plan, so the update. Starting from page number seven, there is no change to our strategy, which is based on five pillars. At the first, there is sustainability, where we will be deploying over 100 million euro of CapEx in the period in sustainability investments. Future SEM continues to be at the core of our strategy. We continue to push towards batch circularity, water recycling, and also we are starting with the SAM initiative in the carbon capture technology in Denmark, where we want to be fully operational by 2030. We filed a commitment to SBTI scenario of 1.5 degrees Celsius. and we continue to work to preserve biodiversity and habitats and supporting local communities. With regards to the other pillars, innovations continue to be at the heart of our operations. We're focusing on low-carbon products like Futuresome and others, and we are increasingly utilizing artificial intelligence in our operating processes. With regards to competitiveness, we are digitalizing all our main processes from manufacturing to logistics to procurement. And we also maintain a high-level profitability to continue to operate and achieve efficiencies. With regard to growth and positioning, we want to continue to capture growth opportunities via the utilization of new green products. We want to reinforce our vertical integration in the Nordics, Belgium, and Turkey. and we would like to keep our global white cement leadership. We will use also M&A opportunistically in core businesses. With regards to people and organization, we have a very strong drive towards a zero accident policy. We are working to develop human capital and we have in place a leadership program and a talent management and succession plan. And we have also invested significant resources on the Cementier Academy to develop, enhance, our managerial and behavioral skills. On page eight, just to show that decarbonization drive is live across the value chain, starting from raw materials with the use of circular materials. In the energy side, with the use of alternative fuels, district heating, and new green energy investment like solar and wind, and switch to natural gas and biomass in Aalborg from 2025. We are upgrading our plants like the KIL-4 in Belgium, for example. We are also working to reduce clicker ratio and to improve our heat consumption in our manufacturing process through waste heat recovery. Logistics, which is an important cost element. We are working on predictive maintenance. We are investing in green transportation fleet, especially in the Nordics. We are also working on network and route optimization and procurement. This is clearly with the overriding investment in FutureSAM and the adoption on new technology like CCS. On FutureSAM, just one slide on page nine, This is a key pillar of our strategy. As you know, this is a low carbon of technology that we have developed in-house and allows for a 30% reduction in CO2 emission compared to ordinary Portland without compromising the chemical or physical characteristics. We have in place a pretty aggressive rollout plan that will bring future SEM to represent around 51% of total volumes of cement sold in Europe by 2030 and around 60% of grey cement volumes by the same time. Moving on to page 10 to illustrate our decarbonization drive. As you can see, these are scope one emissions. We have further up the bar to reduce our carbon emission by reducing the emissions that we want to achieve by 2030. As you can see on the right-hand side of the slide, we aim at achieving 915 kilograms of CO2 per ton by 2030 in white cement and 718 kilograms of CO2 per ton in grey cement at the same time. You also see below the graph the trajectory of the clinical ratio which is declining from around 80% of 2023 to 78% and 64% in white and grey cement respectively. Moving on to CCS, page 11. We have a couple of pilot projects underway. We have started already a pilot plant in Aalborg for the capture of CO2 using amine solvents and new heat integration methods. We are also participating in another big project that kicked off in November 2023. which is called CONSEQS, which again in Aalborg uses an electrochemical CO2 emission reduction technology. We are also investing heavily in PVA contracts, so long-term contracts for renewable energy generation and direct purchase of electricity from alternative sources. So this is again another important pillar of our decarbonization strategy. But to summarize, on page 12 you see here The CapEx highlights, you can see on the left-hand side, the major investments in sustainability, this 100 million cumulative three-year investment program, which will encompass a number of initiatives, including KIL-4 upgrade, switch to natural gas in Aalborg, CCS, preliminary studies, and a number of other initiatives you can see here. And on the right-hand side, you see the splits and the breakdown between Sustainability CAPEX and Maintenance CAPEX over the industrial plan period. Finalized presentation, the last couple of slides, page 13. You see here the financial objectives to 2026. You see that revenues are expected to reach around 2 billion euros. This is a 5% to 6% sales compound growth rate in the period. That is, we expect a moderate increase in volumes with stronger volume growth in 2024, except for China. We also expect prices to be broadly stable or moderately up. As far as EBITDA, we expect to reach around 425 million euros in 2026. Clearly, we have started from quite high comparable figures because we reached two years in advance. Our objective, it was the 2025 objective, was already reaching 2023. So, clearly, the EBITDA progression is a bit more muted. Still, we have a number of initial support in this absolute growth from capacity optimization in Egypt and Belgium the fact that we will face a bit of a headwind in some selected input cost increase. We are on average short about 250,000 tons of CO2 per annum, including a step up in 2026 due to regulatory changes. You see the EBITDA margin after a big spike up in 2023 is just normalizing to the average historical margin level. The average yearly capex is 112 million euro, which is a ratio of about 4% to 5% to sales. And then, as already mentioned, a cumulative sustainability capex of 100 million euro. The most important, I would say, line is the last one. We expect to end 2026 with a net cash position of 600 million euro. That means generating a cumulative half a billion euro of free cash flow before dividends. We also expect dividend payout to be in the 20% to 25% range, therefore a progressive dividend policy. Lastly, just the last slide on the comparison with the previous industrial plan. As you can see here that the sales remains broadly the same with the EBITDA in absolute terms The early capex is broadly unchanged. The net cash position is increased by over 100 million. So this is the presentation, and I will now hand over to you for any questions you may have to Francesco Cotagirani. Thank you.

This is the Coruscall conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touchstone telephone. To remove yourself from the question queue, please press star and 2. Please pick up the receiver when asking questions. Anyone who has a question may press star and 1 at this time. The first question is from Emanuele Gallazzi with Equita. Please go ahead.

Good afternoon everybody. Thank you for taking my question and thank you for the presentation. I have three questions. The first one is on Turkey. Last year you defined Turkey as a wild card and I think on 2023 the performance was very good. So I would like to understand which is your view on the country now and what are you including in the business plan? The second one is on the 2024 guidance. If you can just elaborate a little bit more on your assumption for volumes and pricing and maybe giving us a sense of the negotiation you had with your client in the Nordics. And still on the guidance and on the EBITDA, the guidance is pointing to a 6% decline. Can you just comment on which country are you expecting this decline, so this 6% decline from which country is basically driven. Thank you.

In Turkey, we saw a very nice increase during 2023. We went from... We went from...

nearly 20. From then, we include nearly

around 40, 45 million Yedida. So on the sense of next year, we expect from the moment that there will be the election in the main cities around March. And also you have seen that the head of the central bank has been appoint the new one just in this weekend. and so also the upturn in the rates would continue. And so we see a bit of softness for the economy during 2024. So part, I mean, more than half of what, let me say, we expect as a sort of setback from this year compared to 2024 against 2023, so that the EBITDA is around, let me say, 25 million less. We expect that half of this is mainly done by Turkey. Also you have to consider that the exchange rate is a big question mark because we don't know with still an inflation around 60%, the expectation is to go towards 20, 25, but we have to see the deployment risk. Then we think that in the Nordics where we saw, let me say, a smooth decline during the end of the year, we start to see an upturn during the second half of the year. And then let's say that in the last five years, the company, let me say, increased with the same perimeter. The revenue is around 50% and the EBITDA around 80, 85%. So just to be prudent, we see a sort of consolidation. we still have two wars at our, let me say, border, say that the Ukrainian border can afflict the Baltics, and also the war in Gaza can afflict, let me say, Egypt. So we are cautious. We don't know if our caution is right, but let's say sometimes even if you run a lot, you need to rest. We see a stable situation in the energy prices, both on, let me say, electricity and gas. So mainly, the quantity should start to rebound in the second half. And let me say, this is our, let me say, view for 2024. And mainly, Turkey is 50% of the gap that you see. But let's see. We have to see if this materialize or not. But especially after, let me say, the election that will be during March, we will have a clearer idea. Is that the other one? Yes.

Yes.

Yes, I think, I don't know if I missed something that you asked.

No, maybe any comment on pricing.

No, the pricing, let's say, let me say, we see, except for Turkey, but Turkey is mainly also the translation in Euro of the Turkish lira that can, let me say, reflect a little bit the But then we see in the northern country the prices are stable. Also the project on the ferment is starting to kick in. Then also, as we mentioned, you can see here, we are, let me say, planning to restart our second line in Egypt in the second half of the year. It is logical that today, let me say, We are aware that from the technical point of view, we can start in the second half. Then if the area is involved in other things, mainly due to the war in Gaza, we don't know if we can postpone due to the shift some months due to security reasons. So these are, let me say, but let's say that the number of what we expect in 2024. 2024 is just 385, and they say 15 million is coming from Turkey.

So the other are minors, but they're spread in all the perimeters.

So from my point of view. We are, we continue to see a solid cash flow, including a higher capex. And so, as I said, this 2024 is a year of consolidation for what we see at this point. Then we might, let me say, upgrade or downgrade during the year, be looking at, let me say, you know that in the last quarter of the year, there will be also the election in the United States, and I think in April, May, there will be the election in Europe. is here, let me say, it's not easy to decode to the cipher, let me say, in terms of macro signals. Also, the central banks, as you know, are, let me say, now have stopped to increase the rates, but also there is uncertainty when they will start, let me say, to lower the rates. And this also can afflict, let me say, some macros, projection.

Thank you. Thank you very much. Very clear.

The next question is from Matteo Bonizzoni with Kepler.

Please go ahead. Matteo Bonizzoni, your line is open.

Yeah, thank you. Thank you. I have two questions. One is a follow-up on this let's say guidance for 2024, which is for a 6% EBITDA decline. So you have said, correct me if I'm wrong, that €50 million of this decline are coming from Turkey. But you also say that pricing is not going down. Cost, I don't know if you can elaborate, but I don't think they're going up, if any, if we look at least at the spot commodities, but it might be different for you because of the hedging. spot commodities which are relevant for you are not going up are going if any down so if price are not going down and commodity prices are improving maybe just to understand what kind of safety buffer you have included in this guidance clearly is now very early in the year so it makes sense that you stay with a little bit of caution now because we don't know what is going to happen we are only beginning of February. But just to understand the rationale of projecting an EBDA which goes down by 25 million euros or 6% in a scenario in which prices are not going down and cost, at least the spot commodities are improving. And then I have a question on the cumulative free cash flow for the plan in three years. you are going you're guiding 500 million euro free cash flow but the yearly capex at the end of the day is not about depreciation because the yearly capex is 112 million which is if any slightly below the depreciation i was calculating a little bit of approximate bridge and to get to 500 million euro i assume that there is some working capital absorption or some some assumption also working capital which i wish i don't see here if you can clarify because In my bridge, you should be closer to 600 million than to 500 million. So I just want to add a little bit of color on the various parts of the cash flow bridge in the three-year period. Thanks.

Starting from your last question, let's say that, as I said, when you forecast for a year, you have some uncertainty. When you forecast for three years, you have bigger uncertainty. So it is true that, let's say, blankly speaking, the average free cash flow after tax, so before dividend, it's, let me say, around 200 million. But here we have put around 170, that is 500, just because we don't know the exchange rate, we don't know, we need also to say a little buffer because if we also improve the revenues from 1.7 to 2 billion and we keep the working capital in terms of persons at the same level, we might have an increase in absorption of capital. Then going to, let me say, back to the cost structure, I confirm that we see and we arrange partly more than, let me say, 50%, the energy costs, so we don't see, let me say, a scenario where the energy are more or less the same, but we see some inflation in the personal cost, for sure, in the various country, and this, let me say, considering that we have revenues of, let me say, between 1.7 and 2 billion in the plan, let's say, even Let me say, one, two, or three percent in change can, let me say, bring 10 million of difference in the EBITDA. Then in Turkey, let's say, it's just a cautious approach because it's a volatile country. And if, let me say, we went from, let me say, two years ago that we were close to zero, and now we are, let me say, around... 70 million, let's say, there is the possibility, like even in the stock market, of some retracement. So it's just, let's say, a cautious approach because we don't want, let me say, to sell dream, but I want to sell reality. So the company is performing well. It's producing, I think, a very good cash flow. and also we increased nearly five points of EBITDA for industrial companies. It's a big improvement. You are aware that this year our target, let me say, in industrial plan, where I don't know, nearly 50 or 70 or 50 or 60 million below what we realized. So if we are, let me say, we are well above our target, of the industrial plant. We already reached in the former industrial plant of 22, 24, 22, 25. Already the target 2020 or 2025. I think it's normal that you can expect a little bit of retracement. So I don't want to be too much pushy because there is no reason to be pushy.

Thank you.

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

Yes, good afternoon, gentlemen. Thanks for taking my questions. Number one, when we look at your cash position, which seems to be growing as we speak, and you're taking a conservative approach, other than decarbonization, what other opportunities do you see now? Are you becoming more positive on M&A opportunities. That's the first question. The second question relates to the CCUS project you mentioned here in Denmark. Maybe you can give us a little bit more flavor. Firstly, do you expect any EU subsidies here or are you applying for EU subsidies for this project and what sort of OPEX would you assume OPEX costs, would you assume at the end of it, do you have some competitive advantage in terms of location? And then just lastly, you seem to be one of the more highly exposed companies to housing. And I was wondering what sort of developments you're seeing at the moment coming from these markets. Thank you.

In M&A, let's say, we still have, let me say, limited view on the future because, as you know, we don't see so far a full, let me say, or major deployment of the CCUS technology. But, let's say, compared to a couple of years ago, We have some more visibility on some technology. So we are in talk with two main, let me say, industrial players that they might supply to us the technology to decarbonize. One thing, as you imagine, is the CAPEX. Let's say there are more sense and ceremony about CAPEX than two years ago. There are some, let me say, still some question marks about OPEX because the big question mark is still the energy intensity. And then when you know, when you talk about energy intensity, you have also to apply the cost of energy. And we see, we look in the past two years, it's difficult, let me say, to forecast from the past two years to a price that spiked to 300 euro per megawatt. and now we are around 70, 80 to say, okay, this is the basis for the next eight to 20 years. For sure, the green energy will cost more, but as also I say before that we are not, let me say, forced to invest in the cement directly. We can also invest in the side business that can help our business to grow or to, let me say, reduce the cost, like in green energy, I mean, in wind and solar power. And let's say that also our location in Europe, I think that we have only two big plants compared to other players that have a lot of plants. and our location I think is one of the best because we are the Baltic Sea close to, let me say, the North Sea where there are, let me say, the exhausted oil well that can be injected with CO2 and also seems that in Denmark there are some, let me say, where you can inject in-shore CO2, but this has to be, let me say, more scrutinized in the next, let me say, month. So I think that during this year, we will have a clearer picture for us on which side the carbonization path and the cost and the opportunities because let's say having this strong net financial position can give us also the opportunity to decarbonize faster or to let me say increase our perimeter where other players that are leveraged or have limited let me say financial capacity can have difficulties in reaching the target. Remember that starting from 2026, the allocation, there will be, let me say, a certain cap in the allocation, so as already said, in these couple of years, let me say, sort of limbo, but then, starting from 2026, there will be a cut year by year. And so if you don't have, let me say, a clear path, you are forced to close down and you see that some players, even bigger, are starting to close down some capacity in Germany because they don't have, let me say, the possibility to decarbonize at, let me say, Good price, good cost, and then also there is the possibility that some small player can exit the market because they are, especially now that the rates are higher, they cannot, let me say, survive the cost of upgrading the plant. Then on our CO2 situation, I think that let's say our average, let me say, need for the next three years is around, as an average, 200,000 tons, 250,000 tons. That is better than our previous forecast. On housing, let's say that the only... week market as this year happened in 2023, we see softness in the US, but even if the market, let me say, from our point of view, is bottoming in the Nordics, so we should start to see some pickup in demand in the second half, but let's say the price dynamics are are, let me say, more, let me say, interesting in the Nordics than in the USA, where also we have limited capacity and we import mainly from ourselves in Denmark or in Egypt, but let me say there is also the freight cost. So for this reason, let me say, the USA has suffered this year, but we don't see a major pickup in the demand, but even a major down in the demand.

Thank you very much. I mean, just as a follow-up quickly, are you buying at the moment CO2 at these prices?

Let's say that from an opportunistic area, we buy sometimes, but just to cover our short position, we are not, let me say, speculating yet. just to buy, to resell after. We are short of these 200, so it's a small gain.

Thank you very much.

The next question is from Giuseppe Grimaldi with BNP Paribas. Please go ahead.

Good afternoon everybody and thanks for the presentation. The first question relates to the volume development. If you can share with us an update on current trading. I know that basically you have different products and different geographies, so even a sort of ballpark number on volumes in the first two months could be helpful. The second question is around Egypt. You're going to, if I got it correctly, to increase the capacity in the region. So basically turning up the plant, the existing plant. So I was curious to understand which is the end market that you are targeting with this new capacity. Is Western Europe, US, Asia, just to understand where do you want to sell the product? And the final one is on pricing. The CO2 prices are going down. So I'm curious to understand if you saw smaller players that are trying to chasing volumes, eventually lowering the pricing of the cement at the moment. And if you see this as a sort of potential scenario going forward. Thanks a lot.

Asking from your last question, I don't see that the CO2 that, say, for me, temporary, maybe driven from, let me say, the mild weather in Europe, let me say, now, because January has been quite, let me say, difficult for the weather, especially in the Nordics, and also because there is a sort of rethinking of the ESG, let me say, investment with some hedge funds that are exiting or they are, let me say, paying account, let me say, big losses. And so I think that part of the downturn in the CO2 price is because some financial players are, let me say, sort of unwinding their position. They are forced to unwind position So I don't think that this, let me say, trend will last for, let me say, more than a few months. And so I don't think that this is a trend. And so for this reason, I don't think that any player can, let me say, mute the approach on the market just because the CO2 is 20 euro lower than what is the average of last year. As I said, starting from 2026. So in nearly 20, 22 months, there will be a sharp cut in the allowance. And I think that anyway, it will be temporary for the price of the CO2 to start to pick up again. Then the other question is, as volume development, let's say that we see in the grey market, a rebound in the second half in the Nordics for us, and in Turkey, let's say that we still see a strong market because of the earthquake, because of the neighbourhood, let me say, you know, that Syria and the other countries, they have to rebuild a lot of things, and if one day also Ukraine has will reach peace. The only country where you can, let me say, supply cement in the southeast Ukraine, where today there is the war, is Turkey. Because from Russia, I think it won't arrive. And Ukraine from the border of Europe, let me say, is from 500 to 1,000 kilometers. So the only reasonable way to reach Ukraine will be through the Black Sea. So this is an opportunity when and if there will be the peace. So we don't see any, let me say, sharp downturn in Turkey in terms of demand. And also the government, let me say, is trying to carve the export from Turkey because in some parts of Turkey there is no availability for domestic cement. So this is today's situation. I mean, the first month has been, let me say, for the Nordics, we saw during January, in some country, even minus 30. So the volumes are weaker, or have been weaker, but we see starting now that the temperature are coming back to the normal average. So we are starting to see a pickup in the demand. for what we have seen so far in five weeks, let me say, is more linked to the, let me say, meteo situation than from real, let me say, demand. Our capacity that, let me say, is a restart of our kiln, it's mainly for export and export for Europe and United States.

Thanks a lot. It's really clear.

The next question is from Alessandro Tortora with Mediobanca. Please go ahead.

Yes, hi. Good evening to everybody. I have three questions, okay, for me. The first one is related to, as you mentioned before, the average needs you have in terms of, let's say, CO2 deficit. So the question is, you already covered the needs over the plan over the next year, considering that you already mentioned some opportunistic purchases you can do on CO2, so just understand how do you, what's your strategy on these. The second question is on Turkey. You mentioned before in the call that there are around 70 million EBITDA on Turkey. Can you help me to understand if this is a figure basically no GAF but also excluding the recurring items you had in 2023 in Turkey. And then the third question is, again, on the capital allocation side, considering clearly that the company is still in the leverage mode, first, why don't you think to raise a little bit, at least the upper end of your payout ratio, and second, Is there any possibility to see the company for instance restarting to think about maybe increasing some capacity in China or maybe looking also in other markets where maybe the ETS or let's say a restrictive regulation on emission is not present. So maybe let's say new areas for you where you may think to invest. Thanks.

Lots of questions.

Sorry, sorry.

CO2 for the years.

We are, let me say, buying slowly, you know, 200,000 tons at 65 euros. Let's say that is the average of the last, let me say, 10 days. We are talking about 13 million euros. So it's a small amount considering our, let me say, cost base. So Every week we are buying something, so I don't think that even if we are buying even at five euro lower or even 10 euro higher, this can affect, let me say, the EBITDA, frankly speaking, because, I mean, the gap is around 200,000 tons. Let's say the gap will increase, I mean, toward 2026 because it's starting the gap, but now this year, let's say, it's below 200,000 tons. The third Turkey, let me say, let me say, yes, 29, but there are not, let me say, exceptional items because the exceptional items that we have, let me say, non-GAP figures this year is coming from the sale of some, let me say, business mainly in UK, in China, and in the Baltics, I mean, that were, let me say, all the ready-mix plant or in China, it was the old cement plant that we bought in 2010. Then we relocated to, let me say, a zone that were close to this plant, but this plant now has a different, let me say, zoning from an industrial perspective. And so we decided to solve it. So there is nothing, except the last 29 related that is affecting, let me say, our figures of around 70 million euro for 2023. Okay. Looking at the payout ratio, let's say that I think, you know, the last 20 years, we invested 1.7 billion for acquisition. So, It seems that 200 million you can buy a single plant with 200 million today. With 600 probably a small company conglomerate. But let's say that we don't think that we change the policy for dividend payout even because if you are also to consider another thing that if you keep, let's say, more or less EBITDA at the same level with a small increase for the next two or three years, this doesn't mean that the net profit because of, let me say, the financial income, that is the income that, let's say, we will receive investing this cash, will affect, let's say, the net profit. So net profit should continue to grow even if the EBITDA, let's say, will remain at the same level because you can imagine with 600 million euros at 3% or 4%, you can have some income, let's say, nice income. And so this means that even the dividend should continue to increase because the dividend is linked to the net profit and not to the EBITDA. Okay. Thanks. And then also you asked about increasing the capacity. Let's say that today some countries are not, let me say, in the ATS system or system like this. But for example, Turkey has already announced last year that they want to convert starting to 2026. So we don't want to invest or to start a new investment in any country where probably then in the next three to five years, they decide to converse to a certain APS system. And so they, let's say, indirectly carve your capacity or your, or our ability to sell for the medium long term. So for this reason today is difficult, even in something like China, India to invest, because if in five years they put a sort of threshold in the emission, then let's say you can lose part of the future return of the assets. So this is the main reason. So it is better to invest in the country where you have the ATS system because the rules are clear. So you know, today, for example, in Europe, it's difficult to understand which will be the CO2 price in five years, in 10 years. But then you have the rules, you have the cap in the CO2, you know where there is a pathway you can go. The issue today is the technology that you can use to revamp the plant. But I think in the next two years, we are, I mean, as a sector, aware about the CAPEX and the OPEX. And so this should foster, let's say, starting from 2026, another round of consolidation. This is my expectation.

Okay, okay. And just a question on this last point that you mentioned on clearly. Awaiting the technology and, let's say, economically viable technology, it is probably too early today to say that if the EBITDA margin, basically, let's say, you put as a target in 2026, 21% or something, let's say, in the region of 21% EBITDA margin, considering everything we're discussing on CCS and so on, if this is a level that basically could be deemed as sustainable going forward. You can even answer no or not yet. Just understand.

Let's say you saw that in one year we went from 19 to 24, 25, right? So let's say that I don't want to let me say show the cards to earlier, but I continue to stress that having two plants in two very nice locations, it might be a competitive, a huge competitive advantage going forward. I continue to say, and you know, and you follow probably, some of you follow me in since, I mean, the last 20, 30 years, that I don't want to announce something that I don't, I'm not, let me say, sure, more than 100%. But let's say that today is difficult to say that the average, I mean, from 2030 is 20%, it can be even 30%, frankly speaking, because if some player will not, let me say, anymore in the market. If the market is closed because of the CBAM, if you have a competitive advantage, so your costs are lower, especially not for the carbon capture, but for the sequestration. So in some areas, for example, the Iberian Peninsula, there are no places where you can store. So everybody in the Iberian Peninsula, should, let me say, ship this CO2 one day to other place and this will cost for sure two or three times higher that can cost to us or to the players that are around, let me say, Baltic and North Sea. So this can afflict a lot of the profitability, frankly speaking, because if the cost is 20 euro for somebody, 80 euro for others, this can say, okay, for us, let me say, the EBITDA can be 22, but for another player here with a whole structure for cement, very lean, can be 12% because they lost eight points for shipping the CO2. So today we are in this, let me say, big question mark in some areas, and for this reason also, let me say, even if there are the opportunities to invest our cash, we don't want to because, let's say, if then, let's say, we need 50 euro to store the CO2, it can be a competitive disadvantage.

Okay, okay.

Thanks.

For any further questions, please press star and one on your telephone. The next question is from Bruno Permutti with Intesa San Paolo. Please go ahead.

Good afternoon, everyone. Two questions for me, if I may. The first one is related to the freight costs. I would like to understand if you could have an impact or you are considering having an impact in your guidance from increasing freight costs. And the second one was related to the expected recovery of the volumes in the Nordics for the second half of the year. Is there any specific project that you have in mind? So there is something specific that you have in mind when you believe that would be a recovery?

Yes. One more question.

Let's say that we own part of the vessel, so we have long-term contracts. So, let's say, to ship cement, I mean, 80% of our, let me say, volume, let's say that we have a sort of fixed cost. For sure, for spot contracts, or especially for the energy where you pay, let me say, especially coal, is that the freight can, let me say, add some extra cost, especially in this limited situation when you have, let me say, the Red Sea that is not, let me say, viable for shipping. But I think that, let's say, it's, let me say, I don't want to say not meaningful part, but let's say it's not a big chunk of our business that, let's say, can be afflicted by the increase of cost in shipping. In Nordic about, besides, I mean, the main market, we have one big project that is starting in this week, that is the Furman. that is the tunnel that will link Germany with Denmark. It's a tunnel where we are going to supply 1.2 million tons of cement in five years. This is the project. You know that sometimes the big projects can have delays. Yeah. Okay. Thank you.

Mr. Bianconi, there are no more questions registered at this time.

Okay, so thank you very much for your interest and your questions, and we wish you a pleasant rest of your day and evening. Thank you very much. Thank you. Have a nice evening. Bye-bye. Bye.