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.