Cemetir Holding

Good afternoon. This is the Coruscall Conference Operator. Welcome and thank you for joining the Cementir Holding First Half 2024 Results 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. Good afternoon and good morning to everybody. Welcome to Charity Holding half-year 2024 results. I'm here with our chairman and chief executive, Francesco Caltagirone. And I'm going to present very quickly, go through the presentation deck that has been sent by email and posted on our website. So going through the presentation deck of page two, the key takeaways for these results are that these results are in line with the management expectations. with overall volumes up year-on-year, lower revenues and EBITDA and higher net profits. Cement, RMC and aggregate volumes were in positive territory year-on-year. Both revenues and EBITDA were impacted by important infrastructure projects being delayed in Denmark and temporary ban on exports from Turkey to Israel. In the last 12 months, the cash flow was impacted by extraordinary investments of 24 million euro, a higher dividend distribution, the purchase of 12 million CO2 emission rights, higher capex mainly linked to Belgium K4 upgrade in line with our industrial plan. Excluding one of items, EBITDA for the first half of the year would have been higher the previous year. 2024 guidance on both EBITDA and net financial position at constant perimeter are confirmed. Revenue guidance is revised downwards from around 1.8 to 1.7 billion euro in line with last year. Going through page three, first half results highlight very quickly revenues reached 811.8 million euro up down 3.4% year-on-year, non-GAAP revenues were €803.3 million, down 7.5% year-on-year. Demand volumes were broadly flat, whereas RMC volumes were up 4%, and aggregate volumes were up 6%. Lower revenues were recorded in all regions, with the exception of Turkey and Egypt, which recorded an increase in local currency. EBITDA for the period reached 192.7 million euros, minus 3.9% year-on-year. Non-GAAP EBITDA was 181.9 million euros, minus 10.1% year-on-year. The lower EBITDA was mainly in Nordic and Baltic and Asia-Pacific. A better EBITDA was recorded in Belgium. A strong Forex headwind reduced EBITDA by almost 20 million euros. Excluding no recording charges and income, non-GAAP EBITDA was down 5.6% versus the first half of 2023. Non-GAAP EBITDA margin decreased from 23.3% to 22.6% due to adverse geographical mix. EBITDA was down 9.7% year-on-year. Non-GAAP EBITDA was down 16%. Group net profit reached 97 million euro plus 7.4% year-on-year. Non-GAAP group net profit reached 102.2 million euro minus 6.9%. Net cash position reached 55.4 million euro, an improvement of 44.5 million year-on-year, including 43.5 million euro dividend distribution by the parents, an extraordinary 14 million euro of dividend distributed signed subsidiaries to third parties, some extraordinary investments of 24 million euro, the purchase of CO2 emission rights for 12 million euro, and a higher CAPEX by a pressing impact of 82.1 million versus 77 last year. Going through the different regions, very quickly, page four of the presentation. Nordic and Baltic accounting for around 43 percent of our EBITDA. In Denmark, domestic cement declined due to harsh weather conditions in Q1 and a weak residential market. And Furman Belt, the largest infrastructure project which recently entered the operational phase but was behind schedule. Ready Mix volumes were up 2% while aggregate volumes declined by 6%. EBITDA declined due to lower volumes and average prices despite ceilings on main inputs. Norway, RMC sales declined by 23% due to demand slowdown and adverse weather conditions and delays on some infrastructure projects. EBITDA was down as well. The Norwegian Krona also depreciated by 1.5% versus the Euro. In Sweden, ready-mix sales volumes increased by 25% thanks to the contribution of major projects, while aggregate volumes were down 12%. EBITDA was up year-on-year, and the Swedish corner was broadly aligned with the Euro average. Moving to the next page, number five, Belgium and France, accounting for 27% of Group EBITDA. The domestic cement volumes were stable in the first half of the year with moderate growth in Q2. Exports to France and the Netherlands were down double digits, mainly due to adverse weather conditions and market weakness. ReadyMix volumes were down 15% with a more significant drop in France, while aggregate volumes were broadly flat in the first half of the year. EBITDA was up, driven by lower production costs compared to each one of 2023, which was penalized by higher extraordinary maintenance costs and the purchase of clinker from third parties due to temporary kiln shutdowns. Moving to page number six, 30-year accounting for 15% of new EBITDA. From April 22, Turkey is considered hyperinflationary. The reported figures are non-GAAP, therefore exclude the application of IAS 29. Domestic cement volumes were up 10% thanks to significantly higher sales in Eastern Anatolia and supported by post-earthquake reconstruction. Semana exports were up 10% although penalized by the lack of exports to Israel as a result of the embargo. RMC volumes increased by 24% and aggregate volumes were strongly up due to the opening of a new quarry in Eastern Anatolia. Revenues in Euro decreased by 1.1% because of Turkish devaluation versus Euro of around 58.7% versus the Euro average If we exclude €5 million of non-recurring capital gains income in 2023, EBITDA declined by 7.7% year-on-year due to higher operating costs, negative effects, partially offset by higher volumes and prices. Moving to page 7, North America, counting for 6% of our EBITDA. White cement volumes were slightly up in the period with deliveries to Texas impacted by harsh weather conditions and fewer working days, with a backdrop of a residential market still suffering from higher interest rates. In Florida, deliveries were stable, while in California, grew in all market segments. EBITDA was down 12% due to lower selling price, due to strong competition and higher cement purchases and higher fixed costs. The U.S. was broadly in line with the Euro average Moving to page number eight, Egypt accounted for 4% of Group EBITDA. In this geography, domestic white cement volumes declined by 12% due to a weak construction market and the postponement of major public projects. Export volumes were slightly down due to lower volume shipments to the U.S. because of a different timing of deliveries. Revenue local currency was up 22.8% But in Euro, they declined by 10.2% due to a 36.7% Egyptian pound devaluation versus the Euro average. EBITDA increased due to higher sale prices, partially offset by lower sales volumes and Egyptian pound devaluation. And lastly, on page nine, Asia Pacific accounting for 5% of Group EBITDA, China, In China, revenue decreased by 16%, with volumes down by 11% and a modest price reduction, plus around 4.2%, but it may be the valuation versus the euro. Volumes were affected by the real estate crisis, a harsh weather, and longer national holidays. EBITDA declined due to lower sales volumes and prices, higher transportation costs. If we include €2.5 million of non-recurring capital gains income in 2023, EBITDA decline was actually 11.9%. In Malaysia, domestic cement volumes were flat due to a weak residential sector and closures for religious holidays in April. Exports were moderately up, driven by higher shipments to the Philippines and Vietnam. The last couple of slides, number 10, the guidance. anticipated there is only a partial revision to revenues from €1.8 to €1.7 billion in line with last year. EBITDA guidance of €385 million is unchanged as the net cash position of around €300 million at constant perimeter. CAPEX also around 135 million euro for the year is unchanged. This guidance refers to like-for-like ongoing operations, non-GAAP, and excluding extraordinary items. The last line is the sustainability highlights. You can see that our decarbonization commitments continues with 24.7 million euro investments in sustainability in the period, mainly for KILFOR upgrade in Belgium, which will allow alternative fuel usage to increase to over 70%. Our objectives have been validated by science-based target initiatives, as well as our long-term climate targets, in line with the 1.5% 1.5 Celsius degrees scenario. SBTI has also proved our overall net zero emissions target by 2050. We have been included also in the European Climate Leaders 2024 ranking by the Financial Times and Statista. We have been confirmed as well as the leader in the ESG Identity Corporate Index for the second year in a row. Lastly, we have introduced a lineup of white cement low-carbon brand called DECAR launched in Europe with 15% lower CO2 emissions versus Albert White Portland Cement. And this ends my brief introduction, and I now leave the floor to Mr. Castagirone to take your question.

Thank you.

Excuse me, would you like to start the Q&A session? Yes, please. Thank you. This is the Coral School Conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their 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 Matteo Bonizzoni of Kepler Chauvre. Please go ahead.

Thank you. Good afternoon. I have one question. The question is the following one. We have seen different trends for the first quarter of the year on a year-on-year basis. First quarter EBITDA was down 19%, EBITDA non-GAAP adjusted was down 19%, also due to weather, but in Q2 there was a positive reversal with EBITDA adjusted non-GAAP up around 5%. So we are not in presence of a clear trend. The question is, Can you elaborate on the outlook for the second DALF referring to your key geographies, so Denmark, Belgium and Turkey, to assess for which reason the BDA in the first DALF could be in these geographies up or down, so providing some more color and sensitivity? Thanks.

As we say that after a slow start we expected towards the end of the first half some rebound is something that slightly and what we can see in the second quarter is the same quarter of last year we have a rebound from revenues to ADDR. We think that we are bottoming up out in some region. In other, we haven't seen this bounce so far, but we expect to consolidate the result towards the end, in the second half. As you know, The decline of the rate started with six months, nine months of delay, and so we expect, even with some delay, that this should pick up by the end of the year, taking account that our EBITDA has been impacted, as we say, compared to last year, from exceptional items that compared to last year was nearly 10 million lower this year compared to last year and also by from one of the factors that is the ferment delay and the ban to Israel because it's affecting it started to affect gas from April and you know it is linked in the development of the situation in Gaza and Lebanon so we don't know When we can restart, but for sure, both of these, we can say that the impact on a yearly basis can be more than 10 million euros of EBITDA. So we have the lack of nearing the first half, 5, 6 million due to this, let me say, special cost. Regarding the geography, United States is performing quite well. I mean, the second quarter, the Asia-Pacific is still dull, and Turkey is continuing to perform quite satisfactory. You also have to... I understand that Turkey inflation is hitting and also devaluation that in the first half has been mild, but the devaluation in the Egyptian pound has been quite strong, nearly 50%. And also, as we also said last time, the EBITDA is also impacted by the edging that we bring forward in energy and in CO2. This means that, as you are seeing, we have a very strong result in the financial items. I mean, part of this result is because we edged beyond energy and CO2, so we see the extra profit in the financial islands, but on the contrary, we see a lower EBITDA. So if we are going to normalize even this, I can say that more or less the EBITDA is in line with last year. On Belgium, sorry, just the last, Trump is affected by the end of the infrastructure for the Olympics. So this is a one-off factor. So we don't think that it's already budgeted in our, let me say, forecast. And so we don't think that this kind of consumption can come back soon. But let's say Belgium seems that it's resilient, more resilient than what we expected. Also, my personal comment on the first half result is besides the nearly 3.5% decrease in the revenues, we succeeded in and also if you consider the second half of last year, the company seems to be quite resilient to the downward pressure in revenues and in quantity. Also, quantity, we have seen a rebound or a stabilization, so it seems that we should be bottoming out. And the question mark is, let me say, economic framework, the USA election, and the war that are around us. So these are not predictable in full.

As a reminder, if you wish to register for a question, please press star and 1 on your telephone. For any further questions, please press star and 1 on your telephone. The next question is from Alessandro Tortora of Mediobanca. Please go ahead.

Yes, good afternoon to everybody. I have two questions. The first one is on the price trend by country. Can you comment a little bit about the sequential trend in your major countries? As you mentioned before, on the volume side, there are some countries that are bottoming out, some others still looking for the bottom. So if you can also help us to understand that. the trend of the price side where maybe you still see some price increase or some let's say adjustment on the price listings and on the other side where you're observing let's say some more competitive okay environment on the price side that's the first question and then the the second one is on if you can let's say also give us an update on Any update on the planned initiative on the carbon capture side? I remember that in the last conference call, you mentioned, let's say, still an assessment on the major technology you would use on the carbon capture side, but do you have in mind, let's say, a deadline, I don't know, 2025, in order to assess and then start any major project on the carbon capture side? Thanks.

Regarding the price, we are seeing more or less, let me say, the price that is stable. We don't see besides some persistent pressure on the volume that the price are, let me say, stable. We don't see any price pressure downwards. in the country like Turkey and Egypt for the inflation needs to be adjusted weekly and so there is in Turkey and Egypt because of this very high inflation the prices are adjusted weekly on a weekly basis and so at the end the euro terms are more or less staples So I don't see in the old perimeter any, let me say, particular pressure from the price and especially on the profitability that also you have seen is more or less stable. Regarding the investment on the CCS, we are, let me say, we applied for the innovation fund for the plant of Holbolds. we wait for an official answer by November. We choose as a technology that is a retrofit of the plant that capture the CO2 at the stack trying to freeze the plant. to minus 90 and about, and where the CO2 becomes liquid. This is just very simple. So this is the technology that we have chosen, but we need to understand if the project will be financed by the European community and by the government of Denmark. we will need another two or three months. So at this moment, we just applied and we wait for an answer like a lot of other projects in different sectors because the commission, as you can imagine, with the election are going to be, let me say, renewed during this month. And so they will need, I think, two or three months or even four to check all the documents and also to ask

questions about every single project okay okay thanks and so just if i may a quick follow-up also your let's say new guidance on the safe side so basically considering the price assumption but also the volume assumption you made the guidance on the safe side was adjusted for fx and also for basically what are the main factors? So just understand the main assumptions.

The two factors that brought the revenues down, as I said, is the slow start of the ferments that should pick up sooner or later and the ban of exports towards Israel. because we export more than 200,000 tons. So it's about, let me say, a few tenths of euros. But with these two things in place, I think that our guidance should have been, let me say, at the same level. So we have two special assets that is hitting after this. I mean, it's 80% of the gap on the revenues. The other 20 are minor adjustments in every single, let me say, geography. It's for the forex because, as you can imagine, selling in Egyptian pounds and Turkish lira when you're translating euro is, let me say, you have a downward revision of the price.

Yes, yes, absolutely. Thank you.

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

Yes, good afternoon, gentlemen. Thanks for taking my questions. In terms of your costs, can you sort of go through your various components, cost components, where you see either stable, increasing, or falling costs? I mean, gas is not important for you, but gas is an interesting example where The prices went up early summer but started to come down. So just to get a sense around your energy costs on the one hand, your wage bill, and any other sort of important costs you may want to highlight here. Thank you very much.

The cost structure, let's say, is from some raw materials, is for sure on downward, so we are seeing better cost structure. In terms of personal cost, it is more or less close to the inflation factor, so it's up nearly 3%. dispatching costs by sea or by land are more or less stable. So we continue to see some possibility to lower the cost for the energy and electricity personal and shipment costs are stable. But the availability that we saw in the last couple of years, it seems that is behind us. Now it's just, let me say, a small adjustment. And also, this is because we have most of our cost of electricity and coal. So it's becoming, I mean, for sure for this year, but I think also for the next year, more a fixed price cost than a variable cost.

And when we look at Turkey, it seems to continue to defy gravity. I mean, how do you see the second half of the year in terms of volumes? Have we started to hit a peak where it should start to stabilize or roll over?

I mean, Turkey, as you know, is affected by the bigger quake and also by the bigger export flow that is is still at the rate of 20-25 million stones. So this is affecting the domestic market positively and for sure when you have the rates that compared to 12 months ago increased from 16% to 50%, the economy is hit. But for sure with the inflation of 70, The real estate investment is something that preserves you from the decline of valuation. So there are these two different forces, one headwinds and one tailwinds, that we see balance, let's say, for this and next year. So it's an economy where when you have 70% of inflation, you can adjust plus 5% or minus 5% Consumption, but also if we look at the GDP that it seems to be around four or five percent Seems that and also you have to consider that the general environment of the energy costs like Italy or like Spain and Germany Where this country can use a lot of, let me say, imported energy with the downward pressure of the cost the balance of payment have some relief. And also, we have also to consider that Turkey in the first six months succeeded in yield 12 billions of hard currency reserves. So it seems that the things are starting to normalizing. We don't see a major factor of downward revision to consumption and price, but volatility is always behind the corner.

And if I may ask, has the third quarter started well? especially in those countries where weather was an issue, such as North America?

I mean, the third quarter, it seems that it's in line with what we have seen so far. So even slightly better, I can say, in some areas. But I think that, let's see, today we have our EBITDA that is... So we expect and we hope that if the things continue and have to be confirmed by September, let's say, I hope that we might, let me say, revise the things about this in October, November.

Okay. Thank you very much, Mr. Cotterone. Thank you. You're welcome.

For any further questions, please press star and one on your telephone. Gentlemen, there are no more questions. I'm sorry, there's a last question from Giuseppe Grimaldi of the NP Paribas. Please go ahead.

Good afternoon everybody and thanks for the presentation. I have just a very quick one on the CAPEX. You have announced an investment in H1 in a concrete plan and the minority investment in Denmark. If you could add a bit more color on this capital allocation decision. Thanks.

Yes, it's a small investment compared to our perimeter. It's a bit shy of 20 million euros. It's a ready mix, three ready mix plants and a couple of aggregates for it that complete our, let me say, perimeter and enhance a bit the profitability. As you know, we are the only player In Denmark also we need sometimes to, let me say, to buy out small entities because we want to keep, let me say, the market profile and size as it is. It's value accretive, it's not a defensive move, but it's a small investment.

That's all. Thanks a lot. Was it something that was already included in your guidance, if I understood correctly?

No, I mean, all the extra, I mean, what we say about the CO2, I mean, rights acquisition, the acquisition of these assets, and also the enlargement of the quarry in Malaysia that is about 6 million, so around about, it's about 35 million including the CO2 35, 36 million was not included in the guidance.

Thanks a lot. Really clear.

Gentlemen, this was the last question. Back to you for any closing remarks you may have.

Thank you very much for your interest in Chairman Thier and we wish you a pleasant rest of your day and evening.

bye bye thank you thank you have a good evening