Holcim Ltd

Good morning. Welcome to Holcim's first quarter 2025 trading update. My name is Bernd Pommerin and I'm pleased to be here with our CEO, Miljan Gutovic, and our CFO, Stefan Kindler. After their presentations of our results, you will have the opportunity to ask your questions. If you want to ask a question, please click the button Request to Speak. We would encourage you to already now register for a question. And with this, I'll directly hand it over to Miljan. Miljan, please.

Thank you, Bernd. Good morning to all of you and welcome to Holcim's Q1 Trading Update. Stefan and I are pleased to be presenting our results to you today. And of course, there will be time afterwards for your questions. To start with, let me take you through the key highlights. We had a good start to the year in Q1. Our net sales were stable versus Q1 24, despite unfavorable weather conditions in North America. We achieved over-proportional growth in recurring EBIT. This increased by 1.7% in local currency versus a year ago. As you can see, we continued with our strong M&A momentum with another five value accretive acquisitions. We are well positioned to navigate today's economic uncertainty, and I will speak more about this shortly. I can confirm the spin-off of MRISE is on track and expected to occur in June. We are confirming full year guidance 2025. Let's look at these highlights now in more details. First, let's look at the progression of our recurring EBIT and recurring EBIT margin on a rolling 12-month basis. This graph shows that we have further expanded our 12-month rolling recurring EBIT margin of 19.1% and rolling recurring EBIT above 5 billion Swiss francs. This is of course driven by our high value strategy from scaling up our advanced sustainable building solutions, accelerating decarbonisation and also circular initiatives to our value accretive M&A strategy with focus on the most attractive markets and of course our empowered leadership with strong performance culture. This actually demonstrates the resilience of our business model across all market conditions and all economic cycles. We also made a good progress in growing our premium eco-brands in Q1, from eco-packed and eco-planet to eco-cycle. Last month, we were recognised as a global climate leader by CDP, ranking on their prestigious A-list for climate for the fourth time. To strengthen our local for local business model, we have begun constructing a new site in Tilbury in UK to serve the growing London market with a circular and sustainable building solutions to be commissioned by H126. In North America, we started the construction of our new Malachi Advanced Roofing Plant in Indiana to expand into the Midwest and Eastern US markets, with completion expected by H2 2026. Now, taking a closer look at Ecopact and Ecoplanet, with customer demand continuing to grow, net sales of Ecopact and Ecoplanet reached 32% and 29% of their respective categories, and you can see that progression there even from Q4 last year. And it is our sustainable building solutions like EcoPact and EcoPlanet that really make Holcim the partner of choice for our customers. Many of you are now familiar with our project slides. These show where we add value to our customers with our sustainable, with our circular, durable and, of course, energy-efficient building solution. The first project on this slide is a modern office building in Madrid, which is one of the city's most sustainable buildings built with Holcim's eco-packed concrete. In Texas and in some other parts of the world, we are building data centers. The one here for Meta incorporates our advanced solutions from foundation to rooftop with EcoPact and also Elevate. We are also supplying sustainable building solutions for Grand Egyptian Museum, Africa's first building to get IFC edge recognition and build with Holcim's EcoPact. With that, I would like to hand it over to Stefan, who will take you through some financial highlights. Stefan.

Thank you, Miljan, and a warm welcome to you also from my side. It's always a pleasure to be here with you today. Turning first to the net sales bridge, you can see that net acquisitions contributed a positive 0.4% in local currency to our net sales with a slight negative contribution from organic growth that leaves it broadly stable year on year. There was a minimal FX effect in what is our smallest quarter of the year. In the first quarter, we also delivered over-proportional growth in recurring EBIT, up 1.7%, with most of the contribution coming from the organic side. Looking at the next slide, I think it is important to note that some strong results from Latin America, Europe, and also from Asia, Middle East, and Africa are recorded in recurring EBIT. North America had a good start to the year, but being affected by unfavorable weather conditions. There were improved trading conditions in March and we completed the acquisition of the aggregates business in the quarter. Holcim has now secured more than 230 infrastructure projects down to 2028. Market fundamentals in North America remain strong in the mid and long term, driven, as you know, by infrastructure, modernization and the onshoring of manufacturing. next to Latin America, where profitable growth continued and we achieved an outstanding recurring EBIT margin of 35% in the first quarter. M&A is supporting our growth in this region as well, and there are some promising prospects where we're currently looking at. In terms of outlook, there's a robust project pipeline in Mexico, and we see the public and private sector driving infrastructure and commercial investments across the region in all of 2025. In Europe, there was a continuation of strong over-proportional recurring EBIT growth. There was continued margin expansion in the first quarter. Our M&A momentum was extended. We made three value-accretive acquisitions, one in Bulgaria, one in France, and one in Serbia. We expect continued demand for sustainable building solutions to drive profitable growth in this region. Asia, Middle East and Africa delivered double-digit recurring EBIT growth in local currency, led by North Africa. This was accompanied by an outstanding margin expansion of 250 basis points to a margin of 21.7%. A key driver of that was good momentum in eco-packed sales, which reached 29% of already mixed sales in the region in the first quarter. Our outlook is as before. We expect strong demand in North Africa, a positive outlook in Australia, and price recovery in China. Our final business segment, solutions and products, saw net sales growth driven by roofing in North America. Roofing also saw some margin expansion this quarter. We made one acquisition during the first quarter to expand our specialty building solutions in Peru. for 2025, as we've previously said, expect a favorable outlook for both new construction and repair and refurbishment. And with that, I'm pleased to hand it back to you, Miljan.

Thank you, Stefan. So, as you are all aware, there is an increased level of economic uncertainty in the world currently due to these changes in the global trade. What does it mean for Holcim? Well, I would like to share with you a few key points. Firstly, Holcim, our business, is local for local business, from sourcing and production to delivering for our customers. And therefore, we are well positioned to navigate all these economic cycles. This is based on the following facts. We have a well-established footprint with more than 2,500 sites focused purely on domestic production. We have a fully decentralized operating model with more than 500 in part P&L leaders that have a strict focus on financial discipline and also to a strong balance sheet. Therefore, regardless of all these external factors, at Holcim we will continue to focus on controlling the controllables and also on delivering innovative and sustainable solutions to our customers. Therefore, we are well positioned for 2025. Holcim expects continued profitable growth with mid-single-digit net sales growth in local currency, with over-proportional growth in recurring EBIT. We want a further expand of recurring EBIT margin and free cash flow of above 3.5 billion Swiss francs. We will also continue double-digit growth in recycled construction demolition materials. On the MRI side, well, we are well on track with the listing of our North American business, playing by the way of the 100% spin-off to shareholders. You can see on this slide we have multiple milestones we have passed now. The last two are the shareholders' approval at our AGM on May 14, 2025, and then the listing itself, which will happen in June. With that, I'm happy to now open it up to Q&A.

Thank you, Emilian. Thank you, Stefan. We now open the floor for questions. Please, again, if you would like to ask a question, please click the request to speak button. The first question came in from Luis Prieto from Kepler Chevreux. Good morning, Luis.

Do you guys hear me?

Perfectly well.

Excellent. Excellent. Thanks a lot for your time this morning. I had a couple of questions. The first one is you attribute to in Asia, Middle East and Africa, the margin expansion to good momentum in eco-packed sales. Could you provide us a bit more detail on where that demand is coming from in the region? Because for me, it's not intuitive. I would have assumed that it's more a European thing than an Asia, Middle East, etc., And the second question is, you talk about some fundamentals in North America over the medium-long term, but how should we think about 2025? You also talk about a significant amount of infrastructure projects, but what is the situation of the IIJA and the IRA plans after what we saw, the impact we saw, the recent executive orders of President Trump regarding the speed of implementation?

Good morning, Lewis, and thank you for your question. I'll start with the US, and then I will move to EMEA-ECOPECT. In the US, as you have seen, we have experienced unfavourable weather conditions, especially in January and February. We have seen good activity, construction activity in March, and also it continues in April. so far all the projects infrastructure projects and we did put in our presentation we have secured now more than 230 of them they're all progressing no project has been cancelled or postponed and we are i am confident that 2025 will be another strong year for us On your EMEA question, yes, in EMEA, in some countries, we are seeing a very strong development on eco-packed range. I'll start with Australia, where we are developing the next generation of eco-packed, and the acceptance has been tremendous. These products have been received extremely good. We also, in North Africa, we are scaling up. Even in the presentation, we mentioned that we have supplied Ecopact and Ecoplanet for the museum in Egypt. So we will see the momentum growing on Ecopact and also in Ecoplanet side in countries across Asia, Middle East and Africa.

Excellent. Thanks a million.

Perfect. Then we have three questions which came in from Marcus Cole from UBS by email. His first question is, how are price increases ticking by geography? And where have you seen price increases being delayed? That's the first question.

We have seen good momentum on pricing. Michael, first of all, I'll start with Europe. I think I would say robust, resilient pricing momentum across the whole region. We have a robust momentum in US and it will continue in Q2. And in all our emerging markets, we are aiming well above inflation, in some cases, double digit growth.

Perfect. The second question for Markus is what price-cost spread is assumed in your guidance?

I'll just start and then maybe I'll hand it over to Stefan to elaborate on the cost. At Holcim, our main focus is on price over cost. And I'm very proud to report that Q1 was $12. consecutive quarter of the growth in price over cost. Stefan will give you details. In Q1, we reached 95 million Swiss francs. So we are managing costs very well. We have a strict financial discipline that is driven by our fully empowered more than 500 P&L leaders.

Yeah, thanks, Julian. You already said it. We had positive price over cost of almost 100 million in this quarter. We have got a positive price over cost, I think, now since 12 quarters. So this is a very, very steady development. When you think about how this is composed, you could say that it's low to mid single digit price increases on average across our company. And there's almost flat inflation and input cost in total. So this is the composition. So really, our price over cost is driven by the value of our portfolio, by the growth of EcoPact, EcoPlanet, by all our branded solutions that bring the value of the portfolio up. And we maintain the inflation of the input cost side pretty well. And this drives this development quarter after quarter.

And then there's a third question from Markus, which is pretty much related. So he's asking, what are your latest cost assumptions for the full year and how hedged are you for the remainder of 2025?

Yeah, that's pretty much the same answer, right? We don't like to talk about hedging so much because, you know, we do these things, but we always do it with the eye of securing our operating business. What is far more important when it comes to energy costs is we secure long-term our energy. We go into power purchase agreements. But also what is super important around energy is is that we increase the rate of our alternative fuels. Because today already we have factories in Europe that use more than 90% of alternative fuel rates where we take energy from the waste streams. And this for us is a super important way to A, save costs, but B, also to bring our CO2 footprint down. Again, we do also work on the financial markets, but we would think the energy has been a tailwind in the first quarter. We would hope this continues, but there's a certain amount of uncertainty, as you know.

Perfect, Stefan. Now we already anticipated and explained the next question, which came in from Paul Rochas from BNP Paribas. But here's one additional question. How could the recent macro volatility impact your M&A strategy, if at all?

Well, thank you, Paul, for the question. We will continue with our M&A and we have an excellent track record, as you know. I would not say there would be any significant impact. We will always exercise strict discipline when it comes to M&A. We want to buy the companies at the low multiples. We want to achieve significant synergies and integrate them into our businesses as soon as possible. However, I do not expect any significant impact as a result of all these global and certainly on M&A activity at Holcim.

Perfect. The next question comes in from Yacine Touari from Onfield Investment Research. Good morning, Yacine.

Yes, good morning. Can you hear me? Perfectly well. Please go ahead. Thank you very much for taking my question. So first, when I look at your Latin American results, I'm a little bit surprised by the strength. I think Q1 cement demand was down by more than 10% in Mexico. But your results suggest that you did much better than that. Is that correct? And if this is the case, why is it related to? Are you gaining market share? And the second question is, would be like in the US, you're eliciting better volume in March and the beginning of April. Is it something that you can quantify?

Good morning, Yasin, and thank you for your question. I'll start with Mexico. Of course, in Mexico, the secret to our success is our strong commercial activities. We are targeting both infrastructure projects through our dedicated teams, through specification, selling, and also execution. But at the same time, we are targeting our retail and DIY customers through our Desensa store. One of the big successes in Mexico in the past few years is that we have managed to expand our Desensa footprint significantly and also thanks to the acquisitions, and we did have several acquisitions in the last few years in Mexico, we did manage to increase our product portfolio in the sensor store. And that's why we are ahead when it comes to the net sales and profitability in Mexico. Your question on U.S., I would not go into details, but I would like to confirm once again that after a very slow start of the year in January and February, which was driven by these unfavorable conditions, especially in the southern U.S., in our key markets like Texas, Colorado, and so on, we have seen good and strong recovery in March, and we see this continues to April. So I'm confident that Q2 would be strong in the US.

Maybe a last question. Have you finalized the debt split between AMRAIS and Holcim, or are we still waiting for the latest data?

I'll hand it over to Stefan. Hey, look, we explained at our capital markets day that we split the net financial debt between MRISE and Holcim in relation to our EBITDA, both at the forecast level end of 2025. That has been communicated. That has been also approved by our board. And now the first step in implementing this is you might have seen that on April 2nd, we issued bonds in the United States for about 3.4 billion US dollars. So we financed Amrise. And with that money, Amrise is going to repay intercompany debt. And through this mechanism, we're going to kind of adjust the water levels to exactly the point that both companies will have the right amount of net financial debt in relation to their EBITDA. Mind you, we did this with a strong focus of maintaining a BBB plus credit rating for both companies, which meanwhile is also confirmed by both rating agencies, by Standard & Poor's and a BA1 by Moody's for both companies. So this process is almost complete and will be fully complete with the debt repayment internally by the time of the spin. I think we're on good track here. And we're glad we could go into the market before the turmoil. So I think we'd use the last possible window here. Thank you very much.

Perfect. Thank you, Yasin. The next question comes from the line from Elodie Rawl from JP Morgan. Good morning, Elodie.

Hi, good morning. And thank you very much for taking my questions. So first of all, on pricing, I wonder if I could come back on that and ask you what kind of price increases you're seeing in the U.S. specifically and in Europe specifically. That's my first question. My second question is on the solution and product division. I've noticed it's the only one where you haven't actually posted overproportional EBIT growth. So I was wondering if you could come back on why is that and if you expect that to change for the remaining of the year. And my last question is on FX. Would you be able to give us some updated assumption for the year given the moves recently? Thank you.

Good morning, Elodie, and thank you for your question. I'll start with pricing and solutions and products, and then I'll hand it over to Stefan to tackle the question on FX. First on the pricing, I'll start with the Europe. We are seeing resilient pricing momentum, low to mid single digits across all our markets. In US, it's more dynamic, more pricing will come, especially in price increases will come, especially in Q2 in our roofing business in April and May. So, so far, so good. But probably in Q2, we will be able to give you more information on the pricing impact. secondly on the solutions and products well our roofing business is going really well despite unfavorable weather condition we have seen strong growth in u.s may and this is driven by repair and refurbishment especially in our malaki business more than 90 percent is repair and refurbishment as well as duralas so this is the driving the strong uh

momentum in roofing and therefore in solutions and products stefan on fx yeah thanks for the difficult question elodie fx fx is of course very difficult to forecast these days um look i would say we we have we have seen we have seen the the increase of the swiss rank hold a little bit i If we go from current rates, then we might be looking at an FX impact of sales for this year between 4% and 5%, and maybe between 6% and 7% on EBIT. But you know as well as I do that I might be wrong on Monday morning. So please take this with a grain of salt.

Perfect. Okay, thanks. Thank you. Thank you, Stefan, for this one. The next one on the line is Arno Lehmann from Bank of America. Good morning, Arno.

Good morning, gentlemen. Thank you for taking my questions. Firstly, just the scope effect based on the M&A and the bolt-ons. Can you give us an impact on full-year sales and EBIT, please? Secondly, on the tariffs, if I remember well, you were importing some cement into the US from North Africa. Are you still doing that? Are you adjusting your imports and exports strategy based on the tariff situation? And lastly, can you give us an update on China machine operations? Have you seen any sign of improvement in China in the last months? Thank you very much.

Good morning, Arnold, and thank you for your questions. I'll take care of tariffs and China, and then I'll hand it over to Stefan for scope effect. Regarding tariffs, yes, we did have some exports, especially from North Africa to the US, but this is negligible. This mainly came from Algeria. Now, these days, the domestic market in Algeria is doing very well, so we do not rely on exports to the US, so we do not make any strategic plan regarding this. Our focus for Algeria is to build up our local presence. On China, as you know, Arnold, it was a very difficult few years since COVID. China did not recover what we have seen this year for the first time. We are seeing this price recovery in China and so far it is going really well. Government has made some pretty drastic announcements regarding significant investments in infrastructure in residential they're talking more more than a trillion and this will obviously have a positive impact on our operations in China in the years to come just to remind you that we are not consolidating washing so the impact in the past few years was really negligible

Stefan? We guided previously that our mid-single digit sales growth is about one-third scope and two-third organic. And we would confirm that guidance. Of course, it depends a little bit on exactly when we close the divestiture of Nigeria, which has been announced. But roughly, you can go with that guidance, one-third, two-third.

Thank you very much. Perfect. Then we have three questions from John Bell from Deutsche Bank, which just came in. Can you draw out any difference between the commercial and residential roofing business in the US?

Commercial versus residential. John, thank you for the question. Malachi is 100% residential, while Elevate and Jura Last are close to 100% commercial, if we want to make it very simple.

And obviously, probably the question is also a little bit related to what current trading, what business is doing better than the other one.

So most of our business in Malacca, majority of our business in Malacca, I should say, is repair and refurbishment. And these unfavorable weather conditions are driving the growth in this business. We also have a significant part of our Elevate business, more than 60%, also in repair and refurbishment. And that's why, John, we are seeing good momentum on our roofing side in the US.

Perfect. Then his next question is also related to residential and malarkey. So John is asking, is there scope to accelerate your expansion in the Midwest via M&A, or are you focusing on organic expansion?

John, as always, we are looking at all opportunities. We are looking at the acquisitions, if possible, but at the moment, and as we highlighted in the presentations, we are excited about building our new state-of-the-art, most advanced roofing plant, Malaki plant in Indiana, and this will give us good access to this Midwest and Eastern market.

And then John's third question is related to Germany. How excited are you about the German fiscal expansion plan?

Well, everyone seems to be very excited, including us at Holcim. What's interesting is that Holcim Germany has been performing really well. And I'm sharing this with you from the first-hand experience as I was running Europe before taking over as a CEO. Our team was the first one and the best one in the class in Germany focus on this high-value strategy. They focus on scaling up advanced sustainable solutions. They focus on accelerating decarbonisation and also circular construction activities. We have several M&As closed in the last three years. So, so far Germany was pretty good for us. So what's coming next? Well, our footprint in Germany is very strong. We have four fully integrated cement plants. We have three grinding stations. We have more than 60 ready mix plants and more than 30 aggregate quarries, plus additional production sites for light. and structural precast. So this half a trillion of investment is something that we are looking forward to. And we are well positioned to capture this in the years to come.

Perfect. The next question comes from the line from Ephraim Ravi from Citigroup. Good morning, Ephraim.

Morning. Two quick questions. Apologies if these have been answered. I had a bit of a tech problem in the middle. Firstly, on the guidance, obviously, given the Amrise spin, can you give us a sense as to what you're looking for the spin co? Is that possible at all at this stage? And sorry, for the remain co, I meant. And then a second question on LATAM, you know, clearly, You called out that region for M&A, and it looks like some big plans over there. It's also the region with the best margins at 35%. Is there a risk of margin dilution there if you kind of do sizable M&A there, or are you looking at businesses with a similar margin profile as the current LATAM business? Thank you.

Good morning, Efrem. Regarding the guidance, unfortunately, at this stage, we cannot share this with you. This will be shared in our H1 update. And on LATAM, well, yes, this region has the highest margins in the group. And as you have seen, we are one of the most best performing when it comes to EBIT margin expansion in LATAM. We will continue to focus on margin expansions. And I think even with the M&A activity with the companies below our EBIT margin average, we are able to achieve significant synergies. And as you have seen, last year alone, we have bought five companies. And within a relatively short period of time, we are able to bring the margins of these companies above 30%. So we are looking at all the options. If the company makes strategic fit, if it has a good geographical position, regardless if the margins are 30 or slightly below 30%, we will look into it. And on M&A in LATAM, we did five acquisitions in 2024, and I'm very pleased that we are off to a good start with another M&A in Peru in Q1 2025. Thank you.

Perfect. Tobias Werner from Stifel sent us three questions. The first one is, how do we expect the separation costs for Holcim and MRIs to develop from here?

I think I answered that question at the Capital Markets Day. We had short below 100 million last year. We expect in total to be this number, about 170 million at the end of the process. Reminder, this contains everything. This contains auditors, accountants, also the IT, lawyers, everything that is connected to this project is part of this envelope that I just mentioned.

Perfect. Then Tobias is asking a second question. Can you just remind us how the trade relationships are struck between Holcim and MRIs in terms of cement exports and imports? Are these at arm's length?

My short answer is yes, Tobias. The answer is yes, they are at arm's length and we're going to be two separate companies and we're going to engage into supply and demand relationships like two companies. Of course, we know each other very well and we hope we can maintain some business relationships. But contractually, we're two different companies.

Then the last question from Tobias is, could Asia, Middle East, Africa surprise on the upside this year? How are Morocco, Algeria and Egypt doing in more detail? And is there a chance that volumes return in China?

Well, I already addressed this question on China, but to elaborate a little bit, we are seeing a very good momentum in North Africa. Just a reminder that North African margins are closer to Latin America. And local demand is growing nicely in Egypt. We are seeing a good momentum in Algeria and Morocco. Also Australia, while the Q1 is the very small quarter in Australia, but we are seeing positive momentum. And to remind you, the government of Australia has already committed 130 billion Australian dollars investments in infrastructure over four years. and we are already participating in some of these projects. On China, I think there is a good upside coming up. As I said, there is a significant investment from the government. We talk about more than a trillion, and that will address infrastructure and residential. But on even more positive side, as I said, we are seeing Finally, a strong price recovery in China.

Perfect. Thank you, Emilian. The next one on the line is Ross Harvey from Davie. Good morning, Ross.

Good morning and thanks for taking my question. Firstly, you currently get a modest price premium on EcoPlanet. I'm wondering how that has trended in recent times and do you anticipate any changes as some of your competitors and eventually you come to the market with the near zero or zero carbon cement? Secondly, I think, Milian, you mentioned the economic uncertainty earlier. Have you introduced any cost-saving initiatives internally, or is it much too early for that?

Thanks. Good morning, Ross, and thank you for your question. So on the pricing, we are seeing the same momentum as I told you earlier, mid-single-digit pricing, premiums on average globally. So the beauty about Ecopact and Ecoplanet, Ross, is that this opens the door for innovation. Three years ago Ecopact will be different next year as we are able to introduce the new supplementary, new and I should say innovative supplementary cementitious materials. And by doing this we are reducing cost and I believe we will even see upside on the pricing premium. And what's interesting is that we are seeing this across globally, from Mexico all the way to Australia. Even in the emerging market, scaling up of these EcoPact, EcoPlanet, advanced branded solutions is going well. On the economical impact, at the moment, it's too early to do anything. I would like to repeat once again that our business model with 500 P&L, fully decentralized, empowered P&L leaders, their job is day and day to focus on the strict financial discipline, and this is driving our margin expansion and our growth.

Thanks, Alija.

Perfect. Thank you, Ross. The next one in the line is Brijesh Zia from HSBC. Good morning, Brijesh.

Good morning, Jens. I have two questions as well. So the first one is on Africa, Middle East. Clearly, there's strong growth on the top line. But if I exclude the China contribution of 10 million from EBIT, that EBIT like-for-like contribution increases significantly. roughly similar to the top line. So could you please elaborate? Is that kind of still you're seeing some negative price costs there that's impacting your profitability improvement? And the second one is in the U.S. In the beginning of the year, the expectation was having a mid-single-digit price increase. But given what has gone through in the Q1 and the trade tension and following this energy deflation which we're seeing, Are you kind of tempering that expectation to probably towards low to mid rather than just having mid single digit?

Good morning, Brijesh, and thank you for the question. I'll start with U.S. comment on EMEA and then, Stefan, if you would like to elaborate on price over cost. On U.S., so far, we are sticking to our guidance from the beginning of the year. I believe that all the regions will contribute equally, specifically on U.S., As I said, yes, the beginning of the year was relatively slow, driven by these unfavourable weather conditions, but the momentum in March and now even April is strong. So there will be no changes on the guidance for Holcim. On EMEA, well we are seeing as I said positive momentum in North Africa in some of our key markets and price over cost overall is heading in the right direction. I'll hand it over to Stefan to provide more details.

I think I said this before right, the price over cost in the first quarter is right where we expected it. And I said this before, we had a low to mid single-digit price increase in the first quarter. We had very low cost inflation in the first quarter. And we also had some tailwinds in energy, again, not through hedging, but through the long-term supply of energy and through our strategies. This is basically how our price over cost came together. And we expect that to continue throughout the year. Hence, I mean, this is the essence on why we're able to guide over proportional EBIT growth and margin expansion.

Perfect. Thank you, Stefan. The last question from the line comes from Mike Betts from Data Based Analysis. Good morning, Mike.

Yes, good morning. My question is on central overhead after the separation, where Remain will be left with all of the overhead, but the business is only halved in size. So I've got kind of three questions related to that. Firstly, roughly, what's the magnitude of the central overhead? How quickly can you reduce it? Will it impact the second half margins? And then thirdly, Stefan, you gave a figure of 174 separation costs. Does that also include sorting out presumably some redundancy in that central overhead? Thank you.

Good morning, Mike. I think Stefan will tackle most of your questions. I just want to repeat that When it comes to the redundancy, there will be no redundancy, as we mentioned at the beginning of the year. It is true that some of the headcount will be shifted from Holcim to MRIs, but no redundancy at Holcim. Stefan?

Thanks, Miljan. I would like to confirm what Miljan just said. No redundancy. The envelope I gave you on the project costs are really project-related costs. This is expenses we have to do with the project. This is create a landing zone for the IT in the United States. This is work with lawyers to make sure we have the SEC filing ready, work with banks to make sure we get the bonds launched that we launched, accountants, and so on. So these are the costs that are in there. So there's no redundancy. Yes, it's true. At the moment, we're going to end up with an overhead of about 3% of sales for Holcim and over the next two years. You know, also with a change of geography, we are very active in M&A. We acquire businesses. We also divest. We have some announcement there. So the structure of the company will change over time. And so we expect that in the long term, we come down to about 2%. But there is no restructuring or anything like that in there.

Thank you. Perfect. So this was the last question for today. Thank you so much for the active participation. If there are any further questions, please do not hesitate to reach out to the IR department. We are more than happy to help. And with this, I hand it back to Miljan for some closing remarks.

Thank you all for joining once again. Thank you for all your questions. Just would like to reiterate few points. Holcim is indeed local for local business. We will continue to focus on control the controllable aspects of our business. We will continue to focus on our strategic initiatives and this combined with impeccable execution of more than 65,000 of my colleagues around the world, I think 2020, I'm confident that 2025 will be another successful year for Holcim. Now we are looking for the next chapter of our journey with the planned spin-off. Once again, two milestones are left. First one is AGM mid-May and then in June we are going live. Once again, thank you all for joining us this morning.