Heidelberg Materials Ag

Thank you, operator. Welcome to our Q3 conference call. As always, we have management in the room, Dominic, Rene, Robert, and Hosan from the IR team. We look forward to a lively discussion after our presentation. And with that, over to you, Dominic.

Chris, thanks a lot. Thanks a lot, everybody, for joining. Welcome to our Q3 result calls. You've seen the presentation, so I can go through this fairly quickly, and then we go into the Q&A. I think it's been a good quarter. Results are up 3% on EBITDA and RCO level. Also, margin is up beyond 25% EBITDA margin. Revenue is flat. I think in this environment, this is a good development. The performance has been good. carried by many parts of the organization, but especially by North America, also through the highly accretive M&A deals. I'm sure we'll go into some more details there. Going also into the next years, we have decided to launch the Transformation Accelerator Initiative. where we will chase 500 million result contributions by end of 26 on a yearly run rate. And that will be, we'll go into the details in just a minute. We will then cover the free cash flow discussion, good performance, 2 billion over the last 12 months. And then everybody is here working vividly on getting Breivik up and running. That looks really promising. and will come on stream then in the first half of 2025. On the back of all of that, we are confident for the remainder of the year. That's why we have raised our outlook by lifting the lower barrier of the bandwidth from 3 to 3.1 billion. So the new guidance on the RCOs sits between 3.1 and 3.3, and we should be around 10%. Then next page, page three, you see the development. So overall, flat like-for-like on the revenue side. As I said, EBITDA and EBIT are 3%, and the operating EBITDA margin at above 25%. You see also, if you look at the nine-month page next one, that the quarter is important for us when it comes to the trajectory and the trend lines. because you see that the quarter performance of Q3 compared to the nine-month performance, respectively the first half, is significantly better. You know, nine months is now down 3% like-for-like on revenues, 2% up on EBITDA and EBIT, but the Q3 performance is in all dimensions better than that, so you see that the trend line goes in the right direction. If you then look at the bridge, I think what's encouraging to see, okay, we still lose a little bit on currency. We win on scope. I think the scope adds almost $30 million. And then what's important for us to see, the negative impact from volume has slowed down in the Q3 versus the first half. So I think that's also encouraging. While the price over cost is still holding up very well, with good pricing and also a little bit of relief on the energy side of things. But overall, I think that's an encouraging picture and important for us to track that as we go into the remainder of the year. You see this now also compared to page six. There you see that the volume block is much bigger compared to the, despite the fact that in absolute terms, the third quarter is obviously much bigger than the first and the second quarter. So in that respect, really, you see the machine is running in the right direction. And you also see on the scope effect, you know, the nine months is $49 million, while alone for the Q3 quarter, we have $29. So you also see the ship is sitting right in the water, and I think that looks encouraging also going into the remainder of the year and going into 2025. If you then look at Europe, I think holding up on a high level, basically flat on the RCO line. And I think the demand recovery continues in Eastern Europe. I think Eastern Europe continues to be very strong from our perspective, while Western Europe is still a little bit sluggish volume-wise. I think that's not where it used to be that clear, far off its peak. But the good news is also there on the volume side, we see some flattening out in most markets. And that should give us clearly health going into the remainder of the year, but then also going into 2025. It's no secret that the Transformation Accelerator is a global program, but it also tweaks towards the European asset base. We have already announced the four Klinker Plan closures in Hannover and Jorga and in two French plants. That result contribution obviously flows into the transformation accelerator as one of the core pieces, but by far not the only piece. When you go to North America, really we're happy, very happy with the performance in North America. Also, relatively, I think this is a very good performance. Revenue is even up. RCO clearly applied for like 90 percent, and also the margin clearly improving in a combination of volume still being sluggish, also because of the weather events, especially in the south of the Carolinas and Florida, but results being driven by good resilient pricing performance and very disciplined cost management. So, I think in that respect, It goes in the right direction, and a significant amount of that $29 million in the scope effect comes already from North America. You know that we've done three acquisitions in this quarter in North America alone, and that really is a significant improvement also when I look towards the remainder of the year and going into 2025. Asia is maybe the one point where we are still waiting for a better dynamic to the upside. I think it's holding up well, despite sluggish performances on the volume side and partially also on the pricing side in some of the core markets. That's true for India. That's true partially for Indonesia and Thailand. But also there, we now see, as the latest developments, quite some hope at the end of the tunnel. That's true especially for Thailand and Indonesia, which are important markets for us. Africa, I've been traveling, as you may have followed, again in Tanzania, and great job by the local team with the latest acquisition of Tanga. goes in the right direction. And to deliver these results in a very difficult market environment in Africa, I think it's à la bonne heure. The team is doing an excellent job. The results are basically flat and even, sorry, up by a notch. And also the RCO margin goes up. So in that respect, I think the local team has, despite very difficult general circumstances in these markets, has done an excellent job. Then just briefly on the transformation accelerator, we basically target the 500 million that I already said by the end of 2026 in a yearly run rate. It does mean optimization of clinker and cement assets with a clear focus on clinker, with a clear focus on Western Europe. You know that there is overcapacity in the market. It always has been. You know that we are clearly targeting to be the undisputed cost leader also when it comes to fully loaded costs, including CO2 footprint. So in that respect, it's clear that we do our homework in Europe with a very targeted program. And for the first two years, this program is now baked into this framework. transformation accelerator. Next to that, we continue to work on the procurement side, clean further the back office and also some overhead topics. There's always room for improvement, and then obviously also with the new addition in the management team with Axel Conrad now, we put a significant focus on asset productivity and asset performance, and we chase some significant potential on technical KPIs and obviously try to also improve our alternative fuel position and our SCM position, so secondary cementitious materials. If you go to the sustainability side of things, as I said, we are working super hard. Again, it was a great week a couple of weeks ago. Everything looks very good. Mechanical completion will be done by December 1. That's our ambitious fighting target this year, so not by end of the year, but even a month earlier. And we then go into what we call the hot commissioning. That will be an exciting moment for the team and for all of us. And then we hope to see you also for the Capital Market Day in the first half of next year. And we are planning to do that in Breivik. So that would give all of you a chance also to take a look at what we are doing up there live. I can tell you from my own experience, it's really a fundamental milestone, not only for the company, but also for the industry. On the back of that, we are launching also the decarbonization project in Italy. You know, there were a lot of discussions about carbon capture work in Italy that the government supported. I think it's moving in the right direction. We are taking a cluster approach in Italy, similar to the one in Pacewood. So I think in that respect, in the UK, so I think in that respect, things are moving in the right direction, but it's early days on that. We work diligently on circularity and also low-carbon product solutions. We've made an interesting investment into one of the key tech startups, Enricor, in Canada, that has a very interesting reprocessing of recycled construction demolition waste. That is really a very interesting setup. It's one of many, but that's just one that we are chasing, that we've chased in this quarter. And then, you know, we talked about the project in Poland that is now fully up and running and is producing very encouraging results. We have a couple of technical optimizations going on, and we are working also on replacing aggregates and sand up to 100 percent in fresh concrete. That is technically looking very, encouraging, so we have a lot of hopes in that project down the road, and it's scaling up, obviously. With that, I'll leave it to René to go through the financial highlights with you.

Thanks a lot, Dominik. Hello, everyone. It's René from Microsoft. So the top one is adjusted earnings per share, which is without AOR, increased in the quarter by 14%. which tells you if RCO goes up 3% in our earnings per share 14, that below RCO the performance is really good. There are no big AOR items. Financial results are very good. Tax results are very good. And we had last year in the discontinued operation, we had an increase of a provision, which affected last year negatively. But overall, the performance below RCO is very good. Last 12 months, we cashed for $2 billion. That confirms what we said in the H1 call. We are traveling around the $2 billion and should hit that number as well for year-end. Leverage at $1.5 is a little bit up compared to September 23. Why? We've done, again, a shadow back end. Dominic mentioned that we did some acquisitions in Europe and in the U.S. and this confirms that we are at the lower end of our corridor, and I think that's very well placed. We've issued a second green bond with $500 million. The interest was very high, and the timing was very good. If you look now at interest, I think we did here a very good job, and then in the next few weeks, the first round of our second shadow bank will be also finalized. So overall, all financials are trending into the right direction. Dominik, over to you.

Yeah, and on the back of that, it's clear that we look optimistically towards year-end, and that's why we were confident enough to raise our guidance by lifting the lower band of the bandwidth that we gave you. So it's now the $3 billion is now replaced by $3.1 to $3.3 billion, and also the ROIC will come in around 10%. I think that we are very comfortable around that. And the same is true for CO2 emissions. The numbers we will then show you again as our normal rhythm on a half yearly basis. So with that, I'll give it back to you, Chris, and we're looking forward to your questions.

Thanks, Dominic. Thanks, Vinita. Operator, you may want to start the Q&A call.

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questions on the phone are requested with only handsets while asking a question. Anyone with a question may press star and one at this time.

Great. So we have many people on the line. First one comes from Elodie Rolf from JP Boom.

Elodie, hello. Elodie, hello.

Hi. Hello, everyone. Thanks for taking my questions. So the first question I have is on the cost savings plan that you have announced. So you're talking about 500 million impact annualized by 2026. Is it all incremental versus 24? And how should we think about the ramp-up and the phasing in 25? And then related to that, in 2025, you had an EBITDA target, I think, margin of 22%. Does that mean that with that plan you get there? Did you need that plan to get to that 22% margin? So that's a long question. I don't know if I'm allowed to a second one. So maybe you want to answer that one first.

Let's just leave it there, and then we'll see.

Okay, let me do the second one, and then René maybe goes to the first one. So, on the 2025 margin, you know, we have our strategy running. This program is not being initiated to try and get to the 22% margin. That's not the point. Elodie could be precise on that, and we'll see where we exactly get in 2025, but this program is not launch just because to get to the 2022 margin.

So then the other two questions you've raised. Firstly, the split, you know, there should be roughly 40-60. There should be 40% coming in 25 and 60 in the year after. to come to a full runway then for 27. And then your first one, can you just add the 500 million to our results? You know, that is obviously that is what inflation and this 500 million will take, let's say, a big part of the inflation hopefully away. So don't just add the 500 million to the result because there will be as well staff cost inflation next year and so forth.

But it is clear, our ambitious target is to get as much of the 500 million to be additional to 2024, but I think it's fair to say to any point, to take 100% would be an aggressive approach.

Right. The next question comes from Louis Prieto.

How did she want to do it? Maybe, okay.

Yeah, hello. Luis Prieto here. Thanks a lot for taking the questions and taking the time to help us. I had a couple of questions. The first one, if I recall correctly, in Q2, you highlighted that India and Indonesia were the only markets under price pressure. Does this still remain the case? And are we seeing any other countries joining the list? And the second question is a bit more of a general one on sustainability. Could you shed light on the current pricing differences between regular cement and EVO build? Is it fair to assume that the margin is currently higher for these products than the standard offering?

Thank you. Yeah. Louis, first question, no, we don't see any major countries being added to the list of India and Indonesia when it comes to general price pressure. That's not the case. And I think we also see some uplift now, especially in Indonesia, on that pricing side. So I think we are working rather to get off that list with India and Indonesia rather than adding people, adding countries to the list. Secondly, cement and eco-build, absolutely, we are trying to get better margins from the sustainable products. Our ambition, we need to be a little bit careful with the absolute price point because margin is in that case not necessarily meaning that you get an absolutely higher price point. There can be a difference between the two. Just to give you that clarity, but absolutely from a margin perspective, the target is clearly to get more margin with the lower carbon products than with the normal ones.

Thank you. Thanks, Luis. The next question comes from Paul Rogers from BNP Paribas.

Hey, Paul. Hello. Hey, good morning, Tim. Congratulations on the results. So I've got a few questions on transformation accelerator as well, if I may. So firstly, can you quantify the magnitude of capacity closures you're assuming? You've obviously already announced four, but I wonder what the total might be in that plan. And then secondly, how will you actually track the progress? Will it be, I don't know, benchmarking or is there some other method? and will management incentives be changed to align with it? Thanks.

Okay, let me do the first, and then Penny will talk about the tracking, and then I can come back to the incentives. Now, I think on the capacity closures, very specifically, Paul, we just have included the four plans that we have announced, so that Hannover, Andorra, and two plans in France. We have a longer-term asset plan in Europe, but for this program, it's running until 26. We only have slides out these four clinker capacity closures for now. So down the road, there could be potentially additional things, but for this program, we have included the ones that I have mentioned that have already been communicated. But you remember, in the earlier calls this year, we promised you to come back with specific numbers And this is why we then now also came up with the 500 million that includes those four plant growers. And as I said, there we take the clinker capacity out, and that is a significant cost relief by plant that sits anywhere between 7 to 10 million euros per plant alone, plus all the auxiliary costs that come with it. So I think that is a significant contribution to that transformation accelerator.

So, Paul, regarding reporting, and every country, let's say, has a target for each of the three pillars we have presented to you, and every country needs to provide the measures On business level and even on plant level, how do we come to that 500 million? And that will be then tracked on a monthly basis and as well will be put obviously then into the respective budgets because otherwise it's difficult to track and to incentivize. And for the, regarding incentivized innovation, obviously, our countries will be, will get a part of their bonus, will be willing to hit their targets, obviously.

I want it very simply in our company, you know, that's why the timing of this program is now, you may ask, why do this? Well, you know, we want to make it into the operating plan 2025 already, and that means also that it's incentivized, because to Eloy's question early on, you know, this is not, This is put on top of the normal stuff. That's why it is absolutely incentivized, country by country, function by function, to get to the contribution to the 500 million already in 2025.

That's great. Thanks a lot.

Thanks, Paul. Next question comes from Sida. Hi, Sida.

Hi, guys. Thanks very much. Sorry, another question on the savings or optimization plan. So, Of the $500 billion, you just said that you think the assets that you're closing will save sort of $7 to $10 million each. I assume that that's a fixed cost number. So it would be really helpful to try and understand how much of this $500 million is a fixed cost saving and how much of it is sort of more of a variable cost saving. You're buying less coal, you're buying less raw mass, et cetera, because you're closing assets. Because I think that'll be much, I think it'll be helpful then to actually understand what the the impact is to numbers. So could you quantify fixed cost benefit of that 500? Thank you.

Peter, this is a tricky one. Quite honestly, out of competitive reason, we cannot and don't want to disclose the split between arrival costs and fixed costs. I think it's clear that it's a contribution of both, but just to be very clear, there is also a significant fixed cost component in there because Variable costs, as the name says, they come and go. If you want to make this sticky, you obviously also need to get after the fixed costs. So, it's a combination of the two, but we are not going to be super precise about, you know, where the contribution exactly comes from when it comes to fixed and variable splits. The same is true for specific KPIs that we chase. I ask for your understanding. But we're going to be transparent about the progress of the program, so we're going to come back to you exactly where are we, and so you will have the transparency around it.

Just here, when you look at the slides in the pack, you know, pillars one, two, and three. If you look at pillar three, alternative fuel, clean air incorporation, that all obviously goes into variable. Then on the left, you have the plant corridors, which Dominic said, that's a big part of fixed. Then we do, let's say, productivity obviously is as well fixed, and then we tackle this procurement, especially as well third-party services. This we will tackle as well, and that is obviously variable. So as Dominic said, there's a fair mix, but you can assume that there's as well a big part of fixed costs in there.

Okay, and I don't know if you'd give it to us, but would you put any sort of broad brush numbers around how much each of those buckets would contribute? like even if it's a range, 20% to 30%? No, it's not the plan.

No, we don't give that by feedback. We have it here, but we don't. Obviously, we need to have it here internally, but we don't give that externally.

Okay, no problem. Thanks very much.

Thank you, Tina.

Next one comes from Bernbach. How are we going?

Hey, Harry. Yeah, good morning. Two, please. Sorry, just another one on the transformation program. I think you indicated most of it is in Europe, but can you give us any guide on how it breaks down across, I guess, your global operating divisions? And then secondly, just separately, any update, please, on trends in European volumes, what you've been seeing in recent months, and then is there any sort of calls for optimism in Western European patterns? Thanks.

Yeah. Again, here, we will give you a tracking on the 500 million, but we will not break it down into areas. You will see in the area performance in the end, you know, whether there is a contribution or not indirectly. We're not going to break the program down into areas for the same reason that I said earlier. Now, I do give you the indicator that, yes, there is a large chunk coming out of Europe, but it is deliberately a global program. So, there is also a significant contribution coming from all other areas, all other areas, that includes North America, that includes Asia, that includes Australia, that includes Africa. So, this is yes when it comes to the asset clinker closures. That's where it's focused on Western Southern Europe. So, the fixed cost element to the earlier discussion with CEDA, The fixed-cost element is also mainly coming from Europe, because we always said, you know, there's overcapacity, we want to come down with our fixed-cost asset heaviness in Europe. So, in that respect, yes, there is a tweak to Europe, but other than that, it is clearly a global program. So, there's a procurement program in there that cuts across all of our areas. So, in that respect, why? On the Europe demand side, I said Eastern Europe is pumping along in a very strong fashion. And in those markets, it has been difficult in the last, let's say, 15, 18, 24 months. So, mainly Northern Europe and Western Southern Europe that are traditionally very important markets for us. We do see some bottoming out. It may be a little bit too early to celebrate that things are going up and through the roof again. That's clearly not what we see. However, we do see bottoming out. Volumes also very recently have been very encouraging. So, in that respect, we are moving in the right direction. Now, do we expect a volume increase? in those markets in 2025? No. Do we expect some more stability? Yes. But the full rebound is very hard to predict, so let's wait to get into 2025, and we'll keep you posted on that. But it's clear for us with a large European footprint that the massive upside is that volume rebound comes, especially once we've worked on our transformation accelerator, and that's the purpose of the exercise.

Okay. Thank you.

Hi, everyone.

Thanks for taking our questions. Two for me, please. Sorry, the first one is on the transformation plan as well. It's sort of a cheeky one, really. So you mentioned 7 to 10 million for each of the site closures, and those feel like big actions taking down kilns. But then it does suggest a lot of the other 500 million is still procurements and the technical initiatives. On those things that you were kind of doing already, what is really different, I suppose, with this transformation accelerator versus, you know, as you mentioned, a lot of this is incremental to what you were doing. This is usual cost reduction. What's really different? And then the other one is just any idea on restructuring costs and any cash out that you would actually need to put in in order to realize this 500 million over the next two years. Thank you.

Thomas, I think the first one was different, and then René will take the second one on the restructuring costs and the cash-out. What's different is that, you know, if you look at our, not our, but in the industry's fixed and variable cost development over the last, let's say, three to five years, That's transparent. You can see it in our report. You can see it in everybody's report. I would say the increase sits around 15 to 20 percent. Okay, there was inflation out there, but we are ambitious guys, and we want to roll that back. And that's what makes this program different, to really alert everybody that there is something we need to roll back and make sure that we really are, as a company based in Europe, very, very confident And that's what we are...we want to make another step change on asset heaviness, on competitiveness with this program. That's also why to the earlier question of LOD, we are trying to get as much of the $500 million on top of the 2024 results and not just, you know, compensate other potential cost increases.

Let's talk about how much does it cost. If you have followed our H1 results, we have presented in the AOR already nearly $200 million in permanent and restructuring costs for the plants in Europe, and this is exactly for the four plants Dominique has mentioned, and over in the other the two French ones. So there are already in our H1 P and L. And then obviously from a cash flow perspective, when the plants are closed, they need to pay restructuring. But for the rest, to be honest, to deliver the rest, I would not think there are big material or let's say AOR or cash outflows of the company, it would be middle double-digit millions, which is not material for this kind of problem. Understood.

Thank you.

And the reason is clear, Thomas. This is not a mass layoff program that creates restructuring costs. You know, the ones that have significant impact on that, Denny has just shared with you, and that weight is already baked into our 2024 number.

Thanks, Thomas. Next question comes from Tobias Werner from Stephen.

Tobias. Hi, gentlemen. Thanks for taking my questions, too, if I may. Number one, when we look at North America in terms of like-for-like at the revenue and the EBITDA level, 0.9% and 11% respectively, how much of that is – or I take it Mitchell is part of that like-for-like and how much of that is related to it just roughly to give us a sense. And then secondly, in the past you talked about – trying to crystallize the value in your North American assets, which have significant aggregate exposure, and we all know what that is valued at. Have you any further thoughts on those? Thank you.

Tobias, I think on the first one, you know, again, there, I think we indicated in the past, we can also, for competitive reasons, not disclose exactly how much Mitchell impact is there. But one thing is clear, it is a significant contribution for Mitchell, but by far not the only one. So if I look internally, it really comes from all parts of the U.S., maybe less so even from the southern parts, because you know that the southern parts have been heavily impacted by weather, especially in September. So it's maybe a little bit more from the northern parts than from the southern parts, but I hope that answers your question. And then on the U.S. assets, we stick to what we have said. We don't take anything off the table. We continue to watch the developments. You saw the recent news in the last couple of days again. There's a lot of movement, a lot of either speculation or specific plans that have been disclosed. Very interesting for us to watch that situation. We sit on a very, very valuable asset base in the U.S. that is performing at very competitive levels, and we continue to watch what's the best way to value-rise that. And as we go along, we then take the right decision that is in the interest of our shareholders.

Thank you very much. And sorry, if I may follow up. Any thoughts on that? They tend to be known as shrewd M&A people, not willing to give up quickly. Would you reconsider your position there?

We don't comment on any, as you know, we don't comment on any speculation. They're not on the competition. It's nothing for us to, if you ask us whether we are playing in that rumor pot there, no.

Thank you. Okay. Thanks, Tobias. The next question comes from Citigroup and from Ravi.

Thank you. Hi, thank you. Just two questions. Firstly, on the sustainability slide, obviously you have a new demolition project center in Poland. One of your competitors clearly has much bigger plans. They already have apparently about 100 demolition centers or recycling centers already. Is this a business that you are looking to grow very fast, or is this going to be very selective and one-off? And secondly, just a clarification on your transformation program. The four plants that you mentioned, which obviously are you know, the French plant closes next year, but the other two and Speed also has closed. Is that included in the 500, or 500 is incremental to these four plants that have already had restructuring costs taken? Thank you.

Okay, René will talk to the second one, and it's good that you raised the one in Poland, because the one has nothing to do with the other. You know, we have hundreds of sites that do demolition of concrete waste. That's nothing specific. Sorry that we didn't be transparent about this, but there is nothing, you know, hundreds of our aggregate sites do recycling of concrete. The Polish one is a completely different approach because it's not demolishing concrete and then using that as sub-base somewhere in road construction or anything. This is targeted to get high-level sand, first A-class sand and A-class rock that can eventually to 100% replace technically fresh sand and fresh natural stone. So I think in that respect, that has a completely different ambition level. And I don't know that there is any project like this globally. If you have knowledge about it, let us know. We are always willing to learn. That would be fantastic to share ideas. But from our perspective, we are really trying to lead back there.

And the four planned closures we are talking here right now, they are included in the 500 million targets, the savings of these.

Thank you.

Thanks, Abraham. All right. Thanks, Abraham. The next question comes from Prajesh Sia from HSBC. Hi, Prajesh.

Hi, Jens. Good afternoon. So I have two as well. Firstly, on the EM portfolio, Asia has not probably performed to your liking, and African Middle East is coming back. But looking just on the asset base on return and end returns, what do you think is the optimal return and where those assets are kind of currently generating those assets versus what it is for the group. So that's my first one. And just on the technical one on the scope effect, if you could just give us what's kind of the scope effect you are looking for Q4 and into 2025 based upon your acquisitions in 24 and what's kind of the particular cash flow impact for 2024 as such?

Okay, let me do the first one, and then René will take the scope effect for the remainder of Q4, and then going into 2025, although there's not a discussion about the 2025 number yet. But nice try. Let's get to the Q4 number, and René will give you some transparency around that. On the emerging market portfolio, if I understood your question right, we are going to continue to optimize the asset base. There are still a couple of countries that we have on our list that could potentially be either built out or divested, more the latter than the first. Bear with us. I think there are a couple of things in the pipeline, but we have no hate whatsoever to execute. We do this only if we drive shareholder value and if we increase the focus on our emerging market and performance of our emerging market portfolio as a whole. So that exercise is not finished, but we communicate always when we have results, not just hopes. So in that respect, bear with us. And as the pipeline turns into a reality, we'll come back to you and let you know. But it's an ongoing effort.

What I said already in the H1 call, year-to-date now, the scope is 76 million, and I said it will be north of 100, and that will be north of 100 end of the year. And for 2025, you know, we have not yet had our budget discussions, so I cannot give you an answer. Obviously, for 2025, you have the full effect of the U.S. acquisitions, So that will be a contribution, obviously, but I cannot tell you the number right now.

Okay, thanks, Peter. Next question comes from Gregor Kuklic from UBS. Gregor, hello.

Hi, good afternoon. So a couple of questions. Sorry to come back to this saving program. I know that there's been sort of 15 questions already on that, but just sort of so we can get a picture of kind of what's incremental to what you would have done anyways, because I appreciate the planned closures, that's sort of idiosyncratic, but things like back office procurement gains, optimization, fuel substitution, all that sort of stuff, I think you've always been doing. So just to give us an idea sort of compared to, I don't know, the last two, three years, how much of that is really additional or incremental to what the company would have done anyways? And then the second question is, can you provide us with an updated guidance for this year for year-end net debt? I think you're saying the cash flow is $2 billion from memory, which I think last year was $2.2 or $2.3, remind me. And I guess within that, what's sort of the delta between last year's and this year's cash flow, or do you think it's kind of similar? Thank you.

You know that we don't formally guide on net debt, but maybe René can give you an indication of where we think, at least from a corridor perspective, we land. On the program, I think the incremental discussion we had already a little bit earlier. I think it's clear, you know, we continue to optimize as we go along. But as you probably well know, you know, A, the asset footprint optimization in Europe is nothing you can do as you go along necessarily. That's a major effort. You know, all the frameworks and the... the boundaries you have in place also to get that executed in Europe. So that's absolutely an extra effort with a significant contribution to the $500 million that goes on top of normal business, at least also if I compare it a little bit what I see elsewhere. So I think in that respect, that's absolutely incremental. And then we have a significant procurement element in there that's also incremental with a deliberate focus and also extra resources and efforts to put a significant focus, and the same is true for the technical side of things. You can argue, we obviously always watch these KPIs and also our variable and fixed costs, and I think we've done an excellent job also during this year. However, you know, as I said, we have a new CTO in place, And it's clear that he has additional ideas, additional focus. And that additional ideas and focus, that's why we bring this new board member to the table, that we create additional results, you know? If we just be administering the normal stuff, Gregor, that would be not enough return on additional board member, if I may say so. So there must be additional returns coming. So my clear ambition is that the vast majority of this is clearly additional to what we do anyway. Otherwise, we don't need to launch an initiative. Got it. Thank you.

The second question. The free cash flow for last year was 2.163, and we should be, as I said, we should be around that now to 2. If it's 2 or 2.1, 2.15, that's dependent on working capital at the end, so that's difficult to predict. Yeah, but that should be the number. And regarding a net debt position, you know, last year we were at 5.3. The net debt position will be probably a little bit higher than this because we have the acquisitions, we have the share buyback, we have increased dividend. So our net debt will be higher than last year, obviously.

Thank you.

Thanks, Graham. And the last question comes from Yassine Toury from Onfield Investment Resources. Yassine, hello.

Hello, thank you very much for taking my question. So maybe first a question on your guidance. I think the mid-range of your guidance implies a growth in operating earnings of something like 15%, 16% in the fourth quarter. So it's a big acceleration versus what we've seen so far. And even if I take out the acquisition on FX, it looks like you would be expecting an organic EBIT growth or maybe 10, 15% in Q3, in Q4, compared to only 3% year to date. So what is driving that? Is it because you're expecting better volume? Is it because you're expecting better price cost? And do you have any evidence of this acceleration in earning growth in October? And the second question would be on your margin in the U.S., It looks like your aggregate margin went up quite a lot in the third quarter by approximately 300 basis points. It's a little bit surprising when I'm looking at this result compared to all the other companies that have published margin as a stable under pressure and aggregate because of the weather. So what is driving that? Is it cost? Is it a better volume performance? It would be great to get a bit of color on that.

Yeah, let me start, and then if any of you want to jump in, I think, let me know. You have done your homework, if I may say so, Yacine. I think you've done a good calculation. Indeed, this would mean that the growth in the Q4 is substantial. We are confident that we can pull this off. It goes back to our earlier discussion about the trend line, you know, Q1, Q2, Q3, and what we see now in Q4. It also was already indicated on the scope effect. I think there is good momentum, and this good momentum is also supported by what we have seen in October now in terms of performance. So we sit very confident here. It's ambitious, fair enough, but we are an ambitious company, and we are confident that we can deliver this. Otherwise, we would not have shared this with you in that matter. So that's the answer to that. And then the second one, margin in the U.S., I cannot comment on the competition, but from our perspective, you know, sometimes you lose with the footprint. In brackets, Europe, sometimes maybe also you are helped a little by the footprint. You remember that our business in the U.S. is not 100% in the South. We have a significant business in the Northeast, in the Midwest, and also in the Northwest. And I think overall, you should assume that some of the margin improvement not only comes from the south, but also from the other parts of the U.S., where, in all fairness, the weather events were less pronounced than in the south. But overall, structurally, we see good margin improvement in all of our North American business, and we are confident that that will continue also going into the end of the year.

Maybe just a follow-up on the fourth quarter. I see that the fourth quarter last year was very weak. You had a decline in EBITDA growth when all the other quarters were better. Is there any one-off or did you have any... lack of land sale, for example, in the first quarter of 2023? Or are you expecting an acceleration of land sale in the Q4 of 2024?

No, no, no. Q4, no big land sales missing last year or coming this year. So that will be operational. And if you look, you know, 50%, what was it, 700, 800 million is just, let me talk, 100 million improvement. And as you have said, Q4 last year was not great. Volumes were not good. So as Dominic said, looking at the recent trends, we are very confident with our Q4 forecast.

Do you see volume growth in October?

I think we need to be a little bit careful, but we are very satisfied with what we have seen in October.

Thanks, Martin.

Thank you. Thank you.

We don't have any more questions on the line, but maybe some closing remarks from you, Dominik?

No, I think thank you to all of you. Thanks for joining. I think we moved the timing a little bit to accommodate your schedules. Thanks for making it possible. From our perspective, I think you've seen we go with all confidence into the remainder of the year, and that also should set a great base for an interesting 2025, which will be super exciting for us with the opening of RIMIC. but you probably also understood that it's not all about credit. That's a major milestone for us, but it's clearly also our ambition to overall continue to grow the company in a very profitable manner also in 2025. So let's stay on top of that, and then thanks for joining.

Thanks for joining. We see some of you at the analyst dinner tonight. Looking forward to it, and then we're on the road the next couple of days Also in London. So we see you all there. Thanks a lot, everyone. See you later. Bye. Thanks. Bye.