Heidelberg Materials Ag

Gentlemen, welcome to the Heidelberg Materials full year results 2024 conference call. I'm Moritz, the call operator. I would like to remind you that all participants will be in a listen-only mode and the conference is being recorded. The presentation will be followed by a question and answer session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Christoph Bäumel, Please go ahead, sir.

Thank you, operator. Good morning. Good afternoon, everyone that dialed in. Great that you're all here. We are in the room, as always, with Dominic and René and the IR team, and look forward to your questions later. But for now, I hand over to Dominic for our prepared remarks. Dominic.

Thanks, Chris. Thanks, everybody, and thanks for joining our annual results 2024 call. We open up with another year of success and progress. You've seen the presentation. I'm looking at the executive summary, basically sharing with you that the RCO hits a record high of 3.2 billion euros. The EBITDA margin jumps up to 21.3%, and it's absolutely in the corridor of 20% to 22% that we took as a target in our 2021 Capital Market Day. Transformation accelerator, initially we shared with you last time, target 500 million. We are well on our way. I'm sure we'll get into some more details down the road. Free cash flow sits at a very healthy 2.2 billion euros, which drives the leverage down to 1.2 times shareholder return, first time above 1 billion in one year in a combination of progressive dividend and share-by-back. We have cancelled the shares of the first wave of the second share-by-back, and we will start the second wave in Q2 right after the um general assembly uh exciting times then for us this year with a revolution around the product offering first carbon capture net zero product in the industry worldwide will come to the market in h1 2025 and then our outlook at an rco growth to a corridor of 3.25 to 3.255 a ROIC around 10% and a CO2 emission with a further slight reduction. If you go to the next page, you see the summary. I'll jump over that right next to the next slide where we see the EBITDA margin improvement by area, and you see that Most areas are contributing to a significant improvement, mainly obviously North America. I'm sure we'll get into some of the details in your questions. All areas on a progressing level or stabilizing on a high amount. Cement improving significantly, but also aggregates slightly up. So total margin for the group jumps up to 21.3 from 17.7 in 22. So overall, a significant improvement in structural profitability. We want to keep it that way. That's why we announced the transformation accelerator program. that should contribute by the end of 2026, an additional amount of 500 million on the results. And we are well on our way with the program. We have broken it down to specific plants and countries, and we will obviously track the targets now quarter over quarter, and we'll also make them available to you. On the portfolio optimization, I think we've made nice progress and we've made a significant divestment with our setup in Congo, the Democratic Republic of Congo, which from our perspective is not our sweet spot for the future development of the group. We have shifted our focus, as you know, to significant transactions in the US. You see them all on the left side of the chart, with five significant acquisitions in North America during 2024. On the operational side, I think it's interesting and important to note that we are coming out of a fairly healthy, if not strong, Q4 2024. The revenue jumped up for the first time for a long time, 2% for improvement operating EBITDA, almost 10% up, margin up, and the EBIT 15% up. If you compare that to the 6% for the full year, you see that the trajectory is going in the right direction at the end of 2024. It then also becomes clear when you turn to the next page where you see the revenues being slightly down, operating EBITDA being up 4% like for like, the margin is up. And then what I said, the RCO you see here like for like improvement 6% while the quarter four was 15%. So you see the trend line showing the right picture, which also is happening on the next page when you go to the operating bridge where you see for a first time for a long time now that the volume impact is basically flat. I'll come to the next page in a minute, but if you stay on this page, you see that despite the fact that the volume is basically flat, the price over cost is still significantly positive, which then obviously turns into a very strong quarter with a profit uplift of 15% or more than 100 million in just one quarter. uh if you keep this in mind and then go to the next page you see the big difference now you see for the full year we still have a negative negative volume impact of 360 million uh and basically being flat in two four you can see uh what that does then also to the result that's what we call the leverage effect so if the volume You don't even have to come back big time. If it's slowing down in terms of decline, you see the impact on the results. So I think in that respect, that is quite positive from our perspective. If you go down into the deep regions, you see that Europe is stabilizing on a high level. So revenue is just under 10 billion. The margin moves up to almost 20%. RCO stabilizes well above 1.3 billion. Cement margin well improved, aggregate margin slightly down. Overall, I think a good picture out of Europe on a fairly high level. North America, strong run, not so much on the revenue side. I think that's interesting to note, but clearly on the profit side and also on the margin side. Method jump of almost 400 basis points on the EBITDA margin. uh rco jumps first time ever above 1 billion so i think that's a really nice uh contribution like for like 21 percent while the group is like for like six percent shows you also what which area is putting the train right now or used to pull it in 2024. EBITDA margin in cement up healthy, and also in agri, let's look, almost 400 basis points margin increase in EBITDA. I think that is a la bonheur well done to our team in North America. Asia Pacific, still from our perspective, not great level, but stabilizing now. on the many dimensions, EBITDA margins slightly improved, even RCO slightly improved, EBITDA margin on cement slightly improved. Aggregate is a comparatively small business, very much focused on Australia here. So I think in that respect, this is reflecting the weakness of the Australian market when it comes to volumes, but not so much the rest of Asia when it comes to the aggregates. Africa, you see on a very high level, Further progressing, revenue up 5%. So I think that's moving in the right direction. Even down margin stabilizing on a very high level. RCO only slightly down. Sorry, yeah, slightly down, but like for like, I report it down, like for like, slightly up. Stable at around 20%. So overall, I think from my perspective, from the market's perspective, convincing picture for 2024. And René, why don't you take the financial side?

Thanks, Dominik. Hello, everyone, as well from my side. Here are the big bullet points from the finance section. You see all metrics trending in the right direction. Adjusted earnings per share up double-digit, 11%, to close to €12 per share. Free cash flow stable at 2.2 billion. What we said before, we want to hit above 2 billion, which we have now again delivered. Leverage is further reduced to 1.18. And then the ROIC is 9.9. Now you can ask, okay, why is it not 10? We said around 10. I think that number has hit. But the technicalities, you know, the balance sheet is valued with the currency on the last day of the year, and the US dollar was super strong, and we got currency hits on our balance sheet of 700 million versus prior year, which obviously then corresponding RCO is missing because RCO currency is with average. So that tells you a little bit that without this currency effect, the ROIC would be well, well above 10%. So we are happy with that, that's still a good number. From a financing point of view, once you've seen that, that will contribute to our sustainable financing target. And then shareholder return, I think it was 1 billion and 10 million euro, which we have given back to the shareholders, I think a good number. Let's go to the P&L. Dominic explained until RCO. Now we go down, and you see the additional ordinary result. That's the biggest movement here with minus 4.37. The big part of this, you see it, is 324 million is due to impairments. We said we closed two plants in France, one in Spain, so Klinker, Kins, one in Spain, one in Germany. We have done a goodwill impairment of our Nordic precast business in Northern Europe. We've done some other impairments. So that's mainly impairments. And that's what I said beforehand. As for the transformation accelerator, the big numbers will be impairments, which tells you that we are making, meaning the serious adjusting our asset footprint. I think that's a non-cash item. So that's a big number here, the swing there. And for 2025, if we do not close further plans, I do not expect big numbers here also. Financial result, I think it's nearly flat, even with interest. In the environment, we see increased interest rates for financing. The number is pretty good. 180 million for the size of the company is a pretty low number. Income taxes are slightly going up. 46 million attributable to higher profits. That's okay. Net result from discontinued operations. There you see a big swing, 140 million. The reason is we have an environmental case uh build up a provision in 23 of 62 million this we released in 24 so the swing is 120 million and the rest the 20 is a normal cause of business so you see that's a big shift there and non-controlling interest is nearly flat so our group share of profit reported is down 150 million but this is due to the AOR of minus 437. But if you take out the 437 and the 140 in net result from discontinued operations to eliminate all these big non-cash one-off items, our group share of profit adjusted is 166 million up, which is per share 1.20 euro per share, which is a very good result. Here now the long-term trend, let's say five-year trend about earnings per share adjusted without these major one-offs, mainly AOR. You see CAGR of 15%. I think nothing more to say than that's a really good performance five years in a row. And then let's turn to the cash flow. The cash flow is nearly flat on prior year's level. You see the change in working capital has improved significantly. from minus 200 to minus 110 million, and then that interest nearly flat, taxes paid, we had a big one-off in 23 in North America, and the rest is then coming from higher profits, and then non-cash items and other, this is bits and pieces, result of the disposals are in there, some spare part impairments and other impairments are in there, which are non-cash items in the bucket other. So that looks okay for me. And then the capex net, you see, we stick to what we always said. We guide at 1.1. We are even 40 million below that number. Here you see we are very disciplined in our capex process, and you see it's working. And then that leads to a free cash flow of close to 2.2 billion, which is, again, a good number. Here, our net debt development, the net debt is rather flat. Yeah, that's coincidence. It's nearly the same number for both years, 5.29 billion. And how did we use the free cash flow? We invested 780 million cash in M&A. We returned 1.01 billion to the shareholders. And in currency, ABBA, it's 375 billion. you see there's roughly 200 million debt we've taken over with M&A acquisitions. And if you add that up to say 800, we are close to 1 billion M&A outflow, or let's say net debt impact in 24. Dominik, let's hand over to you for sustainability.

Thanks, René. So I'll close up with sustainability and outlook. So overall, great focus also on sustainability. The reduction, the further reduction of seven kilos on the CO2 footprint is okay, but not stellar. We are very transparent about this. There are a couple of portfolio shifts that have contributed to a little bit of a one-off slowdown, but for me, that's not at all concerning. The overall underlying trend is okay. But I think it's fair to say that the full year result for 2024 is a little bit below our expectation on this one. We are increasing our share of sustainable revenue above expectations, so now to 43.3%. That's really good. As I said, we are going to pioneer for the industry the transformation to net zero with real products coming to the market within H1 2025. I think we've got a nice recognition with the target validated by SPTI on 2050, but more importantly, also the inclusion of Dow Jones Sustainability Index for Europe. So I think that also moves in the right direction. And obviously, we are driving our not only decarbonization, but also circularity and recycling agenda when it comes to low-carbon products. I'll come back to that in a second. Capital Market Day will take place end of May. We also shared that with you earlier, and we will invite you to Breivik to join us for, I think, two exciting days at the end of May, close to midsummer night in Norway. Those of you who have not been in Norway, that's outside of this exciting topic on carbon capture and the revolution by Heidelberg. I think this is, in any case, a nice opportunity. location to visit so we hope that we see many of you at the capital market day End of May. We've made significant progress. And those of you who are a little bit more in the details on the key drivers of decarbonization in our industry will wonder why it's only 70 kilos. Well, that's a little bit of technicality. But, you know, you see we made very good progress on clinical incorporation factor, leading the industry with now 69.2%. So first time below 70. That's, I think, very good. Alternative fluids, we made good progress. yet we've still got to get to close until 2030. We have a very ambitious target, but we've made good progress in 2024. Also, sustainable revenues have moved nicely up with almost 400 basis points. So if you take those three indicators, you wonder why is it only seven kilos. Well, there are two effects in there that I think we need to keep in mind. First, the supply of secondary cementitious materials in the UK has declined short-term because of the closure of some of the steel plants in the UK. And then also the portfolio shift in terms of volume development, Europe being down and other markets being up, that has contributed to a technical calculation that the CO2 footprint obviously is shifting a little bit but that's a that's a one-off portfolio exercise that may go in the other way around uh next time uh what's it what's exciting is that there is there is life before uh ccos long before ccos as you heard me say before ccos is the proof that the product can be fully decarbonized but there is a lot of wiggle room in between. And we've now started an initiative to not only work on clinker factor, but also on alternative fuels and push the limits to what we call ultra low carbon plants. So we are turning some of our older clinker installations to ultra low carbon installations. We do this for the first time in our plant in Paderborn, and we'll do this also in one or two other plants across Europe down the road. And the impact will be a significantly lower carbon footprint for the new products that is working with a new mixture of certain binders. And in that respect, we get a significant contribution, not only from CO2 reduction, but also from the circular side of things. And then if I finally close before we come to your questions with our outlook, we are positive for 2025. You see here on slide 26, North America was not great in volumes last year, but we assume that with all the change in politics, there will be significant investments coming to the U.S. You probably heard the announcement of Apple overnight, $500 billion wealth. you know, this will not be hot air. They need to build infrastructure and buildings and plants and whatever, and that will consume a lot of our materials. So in that respect, that's great to hear. So for North America, we are clearly optimistic. We are more and more becoming optimistic for Europe. Q4 we saw bottoming out volumes in also our critical markets, Northern Europe, Western Europe. So in that respect, I think there is hope and light at the end of the tunnel for some of the critical markets of the past in Europe. Same is true for Asia Pacific and the emerging markets in general, with the new US administration trying to weaken the US dollar that clearly gives some tailwind for the emerging market. As you know, that many of the goods there are imported, nominated in US dollars. So we already see early signs in Africa and also partially in Asia that the economies are coming back. They've been in dire straits for quite a while. And if that would happen, that obviously would give us some significant tailwind for our volume and obviously also our growth and profit potential. That there are geopolitical risks, I don't have to tell you. You just open up the newspaper or look at the news every day in and out, but we navigate through that the best we can. That then brings us to our formal guidance. We are planning an RCO increase and gave you a corridor just like last year, early days of 300 million, 3.25 to 3.55 billion RCO, on a very good level of around 10%. CO2 with a further slight reduction. CapEx slightly going up with an additional 100 million. That's absolutely in line with what we told you before. That's basically about 100 million for all the carbon capture exercises around the world. And that's absolutely in line with what we indicated. The PPE CapEx will remain at around 1.1 billion. And that turns into a leveraged target that is, fair enough, fairly comfortable, 1.5 to 2, assuming that we are currently at 1.2, but that leaves both wiggle room for acquired growth, but also shareholder return. So in that respect, I think I don't need to repeat the summary. We are very much looking forward to your questions.

Thank you, Dominik. Operator, you want to start the Q&A process?

Ladies and gentlemen, we now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their 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. Questioners on the phone are requested to disable loudspeaker mode by asking a question. Anyone who has a question may press star and one at this time. One moment for the first question, please.

Yeah, I see a long list of people in the Q&A section. So please restrict, as always, your questions to two at a time. And we start with Elodie Raw from JP Morgan. Hi, Elodie.

Hi, everyone. Thank you for taking my questions. I really, really have one, but it's a big one. It's on guidance. I think everyone is trying to reconcile This guidance of 3.25 to 3.55. So how do you get there? Because if I'm not mistaking, you already have 150 million of cost savings for 25. Maybe you can confirm that. That brings you to 3.35. Then we would like to understand what you have in terms of effects and scope from what you've already closed and upcoming investments. In 25, so we have Baltimore, Giants, and Morocco, really. And lastly, what you have for organic growth left, because you're talking positively on volume, so price-cost would need to be very negative to be even at the midpoint of the guidance. So if you could help us reconcile that. I know it's a big question, but it's only one. Thank you.

Elodie, thanks a lot. I'm not surprised by your question. I think that's fair enough. Thanks, and let me give you just one sentence, and then I'll turn to Vinnie also to bring some additional color. First of all, early days, Elodie. I think we have 12 months to go or 11 months to go, so we decided to stay a little bit... uh you know humble around the the guidance at this point your points are right they are obviously cost studies coming from the transformation accelerator on the scope just a general remark uh yes those two acquisitions but they are signed not closed yet and that's not always in our hands so talking about a little bit cautious you know both asthma and giant are not closed you need to get the antitrust approval and whether if you know exactly when this is going to happen tell us but we don't so in that respect we are a little bit cautious And then on the organic growth, it's clear that we want to build in organic growth, but again, early days. But René, maybe you would do something else.

Let's go through the different pocket style, which Dominic partly alluded to. As a price over cost, I can assure you our budget is not negative. That's number one. Number two, as Dominic said, regarding scope, we have the close deals you know, which we have done in the US, Malaysia, And as he said, giant investment is not yet closed. You can imagine there's a little bit what we've included in our budget for this. And the scope impact is what we foresee in that number is below a three-digit million number on our CO level, so that you have that covered. Then I hear there's lingering, oh, what ethics assumptions have you taken? You know, our guidance is based on a proper budget we have run for the company. And you can imagine the budget was not done in February with current currency rates. It was probably done in November where the currency rates looked a little bit different. So probably there's something, there's some upside here because it's just timing. And I think from a cost savings perspective, we always said you cannot... count one-on-one the savings into our results translation, let's say, because there's inflation we want to offset. And in our budget, the transformation accelerator is clearly visible because our fixed cost and variable cost increase in these targeted accounts is clearly below inflation. So that tells you that we affected that in, and it's not the 150 million, because it would assume what you say, zero inflation, what we result contribution, but there's inflation, so it's below the 150 million, but this is what we always said.

Thank you, Elodie. Thank you.

Thank you, Elodie. Next question comes from Luis Prieto from Kepler Schubert. Hey, Luis.

Thank you. Thank you. Good afternoon. A couple of questions from me, so very quickly. The first one is coming back to what you commented on Elodie's question. We have seen the net volume impact in the RCO bridge practically flat in Q4 versus quite negative numbers in previous quarters. Do you think we could see a positive net volume impact in the first half of the year 2025 in the bridge? And the second question is if you feel that the current geopolitical changes could have an impact on the decarbonization pace of European businesses? Do we run the risk of European authorities saying we're going to delay things and therefore the whole decarbonization equity story becomes a bit softer? Thank you.

Thanks, Louis. Net volume effect, yes. We assume that we could see finally some positive volume developments. That's clearly our current thinking. On the political side of things, important to note for us, decarbonization only makes sense if you combine it with a convincing business case. Only then we embark on decarbonization efforts. I'm absolutely convinced that with that combination, whether it's Europe, the U.S., or somewhere else in the world, you can make a case for decarbonization, and they will hold the line on that. And then, yes, maybe it's not the party setting of the government. The whole decarbonization topic may shift a little bit. But for us as a company, while we combine with financial success, we absolutely hold that line. Excellent. Thank you.

Thanks, Luis. Next one comes from Paul Roger from BNP Paribas. Hey, Paul.

Hi, team. Congratulations on the results. Good set of numbers. So just two for me then. So firstly, can you comment a bit on your price and cost expectations for Europe this year? That's the first one. And then secondly, I think it was this time last year we talked about potential strategies to unlock U.S. value. I think at that stage you're looking at something like seven initiatives. Any updates in your thinking with regard to that at the moment?

Yeah, Paul, thanks a lot. Price over cost, let me just do one and then really may jump in. Overall, we are quite positive for price over cost in Europe. I think you may see the volume side coming back a little bit. That's one driver. We are trying to cover inflation at least with the pricing. And then on the cost side, difficult to predict. You saw our transformation accelerator program. So we are driving, trying to drive down our fixed cost. On the variable cost, it's a little bit black box, you know, that is very much driven by energy costs. Difficult to say. We are hedged. Rene can share a little bit more. But overall, I think that we are positive on price over cost for your company.

Yes. So, Paul, price over cost, as Dominik said, Energy cost, we assume, roughly flat. I don't expect 10% decays or something. You see the energy cost, we assume, flattish. Then pricing, as Dominik said, we want to try to cover inflation, so they have positive. Fixed cost, we have the transformation accelerator. So overall, Europe, the clear target is to be price over cost positive.

And then a second question on the unlocking of the value of the USPs. We continue to watch the situation, Paul. You know that one data point has now been released with the sublisting of one of our competitors. There will be more data points coming throughout the year. For us, nothing major has changed. We are in a very comfortable position. We perform on a very high level in terms of our financial performance, in terms of our decarbonization agenda. We absolutely take most of the boxes we have, all of the boxes we have promised. So no haste on it, but obviously we stay on our toes, look at the different sets of data points as they come in during the year, and then we take our shot at it once we have analyzed the impact. That's great. Thank you.

Thanks, Paul.

Thanks, Paul.

Next in line is Arno Pinatel from Armfield. Hey, Arno. Hello, Arno.

Yes, good afternoon, gentlemen, and thank you very much for taking my question. I will have to, please. Coming back to the guidance again, sorry. You must have visibility on the order book of your EVO0 green cement in Brevic. And I just wanted to understand if this guidance is integrating a significant impact of the first cells of the EVO0 cement in 2025. That would be my first question. My second question will be on the US cement prices. We know that Mr. Trump is currently thinking about implementing tariff, which should have obviously an impact on domestic cement prices in the US. But let's put that on the side because nobody knows what will be really the situation at the end of the day until he's clearer on his intentions. But just looking at Turkey, Turkey is the main supplier of imported cement in the U.S. And Turkey is going to face probably a massive demand of cement coming from Gaza, Syria, and tomorrow Ukraine if the peace is signed. So if you are a Turkish exporter, you should normally start to think to increase your FOB prices. And if FOB prices are increasing in Turkey, mechanically, CIF prices should increase on the US cost. So I just wanted to understand if in your budget and the way you look at US for 2025, how are you going to handle the pricing difficulties traction on your US domestic market, taking into account that Turkey is probably going to increase the FOB prices.

Arno, it's always a pleasure to listen to you. You know the industry for decades, so a very good question. Let me be very simple. Order book of Evo Zero is very well filled. No, nothing is baked into the guidance at this point. We want to be cautious on this. And the third point or the second point on the cement price is spot on. We already see increased FOV prices around the world. Whether it's just the effect that you described, I don't know, but it's certainly also something which then also helps clearly the domestic pricing, not only in the US, by the way, but also in other parts of the world, notably Europe. So in that respect, spot on, a very important question. Arnaud, thanks a lot.

You are able to pass it. Let's say Turkey is increasing for price in three months time. You will be able to announce further price increase in the U.S. and react quickly on that?

Well, first of all, we are not negative. The impact is at all upside for us. That is not currently baked into the budget. So whether we are able or not, it's difficult for us to tell. Let's see. But it's clearly not baked into our budget. That effect would go unsolved.

Very clear. Thank you very much.

Thanks, Arno. Thank you. Next one comes from Ephraim Ravi from Citi. Hey, Ephraim. Hi. Hi.

Thank you. The first question is continuing on the Evo question. Can you give us some indication of the Evo build in terms of sales volume as a percentage of the cement sales? Also, any indication of pricing premium you may be getting on average versus your standard cement products?

i think uh you know it will build more or less just as an indication it's not 100 percent uh overlap but you know you saw those sustainable revenues uh on cement so that's basically 43 percent of the of the portfolio now that's also under or most of the results sold under the evil build brand uh i think you need to differentiate between pricing and margins uh the clear target is to uh have higher margins with evil builds uh than we have with the traditional products. This works in the majority of the cases, maybe not in all, but overall, I think it's the intention to make this a successful financial business case. That's true for EvoBiz, and it's also true for EvoZero.

Thank you. Second question on the transformation accelerator, the 150 million thereabouts where you're expecting for full year. Now that we are in the middle of Feb or end of Feb, can you give us a sense as to how much of that would be visible in the first half earnings when you're reporting?

We have given the number for the full year, and we will, what we will promise you, we will give you quarterly updates where we are tracking with this, but to give you now a number what we realized in the first six months, you know, that's a little bit too much detail. As we said, quarterly information should be sufficient and the full year number you have.

Thank you. Thanks, everyone. Next question comes from Harry Goat from Banback.

Harry. Hello. Yeah, good afternoon. I've got two questions, please. Firstly, just digging into Europe in a little bit more detail, you sound a little bit more optimistic about trends at the start of the year. If you dig into that on a country-by-country basis, is the comment you made consistent across all markets, or are there any markets that are still contracting in the early months of 2025? And then the second one is U.S. infrastructure spending. Obviously, a lot of, I guess, commentary around President Trump and spending plans and what may be cut. How much visibility do you think there is on those funding programs? Are we talking, you know, very confident for two to three years or is it short of that? Thanks.

Harry, I think both questions are a little bit tricky because I think I can give you a current assumption, but it's glass wall right now a little bit. On Europe, country by country in general, Eastern Europe going stronger than Northern and Continental Europe and the UK. but also the latter, so Northern Europe and continental Europe, are somewhat bottoming out, one country a little bit more than the others. As you know, we can't go into country specifics, but overall, I think most of those markets now are at least bottoming out. On US infrastructure, yes, there are a lot of announcements. You know that this doesn't come in two minutes, so I don't expect anything major happening in the first half of those new announcements. But I think the US is also quick on their feet, quicker than other parts of the world. So I would envision that, you know, the tail end of 2025 or then going into 2026, we should see some real impact on infrastructure, both on plants, data centers, but also, you know, tunnels, bridges, roads. Okay. Thank you.

Thanks, Harry. Next in line is Brijesh Sinha from HSBC. Hi, Professor Brijesh. Hello.

Hi. Good afternoon. I have two as well. So the first one is on the U.S. So we have this potential tariffs coming in. If that is to be the case, do you, in a way, envisage having new capacities built in the U.S.? ? Is that a consideration, if so, for the color around it? And the second one is about the decarbonization. As you kind of pointed out, the carbon emission per ton of cement has kind of only slightly reduced this year, and you target with a slight reduction next year as well, or in 2025. Even Breivik is also coming in the mid-year. So what kind of thing, which is kind of... the progress and anything you would like to add on to kind of accelerate that cement decarbonization.

I'm not sure whether I got your first question. There was something here. The connection was not great. Can you just repeat maybe your first question for us? I got the second one on decarbonization, but on the first one, can you just repeat your point? It didn't come across unfortunately. Sure.

So in light of the potential tariffs, are you planning to build any new capacity in the U.S.? Okay.

Okay, so on the UX, you know, as you know, we've just increased our capacity with this setup initial. So I think that that plan has just come on screen last year. And you know that we have made some significant acquisitions also on the cement side. So giant addition for us in terms of capacity. But instead of building a new one, we are rejuvenating an existing capacity so for me that is quicker and with our good knowledge on how to do this brownfield stuff i think it's it's the quicker way and the more profitable way to roam you know that building new capacity in the us is also not an easy uh it's not an easy undertaking uh so for for now we have no immediate plans to build a new plant but we have got a couple of things in the pipeline that we could jumpstart if things go in the right direction. Decarbonization in Britain, as I was explaining, for us, it's not the majority of the market right now. And then with the reprioritization of the decarbonization agenda around the world, this will, for a couple of years, not be absolute mainstream. We know that, and we have no problem with that. But is there a segment of the market that we can absolutely cater to that is aggressive on decarbonization because people understand that climate change is there to be tackled at some point? We want to build out our leadership in this respect. But as I said earlier, Pradesh, we are doing this with a clear focus on financial returns and growth. So we don't just do this for the sake of sustainability or decarbonization. It will only be done if it creates superior financial returns.

Thank you, Pritesh. Next question comes from Gregor Kuglic from UBS.

Hi, Gregor. Gregor, hi. Hi. Good afternoon. So I've got two questions. The first one is on free cash flow. So last year you had another good year on free cash. I wanted to get your sense of what direction you think that may be heading. Do you expect it to grow? Do you expect it to be stable? Or whatever else you can share on that, please. And then I noticed some sort of new, maybe it's not new, maybe it's just new to me, but your commentary around sort of reconfiguring some of your older plants into ultra-low carbon setup, I think you were saying. Can you just sort of go into detail? What are you actually doing? Is this new? Is it material? Give us a little bit more, please. Thank you.

René will take the first. I'll do the second one. Okay, René. So regarding free cash flow, you know, now it's 2.169%. And the ambition for 2025 is obviously above that. So we are targeting to increase that number. It is, let's say, even with the increased capex of 100 million, what Dominik said in the guidance, we want to increase that number further.

Okay, thank you. And then today we are on the alpha low carbon target. You know, there are a couple of new players around globally that claim that they are inventing products with very low carbon footprint and celebrate this as breakthrough innovation. This can be homemade, the breakthrough innovation, and that's exactly what we are doing with those ultra-low carbon plants. These are new binders, new mixtures that carry a much lower carbon carbon footprints. They are not necessarily applicable in the total market, but they are catering to very special, highly profitable segments of the market. And those are the ones that we are targeting. The asset setup is simple. We have an old a kiln that has been running for decades in one of our German plants. And instead of closing it and writing it off, the team put their arms and hearts together and asked themselves, what can we do in order to build an ultra low carbon setup? So they will use that kiln to produce binders with lower temperature input. So it's rather 1,100 kiln. In degree Celsius, then 1,400, so you save energy, you have less CO2 emissions, and then the mix of the product is also significantly different, and that leads then to a significantly lower carbon footprint. And obviously, instead of writing off the asset base, you get a chance to give it a second life. That fits hand in glove into the strategy. That's the idea of Ternosyn being one example for this product.

Thank you very much.

Thanks, Gregor. Next question comes from Ross Harvey from Davie.

Hey, Ross. Hi, thanks, guys. I've got two questions. Firstly, I don't want to steal your thunder from the capital markets today, but you might just address the EBITDA margin target, the 20% to 22%. I'm particularly looking to figure out what... the impact of Transformation Accelerator is on that. Is it additive to that target or how do those two compare? And secondly, I thought, Dominic, your comment about the flat volumes in Q4 is very interesting, given that you combined that with another price over cost gain. Over the next two to three years, compared to the last two or three years, we're obviously hopeful for an increase in volumes. And I'm wondering if Is there a set of circumstances where you could continue the same degree of price over cost gains? Should we expect those to be more moderate? And is there any chance, hopefully not, that those would reverse? Just what impact would volumes increasing rather than decreasing make? Thanks.

Thanks, Ross, for your question. You are absolutely right. We would not love you to steal the thunder for the capital market day. So we'll stay fairly quiet on the EBITDA margin target. We don't want to go backwards on this, just to be clear. But let's wait and see what overall we can do. On the flat volumes in Q4, absolutely. I think there is a higher chance of volume increases down the road than there is a chance of another decline. Let's put it simple. And that's true globally. You know that we are market leader in Europe. You know that the decline from the peak was massive, probably one of the most pronounced one over the last century. And with that, I think we have a significant upside potential. What that does to price, of course, Rene, do you have an idea? But I think that is hard to predict.

Yeah, but the transformation accelerated, especially the Asset footprint rationalization in Europe obviously gives you cost benefits. Pricing, you know, with the CO2 decarbonization story with, let's say, certificates taken away by the EU, there will be probably pricing upsides. And then, you know, Europe has to be competitive on energy. And that has to change, in my view, in the future, which would give you relief also on cost. Although I'm not so pessimistic about this, even if volumes come back, which we have shown in Q4, flat volumes and 107 million or what price over cost positive. If volumes come back, I don't see why price over cost should not continue to be positive. So then you have a double whammy, which we said... If volumes come back, the leverage is big. So let's wait and see. But to look into two or three years' time is not so easy.

Thanks, Ross. Great. Looking forward to the same day.

Next question is from Abraham Omi from CIC. Hi, Abraham. Hi, Abraham.

Hi. Hello. Thank you for taking my question. I have two, if I may. The first one is about an overview on the German market. Do you think that the low point is reached? And my second question is also about the European market and basically the Ukrainian market, to be precise. Do you think that your position in Poland and Turkey give you some advantage to maybe to benefit from higher volumes in Ukraine?

Thank you for your questions. German market. I think we've seen some slowdown in volume decline. So I think overall, same as to what I said earlier, we are getting much closer to the turning point in some local, very local markets. We've seen some of the turning point already. So we are quite optimistic for the German market. For the European markets, first of all, as a citizen in Europe, I say that the human tragedy needs to come to an end before I think business You know, three years of human disaster in the Ukraine, and we at Hard About Materials certainly first of all hope that the human tragedy comes to an end. And then we start thinking about the business, and we are going to try to now aggressively think on business before the war has not even settled down. So that's just a set of priorities. You know that we've divested our direct Ukrainian business in 2019, so we are not currently present directly in the Ukrainian market. However, we are participating substantially in all of the surrounding markets, so Poland, Romania, Czech Republic, Turkey, we have very strong footprints over there. And if things settle down, if there is a rebuild of the Ukraine coming, then certainly you will have some at least secondary impact, positive impact from this. But as I said, early days, for us, this is not our focus right now, to be very honest. I want to see the human tragedy end first, and then we'll think about the business impact.

Many thanks.

Okay. Last question comes from Tobias Werner from Stiflo.

Hi, thanks for taking the questions. Number one, just a fact-finding question. You mentioned the massive drop from the peak. Maybe give us a sense. I have my own estimations, but it would be good to hear what actually the total volume decline was from peak to drop from pre-Ukraine to today. The second question, I've noted in a news release or press release in mid-January that you launched a sponsored ADR and was wondering what you see as the benefits of this and is a dual listing something you would look at and what you make of a dual listing eventually?

Thanks, Tobias. On the volume drop, René is checking the figures. You know, I have my own figures, but René, do you have an indication for Tobias on the volume drop, maybe, you know, from the global view, but then also, you know, I think you're asking Europe also, yeah?

Yeah, also, Tobias, from a cement perspective, you can say we've probably lost, I would say, 15 to 20 million tons. And if you put across the globe, it's not only Europe, and in aggregates as well, we are probably 30 million tons below the peak. And if you put a certain margin on this, you come to very high three-digit million number volume margin losses we have incurred the last few years. So that's probably what I would say, very high three-digit million numbers. If you look only in 2024, we said, what is it, 350 million euro volume impact, and that was not the worst year we had. So it's probably close to a billion euro.

Yeah, no, I've got the numbers there on the RCO level, but what I was trying to get is just a percentage drop. at the top line across all products from a volume perspective, if that was possible, please.

Yeah, but I don't have it in my hand. Check with Oza and then we will come back to that.

But as I indicated, I think in some markets we are really significantly off the piece, but Oza will come back with you on the details. And maybe, Robert, do you want to say something on the ADR program?

Yeah, happy to. So first of all, we try to achieve a little bit better transparency in our U.S. investor base on the ADR side, address some further buckets, as we see as an important market. And last but not least, we already had a non-sponsored program. So it's just a follow-up program that allows us to have a little bit better insights into the ADR ownership, which is a rather small program today. Okay, on that note...

Yeah, I just wanted to understand what you think about the dual listing as well.

I mean, for now, that's not related to the listing. It is just to get better insight. It doesn't come with additional transparency requirements. So it is just a step to get a little bit better insights. So there is no requirements to do a further follow-up on that program.

And Tobias, I think in the end, you know, we always said we know that all of your eyes and our eyes are on the value crystallization around US. We've given you some better transparency around margin development, around the aggregate performance. We now started the ADR program that also gives a little bit more accessibility to some of our U.S. investors. I think it's one dot here, one dot there to be added in order to try to crystallize also a value and offer increased transparency around what we are doing with our U.S. and how we are continuously improving our U.S. footprint and how attractive the U.S. footprint is also versus the competition. So I think in that respect, that's a little bit That's one data dot in that puzzle. Excellent.

Thank you very much. Thank you. I think that's it for now. We don't have any more questions online. Just a reminder that we are on the road. René is in London. As of tomorrow, we will be traveling to the U.S., both East Coast and West Coast. And to your last point, Tobias, we will also be seeing some new investors. maybe also triggered by the ADR program. And on March 18th, Dominic will attend the BNP conference in London. So we'll be quite intensively marketing in the next couple of weeks. And we look forward to seeing you all in Breivik. So the invitation should go out in the next couple of days, and we look forward to seeing you there. With that, Thank you very much for dialing in.

Thanks for your participation, guys. Bye-bye. All the best. Bye-bye. Ladies and gentlemen, the conference is now concluded and you may disconnect. Thank you for choosing Coruscore and thank you for participating in the conference. Goodbye.