Vicat Sa Unsp/Adr

Welcome to the VICAT Q3 2025 Trading Update Conference Call. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answers session, all the participants are able to ask questions. Now I will hand the conference over to Hugh Chomel, Deputy CEO and Group CFO, and Pierre Pedrosa, Head of Investor Relations. Please go ahead.

Good afternoon, ladies and gentlemen. I am Hugues Chomard, Deputy CEO and Chief Financial Officer of the Vika Group. With me today is Pierre Pedroza, Head of Investor Relations. I will now be presenting to you third quarter 2025 sales figures. Please have a look at slide two where you can read our disclaimer regarding the forward looking statements that this presentation may contain. Let's begin with the key takeaway of the third quarter of 2025 on slide 3. First, organic sales growth reached plus 4.9%, reflecting solid momentum across most of the regions, particularly in Europe, where recovery continues in Switzerland and in the Mediterranean, driven by Egypt and Turkey. This performance brings the 9-month organic sales growth to plus 1.8% despite the slowdown in the USA, India and Africa. Based on this performance, we are confirming our full year 2025 guidance on organic growth in sales and EBITDA growth of plus 2-5% like for like. We also adjusted our 2025 leverage objective to above 1.3 times versus the previous 1.3 times, reflecting the stronger than expected FX impact and certain one-off item in the second half. This does not change our 2027 leverage objective of below 1 time. Finally, or Viag CCS project has been selected by the European Innovation Fund. This decision is an important first step in the financing of this major decarbonization project for all Montaglio plants in France. Overall, the group continues to deliver solid organic growth, confirms its profitability outlook and maintains strict discipline despite a less favorable currency environment. Turning now to a geographical breakdown for the third quarter on slide 4. Group sales reached 992 million euros, up 4.9% organic, confirming an acceleration versus the first half. France, which accounts for 29% of group sales, is showing clear signs of volume stabilization. Cement volumes have leveled off at a low point, which is in line with our early year expectations. In Europe, growth accelerated to 7.9% like for life, driven by Switzerland, while the market is clearly recovering. Demand for low-carbon progressive range remains strong, with notable project wins in the industrial space. Infrastructure is also supporting demand. In the Americas, activity was softer, particularly in the United States, where both the residential and non-residential markets remain affected by high mortgage rates and limited visibility. Having said that, there are some reasons to be optimistic for the next year. As the US economy remains robust, the lower interest rate environment could trigger a residential recovery, and the Bayes effect will be positive in California. Brazil delivered solid growth in both prices and volumes, supported by the integration of real mix, which strengthen our vertical integration model. In Asia, the trend turned positive, with India posting plus 6.5% organic growth, thanks to improving volumes in Maharashtra, where our expanded rail capacity to Mumbai is fully operational. Volumes remain subdued in the southern states. The GST cut in September is expected to support demand going forward by reducing prices. In the Mediterranean region, once again stood out. It now represents 16% of group sales in the third quarter, an increase of 3 points year on year. Organic growth reached 43%, driven by a strong recovery in Turkey, where the government is pushing public works and reconstruction following the 2023 earthquake. Export momentum continues in Egypt, now coupled with a rebound in domestic demand. It should be a very strong year for Egyptian operations. Finally, in Africa, the Nucleon 6 in Senegal is ramping up as planned, already generating its first cost efficiencies. Aggregate activity has also accelerated sharply with the restart of major public works. Overall, this quarter once again confirms the strength of our balanced geographical model. Robust growth in Europe and our emerging markets more than offset the temporary softness in the US. This enables Wicca to sustain positive momentum despite a challenging foreign exchange environment. If we look at the nine-month Bridge on slide 5. Year-to-date organic growth stands at plus 1.8%, confirming the positive price momentum across all main markets. Price contributed plus 80 million euros with resilient prices in developed markets and firm pricing in emerging ones, notably in Egypt, Turkey and Brazil. The volume effect at minus 28 million euros mainly reflect a softer start of the year in France and India, both of which have now stabilized or recovered. The volume effect was positive in Q3 at plus 13 million euros. Foreign exchange impact was again the main drag at minus 147 million euros, driven by the depreciation of several emerging market currencies, particularly Egyptian pound and the Indian rupee against the euro, and, since Q3, the weakness of the US dollar against euro. Scope effect as plus 57 million euro reflect the integration of Cermix since the beginning of the year and to a lower extent RealMix in Brazil that has been consolidated as of September 1. Overall, 9-month sales came in at 2.88 billion, slightly down on a reported basis, but showing clear underlying business resilience and continued pricing discipline across the group. Let's now deep dive into our foreign exchange exposure on slide 6. The currency exposure of a group is well diversified, but as you can see, around 70% of our EBITDA and close to 70% of our revenues are generated in hard currencies. . However, a large part comes from the market where currencies have experienced higher volatility, particularly the Turkish lira with the country in hyperinflation and the Egyptian pound. Since Q3, the US dollar also weakened significantly against the euro. It is important to note that all operations are conducted locally, we produce and sell in the same currency so our main exposure is not transactional but rather linked to the conversion effect when consolidating resource only monetary flows both operational and financial are hedged and these are primarily related to fuel purchases that are made in us dollars while our hedging strategy helps move short-term volatility, it does not eliminate currency exposure entirely as we remain exposed to conversion risk. On pricing, our approach remains consistent. We aim to pass through inflation, including imported inflation, in all of our markets. This disciplined strategy allows us to preserve margin and maintain confidence even in the context of significant FX headwinds. Let's now turn to France on slide 7, where we are seeing clear signs of stabilization. As expected, cement volumes in France reach their low point in Q3, after continued deceleration in the rate of volume decrease over the last seven quarters. Looking ahead, we expect a slight sequential recovery in cement volumes throughout 26 supported by lower interest rates, environment and underlying residential needs in France. The TELT Lyon-Turin will be with the first boring machine now operational and the growing demand for low carbon cement solutions should also support the volume recovery next year. Overhaul France is gradually bottoming out, setting the stage for a more positive trend from 2026 onwards. On slide eight, on the energy front, we've also taken an important step forward. PICA has signed a long-term low carbon electricity supply contract with EDF, known as a Nuclear Production Allocation Contract, CAPM, which will replace the AREN framework in 2026. This 15 years agreement provide us with enhanced price visibility, with around 70% of our projected electricity consumption already secured under this new mechanism. The resulting cost increase will be reflected in our price hikes. There will be an upfront down payment in the second half of 2025 and in 2026, which will temporarily wait on free cash flow. that it will secure our energy costs and contribute to carbon reduction objectives in the long term. Turning now to slide 9, to Senegal, where we started our new plant early June. Since then, I am pleased to report that the industrial ramp-up is progressing as planned. As shown at the bottom of the slide, the output is progressing and the kiln is expected to reach nominal capacity in the coming month. Kiln 6 is replacing both clinker imports, which previously averaged 3 to 400,000 tons per year, and production from the older kilns 3 and 4, which have now been shut down. This modernization allows us to significantly improve our cost base with targeted savings of around €20 per tonne in the medium term. New production line is already a bit more attractive. In short, it is a major step forward for Vika Senegal and a clear example of how our investments are driving both performance and sustainability. Let me now move to our balance sheet and leverage trajectory on slide 10. As you can see, the leveraging remains a core priority for the group. Over the past three years, we have reduced our leverage ratio significantly from 2.75 times in 2022 to 1.58 times at the end of 2024, thanks to strong cash generation and disciplined capital allocation. For 2025, with the controlled working capital requirement and capex spending in line with our targets, we are now expecting our leverage ratio to end the year above 1.3 times compared to our previous target of 1.3. This adjustment reflects the impact of adverse currency movements on both EBITDA and free cash flow, as well as a few non-recurring items in the second half of the year. It is important to note that these effects remain limited and do not alter our long-term trajectory. Our commitment towards a leverage of below 1 by 2027 is fully maintained. To conclude on slide 11, let me summarize our guidance for 2025. Our full-year P&L objective remains unchanged. We continue to expect like-for-like sales growth. For EBITDA, we confirm our target of plus 2 to 5% growth at constant scope and exchange rates. Net capital expenditure should remain at around 280 million euros consistent with our investment plan and our selective approach to growth projects. In short, the fundamentals of our outlooks are intact, continued profitable growth, strict capital discipline, and a clear deleveraging trajectory. Here on slide 12, we've highlighted the three strategic priorities that are guiding VICA's actions over the next few years. First, we are committed to maintaining a BDR margin of at least 20% over the 2025-2027 period. Second, we are focused on continuing our deleveraging trajectory. This will provide us with greater flexibility to navigate economic cycles and pursue opportunities. Third, we are accelerating our climate roadmap, investing in decarbonization, developing low carbon products, and embedding sustainability across all geographies and business lines. These three pillars, profitability, financial discipline, and sustainability, define our roadmap for profitable and responsible growth. Concluding on slide 13, Catalysts of the coming years will be supporting VK's growth with existing industrial assets. First, in Senegal, the U-Kern 6 is a major cost efficiency driver as it replaces clinker imports and allows us to retire older higher cost capacity. Its contribution has started in 2025 and will ramp up in 26 and 27. Second, in France and the United States, we anticipate a recovery in residential construction volumes starting from historically low levels. Third, the TELT is Europe's largest civil engineering project. It is a multi-year driver for cement and aggregate businesses with volume visibility extending well beyond 2030. It should represent between 5 to 10% of VICA salmon volumes in France over the coming years. Finally, the Mediterranean region, particularly Egypt and Turkey, continues to offer medium-term compelling opportunities. Together, these catalysts position VICA for resilient and balanced growth, aligned with long-term industrial and environmental strategies. This concludes my presentation. Maria, can we move to questions, please?

Kindly note that we will take audio questions from analysts only. You can request to speak via the blue hand icon. Investors participants can submit questions via the chat box below the player. The next question comes from Ibrahim Homani from CIC. Please unmute your microphone.