Earnings Call: H2 2020

Mar 25, 2021

Annual report

Afternoon. This is the CarScope conference operator. Welcome, and thank you for joining the Butte Unicham Full Year 2020 Results Conference Call. As a reminder, all participants are in listen only mode. After the presentation, there will be an opportunity to ask Questions. Star 0 on the telephone. At this time, I would like to turn the conference over to Mr. Pietro Buzzi, Managing Director of Buti Unitem. Mr. Buti, you have the floor. Thank you. Thank you. Good afternoon to everyone. I'm here together with Patrick Klein, our group treasurer and also Lorenzo Carlo in the latter that will be Part of the conference together with me and anyway available to help me for any kind of question that If you may raise, so we published 2 hours ago or 1 hour ago The press release on our approval of the full year financial statements, full results for 2020. Some of the sales already disclosed previously at the beginning of February, and particularly net sales and net debt and volume volume and prices trends or in general the underlying operating assumption. And We already envisaged, let's say, we gave guidance for the full year results, at least the operating cash flow level, which eventually was expected, I mean, was achieved. We closed actually with Slightly better in terms of recurring EBITDA, but the reported EBITDA It is on track, that's what we mentioned already in February, which is The EUR 718,000,000 a very good figure, a figure that we absolutely, we did not expect, at least Not last year at the same time when there was a lot of uncertainty risk coming up. So we cannot be, I think more satisfied that in terms of the full outcome for the of the outcome for the full year. This is also the strong results operating and also the net income are setting Quite a high bar quite threshold for the current, let's say, 2021. And Even if it may sound somehow disappointing, the message that we gave in the outlook, It should also be seen, in our opinion, to be considered with the exceptionally good results that we achieved in 2020 that are Really, really difficult, let's say, to overcome. Nothing is impossible, but really difficult to do better in an environment that is anyway showing some quite significant rebound in industry, in industry inflation. So I'd like to guide you through as quickly as possible The results and then turn back to you the floor for the Q and A session. The results were driven not so much by volumes because if you look at the volumes, the trend, We are basically flat at the group level versus last year with majority of the country that are showing at slightly negative sign. The only positive sign or the only favorable variance is that we had Most significant one was in the U. S, where the market performed really very well also in the last quarter. So with a 5% improvement versus last year. Germany, quite stable. Actually, The domestic market was up versus last year, but we suffer from lower Oil cement shipment are going above the export sale that offset, let's say, partially the Good performance of the domestic market. Overall, anyway, we closed with no less than last year in terms of volume. Other markets or slightly all of them, it feels like the negative, minus 3, minus 4. Point decline is there, a positive variance in Russia, a strong recovery, let's say, in the second half of the year, driven by, I would say, a good performance in terms of market share from our companies and also stronger, let's say, demand coming from public works. Also in Russia, we suffer from Lower oil cement shipments that they do represent in Russia a significant portion of our sales. But nevertheless, The total cement sales of grade and oil well closed the year above 2019, slightly up, 2% up. 2 countries with strong interest, Mexico and Brazil, we are going the opposite way. So they were the only not the only, but the 2 countries where instead The flow, the shipments trend was very strong. Mexico performed 12% after versus last year in terms of cement sales and Brazil 9% plus, let's say, percent up. But these figures are reflected only in the equity earnings, let's say, line of the interest payments. So not a big help coming from volumes. More help, let's say, more The contribution coming from the trial trend, which was positive, let's say, favorable across basically the entire scope of consolidation with a lifting local currency. We had prices improving Basically everywhere with the only exception of Ukraine, where the local currency pricing was Flat or slightly negative versus last year due to some pressures, some, It's a volume pressure due to imports coming into the country from basically from the Black Sea. Also, while looking at the Joint ventures in Mexico was basically flat in pricing. U. S. Was basically flat or slightly better, but not much. So In the case of U. S, yes, the dollar has been the major driver. And for the rest, as I said, Nice, let's say, price improvements in Italy, Germany. Also, Poland had a significant price improvement versus last year and Czech Republic to improving. On the, let's say, results and revenues. Quite significant impact was can be referred to the Trends of the ForEx, in particular, are something that for us are quite That we do represent, let's say, a significant portion of our business, like the U. S. And Russia. They both showed a negative variance in the exchange rate, not so much in the U. S. Because whenever We had a minus 2% for the full year, much more significant in Russia. Iberubo lost about 40% during 2020. Other major, let's say, devaluation of Currency is against the euro, currencies that have an impact on our books are can be referred to Mexico with a similar devaluation as Russia at about 14% And major one, unfortunately, in Brazil, minus 34 So a big loss for the Brazilian real during 2020. Net sales that we have already discussed in February, We are flat versus last year, like for like, plus almost plus 2%, ForEx impact, minus €28,000,000 in Russia, minus €26,000,000 In the United States, overall, it's EUR 70,000,000 almost EUR 70,000,000, EUR 69,000,000 ForEx negative The impact on sales for the full year. And this brings to the flat basically, the flat The total turnover, the total turnover. You have countries that in Europe are showing a limited improvement. Again, we're talking specifically the U. S. And Germany. Anywhere else, either you have a decline or a flat almost Let's say, let's say, level versus 2019. The 2 joint ventures performed very well in local currency. So you have a plus 10% turnover in Mexico, almost 40% up the currency turnover for Brazil, which was coming from a very low levels clearly in the previous year. But unfortunately, Brazil It's almost flat after translation of their financial statement versus last year. Meanwhile, Mexico Is anyway, let's say, well, it's not improving, but it's getting very close to the same level as last year in euro denominated values, let's say. Moving to the operating cash flow by country. Here, the picture is quite different And it can be explained basically by the trend, by the favorable, Let's say, tailwind that we experienced during the year on the cost, Which in part was external, let's say, mainly external, and particularly the decline in the cost of energy inputs and in part was obviously also coming from, let's say, close And cost management during the year, particularly when we realized at the beginning of the Q2 that things may get worse. And we had a number, let's say, of Projects of, let's say, focus particularly on some of the fixed costs like maintenance and decided where and when to maybe align this project and adjust this project to The new scenario and the new environment. So overall, there are very few that are performed In terms of operating cash flow, worse than last year. And if they do, like, for example, in Russia, It's more a matter of foreign exchange than underlying, let's say, local currency trend. We do have a decline in Italy, which is quite significant, if you wish, but this is driven by 2 regions. One that Italy was the only country unable to work and to produce and sell during the month of April and basically, yes, between March April and started back into operation going back into operation in the beginning of May, but of course, slowly, slowly coming up after the lockdown. And second, because Italy last year had within its figures Intercompany sales was suited to life, which did not occur this year. So actually, if you To clean the data, I mean, you adjusted for the Missing, let's say, Q2 sales, our EBITDA is actually better than last year Because the recovery during the second half was quite good and volumes lost were partly recovered, prices did well and also the cost, like in the other countries, were more favorable than last year. Strong results, I'd say, in the U. S, clearly, partly affected by the exchange rate. But like for like, we have a 12% improvement in EBITDA in the U. S. Versus last year, Even stronger in a percentage, if a proportion, the performance of Germany, plus €21,000,000 which means 20% up versus last year. Stable, slightly negative, let's say, the Benelux, Laximbun and the Netherlands with minus 4. And for the rest, again, countries that did not perform particularly well in terms of volumes like Czech Republic, Poland In Ukraine, anyway able to improve some The results versus last year. Russia, good performance in local currency. As I said, fortunately, translating into somewhat lower EBITDA after the considering also the ruble devaluation. The joint ventures did not in terms of operating cash flow. In this case, we had in Mexico an improvement also in Europe. So this is quite a significant achievement. And same thing for Brazil, which is showing a stronger, let's say, Operating cash flow in euro also, again, after such a significant devaluation, as we mentioned There are some non recurring items in the EUR 181,000,000 figure. They refer to Italy for about EUR 3,600,000. So let's say the recurring EBITDA of Italy is actually $3,600,000 higher or greater. Small one in Germany, dollars 0.4 And no, sorry. Sorry, the Italian value is 1.6 negative, it's not 3.6. And Germany is 0 this year. And instead, we have a negative in Russia due to a legal dispute that is Still open but was anyway accounted for as a negative result for EUR 2,600,000. So Russia is actually affected of €6,000,000,000 in its EBITDA and slightly better the recurring figures. Looking at the EBITDA bridge, just to summarize what I mentioned so far, let's say, The volume impact the negative volume impact is about EUR 9,000,000. Price effect is that is, if I read correctly, let me second, 52, We had a EUR 45,000,000 improvement coming from the deliverable cost. So the so called mainly the energy input and mainly fuel actually. Power was also favorable. Logistics, you take transportation, was also Favorable, but the main advantage came from the fuel cost last year. Fixed cost, Stable versus last year, basically. It's mainly due to the what I mentioned before in terms of maintenance programs, which were somewhat delayed or anyway kept under strict, let's say, control. And Negative variance of about €30,000,000 on other items that include in particularly the inventory changes. So the fact that anyway also due to the stronger shipping season in the last quarter, Inventory declined towards the end of the year versus the level of year end, let's say, 2019. And this affected, again, EBITDA by approximately EUR 30,000,000 CO2 costs that we did not have, basically, It's still much less in proportion due to the fact that it's still, again, using, let's say, the intercompany reserves. We prefer We have to purchase outside the country that we are in the need or to in a short position, let's say, for CO2, Pursue their rights outside and the additional cost The charge, let's say, to the 2020 impact statement versus last year is about EUR 13,000,000. And then the negative impact is coming from ForEx, which is overall on the EBITDA, EUR 21,000,000. This should lead you to the SEK 781 versus the SEK 728 achieved in 2019. Moving to the Just to give you an idea, looking at the cement business, the energy cost impact, the advantage that We enjoyed this year, and that unfortunately is already moving, let's say, in a different way. In 2021, it's quite major and it's quite significant because The total energy deal, so fuel and power for last year was €95,000,000 representing approximately 14% of our revenues. The previous year, we had 3.57%, representing almost 17% of revenues. This is partly due to the clearly the volume and price trend, but mainly to the lower input costs. Power and between the two, as I mentioned before, the advantage It's mostly coming from the trend of power cost, strongly declining. And energy cost also is not as much. Going to the lower part of the income statement, this was also quite It's advantageous versus last year because after slightly lower, let's say, depreciation and amortization, We have an improvement in operating profit, in EBIT that is that amounts to EUR 56,000,000 versus an improvement of EUR 50 So EUR 3,000,000 more, let's say, in the EBITDA level. The profitability, so the return, let's say, on return on sales It has achieved 16.3% versus 14.5% last year. Strong also contribution in interest taking versus last year in the equity earnings from associates. This is related to the good performance, very good performance, as I mentioned before, of Mexico, Brazil and also other I think that we are not consolidating the same line by line, less important, but still I think particularly This is due to the big, let's say, disposal, Again, on disposal realized by our Saucit Kosmos cement. This was already included in the semi annual Results because the closing of the transaction, of course, in March. And we had a significant gain clearly into this line, which totals You're right. I mean, 105, yes, because of course, yes. Well, yes, before tax because it's a partnership. So anyway, a big portion of the $176,000,000 total It's associated with the, let's call it, extraordinary disposal of our associates, the Kosmos Cement. We were also able to somehow bring down almost the net finance cost. Clearly, yes, we've been the site. I mean, we have both cash, let's call it, Expenses, interest expense or interest income and other items that are not It does not represent either a cash outflow or inflow like ForEx gains or losses, Derivative valuation, etcetera. So we were favorable, let's say, mainly by the trend in these specific items that are not they don't translate into an actual cash Inflow or outflow, in particularly, the ForEx gain. But anyway, at the end, We had a benefit in the income statement, and we achieved almost 0, let's say, net finance cost for the full year. Profit before tax around EUR 700,000,000. Income tax expense, the tax rate is very similar to the one of the previous year, around 20%. And net profit, clearly very high, 560,000,000 to a good extent coming from an extraordinary Not for the gains, but also to also the consequence or an outcome of strong operating performance that we commented upon just recently. A few focus on I mean, yes, brief focus on the cash flow statement. The cash generated on our hands is EUR 744,000,000 versus EUR 6.90,000,000 last year. So almost 2% up in terms of Percentage of sales, let's say. Then we have higher income tax paid also Due to the higher results, but in part, this is also coming from potentially not necessarily matching, let's say, The accrual the accrued capital expense for the full year and interest paid similar to last year, only EUR 2,000,000 less. So in terms of net cash, we have been investing activities. We go down I mean, reduced the amount to €589,000,000 versus €575,000,000 last year. Then the impact of the full consolidated cash flow statement on the net financial position is getting very close to the to last year. So with last year, we improved the net financial position by the 3.22, and this year, we improved by 3.26. But clearly, within the outflow of this year 2020, we have for much higher dividend payments, EUR 32,000,000 the ordinary dividend last year, but also the EUR 144,000,000 included in the net financial position and paid shortly after at the end of 2020. We have also much higher dividend received. So coming to a large extent from the again, from the Kosmos gain on disposal. We had a little less capital expenditure. Capital expenditure, We have also reviewed very promptly at the beginning of the pandemic. So we decided to, let's say, slow down and possibly postpone Some of the CapEx projects because we didn't know exactly what was going to happen. And this translated into some delay. And at the end of the year, a decline in total capital expenditure for they represent EUR 228,000,000 outflow this year, Close to $257,000,000 last year. And other Major items are not clearly worth mentioning. Yes. And as I said, the improvement after an overall dividend payment of €180,000,000, the The improvement in the net financial position is still a net EUR 26,000,000, so very good. I mean, they for sure, very good performance. What else? I think we We'll cover most of the or the most significant items. And we can yes, I think we can move to the Q and A question session, so We can devote more time to that and focus maybe on the subject that are more of interest to you. Call. Excuse me, this is the COSCO conference operator. We will now begin the question and answer session. From the question The first question is from Paul Roger of Exane BNP Paribas. Please go ahead. Yes. Good afternoon, Pietro. Good afternoon, everybody. Yes, I've got two questions to start with. The first one is on your Yes. Clearly, a lot of other people have given an outlook and most of them are actually really quite bullish, particularly with regard to prices. And When we look at the commentary that applies to a lot of your regions, Mississippi, Northeast, Texas. And I guess the question is given that read across out of expect to use A bit more upbeat. So is there something company specific we need to be aware of or are you seeing a less positive pricing outlook? Or is it really just a case of you being conservative early in the year? So that's the first question. And the second question is on SEER 2. You mentioned sustainability CapEx. How much is that likely to be? And are you going to update your CO2 targets beyond 2020 Yes, sure. Well, I think that there are probably in the U. S. Potentially more opportunities maybe than risk. You're right. But these opportunities, at least these are our beliefs and it's partly company related, like you mentioned. They are coming on more on the volume side than on the price side. Or if you want to put it differently, it will also translate into higher prices. Anyway, we will need them, let's say, in a sense to offset the cost. So in our budget, we could be somewhat conservative on the volumes, But I think we are quite realistic on the relationship between prices and costs. And yes, you're right. We have some regions that are more complicated maybe than other than office is 1. The Houston market is another one and other, yes, company, maybe company specific that I don't think it's the case to go into the detail right now, but related to some Yes, it's for the customer relationship that are helping us on this side on the volume side, but maybe I would say, this is our view right now. I think that We can give it, but not necessarily as usual, Good one for the full year. So I think we could maybe reassess Somewhat our view by the end of the semester. We do maybe also this is important to mention, maybe The some of the competitors are always talking about, let's say, like for like improvement. Meanwhile, We are, let's say, assessing a likely outcome for the U. S. Business already translating to Europe. And there is probably, at least, this is what your budget is, there's probably going to be some foreign negative unfavorable, let's say, currency impact. So These 3, let's call it, combined prices cost for volume pricing cost and negative Negative likely negative for us, for instance, impact are, let's say, summarize I'll just summarize to something that we believe is not going to be, unfortunately, as good as 2020. On the second point, no, I mean, this is what was just a way to recall that Like any other companies, we are involved in a process that is very important that it will be long lasting Because it's not something that you can solve very quickly, let's say, in this process to achieve, let's call it, the famous carbon neutrality by 2,050. And again, We're following this process, I think, in the right way, In close contact and in close cooperation with the major, let's say, industry association, This industry association, okay, in the case of Sanddiro, they already come up with some road map, the Very much involved into that directly with our people, with also with our opinion because it's not necessarily The same opinion of the other competitors. And this in terms of CapEx, does not I mean, the message that we wanted to give in this phrase is that we are involved and we are doing something and we will do something more, let's say, going forward. It's not really changing the overall, let's say, CapEx level for this year, which is going to be greater than last year, but not necessarily because of this region. I mean, it's a park, But it's not, let's say, the main reason why CapEx Going up, perhaps going up somewhat because last year, we postponed some of the projects and because we have some, Let's call it special projects targeted to, yes, efficiency, which also means it's a 0 to reduction and limited to a limited extent also to, let's say, capacity improvement. And within that, we will clearly tax focus and evaluate, let's say, the CapEx spending More and more in the light of the, let's call it, CO2 neutrality that we are targeting in the long run. And sorry, just to follow-up on the specific targets for CO2 intensity. I believe you're still targeting 20 22. All the other peers are tied to 2,030. Will that be something you're looking to revise sometime soon? Yes, yes, we are not in a rush. The GCCA roadmap is being discussed Recently, still not fully agreed upon by the associates, let's say, by the members. Yes. The answer is yes. We will. It's one of our, let's say, We wish goals for this year to come up with something that is plausible, okay, and that we will extend our view, our objectives in the longer run. And again, it's not something that anyway you sold. I mean, you can make the announcement, but this is not in In our opinion, it's not really the point. The point is to work in the direction, to work In the way that we are used to, so making, let's say, the right steps in the right direction. Maybe, okay, I don't know much really, but maybe some of the investor prefer Communication versus actual results or how could I say? We tend to believe that, that is more important to focus on what we can do and what we can achieve and then communicate rather than communicate 1st and then maybe not achieving. But anyway, don't be afraid. We will come up Not tomorrow, but yes, in less than one year time. Understood. Thank you very much for taking my questions. You're welcome. The next question is from Brijesh Sheah of HSBC. You have the floor. Thank you. So I have 2 as well. So the first one is on cement pricing. Could you please talk about the markets where you have kind of put in price rises beginning of January or you're planning from 1st April? And the second one is on the balance sheet position. Now you have a strong cash close to 2020. I agree that you have paid $144,000,000 of dividend after that, but still you have lot of firepower left in it. Do you sense that or are you kind of looking to Brazil is one area where you can probably potentially Enhance your position sooner than your road map suggest of kind of 'twenty five, 'twenty six. So anything you're planning to raise that Okay. Well, on cement pricing, well, in general, again, this year, The outlook is more positive than negative. This is also partly obviously, partly driven from the cost inflation. These 2 prices are going up very steeply. I mean, we started the year, I think, at Puro Pitalico Correccio, even less, and we are now at €40 per ton. So this is also driving on one side, selling prices on the other, power prices. And the demand It's not really exciting, but It's either stable or maybe slightly better than last year in general. So this should allow a favorable price variance, quite widespread with maybe pure exception in the market That are after or where you have or you may have more input pressure, I would say that We're not, let's say, pessimistic on the price trend for the full year. I think it's much and versus the cost inflation that is showing, we started to show some clear, Let's say, the election already in the last few months of 2020. On Brazil, well, we have one commitment that is coming up soon. We are in the process of receiving, let's say, the green light from the antitrust authority on the Sierra assets acquisition, which will be done by our associates that actually financed directly from the other companies. So this will be Clearly, use of cash obviously is not in the range. We will see in the range of €200,000,000 anyway to complete the acquisition that should come, I think, if not by the end of April, maybe the beginning of May, But not later. We by the way, we received basically the antitrust approval, but There is a 30 days period of public, let's call it, comments that can be made. So So in principle, the antitrust is nothing against it for the public comments period to expire. Obviously, in Brazil, the other, let's say, commitment that we have refers to the existing 50% so to the remaining 50% of the existing associates before the acquisition of the CRH assets. And there, I don't think there will be an acceleration. Probably, it's not very likely. So The put in call option scheme, I think the first period when the seller Can exercise their its good option will be in 2025. And I don't see it very likely to happen This did happen earlier. It may, but particularly if the performance The business is doing well, it's doing better since also the price of the option is linked to the performance of the business In the perspective, let's say, of improvement, I do not expect, let's say, to our partner to identify the option earlier. Understood. Thank you very much. You're welcome. The next question is from Daijim Hikawa of JPMorgan. You have the floor. Hi, thank you for taking my questions. Just a couple on my side. Given the strong balance sheet with the impressive reduction this year in net debt, Can you sort of tell us what are the plans and whether you would consider sort of any further buybacks? And secondly, back on the topic of carbon, If perhaps I could just ask 2 questions here, which is one related to Europe and how you see the carbon border adjustment mechanism coming in place And what you anticipate that would do to sort of the free allocations of credits? And then secondly, moving to the U. S, what are your views on sort of the potential of carbon tax there. Thank you. Okay. So the first one is Well, we are submitting, let's say, to the AGM a confirmation, let's The renewal of the buyback by the same basically by the same quantity. Let's see quantity doesn't mean that we will actually execute that, but it's a flexibility that we do have, let's say, in our power. So this could be open, could be exercised by the book in theory as as close as possible to the approval by the anyway, If you look at the trend of the share beside what it is the absolute value, Let's say, which can be, of course, anyone can have a different opinion on that. Fortunately, I mean, the performance of the share has been quite favorable. So I think the investor Should be disappointed about that. It's to be better, clearly, but We are right now, I think, back again to what was or has been almost the maximum value average by the shares in the past. In terms of lower indebtedness, This is a good problem to have in a sense Because we need to have in mind going a little back to what was mentioned before on CapEx for CO2 reduction or improvement, let's say, in terms of or Roadmap towards carbon neutrality, it is true that this is not coming, let's say, soon. It's not coming in 2, 3 years. But it is clear that any inert net for the industry that wants to really achieve a carbon neutrality that requires some kind of carbon capture. And carbon capture means, Okay. It depends on the technology. It depends on what is going to be available maybe in 4, 5 years from now. But it's something that will be very, Very expensive, almost like almost not exactly, but almost like adding a new plant to your existing one to be able to capture and especially somehow transport also this year too because it is true that we are not directly involved in the certification, but we don't know how the different fossil countries, etcetera, will Deal with that, how much of the SIF-two that you produce, you would also have to will you also have to bear the cost of transport and storage, to what extent, etcetera. So to have some kind of, let's say, provision or Reserve of funds available for this upcoming, let's say, necessity requirement is not It's not a bad thing. On the carbon border adjustment mechanism, well, we will see how it's going to shave out. We were hoping there are some there were some disclosure or, let's say, press releases by the European Union. Apparently, yes, this is something that will come. Exactly how and when is not clear. It could be coupled with the elimination of the free allocation, which again is not necessarily better than will not be necessarily better off versus today. There is really No fee allocation anymore. So the fact is that in some places that are more, let's say, protected, particularly in Central Europe or where you're far from the shore, from the In port terminals, the current volume adjustment mechanism is not so necessary, would not be so necessary. And it's that when it's where it's more necessary to couple that with the elimination of free allowances could be, again, Worse than the medicine, but we will see. On the U. S. At the moment, No. I mean, in the market and in the states where we operate, there is no open discussion On the carbon tax at the federal level, I didn't I did not hear about it yet, at least. That is true that this administration will address This subject in a more, let's say, active way or in a direction a different direction versus Previous administration, so we may expect some change. I think in the U. S, the main change is Something that could already, I don't say, solve the problem, but improve quite a bit the carbon intensity Since if there are the introduction, let's say, in the norm or the some kind of Possibilities, again, set by the norm to use lower clinker cement versus what we are using today. So if the U. S. Would accept, let's say, by norm in all kind of projects and construction sites, including, let's say, infrastructure, etcetera, Cement, which is, for example, 80% clinker versus 90% today, This would be represent already a big step before the carbon pit that Anywhere else in the world, cement producers are already doing. Great. Thank you. Yes. The next question is from Yafin Tewari of Unseen Research. You have the floor. Yes. So a couple of questions. I think you gave a precise guidance about your CapEx For 2021, I think you just said that it could be above 2020. Do you have another magnitude? Then a second question on the CapEx. You mean total CapEx spending? Total CapEx spending for 2021. Yes, yes, okay. And then the second question is that you mentioned that in some markets, you might have some pricing pressure because of import. But we have seen that the freight rates actually have increased quite dramatically over the past couple of years. Do you think that it could be It could mean that your guidance on pricing is conservative, price rates if the price rate remain high. And then another question just on the magnitude of the price increase. Understand that in the U. S, most of your competitors are announced price increase between $5 $8 per ton. I'm expecting that more than half of it will stick. Is it the case for you as well? Have you announced a different price increase? The announcement by market, let's say, because they are Generally speaking, regional announcement, usually, they are similar. They tend to be similar Then the actual realization on the actual improvement in prices, they often It's not at the same level as the announcement. So And again, I think If the demand stays, let's say, at a good level like it was, for example, in In 2020 or somewhat better, there is a possibility to move the prices up, Maybe not by €5, but €5, so but let's say 2%, 3% improvement It's available. The problem is more on the cost side, As I mentioned before, so is this going to be enough to offset the cost pressure or not? And then well, I already mentioned it. I'm saying the first question, there might be there are Some specific situation, some maybe big customer or new customers, etcetera, specific area where not only we will not be able to move up prices, but instead we have to if we want to keep them away, we have Given quite a significant discount. So again, in line with what I was mentioning before. Higher freight rates, yes, of course, they can have an impact on the interest. They will make them less competitive. But imports coming from For export, let's say, coming from countries like Turkey, like Egypt, etcetera, they are still very much based on the marginal cost, let's say, approach. So if you are reasoning on the marginal cost approach, you can absorb If you want to do it, you can absorb, let's say, a higher freight rate and still remain, let's say, below maybe below the local macro, being, let's say, Remain very competitive versus the local prices. So right or not, This kind of imports behind the reasoning behind it is really on a marginal cost basis. On the CapEx spending, the guidance is About €300,000,000 So total, that's what we mentioned just 230 this year, yes, around 230 this year. How much? The next question is from Yuri Syros of Redburn. You have the floor. Yes. Hi, good afternoon. Hello. Yes. Hi. One question is actually just to follow-up on CapEx. Couldn't quite hear the number that you just said. Did you say that it was going to be more than $300,000,000 this year? Yes. Correct. Dollars $305,000,000 I think we have in the budget versus $230,000,000 this year. Okay. In part, it's coming from, let's say, carry forward. To a large extent, the carry forward is coming Carryforward, not really new project approval, rather carryforward from the previous year, which were postponed at the beginning of the pandemic. Okay. So but you are mentioning in your press release new projects that you're planning to realize in order to improve the efficiency of the business. So can you give us a little bit more detail as to what those projects are and how much improvements you're expecting? No, we have some okay, we have one project that is underway, which is the let's say, not really in a capacity expansion, but it is associated with the capacity expansion project in San Antonio, Texas, in the plant of San Antonio, which will this is more environmentally, if you wish At least at the beginning, then efficiency because it's a new cleaner storage. We are still not during the full year, during the 12 months, but in sometimes during Sometimes of the year, some months, we are forced to store a click, let's say, outside to keep the trade inventory level that we need. And with this new storage, we will be able to accommodate, let's say, all the clinker inside. The other is there is more is both capacity, let's say, the efficiency important one It's the undergoing construction of the new Finnish mill, let's say, Cement mill department in Russia in Cortino. This is probably the most important we have currently. And by the way, This is also has an impact on CO2 because The new technology, which we will apply, particularly the so called separator, will allow to use to produce more than use, but to produce and sell more blended cement, so blended with either slag or limestone and lower the intercontinent in Cortland. Then we have some projects that are saving CO2 indirectly. For example, Austin San Antonio, this is a 14000000, 15000000 projects for the erection of new solar farm, let's say, which will be connected, let's say, directly to the plant and will probably present some And 15% of the total energy consumption for the plant. And that's also in San Antonio? Yes. This is an instrument only. I think together with the Clinker stores, We will also we are currently is actually underway right now. We had already a small portion of the expense as to the 2020. Okay. And look, I mean, obviously, the years beyond the current year are not a focus right now. But Just to get a sense, so you have quite a substantial increase in CapEx and some of that is carryover from last year. Yes. Is this the base? Are these projects going to carry on? Are you planning to spend a similar amount in 2022? I mean, I know that you don't have a budget, but what's your sense? Or maybe higher amount? No, no. I think that the let's call it the maintenance level It's likely to stay in the range of more similar, let's say, to 2019 than 2020. So it can be between EUR260,000,000 EUR 280,000,000 including everything, let's say, but including also environmental emissions and some projects targeted with specifically CO2, but not new technology or carbon capture, nothing similar, including The carbon dioxide being CO2, the, let's say, ventures or the common product that we are came out in Germany, in Italy for testing, let's say, carbon capture. So this is and on top, there will be something. Usually, there is and I think that will continue to be Some let's go expansion. Within expansion, I also include maybe the replacement of certain equipment, certain production lines. For example, In the case of Cortino, the Finnish new department is not really an expansion, but It falls within the, say, the special project category because it's like building, let's say, in New department, of course, you build a new department and you shut down the old one. So you usually have also some improvement in capacity. But okay, just to give you an idea, this kind of project, I think we will have some. They are not officially, Let's say approved yet, but we will have some particularly in court. We have the full line already available on the ground, And this could easily translate into a full upgrade of the plant going forward, which would make a lot of sense, both on the, we think, financial side and also the, let's call it, environmental The environmental benefits that are associated with it. Okay. Good. And the second question is Completely different. So you had a fantastic result in Brazil, dollars 48,000,000 EBITDA last year. You have you're almost doubling your capacity. So what do you expect you can get in the venture going forward. I mean, maybe not this year, but the year after. Can it be doubled? Can it get to 80 or can it get to 100 EBITDA at some point? Well, the addition is interesting from the point of view of, let's say, Strategic. We think also financial, but let's say initially at least is more in a sense that we consolidate quite significantly our positioning in the Southeast of the country. And it will be, let's say, There are interesting synergies that are coming up from the distribution, both on the we think on the price side, but Specifically on the cost side, particularly, the electric transportation. We should have sufficient vessel prices due to the stronger prices, stronger market share and improvement on the logistics. In the production cost, the Acquired entities are not as efficient as the existing ones. So if you The reason is that by doubling the capacity, you also doubled the EBITDA. Unfortunately, This is not because these plans are not at the same level in terms of they have a Good market position, but not under the similarity in terms of, let's say, cost production cost, etcetera. I think that if you ask me 5 years from now, I would say that, yes, we have to target something that is double, let's say, the amount of this year. It makes a lot of sense. How this can be achieved, we will see. I mean, in fact, we know we will We will understand better when we will be able to manage the company. But yes, It can be a meaningful and most reasonable target, of course, with the help of the local market. So if this market the local market performs, If he doesn't know, but if he does Yes, but pricing is moving quite well in Brazil. So if you have That will help have more helpful prices in the current environment as well. And it started from a very low level anyway. So there is some room for price improvement for sure. Okay. Thank you. The next question is from Alessandro Tortora of Mediobanca. You have the floor. Yes, thanks. Good afternoon, mister Lo. Good afternoon. I have, let's say, 4 questions, if I may. The first one is related to the outlook, but focusing on Italy because I see that in the press release, It was not mentioned, let's say, the expectation on the operating results, if you, let's say, give us an impact. So this is the first Well, Italy is one of the This is where we should do better than last year. It's that because we have 2 months, 2 additional months almost Production, let's say production in sales. So the market should be Finish, let's say, at Babla last year by, I don't know, you'll see maybe 4%, 5%. Pricing is okay. It should be okay also because, Again, there is some pressure on the cost side, but besides that, We have, for sure, a stronger, let's say, market position than we used to have and possibility, let's say, to influence the price level better than 2, 3 years ago. So this is We are still in the process of, let's say, optimizing the industrial, let's say, footprint. We announced officially, If I recall correctly, I don't know if it's in need, unfortunately, I think, anyway, that we will shut down both Aquatica and Testi. This is something that, of course, is painful for the social side of it, and we are working on making this, let's say, as easy as possible for the employee involved. But on the other hand, it should goes into, let's say, The target which is always the most important one to improve capacity utilization level in the other remaining plants, in the plants that we will continue to operate. So Cost inflation is pretty high in Italy. The last also versus the budget we are today We're soft than what we imagined, let's say, back in October November. But anyway, anyway, we see yes, we see an improvement there. Okay, okay, okay. The second question is on you mentioned before that, let's say, cost basically accounted for a positive EUR 45,000,000 in Faie. Remember the bridge that you mentioned during your presentation, the results including basically Energy, fuel and some other costs that's right. Is it fair to assume that basically you are telling us that The expectation here is to have instead of this plus 45%, let's say, putting a minus ahead of this number and then 2020 recover as the market allows wood price increase, The most or let's say part of these cost inflation, which is basically what we Yes. I think we are very likely to revert, let's say, to what Maybe not exactly in the different in the different three or four that we are favorable This year versus 2020 versus 2019. But overall, if you look at the input, I think we are likely to reach the 2019 level. So what we gain this year, I mean, this year, 2020, is likely to revert in 2021. So yes, I think and What's going to happen on the price side? Is this going to be favorable or favorable enough to offset that? We will see. In addition to that, we have also higher cost for CO2. Almost certainly, We will have to do their higher safety cost because the plant is looking quite unfavorable. Okay. Okay. And on this point, basically, you confirm to us that countries like Germany, but also, say, for Europe countries I see persons in the outside the RC2 and Italy will keep its, let's say, surplus. Is it correct? Yes. Okay, okay. The second sorry, the third, the question is on can you pass to the guidance on financial charges? Because clearly, This year, the consolidated number was helped by, let's say, some more recurring, but also on tax rate because 20% tax rate for the 2 years in a row. It's a good result. So maybe you can give us an idea of it going forward. Thanks. On financial charges, right now, we have a budget of around €29,000,000 budget year. So this is usually yes, it does include some potential return on cash items, But that's the we can anticipate. So it's more, let's say, A reflection of the actual, let's say, cash net interest expense. And on the tax rate, I think we are probably similar And at Cognos, of course, yes. Normally, in you were asking about the rate, no? Yes. It's a normal, let's say, Right considering the sustainable level, okay, for this year. Yes, We the budget is between 2021, so no, no, no, no, no, no, no difference. Unless the Italian decides to raise the tax rate in U. S, we should be But if you let's say, the recession will take taxes that you should get the interest payments, okay. So it wouldn't be as Yes. And the last question is a little bit on, let's say, medium term in the As you mentioned before, clearly, a significant CapEx related to, let's say, realizing CapEx, say, to capture is Let's say, not there because technology is not commercial and business and the other. The question is, The company is already starting to assess. So when the company started to map all the production plans and all the process where it is economically feasible, okay, to put in place a CO2 plan because we have Some companies are already focusing on the 3 big plans justifying the investment. Yes and no. In a sense, I think this is one of it's very difficult, I mean, very Very important, but also very, I would say, difficult exercise that requires A lot of investigation. I think the process will be more, let's say, first step to understand, Like you were mentioning, which technology is the most or which one or maybe 2, 3 technologies are the most interesting to be introduced. And then, of course, Depending on the technology, maybe a plant would be more suitable for certain technology and other and this is the exercise we have to make. I think Yes. It's not that we are not involved in this reasoning. But For the moment, it's very I think it's very preliminary because we also Come to the conclusion tomorrow, I don't know. But to give an example that we need to get closer to the existing or to what is planned to be an existing storage. So in this case, In this case, you not only are in the need of, let's say, adding, let's say, the catastrophe technology to an existing plant, but you will have to build an entire new plant Just to get closer because it could be from a financial, economical, let's say, outcome better then introducing carbon capture technology in the plant and then transporting maybe 200, 300 kilometers for the storage. So what is likely to happen, in my opinion, is that In general, you will have less or less payment active. You will focus Clearly, on few plans, except, of course, higher logistic costs, higher transportation costs for distribution of cement and yes, introduce the cathode technology in a limited number of plants that are the most The one that for position, I don't know, Raw materials, whatever they have wanted are more likely To be, let's say, it was a long life, but also beyond, let's call it, in 2030, 2017, 50, etcetera. But we should not rule out maybe the possibility Because in some older plants, you may also have some difficulties in introducing this kind of technology. So You may be in the need to build again a completely new one. And I think tomorrow, Today, the closeness to the Roman materials is one of the main requirements when you build the plant or when you are Using a plan of the life of your quarter, etcetera, is one of the main requirements. Maybe this will not be the main requirement. Maybe Tomorrow, it will be more important how far you are from a carbon storage or carbon usage plan. No, okay, okay. It was a question. But I know that basically, the right answer now is I don't know. But thanks for, let's say, giving me some The next question is from Sreedhar Ekblom of Morgan Stanley. You have the floor. Thanks very much. I have three questions. Okay. Can you tell us What your utilization rate is in the U. S. At the moment? Secondly, can you tell us what you have budgeted for CO2 costs in 2021 and if there's a specific price that you are linking your budget to. And then thirdly, on decarbonization, I don't want to talk about carbon capture storage because I agree with you that there's a lot of unknowns on the topic and the economics currently don't make sense. However, there are a lot of things that your competitors are doing related to fuel mix, for energy efficiency and the introduction of lower carbon products utilizing recycling as an idea. And can you talk about what you're doing on those other initiatives, so not carbon capture storage or use, but where what is your strategy on the low hanging fruit on this topic. Where are you in the decarbonization strategy? Because ultimately, this is a massive issue for the industry and it would be great to get some granularity on where your strategy is on those other topics. Thank you. Okay. Sure. Well, in the U. S, it's slightly different from region to region. But let's say that overall, we are currently at 92%, 93%, Say above 90%. Of course, to achieve 100%, 100% is a nominal capacity, but Sometimes difficult to achieve because, of course, you need some weeks to the year for the maintenance program. And so when you're running, let's say, 90 697 versus the nominal on 3 65 days, let's say, Usually, it's what we consider an extremely good performance. So we have some room. If we move, and this is part of your last question, like we will, towards maybe lower Plinker cement on Bente, lower Plinker cement ratio in the U. S, which is Clearly, one of the main directions. This should help in the sense of having more and more More capacity because then in this case, the bottleneck or the constraints is going Into the Finnish timing, not so much in the Keon. Okay. So on the CO2 cost, I think we had €30, 30, 51,000,000, right? It's been in the process. 30,000,000,000. 30,000,000,000,000,000,000,000,000,000,000,000,000 for the budget and this is an average for the full year. So we will see. It could be more. It Could be one of the potential negative, let's say, or risk, let's say, for the budget. And this is also why we tend to be A little cautious on the full year outcome. On decarbonization, I would suggest Two things. I mean, okay, if you want to add something, of course, you can. But I don't think this is the The occasion to enter into some or very, very detailed, let's say, project. We are no different from what the other companies are doing actually because it's Clear that if you want to achieve a certain result, the step actions that can be taken Are the same for the entire industry. So I think we are, in general, maybe ahead versus some others in Some of the action typically, for example, the usage of alternative fuel. On average, in our group, we had a better level at higher level versus most, if not all, the other data groups. Maybe we are not as good in blended Cemento, I like you're saying, but this is mainly associated with our in the U. S. And the fact that the U. S. That represents, let's say, In terms of results, production, not exactly, but let's say 50% of our business, they are still subject to some certain market rules that require very high clinker to cement ratio. And what we I would suggest again, maybe go to our sustainability report, which will be available, I think, soon before the AGM. This is very I think the detail is the Most valuable and most comprehensive information that you can find on this quick release from our company. And then I think we will we have any plan anyway on activity? Until 27, there will be a conference on projects, Yes. Buti Onicham. So you could maybe then join the conference if you would. And in this case, we will prepare for I mean, specific presentation on this subject. So I think this will be a better opportunity to discuss. Thanks. Can I just follow-up one question on the budgeting for CO2? How many contracts Are you planning on purchasing this year? Or do you think that you have enough inventory considering you did purchase quite a lot last year. So when you're just thinking about that €30.5 per ton, what is the sort of volume reference that we should be thinking about? Have you got a sort of range of contracts that you may think of purchasing in the market? I think this depends very much on the of course, on the CO2 price. Necessary, if Basically, if we wish to not to transfer between the companies, we see that 1,000,000 tons of CO2 that would be requested by some of the countries. Okay. So that's the purchasing that you did last year largely covers you this year is amazing. Yes, yes. There's a big part covered. Yes, we expect it to almost 1.5. Okay. That's very helpful. Thank you. Yes. The next question is from Mike Best of Database Analysis. You have the floor. Thank you very much. I have two questions, if I could, please. Yes. The first one, you referred to Delay of some maintenance CapEx for 'twenty into 'twenty one. So the CapEx elements of that, presumably, when you move into maintenance CapEx is an OpEx element as well. So presumably the profits in 2020 benefited from some of that maintenance not occurring. Are you able to quantify roughly what that benefit was? And is it particularly large in any of your countries in relation So that's my first question, please. Yes. And my second question is just on oil well cement. I think there was quite a significant option in demand in 2020. Are you able to quantify how much that might have hit profits? And probably more importantly, could you just talk about with the higher oil price now, are you starting to see that demand return? Thank you. Okay. Well, yes, the you're right. In a sense that very often this of major, let's say, maintenance projects. They include both Some items that are being capitalized and some other that are operating expenses. So I think that the Two countries where we had delays or postponement, the most important one was the U. S. And this was yes, it was strictly related to because we were unable to, let's say, bring the people in the plant or the number of people required to work in certain projects in the plant. So this was not. And the amount, I think, in the U. S, you can assume like €85,000,000 rule of thumb, I mean and also in Italy, we had some postponements. There were some projects that we were planning, for example, during the period of the lockdown that we could not really Carryout because activity was shut down. And in Italy, it's a little less, could be half of that, Between EUR 2,000,000 and EUR 3,000,000. On the oil cement, I don't On the real profitability decline, we don't have a really clear answer. No. At the end, yes, it is true that the oil cement is priced higher, But it's also much more expensive to produce and you have Great, let's say, logistic cost because you moved it particularly in Russia in a very Very long distances. If we look at the let me check Most recent data, there is not really yet recovery visible at least. The 2 countries There are more, let's say, or 3 countries that are where we have significant Volumes of CO2 are all very well, sorry, are Germany, Russia And in the U. S, in Germany, we are behind for the moment. In Russia, we are better. Russia has that somehow improved, but Russia is going a little bit its way. They tend to produce more Yes. Not necessarily linked to the price level, To the price to the oil price, so this is improving. And in the U. S, We are down versus last year. So the 2 countries that are a little more market driven are still below last year level in an evident way. Russia is doing better. I hope this answers your question. The next question is a follow-up from Paul Roger of Exane BNP Paribas. Please go ahead. Okay. Yes. Sorry, gents. Just very, very quickly, did I hear you correctly and you said you would have a CO2 Investor The topic will be project initiatives of Buti Onitschem regarding climate change activities. Perfect. Thank you. The next question is from Gregor Kuglitsch of UBS. You have the floor. Hi, thank you. Sorry, one is a follow-up question. And I didn't quite catch the total energy bill that you incurred last year. And I think you were saying you expect it to increase, give or take, about €50,000,000 that you gained last year, if I understood correctly. But if you could just repeat what the actual bill was and then what the assumption in the budget is, please? Yes, yes. This year, 2020 last year, 2020 total was 295,000,000 2019 was EUR 3.57 billion. This is fuel and then power. So purchase, let's say, directly for the cement business. So that's not include, for example, I don't know, diesel that you purchased for the Evogene extractors for sure. Anyway, and so yes, and the advantage that we had this year, overall input cost, So not only fuel and power was approximately EUR 45,000,000. So not 2 different, let's say, clearly, fuel and power went down, more other input costs like raw materials did not went down, It does go down, and so that's why you have smaller, let's say, improved EBITDA level. So yes, I think the offsetting or the reversal could be more or less of this range, not very different. Okay. Thank you. That's helpful. The other question is, if you could share any color, I mean, it's almost The Q1 is almost done, the 25th March. How things have gone so far in the year, in the New Year? I know that there's obviously and weather issues in Texas. But overall, are you tracking in line with your guidance? Are you being down? Or is it more forward looking? And I appreciate Q1 is a bit small, but still. Okay. If we look at the end of February, we are we would be I would say, we are down. But the reason now, as you mentioned, so also in Europe, quite cold weather, Difficulties, very cold weather in the U. S. Stopping, let's say, almost not the entire nation, but Large part of the nation for more than a week. And so March, so far, we will see by year end, we also do not have, let's say, the only week in March this year. So it's advantageous to have, I think, one more working day. Generally speaking, March, the business is going normal, I'd say, He's picking up. I think he's basically recovering what we lost in February. The Q1 is always Quite volatile anyway. So but no reason to, I would say, to think That we are more negative than what we mentioned in the outlook, which is driven, again, mostly by cost and by Negative force in this kind of factors. Okay. And then the third question is maybe more strategic, and it's and capital allocation and the balance sheet structure. So your company has been generating sort of before dividends and Investments into acquisitions somewhere, I don't know, dollars 3,000,000,000, dollars 400000000,000,000 of annual cash, right, that's at least the last few years. So and your leverage is virtually nil, like it's less than 0.5 of a turn? Yes. So what do you think is appropriate for the company. And at what point do you kind of need to do something about it? I mean, either invest it or return it to shareholders? We have to do both. Probably return to shareholders can improve in, I think again, more in the form of dividend than by that because it's somehow easier and also more Flexible, if you wish. And investments, We have some commitments, let's say, that are certain that will basically the ones that are public The Brazilian, let's say, vision and also the Brazilian, let's say, change in the ownership Come in few years' time from 50% to 100%. And for the rest, I I think that anyway, besides what it is the requirement for the, let's call it, But the 2 things actually are going to some extent or to a large extent together. We need to continue to focus on the existing to make it possibly better. It is clear that in this time since Let's say, the adoption of new Technologies for carbon capture or the The potential of the other changes that will show up In the future or the need to adapt your investor structure, I mean, we know that, that is coming, but we don't know exactly how and when. So I think there will be some years that where beside, again, the requirement, efficiency improvement, etcetera. We may remain in a position where we would prefer, let's say, to keep some money, some reserve in the company To be able to face any kind of, let's say, challenges associated with the, let's call it, the carbon neutrality. And instead Maybe, like you say, return too much capital to the shareholders because otherwise, We may be then later in a position where, I don't know, say that we need to ask money to the shareholders. But let's say to find the right balance between It should be a decent normal return and at the same time, preserve the capital in the company for The uncertainties and the challenges that are coming up in are not clear exactly right now. I mean, maybe We need 4, 5 years time to understand exactly what we need to do, where we need to do it, how much it's going to be, How much is that the cost, etcetera? So this is the way We are thinking about it at least at these times. Okay. But In addition to that, and I appreciate you so basically what you're telling us, you're going to be running very low gearing until you have more visibility on What carbon capture, etcetera, may cost you? Yes, I think it would make a lot of sense, yes. Okay. And then in terms of additional Acquisitions, obviously, Brazil is now becoming sizable. I mean, maybe that's kind of done. What about other expansions or is it really not on the agenda? I mean, how do you take? Yes. So again, it's more opportunistic. It's maybe less in the agenda than it was in the past sometimes, at least in our mind, because then I see an issue of some targeting or a strategic idea in your mind, No, no, no, no. Not necessarily the components are really coming together. But anyway, a little interest in this case, we are more focused to the, let's call it minorities. So okay, for us, we've had some Actually, it's on path that will actually come to a conclusion. We have other positions that are also important In the minority stake, companies that are very good performers that would make, let's say, And a lot of sense within our group. So if there is a possibility there to gain majority, I think this is something that we would Okay. Mexico, I guess. Okay, fine. That was it. Thank you. I appreciate it. Thank you very much. Have a good afternoon. Yes, sure. Thank you. Mr. Buti, there are no more questions registered at this time. Okay. Thanks, everyone, for listening. We already mentioned this next Appointment that we are organizing for 1 month, let's say, from now. And I don't know when, but we all hope to see you in phases and personal meetings sometime soon, let's say, at least sometimes in 2021.