Earnings Call: H1 2020

Aug 4, 2020

Quarterly report

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Vucey Unichin's first half twenty twenty results Conference Call. At this time, I would like to turn the conference over to Mr. Pietro Bussi, Managing Director of Bussi Unitiem. Please go ahead, sir. Okay. Thank you. Thank you so much. Welcome to everyone. That you're able to to join us in this conference call. To bear with me is Patrick Klein, our group treasurer, and also Lawrence Ocala, our investor in that relations. So we're here to try to outline, as quickly as possible, our first half results and then as was already announced, leave you the floor for the question that you may want to ask. I think that generally speaking with good first half, for sure, better than what we originally expected or what we expected at least the beginning of the pandemic where things started to look much more, much more complicated. And this was due to a situation which was favorable, even inside the pandemic for different reason. The main reason was I would say the, the relatively strong trend in volumes So volumes that in many areas, in many markets, we're not from the affected, where yes, effective, but not strongly affected by the pandemic. I'm speaking about the U. S. Primarily because this is an area where actually the opposite occurred. So we had actually an improvement in our sales volumes. And also the Central European market, particularly Germany, where the impact of the pandemic was very limited and volumes basically at the level of last year. In terms of volume, we suffer instead in other markets, but less important in a sense. So Italy, for sure, was the market most affected due to the to the more stringent, let's say, lockdown measure during March April, meanwhile other markets, in all other markets, construction activity or any way, the manufacturing of cement was, continue to be considered essential and not required to come to a stop. And also this is relatively weak with the of Czech Republic that was actually, again, a state similar to Germany. And this was the first, let's say, the first, favorable, let's call it contribution to the overall results. The other favorable contribution was was the trend in prices. So, prices overall, mainly due to the to a very strong start to the year. So a very strong first quarter. We had an opportunity to go up with the prices in Europe. This was driven to a large extent also by the by the trend in the CO2 cost, which were rising or expected anyway to rise. In this, okay, change later on with the, with the of the general, let's say, market level in, during but initially, this was not the case. And so generally speaking, the price trend in look at currency in euro has been, has been a favorable and also did not turn, let's say, unfavorable the pandemic, basically when the market started to reopening in May June. Also, thanks to relatively quicker recovering, some are in some of, most of the market, I would say, price letter remain where it was before the lockdown or the restriction. One exception in the United States where prices were, yes, in a sense, originally, expected to increase the beginning of March, beginning of April. And this did not happen because we were, again, in the middle of the crisis of the, an employment of the labs of the GBP. So, a lot of uncertainty ahead of us and was we consider, let's say, wiser not to move the price. But in that case, in the case of the United States, as I said before, stable pricing, but favorable variance in volumes. And this was again, again, the second main. The 3rd point, which has been helping significantly the result is the trend in cost? I'm speaking about mainly, let's say, variable cost, but some of the tips loss also went down, but not so significantly. But yes, variable cost in particular, if you will, and also ethical power, but I would say, if you will, across all my electrical power, CO2, right, versus budget were significantly better. And the combination of these 3 factors, the 3 elements that I just discussed, trending volumes, the trending prices and trending in main energy costs, it was is what allowed us to achieve these results that are somehow, let's say, unexpected or, I would say, by far, better than what we we've been reasonably about the opening of the pandemic. So, net sales eventually are in line with year, we had a very similar, top line results. Actually, it's slightly less if you consider the changes that not so significant, but some changes in scope of consolidation, which occurred last year, let's say, beginning of July, particularly in Italy. EBITDA better is a very good result. Let's say plus 8.3% like for like and also EBITDA margin are up more than almost 200 points. Net debt lower than, December 2019 due to the strong performance, strong operating performance, but also to some other HR team, I, inflows that I will, I will comment upon later that you may recall already because they were disclosed at the at the preliminary at the trading update by theendofMarch. So moving to the back down of cement volumes by by country, we had negative signs in, in Italy, -12. It would be minus 15 like for like without the changes in scope of consolidation. This is significant, of course, but, again, not as bad maybe as one could have imagined at the beginning of the lockdown, the lockdown period. Because overall, not exactly a V shaped recovery. It was a little more, let's say, used tire, but already in May, we noticed the market that it's picking up again. And in June, was better versus June last year. So this is I would say a good sign also for the for the coming months that the market is not below the underlying market, let's say, not below the level of 2019, except for the lost days. Due to the closure of the plant, a strong performance in the U. S. So we're all considering that we lost also significantly in the oil well category, which is not very significant in the within the U. S, but still represents in a normal year, about 5% of our sales. And also we lost quite quite a bit during March April, volumes, sales activity in the north in what what we call our North Eastern region. So the Pennsylvania plant, which is the closest to New York, so Pennsylvania state, one of the most affected by the pandemic. This is the plant, the volume, the leadership by some of this plant were down significantly much in April. But fortunately, this area is not so important for us. And the rest of the the market areas, we are strong enough to offset more than offset actually completely this kind of impact Germany stable. It's a very similar, Luxembourg, yes, suffer significantly during March. Because it's maximum is also quite exposed to the French market. So French financing is one area where the construction activity was very restricted, let's say, during the second or during the second quarter. But also Luxembourg showed a good resilience, resilience, let's say, following the reopening And we are only 4% below last year and potentially, let's say, with the possibility to recover what was lost in the coming months. Czech Republic almost unaffected. Poland, yes, down, almost 10%. Poland had one of the strongest performance in prices and this could also be one of the reason why we are not so well positioned in terms of volume. So There was also probably AEM marketing decision to be let's say, very firm on the on the ground trees. So this might be adjusted later on during the year. If you forget the between, let's say, our performance and the market comes to wide, you crane suffering, but not only for the for the COVID, there's minus 11 minus 12 volumes. Also, also because of new import, significant import activity come from from Turkey and affecting one, particularly one of our plants, the southern plant. And this had an impact both on prices, which basically did not move up and on volume. So again, more reason to justify this kind of performance. Russia, quite affected by the, by the, COVID and by the oil price. So oil processing you can see declining as opposed to the U. S. Russia, for us, the share of oil well cement in Russia is much more, okay, is about 20% of our sales and this category, let's say, of products declined very significantly. The gray cement was not too bad overall considering, again, the weight of the oil and cement sales in this country. And we lost about, how about 7% overall, including oil and cement of our sales. The main, associates, Mexico and Brazil performed fairly well. Mexico remained stable in terms of Cement volumes versus last year, even though there was a moment where we're, it seems that that we would be forced to shut down and close the plant there was a public announcement by by the same extent was the face taking that were plans who are going to to shut down temporarily for the, for the, let's say, it could be the major, fortunately. A few days later, the government stated in reverse that some of the main infrastructure jobs should continue. So there was a need for cement for building materials. And together with the main structural job at the end, with the plan to open a lot of construction activity remain remain active particularly in the bagged cement category. So we did not lose volumes In Brazil, even if the pandemic is quite aggressive, the number of infection is quite high. The impact on construction activity has been quite, quite limited, quite weak. And we were able to to move up with the volume. So almost 8% in the 1st 6 months. So quite a good performance there. Pricing, as I said before, in Europe, that was mostly most area, an increase at the beginning of the year. We've, with then let's say, its ability moving forward after the reopening So during May June, also Russia had some price increases in the integration and category, not in the old well, where the, of course, the decline in the demand is is asking for a price reduction, which we need to somehow take care of, if you want to keep our market share, stable pricing in Ukraine in local currency, increasing Poland, increasing Republic stable in the U. S, maybe a possibility to improve from June on and slightly declining in Mexico, but we are we've been coming from, from, let's say, not the significant, but yes, an unfavorable trend in prices already since last year. They're now, let's say, stabilizing at the 4% or 5% below what used to be the previous the previous picture. In terms of FX changes, which is also an important variable when you translate, let's say, when you look at the final euro figures. We still had a favorable impact until June at least from the dollar, which is, which is basically the most important currency for our group. So we are comparing first half twenty twenty with 110,1.10 average and versus 1.13 last year. So this did have a favorable impact both on net sales and the EBITDA. More worries, for the ruble, which is strongly related, as you know, to the oil products. In the first half, the decline is not so significant. Only only 4% negative variance, but if we look at the current level of the tax rate, just put us some make us worry, let's say, about the upcoming month. It's currently much weaker than the average of the first half. Ukrainian currency still improving. Let's say, if you compare first half versus first half, if you look at the current exchange effect, by year end, some, some weakening, but so far, at least not so significant. Checking pole and the small decline, but these are anyway within the European system. So, currencies that are moving much lesser. Mexican peso definitely weaker, minus 10% and Brazilian real, very much, much weaker, strong devaluation there, which is, of course, impacting our results in euro because in local currency company from pretty well. But in euro, we did not enjoy the same kind of performance due to the extremely steep and, let's say, quick devaluation of the Brazilian real. Looking at the sales revenue, again, by country, volume prices, we commented upon volume prices and FX. Most of the countries are, they're showing a very similar results. Those first half of last year. I'm talking about, well, generally it's actually 5% up, but if you consider the same Central Europe, so including the last mile of the Netherlands, etcetera, we get closer to what it was last year on this market area. Same, same, same reasoning, let's say, for, sorry, Eastern Europe as a whole, where you have some improvement in, in, well, actually stable revenues in Czech Republic and some declines in the other in the other regions where the stronger it is actually coming from Russia, but also because of the trend in exchange rate that I was mentioning before. And then we do have an improvement of about 1,000,000 coming from the U. S. This is where clearly, the benefit, the most important benefit is coming from is offsetting completing the decline we have in Italy of about 1,000,000. This before X impact, from the dollar, possibly for X impact from the dollar is about 15,000,000 And overall, it's 11 because of the evaluation, let's say, the worsening of the change rate in the market that I mentioned before, particularly in Russia. So again, stable net sales in the first half and a small decline like for like due to some changes in scope in Italy and in Germany. Going to the operating results, the operating cash flow, the operating cash flow, EBITDA, again, by country, clearly, there is a significant decline in Italy, which is even more evident because of a different policy that's a different attitude that we took this year versus last year. I mean, the fact that until last year, we have been selling CO2 rights, excess CO2 rights or shall proceed to rider from Italy to other countries within the ETS. So let's say, a wash if you look at the consolidated results, but instead a positive for Italy. This was not not realized. It was not put in place this year. So there is a difference of about 15,000,000 versus the we were missing, let's say, $50,000,000 income operating income versus last year. So anyway, anyway, the decline was 20 in total. So clearly, the lost days during the restricted activity period had a significant impact on our results. So maybe again, not as much as we as we originally expected though, we could have planned. Thanks to the trend in prices, which was favorable and thanks to the trend in cost which was also quite favorable. U. S. Strong performance. We improved approximately $37,000,000. Two two things to to mention. Or 3. Also, U. S. Enjoyed particularly for fuel, favorable, quite significant, favorable variance. Then, due to the, complication, let's say, coming from the, from the pandemic, We were forced and we decided to postpone some of the major maintenance, let's say, programs that were scheduled for the first half. Mainly because when you when you do this kind, this kind of, you're, you you you, let's say, bring your plant a significant number of people. So Meanwhile, during the ordinary production day, daily production, the number of people actually working in the plant is very limited or very far away from one another. When there is a significant maintenance project to be carried out. There you require maybe a team of 50, 60 or sometimes more people working very close to one another. And this was going against, let's say, the safety policies introduced after the the outbreak of the pandemic. So this is something that we will have to do in a way or another later on during the year. But in the meantime, it's been postponed. And also, versus last year, we had a quite significant approximate the $26,000,000 increase in our inventory. So there was an inventory change of favorable inventory changes last year, $26,000,000. You probably recall that that last year, during May June, we were unable to ship on the river, on the Mississippi River. And or either either by batch or by rate from the most important plant. That is the largest plant due to the high water level. So we had at the same time of the year in 2019, basically all our terminal network almost empty, let's say, with no availability of product. And during the first half of twenty twenty, fortunately, the water level remain normal. We were able to navigate to transport to move cement say, across the country. And, and we built up again, let's say, the inventory that is necessary to operate and to be able to to ship it, to serve our customer during the summer season. And this was quite a significant change, which is actually Again, improving the operating EBITDA, but, that will be to a good extent, let's say, reversed during the second half. Germany, some strong performance due, 23 percent up, almost 10,000,000 after, good pricing level and lower and lower cost due. Similar to what we would be seeing, not similar to what we have been enjoying almost everywhere. Check, yeah, again, from pricing, stable volumes, lower cost. Also, lower CO2 cost within the ETFs. In Poland, mostly price effect, because volume effect was negative, but, also favorable variance for production for production cost. Even in Ukraine, we had a favorable variance for fuel, which was kind of unusual. We are recently, we have also been running our clients using gas again, I guess during this period, cheaper than coal or Coke, which is something that we did not enjoy since, I think, the last time we've been using gas was probably 10 years ago or so, but it's a quite a pretty strange situation. But again, it's favorable for the production cost. Any Russia, the performance was again, pretty stable in term of results. Russia did not have the same or less important, let's say, cost benefit were other countries. But the volume did not declining. And pricing was was showing some kind of favorable variance. Going down to the, going to the EBITDA bridge, EBITDA variance analysis, We move from 298 to 300 and 14 through this kind of this major, let's say, item or these major changes. Volume negative, as we mentioned already by approximately EUR 48,000,000. Pricing is, 33, let's say, favorable. And then a larger benefit coming from available cost in part, of course, related to the lower production levels also to a large extent from lower cost input cost raw material, for example, with planted 5,000,000 less, but this is mainly related to the production level, to the production activity, let's say, fuel instead, we said more than $33,000,000. So there is significant amount. Power also 9,000,000 transportation, which is also fuel that related another 3,000,000 advantage, fixed cost fairly stable, labor cost, negative variance of 2,000,000 maintenance for the group as a whole, not for the U. S. In itself, as we discussed before, but let's say, a negative balance of 2 And then, other revenues and costs, again, very similar to last year level, other, let's say, general and factory overhead a negative variance coming from the CO2 due to the fact that the last year CO2 was, again, a wash, as I mentioned before. So there was no CO2 cost within the group and also partly let's say, Tier 2 purchases instead of this year. We have a $20,000,000 coming, let's say, to be recognized as a CO2 accrual, let's say, cost for the semester. And this is, leading us to the $300,000,000 and $14,000,000 that I that I just mentioned before. And in part of the income statement, so below, let's say, the EBITDA, showing profitability and also at the peak level because all depreciation amount is particularly ordinary. We did not have to to account for any impairment write down all the assets. So, as a percentage of sale, EBT is there 5.2 year versus 10.9% at the 11% last year. So it's 1.2 percentage points after. And then there is a stronger improvement at the equity earnings role. Think from the, let's say, extraordinary results of our associates or previous associates, let's say, cosmos cement company in the U. S, you know, that Kosmos sold all of these assets, to Eagle Materials transaction closed, the closing transaction was at the beginning of March, if I recall correctly. And, and, and, of course, there was a significant gain on this disposal, which translated again for us into equity earnings that are much higher versus last year that we have 149 basic 1,000,000,000 versus 34,000,000 last year or the condition. So this is, of course, extraordinary income. Finance cost higher than last year greater than last year by $26,000,000, but these are driven mainly by, by, non cash item because if we look at the actual let's say net interest expense, a meaning interest expense minus interest income. We have $8,000,000 for the period versus 12,600,000, let's say, 13,000,000 last year. So there's a decline was by, a small reduction in our cost of gross debt and, and, of an improvement in the net financial position. So both things are, let's say, giving us an advantage in terms of net interest expense. Then there are other items, non cash, as I said before, that are worsening, let's say, the net is, yeah, net interest expense as a role, including non cash item in particular, there is a there is an adjustment, we've been making of about 50,000,000, more than 50,000,000. For derivatives valuation. This refers to the put in core option, on the shares of the Brazilian, let's say joint venture, we have an agreement there to, to either by ourselves or being, let's say, forced to buy the remaining 50% under the evaluation of this derivative contracts, what's a significant role negative, let's say, role was as we mentioned before, the value of the real. So the currency devaluation was reflected to the fair value of the option and the impact was significant about, as we said, the 1,000,000, the prospects and the forecasting in itself of the company. I'm not worse than what we imagined, let's say, previously. But of course, they are their functional currency is the real. And when you translate it into euro with the kind of devaluation that occurred during this period, the impact can be quite significant and it was indeed Then, we had a profit tax, of course, much better than last year for the extraordinary results that I mentioned before, even if net finance costs are greater. Income tax expense is rising clearly because of the particularly the the, taxable profit on the sale of the, of the customer's assets? And eventually, net profit is anyway $82,000,000 greater than the previous period 2019. In terms of the cash flow statement and the trend in the next financial position, gas in radio from operation was, was quite good. We are, we are at 2056. After working capital, let's say, adjustments versus 195 last year. Which is which by 18% on the revenues versus 13% of last year. Interest paid is similar. Income tax paid have been a big benefit from some postponements, some delay introduced by the different government, so jurisdiction associated with the COVID pandemic impact in the U. S, we've been able to postpone and they were actually paid right after the cutoff, let's say the closing of the June 30, some of the quarterly tax payments. So this will course, it will be reversed starting from July, but in the meantime, we enjoyed, let's say, less tax paid due to the delay, decided again on the ID, but a different But if I spend it or 2, they are lower than last year because we have 108 cash out versus 126 clearly, when the beginning of the pandemic, the direction given by management, also to the various markets and subsidiaries was to be extremely prudent and careful about capital spending and to, let's say, postpone, as much as possible, just the fact that we have no really visibility and no idea of what could happen to, again, volumes, prices and also cost. So in the meantime, I mean, also after this result, this settled or the results, we are not taking any more such an aggressive test. Thanks. I mean, we are of course, trying to invest in the project that have a greater priority or returns but, we don't think any that should be such a strong restriction. In back in March, April. But anyway, the postponement of some projects, when you start postponing, It's inevitable that you'll be able to accomplish this number and amount of project within the year. So we can expect any way a reduction in capital expenditure for the full year. We had purchase of treasury share of $7,000,000 dividend payments of $32,000,000. We did receive dividend from associates. This has been the main let's call it, inflow or the most significant inflow driving the additional improvement to the net a position of dividend from a source of 171,000,000, of which 145 or so from, from Kosmos, Again, some disposal of starting investments and on, let's say, instrumental or or not minor important. And that, anyway, $10,000,000 inflow negative impact from the transition differences and the real devaluation of 71 and other minor other minor let's say, changes, either positive or negative, leading to a change in net debt. Reduction in net debt of 183,000,000, which is the very positive, let's say, very significant. We are now closing at the end of period with the 380 5, net debt figure versus 819 at the end of last year. Okay. I think I've gone through most of the terms. I hope that this has been helpful to you. And I would like now to give back the, let's say, the microphone to the operator and so that we may start the Q And A Thank you. Thank you, sir. Excuse me. This is the Chorus Call conference operator. We will now begin the question and answer session. Please pick up the receiver when asking questions. The first question comes from Paul Roger of Exane. Please go ahead, Yeah. Good afternoon, everybody. Congratulations on the results. So, yeah, I hope hope everyone's well. Yeah. Yeah. Well, not not the not really everyone in in the company because I like any company. I think we did have some some cases, but fortunately, none of them are required to be hospitalized or translated or turning to more something more and more serious. So I would say. So in this respect, we've been lucky or anyway, we manage well. That's good news. I'll just kick off with two questions then. The first one, the obvious one I get is on the guidance. You've clearly mentioned a few things that reversed in the second half. Like the US maintenance and, US inventory from from last year. Yes. But you're still implying if if I'm doing the the math to write. As I'm misreadings, you're still implying EBITDA will fall by about 15%. Yes. Really just trying to understand what assumptions you're making in that, if if you're making, for example, any assumption about a second wave and how conservative it might be, and and indeed if there isn't a second wave, what might actually be deliverable this year? Well, we are, I would say, for for the Italian market, as as you can read from, our comment, we are not so negative. Let say, we think that overall, the performance of of June when going forward, what could be, could be, let's say, repeated and even though let's say, at the end, we will close with a lower number. No. No. No. Not not not so bad. Let's say considering considering and the fact that, there will be probably no more, let's say, CO2 sales from, again, from Italy to other global markets. In the U. S, yes, we are very, very cautious and a bit concerned. We prefer to be the, the recruitment about the next 6 months for 2 or 3 days. And one is that the, let's the volumes expected and here, we are, of course, relying on our managers, on our sales force, but also considering what the PCA is, is guiding for, let's say, some minor 4% for the full year. So this would, let's say, reverse, let's say, completely, the trend of the first half. It's impossible. And we are taking basically this approach or relying on what side we are listening to what our customer saying, of course, how our sales are going. But on the other, also, we cannot ignore, let's say, what PCA is saying and the reasoning behind it mostly related to the GDP decline and the unemployment, etcetera. And also in U. S, we don't see, we see difficult, let's say, not too easy to the price improvement, across the the next 6 months. So in addition to that, I mentioned 2 or 3 items that are not too small because, again, maintenance and the story changes will be will be partially reversed, but for some significant amounts. In, in Central Europe, we see the possibility to basically, let's say, repeat last year results to go very, very close. At the end, in Eastern Europe, again, we are definitely more, more concerned. Not so much, maybe about, about the Czech Republic and, in Poland, but yes, let's say, Ukraine and Russia, we we we don't see, we don't see really a way to to be able to match last year results. So we see markets somewhat under pressure. And difficulties, let's say, to maintain the same trend of the of the first half. In addition to that, we have made some, some assumption, but this may may turn also along or maybe bias in a 2 favorable way on the exchange rate, because again, exchange rates have been favorable overall in the first half. We don't know exactly what, of course, what is going to happen in the next 6 months. But if we look at the last 2 months, July and also beginning of August, the dollar, for example, which is very important for us and for the overall result in Europe is now is now weakening. So, but, no, Patrick, if you want to add something, but this is the reasoning behind our forecast. Well, it's mainly the U. S. Ukraine and Russia by the sound of it. So In in the U S, just on the pricing comments, clearly, those price increases were delayed to June. Do you have a sense, well, there's first of all, did you did you introduce things in June as well? And do you have a sense of what what type of price increases has been able to stick by region? We are we are trying. We have been trying to do something. We don't have it's usual. I mean, when, you need, okay, 1 month 1 month is as as fast. And, and but it's not it's not enough in our in our opinion to understand whether the price increase, which is not very significant, but let's say $2. We'll speak or not. Lately, we have seen some price activity and negative one because we have been say, asked by our customer to manage some other, some other, let's call it, competitive in terms of pricing. So it's still a bit early to understand whether we would be enjoy really a favorable price variance in the U. S. It's not, it's not even possible. If the market continues to perform, I think it will be possible. In this case, of course, the projections, the forecast may be too pessimistic. Again, I think it was correct on our side to try to give a guidance. The interval is largely because I mean, between 5 10, I can the difference can be many, many millions. Where we will end up, I don't know. Clearly, the U. S. Will be the main driver as it has during the first half in terms of potential benefits or, let's say, worsening. And, the only thing I could say is that, next time we meet for the training update, If, or, yeah, if things are going better, we will, we will, we will not 5, we will inform the market right now. I think we have made quite an effort to understand where we could possibly end up and and the outcome, which is what what was declared since, very reasonable to us. Yeah. I was gonna say, just just one final question from me. I know Mexico obviously isn't consulted in your EBITDA, but but it is an important market for you. We hear from some others in the industry that there's another price rise going through, roundabout now, and it's about 4% are you also putting a price rise through in Mexico? And do you think it could stick there? Not yet, really, latest news. I think we discussed week ago or we were still, let's say, trying to not to lower price is. So to to to stay where we are, which is basically what happened in the first half, it was limited decline, but in part, you also to make, so in general, we had price stability in the first half because anyway, again, a good achievement considering that Also, Mexico, the energy factors gave us some it's also considering the situation and, are still very good in terms of operating profitability for sure. Okay, we know that our same Mexican associated in the cost efficient. So can, can, let's say, weather very well, also some, some, let's call it lower prices or, or, for price decline. But In this case, I would say that also in Mexico, we we beat it, let's say, our internal expectation in the first half. Thank you very much. The next question is from Regis Cia of HSBC. Please go ahead. Thank you. I have 3, possibly. So the first one is on, if you could quantify, what was your maintenance cost differential. So probably the absence of it boosted the EBITDA in 2020. So if you could give that number And can I confirm, the, your inventory, benefit was 26,000,000, I just In US, yes? It. Yes. And second one is $1,000,000, right? Anyway, okay. Yes. And the second question on fuel and electricity prices, if you could tell us what could the kind of magnitude of benefit you would expect for the full year 20. And on thirdly, if you could give us a little more flavor about how July trending setting up especially in the U. S. And in Central Europe? I didn't get the last question. Sorry. July volume and price. Sorry. Yeah. Yeah. Okay. Okay. Market. Yeah. Yeah. Well, the main is, the the two countries where we had some, because overall, as I mentioned before, if we look at total maintenance cost, they're not lower than last year in the first half. But also because, I mean, now that the maintenance program occur for all plants at the same time every year. So they are typical. The significant maintenance cycle is more than 1 year. And so you have it, okay. That said, Italy and the U. S. I would say that approximately we have been postponing some, maybe 80,000,000, maybe 9, something like like so, which We should, yes, we are planning, let's say, to, if there's safety condition allow, allow allow it, to do it later. I mean, within, within the year end, anyway, The second question was about electricity cost, electricity cost, do we have a sale in here? Let's see. Well, we do expect electricity to stay more or less at the level of this first, the first half. So to keep, let's say, the same, the same advantage to gain a similar advantage also in the second half. I don't have here this split to between the situation of the club. Yeah. Sorry. Just a second. So Yeah. Yeah. First half, twenty twenty was $133,000,000. This refers to the to be the instrument operation. And last year, I don't recall. 172 last year. So this was the the the differential. We can, we can check to close ratio if you're interested for the full year. But I think a similar gap should follow-up. Because at the moment, we've also been able to somehow secure a little bit more than what, due to the lower ladder, we decided to edge a little longer than what than what we're used to. So at least for the base the base cost of energy, then the expectation or the quality there is a significant pickup, a quick pickup in the oil price or also the CO2 price, which is actually increasing we may, we may not we may see, let's say, higher costs quicker than what we we're being we are planning, let's say, in the in the forecast. In August, overall, well, August is just started, so there is no really very feedback. July overall has been months, I would say, in line with with, with June, which means that, yes, in some markets, we did better than and some other, the ones that are showing the same or residencies that are stronger, also Italy did better than last year in July. And some others are weaker, where we see, as I said before, more, more basically, the Eastern European markets. Yes. Thank you. You're welcome. The next question is from Elodiral of JP Morgan. Please go ahead. Hi. Good afternoon, and thanks for taking my questions. Can I just follow-up on the US and your more cautious view there, at the moment? If you could give us a little bit of, more granularity about your expectations for the difference of sector, the residential and regulatory infrastructure, what, how do you see those evolving here? That would be my first question. My second question would be on, CapEx and net debt. I was wondering if you could give us some color about the level of CapEx you're planning for this year? And where do you think you end up with, net debt? Could you actually end up in a net cash position? And lastly, given leverage is definitely improving this year, what do you intend to do with regards to, capital allocation going forward, buybacks, extension, what's your priority there? Thanks very much. Yeah. The first question was from the defense sectors in the US. Okay. Well, where are you most cautious? It's not positive. What are you seeing? Would say that we're seeing, fairly stable to increase in trend in, in the residential that overall is showing, and let's say, a good stability the nor residential is the probably the weakest and not so much the, warehouses or pockets, Amazon, let's say, staff or, I don't know, that the center of this kind of stuff is going. But is more the office building, hotels, etcetera, this portion of the of the demand non residential demand is clearly affected. And on the public construction, yes, we are starting to see some, some positive signs, some larger projects that are coming to the with the execution phase. And this is also the department of the demand that should probably become, become more important going forward. But also with the residential steelhead that could, if you don't know, again, if you look at the projection in 2021. They are positive on residential, slightly negative non residential and slightly positive, let's say, on the public works. The CapEx spending for the full year according to our last, let's say, projection and considering what I said before, some of postponement that we will not recover. They were decided that we will not recover by the year end. Still should arrive around the 27 to 70. Last year, last year, we had the 300 and 3040. And, and the, the financial position considering what we have just said, let's say, operating cash CapEx, etcetera, should close it's something that is, to 150 more or less 150. This is what we are assuming right now. For how what to do with the capital location. I don't know. This is quite probably an entire conference. I don't know if you want to spend. No, it's important, of course, but I don't know if this is not so much the the the the the occasion. I think we have some some good ideas, some some plans that are viable and interesting for all the shareholders. And, it's a nice, let's say, problem to have it. I think we can, we can, we can solve it, let's say, fairly fairly well, but again, should be requiring, in my opinion, and separate presentation or a much much more time to be to be discussed. Okay. Understood. Okay. Thanks very much. You're welcome. The next question is from Alessandro Tolcara of Mediobanca. Please go ahead, sir. Yes. Hi. Good afternoon, to to everybody. I have a a 3 question, if I may. The first one is on, so if you can come back as a clarification, you mentioned before the CapEx expect for the year, there is a 270 Udominos or 2270. So we'd Yeah. 270 to 75. That's right. Okay. Okay. And and your idea is, considering the plus and minus that you mentioned before on the cash cash flow side to, let's say, be in the region of 250,000,000 by year end. Correct? Correct. Okay. Okay. The second question is on, if you can come back to the July trend, and all in the US, because clearly, unfortunately, we we saw, let's say, some increasing the, tailies from COVID 19 in the US, also in excess. So I would like to understand, what is, let's say, the underlying trend in the US in July, just to have an idea of, now I will go in the, the situation for you. And the third question, the third question is on, is on Italy. I remember that in the past, you mentioned on the idea to basically, deploy and use inventories and let's start the production of your plant in Italy. Can you give us option update on beside, for instance, if, you still have, some plans, I guess, in the south of Italy, basically still talk and adjusted using, let's say, the, the inventories? Thanks. I did not fully understand the last the the last question. Okay. I I I I try again, Mister Theodore, it was related to the situation in Italy. It's basically all your plants ever started the the the production, okay, after the the the pandemic after the lockdown. With one exception by GBS. Yeah. Yeah. The only exception is the the test implant the one that was acquired last year, last year from my division this time on the sale of the year, well, beginning of July. And, and, yeah, we are gradually using their thinking inventory to grind cement. But this is part of the overall. Let's call it restructuring in Italy. Which will, which will evolve, let's say, some further action to rationalize the production footprint. So We continue to have it. I mean, if it's clear, some excess capacity, and we need to address it. Not too easy at the this time because you know that we are all would also be some, how do you call it, social, social benefit from the off scheme. So during this period, so we are not allowed really to act very, very quickly when you've been using some kind of the unemployment support. You cannot right away entering into a negotiation for it, potential or future, let's say, I'm not bowling of the plant. Okay, very much of the, of the coronavirus cases in general, in the last, let's say, 2 weeks we have been better also within the company. Because, yeah, there was a moment when, for example, I was looking Yes, back in the beginning of July, particularly in Texas and particularly in the operation where you have more people, let's say, going around because within the plant, as I said earlier, we don't have really to, I mean, social distancing is quite, it's quite easy, it's quite normal. We did have in the ready mix and the driver etcetera. No, there was one case per day, fortunately, again, nothing really serious for the first In fact, from an organizational standpoint, some difficulties due to the policy and the fact that you needed them to insulate also the colleagues or the colleagues that have been closer or in contact with them. In the last 2 weeks, basically nothing nothing happening anymore. So we do not have any new infection within the group. But it's worth mentioning that some states like Texas, Louisiana, Georgia, Tennessee, MSCC, that are very important for us in in are preparing plans for a 2nd phase of lockdown. They said they are not they were they were called by by, let's call it, surprising a sense, because initially pandemic was really strongly located in the North And they were caught by surprise when it started to become serious also, again, that's why they were not in Florida, but anyway, in the Southeast And Southwest region. And they are monitoring the steady states are monitoring the number of typically cases for 100,000 inhabitants. And if this figure, which I don't know what it is. But let's say it goes beyond a certain level, they are ready to introduce It's so called the lockdown, the 2nd phase. Hopefully, this will not occur. If we look at our own, let's say, company, Things are much less critical, let's say, than 2 weeks ago, but nobody knows, of course. Okay. Okay. Thanks. And so the last question was on, the assumption that you made on the used dollar, let's say, on your, full year guidance. Thanks. These dollar euro exchange rate, yes. The forecast is 1 to 1.12. But of course, it's now in the last during the last weeks, the dollar has weakened quite significantly. So this may change now in the next forecast. So for the last forecast that we used also for the outlook, we used not to have. The next question is from Gregory Kulich of UBS. Please go ahead, sir. Hi, good afternoon. Thanks for taking the question. A couple of follow ups actually. Can I just come back to two points, the maintenance in the U? S? I didn't hear the number if you could just repeat the would be helpful. The second one is really on Brazil and the derivative situation. If you could just maybe summarize for us the position right now is a put in call in the Brazilian JV, what the cash out would be, what you've already put into your net debt. Obviously, I think you booked, derivative valuation into your net debt sector. So could you just give us a kind of overview of that? And then did I hear correctly there, I see, did you say it's a 15 or 50 impact on net financial expense? Just maybe No, it's 50, 50, 50. 50. Okay. Yes. So if you could just summarize you know, the basically the future catch up. Maybe let's leave it there. And then I'll have a couple of other questions, but otherwise, you know, seeing in the in the U. S, the only, let's say, postponement of maintenance is about a $5,000,000. If you consider your U. S. And Italy, you go to what I said before 8 to 9 possibly. So what we could have in addition to the or or let's say as a negative variance in the second half. I think you want to Okay. Sorry. You broke up initially when you said the number, can you say it again? 5,000,000 in the US. 5, 5, 5, 5,000,000. Yes. Thank you. And considering also Italy, we go to 8, possibly 9, let's say. Got it. Total for the group. Okay. Excellent. Thank you. And on Brazil? Yes. So the question was on the derivatives in Brazil. Yes, so the basically it's the main trigger here is is the floor that is basically the valuation, the equity value of the company is a total of $500,000,000 and the half of it because of what's already acquired is $250,000,000, which is basically the floor for the calculation And maybe due to the fact that the U. S. Dollar compared to the reals have significantly changed the ratio. Therefore, the, the derivative has changed since the beginning of the year and the impact is roughly 1,000,000 So to answer your question regarding the catch out, the in a scenario from 2022 onwards, where basically then the acquirer may desire to be paid out then the minimum value would be the $250,000,000. If the 3 year average of the EBITDA, with a certain multiplied with a certain factor is, is then higher than the $250,000,000, then we were pay the higher amount, but the minimum is $250,000,000. Okay. Thank you. And then that's helpful. Thank you. Can you just then going back to trading in July, are you seeing volumes actually down in the U. S? Or are they still growing? I believe you had a very strong end to the second quarter. I just want to understand your caution on the second half whether it's more about the future or if it's something you're already seeing, right now. And then the last question, which I think, you know, because it's probably a, you know, assuming it's a capital allocation question before you have a whole presentation on it, but And you just give us a sense, in your ambitions as regards to carbon reduction and development of lower carbon intensive products, please. I mean, obviously, that's a very topical situation for the whole industry. I think there was a presentation the company held some weeks ago, which was published on the website. I believe Yes. Yes. But if you could just maybe give us sort of your take on, I don't know, the 10 year targets maybe on the sort of pure see a 2 reductions and then maybe if you're doing anything as regards to kind of in broadening the product portfolio, I don't know, low carbon concrete, whatever else it may whatever else you've got in your planning, please? July, in general, is, is supporting, let's say, I would say the, the upper the upper end of the range, let's say, in a sense that in July, I'm talking about the final guidance. If you look at July only, overall, it was a couple of months, let's say. So it is supporting more, let's say, the minus 5 and the minus 10 on the yes, I didn't mention it before, but that, of course, in the next few years, capital allocation or capital devoted to let's call it sustainability issues in general will become definitely much more more significant. Maybe, maybe not so quickly because the main the main, let's call it, need of capital is associated with the, with the, let's call it, the capturing, camera capture and storage projects, that will come sooner or later. It's a matter of identifying and then testing the technologies, and of course, also knowing where to to store the tier 2 that you can capture, but okay, in principle, this is something that will affect, in particularly, or initially, the European market, the European clients under the ETS scheme. And yes, we will, for sure, require gigantic amount of money. So to be today in a very solid trade financial position, in the light of what's coming for, for, let's say, the CO2 reduction and CO2 capture is a good it's very reassuring, let's say, is something that, that give us let's say, a good feeling about the possibility to do something without, without leveraging too much, too much of the company. And yeah, for sure, if it will come, we are working on some We have already issued some targets. We are working on some new ones, which I think come out with the next ustainability report, more likely than not. And yeah, they will require they will definitely require a significant capital, maybe not tomorrow, but but yesterday after tomorrow. Okay. And the presentation, maybe just to add in the presentation, you may have seen on this method that we have published a number of $420,000,000 for the target of 2022, which is also already realized. So they are not just new CapEx, of course. So this is for the thing is the let's say, the communication into the market, what we are in now and have already done partly and what is the target until 2022? Thank you. Can I have a follow-up? Are you doing this sec? I think that Akil is Maranile. Yes. Then it is included and it's the largest, yes, it's the largest project for until now. And are you doing the next investment in Maranil? I think there was a discussion Sandy on this call. I think it was going to be a new line, correct me if I'm wrong. No, not in Mary Neil. And mainly it's been completed in condition. No, there is initial project in San Antonio in a sense, in San Antonio. I'm sorry, San Antonio. Yes. We had a permit and we are keeping, let's say, the permit alive, but no decision yet. Been made, not final decision on actually building the entire new line, but we yes, we could do it. Let's say, it is again, and potentially a significant project and significant capital allocation if we go ahead, but it's no decisions we made yet, no final decision. The next question is from Yatin Tawari of On Field Investment Research. Please go ahead. Yes, good afternoon, gentlemen. Could you just please reconfirm the positive impact of the inventory benefit that you had an EBITDA in the US in H1, was it $26,000,000 on EBITDA or was it on sales? That would be my on the EBITDA, it was $26,000,000. Yes. I get that. We could have negative impact of $26,000,000 in the second half of the year in the US? No. No. No. No. No. Not could be Let's say that we have been this year. I mean, we needed to, as I said before, to rebuild the inventory and by year end, since we will the minimum inventory level last year was more or less at the end of June. And then, and then went up during the second half. So by the end of the year, it could be, I don't know, 10, maybe. So much less. It should be much, much less, but not not totally reverse because the idea is to is to is to keep a, let's say, the correct inventory level to be able to operate in particularly during the summer season. So there could be a 1,000,000 negative impact on EBITDA in the second part of the year? Exactly, yes. Yes. And then the second question is that could you quantify you were mentioning that the month of July was good, where the volume up in ready mix concrete and cement in the U. S? And could you, could you some specific number if you if you have some order of magnitude? I would prefer to because we usually do not which closes such a detail of the Okay. The volume trend. Yeah. But what was it up or down or stable? Where? In the U. S? In the U. S. Was slightly up, yes, versus last year. And then the last question with the again, on, on capital allocation, is it fair to assume that before committing large CapEx in, let's say, in Europe, you are waiting for a period regulatory environment in Europe. And potentially a carbon tax on imports. And that after that, we could see bigger CapEx that could be profitable. Is it, is it fair to say that you're waiting? And, if let's say the regulatory in your lunch is not, is not conducive to do large CapEx. Could you consider a buyback or are you looking at acquisitions? Well, more than the regulatory is really, it's really the the testing and then the choice of the technology, which will require some time, again, it's because they'll, they'll, they'll the largest or the newest, the largest projects beside what comes from the, let's say, ordinary maintenance and replacement project. Is associated with the carbon capture. And, we are involved in some testing. We have 2 or 3 9th of testing. That will, some are already at the let's call it operating stage, some other been identified in terms of technology but need to be built still under the there is an engineering project, but there is no equipment installed yet. And so this is more than would say more than regulatory is really to understand better what is the, what is the right way to go, which could also be different from one planter to another. It's not necessary. They're not necessarily the same, from one plan to go to another. And then of course, once you capture the CO2, we have to take it or to store it. It's another issue. This is more country or a European issue because it's not, you can, yeah, you can maybe partially solve it by your sales, but not much when you involve the entire industry and not only the cement industry because caribon can capture could be or yeah, we see that also other industry, I think maybe industries are considering to reduce this year to footprint from the rest? Yes, on the rest, on the buyback and on the dividend, I think, yeah, we will continue to look carefully in our in our figure. Our results, they allow probably some more generosity on the dividend, I think it could be expected by Why not if there's not, again, significant, let's say, needs for other, for other reason, it would make sense. We have always been quite conservative. We could increase the payouts, the possibility. M and A is more difficult, not impossible, but more difficult. I don't think it would be inclined to really unless, unless strategic or, or, let's say, highly financially sound to open a totally new market or geographic region. There are many things that you can do, smaller size, typically, both on, in the regions where we are ready. So this is something we are always looking at very carefully. Something has been maturing already last year. The acquisition for Hitachi Mint is an example. The ready mix acquisition we made in Germany is another example, these kind of projects are, I don't know, say, on the table every day, but coming up and they will be followed very closely to strengthen as much as possible. Our, let's say, position and performance in the market where we are already. I mean, it's just to come back on carbon capture. Isn't it fair to assume that in order for the investment on carbon capture to be profitable, you would need to increase cement prices quite substantially. And that it is difficult to do that without the carbon tax on on imports. So that to a certain extent, the carbon capture on the carbon capture investment depend on the on a carbon tax anymore? No. I I did not when you were talking about regulatory, let's say, environment, I was not thinking about the the border tax adjustment and, yeah, of course, this can be, can be an important variable, important factor in taking a decision So in this respect, you're right. But I think what we'll be driving more the profitability or the return of a carbon capture project is actually the CO2 cost more than that. So with the cost rising above a certain level and due to the fact that Superlife are becoming will become more and more shorter due to the mechanism. This is this will be the main, the main trigger. The next question is from Peter Epsilon of Morgan Stanley. Please go ahead. Thanks. I've got two questions. Firstly, on the buyback, in the first half, you repurchased about €7,000,000 of treasury shares. Yes. How do we take that in the context of the 7,000,000 shares that you're looking to buyback over the next 18 months? It seems like that's quite a small Yeah. I see. Should we should we assume that that 7,000,000 number for total treasury share repurchases is more as irrational or is there a potential that you actually ramp up your buyback program from here? Well, at the moment, yeah, it's a little more, that's why it aspirational because, because this was decided as your rig. But when we approved the financial statements, so at the moment, when things who are looking overall for the GDP for the industry and also for the company very, very, I would say, not very negative, but let say an outlook, which we forecasted much weaker than what we have been experiencing now in the 1st in 1st 6 months. And our our position there also the explanation to the board, which was a little bit reluctant to, let's say, approve a buyback in such a enrollment because clearly the direction was to preserve and take cash as much as possible. The decision taken by the board was to impose F, okay? We can do it. We have financial position, we can do it, but we set some price limits, maximum price limits, that, that, unfortunately lately have been unfortunate. I don't know, it's not, not unfortunately. Maybe. But unfortunately, for the buyback, we have been reaching. So we are beyond, let's say, the price the pricing was set by the by the board at that time. And So, I mean, we are open, let's say, to continue, but it will depend on the market trends. Okay. I'm interested you say that because in all honesty, your EBITDA performance in the first half was actually very strong and rose year on year, so I'm surprised that you're not pursuing the buyback as much as you'd expect as you would, considering that actually cash flow generation was very, very strong. But anyway Yeah, but it was when it was decided again, maybe he was not presented in the right way, but, no, I I think it was, again, and it was easy to, to, to, to, to convince everyone say that this was the right thing thing to do. It was considered a little more if you wish, what you need to than really something that we wanted to commit at all at all cost or at any cost. Okay. And then I've just got a question on the decision to stop selling the CO2 rights from Italy to other parts of the business, which are short credits. Can we assume that the decision to do that was simply because we had a correction in CO2 prices in the first half in the market in there was an opportunistic chance to pick up credits at a lower price. What should we assume that okay. So it's basically the question is going forward, if you had a rally in O2 pricing, you would be willing to reinstate the selling of credits from Italy to other parts of the group even if it's net neutral at a group table? Well, we could do it. As you were mentioning, we, again, in an opportunistic, let's call it, pay, we decide to invest quite significantly at the beginning of the year when the price was around in 2020. I'll call it exactly. We don't want also some at the lower at the lower level. Yes, some of them were some right about a lower level. And we secure, let's say, a certain amount of rights at a good price, let's say, which, which was more or less corresponding. Actually, this would be more to the need of the of the group for this year. So we are we are keeping, let's say, the surplus, the Italian surplus for Italy itself, then, of course, starting from next year, everything is going to change. The one will be short. The early market will be short. Actually, including Italy. So at this point, I believe that each market will will take care of of itself. This is the idea. I mean, and Italy will start to let's say, deplete, it's a CO2 inventory going forward. I'm not happy if you want to What was the cost for CO2 in the first half and which divisions was it recorded in? The cost was basically per tonne of CO2, a difference. €10 amounts. So was it €10,000,000? Was it No. It was 12.5.5. There are no more. No, but this is the entire purchase. You're asking, you're asking the accrual. Let's say you're asking, you're asking the No, not what what we paid to purchase this year to rise, sir. No. What did you pay to purchase the CO2 rights in and the decision was at a cost. Yeah, but it was not a direct cost because in part we're still having in our in our top, let's say, in our inventory was utilized. What we paid for to buy was $28,000,000, yes, $28,300,000 for one point the 4 75, 1, almost 1,500,000 tons of CO 2. And that off that was realized as an operating cost in which division? No, no, no, no, in part in part it's going, okay, it's going completely to the inventory and then we accrue What is the estimate for the full year? And and and the estimate sorry. Not the estimate for the full year. The estimate for the 1st 6 months, sir. And the accrual is about 1,000,000, more or less. For any further questions, please press star and 1 on your touch tone telephone. Mr. Lucy, at this time, there are no questions for Okay. Thank you all for listening, the ones that have been able to remain this time. Of the afternoon. Enjoy your summer vacation. I hope you stay safe as much as possible. And Of course, we remain in touch with our investor relations team for any other needs you may have. Thank you so much and bye bye. Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephone