Earnings Call: H1 2019

Aug 2, 2019

Quarterly report

Good afternoon. This is the Chorus Call conference operator. Welcome and thank you for joining Gabuchi Onisam First Half 2019 Results Conference Call. As a reminder, all participants are in listen only mode. After the presentation, there will be an opportunity to ask At this time, I would like to turn the conference over to Mr. Pietro Buzzi, Managing Director. Mr. Buzzi, you have the floor. Yes. Thank you. Welcome to everyone. Nice to meet you by phone and to welcome you at this conference. We just, close and release the, the, official, let's say, are fairly financial statements and assume that all of you or most of you at least were able to go through the the press release and take a look at the financial figures. I think that in a nutshell, we consider ourselves I would say very happy about the outcome of the first task that we were expecting overall a strong first task, particularly after the first quarter, which was, which was, particularly favorable. And we were able to confirm it also Also, after a second quarter, which was somewhat more difficult, but fortunately, not so difficult to offset the good trend that we enjoy in the first one. If we look at the volumes, which is the first driver of revenues and inventory also result. Cement is up approximately 7%. Most of the large part, let's say, of the improvement came actually from the first quarter. In Q2, 7 phase where we're basically stable, a little less than 1% after. And we had also some country with the volume reduction in Q2. Like, Poland and Luxembourg, the Czech, yeah. Also Italy was slightly worse in Q2, slightly negative Q2 versus Q2. And U. S. Also likely we continue to enjoy positive trend instead in Q2 in Ukraine, more than 20% up. Russia almost 10% and also Germany about 2%. If you look at the overall results for the 6 months, cement volume is basically up everywhere, about 4% in Italy with with a slightly negative ready mix sales, about 3.4%, 3.5% in U. S. Despite really significant problems associated with the flooding on the Mississippi River. And the logistics issue related to that, very difficult situation. In the U. S, instead, we have a stronger trend for our ready mix concrete, which is based in most in Texas. So we're in the regions that were not really affected by the flooding ahead and enjoyed some pent up demand, which was coming from a digital let's say, September, October last year. So that was, after the legal let's say final part of 2018, the demand started very well. At the beginning of the year and continue like so also in the second quarter. Central Europe, Overall, strong in Germany with some help from the scope changes. Little decline in Luxembourg, but not really meaningful because of all the, let's say, let's call it, logistic, the management between, between Germany and Latin in part that what is the decline in last year was actually translated actually into an improvement in Germany. And still already mixed sales in Germany. It was slightly up in the Metamax almost 3%. Eastern Europe overall quite strong as well ahead of 2018, almost 13% up. Strongest country was Ukraine rebounding from a weak 2018. But also Russia, 15% up, Poland, despite the negative second quarter remained pretty strong overall in the 6 month. And check-in at the same level as the previous year. The Readiness business was weaker, let's say, in in Eastern Europe, but not so meaningful in terms of percentage changes due to the relatively low volume particularly in Ukraine where we had a negative, but, but offset, as I said, by very strong cement sales. In, in, let's say, pricing trend, which is the 2nd, let's say, driver of revenue of the net sales. Good volume, good, good level. Let's say, good improvement, basically everywhere. We enjoy, we enjoy a price hike in Italy, which was quite, quite significant. And also in Germany, prices went up less than expected, not particularly meaningful, let's say, the price improvement in Germany. But anyway, we were able to achieve a favorable variance. Other countries like Russia and Ukraine also enjoyed in local currency, a nice price improvement, Ukraine, as opposed to what has been happening for many, for many, many years. So, posted also favorable exchange rate variance. So in addition to the local currency, improvement, we also had a positive exchange rate effect, which was not the case for Russia. Where the exchange rate remained slightly weaker than the previous year. Paul, I mean, check here are two countries that as you know, are running close to full capacity. So the focus was, of course, to try to sell the capacity as much as possible, but also to let say, try to pass price improvements in following a check by the way. Not only not only in Eastern Europe, Ukraine and Russia, the similar trend, but in Poland, in particular, considering the European Union, the cost of electric power went up quite significantly and these two countries are also purchasing CO2 rights because they're already short of CO2 rights. So the cost increase is coming from from the purchase of CO2 rights and cost increases mainly associated with looking at the production costs that may be associated with the electrical power. After some years of very favorable and soft, let's say, increases. In the U. S, the price improvement was not very meaningful. On a short term basis, we are talking something less than $2 so far. The reason is, I think, yeah, I think mainly the the weak leverage of our sales. So the fact that, anyway, we have some relatively important volumes in area where the price improvements are difficult to achieve this year. Due to stronger future, let's say, competition imports. And we also had the feeling that somehow in many areas, the price, the price has reached some kind of, of, impropriety. Where, whereas, let's say, an effort, let's say, or an attempt to increase prices would translates into a greater, let's say, import volumes into the market. So eventually, not necessarily good for the business. We did not speak yet about Mexico because, okay, it's not consolidated. But, is an important part of the business anyway considering, in particular, the contribution the equity earnings letter. Mexico is the only country within our system, let's say, where things are gone not bad because the company continues to be quite profitable and the margins are are, by far, let's say, better than average, but the trend already starting from second half of last year has been unfavorable in terms of volumes and lately also somehow in terms of pricing. So, nothing to be too worried about it, but yes, the trend that has turned somehow negative or more negative this year. Mexico, fortunately had also some stronger, let's say, exchange rate, the pesos has been following more or less the trend of the dollar. So actually in your results that we suffered a little less in cases. We are suffering more. One of the driver of our growth in the first half, after volume pricing after volume and pricing was also the ForEx, let's say, factor, which has turned, let's say, policy after last year. Where the dollar was weakening this year, the dollar, which is the most important currency for our group. Has been, has been, has been stronger and strengthening, let's say, in the 1st 6 months. We move from an average of 121 last year to an average of 113 this year. So almost 7% up. As I said, the other important currencies, the ruble is still somewhat weaker in the first half and minus 2.5 percent, but improving lately, maybe that for the full year, we will be able to reach more or less a ForEx new products. Let's say, if the ruble continues, like it is now, let's at the recent, at the Mauricio level, surprisingly stronger, stronger, let's say, Ukrainian grid. At plus 6%. And no big changes in Chic and Poland, the minor devaluation of the 2 currency. And as I said, the stronger pace was more or less at the level of the dollar, more than 6% up. So overall, volume pricing ForEx took us to a level of net sales of $1,518,018,000,000 for the 1st, for the 1st 6 months, sorry, which is, 13.6 better than the previous year. We have several countries. Most of them actually showing a double digit increase. In some cases, very, very high, like a like, again, Ukraine, not particularly significant in absolute value, but relatively speaking, a very stronger Russia, more than 20% up And, and few countries, where, where the state revenue is either either flat or marginally down. I'm talking about the so called the Luxembourg Netherlands group, which is flat. And the Czech Republic, Slovakia, a group of companies, which is a minus minus 1% at least on the like for like basis. So, let's say cleaning up from the from the Forex impact and the scope, particularly the Forex impact has been quite significant almost 38,000,000 positive. And the scope impact has been 7,000,000 positive. So we moved down to plus 10% let's say like for like improvement for the 6 month, which is anyway a pretty good figure. The EBITDA, is, let's say, very favorable, the outcome of the 1st 6 months again, for sure, above our expectation probably also the analyst expectation. This is driven, in part by, okay, some some items that I typically, no, no, recurring, in particular, this year, we have the adoption of first time adoption of the IFRS 16 leasing, which is counting for approximately 12,000,000. So this is should be, should be clean up. To come to come to the, let's call it, a more meaningful and more meaningful figure. But also cleaning up the nonrecurring items and in particular, some nonrecurring profit that we had also in the previous year. At the end, the improvement remains quite large because We have, on a reported basis, 61,000,000 improvement and on a recurring basis, 60. So it's very, very similar actually because last year, some of you may remember that the main, let's say, recurring profit was associated with the disposal of the business in the U. S, the packaged concrete dip in the U. S. Giving approximately $16,000,000, $17,000,000 or the gain no recurring gain in the first half of twenty eighteen. To this to this level, let's say, to this achievement, all the countries have been contributing quite well. The main improvement comes in absolute terms. And also relatively speaking from the Italian market. Now, again, there is something to be mentioned here because we are showing on the EBITDA of 32,000,000, of which, though, 15,000,000 is is coming from CO2 rights sales within the group. So the same EUR 15,000,000 that are, let's say, part of the, of the Italian EBITDA have been charged in different proportion. But let's say, in the, in the, I feel you'll report, if you will find the detail country by country, but every charge has been been invoiced, let's say, to Germany, Luxembourg, Czech and Poland. So the other European Union Country. So let's say the real the line improvement coming from volume and prices and also cost management is about 32 -15. So what happened in Italy? I think we had in terms of volume, again, a relatively good first half. We did not expect really the country to recover. And then instead, we were able to achieve some improvement in volumes. Pricing. I mentioned it quite strongly stabilizing at the say, normal level, I would say, for a European country with cost that are similar to the ones. So Germany, France or Spain. And and a better much better outcome of the ready mix business, which is now approaching, let's say, the slightly positive EBITDA level, which we did not have for many years in the recent past. So another item, which more, let's say, the year as a whole, the 2018 as a whole, but still had an influence last year in the first half, which we do not have now or we had to a much lower extent is the bad debt losses that we suffer. So there's also positive variance in this respect. Much less the debt losses. So, and clearly, I mean, it's not that the cost did not move up because We did have any, any way, some cost increases, electrical power, typically, fuel, to some extent, But, this is an evidence of the advantage of the so called, let's say, operating leverage. So it's enough for the volumes to go up some 4% or 5% like we had in some of the plans overall in Italy in the first half. To offset or to reduce the unit cost, unit production cost, because because fixed cost per cement producer were actually actually downward basically stable in absolute terms, but down, thanks to the higher production level. So, I mean, this shows once more how important is it always going to be to be able to improve the capacity utilization of our our plan for something that we're still working on it because we don't we don't think that the current improvement in the market is going to last much. And if it does, there are some plans that are still running number of daily, which is too little compared to the potential ones or to the available ones. In, in U. S, we close with, figure, which is a new law exactly, let's say, the same as last year. It is slightly better the recurring ones because of the of the gain that I mentioned before in the first half of twenty eighteen. This is, I think, is a fairly satisfactory performance considering again the trouble that we suffer in, particularly during the month of June. And the additional cost that we have to bear, to be able to continue, let's say, shifting and, somehow perform to the desire of the customers. What happened, what the U. S. It is, together with with Czech is the only country. Where the EBITDA margin is going somewhat down. So a bit stability, let's say, not as good as last year. What happened beside additional logistic costs that we had for, again, managing the flood situation is a significant decrease in our in our stock. We were actually somehow, if you wish, should it stay overstock at the end of year. The TRD, the final quarter was not very strong and in anticipation of a stronger demand in the first quarter, which actually occurred. We prepare ourselves with, let's say, higher than usual level of, of, let's say, clinker and cement inventory. Now this overall, it was a good idea because we were able to, let's say, cope with the stronger and tough demand of the first quarter and the climate and the mild weather, etcetera. But of course, translated this year into a significant destocking. And when you when you when you destock, when you decrease your inventory, clearly your cost are counted, let's say, twice. So this is the reason why a stock, an inventory decline of about 20 it's more than $20,000,000 between $20,000,000 $25,000,000, it's affecting our margins, it's affecting our profitability. And to, to, let's say, move, already forward looking in the second half we are, we think that it will be very unlikely to recover, let's say, the same stock level inventory level that we had at the end of 2018 because fortunately, the demand is relatively stronger. So we need to produce that and we are fortunately selling what we are producing, but to be able to come back to that level of stock will be, in our opinion, very, very challenging, also quite impossible and may not maybe not even desirable. So, this kind of, the additional cost that we are having in the first half. So it's likely to stay also in the second half. In the other countries, there's nothing really major, I would say, to mention, or to mention, thanks to the good trending volumes and prices. Overall, the profitability is increasing, the margins are somehow going after is not that the inflation has been particularly low or subdued in in some countries, I mentioned before, we did have significant cost increases in particularly in power less fuel. But the volume and the prices and the capitalization levels. So again, the unit production costs going down, all this factor together, we're able to offset the inflation and actually giving us a better margin. Are there significant, let's say, improvement in absolute terms are coming from Germany, which is $17,000,000 up in on a reported basis, but it's also 10,000,000 up on a recurring basis, which is the most, the most meaningful, let's say, the most significant. Poland appears to be down over last year on a reported basis, but we did have last year 1 nonrecurring item profit, let's say, 1 nonrecurring benefits. So again, on a recurring basis, it's actually asked by about EUR 2,500,000. Strong performance in Ukraine even though not so important and not so material. For the group as a whole in absolute terms. And, to an excellent performance in Russia, in Russia too. If we look at the split of our contribution, according to the before let's say, area of the 4 regions where we operate. 2018 versus 2019. We have Italy that is now representing about 11% of recurring EBITDA contribution, quite a significant decline in the U. S. Because the rest was going better. I mean, we already said that we moved from 60% contribution to less than 50%, forty nine percent. Central Europe is basically flat and Eastern Europe is slightly declining. It used to be 24% of the total is now 22, not because the performance was negative, but because there were other countries, in particular, Italy, gaining some ground. If we look at the DDA, let's say, bridge on a reported basis. We have the positive effect are coming from volume, about EUR 62,000,000,000. Price is about 57,000,000. IFRS 16 is a 12,000,000 and Forex $99,000,000. The negatives are mainly related to variable, variable cost and or, let's say, inventory changes as I said before. Where the logistic has become definitely more costly. Transportation in general, we have $26,000,000, higher, greater cost versus last year. Power, as I said, about 12,000,000 additional cost. Fuel is 6,000,000, which is in line more or less with the let's say, additional additional production, I mean, greater production levels. So, not really a sign of strong inflation within in this respect. Fixed cost driven mainly by exchange rate, let's say, and exchange rate and scope are moving we have a 4,000,000 negative variance. And then we are missing some benefit again, nonrecurring on the so called other revenues and costs, particularly, we had lower gains on disposal of the profit decline in equipment, so $20,000,000 less overall. Partially offset by lower cost within the so called general and administrative function. So, and the revenues and costs are, let's say, worsening versus last year, of about 6,000,000 to 6,500,000, but the recurring or operating portion of it is actually is actually favorable. And this take us from the 2027 to the 2080 you what is it? Yes, it was 88, exactly, almost over 2089 for the first half of twenty nineteen. Moving down to the lower part of the income statement, depreciation and amortization is obviously affected by IFRS 16 adoption, the amount is very similar to the, to the EBITDA impact. A little less. So the 12.3 we have at the EBITDA level is 11.6 additional depreciation for IFRS 16. So they're quite close. And So this takes the operating profit to, $165,000,000 versus $123,000,000 last year. 42,000,000 additional in absolute terms, plus 34%. So quite strong. In terms of margins, we are at almost 11% versus 9.2% last year. So again, almost 200 points improvement, 200 basis points improvement, which is quite satisfactory. Equity earnings are declining some. This is mainly associated with the Mexican performance that I mentioned before. By far the biggest contributor in the equity earnings, let's say, line is the item, let's say, is the mix can succeed during the Mexican joint venture story. And we have also some let's say worsening or some yes, worsening in the net finance in the net finance cost, which last year from an account to your accounting standpoint, we had a net interest cost of 4.4 and this year is 29. Again, this requires some comments because the fewer net interest expense has been naturally showing a favorable variance of about $8,200,000 because the net, the net, the interest minus interest income was 12.5 this year versus 20.7 last year. So So you probably remember that we had anyway some overlap in last year between refinance and repayment of bonds or some kind of negative carry. And by the end of September, we've been repaying a bond, which was relatively costly. At, 6.25 percent, if I recall correctly interest rate. As opposed to the pure net interest expense, we have some negatives in the items that are more volatile or not necessarily more for them are not really, financially a cash item, like the ForEx for gains and losses last year. We had 4x gains of 3.7 this year's 4x losses of 5.6 and did arrive at this valuations so far, we are still affected, I think, for the last time because by year end, everything will be repaid or anyway, anyway, we will go away. We're still affected by the fair value changes of the convertible bond, the cash settlement option, which is playing negatively this year for the amount $400,000 last year instead when the share price was declining, we had a benefit of $17,600,000. So very quite quite a large difference between these two items if you look at the if you look at the deal differential. So overall, that's why the net finance are worsening, are looking worse, but in reality, they're not really worsening over. Concern because what we can manage, what we can monitor is actually the net interest expense and this has been improving. Let me briefly turn, turn over to Patrick, which I did not agree before. I didn't say that already together with me, is a Patrick Klein and a Nagostino Piresa. So you can, you can give us some comment on the Just real statement. Please, Patrick, go ahead. Yes. Hello, from my side as well. Everyone, So, coming to the consolidated cash flow statement, which we can overall state if we look at the development, so basically of the net financial position compared to, last year, we can also see overall that we have a change in net debt of, positively of 71 1,000,000 in the first half year of twenty nineteen. Compared to a negative impact in the first half of twenty eighteen of thirty one point eight six million dollars. So basically what does this, what does this positive impact come from. Clearly, we do have a better cash generated from operations here. We have just been talking about EBITDA. So this is clearly also reflected in the in the test generated. We have also stable income tax on the other side. And the interest paid is, Well, there are some, some, we have just talked about the interest situations. So Caitlin has mentioned that we actually veteran here in the from some of the added cash flow. There are also some non, some, let's say, if we compare first half year of twenty eighteen to first half year twenty nineteen. There are some effects that are kind of delays because we had a new financing in in 2018 in the second half, which is now, which is being paid, but this is basically was used to also refund some activities. So the and then there are other effects that are not purely, financial debt, in the interest payment. So overall, our interest payment is, is actually decreasing, although it doesn't, it is not clearly shown now here in the in the statement itself. So it does not have a significant effect impact on the full year, net debt. The capital expenditures are have increased in the compared to the first half year of twenty eighteen. As well as the equity and we have equity investments, that's have been in 2018 have been higher compared to 2019. So overall, if you look at both positions together, we are actually slightly lower than 2018. And then we have main contribution is clearly the repayment of the convertible bond, which is basically reducing our, our debt, because of the conversion. And then on the other side, we have an offset, a particle offset by the IFRS 16 financial liabilities that have an impact of $93,700,000. So, these are the main the main impact. And then of course, we have big events, but these are relatively stable. And, and then other smaller impacts that do not really impact heavily financial position. So overall, the net financial position is as, has a significant improvement here, although we have also some significant spendings and this is This is also then reflected in the net financial position that we can see here. And it's supposed continue due to the interest impact and some other impacts that we see also in the month of July. The net debt is, the composition of the net debt is, not changed very much, but there is clearly, something new dollar financing. So we have 18% of dollar and, 80, 82 percent of euro, debt at present in the in the gross debt breakdown. And 72% long and 28% short term debts. And the fixed portion of 88% and floating 12%. So overall, the gross debt is still relatively stable after the big reduction that we had in the end of 2018 when we reversed the bond of 1,000,000. Yeah. So the ratio are also are also improving, so the overall, the leverage is still, still improving, which is, which is good to allow us a little more, of course, flexibility if necessary. We, one day after, one day after, let say, the end of the semester, we executed, let's say, we closed the deal to purchase, let's say, the the 2 grinding center and the plant in the full cycle plant in Tuscany. And so more or less, starting from that you were mentioning in July. Of course, this has been approximately an 1,000,000 and 1,000,000, let's say, cash outlay. So we are, we've been using, let's say, right away in a sense, the improvement improvement that we are able to achieve in the 1st in the first half. But of course, this is money invested and we think Not immediately. I mean, over time, it will take some time. It will come it will come back into, into, let's say, better performance of the Italian operation most stability in the volume and in the prices. And also clearly, through the synergies that we can make between the new entities and the existing one a higher capacity utilization level, which is mentioned before, is really what counts the most for the for the financial performance eventually of the country of the business of our business in general. So I think we can turn over the line to the operator and get ready to lease into your question. Thank you. Thank you for listening so far. Excuse me. This is the Chorusco conference We will now begin the question and answer session. The first question is from Paul Lager from Exane BNP Paribas. Please go ahead. Hi. Yeah. Good afternoon. So it's it's actually Paul Rodger from Exane BNP. So, hi there. Good afternoon. I've got three questions actually, if I may. If we start off with just talking a bit about the guidance, I mean, obviously, you're increasing it. You're now expecting 10% recurring EBITDA growth. On my maths, I think that sort of implies a flat second half organically. And I guess the question, I mean, it just looks super conservative. Obviously, you've got an easy base in Q3. I guess the price cost dynamic is getting better as well. So what I'm just trying to understand is, are you really thinking you'd do a lot better than that and you're just holding back, or is there something more specific that maybe we should be aware of? That's the first question. The second question is on Italian pricing. Yes. Sorry. Do do you want me to ask all three or or ways? Well, we can start from the first. I mean, of course, what would we do usually like any company is to rerun, rerun the numbers, look at the and what we have achieved and update update the forecast for the second part of the year. You're basically you're basically right. In a sense that if we make the 10% we will open percent, can be, I hope it can be 11. I am, but could be also 9. I don't know, but let's say, let's say, around, around, 10% this will translate into very small improvement in the second half versus this. We're where do we see the, I mean, trends that are not really traveled ahead. But for example, in Italy, the prices sector will not improve it in the second half. The price variance, this is one one point. And then we are a little concerned about the volume. We are not we don't think that we would be able to keep the same, the same let's call it a positive differential in the second half. In the in the U. S, I mentioned already before, we think that the price momentum is not too good. I mean, it's good, but not not too good at least to where we are. We did have already in the books, some additional costs related with the with the flooding and particularly the inventory decline, which, as I said, is going to is going to stay We don't see really any significant advantage on the variable cost. I read several comments by the analysts. Maybe we live in a different word. I don't know much obviously, we don't see really, we don't see really, let's say, tailwind coming from the from the fuel and power cost. As I said before, we are basically even with the with last year, but no real, no real tailwind. And, and in the other countries, including also Also, let's say, Germany, it would be difficult in our opinion to get further benefits, let's say, going farther. And for example, for example, Poland and Czechia are already running a full capacity. I mean, what we have done in the first quarter was particularly strong, particularly high but we cannot continue the same pace for the full year. So if we continue for the same pace for the full year, it would be well have, let's say, the capacity available. So we can focus maybe a little bit more on pricing, of course. So this can help. But these are two candidates also where the energy cost inflation, particularly the power is pretty high and it's due to rights. Are somehow let's say also waiting on cost. So see, the cyber effect is also on, but yeah, yeah, I mean, yeah, in the second half, the cyber effect will be diluted significantly, of course, versus the 1st the first half where we have only only 2 months. So I don't know. Again, this is what our our let's call it forecast is telling us. Could be too conservative. I also, I think that we are, we are pretty likely to achieve what we have said. Let's say the 10% if anything goes right, we may be more, more, the performance could be better, right? Anyway, let's say, rule out completely the same kind of performance, for the come off that we had in in the first. And so it's not that we are we will finish the year with a 20 plus percent. This is a we think it's impossible overall. Okay. Well, maybe my second question, actually, I'll I'll just follow-up on a few of these specifics that you mentioned. So maybe if we talk about Italian and then pricing first. Are are you basically saying that we are we are now at the right level? And therefore, you you would probably shouldn't expect any more increases in the second half or indeed into 2020. Because my my understanding was actually the cost base, the cash cost base, in Italy was actually still relatively high compared to some other countries. If you talk about fuel and power, you're probably right. We tend to be somehow, let's say, at a higher level, mainly because we are not able to to use as much as traditional as other countries that they are doing again, not for technical reasons, for any certain reason, permit reason, but let's say This is one of the issue and power. However, lately, we had, we had some, some benefits last year in particular with the introduction of the new norm for energy intensive industry. We had a quite significant reduction. Then with CO2 going up, it changed, but not as much. So I mean, in power today, we are not so bad compared to other countries. In terms of oil pricing, I think that if you look at the pure domestic price, I think we have achieved a good, a good level. Right now, And, yes, short term, we don't see any possibility to get that longer term, we will see it, of course, it will depend to some extent, largest tender from the cost. But in our mix, of course, there is also There's also clinker sales that are export sales that are somehow driving down, let's say, the average price. So if you look at the pure average price, maybe you could say it's still not satisfactory, but But the domestic price right now, I think, can we consider fairly good price. Yeah, if you compare with the prices of the U. S, you're missing maybe 30 cent, but the U. S. And also other other costs, a lot of logistics, a lot of transportation and margins are kind of at the peak, but comparing with more similar countries, like Germany, Spain, France is a little different, but we I could say that the domestic price level today in Italy is, is not below below it's not at the level. That that can be considered unsatisfactory. I will consider it satisfactory. Okay. And that's very clear. So my my third and final question then will actually be on the US and then twice then. You're you're talking about sort of 2% this year. You've mentioned import parity as well. I was really just talking about pressures in the northeast, and And, obviously, McKinney is now quite well known. Are there other areas on the water, that imparts a problem as well? And and so what what price we mentioned actually incidentally are you seeing on the Mississippi, and in Texas? Does that mean that's a bit better than that 2% is it? In, in Texas, we did not have any, but again, it could be more specific, maybe to our business. You know that there have been recently some changes, some also exchanges of assets in the ready mix, we lost some of our ready mix customer due to, let's say, really checking of ownership. So the fact that that what used to be an independent or partially independent customer is now part of the over the cement group. So we had also to recover somehow our volumes looking for for other other sources of sale of business. And this translated into a price trend, which was not not really, so much so good in terms of, in terms of, of improvement. And in the Houston market, which is also important for us, the, the the number of initiatives related to, let's say, cement imports are always increasing. I mean, they're not so meaningful in terms of volumes. They're not really affecting so much our volumes But in terms of pricing, yes, locally, they can, they can have an impact. In the river region, Yeah. I mean, we are in a market that is not particularly strong in terms of volumes. So by far, the 2 best performer at least for us are the Southwest and the southeast. So let's say Texas and the Atlanta, Tennessee, Chattanooga, let's say, region, The river region, it's a longer Mississippi river. Markets are performing fine, but only slightly up and this again makes it difficult for the process to really show a significant improvement. And you do have some big U. S, let's say, country, really, we sent it to operator, which are, obviously, I mean, from the standpoint, looking for always looking for better deals. You have the right mix operator in Chicago. It's just been important cement, uploading in your Orleans and moving up all the way to Chicago. So, yeah, this kind of situation that makes it somehow difficult in the Midwest to really achieve a stronger, some improvement. So, okay, in Texas, okay, in the Southeast, Houston, kind of difficult, then yes, the north is kind of difficult. Thank you very much. The next question is from Astellia Swaman with Morgan Stanley. Please go ahead. Hello. Thank you very much for taking the questions. I have 3 as well. Maybe we can go through them 1 by 1. The first one, again, following up on the raw materials impact for the second half you talked about this earlier. But can you give us a little bit more detail? Because clearly, if we look at the prices coal and pet coke, those are down quite significantly. I think 20%, 30% versus 2018. So what are we missing there? Why are you not seeing any deflation or raw materials? That's my first question. Again, I don't know. I can't tell you what is in our, in our figures. And, just a second. I will open again. We have, okay. Generally, I mean, each each country would require specific common because it's very difficult really to generalize. But if you want to make a longer, longer story short, I would say that looking at fuels, in general, we have a fairly, fairly flat, fairly flat. If you look at the euro, let's say, your return or your giga call of consumption, first half twenty 'nineteen versus first half twenty eighteen. In general, we have a fairly flat in price trend with the exception, because I think it's worth mentioning of countries like Ukraine and Russia, for example, where instead, prices went fuel fuel prices went up quite quite significantly. Second half. Actually, again, looking at our at our figures, we see full year efforts, I mean, full year. So including the second half and taking into consideration also what happened in the first half, Some minor decline is is possible. It's possible in some in some of the countries. So again, to generalize it, it's a little difficult, but it's true that the trend will be will be, it should be slightly better. Again, with the exception of Russia and Ukraine. But we are talking about very little, very little, let's say, favorable variances and nothing really meaningful. On power, a general comment is more, it's more difficult to make, as I said before, because you have countries where power costs went up quite significantly. And countries where it tends to be tends to be to be flat. The countries where power costs were going where we're trending let's say higher are mainly the ones in European Union. So it is more related with the trend of this year to rights. Which started to become a very steep in terms of increase last year in September, October. And currently, I mean, not with the same momentum, but it's still going up. So again, we don't see really a great benefit. There's no strong inflation. And fortunately, as I said before, in the countries where this kind of cost were rising more significantly also prices went up in a nice way. But, but to see really a clear benefit coming from these 2 items, in our case, I would not, I would not consider that. Consider that as a clear benefit going forward. Okay. Thank you, thank you, for the answer. And the second question you talked earlier about the impact from destocking in the U. S. During H2. Can you explain why we have this effect? Because I would assume that production should be going on normal in the second half. And I guess, in fact, you would probably catch up a few of the volumes, which you have lost in the first the second quarter to the Mississippi plus? No, as I said before, we were too high the level too high. I mean, it was very high at the end of 2018. We started to use the the clinker, maybe the clinker, because this is something that cement you cannot really have too many days of inventory, but the clinker inventory, yes, We had really, we were excited to keep production going. Year also during the, let's say, the weaker month to prepare for the first quarter. And from then on, we were actually we were actually using the stock during the winter maintenance during the winter outages. And from then on, we are basically producing what we can sell. So we do not expect really to be able to rebuild such a stock. And as I said before, maybe this is not all so we will not also be so so preferable on the right thing to do as long as we can keep this level of stock. Even if it's a little time to write now in some of the planter, from a working capital standpoint is in any way better. So assuming that the demand remains quite robust. We don't think we don't think we'd be able to replenish, let's say, our inventory. Only if the volumes are going down, like it happened in the last 4 months of last year. Okay. And then the last question I had, I think you talked about this on the call last quarter. The convertible is now out of the way can you give us any news whether you still considered to simplify the share structure? And maybe you could also explain if you would do this, how the mechanics would work how would you ensure that the family would still remain in control? Thank you. There's nothing really going on in this respect. Yes, I mean, going on is the repayment of the bond, partly with treasury shares and partly with the coal cash return of the amount. But for the right, no, we have no plan to change the capital structure. Okay. Thank you very much. That's all my questions. Thank you. The next question is from Rajesh Patki with JP Morgan. Please go ahead. Yes. Good afternoon, everyone. I had two questions as well. I think for the second half of the year, you said your guidance is based on conservative assumptions, and you mentioned some of the concerns in response to one of the earlier questions. My question is, do you expect the results in any of your market to decline in the second half year on year? And the second question, is if you can provide an update on expectations for CapEx and where you expect the net debt to end up at the year end? Thank you. Where markets really to decline, let me see, because the second asset is usually, I mean, most of the market is usually in stronger than the first one. So I don't have the area in front of me, really. All the figures, but, yeah, if you wish, as I mentioned in the for the Italian performance is not expected at the same level of the first half. The United States, quite quite similar versus, let's say, last year, let's say, so to end up with something that is very, very close. Germany, yes, it will be somehow declining, but this is a more scope change effect. Let's say that Yeah. Poland, Poland and Czech. Yeah. We mentioned it also in the in the press release, wind flows, with a slight increase, which is, in the case of Czech, actually, better than what we did in the first half. Ukraine, also the performance in Ukraine should be, in a sense, say not as good as in the first half, but with, I mean, closing the year with a clear improvement, Yeah. I mean, I think that maybe the two countries where where we are a little more careful are also due to the strong performance of the first half, Italy and Germany. So these are the 2 that are more likely probably to to show a slower slower pace. Sorry, Patrick, isn't that you want to say something, Patrick? Yes. Yes. I think we can confirm that typically what you can see, especially when we when you're going through some spending such as Pietro mentioned that we have the $80,000,000 for the, for the 3 plants in Italy this year. And then, of course, there are some other spendings, then we have also the alternative cash amount spending and so the repayment. And and we have a, you know, CapEx program. So what we can see is almost in line with what we also expect in a in a in a relatively I would say, normalized situation where we have more than 100,000,000,000 kind of change in net debt in a year. This is something we would expect is also the case for 2019. So, this reflects already the, mentioned effect of basically CapEx program that is, probably including equity investment is similar to last year's level. And, and then of course, results wise, the indications that we had made before already included in this in this forecast. So basically a reduction that is slightly above 1,000,000, euro of net debt. In 2019. Okay. Thank you. The next question is from Mike Vester Database Analysis. Please go ahead. Thank you very much. I had three questions, if I could. First one on Germany, performance was extremely strong. And I just like a bit more of an explanation if you could. I mean, EBITDA recurring was up, like, I think, 10,000,000 yet it had an additional 8,000,000 of carbon charges. I know the acquisition contributed an additional 4 months Yes. What I'm trying to understand is, was the improvement driven in Germany by the the acquisition, by the additional volumes, because it didn't seem to be much pricing or was the cost down significantly? Maybe just a bit more explanation for that. And also, you know, why you expect it to be less in the second half? Is that just the positioned effect? That's my first question. No. I mean, yes, yes and no, yes, so we started to move some of the production and sales from, let's say, even if the cyber plant is still running, we'll still be running until the at the end of September or less, the contribution coming from from this specific, let's say scope change was not, was not so significant. So I think it it it again, I think there was there was a quite good cost control. Let me check briefly. If we had some significant, let's say savings. It's coming. Yeah. The performance is coming basically from the, from the, cement, cement division. And so, because of from the concrete division, but let's say, adjusted U. S. We have around the $10,000,000 coming from the Cement division. And Let's see. The volume the volume let's say, it's volume impact was around 6,000,000 positive in Germany. The pricing was about 16,000,000 policies. And in terms of cost, we had almost, well, now positive in this case, yes, a positive variance for fuel, about 4,000,000 flat, flat power cost. And, in terms of the inventory changes, not much going on there. Personnel, the slightly negative, but nothing really significant. So on the and repair and maintenance, flat versus last year. So think overall, overall, a good performance in terms of plant operation and also managing, let's say fixed cost. I don't know if I missed something, I hope not, but I think, yeah, the volume we mentioned it, I mean, the price, price volume mix, let's say, is about there's not a lot of prices already. The sales and volume mix is about about 6 positive and the price is about 15 positive, 15 positive, but yes, this on a cost situation, which has been either favorable or just slightly negative. Understood. That's great. Thank you. My second question is on the acquisition in Italy. Could you tell us firstly how much capacity 1,000,000,000 tons a year you've acquired. Do you intend to retain all of that, or is the plan to close some of it down and to rationalize your production? And have you quantified anywhere this or given out the synergies that you're expecting? Yeah. Yeah. We did. Well, capacity is not really so many full because, I mean, the 2 grinding centers potentially, they might have one plus the other, maybe 400,000 tons of capacity and then other 500,600,000 could come from the, from this, the full cycle, let's say, plant in a in Tuscany. But I think we have to look mainly at what these 3 entities or 3 facilities were selling, which is in the range of 400,000 tons, more or less per year, and which We will try, of course, the idea is absolutely to, to, as soon as possible. There are some constraints in part also related to the EPS service here to allow us to set up particularly for the full cycle plant, which does not suggest the responsibility to to just close the plant right away. But in perspective, the idea is to is to be able to reach to achieve the same volume, the same customer, to reach the same customer from the existing allocation. So one of them, the so called Bogro Santander Master is very across the street from the Obilante plant. So this is a it's already in the process of being, being shut down this kind of center. The other one in Aracotta, there are some reason associated with their product mix, which, which forced us in a sense to maintain the life for some time, maybe 1 year, maybe 18 months. And on the full cycle plan, To move it as quick as possible to a grinding center is our is our idea and to supply, say, clean in this case, specifically from Weidonia, which is the Roam plant that has plenty of capacity, let's say, available. Synergy, we think that on a yearly basis, let's once we are, let's say, fully restructure. So using entirely our capacity and better and reducing the number of open facilities. So reducing also the fixed costs could be 11, 12, maybe best case, 13,000,000 per year. This is the idea. Perfect. Thank you very much. And my final question was just returning to the U S and the, weather difficulties and logistical differences in the difficulties in the first half. Were you able to quantify what the additional cost might have been with all of that stuff? Yes. We did. It's still, somehow let's say, not fully done because once the river was reopened, actually, the pipeline of and load, let's say, train and then that is to be loaded is quite, it's quite long and it will take at least 1 month to come back to a normal situation. So we think that we lost approximately more than 100,000 tons of sales. And additional logistics costs between $5,000,000 $7,000,000 in this case, okay. But And that will continue a bit in the 3rd quarter by the sound of it. Say it again there? That will continue a little bit in the 3rd quarter. Because we are not we are not older. We need to to to if if the season goes well, like, we hope, July was a good month, let's say, more or less the level of last year, to be able to really we build that the so called peripherals inventory. So the what we have in the 30, 40 terminals that are connected to the system or on the system, it will take at least, 1 more month with, yes, additional cost. And maybe in some cases, use of, use of trucks instead of lower, lower cost transportation means. Understood. That's great. Thank you very much. The next question is from yash in Tuari with also the investment research. Please go ahead. Question for me. My first question would be on the on the U. S. And then energy. Could you tell us how much of your fuel comes from pet coke in the U. S? That's the second we will check it. I can tell you that it cannot be We have about 25% to 6% of a wasted derived fuel. So it cannot be more than 75%. But Let's say don't go in a moment. Go. We've already raised the column. Because we have some gas and we have some, maybe we have some call also in the U. S. So if we take together, yeah, that scope is about 50% that is also another how much is that? 19 another, yeah, another 20% of coal and, which can be somehow consider the same, I mean, similar in terms of trends and cost. So if you look at pet co pricing, the pet co the decline from a level, which was close to $100 last summer to a level, which is close to $60 today. So it's like $40 decline. Have you seen already part of the decline in your press? No, I've mentioned I've mentioned that before. We had pretty stable. If you look at the euro, the Jigakal, trend in dollars in the first half. Let me check it again just to make sure U. S. Yeah, we We have very, very, very, very similar levels versus last year. No, we haven't seen any digits. This includes all fuels, of course. I mean, the mix is the mix of the entire fuels which is not only pet coke. Actually, the but one thing that you were mentioning about the U. S. Pet coke in particular is that as opposed to Italy or Mexico, typically referred to the, to the so called SAIDEXA index So all our pet co purchases refer to that index, which is probably the one you had in mind In U. S, we buy directly from the refineries. So the from the closest refinery, we had a direct contact. So there's no no impact on from the, from the, let's say, freight cost or shipping cost. I mean, ocean freight, and then the pet coke is moved either by rail or by truck to the plane directly from the refinery. So it also depends very much on what that specific refinery is doing. If it's producing, it is not producing, if it's willing to say, get rid of more or as a necessity to get rid of more petcock than, than than usual. So, it's it's not so much linked to the international price. No, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, Okay. And maybe another question on the Eastern, you're telling us that the, your plans are sold out or closed to being sold out in a in a Poland, etcetera. Yes. Yes. What what would be your if you look at the medium term, what would be your strategy for the volume continuing to increase a little bit in the next 3, 4 years? Would you consider importing in those countries? Would you consider some development debottlenecking for an investment? How do you see the medium term in those countries in terms of, of your footprint? I mean, what has been really booming and increased significantly and is also by far bigger in terms of total market is Poland. Because you compare a country that has, I don't know if this year could be 17,000,000 tons, 18,000,000 tons of cement consumption. Versus a country like Jacob and that's 4 or 5. So, and in in in Poland, actually, No, we do not, the idea of increasing capacity. We can optimize, but we don't think it would make sense to increase capacity. We are probably at the point where the country could turn more negative, hopefully not too much. But let's say, kind of a repeat situation, which we try to take to manage at best in part with the prices in part with as much effective effectiveness in production as we can. Importing, in theory, if really the country would stabilize at the level, which I serves totally our capacity. Maybe something from Germany could be transferred, but I don't think it would be so cost effective. So could be thought. We could think about it maybe by train, but probably not so cost effective. And same thing in Czech Republic. So where Czech Republic has been partly also supplying Poland in the Northern Northland, we have some ready mixed clients in the northern part of Poland, which have been supplied by Czechia. In Czechia, in theory, one thing that could be imagined or envisaged We have a very large vertical integration as opposed to Poland where the vertical integration, where I think there's more you could also, in a sense, purchase cement from competitors for your ready mix. And in this case, have more cement available for the for the third party market. But usually, we don't like to do that because it is also a matter of quality, procedure, etcetera. So we are not really we're not really like it, but could be could be an idea. My last question would be on Italy. In the first, at the beginning of the year, you suggested that imports from our Algeria or maybe Turkey with the cattle prices. From pending, we've seen prices moving in the right direction. Could you give us an update on this? Do you still see this as a threat and, on a on the Italian on the Italian market? You mean more exports from this country? No. You mentioned earlier in the year that you could see import in a given Italy from Algeria and Texas. So yes, would you see more exposure? Of course, in Algeria, of course, in in perspective, due to the additional capacity that's been put in place and more is coming, could could be a threat. They are not really well organized today. I mean, they're lacking really a lot of infrastructure. So what they have been doing is really limited compared to the potential. So they need to go through a step of, of, let's say, of putting together the necessary infrastructure, which I think it will take quite a long time. Maybe Egypt's more aggressive. And the bigger threat is coming sure from Turkey, where the infrastructure is there, the capability that failed the producer of the country to serve cement is, is really, is really strong. And, and that's the fit we, we have been seeing some or some, I mean, in 60 days, I mean, in Southern Italy, there are already some terminals with your operating and importing either clean care or cement. So it's nothing really, really new. The major, the major or the potential bigger threat will come, I think, with the next phase of the emission trading scheme. So the fact that that the cost of CO2 will probably be greater. We will not have the repayment rule of the 50% So this will make some of our sales, let's say, to the to the export market or to the domestic market at a relatively low price much less, much less interesting. And if you have to buy to produce, probably, you are not so competitive versus Turkey producer, the producer that has not cost for sale to write. And what would be your strategy in this scenario? Probably to produce and sell, okay, thing to produce first, what we can do with the future, so to free allowances. So, what points to the level of CO2 free allowances should also be, be produced. From then on, try to, to, increase prices if possible. So pay for the CO2 cost through additional prices. And if it's not possible, because the imports are, let's say, more competitive and will jump on this, on this, let's say, higher price level. Maybe like you were saying before, import ourself. So instead of, instead of, let's say, facing the right competition, trying to to, to, let's say, offset it through, through an import terminal or an important facility. This could be could be an idea. The next question is from Alessandro Tortor with Mediobanca. Please go ahead. Questions, if I may. The first one is, on the U. S, if you can, sorry, share with us the trend in July volume, let's say, trend in July, after, as you mentioned before on Mississippi in June, that Then the second question is on Italy. I don't understand what you have assumption of ready mix business, you know, if you are targeting a breakeven desire in the ready mix, the second question, sorry, the third question is on the tax side. I saw some, it's a good number on the tax rate. Are you, for instance, maybe exploiting some, tax losses, maybe you have in Italy, given that now Italy now is printing a good numbers? And, the last question is on the guidance. Can you also give us your assumption on the FX, let's use dollar for instance, the main one on the effects for these guidance that you provide. Thanks. Sure. July volumes, I mentioned it before, we are at the level of last year. So very similar. That's been actually slightly better. So July has been slightly better than July 2018 in the U. S, as a whole, with again, some regional differences, the clearly regional differences, but overall, we are slightly better. EBITDA RMC. Well, this is the first step we would we would like coming from, from, let's say, a period of heavy EBITDA losses in RMC, yes, the first step for this year would be to achieve, let's say, the 0 level. From then on, We try to do better, of course, but let's say, the initial step, the first step would be this one. I don't know if we will be able to achieve it really. Maybe yes, maybe not. But if we don't, if we don't, we should be very close to it, let's say. Deferred, yes, deferred taxes, there is some impact coming, yes, from the calculation because we have, compared to what we have in the balance sheet, actually, the amount of potential, carry forward, or text or text processing or letter is much bigger because it's been gradually gradually impaired, let's say, based on maybe this year, we will change some But let's say, based on the following 5 year plan, which until now or until, say, 2 years ago, was not so optimistic. We did not recognize the part of the deferred tax assets on tax loss carry forward. So there is some of this and the, and the, and also the, okay, the, the, but this was already last year, actually the lower, the lower tax rate in the, in the U. S. Is coming up. And we have also a better mix, stability from Ukraine and Russia where the tax rate is lower. They are bringing some additional, how do you call it, the tax income versus, for example, foreign the tax income has been fairly stable this year so far at least and also probably for the full year. FX, Patrick, do you have it in your front? You have the forecast 2019. We use now, we use 114. And we use for the ruble, we use 75 approval for per euro and 32 with an upper euro in the Ukraine. So these are the main the main currencies here. Yep. Sorry, sorry. I didn't catch on these dollar for the full year, which, level you are assuming for use dollar euro? Average 114. Okay. 114. And, sorry, Mr. Peter didn't catch, okay, understood for the tax rate for the first alpha, which is, let's say, quite good. Can you help us, let's say, to put the numbers for the full year around, an indication, okay, for tax rate? How much do we have for the first half? We are towards 30% is another 30% less than I do remember. 21. We have to check. It's 21. It's 21. It's alpha. We don't really, we don't really, I mean, yes, we have a budget, but to trust it really for the tax rate, I don't know. I don't know. I mean, until until profit before tax, I think we we can make a good assumption, a good good guess. I don't know. It depends on the fact that you're planning as well. Yes, it depends on that really because you, you, something that you actually can change, or you can have more defer, more positive defer deferred taxes by year end according to the calculation. I mean, if you want to to be on the safe side, you're 25. Otherwise, keep it as it is, keep it at 20. Okay. Okay. No. I don't, I don't, you said, I'm taking responsibility. No, no problem. Just only because we we had, let's say, these are good results, okay, on the fiscal side. And I don't know if there are something, let's say, specific or one offer, Also, for instance, as you said before, it's a matter of mix, okay, helping you, okay, to keep these tax rates so low. Okay. The next question is from Greg Orkuglitsch with UBS. Please go ahead. Hi. A few questions. Sorry. It's getting late. So, just briefly on, acquisitions. So you've just done 80,000,000 deal in Italy, I guess, sort of to sort out the market. I think you gave us an EBITDA, which at run rate implies kind of 6, 7 times. Yes. I guess the question I've got is, you know, your own stock trades on 5a half, 6, something like that. In terms of EBITDA multiple. So how do you how do you kind of justify acquisitions that are much higher than that multiple. I understand that it is a network effect and you're fixing the market, but more philosophically, how does that kind of work for you internally? Or you don't really consider your own stock in that context? I mean, but, yeah, financially speaking, you're probably, you're probably right. It's difficult to find or there's no clear evidence of this justification. Again, in the key in this specific case of Italy, We felt that we had the impression that, more than the impression, meaning, we know that the current If you want to stay in this country, and I think we want to stay for several reasons that sometimes go beyond also the pure business reason. We cannot, we cannot stay like this forever. We need to, we need to do something. We need to to bring the becomes the operation to a level that is profitable, of course, and also sustainable more than than what than what we've been able to do until now. So we realized that with the existing assets, we could not, we could not achieve that sustainable and then profitable level in the long run. So again, it was somehow a matter of, achieve this this level, which way we can we can do it, we can achieve it or not. And the answer was yes. Probably could have could have we spent less than what than what will we have spent difficult to tell, because, like any transaction, course, you try to deal and best with your with your counterpart. I think we did Okay. At the end, really, I think the price was important. We thought that we did not discuss it and then we tried to lower it as much possible. But the philosophy, if you wish, behind it was really what do we want to do with Italian business? Do we want to leave it as it is and continue in a satisfactory way or try to fix it and the lowest possible cost. By the way, Maybe not necessarily this I hope this would not imply further capital, let's say, outlay But even with after this acquisition, we cannot consider, our Italian operation fully sustainable in the long run. I mean, there's still something to be done. But probably, it will be more internal, let's say, than the next thermos. So we have to do something. So this is the main the main, justification, which I don't know if you if you that makes sense. Then maybe coming back to CO2. So I think in the first half, it kind of sold. I think it's, if I recall correctly, 15,000,000 Yes. Of certificates internally. And I guess if we extrapolate that for the year, maybe it's gonna be 30 or something like that. Exactly. And then obviously, next year, maybe still the same. But so what happens in 'twenty one? Does it basically become an instance where cost in Germany is not going to disappear. It's still going to be there. And then you need to do the income disappears because you don't have the excess. So then you'll have a $30,000,000 drop in profit basically. Unless you're able to recover it on price? Or For our inventory, it allows us to carry on for for maybe 2 years, we'll see 2 years and a half of 2021. We will see. Okay. 2021 is coming. Yeah. 5,000,000 tons. So you have something like now maybe every year a little more, so more than 1,000,000 tons now. So maybe less than 5 years that, yes. So, okay, it's not immediate, but of course, it will change because because the free allowances will be adjusted to the most recent So this is particularly negative for Italy, not so much for the other countries where we are. Running at high capacity utilization level. So, like I said, we were speaking about Portland and Czech before. They will enjoy an amount of quantity, let's say, of field allowances, which will be very close to the full capacity utilization. So the trouble that you wish is mainly is mainly Italian. We are Yes. TriNet, this is one of the efforts also related with you with the recent acquisition to improve the capacity utilization, but we will for sure receive lower, lower free allowance. And then, from then on, as I mentioned before, you this is a situation which affects the entire industry. So it's an issue, not only for ourselves, but for the entire industry, I think 2, 2, 2 direction. 1, to lower your steel footprint as much as possible. But and this is quite difficult in our industry. So maybe you can improve. We have a plan. I mean, 5% best case, I don't know. If you have time, maybe we can lower 10%, but more is going to be very difficult unless you really change completely your your production process or you introduce some kind of carbon capture, let's say, equipment So this is on one side. On the other, probably transfer part of the additional cost to the customers, if possible. If this will make, we'll make the Italian market too attractive for the for the importers or for the quarters, then I mentioned before, you would probably have to somehow either lower your production level, possibly keep your sales level, maybe become partly an importer, maybe I mean, these are something that we have to start working on it and understand what could be best. But yes, it's a new one in the 2021 data or new it's really a new year or any will also, it will also trigger some capacity closure, which is not does not happen so far because of the famous 50% of which in a sense is positive because because there's been recently too much, let's call it, sales driven just by the issue to allow us its goal. So by the goal to achieve the full analysis. So I think it would be beneficial overall for the industry in the sense of restructuring the capacity. More costly for the customer. I think this is inevitable. Okay. And then final question just to come back on the debt. So I see, like, in the last few years, generally in the second half, you generate something like 200,000,000 of free cash flow. And then obviously you're spending 80 on the plan. Exactly. Yes. So I was thinking your comment earlier, I think it was from Patrick suggesting that the whole year, we'll have a 100 debt reduction, but you already had nearly a 100 in the first half. Obviously, I understand there was another moving parts, but starting from the first half. So the 100 is year over year or is it from the first half? Because it just sounds low because you basically already delivered that in the first half. So No, the 100 or more than 100, but not much more than 100 is, if we compare the net financial position as our first of January, 2019, as we see, 31st December, 2019, that's that's what I'm talking about. So basically a total total year total year reduction in, in net debt. And, considering all the effects, full year effects, that we, that we can forecast. There are no more questions registered at this time. Okay. Good. Good. I mean, no, good thing. And as I said, I think everybody's a little tired of listening. Okay. Thank you for those. Thank you for your patience. I hope you did get enough information. We remain available. Right away for vacation. But anyway, no, we remain available. Please, please, touch base with our investor at if anything else. Thanks again and good bye. Ladies and gentlemen, thank you for joining. The conference is now over. And you may disconnect your telephones.