Buzzi S.p.A. (BIT:BZU)

Earnings Call: H2 2018

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Mar 28, 2019

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Boutsiosnichan Full Year 2018 Results Conference Call. 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 everybody to our annual conference call, related to let's say the recent disclosure of our financial results for 2018. Some of the figures that we that they published today were actually already already issued beginning of February. But of course, the full results balance sheet and income statements we're not, and we approved them today. So if we look at year 2018, I think we can we can be fairly happy with our we do the outcome with our results, exceed the year. Went through some up and down during the quarter. The final part was more positive than what we originally planned. So also, let's say, the overall outcome is, yes, not exactly as good as it was in 20 17, but really close to it, which, again, we consider a fair sense of effective results. Starting from the trend of the market, so the cement volumes, we had positive that the variance, several variance in most of our markets, in some of them, like Italy and Germany, particularly this was mainly a consequence of the change in scope of consolidation. In Italy net of, let's say, the Zillow contribution, which was which enter, let's say, discover consolidation last year, the beginning of July. So the difference in this year is 6 months difference, the 1st 6, 6 months, our sales were basically flat. The Italian domestic market did not perform really in a we did not see any significant improvement in the domestic demand, but we had also some additional export sales and additional clinical sales. So overall, we posted and including the scope of the change in scope, we posted a 13% let's say improvement, which was I would say, in line with our budget. Looking at the other major markets like U. S. In Germany, U. S. Was somewhat disappointing. We were not able to achieve this thing, let's say, shipments as last year. This was also mentioned the beginning of February during the year, you know, that the weather impact during the third quarter in particular was the main we believe the main cause for such a shortfall versus last year. And, we came, we came very close, but not, but not, let's say, at the same level, minus minus 1%. Germany, as I said, with the help of some scope changes, was performing pretty well. About about 8% up in volumes and about 2% up without the lack of like for like, let's say, by neutralizing the change in scope of consolidation. The other, let's say, European markets, relatively speaking, particularly the Eastern European markets where the strongest the same in terms of relative variance. I'm talking about Czech Republic and Poland that enjoy also economic, let's say, development and trend, which is basically greater than average in the European Union. So good performance there. Ukraine instead quite below the previous year. This we realized it's also during the year. And particularly also with the competition. So some issue that we faced during the year. We recover partially in the last part of the year, but we were unable, let's say, to to achieve a result near to the previous year. So we lost more than 10% there in volumes. Instead, the performance of Russia was quite good. Shipments up about 5% and also good price performance. So they're all improving results. The problem with Russia was mainly, as we will see later with the exchange rate, not really with the underlying operations in the in ruble. Now, in terms of let's say, net sales, sales revenue, considering the the price trend, which was generally speaking, let's say, favorable, there was no real country showing any client in the price level, at least in local currency, maybe after transitioning into euro countries like, Russia, Mexico too, let's say, suffer from a flat or slightly declining price level, but in local currency, the improvement was quite generalized and widespread. So, so this translated into into a, the total turnover which was up by approximately 67,000,000 at the consolidated level. And the contribution came mainly from Italy, Germany, again, this European country, like Czech Republic and Poland performed well. Also the our operation in the in the Luxembourg in educent improving. We had a negative sign in the U S, which was amplified, let's say, by the or caused mainly by the exchange rate. Because the U. S. Operation in dollar performed at the same level of last year in terms of turnover, about 1% up that is similar. But after foreign exchange impact, we had a decline of about $41,000,000 in our turnover there. And the other and the other critical market, as we mentioned before, was Ukraine, that again, where it was quite even if you look at the figures in local currency, but due to the negative impact from the foreign exchange trend. It went down about $6,000,000, which means about 7% for this country. Russia performing quite well in ruble, plus 13%. Unfortunately, again, here, fairly meaningful impact from the ForEx about $23,000,000 and we end up with a level of turnover very, very similar to the previous years. Moving to the EBITDA, let's say, by country, The performance, the positive performance was again quite, quite widespread across our region and across our operation with negative sign only coming from Ukraine and the U. S. Of course, the negative sign in the U. S. Is being the U. S. By far, our greatest contributor to operating results in the last few years. Negative time is more significant. If you look at the pure, let's say, reported figure is about in terms of, let's say, EBITDA that is actually somewhat more in terms of recurring figures because the 2008 numbers include some nonrecurring, let's say, profit in the coming from the disposal of assets, basically. So if you you mentioned it's already minus $9,000,000 quite significant. Again, in relative terms and not so much if you look at the consolidated, let's say, amount or reference because of the relatively small, let's say, contribution coming from Ukraine. So besides these 2, the improvement was quite meaningful in Italy. The large, if you look at the reported figure because last year, we suffered from a significant, very material amount of nonrecurring charges related to the antitrust fine But, but also, but also on a pure, let's say, recurring basis in the talent market, moved from a negative of about $17,000,000 last year to a positive of about 6,000,000 this year. So, it's also the first time after, I think, 4, 5 years maybe even more I don't recall exactly where we have a positive occurring EBITDA in Italy. And I mean, we've been waiting waiting. We've been working on this for a long time. And it's a good news, I mean, to see eventually even if it's a small figure to see eventually the operating cash flow turning positive in Italy. Germany, good the foreign achievement, including charges affecting the reported EBITDA, they are associated mainly with the restructuring of the recent acquisition of cyber and insurance. So, actually, the, the 82,000,000 reported improved to about 86, in, on a recurring basis, versus around 80, last year. In relative terms, again, Czech Republic and Poland were particularly stronger. They're not bringing that they're not contributing too much in absolute terms, but but the improvement was, was quite meaningful. The Polish 1 is a bit skewed to the positive in a sense that we had in Poland, again, a release of provision, which was improving as improved the report EBITDA, in terms of recurring figures, the Polish, the Polish BDA is, that's the second, yeah, is, 20,000,000, the $6,000,000 versus $32,000,000, let's say, reported and versus $24,000,000 last year. So it's not, let's say, the improvement is not as mentioned, but still quite satisfactory. Considering the 3rd year, the overall trend. Meanwhile, in JKIA, we did not have any let's say in the recurring cost of our revenue. So the $7,000,000, the $7,000,000 improvement versus last year, is fully is fully operating. Russia, In euro, we improved by about 4,000,000, which is 9% up. Unfortunately, before exchange impact in this specific case is quite significant, 6,000,000, and we could have, let's say, gain an improvement of more than 20% like for like, but unfortunately, the trend of the ruble continue to be quite weak during the year. We have an average exchange rate well below the previous year. And so in total, the 577 reported goes down to 568 let's say, this is 8.5 recurring and compares with the 576 recurring of last year. So about $8,000,000 less. Actually, the end of, let's say, September, our forecast was not was slightly less than that. And as I said at the beginning, thanks to the fourth quarter, better than we were able to actually close, let's say, this gap. If we look at the contribution from the different regions, this clearly, Italy improving, thanks to Silo, but also to some other let's say managerial election carried out during the last few years. And clearly, also to some price improvement, not so significant, but yes, on the domestic market between 2, 3, let's say, euro improvement, which which gave us some oxygen, let's say, versus a very low price level that the country, the country, let's say, was used to until, 2 years ago. The U. S. That used to represent almost 2 thirds of the cost of EBITDA are now down to 57. So still very significant. They lost some in terms of operating margins. So we are somewhat below the previous 2 year, but we can, I think, continue to be quite happy about the performance and also with the possibility to for this high level of profitability to continue in the coming year? And the trend has been favorable in Central And Eastern Europe, okay, with the exception of Ukraine, but the other Three Countries where we operate, they all perform better. They represent about 22 percent of our, let's say, consolidated EBITDA versus 19% of revenues. If we look at the, let's say, EBITDA bridge for the full year, And based on the reported figures, the volumes impact was approximately 46,000,000 the price effect, let's say, there was about EUR 100,000,000, which is before the foreign exchange effect or before And variable cost and fixed cost variance was in for both categories, let's say, an unfavorable more, more impact coming from the variable cost, particularly raw materials, fuel, less power and transportation. They all went up quite significantly. In total, the negative variance was 88,000,000, much more than what you could expect considering the additional, the additional, let's say production in sales. In proportion today. So the cost inflation associated with particularly fewer raw material and logistics transportation was definitely, much, much more than what what would you expect with the associated with the unit, let's say, variable, very So unit variable cost in general went up in the fixed costs where, the unfavorable impact coming from cost was about the $52,000,000, so more under control. And also, I would say, more impacted by some, some, let's call it, charges that are non recurring. Typically, restructuring charges in Italy, restructuring charges in Germany. Counted for about 6000000 to 7000000. And we had also instead some higher maintenance cost about 9,000,000 overall. And this was due to in part, let's say, situation or markets where we are we have been suffering, more than the suffering work in it quite higher capacity utilization levels, typically in the U. S. And in the first part of the year, you probably recall that also the U. S. Suffer from vertical weather, which affected also our maintenance plan and brought down some of the of the equipment that needed to go under repair process, which was positive related offer to the, to the cold climate. Then in terms of let's call it other costs and revenues. We basically have significant benefit on the within this category, which is coming from the fortunately lacking of the organic trust fine, which we charged last year for about the $60,000,000. So this $60,000,000 of favorable variance, inventory and other, let's say, is also going up, which is not necessarily favorable thing in a sense that the working capital management, particularly of the inventory, has been as usual, let's say, follow carefully, but there was definitely by the year end, a higher level of inventory than what we had last year also in the U. S, for example, we when the market in September started to weaken due to weather, we decided to to continue with the, with the, let's say, regular production, so not to stop the key on which was we think overall a good idea that translated into some higher, let's say, working capital absorption by yearend. And the foreign exchange impact on the, on the EBITDA, in total was EUR 21,000,000, a negative negative foreign exchange impact. And, and that's it. Basically, this translated into into the change, the total change from Fabania 77, sorry, from 508 to 577. For the full for the full year. Now look in the same bridge by region, let's say, So Italy, U. S. Central Eastern Europe, the largest part of the improvement is coming from Italy. We are talking about the reported EBITDA again. So we mentioned already the reason. We had a negative in the U. S. And a positive contribution both from Central and Eastern Europe. If we do not consider changes in scope, if we do not consider the say, foreign exchange impact, the value of the EBITDA would have been 599, let's say, of $177,000,000. And again, and again, let's say, the bridge from by region, from 17 to 18 is showing more than 70,000,000 improvement in, in Italy. About 13,000,000 unfavorable variance in U. S, 16,000,000 points in Central Europe and 15,000,000 policies in Eastern Europe. The current margin by country, is showing an improvement in Czech Republic, which is moving from 25 to 26 approximately, showing an improvement in Russia, which is going back to 27 versus 25 last year. And for the rest, is math. Well, of course, an improvement in Italy, which is moving from a negative, let's say, 4 to a positive 1. So let's say, basically, to 0. And for the rest, we have some really very minor variance in the in Germany. 13.7. This is a 30 by 6 and basically flat. It declined of about three points in U. S. The peak in the U. S. Was in 2017 with the 33 percent with 32 in 2016 and we are now down to 30 still that the highest in the group, except, let's say, Mexico, not consolidated, which is higher. But, but yes, the loss or three points there. For the group as a whole, we remain pretty flat. If you look in the last, in the last 2, 3 years, flat to somewhat declining because the total in 2016 was 20.6 20.5% in last year, last year 2017 and less than 2019.8 this year 2018. The energy cost impact has been somehow, offset in a sense by the higher price level. So if you look at the, let's say, ratio between fuel cost, and power cost and revenues that was a worsening for fuel cost, quite, quite clear. But in terms of, for example, of power cost, the proportion between what we spend, let's say, in total. And the revenues remain fairly, fairly flat. Yeah. Our total energy bill, anyway, and had an impact on the cost as we mentioned already in the EBITDA region quite significant because we moved from 13,000,000 dollars, $312,000,000 last year 2017 to $334,000,000. 1,000,000 this year. This was the total impact of, let's say, fuel and power. In the cement business for the for the full year. And if you consider the year 20 seen, which was the lowest in terms of energy bill. The difference is about 40 or almost 50,000,000, basically a 50,000,000 difference due to the rebound of energy, energy factors, fuels in fueling in particular. Going down to the lower part of the income statement, operating profit, is clearly after versus last year. The, let's say, the, The main reason is, again, the no recurring fine that we had in 2017, in terms of the income statement and plus some improvements in, let's say, the market trends and the profitability that we mentioned already for the EBITDA. So we are up by about 66,000,000 in terms of EBITDA to sales 12.2% versus 10% last year, but partially affected EBIT, yes, sorry, EBIT, operating profit versus 10% last year. Affected by nonrecurring charges. Equity earnings from associates are slightly down due to the Mexican business, which was performing well or very well, let's say, as usual, but not as well as in the previous year. So plus there was a foreign exchange impact on the results of Domestic And Associates which was somehow affecting also the equity evaluation. We had a very positive variance 60,000,000 plus 2017, 2018 in the so called net finance cost line overall. This is coming mainly from, let's say, items that are kind of volatile. So, mainly the change that occur in the valuation of the settlement option for the convertible outstanding convertible bond. There we had a policy about 80, almost 83,000,000 And last year, there was a positive of 12. So it's a $70,000,000, let's say, advantage or revenue there, which is actually, let's say, changing the design, what should normally be, say, across became, became a revenue in this case for the net finance cost. If you look at the pure net interest expense, There was also an improvement, but rather than keep in mind, or I mean, the difference between interest expense and interest income, is a 37,000,000 cost, let's say, inter interest cost versus $43,000,000 in 2017. So we gained about the $5,000,000, we had a $5,000,000 benefit from QMAD interest sense. And the rest is coming from, say, non cash item like the valuation, the deferred valuation of the of the derivative. So profit before tax is the $116,000,000 out versus last year. In fact, in Spain, again, here, unusual, let's say, profit, tax profit last year, you may recall the, the, adjustment that we made it to be defer tax liability. This was related to the introduction of the tax reform, the change in the tax law. Particularly the tax rate in U. S. This year. We enjoyed overall a lower tax rate thanks to the mainly to the to the cuts implemented, that became affecting in the U. S. Starting from 2018. But, but we have, of course, let's say, a tax charge of $82,000,000 versus $45,000,000 profit last year. This tax expense is mainly cash the tax profit that we had last year was mainly paper. We almost don't have any see any more. So the net profit, it's very similar to the consolidated net profit or net profit attributable to the owners of the company we completed during the year. The squeeze out of the minorities in Russia, which until last year was the most significant company with, with minority shows, and it's now 100% on starting from the second half of twenty seventeen. If you look at the the, let's say, cash flow statement, which is also clearly a very important part of the overall results. We had a decline in cash generated from operation of about 1,000,000. This is mainly due to, 2 reasons. As I mentioned before, trend in working capital, which was somehow negative in a sense absorbing more, let's say, more liquidity than in the previous year, which we believe should mostly say reversed during this year. And the payment of, let's say, the monthly installments payment that we are making against the liability for the antitrust sign. So this was waging about $25,000,000 to $26,000,000 for the full year. Interest paid was very similar to last year. Income tax paid somewhat lower about almost $20,000,000 lower versus last year. And then we go to the, let's say, main cash expenditure for 2018 at $2015,000,000 of the let's call it industrial or industrial CapEx out of these, about 30 132 can be considered, can fall into the so called, the expansion category. And they relate mainly to the, what we call the perennial phase 2. So father improvements and adjustments in addition to the Medicare plant which was, as you know, totally renovated about 2 years ago. Then we have also equity investment greater than much greater than last year. $228,000,000. The two main items are, this acquisition in Germany for about $45,000,000 approximately. And purchase of the of the 50 percent, let's say, joint venture, we closed the agreement with Luca Ricardo Granali in Brazil. As you know, by end of November with a cash outlay of 1000000 and 60,000,000 approximately. Which is included in the $128,000,000. So these 2 are making, let's say, the by far the largest part of the so called equity investment portion. Another significant cash outlay that we did not have last year and we had this year, is the completion of the share buyback program. So this was, more or less at the end of September was completed by yearend during the month of December. Cash outlay of $119,000,000. Dividend payment was $28,000,000, $59,000,000 last year. We received dividend from a source that's of about 81. We had some disposal of fixed asset and investment greater than last year, $45,000,000 versus $12,000,000. And this was mainly related to the sale of our so called package concrete business in the in the U. S. At the beginning of 2018. For, approximately $18,000,000. And then on the net financial position, there was the impact coming from the translation differences and the derivatives valuation that we commented already before also positive interest received versus last year $14,000,000 versus $10,000,000. And a change in net debt of 20,000,000 dollars, $28,000,000, sorry, net debt increased by $28,000,000 after all this let's say, then items quality and negative to a level of 890,000,000. Which compares to 862 in the previous year. In terms of financial condition, we still improved some because the leverage the debt to EBITDA went down from 1.7to1.5. And also the debt equity ratio went down from 30% to 20% to 28%. So I think that I did cover everything that I wanted to, at least initially, And probably, it's hard to give you the floor and to understand better what is your opinion? And of course, your question about this figures and the in the press release. So I would like, please, the operator to open the Q And A session. This is the Chorus Call conference operator. We will now begin the question and answer session. Please pick up the The first question is from Sophia Sotomayor with Exane BNP Paribas. Please go ahead. Thank you for taking my questions. I have 3, if I may. The first one is regarding your outlook. Why is the group only expecting flats, you in the US in 2019? And and if this is regarding any pricing competitiveness or, any volume attrition that you might be seeing? And which regions and also comment on products, if possible? 2nd question is the magnitude of price increases. In in Europe, that the group expects, for example, in Italy and Poland. And the third one is regarding your cost inflation expectations for 2019. If the group is hedged for fuel and power costs in, for for next year if you could also comment on that. Thank you. Yes. Well, no, the U. S. Market, our view is, as we mentioned, let's say, in the press release, positive let's just call it optimistic or cautiously optimistic about the trend, on volume, because because last year, the impact from the weather was the significant. So if we have, assuming that we have normal weather in, in the third quarter as opposed to very wet weather. Last year, that's for this fact that This would be enough, let's say, to show a positive variance in terms of volume. If you look at the prices, so at the end also, the result, the picture, yes, is a little more, a little more mixed. We see area, that are important for us, like the northeast the part of the Texas market, particularly the Southeast, the Houston market, where competition is very tough. You have new player and new imports, let's say, important that are coming into the market, some movements also occurring maybe in the ownership of the Atlantic player, which could also close, let's say, a shift in the supplier with the need to maybe recover volume somewhere else. So there are also some announcement, which may not translate immediately into, into, let's say, additional capacity that they give the sign Or do you give an indication that everybody is trying, let's say, to correct it? I mean, like, we are too capitalized on the good market and trying to sell more. And this is of course, somehow impacting on the price letter in a sense that you assume a significant price improvement in our opinion, particularly in some of these area. In the area, as I mentioned, is not it's not very likely, and they may represent something like, 25, 30% of our sales in total. Also, the the Secours region is very competitive. You have cement, pretty, very nice player that have been imported Samantha from New Orleans all the way to to to to to Chicago. That are opening up the terminal. Nothing, nothing, again, wrong with it, but quite a competitive situation. So not easy, let's say, in our opinion, see a significant price improvement overall. So we believe that we will see some price improvements not everywhere. And the magnitude still has to be somehow, let's say, clarify or some, somehow, somehow proven. Yes. And the trend in our cost is not, I mean, inflation is not, we don't see an inflation in the situation as strong as we had last year. But, but some of our costs will continue to go up. Services, labor, labor market is very tight. We are in some of our region, we have trouble really in finding people typically when the next truck drivers are really becoming scarce resource And, and and maybe fewer have come, they have come to, to, let's say, well, level, which is not increasing anymore, but our cost for example are still going up. So this is, I would say, then describe it hopefully a little better, our or you own the market, which remain positive, but with some cautiousness for the reason that I just mentioned. Price increases in 34 and the European general, I would say here, in this, in this market, we are more and more confident, let's say, on the possibility to achieve and retain, let's say, some some price increases. But again, one of the main reason He's he's, the the the cost trend. So, yes, we should be able to gain a higher price level, but we are facing we are facing higher costs, typically in the so called ETS region or emission trading system in the region. For example, CO2 prices what we know are more affordable than the services. We are not, let's say, buying activities to rise. But if you look at this, for example, the Poland market, the Polish market, let's say, in itself, yes, is requiring some, some, filter wise to be able to, to to fulfill, let's say it's it's production and then sales level. So And those 2, right, sir, both internally? Yes. So the moment we are able to buy internally. So at the end, this will be a cost for Paul. And so the profitability of following its sales is not likely to improve because because cost and prices would more or less match. And there would be a benefit in this case for for Italy, which is, which is, in a surplus situation, not for aero, entirely, because is going to change more significantly starting from next year. But for the time being, so in this case, the benefit is growing mainly to the Italian market. So this is and this is also the reason why we mentioned for Italy, the likelihood of being, let's say, definitely better than last year. It's not much due to increase in demand. Very little is due to better pricing. And let's call it other operating revenues, for coming from so to write. But at the consolidated level, this is a wash, actually, when you will look at the results for the group as a whole, this benefit, yes, it's there for Italy, but it will offset against the higher cost for Poland, Germany or or Czech Republic, let's say. In the aging for the fuel, we are usually 6 months 6 to 7 months on average. So we think that, that, let's say, the level performed from the peak of October, November, last year, yes, there was some softening fortunately. I talked about the fossil fuels on the energy prices. There is really big, big variance between countries. So it's difficult to give you a general general trend some countries where it's stable, some countries where it's increasing significantly the power and talking electrical power. And some other declining probably nowhere. Now let's say, the picture is really mixed. So there, I think, we will see some kind of a steep, some kind of inflation, maybe maybe, let's say, the game or the main strategy to offset the energy, the energy cost that we for us, the, let's say, further use or additional use of thermative fuel, including biomass or industrial waste. So everywhere, everywhere, we will can or we are we are allowed to, the the trend is is to, to, to, improve as much as possible the so called the quality rate of, substitution substitution substitution rate with alternative fuel, which is which is already well underway in some countries and maybe not as much in others. I see. Thank you. You're welcome. The next question is from Rajesh Paseke with JPMorgan. Please Good afternoon. I've got 3 as well. First one is on net debt. Where do you expect it to end up this year and what are the key moving parts? 2nd one is if you can share any details on the impact from IFRS in accounting changes. And the last one is just a technical one. If you can confirm the guidance on sort of stable EBITDA in the U. S, is that on reported figure or is that on the recurring figure as there is a 15,000,001 off gain in 2018? Thank you. We are on the recurring and the idea is to be able to, let's say, recover, possibly, at least I hope more, but let's say to to go back to a similar level on a recurring basis. So So without the gain, that was fairly significant this year for the U. S. But at least in Dean, yes, we can, we can anticipate what you will find on the full, let's the on the notes, the table notes of the or the financial statements, is actually the impact is $90,000,000 and it's about $90,000,000 at the group level. So we will, we will, book let's say, 90,000,000 assets, right of use assets, And on the liability side, an additional $90,000,000 of the leasing liabilities, in terms of income statement, EBITDA, and this was not actually, I mean, this is still, we don't even feel reconciled because of our out look because the outlook is based on the, let's call it, traditional way of booking the is. So if you wish, this is a kind of potential reserve at the EBITDA letter. It's not not changing or changing very little when you go down to the net income. But at the EBITDA level, we expect an increase of about $24,000,000 coming from the IFRS 16, let's say, calculation. And as you know, for the right to we will have different classification in terms of cash flow from financing activity versus operating activities. These are these are the main So 'ninety, let's say, in the balance sheet, 24 EBITDA, in the in the in the case of the the 2 main changes. That Patrick is here, maybe you can say something Yes. So net debt, of course, was in 2018, clearly impacted that Pietro mentioned by a quite significant CapEx or, let's say, investments and also the buyback, of share This, of course, adds up to more than 500,000,000. And then we had an additional impact regarding the of derivatives, which gave another $90,000,000 kind of offsetting partly this impact. So if you look at this and if you look at the overall, the outlook regarding EBITDA, then we typically see in the cash flow, we see a positive trend, then depending on what the status what the CapEx level ordinary CapEx plus expansion CapEx is, we expect that there is a minimum of a 100,000,000, of a 100,000,000 reduction in a scenario where there is no extraordinary, let's say, spending. So this will be in line with what you may seen also in the past years in a normalized cash flow statement. Great. Thank you. The next question is from Robert Gardiner with Davy. Please go ahead. Good afternoon. I'll ask 2, please. So one, just to go back on, your balance sheet, yes, use of cash I see you're seeking authorization to buy back shares. So presumably after the AGM, you will look to be back in the market buying your own shares to to satisfy the convertible that's coming due. So I just wondering what to think about that. And 2, if I could just ask, you're talking your statement about a a considerable improvement in profit in in Italy. So And what kind of visibility do you have on the bankruptcy costs that you've had, the $7,600,000 that you had in 2018? Did they stop completely or what level of increase are we talking about in Italy? Thank you. Yes. No, no, I did. Okay. Mentioned in the press release, and I didn't mention it before, but you're totally right. This is another reason why we are let's say, on Italy more optimistic than on other countries. If you wish in term, again, in terms of another optimistic in excess of of the way the country, the country is growing. The cement market is growing. We don't see big improvements there, but there are some other factors we mentioned some of them. And this is another one that are clearly adding to the, let's say, positive in a sense of making or making the operating profitability looking better and more likely looking better next year. Yes, we suffer as bad debt. There is durable this year, but that loss was a $7,600,000 in Italy. And this 4, 5 main, let's say, companies. I don't know how much you follow the construction market in Italy. That's, let's say, big names like, Grand Liva, or if you include it, Saudi, CMC, condote for, let's say, big names that all went into some kind of bankruptcy procedure. And we decided to charge 1 of the percent of our exposure. And then maybe, I don't know, the near from now or 15 years, we will get to 10 or 15. I don't know that in the meantime, of course, is much wiser just to consider as the and no, this is not they should not repeat. I mean, there are no more there are no more construction companies. Okay. There is in trade, you know, in Brazil, which, okay, should be in a slightly better financial position. And, and we would be very careful anyway to look for, for, for exposure against the versus, let's say, larger development of fashion companies. So yes, this 7.6 is not not going to be there anymore. That would be maybe 1 or 1.5 and not 7.6 Absolutely. On the share buyback, yes, we think it's worth asking again for the approval. This represents more or less the second half, let's say, of the other convertible. We will see, I mean, there's no, there is no clear decision yet. It will depend. It will depend, I think, mainly on how our stock is meant to perform. Form is very well. Probably, it would not make too much sense to go after it. The industry standard remains somehow, it could make it could make sense. The next question is from Giuseppe Mappelli with Equita. Please go ahead. Yes. Good afternoon. I have three questions. The first one is on Italy. Give us an idea of the picture in terms of M And A and further consolidation that could appear in 2019. My second question is on your CapEx plan. Can you share with us what is your current level of maintenance CapEx And if you have some need for revamping or if you have, in mind, some brownfield in some countries, And my last question is on 2018 taxes because they were, let's say, very low, I would say, and you can share with us are the reason behind that, leaving aside the comparison with 2017, because, let's say, is, we know that in 2017, there were some, I would say paper taxes and what's your projection for 2019 if you consider 2020 27 as a reasonable tax rate going forward? Thank you. Yes, on the last one, on the taxes, we need to analyze it a little bit. What I want, at first, to say, well, what I could say is that there are probably some small, small impacts item, that are playing, let's say, positively in the result, do not get a tax impact tax effect. So we have some policies that are not, they're not, are not taxable. And I think this should be the main reason because, I would say that our that our tax rate cannot be, let's say, much lower than what, than what to mention, the ordinary tax rate that should be very close to what you mentioned after the implementation, of course, over the tax reform in the U. S. Which is any way, I mean, to the 21 is it nominal, but I think we will discuss it already previously. When you take into consideration all the and the changes that were introduced. We are not paying 21%. We are paying also in the U. S. Something that is more 25 to 26. So, okay. So I think we need to do on to this is the consolidated figures where you have a lot of, a lot of, let's say, adjustment from, from the financial reporting to the tax reporting. So temporary temporary adjustments that may result in the future other than do not relapse. So anyway, I would stick to something that is more 25, 26 could make a lot of sense. On the on the CapEx plan revamping real revamping in a sense of something similar to what we have done, for example, in a Mary Neil, maybe we have one one case, which is the cork, you know, corkino plant in, question, the one that the one we acquired in 2014, we decided to, purchase existing equipment. So it's a new equipment, but never and never really interacted steel. I mean, it's packaging, let's say, you think we've been in Russia, this was coming or this is the same location That's a risky team. It was, I say, either in the existing plant, which is part of a significant Cement Group, we found an agreement with them to purchase the equipment for a relatively small amount, about 1,000,000. There is another Sorry. 5015. 1515. Okay. But then there is another 5 or 6 of transportation. To move all the equipment from Siberia, let's say, to court. And then there will be the erection, which we are going to start, let's say, gradually, very gradually. We are not talking about revamping the key on the yet, let's say, probably we'll come later, but initially, we will start from the, from the finished meal, finished writing, let's say. And this is a project of another probably 18,000,000, let's say, for 2018. So it's, let's say, engineering is underway. Don't think we will complete it by the end of 2019, but it can be considered everyone being, for sure, for the finished grinding and also in future future for the client to be, let's say, for the entire plant. For the rest, we have many, many projects that are in the same, in between, atypically, in U. S, the all the distribution network needs to be, not all, but let's say some of the main terminal needs some, some capital to increase the throughput, to increase efficiency, etcetera. So we are, I would say, the range of our our maintenance CapEx, what we Yeah. Sometimes, sometimes we call it maintenance and improvement. Let's say it's more in the range of the one that I think this year. Plus some special project like the Cork, which can be considered, kind of, kind of revamping. For further consolidation in Italy, and we will see, I mean, We mentioned it already several times. We don't think that the current structure structure of the market, even if it's become much more much less fragmented than it used to be. And, it can be considered, can be considered final. So we still believe that there is, let's call it an opportunity to somehow reshuffle in a way or another, the existing assets. For us, clearly, the drive continues to be, how to or find ways that say, to improve the utilization of not maybe not all of them, but some of our clients or the most the most performing ones. So the ones that are, yes, that lower higher efficiency, lower cost. So And I I I think that there will be there will be some more, some more to come. It's likely there's likely It's like something more and more to come. We try to be involved. But clearly, we have an interest that probably other companies are reasoning the same way We hope that this is going to be a, let's call it, start a consolidation probably not not in the number of the players are the ones that exist now. We don't see a change in the number of players anymore. But maybe changes in the ownership of the assets. The next question is from Arnaud Pinnettel with Enfield Investment Research. Please go ahead. Yes. Good afternoon, gentlemen. It's Ahmed Samu from Schindler Research. I I would ask three questions, if I may. I do not see any options for Mexico in your press release. So could you share a little bit with us what you expect there? Because we are hearing from Cielc that they are pushing prices by 12% in January. On the other side, apparently, that's why we're seeing our net following what is your position and what is, in your view, the outlook for pricing and volume in 2019 in Mexico? My second question would be on, you know, Italy. We are all reading the newspaper on I guess we have seen that, Italy is now joining the the Chinese side with, you know, integrating the one belt one road, initiative. So I'm sure it's early days, but do you think it could, you know, over time, consumption in Italy, and you could move back to something above the 20,000,000 from threshold that we are seeing currently for Italy as a consumption. And the last question is very simple. You have seen 3 months of 2019. Could you give us just a flavor of, you know, if the start of the year has been metals and what you are expecting or in line or any comment from the US American side is welcome. Thank you very much. Yeah. Sure. Yes. Mexico, yeah, we usually do not include it or not because, because it's not important because, I mean, clearly, it's a big part of the business, but looking at deconsolidated these figures, since it's valued at equity, we focus on this, let's say, permitted results without talking about Mexico. Well, the other thing in Mexico, I would say that we are this year for all this year, 2018, I didn't mention it before, but it was a bit weaker. Presidential election were causing some concern, particularly in the let's say investment decision by both domestic and maybe even more foreign players. So then some stranded decision, I'm not sure you're aware of, like, stopping the new airport. We don't know if the decision is that will be reverted somehow. We always not, but just to give you an idea of what's going on. So This was clearly putting some of the construction projects on hold. And we lost some 4.5% in our volumes. Prices did not go down. Actually, we were able to keep However, the price is up also because we focus very much on the, on the so called package or barrier portion of the of our sales, which is, the higher in terms of pricing. And profitability went down some, and this is reflected in our, in our, let's say, equity evaluation. For next year, the, so call uncertainty, political uncertainty, I'm not fully, fully over. I can still still what the president wants to do in terms of, economic decision and and how to how to, let's say, improve the the the industrial output of of the country not clear. I mean, it seems that the focus is more on other subject you have been recently or you're reading the story about about Spain and their request for SKUs, etcetera. I mean, it's focused on something maybe his priority is not really the industrial output of the country. The country is in a way growing some, I mean, in terms of GDP, We are, we are, let's say, our margin is fairly, we say flat in terms of volumes. We think we can, after the 4 5 percent loss of last year, we should be able to stay more or less flat pricing. Not too optimistic. I think the attempt that was made at the beginning of the year was mainly to avoid the price reduction. So yes, there were price enhancement, but we didn't actually let's be realized and we didn't actually realize a specific price improvement so far. So maybe some other attempts will be made later in the year. If the market is stronger, it will be more likely to stick if not price level No, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, we don't, we do not assume any significant changes this year. So that's for Mexico. So it is, again, in local currency before, from exchanging, but we see results close to the ones of, of 2018, probably not better. I'd like it to be better. Maybe maybe somewhat down instead of somewhat after. Anyway, they're satisfactory, profitability level, no doubt. We're just coming down from a very from a peak and we are preserving a high capability level in any way. On the China, Italy and China, I don't know if this is enough to bring back heat to 20,000,000 tons of domestic market. Maybe, I mean, anything that can somehow give us some oxygen or some push to the economy, I think is the is welcome. I really, I really don't know. I don't think even we may discuss it in the in this kind of, let's say, projects, assuming that they will actually be executed can somehow have an impact on the, on the domestic consumption. I'm not I'm not too confident. And the last one was about did the same way, yes, the initial trend. We had, I think, in a very, in a very short summary. I think we are in line with the outlook. January February, where maybe better than what we expected. March is a little less. So overall, since March is also a bigger volume, so far, due to let's say, it's public. And relative variance is in January, February, mean, percentage variances can be misleading because you're talking about smaller volumes. So what we noticed for sure, for example, in the U. S, not everywhere, But in the U. S, yes, the so called pent up demand, which was coming from the difficulties. I mean, we faced in the last quarter on 3rd fourth quarter due to 2 weather. It seems to exist. So some of the jobs that were supposed to start or complete last year and did not, they are showing up. This does not mean that it will last for the full year. So I think we will be seeing in the U. S. More likely than not a stronger first half, not necessarily a stronger second but it is something that we will be able to comment during the year. That's it. Thank you very much. The next question is from Alessandro Perell with Mediobanca. Please go ahead. Yes. Hi. Good afternoon. I have a, let's say, a quick question and one clarification. The clarification was on the CapEx a level, so if you can, again, share with us the level that we expect, for what I understood, it should be around 200,000,000 men terms plus 2030,000,000. Let's say let's call it expansion of something that is right. Okay. Good. So starting with the 3 questions. The first one is on Italy. Can you, let's say, give us an idea of, first of all, the result negative result, EBITDA result over the ready mix, let's say concrete, you know, separating with the cement for Italy. And also an indication probably of, let's say, your policy on the public side because it's very by either way of some price increases announced. The second question is on the U. S. If you can also, in this case, give us any idea of any price announcement already made because I remember that usually, no, it takes for you, let's say, April disease, no, the the period during which you are going to apply these price increases. And the third question is on the guidance and also the assumption of the used dollar euro exchange rate because if I understood well on that facilities, you have telling us that you are assuming, let's say, a stable Yes. Yeah. So just a clarification also on this. Thanks. No. Yeah. We are on the same 118. We used for the budget 118 as for the other age. The same exchange rate, actually exchange rate average actual for the last year. Currently, we are a little better off, clearly. Again, if it continues like so, we should have a benefit there. In terms of the translation, let's say. Going back to the first question, very nice country as well. This is you, usually, we do not disclose it also because it's very difficult, very difficult. I mean, it can be some some somewhat difficult to to understand or to or to to establish the, let's call it, the transfer pricing between the 2 entities. We try to do it in the most in the most of the area, most of the fair value, let's call it fair price possible. But it's not too easy because we don't have any other customer of this magnitude. So if you add a customer, the customer of this magnitude, maybe he would be able to somehow get a better price. So I think anyway, another, the industry is always a bit, a bit penalized. And when we're talking up again about the bad debt losses of last year, it was all on the ready mix. I mean, well, maybe it's more part, maybe it's more part, maybe less than 500,000 out of the 7.6 was on the cement. So let's call it the the bankruptcy procedure impact associated with the 4 major inflection company was all on the line on the ready mix Now we clearly, internally, we see, we see cement running at, about the 20,000,000 EBITDA already. But okay, this can give you an idea, but we think we should look at the we should look at the, let's say, a timing result as a whole because the 2 the two businesses are too much integrated. And again, there is a potential issue with the transfer price. Okay. Okay. But probably you already answered, okay, to my question. Thanks. And on the price increase, you need to be sorry? Well, Italy, I read some of the, some of the comments that, that were published after the Heidelberg it's a conference call. They are Yeah. They're very, very bullish. I mean, we don't see the possibility to get the same magnitude, the same differential, let's say. We are looking for something that should be similar to what we had this year. Referring specifically to the domestic market because then we have export we have. So the average price may be different, but let's say if you're purely at the domestic market, the euro for euro. It's very possibility. More, I doubt it. And on the, on the, on the, on the U S, for the moment, for the moment, yes, there are price announcements that are very much, very much differentiated according to the region. So you go from 0 So no question asked me, or maybe extra reduction to fight let's say the imports or the new competition to maybe some area, $6, $7 per short ton. The average, the overall average, we are confident that something like, again, from $3 to $4 should be achievable. Okay. $3 to $4. And as you mentioned before, the idea for you is to have, let's say, price cost spread technically, let's say neutral? Basically so. Yes. Yes. Okay. And just Thanks. And just let's say, a follow-up on Brazil, clearly, you made this acquisition, let's say, this path, you know, 50% of this joint venture. Yeah. Can you comment, let's say a bit more on that also? No, I mean, we are, we are, we didn't, we did not initially in the press release because actually the impact on the income statement was really, very, very minor. Just 1 month of equity, equity evaluation. The closing for them of the year 20 and, 18, just the second was, was actually very, very similar to the previous year. Slightly better. It is slightly better, but we're talking about BRL3 million. So really minor, it might not change. There is definitely also there, some optimism, more optimism today for the coming year. So they that's 2 potential scenario, let's call it 2 budget scenario. 1, where we're, they call it in their share in a sense of kind of the flat economy, the impact coming from the reforms, set for a structure reform, which needs approval from the Congress. So where do they see a 1% 1% to 2% increase in cement consumption? For the company, actually, it would be more because we have secured some sales to to, to the, as a co industry sales, we've been asking to supply in one case cemented another clinker to it. To a competitor and we are accepted to do so. So for us, actually, we will be better. And the other scenario, for the countries at all is, again, adjustment to primary deficit, economic reforms, etcetera, expenses reduction, we should give more market optimism and bring to some 34% increase in cement consumption for the year. Okay. So, but in terms of all the results, we will Again, we are not exactly matching the trend of the of the country. So 1, we can increase, of course, we are starting again. That's why it's a bit misleading. So because we are starting from a very low level, but we can see some 30%, 40% increase in the EBITDA. 30, 40? 30, 40, yes. Okay, okay. Thanks. Yes. Still not where we would like to be, but there's time, I mean, there's time. Step by step. Yes. Yes. The next question is from Piruso with Barclays. Please go ahead. Yes, hello. Thank you for taking my question. There's been some changes on your debt structure this year with some maturity and then yes, there will be the expiry of the equity linked bond. So I was wondering if you could comment around that on the potential costs for 2019. Yes, Patrick. Yes. So in the as you said in the year 2018, we had basically one major major change regarding one maturity of a trade bond, of EUR 350,000,000 in the second half of the year. And we issued also another free trial in U. S. $135,000,000 net year So these were the main, changes, and there were some smaller maturities. Decide that, regarding 2019, now we are looking at a year where we have, again, 2 major topics. 1 is, as we mentioned, the convertible fund that we're mature in July. And we have, we have, some, some bank loans, maturing in the second half of the year. And many U. S. Dollar maturities. So regarding the structure there, we will, now we will see, of course, with the convertible, we have some flexibility already acknowledging to the fact that we have We have own shares acquired, but we have also a cash settlement option. So there is full flexibility. It will be seen So we haven't yet decided on what will be the final scenario for the for the payback of this. Convertible. We have also quite still significant liquidity, within the group. So there is also some some possibility to pay in cash to some extent. Then, we have, bank loans, as I said, in U. S. Dollar that may be prolonged or nearly issued because we also fully balance balance sheet's perspective may make sense to have this exposure in U. S. Dollar. Regarding the cost what was not yet visible actually in 2018 is the fact that this bond that matured in September was relatively at a high coupon of more than 6%. So 6%, 3%, 75%. This was again not visible because it's still just a couple of the last 2 months or 3 months of the year. You will see the in 2019, and this is more than 1,000,000 interest expense, full year. And then on the other side, we have issued 2017, but also at the end of 2017, it should turn up 250,000,000 and another one, as I said, in 2018. So both were basically refinancing the, the retention of the trade bond. So we had an additional interest spend in 2018, which you can see then in interest expense that actually we were not really much better than the year before, but you will definitely see it in 2019 now, the full impact. So therefore, we expect that we will further be able to reduce the cost of funding in 2019. Now we will, of course, need to be seen how the conditions are for potential new financing, there may be some new financing, the year, we have not yet decided on the instrument. There are various instruments there. And but still, the cost of funding is quite I would say, although there has been some volatility in the market, so clearly, there may be an additional financing. But overall, should give us for the full year, clearly an additional buffer in terms of net result and in terms of net debt. So that's our expectation for 2019. Okay. Would you have an opportunity? Estimation of the refinancing costs if you were to issue more debt in 2019? But then you can look at publicly available curves. So if you look at a total B minus industrial company and you look at whatever 7 year maturity, you will be around a yield of 2%, maybe like slightly lower, probably depending on we see at our secondary curve scale some, some, liquidity. So maybe, it's not really an indicator. So even below 2% maybe But again, I think this is probably something that you can derive from the market. Okay, understood. And then the last question, maybe a follow-up on the balance sheet And the priority in terms of cash allocation, you obviously have a little bit of margin of maneuver, but there will potentially be some M and A, fairly potentially share buyback potentially the some maturities to repay, where would you really see the priorities if you were to choose between M and A, for instance, and the share buyback? I think the share buyback I do not I do not consider it a priority in itself, but in the next, let's say, for 5 months, also considering the upcoming maturity of the convertible, it could become. So, I mean, A is more is more something strategic, long term, I mean, It's, and it is not really in conflict. So if you have, if you have the right M and A opportunity or you are working on a project that you consider, from a strategic standpoint, a very high priority So it's a bit different, it's a bit different view. In my opinion, I will not cannot be put on the same, on the same ground on the same level. And, on the M and A, really, what we have done rated in Brazil, has, has not over yet because we have, okay, it's not visible, let's say, in our books due to accounting in the solid rules, but we do have a commitment coming after, which is perfectly, let's say, compatible with our financial situation, but not so small in the it's going to be 2020, 2024. And usually our, our way of approaching this kind of, let's call it, the collision project, is to be, as much involved as possible. So without to avoid too much distraction. So if you put them on the table, too many things, you try your risk, you risk not to follow properly what you have just acquired. So and at the time of the initial acquisition, this is the most important one is where you really understand the people, the business, etcetera, you get acquainted with the with the country. So right now, there's not much focus on the same additional M and A. Different if you're talking about maybe let's call it bolt on acquisition. So there's something different. If you're talking about changing something or rounding something in countries where you already are and you do have the opportunity. This is, usually, usually we consider very closely the We mentioned before the, let's say, the Italian market, where it's a real possibility to further, let's say, of a better position ourselves and to improve our capacity utilization. We will this is the project that in our opinion continues to have a very high priority. We are not talking about a very, very meaningful amount. So we are talking a bit about something financially speaking. Matches baller than a potential deal in a, in another country or an acquisition or an existing company, somewhere somewhere else. So you're talking about something, again, they're not exactly on the same, on the same line. I don't know if I explained myself correctly. Okay, understood. Thanks for the answers. The next question is from Rajesh Sia with HSBC. Please go ahead. Thank you. I have probably two questions. One is on the U. S. Pricing, you did mention that, there's a mix outlook with some markets, competitive pricing environment, some you can do some price increase Also, I just want to understand detail, who are in the place who are kind of there to, who are being the discounting activity? Are you also involved or are you also in some markets pushing volume also in a way, lowering price to make sure your volume are moving off there. If you can give a little more flavor on that, that would be great. Wow. And for the second one, Sorry. Okay. Okay. Now, I mean, talking about the competitor is always kind of difficult. And then, and again, started from, from the ready mix market. Actually, it is where the end use of most of them use of cement is in the U. S. So if you have air in the ready mix in the ready mix market where prices are under pressure because maybe there is some cheaper imports or maybe there is someone that is an independent too that it is willing to gain some market share you need to, you need to react and then you're not talking about specifically cement competitors. I think, all the big competitors in the release when you listen to the conference call, etcetera, giving a kind of a bullish picture on the, on the U. S. Which is good. I mean, then which we, which we share, generally speaking, talking about the trend of the market, but is also translating into some, some pressure inevitably down the organizational chain, because if the bosses say that We absolutely have to improve our prices, 5 or $6 or $7 message is going down the chain. Sometimes, sometimes in a longer chain, I mean, the message is is arriving, but it's not necessarily coming to to a successful outcome because, because, it depends. Everybody is there not to lose market. Everybody is there possibly to gain some. But but since the market is not stable by definition, you will always have some, some, let's say, loser or or weakness. And the loser 1 year, they do decide to be the winners the following year. So you can be maybe very successful in a certain year, gaining market share, etcetera. And the following year, you have to be a little more, more, you will be confronted, let's say, we will pass a competition on some of your customers. So it's really difficult to say there's one player that is definitely more aggressive than another that is not doing any I think anyone is moving, including ourselves as a minimum to keep your positioning not to those customers to possibly increase some. And the area where the, let's say, the importance of more aggressive This is clearly where, the change in the customer base is more significant. Usually a change in the customer base entails some price reduction. Okay. Any of the multinationals who are kind of involved in this price, discounting or, is it more, related to a particular market. Martin is is one of the player that, well, is publicly traded. So they have make they made some, statement, official statements where they want to double their results within, I don't know, 3 years, 3, 4 years. And And again, this kind of message, I mean, if the market is booming and it's growing 10%, 15% per year, is one thing. But the market is okay. I mean, it's we are not complaining about the U. S. Market, but it is not booming. I mean, it's moving up maybe 2%, maybe 3%, so to really achieve the double year results within 3, 4 years means to gain market share, let's say, or to sell more than what the market is giving you naturally. And this is not really realistic in my opinion because eventually you would face some competition, the competitors including ourselves, they won't let you do exactly what you want or if you do it differently, I mean, if you achieve it differently to acquisition or maybe, I'm talking specifically about the the cement market cement and ready mix in some area, So, multiple data, for example, is a very large aggregate business. Maybe in the aggregate business, it will be easier for them to to double the result. But if you're talking about the cement and ready mix market, I'm a little bit skeptical. Okay. Got it. Thank you. You're welcome. The next question is from Stephanie Aldrick with Aberdeen Stanley Investments. Please go ahead. Hi, thank you very much for the call just now. I just had a question on terms of your balance sheet. And could you remind me on your internal net debt EBITDA targets, and whether this is more of us whether you view your target leverage in terms like a through cycle target, or and also, secondly, on where you look at your investment grade rating in relation to your other capital and cash allocation priorities? No, I think investment grade rating has been, fortunately, the outcome was positive at the Eleta has been a very significant effort on our side to make sure that S and P in this K was able to understand the way we were managing the business, our strategy in terms of, let's say, financial goals. And we are clearly very, very committed in maintaining this ladder, I hope, even improving. Why not? I mean, I wouldn't be very happy to be able to to achieve the triple deflect, if possible. So I think anything we do about schedule allocation must be somehow, somehow, confronted, let's say, with the people be minus or people be flat to standard. So I don't think we we are not likely to do something if this could affect the, let's say, the investment credit rating, the net net debt EBITDA target, yes, it does exist, and it's a kind of, through the cycle, like you're mentioning, We mentioned it both in our, in our, in our, let's say financial statements. We say that on a longer, on a longer long time horizon should be, let's say, no more than 2. Which means that you could go to 2.5 or 3 necessary, but with the clear target or plan to reduce it back to 1.5 in a relatively short time. Okay, this is a guideline. I think it's compatible with the investment grade rating. Right now, we are below. And, actually, the next year, probably we will continue to be below. We don't see a reason why to to go beyond, let's say, 2 times. We would not decide to go even lower. So to really exceed the target go beyond it. There must be a very good reason. And it must be should be a project or a decision in any way, does not affect the, let's call it, the investment grade standard or rating. So, this is the way we are, we are approaching approaching this specific point. The next question is from Mike Bets with database analysis. Please go ahead. Thank you very much. Just two brief questions for me, hi, if you could. You've talked about the average price trend in Italy for Cement of in 2018. Could I ask how the year end price compared with the start of the year? So presumably, it went up more than that 2 to 3 start to end of the year? That's my first question. And then my second question on to this IFRS 16, And I guess 2 part question. The 24,000,000 of additional EBITDA, how can we spread that for modeling between the countries? The same percentage to each of them, or is it particularly distorted to, to Europe to develop countries or anything like that? And also, the 24, when we get to net income, I presume there is no change. If we assume that sort of 'eighteen goes depreciation and and 6 goes to EBITDA, sorry, to finance costs. Is that reasonable? Yes. This is, this is reasonable. About the split, okay, clearly, for example, the largest portion of leases in the past could correct me, in terms of magnitude, you may you may be more precise, but if it is different in the US, Why? Because, because refers to, for example, car, car, car, wave ons, for the distribution of cement barges, again, for distribution of cement, at least by far the main portion. In Italy and in Germany, we have some some land, some office buildings, let's say, some in terms of equipment, very, very little. What else? Yeah, we have some, sometimes, how do you call it, we are leasing some businesses, what we call, a fleet of identity. I don't know. I think you translate it into we are leaving, for example, some ready mix operation, let's say, from someone else, yes, probably maybe you can more precise, but I think in terms of, your policy, but, roughly one third is is, let's say, Germany, Italy and Czech Republic and partly also Russia and Ukraine. And twothree are U. S. Excellent. Thank you. And on the domestic price, is actually if we look at the end of 2017 versus, end of 2. Let me see. Yeah. It's not, it's not very different. It's a bit more. Maybe maybe 4 instead of 3, but, but there is a slight difference. I mean, very, very similar. I mean, I think in the past, the Italian price tended to come off quite sharply at the end of the year. Is that a correct memory from me? And and if so, did that happen again, therefore, in 2018? No. No. Unfortunately, they did not. No, no. What we, the price increase last year, if I recall correctly, was, yes, pretty much at the beginning of the year. Maybe February, not January, but let's say February and its date. Okay, some changes due to me, maybe or you do some adjustment, but we did not really face any decline going forward. And hopefully the same way is going to happen this year, hopefully. Excellent. Thank you very much. The next question is from Gregor Kuglitsch with UBS. Please go ahead. Hi, good afternoon. I've got three questions as well, please. So firstly on coming back to the ETS, can you remind us what kind of bank you've got in terms of allowances? And then how you are planning for the next phase? Are you preparing for any changes in clinker capacity, and perhaps in that context are you seeing any changes specifically on the Italian market in that regard? That's question. 1, Question 2 is, can you remind us of your dividend payout policy? Obviously, was a very modest increase? And then related to that, whether you have given any further thought about simplifying the share structure between the saving shares and the ordinary shares or whether that's just not a discussion at all at this point in time. And then finally, so you've been focused on M and A wise, mostly on cement as far as I can tell, Brazil, Seibel, and video. Others in the industry are focusing more on vertical integration, so particularly ready mix. Want to get your thoughts as to why you are not pursuing that route or whether that's just how things fell in the last couple of years and may change in the future. Yes. Well, on the well, I guess it's a big subject, clearly something that will become they may much more, we'll have much more influence on the strategy, on the production structure, on also on the cost on the economics, particularly starting from the Nextiva, let's say, from the, from the so called 4th stage, Right now, yes, we are still able to offset basically this, not exactly what I like. So, but basically the surface of the Italian allowances that matches the deficit or the other ATS country in our, in our portfolio. Starting for last year, this is not exactly the case anymore because due to the reduction factor, which is the 1.7, let's say, per year, we already we already did freeze some, our, our, our stock. The stock, we can, we can carry forward. We can move to let's say, the forward phase, the forward phase interval allowance, it will be, will be, will be much less than our electricity that the principles about, about, let's say, the way the way allowances would be granted is is different. Not everything is totally clear yet. We're still missing, for example, the same old benchmark. So it will depends on the benchmark. But the trend I mean, without, it depends on which you have to price, you are assuming in your, let's say, long term plans in your projections. It's your to price. So it remains around where it is now, let's say, 2020, 2021, 2022 or below, it could still make sense maybe to it depends, of course, on how much you can transfer down to the customer in terms of prices. But it would still make sense to, produce and sell a part of your, of your capacity by CO2 rights. If the CO2 price goes to 30, then, it is very likely that you will be in an economic, let's say, balance selling product, let's say, beyond your, say, free allowances. So you would be able to be to be competitive and to sell products for what the allowances will do for the corresponding, if the production of your allowance is given for free, and beyond, it will be extremely difficult. This will, for sure, we think it's especially in Italy because there's a difference between countries that are maybe inside Europe. Where the they're much more protected from import versus Italy, where in the imports from non ETS countries like Turkey, North Africa, mainly these 2, let's say Turkey, Egypt, maybe tomorrow, Algeria could come easily. In this case, If you continue to raise the prices to offset, let's say, your CO2 cost, you may see some, some, the tough competition so that they are the possibility to compete against, against, countries like the one I mentioned with no, no ATS limitation. Being is that inside Europe, inside of the continental Europe, much less, in a sense, that, probably you will be able to transfer, let's say, your CO2 cost, additional CO2 cost down to the customer letter. So cement will cost more. We'd not necessarily be more profitable. So you would have higher cost in terms of CO2, but you should be able to let's say, fully sell your production or fully or fully, fulfill the demand of the certain market, not necessarily in a country like Italy where you may you may be forced to at a certain point, reduce your production below your capacity. Or your choice in all capacity just because CO2 cost would put you out of the market. I don't know if you just Okay. And you haven't looked at shutting any clinker capacity? Well, it may, we, you may, may, we may come. Yeah. We may come to this, to this decision. It's not, educated against it depends on the CO2 price. I mean, and on our fears that the competition is going to be, exporter theoretically in theory is easy. In practice, it's not too easy because you need to, to, the terminology, you need to guarantee to the customer certain consistency of your product, of your shipments. If for some reason, the ship does not arrive, the customer gets mad, So, I mean, in theory, yes, it's possible. In practice, not necessary. We may become ourselves in theory importance of cement in some situation. Instead of instead of producing, beyond the certain level or beyond the certain CO2 price, it could make sense for a company like Italy, maybe yes. Shut down a bigger capacity and just grind. It's not it's not something that we are planning now. Let's say, we have to see, 1st of all, the benchmark on the quantity of the allowance is that we would be granted for free. There could still be also some decision by the European Union to somehow tax the imports coming from, let's say, and no non ITS, non ITS countries. So it's a it's an opening. It's really matter of how much how much, Europe would like to, to, to penalize in a sense it's industry considering that at the end, the CO2 that will go out in the atmosphere, is exactly the same or maybe even worse because if you consider, maybe Algeria, it's not necessarily as efficient, and it is Italy or other countries. So if it depends on how much did the principle of being leaders and, first in, in, environmental policy, on top or against the the existing, the existing European industry. So if you prefer to give an advantage to someone else, Right. Again, in terms of CO2ization, this is not going to change. Actually, Dan is going to say maybe to get even worse. Because you have a transportation from the from Turkey, for example, by ship to reconnect that are producing locally. But if the principle is that, Europe has to set, let's say, the, high goals, let's say, or extremely, extremely to be the leader, let's say, to reduction, it may we may come to a point where the clinker capacity, yes, should not be here anymore. Without, without no improvement for environment as a whole, but, it can be it can happen. Okay. Do you have a bank and unrealized banks or on credit or nothing? Yes. I mean, we have, I mean, this is, of course, this is public So you can see it per client, but we have overall now without the allocation of 2019, We are above 5,000,000 tons now, 5.7, at last situation. So then, then has to be still has to be the redemption of the life for 2018 as the allocation for 2019 will be coming out in the next 2 months. No, I'm going to take it quickly. On the dividend policy, no, yes, of course, this is what the decision had that was taken by the board today is is, let's say, below the potential dividend cost of the company, in with these results in theory and also in fact, we could distribute more. The decision was taken mainly because there was anyway quite a significant cash out late last year. Directly to the shareholder, okay, in a different way to the share buyback. It's not exactly the same as the dividend, but anyway, it was a significant amount of money that was, was, let's say, going in the end. So the shareholders, so this was one point. That we discussed. And then we have some, we mentioned it before, some upcoming maturity for, for, let's say, to renovate the indebtedness once it is convert it may require, again, some, if we go, if you go for the cash settlement, significant or not significant, let's say, amount of money to be paid out, we can refinance partially or we may decide to use like Patrick was saying before, application, partly refinance, but there is, there is some, some, let's say, a series of payments coming up this year, which are which are not so small. And at the end, we have you have to consider that anyway, even if the group, from a consolidated standpoint, it's showing a certain let's call it amount of liquidity profitability, etcetera. The company that is actually painted even in the entity, the legal entity that is actually painted even then is the Italian 1 where the profitability and the recent result has always been negative. So we cannot forget completely, just look at the consolidated, let's say, figures and consider a dividend policy based on the consolidated figures. We need to take into account necessarily what the legal entity that paid the dividend is doing. And it's a separate, let's say, financial position. If Italy improves, likely, we were mentioning before the dividend will improve, I think, is quite it's quite obvious that we can we can we would like to improve it. On the savings, I think, you're right, we are not, it's not project on the table. On the on the M and A ready mix, what can I say? Yes, maybe we are not reasoning in the same way as some other for SAAR. We tend to avoid the we tend to avoid a further, let's say, investment further with on our expansion in the ready mix sector. We think that where we have it, okay, we can keep it. We try to manage it the best. Italy, actually, we decided to downsize eventually. In some region, we decided to exit. It was a very particular case with significant losses, but anyway, and just it's going into the opposite direction of becoming bigger and indirectly. But it's very, it's very specific to the local situation. So tomorrow in a market where we operate, we had a big customer that decides to sell its business. This is a typical case where you have to consider very carefully whether to to buy, to buy, to be, to be able to acquire it or let them go in the end of someone else. So I think there will be also in the future more cases of this kind. Sort of potential further investment into ready mix, may occur, but it will be typically defensive just to be able to not to lose a certain customer, particularly important, particularly if it's close to your plant, etcetera. But as a strategy in itself, just go out and buy ready mix now. Mr. Buchi, there are no more questions registered at this time. Okay. Thanks. I don't know. I mean, people are blessed because the conversation went on for quite a long time, but I'm glad actually we're here for So there is interest and that is important and it's taking us really the opportunity to somehow open a little more and, I mean, inform as much as possible. So thanks for listening. And I think as usual, I mean, the, our debt relation is available for any additional info. There will be some, I think, opportunity to meet you in investors beating roadshow, we will see. So for the time being, thanks again and so long. Ladies and gentlemen, thank you for joining. The conference is now over and you may disconnect your telephones. Hello?

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