Earnings Call: H1 2018

Aug 2, 2018

Quarterly report

Good afternoon. This is the Chorus Call conference operator welcome, and thank you for joining the Boccioni Champs first half twenty eighteen results conference call. As a reminder, all participants are in listen only mode. After the presentation, there will be an opportunity to time, I would like to turn the conference over to Mr. Pietro Chief Managing Director. Mr. Busy, you have the floor. Yes. Thank you. Welcome everyone to our conference. I'm here together with, Lagostino Piresa, our investor relations and, Good day. So I'm ready to possibly answer all your questions after the first part of the presentation. Again, thanks for for joining. We just, approved today our, last year results. As you know, I mean, I feel trends are usually a pretty good indication for the full year. After particularly this year first quarter, which was quite significantly affected by either less working days and also whether it's showing many, many of our countries how we ended up, let's say, the first half. In terms of volume, I think a good recovery in, in, in, in Q2, cement was overall up, almost 8% in Q2. And, And this, this recovery was generally, evident, let's say, in most in most of our So you're positive, the U. S. Czech Republic Poland volumes were up in Italy too, even though this was helped to a significant extent by the by the change in scope. Also Germany has been has been recovering. And, did this brought brought that, let's say, the the the the the trend for for the 1st 6 months to a level which is, which is slightly up as we mentioned in the presentation. Actually, if we consider the, the, let's say, changes in scope of the debt occurred mainly in Italy, but also to some extent in Germany, we are minus to 1.5% versus last year in terms of cement sales. So a little, very, very close to the previous year. Again, looking at the trend, by countries, we can point out, let's say, we should point out the good performance of Italy. Even though the market is still, let's say, in a stagnant situation, So, the performance was was strongly added by the by the changes scope for the 1st 6 months. You remember that cemented dealers started to be consolidated beginning of July last year. So the overall market, the overall market is is probably down around around 4%, which is also our our figure, like, like for like. In U. S, the performance is exactly the same as last year in terms of sales, same levels with with, let's say, a different difference is quite significant difference in geographies, among the states where we operate. We had a strong level, a strong or, let's say, definitely better than last year level in the Southeast States and also in the Southwest, including the Texas area, more or less flat, the typical, let's say, Midwest States, the central part, the core part of our Riviera region and a decline in the Northeast, which has been the area. Mostly suffering this year or mostly down this year for us. The German market is in line so far versus last year. There was an improvement in the second part, let's say, of the semester, but not really enough to completely offset the very negative February March effective, let's say, mainly by the bad weather. In the Eastern part of Europe. So Eastern Eastern Europe, let's say, the two countries belonging to European Union Czech Republic, and and Poland, the performance in terms of sales was, was solid in both country, particularly the Czech Republic had also the Polish performance was, was fine, I think, in line with our expectation. Bad news instead are coming worse than what we from Ukraine where we suffer from, yes, on both a difficult market and also specific situation associated with our, with our, let's say, plan to do with our business, fact that, let's say, we try to, implement, price increases due to the high cost inflation in the country. This price increases were successful, but at the same time, made us, let's say, suffer on the volume side. So, the overall market or some of the competitors have been more aggressive. On the on the price side and asset. And, and this has been has been, let's say, somewhat affecting our market share, which is something that we will try to take care of in the next part of the year. But in the meantime, let's say, during the first half, our performance was, let's say, below, below expectation in terms of volume and also in terms of the results at the end. The Russian market, is stable to slightly growing. Again, no real this renewed year from what we were budgeting. So okay. Let's say negative impact from the foreign exchange and the results. But on the pure, let's say underlying business, volumes and as expected on a gradual, let's say, even those low growth Mexico is not consolidated, but of course, is a significant part of our results. Mexico was declining some during the first half of the year. In a market that was kind of waiting, let's say, the general election. So the political environment was not let's say, helping in a sense of decision making before the political relation on some of the maybe important project. Now the presidential election are over, you know, the result there's an, I mean, it would take some time until the end of the year before the new president actually becomes, let's say, it comes in charge. But on if you look at the pure, let's call it the impact on construction and indirectly of cement operation, we remain, let's say, cautiously, cautiously optimistic about the future. Even after the change in the, let's call it, political duration, which occurred with the new the new candidate that with the candidate that was eventually elected. So, joining at to the second part of the, let's call it, top line. So the price is price trend was, as we mentioned in the press release, generally favorable, there was actually no country, really, that had a negative variance around favorable variance on the price side. Small exception about Czech Republic, which remained stable versus last year. But, anywhere else, we were able to move the prices up in some cases, also in a relatively significant way. For example, the Ukraine price improvement was double digit, but On the other hand, this was also the country mostly affected by the cost inflation. So we were was a price improvement, but not enough to to offset, let's say, the trend in the cost. And this price improvement, which we were able to achieve as we said, quite, quite broadly, in some cases, translated into, into better result. Some others did not because, as you know, already starting from mid-twenty 16, environment for the industry has changed quite significantly and also lately, first half of 2007, this was that there were additional cost increases not everywhere, but in most of our countries, yes, and this concern, mainly, let's say, the fuel cost, but also some other, some other, let's say, cost factors like, for example, staff cost labor, services, transportation costs. So it's associated with the logistics. This was particularly true if you wish in the in the U. S. This, I think, was the area where the cost increases were more clearly, clearly evident, also due to a winter season, which was somehow particularly harsh in terms of whether we're freezing, we said an impact on the, on the a production rate of the plant and on the maintenance cost. So it was good, let's say, and it's a good sign also for the next month to have achieved a certain price improvement, not everywhere. This was enough to keep or or, or, let's say, get better margins in the, at the operating level. The other very important variable, which affects the, the, top line and also And also the margin is, is the exchange rate trend. So this was, again, and, mostly unfavorable, particularly, in two countries where our operation are quite meaningful. U. S, of course, is very meaningful. And we compare we compare after staff, average rate this year of 121 versus $108,000,000 last year. So about 12% impacted due to exchange rate almost 15% devaluation in, in Russia due to the, again, weaker ruble, Ukraine, again, around 12% loss of the, let's say, of the local currency and stable to slightly better foreign exchange in Czechya and Poland. And also in Mexico, negative impact of about 10% and not as much as the dollar, but let's say, similar. So you have to the trend to the trend of the dollar. So when we move to the, turnover, which is, okay, mainly, mainly volume prices and then, and ForEx, we see that, the overall net sales ended up, at a level, which is very close to last year. So the reported figures are about 1% below, but the like for like figures also after, let's say, eliminating the scope effect is about 1% up. So we are very, very close to last year level with, with a foreign exchange impact of about $7,000,000 to $2,000,000 negative and the scope, the impact of about the 41,000,000 positive most of the scope intel. We already mentioned it is in Italy. U. S. Dollars So like for like in dollars, they're flat with last year plus 0.7. It's a plus 1, but minus 10, almost in euro after translation Germany very close to last year. Better, better, let's say, trends, definitely in Central And Eastern European area. So improvements in Latin, the Netherlands, Czech Republic, and Poland, significant decline, at least 39 percentage If you look at the percentage variance in Ukraine, almost minus 17%, this would have been a decline also in currency due to the, to the, let's say, sluggish trends in sales. And, Russia quite penalized penalized by the, for exchange rates. So what, what, what is an almost a 7% improvement in local currency goes down to a minus 5 in euro. After after translation. If you look at the EBITDA, there are number of, let's say, nonrecurring items, which are impacting the first half figures, because the the the reported, the reported numbers are, 227. Total versus 241 last year. So about 5% decline. Which decline is mainly the gain coming from the trend, in the U. S, and most of the, most of the, let's say, most of the impact of the negative income is coming from the U. S. But the, let's say, recurring figure are actually somewhat lower because the total not recurring profit this year is about 11,000,000. And last year, we had a 4.5 fences. These items are different nature. Most of them, I think the biggest, the biggest amount is the one that is most worth mentioning comes again, from the U. S. USA market. It's, again, on a sale of a business that we accomplished at the beginning of 2018. We used to have a plant in San Antonio, Texas producing under license certain concrete package product, which was sold to the owner of the license the beginning of 2018 and this translated into gain of approximately $17,000,000. And then we have some other instead, let's say, more recurring cost or revenue. Of, less important individually, some are related to, contingency or indemnification on the positive side. Some other related to the restructuring or rationalization of the business which you are in the process or that are forecasted for the near future. So, again, for example, the Italian market eventually, it is showing some some improvement. If you look at the pure accounting figures, for example, we compare minus 11 last year with minus 3 this year. The minus 3 by the way is also influenced by some I would say, unexpected or particularly heavy, bad debt receivable, which we had to, to accrue, during the month. These are considered business that they were definitely, unexpected that the days they should not repeat itself in the in the second half, this figures due to the debt receivable account for about the 2,600,000 So without the 2,600,000, let's say, cost or this particular cost, we would have been already not far from a 0 EBITDA level already in the first half. 2018 recovering at least. U. S, let's say maybe for some of you or all of you, somewhat disappointing, not really totally unexpected what happened in the U. S. During the first half in terms of margins and operating cash flow. Actually, we are pretty close to what was the original budget at least in dollars. Of course, the exchange rate is not done that our control. So if we look at the decline that we suffer, in dollar is about 13% less with a situation of condition, the credit condition of basically flat volumes and the cost, let's say, production not only production costs going up definitely more than what we were able to achieve on the price side in part. As we mentioned before, there was a concentration of this cost in the first half. We don't expect to have the same cost level, in the following part of the year. But as we mentioned in the press release, we don't think we will be able to fully recover, let's say, to get which is feasible, let's say, in the first half. Germany, cleaning up the, the, let's say, no recurring items We are doing already somewhat better than last year. This should continue in the second half. Good performance in Benelux. So lots and good in the Netherlands too, better than last year. Same thing for Czech and Poland. Ukraine, not a huge impact. You do the size of the business, but definitely impacting in a favorable way on our results, about 7,000,000 less to almost 0 DDA. And, we commented already, some recoveries, especially in the second half. But again, it's a market where we don't think we can, we can perform at the level of last year. Russia suffering mainly from the foreign exchange rate, stable EBITDA in ruble. Hopefully, hopefully some changes, let's say, to do that next year, next semester shortly. Mexico, price improvements coupled with, let's say, as we said, lower shipments, rising costs also, in Mexico in a quite significant way. Performance, let's say, in local currency is still very good. Let's say, very favorable close to last year. -3 percent, worse after the the transition into into Europe. Were due to the lost value that we mentioned before, actually, the report the decline in the reported figures reported EBITDA is minus 11%. Now, if you look at the, EBITDA breach on the reported figures, we had volume favorable about 21,000,000 price is favorable about 44,000,000, but variable cost already absorbing almost entirely the variable price effect because it's basically the same level of production and sales. You have a negative variance of 41,000,000 on variable costs. They include raw material fuel, power and transportation among these if you will, and let's say, there's potential validity costs that were the most important in terms of negative variance, less than power. Fixed cost also up by approximately 27,000,000 total. Some of them, some of the increases are coming from the changes in in scope, but, a significant part of it is also the additional main main cost that particularly we suffer in the U. S. During the during the 1st semester. Then, for the rest of the other, the other, let's say, changes that's important on the other revenues and costs. We have an advantage of about 8,000,000 which is, you know, Jerry Brick, let's say, somewhere between the gain on disposals that I mentioned before. And other either operating on nonrecurring costs like the bad debt provision, the provision for risk nonrecurring. And then eventually the foreign exchange impact of about 19,000,000. And, again, the digit takes you from the 241 to 127. That we mentioned previously. If you look at the bridge, they're in a slightly different way. So by region, And, and we do it on a reported basis. We noticed that there was, there was an improvement in Italy, of about 4,000,000, U. S. A minus 18, Central Europe, very close to last year, but anyway, minus the 3 on a reported basis and then plus 3 in Eastern Europe, cleaning up, let's say, everything. So both, nonrecurring items and also scope impact and also, and also foreign exchange Italy continues to be slightly positive. U. S. A bit more negative. 22,000,000 less Central Europe instead is going up is improving by 80,000,000 and Eastern Europe is flat versus last year. Well, in the In the lower part, let's say, of the income statement, I think we did, we did okay. No major, I them. So, lines to to to point out that depreciation is an amortization is in line with the last year. Actually the operating profit. We lost about 200 points of EBITDA margin on a recurring basis. At the operating profit level, we are at 9.2 versus 9.8 last year. So pretty pretty close, let's say, to the previous year. Equity earnings are somewhat lower due to the somewhat worse, it's a performance, in Mexico, which is the main contributor for, for equity earnings net finance costs are, clearly lower than last year. This is in not so much to the real, let's say, interest expense minus interest income, differential. Yes, we did improve there about 1,000,000, but was not so significant. There were other items like the non monetary, non typically, yes, non monetary items like the foreign exchange unrealized or devaluation of derivatives which helped us in reducing the total interest interest expense for the year. Also, our cost of gross debt remained close to what it was last year around between 2.6,2.7 percent average weighted average, let's say, interest rate. There is a benefit there's a more significant benefit at the income tax expense level. So, the, this, in this case, what comes particularly helpful is the 0 reduction in the tax rate that became effective in U. S. So we're benefiting from a lower tax rate in the U. S, which is the main, anyway, continues to remain the main contributors to our taxable, let's say, results. And thanks to the lower income taxes, the net profit is slightly better than last year. It's not lower than last year. Also the obviously, net profit, let's say, attributable to the owners of the company, minorities are very minimal, particular after having completed the squeeze out in Russia. We now was part of the CapEx for the semester, the completion of this result procedure in Russia. And we have now very limited minorities, let's say, companies with minority shareholders in the within the group. Taking a look at the, at the cash flow statement, we had a decline in cash flow generated from operation, which was Why significant if you compare versus last year? This occurred mainly for, let's say, working capital absorption. There was also one technical reason that the the fact that the 3rd June was a Saturday, if I recall correctly, in any way, the, the, let's the cash inflows related to the to our sales to our invoices that mature at the end of the month were postponed due to the due to the non working day. I mean, the month ending with a nonworking day. This can be worth easily, maybe between 2030,000,000 And then we unfortunately continue to pay the to pay at a rate of approximately 2,000,000 per month the trust fine, issued at the, as you know, at the more or less last year at the same time. So we had a delayed payment underway, but is there any way to basically 2,000,000 every month on our cash flows. Capital expenditure was, somewhat above the last year, last year in the first half, $90,000,000 this year. $110,000,000 of which around $19,000,000 related to, let's call it, expansion or major project. This is this is a source this is refers to the U. S. In particular to the so called Medidinil 2nd phase and another important renovation projects, which is which was carried out in the Cape Girardo, Mitsui plant. Then we had a cash out for equity investments of about 54,000,000. These are mainly 2 items. 1 is the sibel and acquisition in Germany. And as I said before, the completion of the of the squeeze out in Russia. So the squeeze out of the minority in Russia, dividend payments occurred last May for 28,000,000. We received a dividend, from associates, of about 52,000,000 the disposal of fixed assets and investments. We are $26,000,000 in the semester. The main part is what I mentioned before. The business of packaged concrete in the U. S. We had positive translation differences and derivatives for $28,000,000. And other minor, let's say, or smaller changes leading to a changing net debt of 52,000,000. It's a higher, either in the semester. So starting from a 62, a total of $162,000,000 at the end of 2017, the definite, definition, indebtedness at the end of June is 894. The split of the net financial position between, let's say, short term and long term is still, quite favorable, very comfortable. We have a non natural term cash of 300 and $40,000,000. It was 400, about $400,000,000 at the end of last year already including, under short term debt. So that has to be after deduction of $450,000,000 or shorten that the main, let's say, most important upcoming maturity, the Eurobond of the 150,000,000, at the end of September, which I've already We are already, let's say, prepared to repay with existing, with the existing, let's say, liquidity. Well, Just another brief, let's recap on the outlook. For the for the full year. As usual, we ran, let's say, internally forecast based on the core sexual results so far. And expected for the next month. As you'd mentioned, as we mentioned in the press release, we we think that some of the negative trends, which we're affecting the first half should turn into a positive or more positive or more favorable in the second half. We expect generally speaking, a second half, that can give us, I mean, it's already conditioned that, that can give us the possibility to recover or most ability to recover what we lost in the first half in terms of recurring BDA. And, okay, the final phrase that we use is, is, a kind of, yes, we can call it a bit of a downgrade versus what we expected initially versus what was mentioned say March, we are not convinced anymore or we are, let's say, We we we we believe that that, even with a more favorable trend occurring in the second half, the possibility to beat, let's say, last year results at the recurring operating cash flow levels are less than what we initially thought, let's say, what we initially plan and disclose to the market. So the figure that we're looking at now in our forecast after what happened in the first half show that our results are likely to be very much in line with the previous year. This is our current expectation and the, in our opinion, the more the most likely outcome for the full year. Now online, what does it mean can be a bit lower, a bit better. It's difficult now to give you exactly. Where we will be finishing up. But the idea is that the most likely results for the full year is something very close to what to what we had to what we had in last year, at least at the consolidated level, the improvements will come from, from from Italy will continue to to come from Italy where you expect to do better in in the second half than in the first we will continue to remain below last year in U. S. Also, also after, let's say, also like for like in a sense of, let's say, cleaning up the exchange rate effect. Which is assumed to be not as bad as in the first half. We will be improving in the other country, Germany, Denelux, Czech Republic in Poland, Ukraine will remain quite below last year. And then was very close to the to last year, let's say, very, very close to last year level. So overall, this is, of course, it will depend on the magnitude of the decline in the U. S. On the US dollar exchange, right? But overall, this is giving a quite clear indication that our performance is going to be very similar to the one of the previous year. That's it. Basically, think, I think, most of the comments that they wanted to make, are now are now done. So, we would be, we are, and I'm pleased to, to, to answer your question and, and to possibly solve your doubts if there are any. Excuse me, this is the Chorus Call conference operator. We will now begin the question and answer session. Please pick up the receipt The first question comes from Mike Beth with DBA. Please go ahead. Thank you very much. Can I first ask a bit more detail on the U? S, please, and particularly to try to understand these cost increases. I mean, Firstly, were there any kind of maintenance or any one off issues in the in the first half? And secondly, you said that you would expect less pressure in the second half. Is that, just because of a base effect, or if you change fuel source or anything like that? And also while we're on the U. S, could you talk maybe a little bit more about pricing? Because that seems slightly better than I you talked about, I think several percentage points increase in price. Could you talk about the regional situation there, the river, the Northeast, and Texas in terms of where you've got that price increase? Thank you. Yes. I think think, particularly on the U. S, and most of most of the impact was, was coming from, say, or the negative variance versus the budget was coming from, from maintenance. For sure. And in fact, beyond, let's say, the budget level, 1 or 2 specific plants that suffer from, I don't know whether to call it, worn out or specific specific reason. The winter, as I mentioned before, was not, was not helping in some or in some of the northern plant in particular. Not talking about Texas, but even Mary Neal in some time during February, can sure, went very much down with freezing. We had a plant, for example, the green or plant, which is not exactly a wet technology, but yes, it's using water, let's say, in the raw material. And this is typically something that when the temperature becomes extremely low, it can cause you a lot of problems and delays also starting up be the the production. So, This is something that, affected the first half, again, more, more than what we, we originally budgeted. And we think we we can recover to some extent, you know, in the second half. So we should we should be able to do to do, you know, to do better in the second but maintenance cost after the first half of this year will remain anyway higher than budget and definitely higher than last year. Other increases, we have typically in the, I would say, in first location, generally speaking, we relate both to raw materials and, let's say, a logistic on the distribution side. So these are mostly related with the diesel trend, with the trend of diesel, but not only because also the the, for example, the fair for, RaytheWagon, so also barges are increasing. So I don't know if this is what you were willing to hear, but what I can, let's say, describe in a nutshell. For the for the prices, I mean, the range of the price increases on average, we're not very significant. So our, if you took it, if you look at the overall average for the U. S, we are between 3%, 4% price increase, which is, I mean, of course, obviously, they're welcome, but not particularly high. And, and, and, yes, there are, there are regional differences where we are still, somewhat even if the volumes are going better, we're still struggling some area of Texas to bring the prices up. And, for sure, in terms of pricing, the most affected, it was the northeast due to, wheat per form as the trend of Pennsylvania New York House. If you look at the BCA statistics, the trend of, let's say, DTC see, sorry, Pennsylvania, New Jersey, New York is quite negative in terms of cement consumption. There is a high level of capacity available. There is new capacity not only the famous, let's say, Canadian making this plant, but also, for example, the Los Angeles in Rabina plant expansion, which was completed later. So it's a situation where you have a lot of capacity available low demand and consequently, let's say, the aggressive, let's say, pricing behavior between the competitors. Okay. Thank you for that. Just one follow-up on pricing. Have you or are you attempting any second price increases this year in the U S? And then just one final question on, I guess it's Mexico, but the cash flow showed 20,000,000 more receipts from associates for dividends in H1 despite lower profitability. I mean, if there's been a change in distribution policy from the associates or is there something else going on there? No. There was no real. Let's a policy, dividend policy change, I think there must be some, some time difference, if do I have to check. Patrick, you want to add something because I think it was just a timing difference. A timing difference. Yes. Yeah. I think that's the timing difference. On on the, yeah, mainly on the on the she can leave it in, but no, no other real, the amount, the amount, the amount, which was, which was distributed to the shareholders, the same as last year. At least if you look at, if you look at, let's say, 7, 7 or 8 months, instead of just 6, but an annual change, instead, now your per question was about, price increases in the U. S? Well, there will be not, not, we don't think officially Let's say, no, no, no, no, efficient, and I, announcement of, of, you said, specific price increases, but yes, some, how do you call it, let's say, sequential, sequential price increases that will occur So we think we can keep a similar, a similar improvement for the full year because last year, anyway, prices went up also during the 2nd half gradually. And we think the same, the same, we expect the same for this year. So to be able to close with, again, confirm, let's say, the 34% price increase is what we expect right now. Perfect. Thank you very much. You're welcome. The next question comes from Rajesh Patkiviti, JPMorgan. Please go ahead. Yes. Good afternoon. Good afternoon. Two questions for me, please. Again, on price increases, One of your peers mentioned a second price increase in the Italian market as well. Are you looking to push another price increase in this market? And the second question is, if your balance sheet is in a relatively strong position and given the recent share price performance, are you contemplating on any buybacks at the moment? Thanks. Yes. I would say similar to to U. S. No, let's say, official or I would say, no, no widespread increase in Italy forecasted for for the next few months, but we do have in our budget some further improvement, coming again from agreement that we reached with the customer already already, let's say, at the beginning of the year, already when the original price increase was implemented. It's a very it's a very, let's say, specific situation customer by customer. But, yes, the trend, the trend should be, should be positive. So, we, we, we should continue to, to, to show an improvement also in the coming months. In Italy, the is a bit more of what it is in the U. S. Also because we are obviously starting from a much lower and a much lower level. The buyback it's something that, yes, is under is under scrutiny, let's say, under under review. It is something that was not was not discussed today in the Board of Directors, but could, could be, could be, let's say, a topic for a future meeting. It couldn't make sense. In the current situation, we have sufficient liquidity, like you're saying, to do it, the share was not performing particularly well in the last in the last month. And also, we have to start, let's say, thinking about the, let's say, upcoming maturity of the convertible bond, which could be settled is not in full, maybe partly, in cash. So let's say that we are we are close to a likely positive decision on this subject. Thank you. And just one follow-up on the U. S. Additional maintenance cost issue. Can you just quantify how much was the original cost there? If we look at the first half, it was probably in dollars, 6, 7,000,000. Just for me concerning. Great. Thank you. The next question comes from Miguel Borjega with UBS. Please go ahead. Hi, good afternoon, everyone. I've got two questions please. The first one is on the U. S. You are guiding for negative EBT like for like, and since that you've been investing quite a lot over recent years and after the cost this year. Can you give us your view if this is still a market where you still see or do you still expect EBITDA growth over the coming years, post 'eighteen, or do you think we're kind of reaching a peak on the U. S. Market? Second, the second question is on Italy. Yes. Your EBITDA, if we exclude the contribution from Silio, is still quite negative. So can you maybe give us, your expectations for the second half if there's, a one off, maybe a sale of CO2, for example, that you expect to come through in the second half to, to end up is it positive EBITDA? No, there's no real one off. It is true that if you, if you, if you, let's say, exclude the scope impact, the results are not particularly exciting. We had, as I mentioned before, a one off of about almost 3,000,000 for the debt expense that we do not expect to flock crew, father, let's say, or anymore in in the second half. It it in the second half also, it it should go to let's say, more to, to, to regime or normal or to normal, the organization, the restructuring that we have made recently in the, the ready mix, let's say, branch and ready mix division of the business, which was which was, let's say, partly accomplished during the first half, but not completely. We are gradually let's say, giving you a way in a sense of not managing anymore directly, the ready mix operation in certain areas, certain regions. And this is let's say, in second half of the year, it will be what we wanted to do, we were able to do it in the first half, but not what step, I mean, was done in several steps. So now the second half is clean. Some somewhat, better price improvement. No. Not a big help from from the demand. This is this is true. Fortunately in Italy as opposed to most of the other countries, the overall cost this year and not I'm not, let's say, showing a significant inflation. We do have a higher definitely higher fuel cost, but on the other hand, much lower energy, electrical power cost, the so called let's say benefit for energy intensive industry has now been included fully in the in the low, let's say, in the invoice that we receive for, for a power cost and, this should should keep our production cost pretty, pretty stable for the full year. Some sequentially price increase is, as I said, better performance in ready mix, even though ready mixing itself continues to be negative. Demo contribution, yeah, less important in the second half because of the, of the, there would be no change in scope in the second half. So overall, I mean, continue to be definitely a depressed market with extremely low level of capacity utilization, but at least we should be able to to achieve a certain accretive room at the operating cash flow level. In the U. S? Growth in the U S. For a full year. Now going forward, well, I think, I think, I mean, if you look at the story, our margins, last year, we're at quite a quite technical level, so 33% to 54 and EBITDA margin. It's something that, I think, stands out also as you come, when you compare with the competitors and in general, it's quite a high level. We see the economy a bit, a bit overheated with a rising cost as we said before. The market is okay. I mean, the volumes are there. So we do have, let's say, a view that positive on the on our sales. On the margins, I think that to do better than what we did last year, even in, let's say, more, more stable cost situation or better cost management, it would be It will be difficult. It will be difficult. I think, also when you go back to the previous, to the previous record, let's say, the previous, consumption peak 2005 or 2006, we did not really go beyond, let's say, the 33%, 34% EBITDA margin level. So it seems to be quite the quite the ceiling for our business there. Thank you. The next question comes from Tazeppa Matalebi with Equita. Please go ahead. First one is on prices on Italy. Let's say, in the past, your competitors have been more aggressive in stating what would have been the the performances in prices in Italy, you are dealing with 2% to 3% per ton increase. I'd love to understand if there is a regional effect or it's something that should come in the future. Or, let's say, the concentration is not enough to sustain a most significant increase in prices that are still close to per ton. My second question is on your convertible bond. The expiry, as you stated, is approaching, I would like to understand if you made up your mind about what you want to, what you want to do with this convertible in terms of the possibility to use the cash settlement And I think I have 2 other questions on figures. Can you repeat please the volume and price effect on EBITDA And my last point, a guidance on the tax rate considering all the moving parts for the full years. Thank you. Yes. Well, presumably, How can I say it? I don't think it can be much different from the rest of the market. It's it's true that I've been reading, let's say, statements about the management migration. It might be too, I think, what we can, what is compatible with our goal of, of course, not losing, not losing customers. And Again, I think that the sum of the statements are probably like you're saying, related to regional situation where the starting point was on average, let's say lower than what we have in our in our system. But I think to believe that the improvement that we have been able to make and maybe the sequential improvement that will come, that would follow, we remain, we remain below the figures that's sometimes you read or you, or you, yeah, you hear. So I do not dare to say that they are not true, but if you look at our, our, let's say, internal internal, let's say, figures and real possibility to do something they don't seem to be true. Or they might be true if you're willing to lose, maybe a significant, significant volume, significant a share, which we cannot afford also because we're maybe versus other competitors already running at the lower capacity utilization level. So for us, volumes that we are more important than in other cases. On the, on the convertible, I think we will keep, we will keep the option open until until the end. There is no good reason in our opinion to decide exactly today what to do. We do have the option of settling the amount in cash. As I mentioned before, in the meantime, we can anyway consider maybe to start to open the share buyback process or, which, which still has as I mentioned before, still has to go through one step, let's say, final board approval, but it's already in place. It's already the approval of the of the shareholders. And this can be, somehow also related to the upcoming maturity in a sense that once you have the shares in your portfolio in treasury, let's say you may also decide to use it for the or in part or in full for the bond repayment. On the EBITDA bridge, you, the volume and price effect, the volume was $21,000,000, and the prices was 44. Tax rate, well, we base, we base our, let's say, 6 months figures on the on the budget and the budget tax rate because we do not recalculate every 6 months, the full, let's say, taxable income and, nontaxable items or whatever. So, it is currently, yeah, quite at a low level. I would, I would assume something that is, somewhat higher, let's say, in the final in the final calculation or the full year calculation. For example, 25% that could make sense. And now I think we are at 21% currently with the in the 6 month report, I would assume I would be a little more conservative and assume a 25%. Thank you. The next question comes from Alessandro Tortra with Mediobanca. Please go ahead. Yes, sir. Thanks. Good afternoon, everybody. I have already three questions. Sorry. The first one is just a clarification. You said a 25% tax rate for this year. Is it right? 25. Yes. Okay. Okay. Then then okay. I do not Oh, okay. Okay. Yes. So that's that's a good one. Yes. Okay. So let's say 25, around 25, then Okay. The first question is on, if you can just clarify the assumption on the main currency you have used all of user exchange rate, okay, with the new guidance? The second question is on Germany, what I would like to understand is, let's say, your view on the recurring EBITDA for this year, given that you had a lot of also one off this year. And the view, that you have in terms of cost savings are coming from the acquisition, okay, so synergies for next year are coming from the recent acquisition. And, the last, I I don't know if you, gave an idea or an indication of what the recurring EBITDA on Italy, if you still expect, let's say, something close to breakeven or a bit better of the breakeven level follow the full year, you're recovering EBITDA for Italy? Yes. And who said that it? Okay. The guidance, or the forecast is calculated according to the following exchange rates. $40 is $1.19 average for the full year. Mhmm. Well, the others are less important. Let's say Russian ruble is a 72. Okay. These are the 2 main ones, the ones that can also make real difference that should be more stable. For Germany, for Germany, yes. I mean, if we look at the, I mean, this year, we clearly have more cost than benefit from the from design better position. We are also preparing as was already officiated credit is closed for the, for the shutdown of the plant. So there will be, there will be some some, let's call it, the one off cost associated with the with with that. Never nevertheless, nevertheless, thanks to, again, better trading condition and less one off expenses in the second half. We see let's say, not a big one, but yes, an improvement for this year, recurring EBITDA, Yeah. Well, I know, I prefer not to be the precise figure, but let's say we're talking some, some even better, let's say. Okay. The cost synergies, from of the next year. We'll come here in starting from next year, in particular, when the plant, the intermediate plant will be closed, which we don't know exactly when, but let's say during the first half, maybe April, May. I don't know. We will see. So moving, production and sales to the other plants. So this will be, it should be the key, the key turning we are already gaining some, some, let's say, revenue synergies, for example, on sales saw those bags in particular. We had some price improvement there versus what used to be the price level of sizes. So I think it's going well. And I think we can confirm that, this can give us some 7 to 8,000,000 EBITDA Advantage starting from next year though. Not this year, not this year yet. I think we are on track for this kind of let's say, cash flow improvement. In Italy, yes, we believe that we will be positive by how much we are not talking about big amounts. Mhmm. Yes. We think that we can, we can revert to the trend in the 1st half and become positive, let's say 5,000,000 positive, for example, something similar. Okay. Okay. And, just if I may, the last question is on, let's say, the refinancing of the bond that is going to expire in Denver, but do you have any, let's say, idea when the company is going to to do not to to refine a similar amount, or if you're going to, if you're waiting, let's say, any news, but the positive news from rating agencies, or you are going out to the market for the new bond? Yes. So I'm answering this, Patrick. I'm speaking. So, as Pietro already mentioned before, We have basically already, available the funds, internally for the for the repayment of the of the bond. We have not done specific refinancing. The only thing we have done recently, you may have read in the newspapers that we have issued, initial transaction in dollar, a $135,000,000, which was basically done now end of July. So it should end of July. And this is also partly then for the for the refinancing of these bonds. But again, we have sufficient, liquidity to, to pay back the bond holders. And, and so we can say that they transaction is already refinanced and there is no the rating discussion does not really impact this this this month, repayment. Okay. Gotcha. The next question comes from Rajesh Sia with HSBC. Please go ahead. Thank you. So I have three questions, if I may. The first one is on ready mix situation in Houston area. So, and I think earlier in the year, you had some issues with the pricing scenario there. Given that the volumes have improved, in Q2, from a negative, kind of ending the 1st half of a flattish type. What kind of pricing scenario you can foresee in second half, is the competition still in the market or you are kind of given the demand is picking up, you're able to put some price there. Secondly, into the energy cost inflation, can you give us any number in terms of percentage? How much it was in half 1 and what's your expectation for full year? And, probably a third one, is in Ukraine, given the situation is not getting better, and one of your competitors thinking of exiting, do you have any such thoughts in your mind there? Thank you. Yes. Well, Houston, it did improve, if you look at the volumes and not greatly, but let's say generally speaking, the central and also, north part of Texas, Dallas of Venezuela and San Antonio are doing better. But but Houston is also improving versus last year, due to the volumes still remains remains a market where the imports are not so much in terms of volume, but in terms of prices, prices, they do have a role. So, and there are, there are new importers, it's a situation where also due to the fragmentation of the ready mix market on the, let's say, the user of cement to move the prices up is quite, it's quite difficult. Actually, if we look at our ready mix operations in Houston, prices have worsened versus last year. And not in cement yet, let's say, but in ready mix, we do have lower price that last year. So it's one of the region, together with the northeast where we see definitely more difficulties Not so much in terms of volume, as I said, but in terms of prices, to be able to achieve an improvement on the cost, your question about cost inflation was did it refer to the U. S. Or in general? It's general at group level. What was your energy cost inflation? In h H1 and what's your expectation for full year? There are the number of difference let's say, between, yeah, one country to another. As I mentioned before, where, for example, in Italy, fortunately, right now currently, production costs that are at the level of last year because because energy went down, but it's almost the only case. I think that, clearly, the fuel is up everywhere and in a significant way, which means between In some cases, more than 20% versus last year, in some cases, maybe between 15% 20%. Energy prices, let's say, not as much But yes, I would say on average, you're probably 7.8% after And the rest is a bit more related to the inflation, the inflation rate of the country. So the the well, the diesel goes together with the fuel even though we the fuel, we may we we mean mainly the the the pet coke as fossil fuel for us. Meanwhile, the diesel is something that we purchase directly. Mainly in the U. S. For either, let's say, a very transportation, bad transportation and redeemings transportation on the on, on our trucks, on our ready mix trucks. So I think Again, it should be analyzed the case by case market by market But I think that you can assume on most of the market, something that is not far from 8%, 10% cost increase at least the production cost level. Okay. Just on staying back on energy, in the U. S, a few of the other players have considered Herman. Moved into the gas given that that hasn't moved up much, or rather it's down on spot basis versus average of last year. So have you, have you kind of considered data and in US? Pitching to gas. Oh, gas. We are using where we can. So because it's a matter of availability and also adding the pipeline, let's say, already in place. For example, the netting plant in Texas is using mainly gas. The other plant that could use it, but it does not currently, is the San Antonio, or are they able to have the pipeline that is not competitive currently versus the pet coke is a higher cost versus the Indian north Texas region. So yes, I mean, it is something that we regularly, let's say, analyze and compare with the other potential fuels. In driving the U. S, for example, recently, but also in Europe, it'd be more towards, let's say, turn of the fuel, meaning waste waste device fuel. Our effort to mitigate, let's say, the inflation of fossil fuel is and also in the light of or the, let's say, benefit related to the, let's call it, sustainability. Our effort goes more into the direction of the way the right fuel. Ukraine, Ukraine, yeah, I mean, something that doesn't seem to be such an interesting place. It had some good years in the past that the S is always somewhat struggling for one reason or another. No, we did not take any, any, we never really analyzed or indeed the possibility to exit to exit the market is not something that has been considered so far, but we cannot rule it out completely. The problem is that if everyone's wants to answer, it would be difficult. It would be difficult find to find the potential value anyway. We are not, we have not married, let's say, from life with Ukraine in the system. The next question comes from Xavier Marshall with Deutsche Bank. Please go ahead. Yes, good afternoon. I have two questions. The first one is on the guidance. So you have changed your outlook versus the one you did after Q1 results, which were early May. Yes. And I was wondering what may change your mind, especially with the positive evolution of the euro dollar exchange rate and rather good volume trends in Q2. So that's my first question. Yes. 2nd one is on Germany. So recurring EBITDA in H1 18 is almost stable this last year. Yeah. And you preside also in the presentation that's net of nonrecurring items and changes in scope. EBITDA showed a positive change of a EUR 6,000,000. Yes. So does that mean that the EBITDA from your newly acquired plant in German is minus €6,000,000? Or is it some kind of a one off for restructuring cost? I don't understand the minus 6. Well, you have a stable, recurring EBITDA in Germany and you see in the presentation that net of non recurring items and changes in scope, EBITDA showed a positive change of EUR 6,000,000. So does that mean that the EBITDA from the new plant is minus €6,000,000? Well, in a sense, yes. But it's not the of the plant is is the is the, let's say, yeah, is the cost associated with the, let's call it, rationalization and future expenses associated with the closure of the plant. Yes, Yeah. So that's the one off which should not repeat in H2. Exactly. Okay. That's correct. Okay. Going back to the to the, guidance, well, the reason for the guidance, I tried to explain it before. It's coming from a from a job that we do regularly, let's say, usually three times a year, which is, which is what any company does. I mean, to, to, to, update the budget, it's a forecast after 5 or 6 months of actual results. So yes, we think that that we can recover partly what we lost in terms of the recurring EBITDA in the first half, but not fully. So at the end, we will, we will remain, even after potential benefits, like, like you mentioned, from a from a higher dollar or pulling, the worsening of the profitability in the in the U. S, which is the most important in our group, will not be offset or completely offset by the improvement that we are forecasting in other markets. There is also worsening of the profitability in Ukraine and not too small because we are talking about potentially something like, minus 10,000,000 was last year. So it's not it's not that's a small that's a small, let's say, in figures. So the two together are the negative parts. The rest is positive, but not enough to to to to upset. And that's why we think we will we will end up at the level which is very close to last year. It can be a bit better. It can be a bit lower. But let's say not meaningfully different from last year. Okay, thank you. The next question is a follow-up from Alexander Tortor of Mediobanca. Please go ahead. And then again, just if you can give us a share with us NAD or an indication, given, let's say, the trend that we saw in the working capital in the first half? Any indication of, let's say, net debt level, just a range, okay, for the full year? Thanks. Well, yes. We do have it. I mean, half asked, of course, that this was already paid in the first half. Let me check, let me check very quickly. Should be should be something like, 750. The next question comes from Vlad Fania with DMP Paribas. Please go ahead. Hello. I just have one question on the debt. So is there a particular level of debt that you're targeting are comfortable with the current level? And are you possibly looking towards an investment grade rating upgrade? And also a second question in terms of your financing You said you have a lot of liquidity, but do you see yourself tapping the capital markets anytime soon? Maybe refinance the convertible? Thank you. I did, I did not get confused. The last question. Yes, the first question was clear about the debt level. And the very last part was hard to understand. Could you repeat the last question? Sure. Are you looking at tapping the capital markets anytime soon, maybe to refinance the 20, the convertible. That's, was that it? So regarding the debt level, we do not have a precise target on gross debt, what we would like to have clearly, also a growth that can be, can be, a curation. Sometimes It's not necessarily linked with, probably not the key issue also for the rating discussion because typically raising agencies will also look at gross debt, but rather also at the net debt and, and some key ratios depending on the respective agency. Standard Foods is looking very much on FFO to debt and net debt to EBITDA. So, on the other side, we think that we have quite significant liquidity at present and potentially even more with the positive cash flow and respective areas. This was, also in the past, justified by some private placements that we had in the U. S. With some potential triggers that presented a risk. And so we do not have these anymore, which means that we, we have probably there the possibility to, change a little bit our approach about the the the necessary, liquidity, for, let's say, operations, but also for a strategic liquidity and, clearly, there is negative carry on the liquidity today, especially in euro. So this is something that needs to be considered too. And this basically also leads to a conclusion that we what is basically now will be seen, refinancing and no refinancing of the bond by a capital market transaction, in September. Notwithstanding, of course, the BCMs also. Fixed income markets remain interesting also in the future for us. There are some, some, as you said, there is an un convertible bond that depends, of course, very much on what will how the how we will treat the convertible bonds? Will it be converted or will it be repaid in cash? Of course, this will completely change the necessities for refinancing. So this needs to be seen, but clearly, again, fixed income mark is for us is always a quite interesting source, especially, especially with quite positive metrics overall. And, and of course, having already tested market various times. So yes, we think that this is also an option for the future. Okay. Mr. Boucher, there are no more questions registered at this time. Okay. Thanks everyone for for listening. I I hope the the conference was giving you enough information, let's say, a satisfactory information. As usual, we remain available. I don't know when Avastina is going in holidays. But, yeah, he will be available. We remain available for some for some days, at least, for those of you that have not been in holidays, yes, We wish you the best of all and for the rest of the bean oil days already. To continue to work awfully in a in a climate that is not too hot and too humid. Okay. Thanks again and good bye. Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephone.