Welcome to the Vicat 2024 full year results conference call. My name is Alan, and I'll be your coordinator for today's event. Please note this call is being recorded, and for the duration, your lines will be on listen only. However, you will have the opportunity to ask questions at the end. This can be done by pressing star one on your telephone keypad. If you require assistance at any time, please press star zero, and you'll be connected to an operator. I'll now hand you over to your host, Guy Sidos, Chairman and CEO, to begin today's conference. Thank you.
Thanks, Alan. Good morning, ladies and gentlemen. Welcome to the Vicat Group's 2024 annual results presentation meeting. I'm Guy Sidos, Chairman and CEO of Vicat. Joining me are Hugues Chomel, Deputy Managing Director and the Group Chief Financial Officer, and Pierre Pedrosa, Director of Financial Communications and Investor Relations. Slide two contains a preliminary disclaimer. It aims to draw your attention to the fact that the elements presented here for fiscal 2025 are assessments of expected trends in the group's various markets and should, under no circumstances, be considered as forecasts.
On slide three now, our presentation today will be divided into five points. I'll start by reviewing the highlights of 2024, the group's fundamentals, and then focus on a number of key points in our business. I will then hand over to Hugues Chomel for an analysis of financial performance and the main balance sheet and cash flow items. I'll then come back to our climate action plan before concluding with a look at expected trends for the current year and our priorities for the future.
On slide four, let's start with the highlights of the year. Switch to slide five. The year 2024, through its success and the prospects it opens, confirms the relevance of Vicat's development model. In a historically depressed environment in Europe, the group posted organic growth of plus 2.3% and EBITDA of EUR 783 million. This is the group's best-ever performance. It is a result of commercial and industrial efficiency of all our teams in various markets, and I would like to congratulate them once again for the commitment and the contribution to this fine performance.
Strong growth in the US, which now generates EUR 190 million in EBITDA, resilience in Europe, and progress in the Mediterranean zone have all contributed to the EBITDA margin returning to above 20%. More on this later. At the same time, the group generated a sharp rise in free cash flow to EUR 373 million and continued to reduce its debt. Financial leverage was 1.58 times at the end of 2024. Finally, the group is continuing to implement its decarbonization roadmap with a further reduction in emissions intensity in 2024. On slide six, a quick overview of our long-term performance.
Consolidated sales reached EUR 3.88 billion, with average annual growth of 7.2% over the past five years. ROCE rose to 8.1%. Finally, our leverage ratio continues to improve from 1.92 times in 2023 to 1.58 times in 2024, reinforcing the group's financial strength. These results demonstrate Vicat's ability to combine operational performance and financial discipline in a demanding environment. On slide seven now, Vicat's fundamentals are based on four pillars: family roots and a long-term vision based on our heritage.
It enables us to pursue a coherent long-term industrial strategy, modern high-performance production facilities to optimize our costs and reduce our environmental footprint. Third pillar is a strong capacity for innovation, which positions us as a key player in the low-carbon transition, and fourth pillar is a balanced geographic diversification between developed and emerging markets. This enables us to navigate changing environments with agility and efficiency. On slide eight, you have before you an analysis of our investment cycle over the past 10 years. The phase I between 2014 and 2018 is that of stable investments and substantial cash generation.
Then, from 2019 onwards, we chose to accelerate our investments at a time when financing conditions were very advantageous. We acquired Ciplan in Brazil and began investments in Ragland and Senegal. Today, as the cost of financing has risen, we are focusing on reducing our debt by moderating our investments. This phase has enabled us to significantly improve our cash generation. Go to slide nine, and let's now turn our attention to our worldwide activities. On slide ten, let's start with an update on the French residential market, which is going through a period of historic slowdown, but which also offers significant prospects of recovery.
As you can see from the graph to the right, the French residential market is currently at its lowest level for 25 years. However, this situation creates the potential for recovery. We know that residential needs in France remain high and that latent demand is strong. Several structural factors underpin this demand: population growth, which continues to rise, particularly in certain urban and suburban areas, societal trends such as the rise in the number of single-parent families, reindustrialization, and then the impact on the climate because the new homes comply better with environmental standards and are more energy efficient.
Vicat, with its regional presence and available production capacity, is perfectly positioned to benefit from this upturn when it arrives in cement, of course, in concrete, in aggregate materials, as well as in high-value-added construction chemicals. Let's focus on slide 11 on what we call the TELT, which is the Lyon-Turin Tunnel. This project is the largest civil engineering project in Europe, a 57.5 km tunnel in two tubes, a colossal project mobilizing a large volume of materials. It will generate a significant contribution to Vicat's businesses over more than seven years. Around 1.3 million tons of cement will be supplied with a gradual ramp-up to a peak expected between 2027 and 2028.
Our SATM subsidiary will produce the concrete and use almost 4 million tons of aggregates for the various phases of the project. 24 million tons of material will be excavated from the tunnel, a major challenge for the management and recovery of the extracted materials, which was the subject of a contract won by the consortium led by Vinci and Vicat. The TELT is a large-scale project that will support our activity for years to come. Another focus on slide 12 that shows our activities in the US, where we produce cement and ready-mix concrete locally in the Southeast and in California. The US is now our second-largest market.
We generated a bid of EUR 190 million in 2024, up 26% year-on-year, representing a quarter of the group's operating profitability. The Lebec site in California has a capacity of 1.3 million tons and covers the Los Angeles region from Merced to the Orange County, where we also produce decarbonated ready-mix concrete. Our Ragland plant in Alabama serves the southern United States, in particular the area of Atlanta and Nashville, thanks to a network of efficient rail terminals. These are dynamic states that benefit from considerable public and private investments that we are in position to serve.
Now, the LNZ project , the Lebec Net Zero project, is the first carbon capture and storage CCS project in California. It is based on the capacity to capture 950,000 tons of CO2 per year to completely decarbonize cement produced on this site. The deployment will take place in phase IV, with commissioning scheduled for after 2030, subject to a final investment decision in 2027. The phase I has been validated by the Department of Energy and the DOE, while subsequent phases may evolve at our initiative in line with regulatory and technological adjustments. The project benefits from several favorable levers.
Regulation and discussions are underway with the state of California to secure a favorable framework, including the Carbon Border Adjustment Mechanism and CO2 transport logistics. Second level is financing. We have a commitment of up to EUR 500 million in DOE support, as well as eligibility for IRA 45Q, with a tax credit of $85 per ton of carbon sequestered over 12 years. Technology is the last lever. We work with proven technologies and partnerships with local engineering specialists. Lebec Net Zero marks a major step forward for Vicat in the US in line with our roadmap. On slide 14, we focus on India now.
India is a buoyant market underpinned by a solid economy, dynamic demographics, and growing urbanization, generating significant infrastructure needs. In 2024, the group has adapted to a complex market while securing its margins and growth prospects. In a fiercely competitive environment in the south, sales reached EUR 273 million in 2024, down on 2023. Faced with this pressure, Vicat has adopted a kind of a differentiated strategy. In the south, we focused on pricing of the volume, and our logistic capacity to Mumbai was considerably strengthened to supply this growing market. This is the south of Maharashtra.
At the same time, we are starting from a competitive cost base and have been working on strict cost control, which has enabled us to improve EBITDA to EUR 75 million, up 5.6% on 2023. Of course, lower energy costs contributed directly to this performance and improving industrial and logistic efficiencies to strengthen our competitiveness. On slide 15, we focus on Egypt. Egypt also deserves a slide. It has been a spectacular recovery driven by strong export momentum and improved market conditions. In two years, EBITDA rose from negative to EUR 34.1 million in 2024, with a sharp increase in margin to 27.7%.
This performance is explained by an acceleration in export volumes, with an order book secured for 2025, and a gradual convergence of domestic prices towards export prices in the second half of the year, improving profitability on the local market. After a difficult period, the opportunity for growth in the region has been seized and backed up by our quality assets in the Sinai region, and we are very confident on the upper end. Another focus on slide 16, where we outline our investment in Senegal. The group has launched a EUR 260 million investment plan to build a new 2 million ton kiln line.
Commissioning is scheduled for the Q2 , with contribution expected in the second half of 2025. We have a ROCE target of 18% on this project, which is mainly linked to an improvement in production costs. I now hand over to Hugues Chomel for a more in-depth analysis of our financial performance. Hugues, the floor is yours.
Thank you, Mr. Chairman and CEO. Let me start with key figures in our income statements. As presented by Mr. Sidos, the group achieved organic sales growth of 2% in 2024. Organic growth in EBITDA exceeded 10% and was driven by growth in Ragland in the US, development in Egypt thanks to exports, a favorable price-cost spread in almost all the markets where we operate, and improvement in the group industrial performance overall. EBITDA margin in 2024 was 20.2%, up 140 basis points year-on-year, meeting the group target of a return to the margin level that preceded the inflationary crisis of 2022 to 2023.
In the context where almost 40% of the group markets in Europe are at historic lows, this performance demonstrates the solidity of the Vicat model. Net income group share rose to EUR 273 million, almost 12% up on a like-for-like basis. On slide 19, this slide shows sales trends by geographic area. Most regions reported organic growth in 2024, with the exception of France, marked by the historic slowdown in residential sales, and Asia, due to India, where the group continued to focus on price-over-volume strategy. Africa is essentially stable.
To note, the growing contribution of the United States to group sales up to over 19% in 2024, and the very strong performance of the Mediterranean region powered by the recovery in Egypt. Let's move to slide 20, which shows the EBITDA bridge between 2023 and 2024. The main variation is due to price dynamics, which remain solid in most of the group regions. It should be noted, however, that more than half of this favorable price contribution was due to the hyperinflationary environment in Turkey. Coupled with the improvement in the group industrial performance, this growth has enabled us to more than offset lower volume effects and the cost inflation.
On slide 21, it shows the improvement in the free cash flow generation. In 2024, industrial investments came in as forecasted at EUR 320 million. In this envelope, strategic investments accounted for EUR 188 million, most of which are related to the new kiln project in Senegal. The group remains committed to its climate investment target of EUR 800 million between 2021 and 2030. Free cash flow grew by 26% to EUR 373 million, a strong showing for the second year running. The effective transformation into free cash flow resulted from the growth in EBITDA, a significant reduction in working capital requirement over the period, and tight control over capital expenditures.
The free cash flow conversion rate reached 48% this year, up eight percentage points on 2023. On this basis, the group generated free cash flow yield of almost 20%, thus maintaining significant value creation for its shareholders. The next slide, slide 23, shows our debt situation at the end of 2024. The group net debt stands at EUR 1.2 billion, with a cash reserve of EUR 536 million. Our debt has a well-balanced maturity profile, with an average maturity of over five years. The average interest rate is 4.74% for all currencies together before hedging. At the end of 2024, Vicat has strong liquidity, with around EUR 850 million in available under credit lines. Let's move to slide 24.
The next slide gives an overview of our debt reduction trajectory. Our management strategy of EBITDA growth, tight control of working capital requirements, and disciplined capital expenditures has enabled us to further reduce the group net debt. The leverage ratio stood at 1.58x at the end of 2024, and the group has set itself the target of reducing the leverage ratio further to 1.3 by the end of 2025 and below one by 2027. With that, I'll hand back the mic to Mr. Sidos.
Thank you, Hugues. So let's switch to slide 26, where we start with an update on our progress in the climate plan. The group's climate performance continued to improve in 2024 on all indicators in all the group's geographic zones, with a notable improvement in India, which increased its use of alternative fuels by 13 points to 27%, with the commissioning of two new facilities in Kalaburagi and Bharathi. This performance contributed to a four point improvement in the group-wide substitution rate. This rate now stands at 36%, well on the way to our target of 50% by 2030.
In France, the startup of the Argiloc project at Xeuilley using activated clay as a sustainable substitute for clinker. Let's switch to slide 26 now. Slide 27. This slide gives a quick overview of Vicat's low-carbon solution in France. Vicat markets a complete range of low-carbon products and services called DECA, including Carat, our ultra-low-carbon product. Today, this product accounts for 16% of our cement sales volume in France, double that of 2023. The driving force behind this growth is twofold.
The French regulatory framework sets emission ceilings for construction, measured in CO2 equivalents per square meter, and the other driver is the commitments of our customers. They met commitments as part of their Scope 3 for 2030, and their Scope 3 is the sum of our Scope 1, Scope 2, and Scope 3. They understand that Vicat's low-carbon solutions will play a decisive role in reducing their indirect emissions, those that are not directly controlled by the company but are linked to its activities. Overall, these objectives illustrate a clear trend.
Major players in the construction industry are aggressively moving towards a more sustainable practice, with Vicat playing a central role in facilities expenditure. I will conclude with our outlook for the current year and beyond. On slide 29 now, in 2025, the group has the following objectives: like-for-like sales growth, low single-digit EBITDA growth, net capital expenditure of around EUR 280 million, and continued debt reduction, with the aim of reducing our financial leverage to 1.3x by the end of 2025 and below one by 2027.
These objectives take into account an acceleration in performance in the second half of the year, thanks in particular to the contribution of Kiln 6 in Senegal and stabilization of energy costs. On slide 30, now to the dividend. On the basis of the 2024 full-year results and confidence in the group's ability to continue its profitable development, the board of directors has decided to propose to shareholders the distribution of a dividend of EUR 2 per share, equivalent to a yield of around 5%. On slide 31, Vicat is pursuing a controlled growth trajectory with three strategic priorities for the coming years.
Firstly, to maintain EBITDA margin of at least 20% over the 2025 to 2027 period by optimizing industrial and commercial performance. Secondly, to continue to reduce debt, as you have already mentioned. Finally, accelerate the climate roadmap with a strong ambition on reducing CO2 emissions and promoting low-carbon footprint products. This reveals the structure of Vicat's strategy to ensure profitable and sustainable growth. Ladies and gentlemen, thank you for your attention. Mr. Chomel and I will be happy to answer any questions you may have. Alan, up to you.
Thank you. If you'd like to ask a question or make a contribution for today's call, please press star 1 on your telephone keypad. To withdraw your question, please press star two . You'll be advised when to ask your question. Please. We will take our first question from Tom Zhang, Barclays. Your line is open. Please go ahead. Afternoon.
Thanks for taking our questions. I've got two, please. The first one just around your 2025 to 2027 guidance on keeping EBITDA margins at least equal to 20%. I guess you've seen a pretty impressive kind of margin improvement over the last two years, but now the guidance sounds maybe a little bit more conservative. Are you expecting less in terms of price-cost benefits going forward than you have in the last couple of years in terms of what you're able to hold on to? Are you assuming any kind of volume recovery within that guidance? It just sounds like the kind of margin progression story is plateauing a little bit. Just curious if you thought so.
But your focus on this is Guy Sidos speaking. Yes, we focus on EBITDA margin of over 20% over the next two years, thanks to a mix of volume recovery in certain markets and of price solidity and cost being lower thanks to modern equipment. To give you an example, we commissioned our new kiln in Ragland a couple of years ago, and cash costs are in the range of 30% lower than what they were. So, new equipment, they bring efficiency because we have less energy consumption.
We have higher volume, which reduces the share of fixed cost on every ton, and at the end of the day, we lower our cost. In a good market where prices stay good, even if they don't increase, we increase our profitability this way.
Okay, so all of that makes sense. I guess my question is, why is the guidance not higher, I guess, as a result? Because you have this organic growth coming from your rail distribution network around Ragland. You have, obviously, new kiln in Senegal. Yeah. I'm just wondering if the guidance maybe is a bit conservative or if there's any other factors that you're thinking of that might be a bit of a headwind in the next two or three years?
Yeah. We are in February 2025, so who knows can happen. So we have already a good objective. We'll adjust it with facts, but we live in a very complicated world. But even in this complicated world, we forecast the results or the objective we set up. And we are only keep in mind who knows that, but we are only in February 2025, and we're talking about objective in 2027. So sorry for that.
No, fair enough. And then the second question was just around the US. I was wondering if you are seeing any indications of kind of growing import pressure, I guess, from some of the data we've seen at the end of last year. We saw pretty sizable uptick in import volumes and quite a decline in import prices per ton as well. So wondering, one, yeah, if you're seeing any import pressure, and two, just any thoughts around your approach to pricing in the US in trying to place the additional material coming out of Ragland into the distribution network. Thank you.
So globally, in the US, we know that the US relies on imports from Canada and Mexico to adjust the need to the capacity. Right now, Vicat is on one side in California, close to the sea, and we face some imports, especially from Asia. By the way, yesterday, the PCA sent a letter complaining about dumping of Vietnamese cement in California. So we expect fast answer from the administration about that. Our second location is focused on the Atlanta market and the Nashville market, far from the coast and much less exposed to imports wherever they come from.
So these markets are very dynamic, and we were able to increase our footprint thanks to good product, good production facility, and also good network of rail terminals. And we started new terminals last year, especially in the south of Nashville, and one more in the vicinity southeast of Atlanta. And it brings service. And we sell on availability of cement, of course. We sell on quality on cement, and we totally switched to Type IL . We had, to my knowledge, it was only one in the US to do that, and this is low-carbon cement in the US. We also focus on quality of service, and it helps us to capture the dynamism of the metropolis we are in. So I feel very comfortable.
Okay. That's clear. Thank you. I'll turn it back. Thanks.
We will take our next question from Lefèvre-Moulenq, independent analyst. Your line is open. Please go ahead.
Bonjour. Good afternoon, everyone. I have two questions. The first one is a fundamental question. Where do we stand with CBAM implementation? There are rumors of delay. Can you give some color on this difficult subject? And secondly, the French market. I would like to focus on some number of French markets. If I am not wrong, EBITDA margin of France slightly declined in 2024 over 2023. Is that due to the ready-mix concrete operations? As you know, ready-mix concrete operation for the cement layer in France were less making in 2023. Is that still the case in 2024? Can we also have an order of magnitude of the Voreppe and Fos-sur-Mer capacities?
And last question, outlook for 2025, both in volumes. I think that your competitors have forecasted a slight decline by -4% to -5% in 2025. And where do we stand with import and export situation globally? I think the official export numbers of the Syndicat Français are underestimated. Many thanks.
Thanks, Jean-Christophe, for your question. Guy Sidos speaking. I will answer to the first one, CBAM. And Hugues will talk about the French market and answer your question. CBAM regulation, we face two kinds of CBAM. One in Europe, of course, and we started to declare what is related to CBAM. Next year, first taxes, I would say, will be implemented, tax schemes, and we don't know exactly how it will be done and what it will mean for importers. Of course, things are sometimes somewhat still fuzzy on the exact CBAM procedure. We have enough tools to deal with these intermediate periods.
At first, we have enough free allowance of quotas. We own more than in France, more than 4.5 million tons of CO2 quotas. So it will help us to face unfair competition as far as CBAM is not totally implemented. And we also are in France in a very integrated market, which is not that easy to penetrate deeply. So we believe that CBAM, which we support, will go ahead. Of course, we don't know exactly the agenda of the European Commission about that, but maybe it's coming. We have another expectation of CBAM in California.
I talked about it. It's still under progress, but it's a necessity for us once we have additional costs linked with carbon capture and storage. And hand over to Hugues Chomel about your question about the details on the French market.
Yes. Good afternoon, Jean-Christophe. On the French EBITDA during the year, you have to keep in mind that 2024 was a pretty brutal year on the French market with volume decreasing double digit, low double digit, but double digit in cement. And as you know, all cement operations have a high operation level. Therefore, the impact of volume is very significant. So I can tell you, I believe our teams in France did a great job in compensating to a large extent the impact of the volume decrease. Going forward, on the outlook, has the trend of decrease still there today?
We do not expect the market to rebound this year. So we see still a negative trend of volume in the market. As highlighted by the presentation of Mr. Sidos, we will see the beginning of a ramp-up of the TELT projects that will make up some of the market volume decrease, but we don't expect an overall rebound. So we do expect one, but not this year.
Okay.
And on the capacity of the two grinders? Well, we don't disclose capacity by equipment. Lefèvre is a good try.
Okay.
You're welcome.
Once again, if you'd like to ask a question, please press star one on your telephone keypad. We'll take our next question from Ephraim Ravi, Citigroup. Your line is open. Please go ahead. Hi.
In terms of the Lebec CCS project, can you give us an update in terms of what you're looking for from the government in terms of more clarity on the regulation and also in terms of funding? Will that funding kind of be available? What is the timeframe before which that funding has to be taken, or can it be extended beyond a certain timeframe? Thank you.
Yes. About this Lebec Net Zero project, deployment will take place in phase IV with commissioning scheduled for after 2030, and the final investment decision will be taken in 2027, and that's in our hand. The phase I has been validated by the Department of Energy, and as I said, while subsequent phases may evolve at our initiative in line with what can change with that, so we started the phase I. We sent our first bill to the DOE, and we are waiting for the payment right now, so month after month, actually. It will have soon, hopefully, money from the DOE about the phase I of our LNZ project.
Basically, phase I is mostly about detailed surveys, and then we'll implement two major parts of the project, which are aimed to reduce before capturing carbon to reduce the carbon footprint per ton of cement. I mean, we will defossilize totally the process with subfuels, and I was last week in Switzerland, in Zurich, and there is a special laboratory about cements there, and they were talking about the pistachio cement of Lebec because we burn pistachio shells instead of petroleum coke, and we also have a sound lever we will implement before carbon capture. This is linked with what we call LC3. It means calcium clay.
That can substitute some percentage of clinker so it lowers the carbon footprint per ton of cement. And then the remaining carbon we cannot fight, reduce, has to be captured and stored. So you see, these phase III will follow. Each phase will follow the other, and the capture will come not before the investment decision will be taken in 2027, and it could take three years to build it.
Thank you.
You're welcome.
That is all the time we have for question and answer session for today. So I will now hand you back to your host for closing remarks.
Thanks, Alan. This concludes our call for today. I'd like to thank you for your interest in Vicat. Our next call is set for the 29 April with the Q1 2025 sales publication. Of course, it will follow our General Assembly 11 April . Until then, à bientôt.
Thank you for joining today's call. You may now disconnect.