Hello and welcome to the Vicat first quarter 2025 trading update. My name is Laura, and I will be your coordinator for today's event. Please note this call is being recorded, and for the duration of the call, your lines will be on listen and limited. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star one on your telephone keypad to register your question. If you require assistance at any point, please press star zero, and you will be connected to an operator. I will now hand you over to your host, Hugues Chomel, Deputy CEO and Group CFO, to begin today's conference. Thank you.
Thank you, Laura. Good afternoon, ladies and gentlemen. I am Hugues Chomel, Deputy CEO and Chief Financial Officer of Vicat. With me today is Pierre Pedrosa, who heads investor relations. I will now be presenting to you our Q1 2025 trading update. Before starting the presentation, please have a look at slide two, where you can read your disclaimer regarding the forward-looking statements that this presentation may contain. Let's begin with our highlights on slide three. The first key point is the stable like-for-like revenue we recorded this first three months. This was a sound performance achieved despite market slowdowns this quarter in India and Africa. Another main highlight of Q1 was the resilient performance in Western Europe, with stable revenues in France and over 6% organic growth in Switzerland and Italy.
The firm takeaway is the confirmation of our 2025 guidance that includes like-for-like sales growth and low single-digit EBITDA growth. Finally, we moved ahead this quarter on a key initiative in our climate action plan with the Vaya project, whose public consultation has been launched. I will return to this. Moving to slide four, you have a regional performance this quarter. I remind you that due to the strong seasonality in our business, Q1 is our lowest quarter of activity and not always representative of full year trends. Q1 public revenues was down 2.7% on a reported basis, impacted by negative exchange rate trends of minus EUR 30 million or minus 3.3%, chiefly owing to the depreciation in the Turkish lira, Egyptian pound, and Brazilian real against the euro. The main outlier in this first part of the year were the lower activity volumes in India and Africa.
Let's now turn to slide five, where you have the revenue bridge for the quarter. You can see that the effect of lower volume was offset by price hikes this quarter, with the difference coming from the negative currency effect we just mentioned. The integration of Cermix has contributed to the revenue with a positive net scope effect of plus 7 million this quarter. On slide six, we present our performance by region, beginning with France. The cement business in France was still impacted by the weakness of the residential market, but the decline slowed sequentially over the quarter. Cement prices remained stable. Over the first three months of 2025, the infrastructure project for the Lyon Tunnel Rail Link, the TELT, contributed in a limited fashion, only partially offsetting the downturn in residential volumes. Trends in concrete were encouraging, with aggregate volumes rising slightly, supported by TELT projects.
Other product and services rose with the integration of construction chemical activities related to the Cermix deal. On slide seven, I would like to give you more color on the Vaya project. This is a decarbonization project that aims to capture nearly 100% of the ultimate emissions from the Montalieu plant. It includes several dimensions: the use of activated clay via an innovative process to avoid 200,000 tons of CO2 per year, and a CCS facility with a capture capacity of 1.2 million tons of CO2 per year. It is a complex value chain involving several partners and comprising a capture at our Montalieu plant using cryogenic technology, including supply of low carbon electricity. The CO2 will then be transported via an existing pipeline operated by SPSC to Fos-sur-Mer. In Fos, the CO2 will then be liquefied by LNG for transport by sea.
There are still few storage sites, and they are currently being studied, with the closest one located in the Adriatic Sea. The investment for Vicat, Hugues Chomel, would be EUR 700 million as an initial estimate and is mainly related to the CO2 capture system. The cost of transportation and storage will be an operating cost. We are currently in discussion with French and European authorities to obtain subsidies, particularly under the Innovation Fund and the call for tender Grand Projet Industriel de Décarbonation. This project is well underway. We have very recently launched a public consultation phase with local stakeholders, which should be completed by June 2025. Pre-feasibility studies have also been launched. On slide eight, you have the focus on Europe. Let's begin with Switzerland. Cement activity rose in the first quarter. This is the second consecutive quarter of growth. The introduction of new low carbon cement supported the growth.
Going forward, major infrastructure projects should support activity in 2025. In Italy, sales rose against a backdrop of a volume rebound and stable prices. Moving to slide nine with our performance in America. I will begin with the United States, where the cement business experienced mixed trends by region. Residential volumes in California continue to decline, a trend partially offset by growth in the southeast, driven by the ramp-up in rail terminals. The pricing environment remained resilient during the quarter. In Brazil, cement business reaped the benefit of progression in volumes while prices remained stable over the period. On slide ten, we thought it useful to remind you of the local-for-local business model of Vicat, as illustrated here in the United States. As many of you know, Vicat is present in California and in the southeast under the National Cement brand. In both cases, we developed our local-for-local business model.
Vicat is a local producer using local resources and selling to local markets. This means no import and no exports of cement or clinker, which provides us with a competitive asset in today's economic environment. On slide 11, you have our activity in Asia. Beginning with India, where cement volumes were down significantly, owing to the increasingly fierce competition environment in the southern states, where prices remained under pressure and where the base of comparison was unfavorable. The encouraging volume growth in Maharashtra, with the increase in rail capacity in late 2024 to serve Mumbai, only partially offset the volume downturn in the south. In Kazakhstan, prices continue to move higher to pass the increased costs. Volume also rose slightly in the quarter. On slide 12, to the Mediterranean region.
Amid a persistent hyperinflationary environment, the cement business in Turkey was impacted by volume declines caused by unfavorable weather conditions in February and the political situation. Selling prices were hiked again to offset the effect of inflation on production costs. The cement business in Egypt was boosted by further dynamic trends in the export market, with a strong rise in volumes and higher prices. Prices in the domestic market also moved positively over the period. Turning to slide 13 regarding Africa. Cement business in Senegal was impacted by a downturn in domestic price as a new competitor entered the market. Aggregate operational sales in Senegal moved lower as a result of a sharp slowdown in volumes, given the continuing delays to public sector infrastructure projects. Cement operational sales in Mali and Mauritania decreased as volume and price moved lower.
Slide 14 compiles the benefits of a new investment in Senegal that will substantially decrease our production costs in this region. We are on track for commissioning of CAN6, which is set for this quarter, with a contribution to EBITDA expected in the second half of 2025. Finally, on slide 15, we confirm the outlook for 2025. I will remind you of the underlying factors that lead to this: an acceleration in performance in the second half of the year with the contribution of CAN6 in Senegal, stabilizing energy costs, net capital expenditures of around EUR 280 million, and tight control of working capital. Of course, it's important to note that this guidance does not factor the macro impact of a prolonged trade conflict. I will conclude on slide 16 that sums up the three priorities of the Vicat Hugues Chomel for the coming months and years.
The first is maintaining our EBITDA margin level to at least 20% over the 2025-2027 period. The second is to continue deleveraging to reach a leverage ratio of below one at the end of 2027. Finally, accelerating our climate roadmap and promoting our low carbon hub frame. Going forward, we're confident this levers our call to creating value for all our shareholders, and we remain fully focused on delivering on these objectives. Laura, we can move to questions, please.
Thank you. Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star one on your telephone keypad. Thank you. We will now take our first question from Auguste Derricks of Kepler Cheuvreux. Your line is open. Please go ahead. Auguste, would you mind to check if your line is muted?
Hi, hello. Do you hear me?
Very well. Auguste, go ahead.
Okay, yeah.
Thanks for the presentation. I have two questions. The first one is about Senegal. In the press release, you say that there is an increased competition, and I would like to know if the lower cost of production, thanks to the new kiln, will allow you to regain market shares. The second question is about carbon capture projects. Can you give us an update on the total CapEx for the current project? Because there is another one on top of Montalieu. Also, how much has been spent to date? Maybe if you have an indication on the OpEx per ton of CO2 capture, that could be wonderful. Thanks.
Thank you, Auguste, for these great questions. On Senegal, we mentioned an increased competition with a newcomer, with the arrival of CIMAF, a Moroccan player that started late last year.
Actually, I want to remind you that Senegal is a long-term growing market that grows mid to high single digit year after year for decades. We have always seen these similar trends of temporary tensions on prices with a newcomer and the capacity of newcomer or capacity expansion being quite quickly swallowed by the growth of the market. In this specific case, we have seen limited erosion of selling prices and no erosion of our market share. It is a temporary event, and we are not overly concerned. As a reminder, our new project is about to start, and the key rationale of this project is to reduce production costs by eliminating imported clinker and substituting the production of the two oldest kilns by the latest technology with CAN6 and maximizing the use of alternative fuels to fossil fuels.
We are confident that this will allow us to have a competitive industrial base. On the Vaya project, let me come back quickly. This is a project that we have spoken about before. We just wanted to update the market about what it is. It is a project that is meant to capture all emissions of the Montalieu plant. In terms of timing, we are now entering the consultation and the study phase. We expect to be in a position to make a final investment decision late 2027 to target commissioning probably around 2031, depending on the amount of subsidies obtained from both EU and the French authorities. In terms of economics, as you know, carbon capture is today a new technology that is quite expensive. What we expect from it is savings on the carbon allowance that we will not need to surrender anymore.
We do believe that the market will accept premium on selling prices, and both Capex and Opex will need to be partially offset by some subsidies, as we mentioned. In terms of Opex costs, it's probably a little bit early for me to share numbers, but we can share a few comments. First of all, the carbon capture project is an energy-intensive installation, so it very much depends on the cost of electricity. It also depends on the distance to storage sites. Depending on where the project is located towards the storage site, whether it's onshore or offshore, the cost of transportation and storage is more or less important. We have two projects in the group, as you know, NNZ project in California, which is aiming on onshore storage site, and Montalieu, which, as explained during the presentation, is aiming offshore storage sites.
Again, as the technology will progress with the years, we expect the cost of those technologies to come down as well. That is probably what I can share with you at this stage.
Okay, thanks.
Thank you. We will now move on to our next question from Ebrahim Khomani of CIC. Your line is open. Please go ahead.
Hello, Auguste. Hello, Pierre. Thank you for taking my question. I have two, if I may. The first one is about France and the organic growth. It was stated in Q1. Did you announce any price hikes in April? Will the organic growth be positive starting from Q2, given the organic growth in Q1? My second question is about Switzerland. You did it well, a huge organic growth. With which level of margin is the margin level in Switzerland higher than the consolidated level? Thank you.
Good afternoon, Ebrahim. Thank you for your question. Yeah, we did place price hikes in most of our markets this year, including France and Switzerland, with low single-digit numbers. We do expect those price hikes to pass on as we go along. As mentioned, the volumes are still decreasing sequentially in France. The decrease is slowing down, but it is still decreasing, as expected in our annual guidance. Again, both for France and Switzerland, you have to keep in mind that Q1 is a winter period that can be impacted by weather, positively or negatively, and cannot be extrapolated easily. We do not comment on margin by country at this stage of the year, of course.
Okay, thank you.
You're welcome.
Thank you. We will now take our next question from Yassine Touahri of On Field Investment Research. Your line is open. Please go ahead.
Yes, a couple of questions.
Firstly, regarding your guidance that you kept unchanged, I'm a little bit surprised because we're seeing quite a big decline in India, 20% down organically, with pricing pressure and some pricing pressure as well in Senegal or in Africa. Do you feel that in those two regions, Africa and India, your effort on cost would be enough to prevent a drop in EBITDA in those two regions? If there is a drop in EBITDA in those two regions, how confident are you to be able to achieve your guidance of growth? Are you very confident on growth in EBITDA growth in France, Switzerland, the U.S., or Egypt? It would be great to understand a little bit why you kept your guidance despite the difficult trends in India and Senegal. That would be the key question I would have. I've got a few follow-ups as well.
Yes, good afternoon. Yassine, thank you for your question. Of course, we are confident on our guidance. Otherwise, we would not have maintained it. As you surely have in mind, guidance are annual, and we have been commenting on the trends. We have positive and negative movements in various regions as every year. As you can remind, we had quite strong H1 last year, but it is probably a more challenging base for comparison in Q1. This is true in Turkey. This is true in India, for example. We are quite clear that we will be able to achieve our guidance. On top of that, specifically in India, you know that the end of the financial year for Indian players is the 31st of March. As such, the pressure is always a little bit stiff in March. We have seen quite a noticeable price recovery in April already.
When we look at the pricing developments in Senegal, you have a 10% decline like-for-like in Africa. Is it fair to assume that it is half price pressure, half volume decline, or am I wrong with this assumption? Yeah, it is a global decline for the region. A large part of this decline is linked to the aggregates business, where there is a temporary but strong slowdown of infrastructure projects as the new administration is conducting audits of public infrastructure projects and therefore slowing down a lot the implementation. This will resume at some point, and there is no substantial volume decline in cement.
The price pressure in cement would be moderated, more in the low single-digit trend rather than in the mid-single-digit trend. Is it fair to assume that based on your comment?
Yeah, we don't give precise data per country and quarter, but it is a decent assumption.
Another one on your project in France. There is a EUR 700 million investment. I understand that you will make a final decision in late 2027. How do you think about this decision? Are you targeting a specific return on the investment that you will have to make? Will you have to, do you want to be confident on your ability to at least cover your cost of capital? Or would you be considering a return below your cost of capital if it really helps decarbonize? It would be great to understand the parameter that you will be taking into account before making final decisions on what kind of return you expect for the money that you will be putting in the plant.
As you know, this is a fairly complex project on quite a few dimensions: technologically, regulatory, and commercially, since all these aspects are new. Therefore, we will monitor how all these aspects are evolving. We will clearly need to have public support to make this project possible. We could probably temporarily, for a first CCS project, look at a somewhat lower return, but clearly, that will depend on the environment and our understanding, especially of the market trends. The key element will be as well to see an appetite of the market for decarbonized cement.
Do you feel that the French government could be ready to buy decarbonated cement at a premium when building bridges, roads, or highways? Do you feel it's too early to say?
The projects that are coming on stream today have been specified a few days back, so it's not yet in the market, but I'm sure that the authorities will lead the way to decarbonize them. The last question on the U.S. I think that a lot of price increases were postponed from January to April.
Have you as well put your price increase in the U.S. in April? If so, do you see traction on cement?
We have not implemented the price increase yet in the U.S. We had resilient pricing. We do expect to see price increases in July rather than April, but we think there is good room for it, and more specifically in California.
Okay, that reflects the market. It's not only Vicat.
Indeed.
Th ank you so much.
O ur perception of the market.
Thank you very much for those answers.
You're welcome.
Thank you. Once again, as a reminder, if you would like to ask a question, please press star one on your telephone keypad. We'll pause for a further moment. Thank you. We will take our next question from Zoe Yu of Citi. Your line is open. Please go ahead.
Thanks for taking my question. I have three. The first one is on India. Can you give us some expectation when you will be able to see some improvement, say maybe as fast as Q2? Can you also give us some color in terms of the volume, group volume, excluding India? Maybe say like flattish or low single-digit down for the Q1. The second one is on the construction chemical JV. I think there will be some margin dilution from that. When do you expect to see the synergy coming in?
Would the synergy be sufficient to offset the margin dilution impact? The third one is on Senegal. Do you expect to see some commissioning cost, the start-up cost, like the one in the Rockland plant? Thank you.
Good afternoon, Zoe. Thank you for your questions. Regarding the Indian market, you know that this is a rather volatile environment that has still a strong market demand growth. What we have been facing is a fierce price competition in the south, and where we have conducted a price over volume strategy, declining to sell when it is below certain levels. We have seen pricings recovering already in April, which allows both to have better prices and to participate again in the growth of the market. Again, this is in the southern markets.
In Maharashtra, we see a good demand drive, and we have an efficient logistic asset to serve the Maharashtra market. I mean, we do expect some recovery, but still, recon, it is a volatile environment. Regarding CERMIX, indeed, the average margin in this business is lower than the average group margin, so you can expect some dilution. At the same time, we do expect some synergies from the combination of CERMIX and VPE. We would more see these synergies unfolding late this year and in 2026 rather than earlier. It is a rather limited figure compared with the global group sales. Lastly, on Senegal, I mean, there is always commissioning cost in all startups, but we are in a very different situation than Ragland in 2022.
Ragland, we had only one kiln, and we had to discontinue production of the old kiln to prepare the tying of the new installation. Whereas here, we can continue to operate the existing lines until the new one is ready to operate. That makes things very different. We are not expecting specific difficulties. Again, commissioning a clinker line is a complex installation, so there is always an unknown part to it, but we are preparing as much as we can to make it successful.
Okay. Thank you.
Thank you. That was our last question. I will now hand it back to Hugues for closing remarks. Thank you.
Thank you, Laura. This concludes our call on Vicat HQ1 2025 for today.
A sound quarter, but so does move ahead to confirm our 2025 guidance of like-for-like sales growth, low single-digit growth in EBITDA, net Capex of around EUR 280 million, and deleveraging that should reach 1.3 at the end of 2025. With that, I would like to thank you for your interest in Vicat. Our half-year result will be published on July 28th. À bientôt.
Thank you. This concludes today's call. Thank you for your participation. You may now disconnect.