Welcome to the Vicat Q3 2025 Trading Update Conference Call. For the first part of the conference call, the participants will be in listen-only mode. During the Q&A session, all participants are able to ask questions. Now I will hand the conference over to Hugues Chomel, Deputy CEO and Group CFO, and Pierre Pedrosa, Head of Investor Relations. Please go ahead.
Good afternoon, ladies and gentlemen. I am Hugues Chomel, Deputy CEO and Chief Financial Officer of Vicat. With me today is Pierre Pedrosa, Head of Investor Relations. I will now be presenting to you the Q3 2025 sales figures. Please have a look at slide two, where you can read a disclaimer regarding the forward-looking statements that this presentation may contain. Let's begin with the key takeaways of Q3 2025 on slide three. First. Organic sales growth reached +4.9%. Reflecting solid momentum across most of the regions, particularly in Europe, where recovery continues in Switzerland and in the Mediterranean, driven by Egypt and Turkey. This performance brings the nine-month organic sales growth to +1.8%. Despite the slowdown in the U.S., India, and Africa. Based on this performance, we are confirming a full year 2025 guidance, an organic growth in sales, and net EBITDA growth of +2.5% like-for-like.
We also adjusted our 2025 leverage objective to above 1.3 x versus the previous 1.3 x, reflecting a stronger-than-expected FX impact and certain run-off item in the second half. This does not change our 2027 leverage objective of below 1 x. Finally, our VAIA CCS project has been selected by the European Innovation Fund. This decision is an important first step in the financing of this major decarbonization project for our Montalieu plant in France. Overall. The Group continues to deliver solid organic growth, confirms its profitability outlook, and maintains strict discipline despite a less favorable currency environment. Turning now to a geographical breakdown for Q3 on slide four. Group sales reached EUR 992 million, up 4.9% organic, confirming an acceleration versus the first half. France, which accounts for 29% of Group sales, is showing clear signs of volume stabilization.
Cement volumes have leveled off at a low point, which is in line with our early-year expectations. In Europe, growth accelerated to 7.9% like-for-like, driven by Switzerland, where the market is clearly recovering. Demand for our low-carbon Progressor range remains strong, with notable project wins in the industrial space. Infrastructure is also supporting demand. In the Americas, activity was softer, particularly in the United States, where both the residential and non-residential markets remain affected by high mortgage rates and limited visibility. Having said that, there are some reasons to be optimistic for the next year. As the U.S. economy remains robust, a lower interest rate environment could trigger a residential recovery, and the base effect will be positive in California. Brazil delivered solid growth in both prices and volumes, supported by the integration of Realmix, which strengthened our vertical integration model. In Asia.
The trend turned positive, with India posting +6.5% organic growth, thanks to improving volumes in Maharashtra, where our expanded rail capacity to Mumbai is fully operational. Volumes remained subdued in the southern states. The GST cut in September is expected to support demand going forward by reducing prices. In the Mediterranean region, once again stood out. It now represents 16% of Group sales in Q3. An increase of 3 points year-on-year. Organic growth reached 43%. Driven by a strong recovery in Turkey, where the government is pushing public works and reconstruction following the 2023 earthquake. Export momentum continues in Egypt, now coupled with a rebound in domestic demand. It should be a very strong year for Egyptian operations. Finally, in Africa, a new Kiln 6 in Senegal is ramping up as planned, already generating its first cost efficiencies.
Aggregates activity has also accelerated sharply, with the restart of major public works. Overall, this quarter once again confirms the strength of our balanced geographical model. Robust growth in Europe and our emerging markets more than offset the temporary softness in the U.S. This enables Vicat to sustain positive momentum despite a challenging foreign exchange environment. If we look at the nine-month bridge on slide five. Year-to-date organic growth stands at +1.8%. Confirming the positive price momentum across our main markets. Price contributed +EUR 80 million with resilient prices in developed markets and firm pricing in emerging ones, notably in Egypt, Turkey, and Brazil. The volume effect at -EUR 28 million mainly reflects a softer start of the year in France and India, both of which have now stabilized or recovered. The volume effect was positive in Q3 at +EUR 13 million.
Foreign exchange impact was again the main drag at -EUR 147 million. Driven by the depreciation of several emerging market currencies, particularly the Egyptian pound and the Indian rupee against the euro. And since Q3, the weakness of the U.S. dollar against euro. Scope effect at +EUR 57 million reflects the integration of Cermix since the beginning of the year and to a lower extent, Realmix in Brazil that has been consolidated as of September 1. Overall, nine-month sales came in at EUR 2.88 billion, slightly down on the reported basis, but showing clear underlying business resilience and continued pricing discipline across the Group. Let's now deep dive into our foreign exchange exposure on slide six. The currency exposure of the Group is well diversified.
But as you can see, around 70% of our EBITDA and close to 70% of our revenues are generated in hard currencies, mainly euro, dollar, and Swiss francs. However, a large part comes from the markets where currencies have experienced higher volatility, particularly the Turkish lira, with a country in hyperinflation, and the Egyptian pound. Since Q3, the U.S. dollar also weakened significantly against the euro. It is important to note that our operations are conducted locally. We produce and sell in the same currency, so our main exposure is not transactional but rather linked to the conversion effect when consolidating results. Only monetary flows, both operational and financial, are hedged, and these are primarily related to fuel purchases that are made in U.S. dollars. While our hedging strategy helps mitigate short-term volatility, it does not eliminate currency exposure entirely, as we remain exposed to conversion risk.
On pricing, our approach remains consistent. We aim to pass through inflation, including imported inflation, in all of our markets. This disciplined strategy allows us to preserve margin and maintain firmness even in the context of significant FX headwinds. Let's now turn to France on slide seven, where we are seeing clear signs of stabilization. As expected, cement volumes in France reached their low point in Q3 after continued deceleration in the rate of volume decrease over the last seven quarters. Looking ahead, we expect a slight second-half recovery in cement volumes throughout 2026, supported by lower interest rate environment and underlying residential needs in France. The TELT Lyon-Turin will begin with the first boring machine now operational, and the growing demand for low-carbon cement solutions should also support the volume recovery next year.
Overall, France is gradually bottoming out, setting the stage for a more positive trend from 2026 onward. On slide eight, on the energy front, we've also taken an important step forward. Vicat has signed a long-term low-carbon electricity supply contract with EDF, known as a Nuclear Production Allocation Contract (CAPN), which will replace the ARENH framework in 2026. This 15-year agreement provides us with enhanced price visibility, with around 70% of our projected electricity consumption already secured under this new mechanism. The resulting cost increase will be reflected in our price hikes. There will be an upfront down payment in the second half of 2025 and in 2026, which will temporarily weigh on free cash flow, but it will secure our energy costs and contribute to carbon reduction objectives in the long term. Turning now to slide nine, to Senegal, where we started our new plant early June.
Since then, I'm pleased to report that the industrial ramp-up is progressing as planned. As shown at the bottom of the slide, the output is progressing, and the kiln is expected to reach nominal capacity in the coming months. Kiln 6 is replacing both clinker imports, which previously averaged 300,000- 400,000 tons per year, and production from the older Kiln 3 and 4, which have now been shut down. This modernization allows us to significantly improve our cost base, with targeted savings of around EUR 20 per tonne in the medium term. A new production line is already EBITDA accretive. In short, it is a major step forward for Vicat Senegal and a clear example of how our investments are driving both performance and sustainability. Let me now move to our balance sheet and leverage trajectory on slide 10.
As you can see, the leverage remains a core priority for the Group. Over the past three years, we have reduced our leverage ratio significantly, from 2.75 x in 2022 to 1.58 x at the year-end 2024. Thanks to strong cash generation and disciplined capital allocation. For 2025, with a controlled working capital requirement and CapEx spending in line with our targets, we are now expecting our leverage ratio to end the year above 1.3 x compared to our previous target of 1.3x. This adjustment reflects the impact of adverse currency movements on both EBITDA and free cash flow, as well as a few non-recurring items in the second half of the year. It is important to note that these effects remain limited and do not alter our long-term trajectory. Our commitment towards a leverage of below 1x by 2027 is fully maintained.
To conclude on slide 11, let me summarize our guidance for 2025. Our full-year P&L objectives remain unchanged. We continue to expect like-for-like sales growth. For EBITDA, we confirm our target of +2%-5% growth at constant scope and exchange rates. Net capital expenditure should remain at around EUR 280 million, consistent with our investment plan and our selective approach to growth projects. In short, the fundamentals of our outlooks are intact: continued profitable growth, strict capital discipline, and a clear deleveraging trajectory. Here on slide 12, we've highlighted the three strategic priorities that are guiding Vicat's actions over the next few years. First, we are committed to maintaining EBITDA margin of at least 20% over the 2025-2027 period. Second, we are focused on continuing our deleveraging trajectory. This will provide us with greater flexibility to navigate economic cycles and pursue opportunities.
Third, we are accelerating our climate roadmap, investing in decarbonization, developing low-carbon products, and embedding sustainability across all geographies and business lines. These three pillars, profitability, financial discipline, and sustainability, define our roadmap for profitable and responsible growth. Concluding on slide 13. Catalysts of the coming years will be supporting Vicat's growth with existing industrial assets. First, in Senegal, the new Kiln 6 is a major cost efficiency driver. As it replaces clinker imports and allows us to retire older, higher-cost capacity. Its contribution has started in 2025 and will ramp up in 2026 and 2027. Second, in France and the United States, we anticipate a recovery in residential construction volumes starting from historically low levels. Third, the TELT is Europe's largest civil engineering project. It is a multi-year driver for cement and aggregate businesses, with volume visibility extending well beyond 2030.
It should represent between 5%-10% of Vicat cement volumes in France over the coming years. Finally, the Mediterranean region, particularly Egypt and Turkey, continues to offer medium-term compelling opportunities. Together, these catalysts position Vicat for resilient and balanced growth. Aligned with our long-term industrial and environmental strategy. This concludes my presentation. Maya, can we move to questions, please?
Kindly note that we will take audio questions from analysts only. You can request to speak via the blue hand icon. Investors' participants can submit questions via the chat box below the player. The next question comes from Ebrahim Homani from CIC. Please unmute your microphone.
Hello, hello, thank you for taking my question. I have three. If I may, the first is on your leverage guidance. It has been modified. In my understanding, it is more an EBITDA effect than a net debt effect. So my question is on net debt.
Do you expect a decrease in the net debt in 2025 compared to 2024? My second question is on the French market. Could you give us, please, more details on price and volume effects and which level of price hike do you expect in 2026? And my last question is on Europe, on Switzerland specifically. In Q4 2024, sales were stabilizing. Should we consider a slowdown in organic growth in Q4 compared to Q3, which is very dynamic?
Yes. We have adjusted our guidance and deleveraging. So far, our debt reduction trajectory has been continued to September 2025. We are maintaining a controlled working capital requirement. CapEx are in line. So nevertheless, as you mentioned, the FX fluctuation is negatively impacting EBITDA and cash flow generation and therefore the denominator. So that's the sense of this revision.
On pricing and volumes for 2026, obviously, it's still early to give precise guidance. As mentioned, on some of our markets, namely France and the U.S., we are starting from a low level of a residential market. So we do believe that at some point it will recover, probably very gradually. For France, as we mentioned, the cost environment includes two specific elements, which are the implementation of CAPN and the end of the ARENH mechanism. Both of them will imply cost increase and therefore will push us to push price hikes to the market. It is too early to quantify them. And on emerging markets, again, those markets are well-oriented. Each of the countries is a different dynamic. It is usually inflationary, except temporary periods.
Okay. So on Switzerland, please.
Well, I usually don't comment by market, by quarter, Ebrahim.
So, of course, the higher the base, the more difficult the hill to climb.
Thank you very much.
Now, move on to the written question. So first question from Auguste Deryckx from Kepler Cheuvreux. "Cement volumes are virtually stable in France, but turnover is down by nearly 5% in organic terms. Is it entirely due to the performance of concrete and aggregates business? Can you recall the typical end market for cement, concrete, and aggregates?"
Yeah. As we mentioned, we have reached a limited level of decrease of cement volume in the last quarter in cement. Nevertheless, as mentioned in the press release, Ready-mix concrete and aggregates did nevertheless continue to decrease. And so, as you mentioned, the global sales evolution reflects the mix of those activities.
On your background question on the end markets, as you well know, cement volume typically in a developed market grows roughly 50% in residential market, 25% in non-residential, and 25% in infrastructure. At the moment in France, obviously, we are facing a very low residential market and a somewhat more resilient infrastructure market, which may be changing slightly this performance. Typically, aggregates has a larger part on infrastructure since it has as well road application. And typically, ready-mix is more serving the residential market and more rarely the infrastructure market. So I hope this helps.
Next question is coming from Isaac Ocio from Onfield Investment Research.
"First, in the U.S., do you expect tariff and consolidation of ready-mix concrete market in California to better support price in 2026?" Second question, "What is the outlook for prices in Egypt, given the government effort to redirect export to serve the domestic market?" And last question. "What level of cost benefit do you expect from the Kiln 6 in Senegal in 2026 and 2027?"
Yes. As you may have observed, the prices have been holding up fairly well in California. So I believe this already reflects some of the movements that you have mentioned. California is exposed to cement imports but are themselves exposed to tariffs. We have not yet seen price increases from importers. I think the margin hit is nevertheless significant for them, and that should be a positive element for pricing. Prices in Egypt. There has been the movement that we have been witnessing.
Historically was a low non-economical price in the market. That has gradually recovered, as capacities were able to serve a more profitable export market. Since then. In the last 12- 18 months, we have seen the domestic market coming to a next-forward price comparable to the export prices. Which is just an economic movement. There have been some temporary spikes, especially at the end of H1. Ever since. Indeed, the authorities have expressed their willingness to see the price increase come down. There have been discussions on trying to bring back capacities, but we are not aware of restrictions. And plus, I think that not all regions will probably be in the same situation. So we do expect now prices to be reflective of cost inflation, mostly. Kiln 6, we have, of course, expressed our medium-term cost reduction target.
Next year, we will have a full year effect of the run rate of the kiln. But probably not yet the full ramp-up of fuel substitution. So I would typically expect a very gradual unfold of the cost reduction. Sorry, not to be more precise than that.
Next question from the audience. So on the VAIA CCS project. You obtained the subsidies from the EU Innovation Fund for the VAIA CCS project of Montalieu in France. Can you give more color on this subsidy? What is the level obtained, and is it in line with your expectation? Thank you.
Indeed, it has been announced yesterday morning. The VAIA project has been selected among others by the Innovation Fund to sign an agreement at the end of March of next year. The grant agreement. So this is very good news.
We have applied for a grant of EUR 150 million, but the amount awarded to each project has not been publicly disclosed by the Innovation Fund, and we are not in a position to disclose them. We do consider this the investment fund award has a very important first step for the financing of our project. And to complement it, we are still expecting an answer of a grant from the French administration as part of the GPID framework. That should come early 2026.
Next question on Egypt. Could you give us an update on the buyout of the minorities of Sinai Cement?
So. As mentioned before, we have introduced an offer to buy the outstanding floating shares of Sinai Cement in Egypt in July. We are expecting the approval of the local market authority since then.
Once this decision is issued, there is a legal procedure that implies that the company has a third party to issue a valuation. And once this is done, we will be in a position to appreciate our view going forward.
Next question on the U.S. recovery. Can you elaborate on your optimism for the return of residential construction in the U.S.? How much of your U.S. business is exposed to residential versus non-residential?
Yeah. Just as a reminder, 2025 compares with a very strong 2024 performance that was almost a record high. Our views are the U.S. economy remains very robust. The Fed rate decrease has begun and is expected to continue. We still have some question marks on the pace of reduction. But once this reduction is well underway, this will support residential demand.
I believe that a large part of 2025 has been the visibility has been deteriorated by various moves of the administration in terms of fiscal and tariff policies. This is likely to settle down and clarify, and this will surely support the non-residential demand. So all that combined, we do believe the market will recover. I come back to my previous comment. We are usually in mid-cycle exposed to roughly 50% residential in developed markets, probably slightly less at the current part of the cycle where we have still a resilient infrastructure spending and somewhat more resilient non-residential than residential.
And last question on the dividend. Please give us some color on the possible dividend for 2025 full year.
So obviously, in the hands of the shareholders rather than in my own hands. As a reminder, we increased the dividend in 2024 thanks to improved results last year.
The current level is sustainable and is implying a quite reasonable payout. Typically 35%. If I may look back, dividend never came down in the last two decades, at least, through various economic cycles. So I do not expect it to come down again. I do believe that further increase should be linked to a further progress of net results.
No more questions.
Thank you, Hugues and Pierre. There are no more questions at this time. So I hand the conference back to the speakers for the closing comments.
Thank you. This concludes our call for today. Thank you for your interest in Vicat. Our 2025 results will be published on February 17th after market close. Until then, both Pierre and myself remain at your disposal.