Ladies and gentlemen, thank you for standing by. Welcome and thank you for joining the HeidelbergCement's full year 2021 results call. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question-and-answer session. If you would like to ask a question, you may press star followed by one on your touchtone telephone. Press the star key followed by zero for operator assistance. I would now like to turn the conference over to Christoph Beumelburg. Please go ahead.
Thank you, operator, and good morning and good afternoon to everyone listening in. With me today in the room, we have Dr. Dominik von Achten, our CEO, René Aldach, our CFO, and Ozan from the IR team. It's an eventful day today, so let's get started right away. Dominik, over to you.
Thanks, Chris. Thanks a lot for joining in this rocky day. René and myself will lead you through our full year results. Before we do so, I think we should keep our minds with the people in Ukraine. This is a very difficult and tough day and weeks ahead for them. Although we do not have any operations in Ukraine, remember how we sold them in 2019, we still think about the human tragedy that happens actually right now in the Ukraine. Maybe just one other comment from our side concerning our business. We do have business in Russia. We run three cement plants. The business continues to run.
I had a longer chat with our GM in Russia. I also remind you that the impact on group level is just above 1%, both in terms of revenue and in terms of EBITDA. The direct impact of the conflict there, when it comes to the Russian business, is fairly small. Obviously, there could potentially be secondary impacts. I'm pretty sure you will ask some of your questions along those lines. If you are fine with that, we've given you the presentation, and I would not now spend an hour to go through the presentation again, but rather pick the key points from our perspective, and then we would open up to your questions, and obviously René will do the financials. Let's dive into it.
I'm on the key message slide. I would say despite significant headwinds in 2021 second half, we have managed with a very strong finish in Q4 to pull together a very strong result for 2021 altogether. Revenue plus 8%, EBITDA plus 6%, RCO even plus 12% like for like. I think that is a good performance in difficult times. For us, probably most importantly is the driver of that performance, because you all know that typically towards year-end prices for our products taper off a little bit. Given the cost situation, this was something that could not happen. We have promised you that we will work hard in the Q3 call to manage the Q4. We'll close the price gap, the negative price-cost gap a bit, and we've done this.
Key driver was very successful implementation of price hike. I'll come back to the details and obviously also good DNA Heidelberg Materials, strong fixed cost management. René will go into ROIC development. I think the 9.3% ROIC. I think that absolutely moves in the right direction as well as the shareholder return, EUR 1 billion for the first time ever, I think. A good combination of dividends and also share buyback. We also announced today that we will start our next tranche of the share buyback quickly, at the latest before March 10. If I look at current market developments this May, as tragic as the events are, maybe quite a good timing in that respect. Good progress, I would say strong progress on ESG.
Net CO2 emissions are coming down. I also come to the launch of our local products in that respect, and we also continue to work on our CCS leadership position and continue to expand it. I also come back to that briefly. Last but not least, from today's perspective, optimistic outlook for 2022. Further growth in revenue, EBITDA, and RCO under clearly challenging conditions, especially in the first half, but I'm sure we'll come back to that discussion during your questions. If you then go to the next page, just to remind everybody, we promised to you that we come back consistently on how are we performing against our targets set in the 2020 Strategy Capital Markets Day, September 2020. In all five dimensions, we are absolutely on the right track.
In two dimensions, we have already reached our targets. Some of your questions may also center around that. EBITDA margin up from 19% - 20.7%. Our ROIC now not only above 8%, but above 9%, with 9.3% leverage ratio below the guided corridor of 1.5-2 at 1.3. 565 kg on cementitious, so 2% down. Also the digital transformation, which you know is key for us, already 52% of our global sales covered by the HConnect product. If you then turn to page 5, you see the details of the Q4 performance. As I said, we'll come to the details in a minute.
The driver for the good operating EBITDA and also the okay margin development, especially also the good RCO development, and then obviously respectively also the top-line management is a little bit volume, but it's predominantly price. If you go to the next page, you see the full year picture on page six. That's the split half, H1 and H2, where the revenue eventually came out at like-for-like 8%, operating EBITDA up 6%. And the EBITDA margin coming down slightly from 21.1%- 20.7%, but operating EBITDA is going absolutely in the right direction. Now, importantly, what's the mix that has driven that in Q4?
I'm happy to see, I say this openly and especially also our North American business has performed very well. You know that we were sometimes critical, self-critical on this in the past years. I always said, you know, we have some upsides in North America, and I'm glad to see that this upside is now slowly materializing, and the trend is clearly painting in the right direction. I'll come back to the details in a minute. Good revenue, good EBITDA developments, even margins going in the right direction, and that's despite high freight rates. I think that's really a good trajectory we have developed now in North America.
You remember we have said we want to be over proportionally, structurally improving our profitability, not 300 basis points, but 500 basis points, and we are well on track to achieve that. You are probably the eye of the storm when it comes to various cost development, because it's not only coal and gas, but it's especially also power on the back of very high CO₂ certificate prices also freight. There is the perfect negative storm. What's very key for everybody on the line to understand what we really changed and we're adamant about that change is the top line ability of Heidelberg Materials to raise pricing on the back of strong cost increases.
Africa was also good, volume good, pricing good, and especially encouraging is that Egypt is now coming back. We are clearly back in profitability, so we have no country left with any negative RCO or RCOBD. In that respect, we are moving in the right direction. APAC, if you wish to be a little bit critical, you can say, "Okay, this was not the best year ever in Asia Pacific." You're right. Australia, very important for us, has come back. Sentiment is back, volumes are back, pricing is going in the right direction. Australia is clearly coming back, but there are still gray clouds over China, India, Indonesia. Thailand is improving, difficult year in 2021, and also Malaysia and Bangladesh are coming up after the big lockdowns.
If you go to the next page on 8, you see, and that's important. That's very important. Remember, we were going against a brutally strong baseline in 2020 because Q4 2020 with low energy costs, we for the first time, I think ever, René, we hit EUR 1 billion EBITDA in Q4, and we almost got there in the recent Q4 on a good balance between volume development, but especially also a much improved price over cost. It's still negative, but you see here it at least balanced itself out. If you then go to the full picture, you clearly see that volume development was good and price over cost was with EUR 250, heavily negative.
I think it's important to see later on what's the trend line and the structure of this price over cost development. Page ten, very important. You see, even in a difficult year like this, margins in the U.S. even improved. We are now almost at 23%, coming up from 21.8%. That's really the right trend, both against 2019, but also against the very positive 2020. I would say also the performance in Western Europe, to lose only 0.4 percentage points is, from my perspective, to be fair to our teams, a good performance. The cost explosions were very steep, but they have, and that's crucial, they have turned absolutely the corner in every country, on the pricing already in Q4 last year, and that trend continues into 2022.
Northern and Eastern Europe, okay, that geopolitically now, not all that easy, but, financially the performance was, strong on a high level. Okay, the margins have come down a little bit also on the back of very high variable cost, but overall still a strong performance, from Northern and Eastern Europe. APAC, I told you, the difference between the different countries and, IAM, look at this 25.7% margin. Again, the second area in a difficult, environment that has been able, despite high freight costs and everything, to expand even their margins and their profitability. Page eleven, you know our continued portfolio management. I'm glad to see that the, page over time now gets more green than yellow. Red, sorry.
The key divestments with the West Coast, also the five transactions in Spain, have been done. We continue to divest. We still have countries to go in that respect, but we take our time and watch exactly when do we create the best value for our shareholders. We have no pressure whatsoever to continue that at an accelerated speed. On the green side, we wanna clearly grow, and we wanna grow the business without mega acquisitions. We wanna grow the business to make our strongholds even stronger. In that respect, the acquisition, especially, in the Pacific Northwest, with Corliss, and also in the UK and Italy are spot on, and that's what we continue to do.
Tanzania, we try to close the deal in the first half of this year. Yeah, very importantly on page 12. Guys, we were sitting here in Q3, where we were hit by the EUR -175 price over cost negative. We did tell you it's going to improve in Q4, but it's not gonna turn positive. This is exactly what happened. We halved the problem, so we're now minus 97. If you look at the development on the right side, even between October, November, December, you know, by October the domestic cement sales price was 5.5% better than in October 2020. By December, it was already 13.3% better. I think in that respect, that's gross, so that's including all currency, inflation, everything.
It is visible in our total P&L, and that's why this 13.3% turned into an EUR 8 advance in domestic cement sales price globally. In my 13 years with the company, I have not seen even half of that magnitude. Of course, also the costs are increasing, but I think that price, that flexing of the top line is for us a very crucial achievement. I think the train is moving absolutely in the right direction. With that, René, the floor is yours.
Thanks, Dominik. Let's talk quickly about the main financial metrics, which are on slide 14 over here. Dominik talked already about revenue and EBITDA. We hit our guidance and we're able to improve our like-for-like EBITDA by 6%, which is, I guess, a pretty strong result in 2021. Then leverage ROIC, we come back later to this. In the middle you see the clean earnings per share, that's up 15%. This is obviously a function of good net income development plus the reduced shares because we have canceled the shares of the share buyback. I guess the 15% earnings per share growth in this environment is not too bad from that perspective.
On this slide, you see slide 15, how the shareholder return went over the last few years, and what we have said in 2021, I'm rounding up now, that's 968 to 1, roughly EUR 1 billion shareholder return, which is split through the HeidelbergCement AG dividend. The dividends to minorities, for example, if India Cements pays a dividend, we need to give the share to the minorities. Then obviously the share buyback was EUR 350 million. I guess that's again, we do what we promised. I guess EUR 1 billion which we can really finance out of our free cash flow is a pretty good number. Here you see the ROIC, slide 16. On slide 16, the reported number is 9.3%.
Yeah, this number you will find this in our annual report. You see slightly above at 9.9%, which is the number if you deduct the tax expense we have in for the gain of the U.S. West disposal, which is a one-off. The 9.9% for me internally is the right number. In our accounts, you see the 9.3. Obviously, the good improvement is a function of three things. You see our invested capital, it's rather flat. You see it in the green bars, it's flat. Our RCO went up by 10%, like-for-like 12%.
Then our tax rate went down due to the over proportional profit in the U.S. and U.K., where our tax rates were, let's say, very low because we still had losses to be utilized. Very strong, nearly 10% on a comparable basis, I think very strong numbers. On the next slide, you see, let's go to the left, our free cash flow generation. You see the reported number is EUR 1.187 billion, but that includes as well as the amount of EUR 306 million we need to pay taxes on the U.S. West disposal gain. That is included in our free cash flow, which obviously has nothing to do with our operational business. That has to be taken out.
You have other EUR 175 million. As you know, we've repaid the bonds, where we have the interest payment for the next two years in December, which hits, as you said, the EUR 3 million. We had COVID tax relief in 2020, which we always said we need to pay this in 2021. These are as well, let's say one-off, which are not coming back. The real cash flow is EUR 1.6 billion, which is a cash conversion of 40%, I guess, which is as well, okay. Net debt position on the right is, roughly, EUR 5 billion, and you see the free cash flow contribution of EUR 1.2 billion. Net M&A is mainly the cash in from the West disposal.
I have to mention that the Corliss acquisition we have paid already as well in December. The EUR 150 million for Corliss is already included in our net debt number. Then you see the dividends of EUR 1 billion going out. Five billion, I guess, really very strong result. If you go to our full P&L, we have discussed until RCO. If you now go to the additional ordinary result, as you know, in 2020, we had big impairments due to the COVID crisis. In 2021, you see here plus 481. That is the gain from the U.S. West disposal, which is expense EUR 466 million out of this.
Then you come to a delta of EUR 4.2 billion, but that's as just explained. The financial result improves again. This includes as well already the EUR 33 million we have paid for buying back the bond earlier. Why do we significantly improve here? We have interest rates on recapitalization, that's accounting, and then the other interest payments for the other debts went down because we reduced the debt. Very good result here as well. Income taxes -EUR 600 million, that looks high, but there's a lot of movements in the deferred tax line, and we have roughly EUR 300 million left disposal impact. That's EUR 300 million.
Then we had in 2020, due to the impairment, we have a deferred tax impact of +EUR 175 million. In 2021, the U.K. changed the tax rate, so we have a deferred tax liability increase of EUR 50 million. This explains the data. Overall, the income taxes, if you take these items out, are in very good shape compared to the profit we are making. We come to a reported net profit of EUR 1.75 billion and adjusted for the AOR and the big tax movements, we come to a share group share of nearly EUR 1.6 billion, which is EUR 8 per share, I guess. That's a very, very strong result.
Now I hand over to Dominik, and he will guide you through the sustainability topics.
Thanks a lot. You know that sustainability is core in our strategy. You know, strategy is one thing, execution is the other. I think we are progressing well in three dimensions, and I'm gonna lead you through those three dimensions. One is obviously the CO2 roadmap, and with it, the reduction in CO2 emissions. We've come down another 2% to 565, and the driver was a very good improvement on the clinker factor, because that's basically coming with very limited CapEx. That's also important. These are improvements that can be done anyway before we come to carbon capture. That is probably a little bit more CapEx intensive, but these here can be done with very limited CapEx. Clinker incorporation comes down to 72.9.
That's a real strong improvement year over year of 1.4 percentage points. Alternative fuel rate also moving in the right direction, 26.4%. That's certainly, I think, the right direction. On the next page 21, you know that we want to further expand our leadership on carbon capture, utilization and storage. The projects are advancing well, and I just want to make sure that everybody understands the project in Brevik. And René was just in Brevik again two weeks ago. It is actually moving ahead well, and we are still planning to bring this on stream by 2024 with the volume of 400,000 tons of CO2 captured. The supply chain is local. The supply chain will function up there.
It's a very robust supply chain. We've aligned with all the partners, and that will mean that we will be the first ones in the world who will produce CO2-free clinker to a large extent in industrial scale. I think in that respect, we're moving in the right direction. Lixhe, you probably followed also the developments there. We continue to focus to build the first carbon-free cement plant globally, 1.8 million tons. HyNet, the project, is also moving in the right direction. We are in continuous discussion with the U.K. government on the permitting and on the funding side. Edmonton, you probably followed our announcements. It's also progressing.
Originally, the target is to come by 2030. We've tried to accelerate it, to accelerate that project, and we are now working to do this anywhere between 2025 and 2028. Then, you know, all these nice technical improvements obviously need to drive customer value. That's why it's very important for us that we only focus on the CO2 reduction in clinker, but eventually we wanna make our concrete very sustainable. I'm happy to see what our countries around the world are doing, and we just brought you the German example, how you can do this in a very savvy and professional way.
They have now our German team, and I've been in close contact with them, but also with our customers, because I wanted to understand, you know, does that hit the customer sentiment? They have not only focused on the CO2 reduction, which is up to 66% depending on the cement and clinker you put into that product, but they've also looked at other topics like recycled water, recycled aggregates, transport efficiency. I think there is a lot of arguments to play, and the feedback we get from our customers is very positive, indeed. That is very encouraging in our path going forward to also get the top line growing and profitably growing in the future. Stay tuned on this one.
We will obviously give you more updates in our upcoming capital market day on May 24. This then also needs to turn in terms of transparency. We know that we are super transparent on this, as transparent as you want to be or can be. All the key ratings are going in the right direction. We continue to work with them to help give them full transparency to be able to score. Also obviously EU Taxonomy is now for us a key point to consider. We have the transparency being worked on, and obviously we follow the legal restrictions that the EU has put in place on that.
We are very confident that we will paint a very good picture, especially when it comes to the implementation of the sustainability roadmap that we have. We are very positive and convinced that eventually the EU taxonomy will lead to a situation where it makes our significant efforts going forward very transparent, and that should help us as a company and also you and our analysts and shareholders. If you wrap it all up, business outlook for 2022 from today's perspective is that the demand is intact in all business lines. I had a lot of calls over the past two or three days with our key countries. The demand is, as of today, still in strong shape.
The pricing, as we indicated, is also continuing its track record from Q4 2021. Of course, energy cost inflation is still high. I'm sure there will be some questions from you coming on that topic. René also shared with you the cash generation. You should assume that we stay razor sharply focused on our free cash flow generation. Just to make sure that everybody understands that, free cash flow is for us, especially in volatile times, a key item to watch, and we will obviously continue to do so. We turn this into a formal guidance, which we will also give in our annual report, with a strong increase like for like in revenue, a slight increase in operating EBITDA and RCO, all obviously like for like.
CapEx net will be slightly below the EUR 1.2 billion, and ROIC will stay around the 9% for now. Let's wait and see how this develops over time. For now, this is what we formally guide. Then on the leverage side, we stick to our current guidance that was out since 2021, 1.5x-2 x. I'm sure you have a couple of questions around that. With that, I would hand back, Chris, to you, and obviously to all of you. We are happy to get your questions.
Thank you, Dominik. Thank you, René. Operator, you may want to start the Q&A session.
Okay, thank you. Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you're using speaker equipment today, please lift the handset before making your selections. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. First question is from the line of Luis Prieto from Kepler Cheuvreux. Please go ahead.
Good afternoon, gentlemen. A question for me. Thanks for answering. Could you give us an updated quantification of cost inflation pressures in 2022? I would be interested in particular regarding energy inflation on a per ton cement basis. If you can give us numbers, are they gonna be +15%, +20%, +30%? What is it expected? What could it be expected in your 2022 accounts? Thank you.
Let me make one general remark, and then I will ask René to. You know, Luis, I understand your question. It's an important one, but be fair to us that we will not be able to give you an exact guidance on this current volatility in energy cost developments in 2022, because there is, you know, there is obviously, and René gives you some of those details. There is the question, you know, where do we stand today with our current coverage. What have we covered down the road. Then how are forwards developing. How is the stock market developing. Then you put the current volatility on top. So this is, and that's the general comment I want to make.
This is an hourly management task now. It's not a daily, it's an hourly management task to follow the development. I think that's good DNA of HeidelbergCement to be able to do that and be very flexible and when we need to react. Maybe René, you give a little bit more of the picture how we have plans at this point today for 2022, as much as we can say in the broader sense of things.
Yeah. Thanks, Luis, for your question. As Dominik said, super volatile and it changes day by day. Just to give you a little bit of flavor, and I guess the other sides were pretty interested. We had a look obviously about our forward buying policy and strategy. What I can tell you already is for the year 2022, and I'm saying now before and now we have the crisis, we have overall roughly a forward buying coverage of roughly 50% already for 2022. Yeah. For Q1 and Q2, we are pretty well covered. So the risk now is, let's say, limited. Obviously, the prices for H1 are much higher than last year. We all know this.
Just a little bit more flavor on this. If you look now, the spot prices for electricity are even much lower than the forward prices, yeah. For the rest of the open positions, we stay a little bit spot, but that is not much for the first six months anyhow. We think we have a limited impact of the crisis right now, if it's not exploding further, yeah. One thing is clear, H1 will be. We will see much higher energy prices on our P&L as last year. As Dominik alluded to, we will cover this via price increases, which seem to be very well in the market.
Thank you. The next question comes from Gregor Kuglitsch from UBS.
Hi.
Hi, Gregor.
Hi, good afternoon. Maybe a couple of questions. Just, can I drill down on that comment you just made there? Do you think you can, with the 13% exit rate on price, cover the cost inflation at least sort of in the first half? I don't wanna pin you down in H2. I appreciate there's so many moving parts. But right now, do you think you can cover cost inflation, or do you think it's still a little bit of a negative price-cost spread? And then secondly, I think you mentioned that you caught up with a lot of your colleagues. If you would like to share your sort of regional perspectives, where you see strengths or less strengths, by various, you know, key geographies for Heidelberg, that would be much appreciated. Thank you.
Gregor, maybe on your first question about the price versus cost gap, yes, the positive trends, if you draw the line Q3, Q4 into this year continues. The gap is further closing. Is it gonna close month over month? That's difficult to say, because the volatility, as I said, is fairly high. You know, the pricing effort, if that's also behind your question, continue. I think it's clear that we have made it very clear to our customer base because they also need some sort of reassurance that we cannot give them yearly pricing anymore. I did say that already last year, and this is clearly now the implementation has been done.
All the customers know that this is a volatile time, and that means that the price increases already implemented end of last year, beginning of this year, will be followed wherever necessary by additional price increases even before the first half of the year will end. In those markets where it is necessary, we will continue to drive pricing. In that respect, I cannot promise you that every month we will end up with a positive gap, but the trend line at least, Gregor, goes in the right direction to eventually be able to close that gap fully, and that must be clearly our target. On the regional differences, I would say the eye of the storm because the cost increase is the highest, it's obviously Europe.
There, what we see is very encouraging. You know that the pricing, as you've been known around the block with us, is sometimes a little bit sluggish in Europe. We have a very good market position. We really now need to prove that we can also leverage that good market position in a way that if costs are moving up like this, if we start to deliver superior products, you know, then we also want to get the fair share of that value creation we do on the customer side. In that respect, in all markets in Europe, the prices are moving up. Moving up in most cases double-digit percentage points.
Yes, there is steep cost increases, but yes, there is also a structural change in pricing. That is, to a lesser extent, true for Eastern Europe. It's equally true for Northern Europe, where we have clear double-digit price increases in the market. You go around the world. I think it's a little bit less pronounced in some of the Asian countries given the current situation that I described. It's a little bit less pronounced in the US in some certain markets, but it's still very significant in the US. Let's also keep in mind the cost increase in the US is not necessarily the same, especially not in power, than it is in Europe.
That doesn't necessarily mean even if the actual price increases in the U.S. are smaller, that the margin will not move. It's rather the opposite. I think overall, we are satisfied with what we see, Gregor. And as I said, importantly, the ice is broken on this one in a positive way, and the price dynamics will continue where they need to continue.
Thank you very much.
Next question is from the line of Sven Hedefeld from ODDO BHF. Please go ahead. Hey, Sven.
Yes. Hello. Good afternoon. Thank you very much for taking my question. Two for me. I had a question on slag first. I understood the CO2 footprint for slag is set to increase to 50 kilogram of CO2 per ton. Is it included in your 565 kilogram of CO2 per ton in 2021? And is there a risk of further legislation change, and how do you see this evolving going forward, and how does that affect your CO2 target in 2030?
Yeah, Sven, I'm not fully sure. It was not so easy to understand. I mean, I understood your question, but it didn't come across very well technology-wise. If I understood it right, you're asking a little bit about the slag and the impact on the CO2 roadmap. Ozan can come back with maybe double-check with you whether you really got your question answered. My understanding is, you know, what's the slag impact and the potential reduction in slag availability on the CO2 roadmap. We have taken that into account to the best of our knowledge, what we know from today.
Things can always change, but I think it's clear that, over time, the slag availability will come down, and that's certainly something that is reflected in our CO2 roadmap, and it will be reflected in our plans going forward. That is a very country by country issue, because there are some countries that are very much driving their products on the back of strong slag contribution. There are other countries where it doesn't play a role at all. We are obviously working strongly to mitigate the reduced slag availability. Yes, that's part of our roadmap from today's perspective.
Next question, please. Next question.
Next question
is from the line of Yassine Touahri from On Field Investment Research. Please go ahead.
Yes, good afternoon, gentlemen. My question is on the EUR 8 per tonne price increase that you've announced in the call. Could you give us a bit more color on where it was the most effective? Could you also quantify any additional price increase that you've implemented at the beginning of January, or that you are considering to implement in April? Could we expect pricing to be up high single digits to double digits in 2022 at the group level?
Yassine, thank you very much for your question. You know that we are sensitive on pricing communication market by market. That's not what we want to do and can do. You know also there are legal restrictions, and we take that very serious. We give you hindsight, the total figure on global scale, which shows you, and I think that's the most important thing, where you know one thing is announcement of price increases. The question what do you really get to the P&L. What we tell you in December 2021, we actually got to the P&L. I think that's the first and very important step.
What I can say is that, yes, the clear target, as I said earlier, in some of the key markets is that we do get to double-digit percent price increases. That's not in every market, but that's more than in one market. You will see that we will continue to move the top line. As I said, the trend that we have started and that has accelerated even through Q4 is continuing in its trend into 2022. We will do everything to continue that as long as possible through 2022 and beyond.
Can you quantify any sequential increase that has been successful in January compared to December? Is it like EUR 4, EUR 5 additional price increase, or is it something that you can quantify, or is it too early?
No. It's, I mean, obviously we know the number, but careful, guys. We cannot go market by market for price increases in terms of absolute terms. I give you the indication that you should assume that in key markets, this is a double-digit percentage increase. That moves already in January, and that's the most we can say at this point.
Thank you. Thank you very much.
Thank you.
Next question is from the line of Cedar Ekblom from Morgan Stanley. Please go ahead.
Hi, Cedar. Cedar?
Hello. Hi. Thanks very much, guys. I've got two questions. Just on your points that you made about the price cost development continuing to improve and the momentum there moving in the right direction. Considering price increases year to date, could we get a positive price cost outcome in the second quarter? I would expect you've got reasonable visibility on your energy costs, at least until the end of Q2. Just on your net debt to EBITDA guidance into 2021 with 1.3 times, and you're guiding to a similar level of CapEx in 2022 and, you know, a broadly stable EBITDA outcome, and yet you're guiding net debt to EBITDA up.
Does this mean that we should be prepared for much larger shareholder returns, considering that your M&A agenda seems to be sort of moderate or in line with where you were previously talking about it? I just want to understand why net debt to EBITDA should go up. Thank you.
Yeah. As always, you've made your homework well. I think the spreadsheet has worked. Absolutely. I think we're happy to answer that. I'll start and then René jumps in. Maybe on the price over cost, as I said earlier, Cedar, we are clearly targeting to continue to close the gap. Can we guarantee you exactly when this will work? Difficult to say. As I said, into 2022, the positive trend of closing the gap has continued. We have not seen anything change yet. I think there will be some point in 2022 where this will turn positive.
Whether this is exactly now end of Q1 or during Q2, difficult to judge from our perspective because that is a fairly dynamic situation. As I said, the trend is clearly going in the right direction. It is our clear target to close that gap at some point in during 2022, and that's what we are day in, day out fighting for. Now, on your other calculation, you are absolutely right. Guys, we are very open and fair with you. We still have our Capital Markets Day to come up, where we talk a lot about capital allocation.
Until then, it is exactly true what we have told you in our last capital market day in September 2020, where we said, you know, we give you a financial framework that we operate in. You remember this famous waterfall chart where we said, "Okay, what are we gonna do?" We stick, we stay strict on key sustaining maintenance CapEx. We pay our dividends, we get to our deleveraging, and then it gets into a competition between share buybacks or direct shareholder return and M&A. To your question, it will exactly play along that line. That's why we have accelerated our second wave of the share buyback.
You know we are gonna start this at the latest by March tenth. Originally, we say that we plan to go later during the year, so we have accelerated that. We've also accelerated the growth of our M&A growth pipeline. So the pipeline is filling and filling. One thing I can tell you clearly, Cedar, we are not gonna go out for one multi-billion euro acquisition. We promised that, and we stick to that promise. We also promised, and I think some of you have not believed it, we wanna grow the company, and we wanna grow it very profitably. That's why we will have a large M&A pipeline of small and medium-sized bolt-on acquisitions. Corliss is a nice example.
that pipeline is filling, and especially in volatile markets, there may be some quite attractive opportunities. Again, small and midsize acquisitions in our stronghold market position, in our current focus of vertical integration and transformation, where it makes sense to move. If all dimensions or many dimensions in
Next question, please.
Next question is from the line of Harry Goad from Berenberg. Please go ahead.
Yeah. Good. How are you?
Yeah, hi. Good afternoon. Thanks for taking my question. I thought that was quite interesting updates you gave in terms of the timing of the Brevik and the other carbon capture projects. I guess just in that regard, can you give us any sort of information, and I appreciate it is very early days, around, you know, how we should think about possible CapEx per plant and indeed maybe the OpEx up there, just to give some ballpark feel for the cost landscape. Thank you.
Harry, that's an important question. If you do not mind, I would ask you to wait for our capital markets day. I know all of you are waiting to get some more in-depth information.
Obviously, we are in the comfortable position to have more and more real data points from all the projects that we have announced and that are moving. I think we are sending these data points to give you as good an answer as possible by Capital Markets Day. In that respect, important question, but please bear with us until the end of May.
Okay. Understood. Thank you.
Next question is from the line of Elodie Rall from JP Morgan. Please go ahead.
Hi, Elodie.
Hi, good afternoon. Hello, hello. Hi, thanks for taking my questions. I just would like to talk about volumes for a second. We talked a lot about pricing, but I have a question on volume. First of all, on the impact on EBITDA bridge in Q4, it seems like with lower volumes in Q4, you've had a bigger impact on your EBITDA, if I refer to your presentation, for about, like, EUR 94 million impact on EBITDA. Can you remind us here what happened with the operating leverage and the different moving parts? Second, still on volumes, you're talking about strong like-for-like revenue growth in 2022. Of that, how much are you targeting in terms of volume growth for the year? Thank you.
Yeah, Elodie, I'm not so sure whether we have understood fully your first question. We all look a little bit. I'm not exactly sure because the volume did actually look quite well in Q4. I think the piece of the presentation you saw that. So I'm not quite sure what you are referring to in terms of negative volume development. Is your question coming from Windhoek split, or what? Could you help us on what exactly your first part of the question was?
Yeah, sure. If I look at your slide seven on Q4 volumes, you're showing -1% in cement sales volume, 3.5% in aggregate sales, and then -2.4% in ready-mix sales volume. If I look at the bridge on EBITDA, the impact on volumes is EUR 94 million on the bridge. If I refer to the presentation in Q3, you have a EUR 37 million impact on net volume in your Q3 bridge, when you know, the development in top line doesn't seem to be more negative. I'm just trying to understand what the drop through there, if there are other moving parts that we should have into account for modeling.
I would suggest, Elodie, let's come back to that maybe at the end of the call. We have to check that. I'm not fully sure whether we have followed your argumentation. We'll double-check this and come back at the end of the call on that one, huh? If that's okay for you. What was your second part again on the question?
The volume expectation that you have.
Ah.
for the year.
Sorry, 2022 volume expectation. Now, for us, yes, we said we're gonna increase our revenues strongly in 2022. It's clear from our current assumptions. Energy this is predominantly price and to a significantly lesser extent, volume. We do not expect the volumes to decline sharply or something, you know? I think it's clearly a price before volume strategy. The product gets better with all the efforts we do. That means also that we need to boost a higher price for it, but it doesn't necessarily mean that we are pushing for the last ton. This is also country by country, market by market, a little bit different. The key answer to your question is price. Okay.
If you don't mind, let's go, let's continue with other questions, and then we come back to your first question at the end of the call. Okay?
Okay, thanks.
Thank you.
Next question is from the line of Arnaud Lehmann from Bank of America. Please go ahead.
Thank you very much. Good afternoon, gentlemen.
Hello, Arnaud.
I have two questions, please. Firstly, just coming back on slide 12 on your pricing trend. Could you give us an indication how would that look for Europe? Because it's looking like you're taking a much more dynamic views on pricing, and that's helpful at the moment for sure. How can prices go up in Europe when things are usually ramping down, I would say, for maintenance and the winter season? Related to that, I guess if we see pricing moving more closely with cost going forward, that means that pricing might actually have to come down once coal, electricity and everything come down one day. Are you comfortable with a more, let's say, volatile pricing trend for your cement business?
Are you confident that net-net, this is actually a positive for your earnings? My second question was on CO2. Maybe too simplistic, but you've reduced your CO2 per ton by 2% year-on-year, which is a good achievement, but at the same time, your cement volumes are up 4%, and I appreciate that the base on volumes was not very high compared to 2020. Does that mean that you've actually increased your overall CO2 emissions in 2021? I guess the question is, beyond the CO2 per ton, are you also trying to reduce your overall CO2 emissions in million tons?
Okay. I think that's thanks for both of your questions, Arno, and I think let's turn to your first one on pricing. You are along with the business already, and you know this has been always an issue with pricing, not only volatility during the year, but also you know this cost focus, and then the direct relation to pricing. I give you my personal answer and my conviction from a HeidelbergCement perspective on this. First paradigm to break was the point that you know we just accept that we have yearly pricing, and we just accept that in Q4 the prices come down.
Sorry, if environments change, then also these paradigms need to move and that's what we were so focused to get done that this also works in Europe. That was a little bit between the lines, the second question. It is not so that this price increase comes from everywhere else but Europe. No, also in Europe. In our business at least, the prices are moving significantly. I did say in some countries in clear double-digit percentage points, and that has started at the end of last year, but it continues well through this year. That's, you know, one step after the other, but this breaking the ice in paradigm, this is what we are doing, trying to do.
Obviously, your point that was also in your question is what does it mean eventually? I can only give you the answer for us at Heidelberg Materials. We are working to upgrade our product. You know, that's why we talk about EcoCrete. That's why we talk about the carbon capture side. But with an upgraded product, also the price point will change. If you take all that, you know, discussion about high energy costs and everything aside, we strongly believe that our superior products that we develop down the road deserve a significantly, I said in the past, quote, "structurally different price point," and that's what we are fighting for.
For me, this cost increase is not necessarily a cost increase that may be triggered now by some of the commodity price development, but it's not solely justified by those. That's at least our conviction at HeidelbergCement. How that plays out, Arno, we also don't know, but that's our clear conviction. On CO2, you know, the full figures on CO2 will then be published in our report. That's not final yet, but it's absolutely clear that down the road we will also try to reduce our absolute overall emissions.
That's maybe a little bit in line with what Elodie was asking, you know, to run for the last ton. Maybe one strategy, but I would say that's probably maybe a little bit historical strategy. We have shifted gears, and we want to bring more value to our customers with the ton we sell. That includes a higher price, but that also includes an overall lower CO2 footprint. If you make the multiplication of those two items, then the top line grows more by price than volume, and the CO2 footprint comes further down.
Very interesting. Thank you very much.
Sorry, before we come to the next question, Elodie, if you want, I think we've now gotten where you wanted to get. Sorry for taking the turn here, but yeah, maybe you just get to Elodie's point.
Hi, Elodie. We have a look now quickly. The positive volume margin comes mainly from North America and Africa. You can say it's a mixed effect because these two areas in Q4 come with a pretty good margin. Yeah. Even though we have in Africa, we have lower volumes, and that's due to the fact that we have lower volumes in low-margin countries, and the proportion of high-margin countries with good profits is much higher. It's a mixed effect, and mainly coming from NAM and Africa due to better, let's say, relative volume performance in terms of margin in a few countries. That's, yeah.
Okay. The next question is from the line of Tobias Woerner from Stifel Europe. Please go ahead.
Yes. Good afternoon, gentlemen. Thanks for taking my questions. Just very quickly, on the third quarter release, you referred to the energy cost being up EUR 196 million- EUR 1.3 billion. You didn't give that detail in Q4, unless I'm wrong. I guesstimate that the numbers sum up for the full year, which you normally show in the annual report at EUR 1.85 billion to, let's say, EUR 1.9 billion. Can you just confirm that number please for me? That would be helpful. Just remind us quickly in terms of your dividend payment. I couldn't see a dividend per share anywhere in the release unless I'm blind, which is possible given my age. If you could just remind us about your dividend policy. Thank you.
Tobias, let me get to your second point on the dividend, and then René would come to your first point. On the dividend, I know you know this, the final figures for, or the current figures for this year are coming four weeks earlier than prior. I think there is a change now in procedure that not with the same call. We now also announce our dividends. That's very, you know, this is a formal exercise on the dividend side. There is an opinion on my end, and there is an opinion in the board, but we then need to take a formal board decision during March or the beginning of March. That then goes as a proposal to the supervisory board.
That then proposes it in our annual report, and an invitation to the general assembly, and that's where the dividend is then decided. Now, that's the formal answer. The informal answer is we will again stick to our promises. We said we are working on a progressive dividend development, and that's exactly what we will do. Now, what number exactly will come out, bear with us. There needs to be some additional excitement, but let's wait and see how that plays out. But that's the situation on the dividend. René, maybe you add on the other question of-
Tobias, on the energy last year, on the 2020 annual report is EUR 1.5 billion. This year it will be around EUR 1.9 billion. That should answer your question.
Okay. Okay. That's very helpful. Thank you very much.
Thank you.
As a reminder, if you'd like to ask a question, please press star followed by one on your touch tone telephone. Next question comes from the line of Yuri Serov from Redburn. Please go ahead.
Yes. Good afternoon.
Hey, Yuri.
Yeah. Can you hear me?
Yeah. We can hear you well.
Okay, amazing. Two questions for me. I'll ask them one by one, if I may. One is again about pricing, and there's a lot of discussion about pricing on this call. I just want to ask you, so you talk about double-digit pricing. The indices that we see being published for the cement industry for a variety of countries don't show that. Are you raising your prices ahead of your competition? Is that sustainable, or will you just say that the indices that we look at are wrong?
Yuri, you know, we can only talk about our figures, and I'm very. You've never heard me comment on any competitive behavior, and you will not going forward. That's not our duty. We are paid for a good performance and an increasingly good performance for Heidelberg Materials. We have shared with you what we have actually realized, and you have to make your analysis what others have realized. I can only tell you what we have realized, and I've also shared with you what we want to do in general terms as much as I can legally do. I think that is clearly our strategy. You know, as I said, I know some of you were skeptical about this.
I strongly believe I've been 13 years now in the industry, directly, and I strongly believe this is gonna be a junction going forward. Because if you as a company, and that is our clear strategy, work on superior value for the customer. Only then you can ask for superior pricing. To just think that our customers are stupid, and we can just ask for our prices if our input costs are lower, and we just want to drive the margin with the same product. Ha. If I would be the customer, I'd say, "Go to hell. I'll buy somewhere else." The question is, do we deliver eventually better products with better service to our customers? Only then we can justify higher prices, and that's exactly what we are doing market by market and product by product.
Well, I understand that, and I'm not asking you to comment on the strategies of your competitors. The competitive context is very important to understand what is going to happen to you. That's the reason why I'm asking how your price increases compare to the others.
Yeah. I agree. I think I fully understand your point, Yuri. This is a competitive situation, but maybe you also now understand why we are so laser-focused on the portfolio management. You know, if you have some market positions somewhere across the world, that's one thing. If you continue to improve your market positions, I'm not talking about creating market share for business line. That's not what I'm after. You know, the game of vertical integration, having a good market position in very focused markets in all business lines, cement, ready-mix, and aggregates. You know that's been the strategy for a longer time. I strongly believe, and that's my HeidelbergCement conviction, this is a clear competitive advantage going forward.
I can only show you the figures that we've jointly achieved as a team, and then you need to judge how that compares to the competition. Okay?
Well, okay. No. Look, I’ll need to read between the lines, and what I’m reading is that you probably are pushing the prices above competitors and maybe that’s the reason why the volume outlook is not particularly rosy. I get your point. Can I ask a second question, please? It’s just technical, and I just wonder whether you can give us this number. Your net emission in 2021 went down by -1.9%, or up to 10%. Can you please-
What?
Net emissions.
No, I think. What did you? I'm sorry, you broke up, Yuri. What went down?
The net emissions, sir.
Okay, let me repeat the question. Your net CO2 emissions.
Okay.
In 2021 went down by 1.9%.
Okay.
2% the same presentation. Can you please tell us by how much your gross emissions went down?
As I said, you know, as I said, Yuri, I ask for your understanding. You know, we are now four weeks earlier than in the past. In the past, we published this in our sustainability report in June. We wanna be very specific and exact on what we are doing there with the CO2 emissions because this is a very relevant figure. Yes, we have the relative emission at this point, but we are still finalizing our figures on the total emissions, so bear with us. As I said to the earlier question, however, this moves now, you know, quarter-over-quarter, year-over-year.
For us, eventually, the target as a group must be to reduce not only the relative emissions, but also the total emissions, not sacrificing the growth path and the profitability path of the group. That's what we are paid for, and that's what we are targeting for.
Okay.
Okay? Thanks for your question, Yuri.
Next question is from the line of Matthew Donnan from Morningstar. Please go ahead.
Hey, Matthew.
Hi, good afternoon. Thanks for taking my question. Just carrying on with the volume theme. Based on your discussions with customers, did any mention possible impacts of labor shortages having an impact on their demand?
Matthew, it's a fair question. I don't think there is a global answer for this. I think there is, in some markets, there seem to be labor volatility, I call it. Labor shortage is always a matter, you know, this moves quickly from one end to the other, you know, during COVID. Now, you know, take the U.S., if I may say so, there was maybe some driver shortage because they were more with Robinhood than on their trucks. I'm not so sure after the very recent developments whether that is gonna continue that way. That is a very volatile situation that we watch very closely because, you know, we need the labor force.
It also reaccelerate and continues to accelerate our automation efforts, our digital efforts to make sure, you know, 3D printing, you heard our communication around that, to make sure that we enable our customers. Again, guys, I talked about superior products, superior customer service in order to structurally change the price. This is exactly also what is happening. If we deliver and put the customers into a position where they can place the products with half the labor, guys, this is intangible value for our customers, and that deserves a significantly higher price point.
Thank you. Understood there. Just another question for me, sorry, on the cash flow. What are some of the levers you're looking to pull to get the cash conversion back to around 45%, given CapEx and EBITDA are expected to remain relatively stable?
Yeah. Okay, René, you wanna start?
What you have seen in our guidance, we will say we will be below the EUR 1.2 billion CapEx. That's in the former guidance was at 1.2. Now we will be below. We pushed that clearly below so that we get an increase over there, which is I guess the plan. Then obviously we had working capital outflow in 2021, you know, very strong Q4. Receivables up. We put our inventories a little bit fuller with coal to get advantage of the pricing.
We will have a little bit, should have a better year in 2022 regarding working capital, then we reduce the CapEx a little bit, so that should free up cash to get close to that number that you just mentioned.
Thank you very much. Appreciate it.
Thank you.
Next question is from the line of Mike Betts from Jefferies. Please go ahead.
Hey, Mike.
Hi, Dominik. My question is a bit around today's events, but if we end up with energy shortages in Europe because, you know, Russia supplies so much of the gas that goes into the power plants, et cetera, and maybe fuel has to get redirected. I had a two-part question, please. Firstly, of your solid fuel, how much of it do you already have in terms of inventory? Are the forward purchases that you referred to earlier actually guaranteed, or could they get redirected? So I guess it's like three parts. Also on the grinding plants, it's a European problem, I guess potentially. You know, could you shift the time you did the grinding? So if you could only get electricity at night, do you have enough grinding capacity that you could shift production to nighttime?
Yeah, Mike, your questions hint to us that you have been long in the industry. I think that's two very good questions. I'll answer the second one, and then I would hand over to René to go to the first one. On the grinding, you are absolutely right. Yes, that's now a very interesting dynamic. Guys, I know sometimes it's not so easy for you to follow also what we do on the digital side. One of our key digital products, for example, does exactly that, Mike. It does nothing else but what's linking the spot price of electricity to the production planning on the grinding plant and matches that. Yes, there have been days where we pushed grinding production like hell.
If you talk to our GM in Germany, there are some days where he produces at negative electricity prices. There are other days where he says, "Guys, go into maintenance, silos are okay, and take advantage of too high energy prices." Absolutely, Mike, this is crucial to manage this crazy volatility on the pricing, and also the delta between forward and spot, as René also mentioned earlier. You know you have that. That's also why I don't think if we would tell you now we are 100% covered, I'm not sure whether from your perspective and from our shareholders' perspective, this would be great.
Because there are opportunities, you know, depending on wind, on solar, especially in Germany, that you can take on spot prices that there are window of opportunity that we want to take. In that respect, spot on the question. It's clearly important to manage the power cost going forward. We are really pushing also this tool that I'm mentioning is now rolled out to 80 plants already. This is with great feedback and great saving potential. Just one indication of where digital can also significantly help because this is an exercise you need to do minute by minute, hour by hour. René, maybe you go to the-
Mike, let's talk about your question regarding fuel coverage. Obviously there's a difference if you have the stuff in stock, which we can then use immediately and/or if you have that contracted. Because we don't know will the suppliers keep to their commitments in the contract. I can't tell you if they will do or not. That's a little bit in the air. We are talking here about a coal supply for Europe, and we have a very comfortable position right now. We have a certain volume covered, which would bring us, let's say, pretty long. We are already looking obviously to see what would happen if we can't get the contracted coal.
Yeah, we are looking now with our trading arm to see if we can get it from somewhere else. Now obviously that has an impact on the cost if we do this. Let's wait and see. If everybody sticks to their commitments regarding cost, regarding the contract, I think we should be all right.
Thank you both. Cheers.
Next question is from Nabil Ahmed from Barclays. Please go ahead.
Hey, Nabil.
Hey, good afternoon. Thanks for taking my questions. I actually have only one. Given the very strong price hikes, clearly the strongest we've seen for a very long time in the industry, how do you think about volume elasticity? Are there markets, I'm thinking at Baxenden, for instance, or U.S. public end markets where you are on a fixed dollar budget, where you could see negative impact on volumes?
Nabil, obviously in every industry, in every market, there is a price volume elasticity. I think we are all long operating in the industry, and we know that, and we keep that obviously in mind. You know, if the background of your question is are you gonna send your volume into half? No. We are not planning to destroy our good market position. That's not what we are after. Are we running for the last ton? No. That's clearly not the case because also with this high volatility, keep in mind not every ton has the same profitability, yeah? Let's say this is our spreadsheets, and you guys are very familiar with spreadsheets. Not every ton has the same profitability.
In that respect, I think we try to do our homework. As again, we are focused not to do this by doing it on the back of our customers. We do this with a clear conviction that eventually this will only work if our customers get also superior products for a higher price and not the same product for a higher price. I think that is exactly what we are working towards mid-term, and I think the EcoCrete example is an interesting one. Let's wait and see how this all plays out, but I think we've been very open in sharing with you what's on our minds.
I think it's a combination because, yes, when we go back to the call Q2 last year where we had similar discussions, you said, "Oh, yeah. Come. What you are telling me, nice." Here we are at least with one half year where we have now in Q4 especially proven that something does happen in our P&L if we raise the prices, if and if we can flex them, and let's wait and see how this plays out. As we said, the trend continues so far into 2022. We are optimistic that our strategy is working in its implementation, and then we'll go forward with some good optimism in order to also be able to manage this very high volatility.
Thank you, Dominik. Thank you, René. It's good to end on an optimistic note. Thank you very much for dialing in. We have our next earnings call on May 12. That's also the day of the AGM. Obviously, we send out the save the date for our capital markets day on May 24, and we look forward to welcoming you here at our headquarters in Heidelberg. Thank you very much. Bye-bye.
Thanks, guys. Thank you very much.
Bye.
Bye.
Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.