At this time, it's my pleasure to hand over to Christoph Beumelburg. Please go ahead, sir.
Thank you, operator. Good morning, good afternoon, everyone. Thanks for listening to our Q1 conference call. In the room is Ozan Kacar from the IR team, René Aldach, our CFO, and Dominik von Achten, our CEO. Welcome, everybody, and we have some prepared remarks that we go through and then immediately jump to the Q&A. If you haven't done so, please check out our presentation on our website. With that, over to you, Dominik.
Very good, Chris. Hello, everybody. A warm welcome from the Heidelberg Materials team. Great to have you on our Q1 2024 call. I would suggest that we just dive into the summary of page two to give you an overview of what we believe is a good quarter, although we were running against a very good comp, Q1 2020. Revenue is slightly down, -8%, EBITDA almost flat, -2%, RCO, -9%. Like-for-like, this is all like-for-like. EBITDA margin improves, which is an important message from our side, 71 basis points up in a combination of good pricing. We'll come to that, I'm sure, in your questions and also strict cost management. I'll come to that in a minute.
We are continuing our growth path with an interesting acquisition in Malaysia. I'll come to that later on in a little bit more detail. We will, as promised, start our next share buyback of EUR 1.2 billion, with the first wave after our AGM in Q2. We have received a very important contribution to our project, this full decarbonization project in Mitchell, Indiana, with up to $500 million by the DOE. That, from our perspective, the largest capture project of two million tons CO2 per year, already as of 2030. And we are confirming our outlook with the RCO bandwidth of EUR 3 billion-EUR 3.3 billion and a ROIC around 10%.
I suggest we dive into the overview of Q1, and it's basically, you know, if you take ballpark, it's basically flat to prior year in most dimensions. Revenues a little bit more down 8%, but EBITDA are basically stable. Operating margin improved and EBIT slightly down, but in absolute terms, from our perspective, still a very convincing result of EUR 1,032 million. You see then on page four, the hit on the volume side. It's clear that the volumes are contracting in some of the key markets, but the good news is that price over cost is still working very well and continues to work well in a combination of good pricing and also cost management. If you go into the different areas, we start with Europe on page five.
Yes, Europe came down in terms of revenues and also RCO in the first quarter. The same is true for the RCO margin, but from our perspective, still was holding up quite well. From our perspective, Europe is big, huh? And there are different parts of Europe. I think while Western and Southern Europe, as well as Northern Europe... while Western and Northern Europe are still quite depressed on the market development, Southern Europe and especially Eastern Europe are clearly improving. Eastern Europe, with a very convincing performance in Q1, and we expect that this eventually will also spill over to the other parts of Europe, but Eastern Europe was clearly from our perspective, the bright spot. North America is the other bright spot.
I think from our perspective, very convincing performance in North America. Profitable quarter, this has not happened often in the U.S., back through our... Because it's a small quarter, and then it's winter. Weather was not good in the U.S. in general, you know, even in Texas, Northeast, bad weather. And nevertheless, I think clear improvement on the RCO in absolute terms and also on the margin side. So you see also the Mitchell effect, we call it, it's clearly coming through. Operational performance is improving, cost management is getting better. So I think a convincing performance in North America, and there is no reason to believe that this will change in any near future.
Asia Pacific, to be honest, I think we are a little bit disappointed on Asia Pacific. I think there is a good performance in Australia. René can maybe share a little bit more. The market is still down, but very diligent cost management in Australia has led to a convincing result out of Australia. The rest of Asia, still a little bit subdued on the volume side. Improvement now after Ramadan in April, but in general, Asia with a sluggish volume start in the first quarter. Africa, next page, I think very much impacted by volume declines in Sub-Sahara. So, you know, Morocco, Egypt is not bad. Turkey also.
The problem is a little bit Sub-Sahara with a sluggish start, especially also the currencies are a little bit devaluing. So when you then turn the results into Europe, into euros, then I think you get a bit of the hit, but still, you know, it's close to EUR 70 million result in Africa. So the... We'll fight to get also the African results into the corridor during the remainder of the year. What's very important for us is that we continue to grow the company with the portfolio optimization. We have done significant deals in the past and another one now at beginning of April, with the acquisition in Malaysia.
That is an important deal, not only for the footprint in Malaysia, but especially also for the sustainability topic. It's a cementitious material that we acquired, market leader in the Malaysian market, which is a growing market, and we have a very strong position in all the other business units, aggregate, asphalt, and ready mix. So a great complement to the Malaysian market position. But as always, you know, we are continuing to work on the cost side of this. We are not making a big splash, but we go very diligently, step by step, with significant step changes in our asset base that will also deliver significant savings on the fixed cost side. Leimen, just out of Heidelberg, we closed the clinker production.
The same we have now announced for Germany in Hanover, which is gonna happen during this year, and then two more closures to come in 2025, due to the social process in France. We'll continue to work on our Mitchell plant optimization that will deliver significant increase in margins in the U.S., as we said. Just to take you back to our capital market presentation in 2021, where we said the margin improvement in the U.S. is gonna be above the average of the group. At the time, we said 300-400 basis points for the group, and 400-500 basis points for the U.S., and we are absolutely well on track to deliver that margin expansion.
Then, turning to the sustainability topic, I think I mentioned already the ASIC group acquisition in Malaysia. I mentioned also the funding of the DOE on the CCU.S. project for Mitchell. A very important step for Germany, and I would also say for Europe, is the fact that finally, the German government has moved on the carbon capture and storage piece. So, the barriers have been lifted, both to capture CO2, also to export CO2. We are well on track to get that executed in the political framework in Germany. We've taken a very active part, and personally, I also took a very active part. This is the lifeline for us in Germany, and I think we're moving in the right direction. Good traction also on the EvoZero commercialization.
We've announced the first project with the Nobel Center in Stockholm, and there are many more to come. And then we finally renewed our longstanding partnership with BirdLife to also continue to work on biodiversity. If you wrap it all up, we are confident in our guidance to grow the revenue like for like, to stay within the corridor of EUR 3 billion-EUR 3.3 billion when it comes to the RCO, to stay around the 10% of ROIC, to keep the CapEx budget around EUR 1.1 billion, and to stick to the leverage of 1.5x-2 x. With that, I'm very much looking forward, and we are very much looking forward to your questions. The floor is yours, Chris.
Thanks, operator. Will you kick off the Q&A session, please?
Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question. Anyone who has a question may press star and one at this time. One moment for the first question, please.
The first in line is Elodie Rall from J.P. Morgan.
Hey, Elodie.
Elodie, hello.
Hi, good afternoon, everyone. Thanks for taking my question. My first question is on Europe. You say price cost is positive, but margin is down because of negative volumes. So I was wondering if there are extra actions that you need to take to maintain margin, even if volume remain weak? Basically, what else can you do to absorb fixed costs at this stage? My second question is on price increases, whether you have done more, announced more, and when should we expect to see the impact? And lastly, on guidance, what would be needed at this stage to get to the top end of the guidance? Thanks very much.
Very well, Elodie. Thank you for your two and a half questions. I think that's, that, that's good. I'll go first, and then maybe René has something to add. I think on Europe, it's gonna be a combination of the triangle that you know from our perspective, volume, price, and cost. I think, I've indicated already that on the volume side, we should not expect miracles in Western and Northern Europe, including the U.K.. However, I think we do see also in those, some of those markets, stabilization on the decline. So I think that, then that's encouraging. Eastern Europe, as I shared with you, is going very strong in almost all markets in Eastern Europe. So I think in that respect, there is good development on the volume side.
Pricing is, I think we have gone for price increases in almost all markets, some of them sticking a little bit more than others, but there is... I think that's also behind your question, there's no significant price decline or anything dramatic, from our perspective, even not in Europe. And on the fixed cost side, we are continuing to work. You know, I think already shared with you, if we take out clinker, the clinker kiln in any one of the plants, you typically save a high single-digit up to a low double-digit EUR million fixed cost per year. So it's very significant, and you can then make your calculations on your own. We've done now, Leimen, Hanover, and the two French ones. Rest assured, this is not gonna be the end of it.
We are gonna trim our capacity. We wanna be fit for the next 10-20 years in Europe, and I think this is now the time to move and the chance to move, and that's what we will continue to work on. On the top of the guidance, I think, you know, the question is, you know, in that triangle, you know, if the price increases go through, and there are markets, notably the U.S., where we are going for mid-year price increases. So there are more price increases in some markets to come. Obviously, the volume development and recovery plays an important role. And I would also say the emerging markets are always hard to predict.
If they come back quicker than currently assumed in our plan, then I think that would also be a trigger for driving that to the upside. That's a little bit my view, but René?
No, no, no. Dominik, just to confirm LOB as well, price over cost for all the regions is very positive. So just to take the fear away that we are not working on cost, yeah. Pricing is for all regions positive and cost as well. So that's a little bit the message. As Dominik said, the key will be how will volumes develop, and the rest, I guess, we have pretty much under control.
Thanks very much.
Thank you, Dave.
Can I, can I ask where pricing is sitting or not?
Sorry. Okay, one more.
So let's, let's see, we are in the beginning of the year, you know, winter quarter, different seasonalities in the group. So let's, let's wait and see. But as we said, we went out with price increases, and now we need to see in Q1 how these price increases will come into the market.
Q2.
Q2, sorry, Q2. Yes.
Okay, thank you.
Thanks, Dave.
Thanks. The next question comes from Luis Prieto from Kepler Cheuvreux.
Hey, Luis.
Hi, Luis.
Hello, good afternoon. A couple of questions from me. Thanks for taking them. The first one is, do you have any update on your plans to pave the way for a re-rating of U.S. operations after the CRH and the Holcim, Holcim moves? U.S. listing, segregation of assets, whatever you might be considering at the moment, if you have initiated a discussion or not. And then the second one is, could we drill into how much of your very positive price over cost dynamics ex- is explained by price and how much by subdued cost inflation and cost optimization? Any indications of magnitude would be extremely useful on both fronts. How much is pricing and how much is the rest? Thank you.
Okay, Luis, I would suggest I'll take the first one, and then René will give you the details on the second. As we said in earlier calls, we have noticed that some of our competitors have moved west and have worked a little bit on some of the past discussion. We've indicated that we continue to review the situation, and that's what we will do. We have internally discussed that we will bring some more transparency around the performance in the U.S.. I think that's that you should expect during 2024. That will be the first specific step, and then more structural changes, like you indicated that we've seen by any of our other competitors.
We continue to evaluate, but for some of these steps, the jury is still out whether they deliver what they expected. So I think we'll watch the situation carefully.
Luis, your second question is the share is roughly 60/40, so 60% coming from price, 40% from cost. All right.
Super clear, thank you.
That answers your question, Luis?
Yeah, absolutely.
Then, we move on. Okay, we move on to the next question from Arnaud Lehmann, from Bank of America.
Hey, Arnaud.
Hi, Arnaud.
Hello, hello. Thank you, Chris, Ozan, René, and Dominic. Two questions on my side. Firstly, obviously, very negative volume effect in the first quarter, and we know it's a small quarter, but have you seen a normalization of volumes in April in the various region, especially Europe and North America? And my second question is on carbon capture. Obviously, this big announcement from the DOE for Mitchell is quite encouraging, but you've had also some financing from the EU for your European carbon capture plans. Still thinking of returns, considering that you have to cover the ETS cost in Europe and you don't have that in the U.S., do you see better returns on investment for European CCU.S. plants relative to the U.S.? Thank you.
Okay, I'll do the first one and a half, and then I give René to you, because he's also doing the calculations on the business plans of carbon capture. The answer to your first question is very simple: Yes, we see normalization of the volumes in April, so I think that's easy. Second one on the DOE, yes, absolutely, that's encouraging. And in Europe, you know that we've received the funding for GeZero, around EUR 200 million. We've received earlier even the funding on Bulgaria. So, and we have obviously significant applications in for the round that closed beginning of April. So those results, I think, will come in October, November or something. So let's wait and see.
As we've indicated earlier, the first real business case that I think we can judge, and we have already 80% data points realized, is the business case in Brevik, and that one looks good, even our CFO doesn't lose any hair or get any gray hair from that, it's rather the opposite. So that looks, that business case looks absolutely solid. Okay, we received 85% funding, so I think there is a little bit of a of a special setup. And now we are going into the calculation of the business cases in the U.S. and Canada. So Edmonton and Mitchell are the next ones. And then we have the European ones. We go one by one.
It's very difficult to give you a general answer to this, because it is really a case-by-case scenario, because it depends on the stuff that hits in Europe, everybody. What's the CO2 price, you know? And then it becomes very specific. What's the technology you are using that drives CapEx and OpEx, you know? What is the, secondly, the transportation issue, and certainly the storage and/or utilization issue. And that one is so widely spreading from left to right, that every business case is very different. And then, you know that in the U.S., it works more with 12-year tax credits plus direct funding. That's why it's so important. You know, don't underestimate, we get the $500 million, but we get the tax credit on top of it.
So, I think that, that's a combination of direct funding, and that makes also the U.S. cases, from our perspective, quite interesting, so let's wait and see. Plus, we have in Mitchell, the specific situation that potentially we have the storage right below the plant, so we save the transportation, which is also a significant benefit. So I think in general, I would say it's a case-by-case decision, but rest assured, Arno, you know, we have given you the financial targets for the whole company. And even if we like decarbonization very much, even if we love this assumption that we go down to fully decarbonized by carbon capture, we are not financially stupid. You know, we continue to make this a very successful business case.
In fact, for Brevik, we try to make it a business case that's even more convincing than the average of the group. So let's wait and see.
Everything said, I guess, Arnaud, don't forget, as Dominik said, you get the $85 per ton tax credit, and then the direct funding. And then if you have no transportation costs for Mitchell, you can be sure that hopefully the tax credit will be higher than the OpEx for the CCUS, so that will be anyhow a positive business case, so.
And then you don't forget, you have the commercial. In none of these business cases, we have the commercial upside that we are targeting for EvoZero. So all, all, all what I said is, you know, in brackets, and then you have multiplier is the commercialization of EvoZero. So let's wait and see, and I'm sure there will be some excitement coming down the road.
Thanks a lot.
That's very helpful. Thank you so much.
We move on to Cedar Ekblom from Morgan Stanley.
Cedar! Cedar, hello.
Hi, guys. Thanks very much. So just two questions for me. Could you talk a little bit about Asia? You mentioned it as being disappointing. We have seen you allocate a fair amount of capital to that region recently, so I'd like to understand what the plans are for Indonesia and how you see the path forward to profitability. Is, is it really just around the market, or is there something that you can do within your control, to get profitability in the right direction? And then the second question is just around fixed costs. I know you mentioned, you know, a triple-digit number for Mitchell, but, your price cost is positive, but I assume that that's variable costs. At the end of the day, you've got quite a lot of negative operating leverage working against you.
I know you can't fix the volume backdrop, but can you do more on the fixed cost side of things? Could you quantify some potential savings that we could look to as we move through 2024? Thank you.
Okay, I'll do the first one, and then, René, then that's the second one. Cedar, on Asia. I think there is a combination of two things. One, I do believe that short term, the market is a little bit subdued, and that's, I would say, a post-COVID effect that we do see there. Also, the currency is getting a little bit under pressure. Some of these markets had elections. Indonesia was just coming out of elections. India is going through an election cycle. Thailand went through an election that took them six months to get the budget done. April looked already very strong again in Thailand. These emerging markets, that's why you need a portfolio of markets, because it goes up and down, but this can change quickly.
So we believe that, you know, growth will come out of Asia. It's clear that these economies will grow. If you look at the population growth in India, it's mind-boggling. Don't forget, you know, some of these markets are now bigger than China. Indonesia is growing fast in terms of population. So in that respect, the markets and the structural demand is absolutely there. You know, quarter one, quarter two, let's wait and see when it kicks in again. Then there are the second part of your question, obviously, portfolio measures that we are taking in Asia, and we within our January mark to portfolio management, we go one country after one country, and I just had a call again with Roberto Carlier, our new board member for Asia.
We go one by one and check whether we have a convincing market position or not. Indonesia, I think, for the time being, is fixed. Bosowa and Grobogan are the two additions, and they will, you know, eventually pay out. I have no doubt, there's always a little bit of a ramp-up in the first couple of months, but I think that's absolutely normal. From our perspective, mid and long term, this will be a very convincing setup in Indonesia. I think the recent acquisition in Malaysia shows you that, we target the vertical integration in Malaysia and with the cementitious addition now, that really is also something that will solidify our situation in Malaysia. In China, I think it's a, for us, it's a small position.
It's a 50/50 joint venture, so nothing exciting. Hong Kong is good and stable, delivering good results, great market position, so I think that's good. Brunei and Bangladesh are more the small pieces in the puzzle. It's a little bit up or out, in that respect. And Thailand, in essence, is something we still need to get our arms around. The market position from my perspective, is not perfect, so let's wait and see what we can do, over there. But in general, we strongly believe in Asia, and we do believe that we have a very defendable market position in each of those markets.
Cedar, to your second question, your working assumption that from the cost savings, everything from is coming from variable costs, if you want, it's not fully correct. So I said to Luis, 40% of the price of our cost comes from cost, and out of the 40%, half of it is coming from fixed costs, yeah? So, and the biggest part out of Europe, and there you see that we are trimming our business to adjust to the lower volumes. Obviously, you can always do more, and we are doing just an analysis right now on our ready-mix and aggregates footprint as well, to see what do we need to adjust in terms of volumes.
So you can be sure that's in our DNA, that we very much know how to manage fixed costs, and that we have a very hard focus on this. And you see it already in Q1, where I said there's already a nice fixed cost reduction in Q1. Can I give you a target? No. Because, you know, if volumes pick up, we need to be ready, but you can be sure we will adjust to lower volumes.
Yeah, and on the flip side, just to add what René said, we can also not exclude that during 2024, we'll give you a target. So, we are constantly working on it, no?
Okay. Thanks for your question, Cedar. The next one comes from Rajesh Kumar Ravi from HDFC.
Rajesh, hello.
Rajesh, hello?
Hi. Hi, Dominik. Hi, René. Afternoon. So, two questions from my side as well. The first one is on Africa and Middle East. That market has possibly, and we have seen in the last two years or three years, have been kind of moving around, by re- by quarter. So it's very difficult to get a hand onto it, and, and, I'm sure you are- you as well must be, kind of grappling around with it as well. So can you just give us a little more into how, the market is looking like and what's your strategy in terms of to kind of get around this and get a consistent performance quarter by quarter? And the second question is more about U.S. pricing. You talked about price increase, plan, plan from starting June.
Could you give us what it was, a ballpark number, especially in aggregate and cement, given all the talks around East Coast pricing pressure, if you could give us a little more sense about how it was in Q1, and anything you have seen as a pricing pressure in East Coast would be great.
Yeah. Rajesh, just a couple of thoughts, and maybe René has something to add. On Africa and Middle East, well, from my seat, I have to say, given the typical volatility of emerging market, if I look over the past couple of years, our performance quarter over quarter in Africa, there was not a high volatility, huh? It was the only one trend line, and it was up. So our result in Africa has actually moved absolutely in the right direction. This is now a little bit of a stabilization on the high level, yes, but we continue to work on two things: One, you always need a portfolio in emerging markets. It's never one country can do it all, and that's what we also do in Africa.
You know, that's why we have more than one country, and rather a basket of countries. But within the countries, you know, you don't want to have a flea circus of crazy market positions. You want to have each country being on a top market position, and that's what we've been working on, especially, with our restructuring efforts in Egypt. I think we've come a long way. The Egyptian results, you know, a couple of years back was negative, now it's strongly positive. Tanzania, we've made this acquisition, which was very important, and we have a clear number one position now in Tanzania, that's very comfortable. Ghana, we have a clear number one position. We've just built out the sustainability investment with CBI together on the calcined clay.
So I think we, again, similar to my answer to Cedar, we go market by market, not only in Asia but also in Africa, to have a number one or number two position in each of those markets, otherwise we should leave. That's a little bit our mindset, and that is true also how we manage Africa. On the U.S. price increases, I ask for your understanding that I can't say more, but we go for mid-year price increases in some business units and some markets in the U.S. And secondly, if I see what has been published, we are very well in the water when it comes to price realization, so nothing from our side to be concerned about.
Understood.
Okay.
Thanks, thanks, Dominic.
Next is Harry Goad from Berenberg.
Harry.
Harry, hello?
Yeah. Hi, good afternoon. I've got a couple of questions, please. Firstly, just, just continuing that vein on, on the U.S., can you give us a bit of a feel for what you see in terms of underlying, sort of almost like clean volume trends? I guess Q1 was obviously distorted by weather and the comp and a few other things, but, but maybe breaking it down by the different markets. You talk about the, the sort of clean volume trends you're seeing there. And then secondly, you, you've obviously referred to some capacity closures in Germany and France. Can you just let us know when those closures are, are effective, what, what the decline will be, almost like from, from the beginning to the end of the process, in terms of, production capacity in, in both countries? Thank you.
Okay, Harry. Let me take the first one, and then René and myself are helping you on the second one. On the U.S. volume development, you're right. I think there was a little bit of a subdued volume development in the first quarter in the U.S., driven from our perspective, you know, by the working day topic, but also by weather, especially in the Northeast, partially in Texas, where there was even snow again, and tornadoes and whatever. So I think we do see some stabilization on the volume side in April, as we've indicated before. So I think the picture overall has not changed fundamentally. Infrastructure is strong, commercial, sorry, industrial plant developments, I think looks good.
Housing is, from our perspective, stabilizing on a very low level. So a little bit up in some small markets. You know, if you take, for example, Houston, I think the volumes are coming ever so slightly back, even in residential. But in other markets, there is still a decline. In other markets, there is a stabilization. So I think from my perspective, if the general economy in the U.S. continues to work the way we have seen the worst in the housing side, so let's wait and see. I'm not so pessimistic, you know, if you talk in a one- to two-year timeframe for housing in the U.S., if the economy stays where it is. So I think that's a bit the picture on the U.S. volume side.
Maybe, René, you wanna-
Harry, regarding closure of Hanover in Germany or the kiln, now we're talking the kiln, the grinding center will remain. That will be in H2 this year, so you can maybe there's a smaller financial effect this year and the full financial effect next year, and the two plants in France, that will be in Q4 2025. That's a little bit the timeline. And then on further outlook, that's what we in the past said already, there will be market consolidation. Let's say there will be plant closures, and we are market leader in Europe, and I guess with the announcement we have done so far, we are in a very good position to streamline our asset base.
As Dominik said, we are working on how can we improve further to adjust our capacity especially in Europe, and maybe we'll come later in the year with something about our plan.
Harry, and maybe if I may add, also to Cedar's question earlier on, I think, Elodie, you also had a little bit of the question. I think one is the reduction in fixed costs, but I think the other piece that is important to understand; it will also be a margin expansion topic. Because, again, it's a portfolio of assets, and you know, we are closing obviously the inefficient kilns, which helps you on margins, on fixed costs, and on sustainability performance. So I think you'll get a portfolio asset effect, if that's how I call it, out of these plant closures, that I think everybody's underestimating a little bit.
So I think in that respect, I think every kiln we close has three dimensions of positive effect, not only one. That's a little bit what we are also targeting, yeah?
Great, thank you.
Thanks, Harry. The next question comes from Yassine Touahri, from Onfield Investment Research.
Hey, Yassine.
Yaseen, hello.
Hi. Good afternoon. So a couple of questions. The first one is on what's happening in April. You're guiding on like-for-like sales growth for the full year. You delivered minus 8% in Q1. Is it fair to assume that you've got a good like-for-like growth in April, with volume stabilizing and at least volume stable and a bit of price increase? And then my second question would be on imports. So we see the cost of imported cement is declining in Vietnam, in Turkey, around the Mediterranean. Do you see any impact from independent importer in Italy, Belgium, Texas, or around the Mississippi River taking market share or capping prices for some of your clients?
Yassine, first one easy is yes, your assumption is right. Second one, on imports, I think you are right. Cost of imports have decreased, both in terms of clinkers and cement costs. I mean, shipping is going a little bit the other way, so it's not like shipping is also declining. So it's always a combination of many things. But the markets that you are indicating, you know, Italy, it's not generally in Italy, yeah? It's in the Northeast, maybe that's not such a super stronghold for us.
So I think there are spots in the U.K., maybe here and there, a little bit in the U.S., in Houston, yes, you know the normal spots, but it's not like it's a massive impact. This is very pinpointed in some of the local markets. But that's it from our perspective. There is not a massive flood of imports. And just to remind you, on the opposite point, we also profit from this, no? We are still net importer in the U.S., so obviously, if the import costs come down, we also source much cheaper. The same is true for Africa. It's a big net importer from our perspective. That obviously helps us. Bangladesh, net importer. So we have-...
Yes, there is a little bit of rain coming through the roof, but we have a lot of buckets on the floor that will capture that rain and make gold out of it, almost, you know? I think that's a little bit, that's the balance of the group, no?
No, okay. And just on, on April, what you're suggesting is that volume might be up a little bit at the group level?
Sorry, I did. Did you ask confirmation on the first place?
What you're suggesting is that April, in April, the volume are up a little bit at the group level.
Well, he said yes.
Yes, you're right.
Okay. Thank you so much.
Yes.
All right, next in line is Gregor Kuglitsch from UBS.
Hey, Gregor.
Oh, hi, good afternoon. So can I ask two questions? So the first one is, so in Q1, you actually had cost deflation from your answer. And I guess my question to you is, do you think you can sustain that, or do you think that now goes into inflation? And if so, I guess why? And then, I think when we had the dinner a few months ago, you were sort of hoping, I think, that European earnings could grow this year. Do you think that is still the case, or do you think that's become more challenging? Thank you.
Gregor, I will take the first one. Cost in deflation, correct, for Q1, I would say on the variable cost side, we can probably see this in continuing, especially for energy. And then on the fixed cost side, there will be, let's say, deflationary impact due to our measures, and obviously an inflationary impact due to, for example, staff cost increases because still salaries go up. For the full year, both cost elements, deflationary, let's wait and see. But variable cost, energy should be, and fixed cost, we will try to manage as hard as we can.
And then on the second piece, Gregor, you know, the year has 12 months. And yes, Europe has got a little bit of a hit in the first quarter, but keep it a little bit in the total perspective. We made, you know, almost EUR 1 billion profits in Europe last year. And I think now we talk about EUR 100 million up or down in the first quarter. So rest assured, we don't give up until the finish line. And I certainly haven't given up the hope that Europe is gonna come in with a very strong result also in 2024.
Thank you.
Remember, you know, just sorry, again, Europe is now a big picture. Because we've made the organizational change, I think Europe is now a big picture of, for us, let's say four or even five different sub-markets. You know, you have the Northern European market, that is a completely different game. You have the Eastern European market, different game. You have the Southern European market, different game. You have the Western market, and then you have the U.K.. So four to five markets, and they will behave as they did in Q1, behave very differently. And I think that I'm still hopeful that we'll come in with a very strong result in 2024 for Europe.
Thank you. Can I follow up on the energy cost comment, what you, what you've actually seen in terms of deflation, and maybe what your most recent thinking is on the price decline, or let's say, cost decline, that you expect for 2024, please?
Yeah, in Q1, we had double-digit percentage relief. Yeah, and the comparison based on H2 will be much more difficult because, you know, H2 last year, we had already relatively lower energy costs. But again, it will be valid what I said, there should be deflationary energy cost for the full year.
Thank you.
Okay. Thanks, Yassine. Thanks, Gregor. Sorry. The next question comes from Ross Harvey from Davy.
Hey, Ross.
Ross?
Hi, guys, how are you? I'm just looking to go back on, I think a comment you made about North America earlier in the call. I think it was a comment about 500-600 basis points of margin improvement. Can you just reiterate what that relates to? Is it RCO or RCOBD, and is that for 2024?
Oh, I think just to be... We are always confident on the U.S., but just to be, we said 400-500, no? It was not 500-600. So we said 400-500 for the time being. So let's get to the, let's get to that milestone first, and then I'm not against work, fighting for 600, but let's do one step, one step after the other. I don't have the absolute RCOBD impact in my mind, but we talk about at least double digits EUR billions, if not more, no?
And for this year, for this year, Ross, we have as well, we should see and will see the full Mitchell impact, so that will drive our result up in 2024. And as Dominic said, the exact amount, you know, then let's wait and see, but we should see improved results plus improved margins in the U.S. this year.
Okay, great.
Okay.
Then just one quick-
No, go ahead.
Oh, yeah, I just wanted to ask a quick follow-up. So I think you've been helpful in terms of pricing commentary on North America, and you said, if I took it down correctly, more increases to come. I'm just wondering, are you expecting a set of mid-year price increases, or, or what is that based on? Or have you seen most of the price increases actually come through in North America already for the year?
As I indicated earlier, Ross, I think, yes, many of the price increases have already been done, but there will be, from our perspective, a market in the U.S. with second-round price increases to come during the year that have not yet been met.
Great. Thank you.
Thank you.
... The next question comes from Tobias Woerner from Stifel.
Tobias.
Tobias, hello.
Yes, hello. Thanks for taking my questions. First one, when you look at the like-for-like across Europe, -10.3% in the first quarter in revenue terms, if you assume a low single digit price impact, so that's about eight. If you assume that working days impact, whatever, 1.5-2%, is that a fair assumption? And does that point to, over and above what you said about April trends getting less bad, working day adjustment? That's the first question. The second question, when I look at the price cost spread, I think you sort of indirectly answered it. Most of that, what you expect for the full year, will, however, happen in the first half.
Is that fair to say, or a larger proportion of that? And then, if I may squeeze one cheeky one in, lastly, how do you see this quarter? Is this sort of a typical quarter for you? Or because of what happened on the volume side, you'd say, actually, generally, we should be doing a better Q1. Thank you.
And so let me take the first one, Tobias. The work day impact, you said, what? 1.5%-1.5%, as of—from our calculations, is much more, so we are talking probably 5%. And that is the impact on the work days in Q1, which consists of, you know, Easter, Ramadan, and all this, yeah. So that is a little bit, the impact in Q1. Then price of our cost spread. You know, as I said, H2, the base will be tougher, but we see still energy costs coming a little bit down. And where does it come from? Maybe on electricity, there will be not, not, super much relief anymore, but on fuel, because last year, you know, fuel was a little bit more expensive with stuff on stock.
So that will then come from fuel, but I would agree to the statement that the H2 relief will be lower than the H1 relief. Yeah, that's probably correct to say it like this. And then the last one-
I didn't quite-
Typical first quarter, whether it was a typical first quarter, I think, well, then, yeah, it's gonna be.
It's difficult to say. We've tended to forget that we had huge winter in Q1, and I think it's been a mixed bag of things. But I think, has it been an extraordinary quarter to the one side or to the other side? I wouldn't say no. So, I think it's nothing that gets us out of our seat on this anything, to answer your question.
Don't get excited about it, EUR 20 million gap on RCO, you know, in a good month, in summer, it's one working day where we make this profit. As I would not get super excited about the delta in Q1.
Mm-hmm. Excellent. And then-
That puts it into perspective.
Yeah, go on. Sorry.
I was gonna say that puts it into perspective. Thanks for that comment, René.
Okay. Just, just, sorry, I didn't hear that. Was it 5%, René said, on the working day?
Yes, I said five.
5. Okay, thank you.
All right, now we have Mike Betts, who is complementing the Q&A session.
Mike.
Mike, hello.
Hi, can you hear me?
Yes.
Yes.
My questions are both on scope, if I could, slide 14. The contribution in Q1 was EUR 16 million to EBITDA. Question one, you know, what are you expecting based on what you've done so far for the year? I mean, are we around the 50 area? And then the second question, if I could just ask for a bit more explanation on North America, where there was a EUR 7 million contribution to EBITDA, only EUR 2 million to EBIT, suggests there was a lot of depreciation. Does that also suggest that the North American contribution from scope will be a lot higher in the rest of the year? Thank you.
Okay. So, Mike, let me take that one. Also, that's-
I leave that to the CFO. You know, this, Mike, that's a great question for the CFO.
So, Mike, you need to... The scope are the 16, yeah, that consists of obviously of items we have bought, yeah, consolidation effect, and then obviously, the other way, we sold a few, let's say, operations the last year. Yeah, the 16, if that would be only 50 in a year, that would be very disappointing. Yeah, that should be more, and Q1 is, as you know, the lowest quarter, so the 16. I can't, I don't give you an absolute number, but the 16 should be way more than 50, yeah, in the year. And then the U.S., that is scope is, you can imagine what that is. You can imagine what that is. That is SEFA, and that business is running super, super nicely.
You see only EUR 7 million in the last quarter. And then you allude to the depreciation, now EUR 5 million, that is how it is, but that should significantly grow in the next three months, because that business is really running well. And nothing more to say. Don't. We got the question in Q3 already, I guess, from Cedar. Our acquisitions will pay nicely off. You see it already here in Q1. Just one more comment, you see the EBITDA margin, if you divide 16 by 72, it's over 20% in our weakest quarter. So you can imagine that we did a few good deals, and you see the Asia impact with very nice margins.
Just on that Asia-
Okay.
-that was already in there in the fourth quarter last year, was it? Asia was already in the fourth quarter?
No, no, no. That-
Part of it.
No, Globogan-
Globogan not.
No, Grobogan not. That is our Grobogan acquisition, yeah, which we closed in December. There was one month, I think it was two million or something, half of a month, last year. So the number here is just that one acquisition.
That's great. Thank you very much.
Thank you, Mike.
Thanks, Mike.
Thanks, Dominik. Thanks, René. There's no further questions in the line.
Perfect.
Let me just tell you that we are quite active now, going on the road with the IR team. Go to Milan, Paris, New York, Boston, Netherlands.
Oh, maybe we should also join.
Yes, a couple of conferences. So hope to see you all there. Stay tuned and thanks for dialing in.
Thanks, everybody. Thank you.
Bye-bye.
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