Welcome and thank you for joining the Call on the Full Year 2020 Results of HeidelbergCement. For purposes of this presentation all participants will be on listen only mode. The presentation will be followed by a question and answer session. If you would like to ask a question press star followed by one on your touch tone phone. 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. Good afternoon to everyone. Good morning to everyone listening in from the U.S. Very pleased to have you all today at our Full Year 2020 Results Conference. We were together four weeks ago already for our trading statement. We will concentrate with our remarks on what happened since. With me in the room as always, Dominik von Achten, our CEO, and Lorenz Näger, our CFO, and Ozan from the IR team. With that, I hand over to you, Dominik.
Christoph, thanks a lot. Welcome everybody from my side. Great to have you, yet another nice day here in Heidelberg. I would love to share with you and Lorenz Näger together the full year results. As Christoph said, some of it has already been released, but we've also focused on the key messages that are new today because the rest we don't need to repeat. I think I really want to make sure that we bring across the additional information that we've got for you and first and foremost, I think the ROIC performance. Just to remind everybody, last year we changed our ROIC definition to the, let's say, capital market accepted definition. With that, our ROIC last year stood at 6.5%. Here we are just 12 months later and the ROIC shoots up to 7.9%.
That's well on track, I would say, if not better, to reach our Beyond 2020 target of clearly above 8%. We'll come to the details later on. There's also a lot of operational self-help in that jump. EPS going up almost EUR 0.50 to almost EUR 7 per share. Net debt clearly down with much better cash flow development. Now the leverage is at 1.86, so clearly below the 2.0 that Lorenz Näger guided in September, I think, August, September last year. I think also that is a tick in the box. On the back of all of that, we decided to, for a start, unexpected return to progressive dividends. I think that is a clear sign of our confidence. Dividend proposal EUR 2.20 per share, and I think a very attractive proposition also for our shareholders.
You know that for us the road to sustainability and significant reduction of our CO2 footprint is absolutely key, and I think in three dimensions we've made here significant progress. Also new today is the final CO2 emission number for 2020, reduction of 2.3%, which is a very good performance. We are now well on track to deliver our 2025 and 2030 targets. We've also made some very good progress on the industrial scaling of CCUS. I'll come back to that later. Last but not least, I'll also come back to the details we are not only in our industry, but I would argue in many other industries, linking our remuneration in a large scale to our CO2 reduction targets.
Last but not least, I know very important for many of you, good start into the year, we have an optimistic view on 2021, and we'll carry you through some of the details of that later on. Wrapping it up, Beyond 2020, I think we've clearly left now phase 1, how we called it internally, and will now enter into phase 2 of Beyond 2020 execution. We are generally on track or even slightly ahead of track. That shows also the next chart, where you see the 2020 achievements versus 2025 targets. We promised you as a management board, and also as an IR team, September last year that we're going to very consistently come back to always the same target setting and then try to deliver as good as we can against these targets.
Every quarter will not work out always, but I think in general the trend line from us is very encouraging. On all five dimensions that we have shared with you as our key targets, we've delivered well in 2020. EBITDA margin going up significantly by 206 basis points versus the target of 300 from 19 to 21.1. ROIC, again, I think this is a major achievement from our perspective, from 6.5% to 7.9% under the new definition, so very well on track for clearly above 8% by 2025. Leverage ratio down already in the corridor of 1.5 to two with 1.86. Reduction of CO2, - 2.3%. Also on the digital side, significant progress already in terms of coverage with HConnect, already 30% in 2020. I think the next one we can do fairly quickly because that's not new. You've seen this.
You know that we've over-delivered, in Western Southern Europe, Northern Eastern Europe, Africa, and on the right trend line in North America, but clearly not at our expectation level yet. We see some significant upside in North America, but Q3 and also Q4 was sitting on the right trend line. With the next chart, I would hand over to Lorenz, who will share with you the free cash flow generation, net debt reduction, and also leverage. Lorenz, you want to?
Yeah. Dominik, hello. Good afternoon from my side as well. I would like to lead you through a few financial charts. The first you find on slide six, you see that we had a record high free cash flow generation. Let me come back on that at the latest chart. Secondly, this then results into significant net debt improvement of EUR 1.5 billion. By that, we also reduced our leverage by organic performance by 0.49x down to now 1.86x, well inside our target range of 1.5x to 2x EBITDA. If you turn page to slide seven, you can see the development of our return on invested capital. We have achieved a value of 7.92%, 1.4 percentage points above previous years. That includes a number of elements. One important element is invested capital.
This you see depicted at the lower part of this chart. If you look on, we currently stand at EUR 21.2 billion capital employed, and we come from 2016 with EUR 26.2 billion, and then we managed it down in 2017 to EUR 24.2 billion. The main impact here was that we managed and cleaned up the ex Italcementi group balance sheet and reduced the capital employed roughly purely on Italcementi side by EUR 1.5 billion. Then you see a jump up 2019 that came from the IFRS 16 regulation, which came with capitalization of leases and this contributed to an increase in working capital.
Now, right now, we managed it down to EUR 21 billion. A part of this is the impairment, which we did, the EUR 3.5 billion, but the remainder is operational management. We had a good run in reducing our working capital requirements, and also with limited CapEx, we reduced our capital employed.
The impairment effect is, of course, accounting effect. If you look to the increase, which I was talking about, of 1.4 percentage points in total, about 0.6 percentage points is the effect of impairment and 0.8% is the operational effect. Still, we contribute significantly from the operational side. As you may remember from our Capital Market Day, we have adjusted the definition of ROIC to market standard, to avoid any irritation. Just for your information, if we kept the old definition, the ROIC would have jumped above 9%, mainly due to lower tax payments. Okay, that's from my side to the ROIC. I come back on you later on and would give on to Dominik.
Thanks, Lorenz. I would just quickly take you through the CO2 topic. As I said earlier, 2.3% down, 589 to 576. Well on track with 23% reduced versus the baseline now to the 30% reduction of our 525 by 2025, and also well on track with the target to be below 500 by 2030. Driving that is not only the share of alternative fuels that have gone up to 26%, but also the reduction of the clinker factor down to 74%. If you turn the page, the dividend proposal, you see the development in the past. We have cut the dividend in light of the coronavirus pandemic last year down to EUR 0.60. Obviously, I share this very openly. There was the internal debate, how big are the steps that we want to take?
We discussed all sorts of different options and finally decided for the, I would say, one of the more bolder ones and say, come on, we feel very confident and we are happy to go up to EUR 2.20. That sits even above the dividend of 2018, 5%. I would say this is a strong signal to our shareholder base that we are in good shape in order to justify that dividend. If you go to the next page, just a quick progress on the digital side. Good progress on HConnect, which is for us key on customer interaction. Sales coverage in the countries that we've developed there is above 30%, so that's good. Also the monthly active users are showing a good growth rate with high user retention. In that respect, on track from our perspective.
On the production side, HProduce, we have a couple of good tools implemented now, one of which we roll out very quickly, which very swiftly helps us to react to volatility in energy markets, which obviously for us is a big lever, needless to say, in the scenario of volatile energy costs. HService, that's our back office shared service center function that is now also going down the automation road with a significant lever on customer satisfaction and also cost reduction. We have the first robotic use case in place that really drives the performance on that end. From the digital side, we are also well on track. I will hand back to Lorenz. He will take you through the life below RCO.
There is a life below RCO and a life below RCO with E, and sometimes it's even interesting. If we look at the additional ordinary result, we see here expense of EUR 2.7 billion, and that mainly comes from the reevaluation of the asset portfolio as a result of the COVID crisis. In Q2 , business expectations went down significantly, and it was pretty unclear whether or not, or at what point in time economy would recover. In the finance world, this was considered to be a so-called triggering event under IFRS, which requires a revaluation of the asset portfolio. We did, as many in the industry, and not only in our industry, had to do a asset revaluation on the base of that triggering event. With a low surprise at that point in time, the business expectations were low, our business plans reduced.
This led then to an expense of EUR 3.4 billion, which is booked here in the additional ordinary result. This revaluation, that triggering event, replaces the regular impairment test at the end of the year. The next impairment test will be done in the end of the year 2021. There was no review of that at the year-end. Next line, the financial result develops according to expectations. Improvement EUR 88 million. The finance cost reduces as we have paid down all our old high yield bonds from the HeidelbergCement history, but also acquired by Italcementi, that brings down our financial result. That means that in future, this financial result will continue to reduce, but at a significantly lower pace than in the last years. Taxation EUR 335 million. Previous year, EUR 358 million. We are more or less on the same level.
This is a bit misleading if you look only on that figure, because it includes deferred tax income due to the revaluation of the asset portfolio. As we have impaired many assets, this impairment is not tax deductible, and therefore, we have to create a corresponding deferred tax asset, to outbalance this tax effect. This has an amount of EUR 174 million. I will come back on that very soon again. The discontinued operation are more or less in line this previous year, EUR 72 million, EUR 32 million. They vary from time to time here. The minorities, EUR 130 million compared to EUR 150 million previous year. This shows that our subsidiaries where we have significant minority stakes in, they had a lower net profit than previous year. This is mainly Indonesia, Morocco, and Thailand.
This list brings us to a group share of profit or this year group share of loss of EUR 2.1 billion. Previous year we stood at EUR 1.1 million profit. If we adjust the group share of profit, we reach EUR 1.365 billion, which is an improvement of EUR 96 million or 8% compared to last year. Let me shortly comment on that, because typically we only deduct the additional ordinary result. If you run the figure still, you will see that we have at the back the deferred tax income, EUR 174 million. That's close to EUR 0.90 per share. We thought we must not keep that out of scope because it's directly linked to the impairment. This time, that's exceptionally, we adjusted this group share of profit, not only for the additional ordinary results, but also the corresponding deferred tax effect, because otherwise it would be misleading.
Just keep that in mind. We had shown a figure above EUR 1.5 billion, and this would not have been a fair figure. The earnings per share, adjusted EUR 6.88, EUR 0.48 up from previous year. Let's turn to page 13. We have the free cash flow. You see from the horizontal green bar on the very top that we have a free cash flow of EUR 2.2 billion. Our free cash flow figure is calculated as operating cash flow minus CapEx for net CapEx for tangible financial assets. That's what we need in CapEx to stay in business and to continue to run our business. You see that that is significantly up compared to previous year of EUR 1.7 billion. We have to keep in mind two main effects here, which contribute to that increase, which is first, tax payments.
In the COVID crisis, many governments allowed to postpone tax payments or tax prepayments. Of course, we have used this opportunity to push out our payments and protect our liquidity. This is an amount of roughly EUR 150 million, but this is a one-off effect. Next year, in 2021, of course, we have to pay these taxes, this will come back as a tax payment. It's only a postponement. The second main effect is coming from working capital. We have achieved to reduce working capital requirements by EUR 236 million. That is typical for the industry. When volumes go down, working capital requirements goes down as well. As we expect recovery on volumes in 2021, we would also expect working capital come back, we would need to invest a little bit more into working capital in this year.
This top figure of EUR 2.2 billion will not be able to repeat. We will drop back on a very strong level, but more or less in the range of 2019 figures. As you can see from the bar, the horizontal bar below, the free cash flow figure, we have used most of this cash flow to pay down debt of EUR 1.7 billion, and that's what brought the net debt from EUR 8.4 billion to EUR 6.9 billion. By that, we are comfortably into our target zone of 1.5-2x leverage. Actually, we stand at 1.86x, and we believe that's a great achievement. Okay. Thank you for your attention. That's it from the finance side. I expect the Dominik for mainly ESG topic.
Thank you, Lorenz. Thanks a lot. We'll turn to sustainability and show you first what can all be done during a corona year. This is 12 months. It was also interesting for us to see in preparation for today, how much we have advanced with many different projects. Up in Canada, CO2 capture and storage project in our plant in Edmonton. A good progress on Leilac- I and then Leilac- 2 later on in Hanover. Leilac- I was in Lixhe in Belgium, then Leilac- 2 now at industrial scale in our Hanover plant in Germany. Significant progress also in Brevik. We shared that with you with the green lighting of the Norwegian government and parliament. Also lately, the CCU project in Redding that is targeting a reduction of 60% of CO2, and basically its utilization in our own cementitious products.
Also the HyNet project up in the northwest of England. Again, here we talk large quantities, and this is mainly driven by a fact that we can transport the captured CO2 with a nearby pipeline to the pipeline network and then its storage in the Irish Sea. That is clearly a large-scale project. That's also, I think, a message we want to bring across, because, if I listen left and right and everywhere, my understanding is that, "This carbon capture technology stuff is something beyond 2030." This is clearly not our mindset. This is absolutely not our mindset. We are going for industrial scale at the latest by 2025. Brevik is 400,000 tons minus 50%. This is clearly industrial scale. Leilac- 2 is clearly industrial scale. If HyNet Northwest England gets to work, we target this to be 2025, 2026.
That is clearly industrial scale. We may have some different opinion here, but I'm openly sharing with you that from our perspective, this is not a post-2030 topic. Just to share with you our thoughts on that. If you look at the sustainability roadmap and our CO2 roadmap and our advancement there, we just wanted to make to you very transparent the emission reduction from 589 to 576. The Clinker incorporation factor reduction and also the clear increase on alternative fuels. All three are well on track to reach the 2030 targets. Yes, we want to do good work, obviously we want also the rating agencies to understand and be transparent to them for them to do their ratings. I think we're well advanced in that respect.
For us, as I said, first we do the work, and then we get the good marks for it, not the other way around. Our room for improvement is still there. We've identified this just recently, together with the IR team and our ESG team. There are in all four ratings still room for improvements, and we will target them as we go along. Obviously one of the levers is to also work consistently on our carbon capture projects, both storage and utilization. I've shared with you some of the details in the earlier slide. Rest assured that we continue not only on these communicated projects, but also on some additional ideas we have in the pipeline. For us, I would say one other exclamation mark behind our front-runner aspiration.
I think we are clearly the first in our industry, but I would argue probably across the globe, that is heavily tying the CO2 reduction target to the variable compensation in the company. Not only in the management board, but also in the levels below. Every employee that is eligible for variable comp will be targeted with this retrospectively 1st January 2021. This is not by 2025 or 2030. This is for this year in action. How does it work? You basically have a financial target, and if you reach your CO2 reduction target, then you get the payout on the financial target because that is multiplied with one. If you miss your CO2 reduction target, then you get a heavy hit potentially, because you will lose 30%, 30%, of your variable comp. That really you feel in your pocket.
Then it also goes to the other side. If you overperform on the CO2 reduction target, you can also mitigate a slightly lower financial performance, and to also increase your variable comp by a maximum of 30%. The overall bonus pool for the variable comp will stay unchanged. The clear message is, no maximum payouts of bonuses anymore without reaching at least 100% of your CO2 reduction targets. With that, I would go to the outlook and guidance for 2021. We've tried to give you some color here on the left, going through some of our key countries. I would argue the U.S., you saw overnight the Fed even increased their GDP growth expectation to 6.5% up from, I think, what was it? 4.2% or something in December. I would say the outlook for the U.S. is clearly positive.
We see some recovery in the construction activity. You heard about the $1.9 trillion program. There is another $2 trillion apparently in the pipeline on the targeted infrastructure and programs. Let's wait and see how far that will get, but clearly tailwinds. On the back of that, and on the back also on rising input costs, a positive pricing environment we see in our markets in the U.S. Germany will continue its stable business environment also during 2021. U.K., there is some post-Brexit economic uncertainty, but I just talked this morning again with our U.K. management and they were quite positive for 2021. Also on the back of good infrastructure investment proceedings, but especially also general sentiment in the U.K. seems to go up. Poland, anyway, on a high level for us.
Still driven by strong housing, which is expected to continue, also some additional demand for infrastructure projects. Australia was a little bit tough for the last one or two years. From our perspective, solid expectations for the H2. Indonesia, difficult COVID situation, difficult weather situation right now. They are in rainy season, Clear target to improve the profitability on the back of better volumes and also some good pricing. Morocco important for us. Heavy rain and snow in Europe means also some rain in Morocco. That helps, because that's an agricultural country, very much depending on agriculture. It looks very green right now. I've not been there myself, unfortunately, due to COVID, but that's what I hear from our management, and that means good prospects for Morocco. We see some demand growth also coming out of Morocco.
Wrapping it up, we expect a slight increase in like-for-like revenues, operating EBITDA, and operating EBIT. We stay course on the CapEx net EUR 1.2 billion. Obviously, as we always said, this is before any growth CapEx and/or M&A. ROIC is targeted to go above 8%, and our leverage will stay in the targeted range and guided range of EUR 1.5 billion-EUR 2 billion. That is, I think, the message from the outlook and guidance perspective. Just to wrap it up, two quick reminders. We are clearly prioritizing the improvement of ROIC and margins over growing the top line. Just to make that also clear, our ROIC jump from 6.5% to 7.9% was to the majority, self-help. It's not in the majority driven by the impairment that Lorenz was sharing with you. It is, by the majority, driven by self-help. The same is true for margins.
We stay focused on that. We work on our portfolio. Stay tuned on that. We focus on strengthening our core markets as we communicated. We ensure strict capital discipline. CapEx spending is very much focused, especially in the core business, on creating even better returns on the asset-based improvements. With any smaller and larger or mid-size bolt-ons, we try to do the same. If they would be larger, we would clearly, as we committed in September, go for co-foundation through portfolio disposals. We accelerate our front-runner ambition and good position in terms of both CO2 and digital. Obviously all of this should lead to attractive returns for our shareholders. I think the much earlier than planned return to progressive dividends is one of the first exclamation marks on that. On share buybacks, I would argue stay tuned.
We still have some way to go. One step after the other. I think on the key messages, I don't need to repeat that. I think all has been said. I would say I would turn it back to Chris. We would love to get your questions.
Thank you, Dominik. Thank you, Lorenz. Operator, would you like to start the Q&A, please?
Ladies and gentlemen, at this time, we'll begin the Q&A session. Anyone who wishes to ask a question may press star, followed by one on their push-to-talk telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you are 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.
Thank you, operator. The first question comes from Matthias Pfeifenberger. Before you get on, Matthias, let me remind you that, please do not ask more than two questions at a time to allow everyone the chance to ask their question as it is and was good practice in our calls. Matthias, the floor is yours.
Thanks a lot, gents. Two questions from my side. The first is really on margins. You gave an outlook of slight revenue and operating profit increase, I think there's three factors. Basically, your ambition in the U.S. to increase the margins. Also you elaborated on 1% to 5% price increases across the board. I think if you land at the midpoint of that, it's going to cover more than well the potential cost increases you're seeing. Also if you continue with disposals, it's probably on the low margin side in terms of these assets. I think there's lots of scope to improve the margins further. Can you elaborate a bit on that? On the CO2, I think you raised a very fair point.
You are basically launching industrial scale carbon capture projects earlier than 2025, and they probably will become fully effective in 2025. When I look at the CO2 emission targets, basically incremental seven percentage points till 2025, only more than three percentage points incremental reduction from 2025 to 2030. Is there a point where you will raise the 2030 target to, I don't know, below 450 or even more ambitious? Thanks a lot.
Yeah. Matthias Pfeifenberger, thanks a lot. Both good questions. Thanks very much. I think let me get to both of them. On the margins, as you've heard me say before, Rome was not built in one year. I think you're right. We've made significant progress on our margin development. 206 basis points up, 300 was the original target. As I always said, this may go up and down quarter-over-quarter a little bit. Let's reach the target of 300 basis points improvement first, then we'll reconvene. One thing I really wanted to make sure is that we set ambitious targets, then also reach these ambitious targets. We can obviously not give you a guarantee on anything, I think it's our clear dedication that we reach those targets. That means also in 2021, you've indicated that we face increasing input costs.
Even in 2021, it's our core focus that we defend wherever we can and even build on additional margins where possible. We'll do that obviously then with price increases that I've already indicated last time, from our perspective, are going well across the board. In that respect, we are confident that our 300 basis points target that we set out, we should be well on our way. I would not promise too much if we try obviously to be there maybe even slightly before 2025. Absolutely, to your first question, margin remains our focus. On CO2, interesting viewpoints. You have done your math well, congratulations. I think you are right. Here it's the same, Matthias. I think let's reach the target that we've given out for 2025, so the 525 first.
The trend line is intact with the 576 that we have reached now in 2020. It's also not, at this point, early enough to say, "Okay, guys, we are going to be much, much better than the 525 or even the 500 at this point." We'll come back to you if that's the case. Let's first make sure that we deliver what we have promised. What we also don't want to get into, it's into a race of announcement. I'm all a fan of ambitious targets, but we want to be the front runner in delivery. I leave it to you to speculate and announce, but we are focused on the delivery of our targets and hopefully that's also in your interest and in the interest of our shareholders.
Thanks. Great. Thanks a lot and congrats to the release.
Thank you.
Thanks, Matthias. The next question comes from Arnaud Lehmann from Bank of America.
Thank you. Good afternoon, gentlemen. First question, just a follow-up on your guidance. I understand the EBITDA guidance. You had a fantastic margin in 2020, so a bit of a challenge to stay there or maybe improve. On the sales guidance, considering you had, I think about 10% decline in the top line in the H1, and then it was more or less stable in the H2. We could have hoped for a bit of a bigger rebound in 2021. Could you elaborate why you only think you can slightly increase the sales in 2021 with the base effect? That's my first question. My second question is on carbon capture. You're making more or less one announcement every month, so that's how it feels. You seem to be looking at various ways in terms of process and technologies.
Will you eventually focus on one or two technologies that will roll into all your plants, or is the medium-term plan to continue to test and try and maybe go for five or six different technologies across the world?
Yeah, great question, Arnaud. Let me answer that, and maybe Lorenz chips in on the first one as well, on our guidance. I understand that you all focused on the guidance, and obviously we've also looked at that very intensely. Flashback 12 months, when we also listened to our investors and also to you as our analyst base, in many cases. The feedback was, this is not an industry where you can go into footnotes and all details of guidance. It's not tweaked to very detailed guidances. Nevertheless, obviously, we want to guide wherever possible. As with all guidance, there is upside potential, but there is also downside risk. We want to stay focused, Arnaud, on being able to deliver what we are guiding.
As I said, there is no guarantee on this, but we are trying to keep course in that respect, and in that light, you should also see the messaged slight increase in revenue, slight increase in EBITDA, and a slight increase in RCO. Let the year progress. It's early in the year. Now we look at the Q1, and then we'll go quarter after quarter, and then we'll take you along on that way, and then we'll see what is possible. On the carbon capture technology, you are right. Absolutely, we are currently testing four or five different carbon capture technologies. It is too early to say whether it's going to be one technology that we are going to roll out, or whether it's different ones. Eventually, I'm not a big fan of putting a bet on four or five different technologies.
Once they are really proven technologies, able to be industrially scaled on a different asset base, I would be more in favor to put the bet on one, two, or maximum three different technologies. That as a general remark. Obviously, we're not going to disclose this at this point, but if you look at the four or five different technologies, they are very different in terms of technical readiness, and they are also very different in terms of industrial scalability. That we keep a little bit for us. The clear target is obviously at some point to scale this not only in one plant, but to scale it across more than one plant, and eventually our plant network. That's clearly, obviously, the focus going forward, but that will take some time because we don't want to bet on the wrong horse there.
Very clear. Thank you very much.
Thank you.
Thank you, Arnaud. The next question comes from Yuri Serov from Redburn. Pardon.
Yes. Hi, good afternoon. Two questions. One, your leverage is now within your target range. You are talking about disposals, which may end up being fairly substantial. Can you please give us an update on your current thinking about the use of funds? Your business is producing cash disposals, so what are you thinking about doing? During your conversation, you mentioned share buybacks, maybe dividends. You're talking about bolt-ons, which are usually fairly small. What are your current plans, or at least ideas as to how to deploy the cash? Secondly, on the energy costs, I don't know whether you can give us any guidance as to by how much as a percentage you think your total energy bill is going to rise next year. Also, curiously, I'm seeing that you're mentioning cost increases in electricity, diesel, pet coke, but you're not mentioning coal.
What is the reason for that? Am I just reading it incorrectly? Thank you.
Thank you, Yuri, for your question. I will take the first one, then Lorenz will take the second one on the energy bill and on the energy costs. Let me get into the deleveraging and the use of funds. Again, here, Yuri, we try to stay course. We have communicated the logic in the Capital Markets Day during our Beyond 2020 new strategy disclosure. Exactly that we will do. We said, we go for disposals on our portfolio restructuring. We then stay course on the CapEx net that I disclosed earlier, EUR 1.2 billion net. We then make sure that we reach BB B flat investment grade. I think there we're also well on our way. We commit the dividends. There we have clearly accelerated. That's what we shared.
We have returned earlier than we originally thought to the progressive dividend of EUR 2.20, also as a strong sign to our shareholder and make some use of our funds also for shareholder return. The excess cash goes into two potential buckets. Growth CapEx, including smaller or larger bolt-ons in our core markets. Clearly no multinational, multi business lines, more than billions acquisition. That is clearly off the table. That's what I said earlier, that remains off the table. In our core markets, where we are operating geographically, we obviously also need to do and want to do some growth CapEx and bolt-ons because we are not here to shrink the company. We are here to, on a very profitable structure, grow the company in the interest of our shareholders with the financial parameters that we have shared with you.
The second bucket remains, obviously, the share buyback. Not but, one step after the other. We cannot, again, build Rome in one day. We have taken one significant step in the interest of our shareholders now with the progressive dividend return to EUR 2.20. Bear with us on the share buyback. We still have some time until 2025, but we are ambitious and also we keep that option clearly on our desk. Lorenz, you want to launch? Maybe you want to do the energy cost?
On the energy cost side, the situation is so that currently on spot prices and on forward prices, energy cost is raising across the board with different emphasis and more or less in all energies. Power, petcoke, coal to a lesser extent. Oil, either gas oil, diesel, et cetera. Also freight costs, Supramax, Cross Atlantic, Cross Pacific, you have seen it has doubled or tripled. We see a broad increase in energy cost right now. We noticed this already in Q4 in the end of last year. We encouraged our country management to increase the forward buying right to the limits of our forward buying policy. As you may know, we have forward buying policy in place for each and every commodity where we are going to do forward buying.
We do not hedging, we do forward buying in a certain framework which we fix. We went fairly long in our accounts. Typically we are a bit shorter than the average of the industry, but right now in autumn, we went long inside the boundaries of our buying policy. That leads to a situation where in H1 of this year, in the first and the second quarter, we are pretty safe. We have to a large extent, not totally of course, but to a large extent, secured commodity price levels as they prevailed in Q4 of the previous year. That does not make any concern to us. Looking forward, we will have to have a fresh look into that as towards the end of the second quarter, see where prices are there, and then we have to look at that again.
Typically, especially in the power side, which makes 50% of our energy budget, prices go down in summertime. We will see where we are. Of course, what we see across the board, we have to reconsider price increase during the year to compensate for that. That's where we currently stand, and we are pretty optimistic and pretty confident that we are able to compensate this inflationary trend on the top line. Thanks.
Thank you, Yuri. Next in line is Gregor Kuglitsch from UBS.
Hi, good afternoon. Can you hear me?
Yes.
Yes, pretty good.
Okay. Thank you. I have two questions. The first one is on going back to carbon capture, and I was intrigued by the announcement the other day of the California plant, where I think the idea is to solidify carbon somehow and then add it into the cement mix. If you could just elaborate on that and how realistic you think that is a successful strategy and maybe more broadly, and maybe you don't want to share this, but I'm going to ask it anyways, what the sort of cost to mitigate is the range of the whatever seven, eight technologies or projects that you put on slide 18. What kind of range you're seeing in terms of cost so we can compare that to, say, the carbon price, right?
The second question is maybe for Dr. Näger, which I think was a comment around the free cash. You effectively guided, maybe that wasn't intentional, but you basically said, I think in your speech, that you expect to go back to EUR 1.7 billion of free cash, having done, I think EUR 2.2 or whatever this year. Can I just confirm that's really what you're saying? It seems to me with some of the unwind of tax- maybe working capital and higher CapEx, a little bit ambitious, but maybe it is what you're saying. Just want to confirm that is indeed the case. Thank you.
Yeah, Gregor. Thanks a lot for your good questions, as always. Let me just elaborate on the two questions or the question one A and B.
Sorry, I broke the rules a bit. I'm sorry.
Yeah. That's okay. That's no problem. Okay. I think on the project in Redding, again, this is a plant north of San Francisco, in the northern part of California. We have partnered with a company called Fortera. That's a company that's been around for a while, and they have actually worked on that technology for quite some time. We are now advanced the state that they are going to build a plant right on our campus, on our plant, in order to capture the CO2 and then use it basically for cementitious material. It's basically a in itself loop that we are trying to create, and the targeted amount is that we by that capture 50% of the produced CO2. I think that's an ambitious target. This is a technology that's not proven yet, to be fair, on an industrial scale.
It's proven in a lab scenario, it's not proven on an industrial scale yet. Fortera would not make that investment, and we would not do this if we would not see significant potential in this project. To be very fair, Gregor, this is not something that will come in a large scale on stream in 2024. This is probably more between 2025 and 2030 in terms of a larger scale. Well, from our perspective, nothing that we talk of 2050. We really try to hit projects that have a shorter time horizon. When it comes to the cost and carbon price I know this is obviously the calculation that we always try to do, and I think you have to keep two dimensions in mind. One is what is the full cost for doing this carbon capture play, both on the storage and on the utilization.
What is the cost to us? Because in none of the projects that I shared with you in terms of industrial scaling, we are on our own. We basically do this together with governments, in order to support our transformation in that respect. Both the Brevik project is heavily subsidized by the Norwegian government and the project in Germany, Leilac- 2, is subsidized by EU and German funds. In that respect, we are trying for our shareholders to mitigate as good as we can the costs of these projects. Every project, Gregor, has a different CapEx amount per ton and a different OpEx amount per ton. It's not like you can basically give out one specific number. It is not yet that cheap. That's also clear. I said it already last time.
From our perspective, it is super critical that we scale this up quickly because with that, the costs of both carbon capturing and also storage utilization and the OpEx side will come down significantly. That's a little bit the long answer on this topic. Lorenz.
Yeah. Gregor, thanks for the question. The free cash flow. You know cash flow is much more volatile than ATPA or RCOBD or whatever, so it's always a bit difficult to forecast. If you took the EUR 2.1 or EUR 2.2 and you deducted what I said, the cash tax postponement was EUR 150 and the working capital of EUR 240, which I told you, if you deduct those, you end up at the EUR 1.7. Now the key question is, does this have a reverse effect? Meaning, do we have to pay the EUR 150 on top of our tax bill in 2021? The same with working capital. Will the EUR 240 million, which we had cash in this year, need to be reinvested into working capital in the next year? That depends on a lot of, let's say, how to say in English, no phrase for that.
Of factors which are difficult to forecast. Like Essid Gray, how December is on turnover. Do we have a dry December, then the working capital requirements are higher at the end. That's a bit difficult to forecast. There is one more element, which are disposals. Last year we had very little disposals because the market for this type of assets was de facto closed. Now we hope that this year it reopens up and that could give us a little bit more oxygen here. Meaning a little bit better free cash flow on that level. I guided 40%, if I'm not mistaken, 40% cash conversion rate sustaining. 45%, that's right.
If you take that 45% based on your CapEx forecast, that would bring you somewhat in that area. I have to be a little bit careful here. The variability of cash conversion rate, 45%, I think that's a realistic rate over a number of periods, so that's an average for two or three years. That will bring you pretty close to the figure you mentioned.
Okay. Thank you very much.
I was a bit cryptic, but it's difficult. Cash flow is difficult to forecast because-
No, that's why I'm glad you mentioned it.
on the year end, but I mean, the 45% average over a couple of years is a very reasonable assumption and a very good figure.
Okay. Thank you. That's helpful.
Thanks, Gregor.
All right, the next question comes from Yassine Touahri from On Field Investment Research.
Yes, two questions. First, could you quantify the price increase that you have announced in your key bulk markets, like the U.S., U.K., Germany, France, the Nordics, Italy, and Australia? The second question is, could you quantify the year-on-year energy inflation that you're expecting in H1 2021, if you assume that it's at the same level as in Q4 2020?
Yassine, thank you very much. I will take the first one, and then Lorenz will take the second one. Yassine, we feel very confident on the price increases that we have in our plan. On the back of rising input costs, that's, I think, also prudent to do from our perspective. We want to safeguard our margins. Please understand that we are not commenting on any specific price increases in any of the specific markets. That's also not good practice from a competition law perspective. In that respect, we absolutely focus on our price increases. I gave you the information in the last call that we are well on track to achieve the targeted price increases. We see good pricing momentum in the, for us, relevant markets. We're not commenting on any specific countries in terms of price increases. Lorenz, do you want to-?
Yeah. Forecasting the future is always difficult, especially when it concerns the future. The same is true for energy price increase. As I said, we have locked in, or we went pretty much to the limits of our forward-buying policy recently. I would say double-digit increase in percentage on that, but double digit is from 10 to 99. Is it closer to 10 than to 99? Yes. It's pretty closer to 10%, but that's very difficult to forecast right now because the last forecast we did late last year, and the situation was pretty much different from today. We really have to assess the situation from time to time. Our target is to keep the margin and this plays on the energy bill, but also on the top line, on the price. That's the element.
Sorry, not to be more precise because currently the things develop very dynamically.
Okay. That was very helpful. Thank you very much.
Thanks, Yassine. Next in line is Sven Edelfelt from ODDO BHF.
Hello, Sven.
Yes, good afternoon. Yes. Could you hear me?
Yes, we can.
Hello?
Yes, we can.
Okay. Thank you very much for taking my question, and good afternoon, everybody. Just wanted to come back on Gregor's question on the CO2 project. I believe Leilac project is one of the most advanced you had. You're passing to Leilac- 2. Can you maybe give us some metric on this specific project for 1 million ton production? How much CO2 you're saving and how much does it cost? Just to help us to better understand the CapEx that need to be put on the table.
Yeah. Sven-
Maybe the second question. You mentioned the additional 2 trillion plan to come in the U.S. How realistic do you believe this plan is? Is it more like a political noise rather than anything else? Trump had the same scale of program on the table before, finally, it ended up with EUR 500 billion that did not even come through. These are my two questions. Thank you.
Yeah, Sven. Thanks a lot. Let me answer your two question. Leilac- 2, it is basically targeted to. That's why I said it's industrial scale. Anything between 70 and 100,000 tons. That's basically 20% of the plant emission. Cost overall, EUR 25 million, but our own share, EUR 3 million. That gives you also a little bit of indication. I know you guys are all worried we are going to spend half the company on this. This is not what we see right now. I think it should really give you more comfort that this is a serious topic for us, no question. I don't want to play it down, but we are also very targeted to make this a success for our shareholders, rest assured. In that respect, Leilac- 2 Industrial is gaining up to 100,000 tons, EUR 25 million our own share, EUR 3 million.
On the 2 trillion, the sky is the limit in the U.S. I know that. 1.9 trillion already announced on COVID. All I'm saying is he has promised it during his campaign. Do all campaign promises come 100% true? Potentially not. Do they have the clear majority now in both Houses in the U.S.? Yes. If he wants to get something done, he needs to get it probably done in the next two years. I'm personally hopeful that there will be something coming. Typically, Democratic governments lean more towards government spending. If you put all that together, I remain positive. Also here, it's true, announcement is nice, but once it's fixed and the decision is done, that's where things then count. Yes, we are hopeful, but no guarantees on that.
Thank you very much. Very useful.
Okay. The next question comes from Glynis Johnson from Jefferies. Glynis.
Hello. Thank you.
Hello.
Hello?
Yes, we can hear you.
Perfect. Thank you. The first question, I just wonder if you can give us an update on the master plans that you've been rolling out across the organization. Second of all, the disposals. I wonder if there's anything you can tell us in terms of any update on the timing of disposals, and also just anything in terms of that watchlist of other regions, countries that you were evaluating. I'm wondering if any have moved from watchlist to actually on your disposal list now.
You're talking about any specific master plans, Glynis, or?
I'm thinking the U.S., I'm thinking the U.K., I'm thinking Germany. Just anything that's different from what you told us over the summer, really. If there's any movement.
Yeah. Glynis, thanks a lot. Maybe start with your first piece. The master plan, obviously, U.S., we shared the action plan that we wanted to increase the margin in the U.S. within the Beyond 2020 scope by 500 basis points. We've seen the first traction in the H2, especially of 2020. It comprises of a couple of significant assets, upgrades, but also some more focused work around customers and markets, asset uptimes. That master plan is absolutely on track. You know that we have one acquisition still pending in the Northeast of the U.S. Our plant project in Mitchell is on track. We have re-accelerated it already in 2020. That's well on track to get executed. The other big master plan is France. We've announced the EUR 400 million investment into France. We are currently in the final stages of negotiations with the unions and the employee representatives.
Overall situation looks promising. We're just about to finish this year a plant upgrade in our plant in the Champagne in Couvrot. That will come on stream during 2021. Also that one is on track. U.K., you are right, that was not necessarily a master plan, but also an action plan. If I look at the most recent results out of our U.K. business, and also compare it with what is visible for us from the competition, my understanding is that we are on the right trend line. We were underperforming in the U.K. for quite a while. I think the trend has clearly changed, and we are really turning the wheels in the right direction. German master plan is basically done in its current communicated phase, which was the upgrade of the two cement plants. Those two investments are fully done and operational.
On the disposals, I understand all your curiosity on these, but I ask for your patience. As I said earlier, we are working on five specific projects, smaller and bigger ones. That is on track, but this does take some time, and for tranquility reasons, I ask for your understanding that we're not speculating around either specific countries and/or specific sizes. I said that we are going to continue also to work on bold on M&As in our core markets. That basically runs in parallel. When it comes to the watchlist, yes, we've said some markets are set to be core, others are set to be disposed, and others are on the watchlist. Those countries that are on the watchlist, I see some good progress in two or three countries that we have put on the watchlist. That's an interesting dynamic.
You may say once you put them on the watchlist, they really get going. That's what we see in two or three countries. That's an interesting dynamic. The methodology from my perspective works, and we'll continue and stay course with that.
Thank you, Glynis. There are four more gentlemen in the queue. The next question comes from Tobias Woerner from Stifel.
Yes. Thanks for taking the questions. Good afternoon, gentlemen. The first one's a quick one. The significant increase in ROIC above 8%, have you factored in any disposals into that improvement? That's the first one. The second one relates to CO2 certificates now priced at EUR 42, EUR 43. What's the impact on your costs and are your customers open to accept supplements on that basis?
You want to start? I'll ask Lorenz.
Yeah.
Lorenz Näger will start, and maybe I'll chip in on the customer side of CO2 certificates once he's done.
Mr. Woerner, thanks for the question. ROIC above 8%, of course, as that is the result of the strategy, includes each and every action we take, whether that's internal improvement program, master plans or portfolio policy. Portfolio policy should also contribute to further increase of the ROIC. The answer clear, yes. On the CO2 certificates, as you know, we are long on the CO2 certificates as a group. We trade CO2 certificates inside the group and as long as we are in a long position, which will prevail for a couple of years. Therefore, we may have costs inside a single country. We outbalance this on area level. On area level you will not see any impact of the cost of CO2 certificates, as I say, as long as we are in a long position.
As we make good progress in CO2 reductions, our position improves currently over time. That's from my side. Maybe you comment, Dominik, on the customer side.
Yeah. Mr. Woerner, maybe just one additional point to what Näger has shared with you. Exactly right, we are long. While we are long, we don't sit on our hands. We are working obviously intensively to reduce the carbon footprint of our products. Obviously, we are also working with the customers on the relevant pricing for that. It is clear that over time our customer base needs to understand that especially those products that carry a significant CO2 footprint need to come at different costs. That's something that we have started to educate the customer base and that education needs to go on. It's not an education one way. This is obviously also in the interest of our customers. If they receive low carbon products, then it comes at one price. If they receive high carbon products, it comes at a different price.
They need to also factor that into their own calculations. That's something we do in full transparency with our customer base, and that's an effort that has already started, despite the fact what Näger was saying. We will continue diligently in order to make sure that even if there is the EU Commission that will change down the road the rules on this, we are well prepared to counteract that.
Thank you. Just to clarify, are you already translating this into pricing as of now?
Yes, in single markets, absolutely. We are translating that into pricing. As I said, not across the world, but in core markets, absolutely, we are doing that. We need to face the facts, so do our customers. Nothing we do against our customers, but very much also transparent to our customers. It's in everybody's interest, and it's clear that is already ongoing.
Thanks, Tobias.
Thank you very much.
The next question comes from Nabil Ahmed from Barclays.
Yes. Good afternoon. Thanks for taking my questions. I had two, actually. First one is on the U.S. tax rate. I was wondering if you could help us understand what would be the impact for the group if U.S. corporate tax rate would go to, say, 28%. If you don't want to go into prospective specific details, maybe just remind us what was the gain when the U.S. tax rates was lowered a few years ago. The second question was on Australia. Could you elaborate a little bit on the outlook you're mentioning in the press release? What's the basis for the more positive comments for the second part of 2021? I was also wondering if you could comment about a possible evolution of your stake in Cement Australia. Either selling to your partner or buying their stake. Thank you.
Nabil. Thank you very much. I will take the second question and then Lorenz will take the first one on the U.S. tax rate. On Australia I think Australia is an important market for us. You know that we have a very strong business down there, highly vertically integrated, and that includes Cement Australia. From our perspective, that partnership works well, and I think that for us, no need to touch this at this point. If there is some change necessary from our partner's perspective, then we'll reconvene. From our perspective right now, we are happy with the setup. Australia, in general, I was indicating that the last one or two years in Australia were not easy. They were, for a long time, very much dependent on the commodity boom that has then come to a clear end in 2020.
There are a little bit of an infight in some of the commodities with China, and also the Chinese not being able to travel to Australia, and the slight decrease in Chinese rates of the Australian economy may have had an impact on that. In general, I have to say, commodity prices are now up again, which then should also help in a commodity-driven nation like Australia, and also a sentiment in Australia. COVID is basically over. The life is fully back to normal. Okay, they cannot internationally travel, the life is fully back to normal in Australia. That's why we are pretty optimistic for at least the H2 in Australia. I know that our competitors in Australia may have, based on their communicated guidances, may have a little bit of a different view on this.
From what we see, also on the back of good infrastructure pipelines, there's also a significant infrastructure program. There are significant infrastructure programs locally, by state, and nationally in place. We are optimistic for Australia. With that, I would hand over, Lorenz, to the U.S. tax rate.
Yeah, U.S. tax rate, currently it's 21% plus the state tax. That brings us to combined tax rate in U.S. of roughly 24%, 25% in Heidelberg. If you increase the tax rate to 28%, okay, that increases the tax rate. Currently, we are still in a carry forward loss position, we have a capitalized deferred tax asset, and which still covers at least 2021 and a part of 2022. If they increase the tax rate right now, the value of my deferred tax asset goes up, and I will show a nice profit on that long term. Of course, if the tax rate is higher, we have to pay more taxes. That's simple.
Okay. Thank you.
Thank you. Second last question comes from Christian Koch from HSBC.
Thank you very much. My first question deals with the growth CapEx. I appreciate you gave us a number for the maintenance. I just wanted to ask how we should think about growth CapEx in 2021 and 2022, and if that is somehow comparable with the number in 2020 or not. The second question deals with capacity utilization in North America. Your annual report shows cement capacity in North America of 17 million tons, which is based on an 80% calendar time utilization. Last year, you sold 15.5 million tons of cement in North America. When I compare these numbers, they indicate a utilization rate of 91%. My question is this a fair comparison given that we do not know if you did any imports and maybe you can run your plant at more than 80%?
Said in a different way, how much headroom do you think you have to grow organically in North America before you have to turn to imports or invest in new capacities? Thank you very much.
Christian, let me take the second question, and then Lorenz Näger will take the one on the growth CapEx. Capacity utilization in the U.S., yes. Our capacity utilization in the U.S. is above 50%. That's right. It's clearly up there. That's historically always been the case. We are one of the players historically. I know the business quite well. I managed it myself eight years. We are historically a player that has a more balanced share between local production and in peaks, also imports. That plays, I think, to our strength. We have a large HC Trading business. We have onshore plants on the coast, basically, across our network where we can basically supply also via imports.
You know that we have switched our strategy already in parts of the U.S. and notably up on the West Coast with the current mothballing of the Permanente plant where we switched imports. If I look at our results, that has not hurt the results. It has rather improved quite significantly. We are happy. That's the background of your question with the balance between imports and local capacity. We do have, if that's the question, also some room for additional local production. Keep in mind, we still build out Mitchell. That comes with a capacity increase. Once it's on stream, we still have this one acquisition pending in the Northeast.
We have a couple of smaller capacity addition brownfield projects. In our action plan in North America, also in our just concluded strategic plan, there is, in the existing footprint, quite some room for small capacity additions here and there. Everywhere, a small one also makes a summer, and that is typically, for our shareholders, the best return you can get if you do small capacity expansions in your existing footprint. We are not up for a large new plant outside of Mitchell for the time being, and we do not see any need to do so in the coming years in order to capture the growth. With that, I would hand over to Lorenz on the growth CapEx.
Yeah, on the growth CapEx. Mr. Koch, it is so that we changed the definition on the CapEx side. We do not distinguish anymore between maintenance CapEx and growth CapEx or sustaining CapEx and growth CapEx because there is no generally accepted definition of that. The industry has changed here and does not use that anymore, with the exception of CEMEX. They still do it that way. The big part of the industry distinguishes now between CapEx on tangible fixed assets and also disposals on tangible fixed assets on the one hand side, as a in German language, and M&A CapEx on the other hand side. We have followed that definition. We have also, maybe if you look into our annual report, we have changed the presentation of the legal cash flow statement in that respect so that you can calculate this easily.
For example, you see it when we talk about free cash flow. This is operating cash flow minus investment in tangible fixed assets, plus proceeds from divestment of tangible fixed assets. That's a change in definition, and we stick to that because that's transparent and that's visible, and that's clearly defined by IFRS, how we should read that. Coming from that, our net CAFA CapEx, the plan is EUR 1,200 million. That is our target for 2021 and ongoing. We think we are very confident that we can stay inside this frame.
With respect to today, I think we made it clear that larger M&A would be co-funded by divestment, just to make sure that we are not up for a multi-billion standalone M&A that basically brings leverage back up to 2.5 or 3. That's not on the agenda.
Thank you very much. I appreciate your answers.
Thank you, Christian. The last question comes from Harry Goad from Berenberg.
Good afternoon. Thank you very much for taking my question. It's coming back to the guidance. You talk about the slight increase in revenue in the year, and you've obviously talked about some of the contributing factors to that, whether it's positive U.S. markets or the tailwind from infrastructure programs or housing. I guess given a lower base effect in 2020, there must also be implied in that some more challenging end markets that you're seeing. It'd be useful to get some color, whether it's by end market or by geography where you anticipate slightly more challenging or are seeing already more challenging starts for the year in 2021. Thanks.
Well, thanks for your question. As we said earlier, Harry, I think from our perspective, we feel at this point comfortable with the guidance that we've given about the slight increase in revenue, EBITDA or RCOBD and EBIT or RCO. We've indicated on our slide to give you some color on some of the core markets. In general, in our broad portfolio of countries and areas, we do not see, and that's the positive news from our perspective, we do not see a market that is falling off the cliff in a negative way. Let's start with that. I think that's always in the large portfolio risk that you have, that a market basically completely collapses or there is a significant decrease in double-digit terms. I think that's not what we see in the current development the first two months happening.
On the flip side, there is not one pronounced market where I would say things go through the roof. I think it's clear that if you read the chart that we have given at the end of our presentation, that on the core markets that we have shared with you, we are quite confident about the development this year. On the back of good infrastructure money coming in. North America, partially U.K., partially Australia they are going in the right direction. Other markets for us important are Indonesia and Morocco. As I said, the year has started well for us. Now let's wait for Q1 results that will be out in April and beginning of May 6th. We'll fight hard to make that a good Q1, which goes against a very good Q1 last year because Q1 2020 was still strong.
It was one of the strongest ones that we had ever. In that respect, we are fighting against a significant comp, but we are still hopeful that we'll be able to pull off a good Q1 2021.
Great. Thank you.
Thanks, Harry. Good coincidence that you are the last speaker since you are also organizing, you and your bank. The roadshow that we are doing tomorrow, there's a fireside chat at 2:00 P.M. CET in the afternoon. Everyone who's interested, please reach out to Harry and his team. We continue on Monday with the roadshow, and on Tuesday we are at the Exane BNP Sector Conference. There is a fireside chat at 2:00 P.M. in the afternoon. We would love you to take part in these discussions. Thanks for dialing in, and see you soon.
Thanks, guys. Thank you.
Bye.
Thank you.
That's the end of the conference now. You may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.