Ladies and gentlemen, thank you for standing by. Welcome and thank you for joining the call on preliminary results 4th Quarter and Full Year 2020 of Heidelberg Cement. Throughout today's recorded presentation, all participants will be in a listen only mode. The presentation will be followed by a question and answer session. I would now like to turn the conference over to Christoph Bommelburg.
Please go ahead.
Thank you, operator. Good afternoon, good morning, everyone listening to our call today. It's the trading statement called on our full year results 2020. Preliminary results, I should say. And with me today, as always, are Dominik van Aften, our CEO and Lorenz Neger, our CFO as well as Ozan from the IR team.
We have put the presentation on our website. So in case you haven't seen them, it's available on the IR section. Quarter. And before we start, I would like to draw your attention to the disclaimer language on the last page of the presentation. We have great weather here today after a streak of cold weather.
So with that, which is always good for the building industry. With that, let's get on and over to you, Dominik.
Thanks, Chris, and welcome from my side. 2019. And you see us here in the room in Heidelberg with a smile on our face, not just because of the sun that Chris already mentioned, but also looking at our results in 2020 and our 1st view into 2021. So I would love to take you through our presentation for a moment, and then we would love to take your questions, Lawrence and myself. If I go to the key messages, who would have thought in March, April 2020 that this is going to be a record EBITDA here for Alberts Cement.
I think that's something that the team has pulled off in a super effort, And it has also led to significant margin improvement, something we discussed during our beyond 2020 strategic discussion. It clearly shows the exceptional resilience of the company in market conditions that, with all due respect, have been Quite challenging. I remind you, in Q2, volumes were down 90% partially in some months in some countries. So and here we are and have pulled off cash savings in our co program of almost €1,300,000,000 That, I think, is one key driver for the step change in net reduction, And that brought the leverage clearly below 2.0, and that's clearly within our target corridor that we communicated during the Beyond 2020 Capital Markets Day. For us, very important, we want to be the clear leader on CO2 in our industry, and we are the clear leader in industrially scaling the topic of carbon capture.
You have heard about the project. I will remind you of some of them in just a minute. And then we have taken a second very important step now in the last couple of months weeks where we have decided that we will fundamentally change our remuneration scheme, starting at the top from the board level all the way to all employees across the world that are eligible for bonus, and that is true for all business lines. Quarter. So in that respect, fundamental change.
I will come to the details in a minute. Start into 2021, I know many of you are interested as much as we are. So January was good, if not very good for us. The winter. Winter came down in February, so let's wait and see how this plays out.
But we remain confident for the Q1 of this year. All
in all,
I would say given the excellent operation and especially also financial performance in 2020, we are earlier, from our perspective, able now to take the next phase of beyond 2020. And that's especially the divestment and also the potential tuck in M and As in our focus markets. So clearly, we will accelerate our move into that phase as we go into 2021. I would like to draw your attention to the next page. I know there was a lot of discussion in the past.
Are they delivering on their targets, guys? Look at Page 3. With all due respect, we have clearly delivered what we've promised on all dimensions. We gave you the targets During 2020, that we're going to be above the year of 2019, so EUR 3.58 billion EBITDA, we came in at more than EUR 3,700,000,000 like for like up 6.1%. On the net debt, Laurence has guided you to go below SEK 7,000,000,000 We came in at SEK 6.9
On
the back of that, the leverage, Laurence guided you on leverage below 2.0. We came in at a strong 1.86, very well in the corridor of our beyond 2020 exercise. And then last but not least, a program that we have actually launched under Very different circumstances in March, April that I alluded to earlier, nevertheless came out at cash savings of almost 1 point €3,000,000,000 versus the announced target of €1,000,000,000 If you go to Page 4, you see the revenue side. There is clearly pressure on the volumes from Q2 that we did not fully recover. But from our perspective, if I look at the details, and I'll come to that a little bit later in some of the markets, Q3 was still a little bit low on the volumes, Q4 was actually quite strong on the volume side.
So I'm actually positive the trend in Q4 in that respect was good, better than the average of the year if you take Q1 out. So in that respect, I think we saw a good trend line on the volume side. And just for you to note, this minus 5% like for like still even includes the deliberate reduction of revenues on the HD trading side of more than €500,000,000 and also some heavy currency impact That we basically have to also take into account. That altogether almost It's up to a sales of €800,000,000 to €1,000,000,000 So I think in that respect, if you take that into account, even the revenue line, I think, was quarter? Quite.
Okay. Strong then on the operating EBITDA, like for like plus 6%. Operating margin, you know that we quarter, we discussed during the beyond 2020 exercise that we wanted to move from 19%, 300 basis points up to 22%. And here we go. Already in less than 1 year, we are now at 21.1%, okay?
1 year does not make a full summer, that's clear, but a strong two zero six basis points up versus prior year. I think that clearly shows also the strong operational performance. And then on the operating EBIT side, it even looks a little better like for like 11% up. Obviously, that has also helped a little bit by the write offs that we took during the year in June 2020. If you go to Page 5, you see the margin improvement on the EBITDA side.
And I would say everything looks good. We have Improved the margin development in all areas, which is very important for me, shows also the strength of the balance of the portfolio Even prior to the divestments that we are planning. And I'm also being very open. We are ambitious. The North American, 25 basis points, you can argue, and I will come to that on the next page, whether this could have been even better, absolutely.
But with all the circumstances that we saw internally, we are happy with that plus 24 basis points. And the action plan that we have communicated going into Q3 is clearly on track in North America. And also the start For 2021 was very promising there. So from my perspective, the trend is absolutely intact also in North America. If we go to the next page, 6, you see that the volume development in Q4 was actually good in cement, also in aggregate and only slightly hampered in ready mix.
So overall, volume development was okay from our perspective in Q4. If you look at the revenue side, even stronger. That indicates That also the pricing in those markets is still intact. I know many of you have asked, how is your sentiment on the pricing. If you look at the volume development in Q4 versus the revenue, it clearly indicates that the pricing momentum in the market is absolutely, in fact, in most cases from our perspective.
And that also then relates into a good operating EBITDA performance, Especially in Africa, but also in Western and Southern Europe. Northern in Eastern Europe, against a very strong comp prior year and also Asia the quarter. Slightly up on a like for like basis. And then North America, strong development on the revenue side, which was important for me to watch because you remember Our revenue development in the first half of the year in North America was lagging versus the competition. So I was very much keeping a close eye on the revenue development in Q3 and Q4 and the trends in that respect in North America is absolutely intact.
On the operating EBITDA level, we had a couple of special developments that we don't need to go into any details. This is operational management the company. But just to help you a little bit where it's coming from, you saw the good volume development and revenue development. Clearly, that eats into our inventory, and that obviously also hits short term our EBITDA. And then we took a very deliberate decision on maintenance in two dimensions.
Both, we postponed during 2020 some of the maintenance that was necessary for 2020 into Q4. You saw the COAP savings plan that was part of that exercise. And then we also pulled forward some of the maintenance that was necessary in the first half or in the Q1 of 2021, wherever possible, into Q4 2020. And all that together has a significant impact on the operating EBITDA in Q4 in North America. So as I said earlier, From our perspective, the trend is absolutely intact.
We had a very strong Q3 in North America. And as I said, Q1 the 1st month in 2021 was also strong. If you then go to Page 7, you see the development on the EBITDA side, the famous bridge. So we have a currency impact alone in Q4 of almost EUR 50,000,000. That's a big hit.
But going from there, strong volume development and also price over cost is still intact despite the slightly higher fixed cost development that I was alluding to earlier that's coming from Mainly North America, partially Asia Pacific. Those are the ones where the fixed costs are a little bit higher than you may have expected and again, that was deliberate management on our side. So but despite of that spike in small spike in fixed costs from a global perspective. Price over cost is even in Q4 still positive. If you sum it up point into the full year performance, you see the 6.1 percent from just below EUR 3,500,000,000 to more than EUR 3 point €7,000,000,000 currency impact around €90,000,000 volume impact still negative.
You saw the revenue development, minus €200,000,000 On the EBITDA side, but look at the very strong price over cost. So that's a combination of very good price management an excellent cost management during the pandemic year. So a favorable more than EUR 400,000,000 and that then adds up to this EUR 3.7 €1,000,000,000 Before I hand over to Laurence, let me just share with you the COB action plan. I will split this slide a little bit between the 2 of us. So we announced the EUR 1,000,000,000 originally in March.
And you remember that was really with the line of sight that the earth is going to sink and the moon is going to come down because the volume development in April May was really a disaster. And under that scenario, we said, okay, guys, we better fasten our seatbelts and Preserve cash wherever we can up to EUR 1,000,000,000 Despite the fact that the volumes came back rapidly, we still pulled off a Cash saving of almost €1,300,000,000 about €250,000,000 cash costs, about EUR 500,000,000 CapEx. And Laurence can maybe say something on the EUR 560,000,000 other cash savings because there he has, as our CFO, the better visibility. But overall, I think a strong almost €1,300,000,000 Lawrence, do you want to On that one?
Yes. Thanks, Dominik. From my side, here, so I will take over here. But that's fine Because the cash savings, which we did, had a major impact on the net debt position. And the upper cash The savings, all that they do consist of tax savings and working capital reductions.
On the cash tax savings, it's more like EUR 180,000,000 in that figure. And these are Mainly payments, which will come back next year. There's not so many final cash tax savings, but many countries put in place laws where you could postpone prepayments for the current year to the next year and that we use throughout the group. The second big item then is the working capital. And here, predominantly, the accounts receivables and the accounts payable.
We do not so much push on operational stocks. That means we do not trying to push down clinker stocks, cement stocks and aggregate stocks because to do our the business, and we do not want to run out of the stock. So we talk about accounts receivable. Here we saw good performance All over the market, the payment behavior of our customer was very good. We have very little overdue payments in the COVID crisis where we were the Q4.
And our operating liabilities, our liabilities to our supplier. Here, we were able to push out payments To a certain reasonable extent, and by that, we achieved overall working capital savings of 100 plus EUR 380,000,000 Euro also here, we will see a sort of buildup in working capital in the coming year. That's an exercise which will not be repeatable. And this brings me then to the next slide on Slide 10, where you can see the free cash the net debt development and the associated leverage. You can see that we ended the year at SEK 6,900,000,000 net debt, Which consists of SEK 5,800,000,000 clean financial debt, if I may say so, and SEK 1,100,000,000 IFRS 16 lease obligations.
And this came down from SEK 8,400,000,000 previous year SEK 1,500,000,000. You can clearly see how The IFRS 16 liabilities reduced. That's because we have replaced our a part of leased items, mainly trucks and yellow machines, by purchased machines. So that brings that significantly down. You can also see over a 2 years period of time that over 2 years, we have reduced net debt ex IFRS 16 from 8.3 percent to 5.8 percent.
This is a reduction in the net debt position on a like for like basis of $2,500,000,000 which shows the outstanding ability of the company to generate Cash and to have a high power of self financing. This then translates into The leverage, it goes down from 2.6% in 2017 and then 2.3 5 in 2019 and 1.86 now at
the end of
December 2020. This is well inside our target range of 1.5x to 2x. And if you exclude IFRS 16, it would have gone down to 1 point 7 0x. So we see a strong deleveraging. We are well in our beyond 2020 target range.
And What I mean is remarkable that in the coke action plan, we were able to redirect €1,300,000,000 on very short time In cash, to keep it inside the company, of course, that exercise cannot be reputed. The company, again, not only now in 2020 in the COVID crisis, but even earlier in 2009 in the financial crisis of 2012 in the Fukushima crisis shows this excellent and I would say exceptional financial resilience in crisis situations with a good Very high, I should say, very high flexibility for Sachin's asset heavy business model And strong implementation strength on all levels of our organization. And that's, let's say, a characteristic, which we which we have executed into the company over many years and which will help us to master any challenge That's it from my side.
And I
would like to give back to Dominik.
Yes, Laurence. Thanks a lot. Very strong on
the financial side. So thanks a
lot to you and your team. Sustainability, you know that this is for us the core topic at this point beyond our operational excellence and the financial resilience of the company. We want to manage the future, and we are paid for managing the future. So for us, sustainability is absolutely core. You know that our clear target is to be the industry leader in this topic.
And I think we have well advanced when it comes to industrial scaling of CO2 Capturing Technologies. We have announced the Nordic Brevik project that captures 400,000 tons of 50% of the total emission of CO2 in the plant per year, and that is well on track to go live 2019. We've also announced what we call the Lilac II project that will be done in our Hanover Cement plant in Germany, And that's targeted also to get to an industrial scale in the Phase 2 of this lilac, the first phase we did in Ligse, Belgium. And this phase will then go to 100,000 tonnes of CO2 captured. And then we have A couple of other CO2 projects that are in the pipeline and have been communicated.
The catch for climate in Germany that we do together with a couple of our industry partners and also the feasibility study on a very important project of CCS in Canada. Now you can obviously make a big announcement on CO2 reduction target on roadmaps
and new
projects. But from our perspective, do we really mean business? And in that respect, we had an Yes, interesting discussion within the management board and also internally with our supervisory board. And we have the full backing to now make a significant change For our compensation, that is true for the managing board, and that's also true for all bonus eligible employees globally. As I said earlier, this cuts across all countries, all business lines.
And in essence, we basically put a multiplier on our profit targets. So it clearly has the idea to say going forward, we want to be in balance between financial targets and sustainability targets, And we take this very serious indeed. And that's why going forward, there will be as of 2021, when this starts the full year. It starts right now for the full year 2021. You will not be able to earn a full bonus without reaching your CO2 targets, and I think this is the clear message that we want to send internally and also externally to make sure that everybody understands That we, a, trust in our target set, and we do everything as a management team and as a total company to reach or even exceed those targets.
And the basis for this is obviously our CO2 roadmap that we've communicated to you during the beyond 2020 Capital PPA. Today, this is still absolutely the basis, and this is also the basis for this incentive scheme change. So there is no delta between internal or external targets. These are the targets that we chase together And that we have communicated, it's very transparent exercise, and we will keep you updated on whether we reach them or whether there are any deviations to the positive or to the negative side. Rest assured, we do everything to get there, and we'll give you an update on all of the beyond 2020 targets in our March full year result disclosure that you know about.
Okay. If I wrap it up, Before we come to your interesting questions, KeyMetz is record year in a very difficult scenario. So I think the team has done an excellent job also to significantly improve the margins. Coop savings came in well above the original target of EUR 1,000,000,000 with more than EUR 1,200,000,000 or almost EUR 2,300,000,000. That allowed us for a step change in net debt reduction, bringing the leverage clearly below 2.0, 1.86, as Laurence was explaining.
We have made good progress on the industrial scaling of CO2 capture technologies, and we've also made a fundamental change in order to underline our ambition to our remuneration schemes. Overall, the start into 2021 was good, And we take a very optimistic view for Q1 of 2021. All of that allows us to then enter into the next phase of beyond 2020, where we will then also start to see the first shift in our portfolio and work with our countries on their strategic plans going forward. Okay. That's it from Laurence and myself at this point, and then we are looking forward to your questions.
Thank you, Laurence. Thank you, Dominik. 2019. Renee, do you want to stop the Q and A, please?
Ladies and gentlemen, at this time, we will begin the question and answer session. Please leave the handset before making your selections.
Okay. I see the line is filling the Q1. A number of questioners. So as usual, please stick to 2 questions at a time to allow everyone to ask their question. And the first question comes from Gregor Kuglitsch from UBS.
Can you hear me well? Yes, Gregor. Hi.
How are you? Two questions then for me, please. So the first one is, if you could just give us a little bit of color on your energy position for this year and your expectations for cost inflation. And maybe tied into that, What your confidence is of recovering that cost inflation in 2021? And then the second question is on cash.
So The slide on the cope savings, there was a mention a few times of sort of things unwinding and thinking about the tax savings, maybe there's going to be higher CapEx, I guess what I want to understand is how much of the SEK 1,300,000,000 will effectively Appreciate it. I won't repeat again, but how much will be a headwind in 2021? Quarter. And if you care to dive maybe specifically on CapEx within that as an absolute number, that would be helpful. Thank you.
Yes, Gregor. Thanks a lot for your good questions. I will take just a part of those Two questions, and then I will hand over to Laurence because cash, he will be very pronounced to answer on that. And then also the energy cost, I think he has a good transparency because he's leading our purchasing effort that also includes the energy cost side. Let me make a couple of opening remarks on your second point with the cope savings.
You mentioned how much is going to come back. Let me comment on the fixed cost side and also on the CapEx side, and then Laurence will take the tax and the working capital topic together with the energy cost development. Gregor, bear with us. We're not going to give any specific outlook or guidance today, not because we don't want to do this, but we typically do this in March. If there is good visibility, we will do that in March.
But bear with us that we don't give you a formal outlook, but we'll give you a current thought, at least. I think That's fair. On the COAP plan, fixed costs, we had EUR 250,000,000. And we always said We try to preserve as much as we can from those €250,000,000 But one thing is also clear, some of the government programs that we have profited from Last year will not come back, hopefully not come back because that would mean that COVID is over. So in that respect, we hope that they are not coming back, But this obviously will lead to a little bit less fixed cost relief, but we are trying as a management team to get as much over the line Also in 2021, we have made during the crisis a couple of adjustments also on the staff side.
That's also true for Heidelberg's headquarter. That's true for some of the other countries, especially also across Europe. So we continue to work on that, and we will, with that, try to preserve as much the fixed cost savings that we did last year. But it's, I think, fair to assume that not all of it will come back, but our clear target must be to get more than 50% of that at least, also across the line for this year. On the CapEx side, we've given you the guidance of EUR 1,200,000,000.
That is clearly still the target before any M and A. But the €1,200,000,000 that we communicated within beyond 2020 is clearly our aim also for That's net CapEx, €1,300,000,000 gross, minus €100,000,000 so €1,200,000,000 net. That. That's the point on that end. And then, Laurence, do you want to take the question with regards to the working capital and receivables and then also the energy cost side, Mehdi.
Yes. Thank you. As I said earlier on the tax side, we will You'll see a first thing swing back on the tax side, not all of the EUR 180,000,000 but part of that will Needed to be paid in 2021. So we will see compared to 2020 an increase in the tax Payments, yes? On the working capital side, as I said, it's mainly on accounts receivable percent accounts payable, not so much on the stocks as the stocks are managed operationally, and we try to keep the stocks which are required in order To be always able to serve the customers.
So there's not much change on the accounts receivable and payables. We are just analyzing the situation, what we can keep and what we have to increase our working So our expectation is that the limited part of this EUR 380,000,000 in the working capital will swing back maybe €100,000,000 or €150,000,000 That's my expectation. When it comes to the energy position, you know that hydrofoil cement in structurally has a shorter forward buying policy than most of the market. However, when we saw energy prices rising in autumn last year, we Trucked our operations to buy longer to go to the upper limits of the boundaries. We centrally set and that has been done.
So currently, we are covered maybe with onethree to onetwo of our energy requirements for 20 2021. So that will bring us on a reasonable cost base through the spring. And then we have to see how things develop At a later stage, we see cost inflation on both on power side but also on Fuel side, coal and petco. So that's the situation. So that's equally going up.
And as I said, we are a bit the quarter. We are longer than we used to be in the past, and that will help us until summertime. If you look to the pricing, we see quarter? Strong pricing and reasonable development all across the board. So currently, we are quite We will be able to keep the margin on the predominant part of our business overall in the group.
So that's where we stand in a moment. And how that goes through springtime, let's see, this February was very cold. Now it's very warm. Volumes are picking up so much. So let's see how that will how weather will develop in March, and then we will see where we stand.
2019. Thank you very much.
Thank you, Lawrence. The next question comes from Elavije Wallow JPMorgan.
Hi, Arvind. Hi, Arvind. Hi, Arvind. Hi, Arvind. Thanks for taking my question.
Hi, everyone. I have a few questions on capital allocation then. First of all, on disposals, could you actually give us a little bit of an update on your program? There have been a few remarks in the press, but potential asset disposals. So if you could update us where you are at the moment and specifically on the North American division and the action plan that you've put there as part of your strategic plan beyond 2020 strategy.
Would you still consider or would you consider disposing this asset in this market? And then the flip side of that question would be on what you would do with the cash. Would you actually go for acquisitions even also that much more comfortable leverage at the moment. And if so, in which area? Would it be just cement?
Or would you consider some building and lighter solutions like some of your peers. And lastly, would you consider going back 2 full dividend, maybe as soon as this year. Thank you.
Elodie, you are a clever lady. You squeezed 3 questions in that. That's almost fine. But they also say yes. Yes, yes, yes.
That's okay. No question. No comment. Let me answer Your points, and Laurence can chip in if he has additional points. So on the capital allocation, especially the disposal program, you're right.
We indicated that we are working on at least 5 topics in that respect. Please, we ask for your understanding that we do not comment any market rumors at this point As we never do on that end, and that's why we cannot comment on anything that's out there that's running exercise for us, this disposal program, and we do not want to deteriorate that with any comments on this end. So bear with us. This will happen, as I indicated. Hopefully, some of them will also come to fruition in the first half of 2021.
And then we'll push ahead with all others. But you know that these transactions always take a little bit of time, and We want to absolutely get the best results for our shareholders. You also asked a little bit about the North American action plan. Absolutely, as I said earlier, Elodie, the The action plan is in place. It is executed.
And we have, I think, brought some light on where we are focusing on. That's both on the cement side and on the aggregate side as well as the ready mix side for both U. S. And Canada. It's a very detailed plan that Chris Ward has worked on with his team all across our areas in the U.
S. Regions, we call them in North America, every region needs to contribute in each of their business lines with a very specific program. And as I said, this program from our perspective is absolutely on track, and nothing will stop us from executing that. So there is a clear focus of the North American team to get that action plan executed. On the Cash allocation, we stick to what we have communicated in beyond 2020, yes?
First, the target is to generate as much cash as we can. That includes the operational cashier open that Laurence has shared with you. We then go for the divestment process that we have communicated also in the beyond 2020 exercise. Then we spent our normal CapEx of €1,200,000,000 net. Then we go to the question of dividends.
And I think it's clear that in a scenario and a year like this, we will take a very close look at our dividend decision for the year 2020 to be paid out in 2021. And then we have, as we always said, the competition between M and A on the one hand and share buybacks on the other hand. And we are an ambitious management team. We said we would like to grow the company in a very healthy financial position, and that still absolutely is our target. But we also clearly excluded multibillion, multinational acquisitions.
So don't I get overly excited that tomorrow we come up with a €5,000,000,000 investment in 5 different regions of the Of the globe, this is not going to happen. If we do M and A, we do this in a very pinpointed way in our targeted markets that we have actually decided under the beyond 2020 exercise. And whether we stay within our core markets or that we move a little bit left or right, let's wait and see. This also depends a little bit on the opportunities. But rest assured, it will be clearly in line with what we have communicated.
Beyond 2020, we gave you Our corridors. And in that respect, we will absolutely stick to what we have said. So no change In that respect. And as I said, LOD on the dividend, no final decision. No, this is a very formal process.
The Board takes its decision once the final results are there. So we take that in middle of March. We then need to go to the supervisory board, discuss it with the supervisory board. And then the supervisory board makes a proposal to the general assembly in May, and that's the process. But I think given the financial stability of the company, you should assume that the dividend should lie clearly above the €0.60 of last year.
Don't worry. We also have a good heart for our shareholders.
2019. Doris, do
you have anything?
Yes. I just want to add that we said that we will return to a progressive dividend when the COVID crisis is over. I think that tells you everything.
Yes. Thanks very much. Thanks. Welcome, Henri.
So we still have a number of questioners in the line, so please stick to 2 questions, if possible. The next question comes from Nabil Ahmed from Barclays.
Hi, Nabil.
Yes, good afternoon. Thanks for taking my questions. I have 2 actually. The first one is relating to what you said the year regarding the timing of maintenance, I'm assuming cost and CapEx. Could you please help us quantify that impact.
I mean, how much incremental OpEx you had in the Q4 the quarter. And as you probably understand, I'm trying to gauge the sort of margin improvement you would have had excluding that. The second question is on North America. I mean, you alluded to it as well. This has been the very minor margin developments in relative terms compared to the other region.
Could you please help us to understand a little bit the moving parts? Maybe if you could make a few comments on the performances between the U. S. And Canada, cement aggregates and ready mix and also perhaps the presentation. That will be a useful.
Thank you.
Yes. Nabil, thank you very much for your questions. And Laurence can also chip in if he has a couple of points. On the maintenance cost and CapEx side, We are not in a quarter to quarter business. As many of you know, this is and we are in the midterm and long term run To get to our target, that's also why we communicated the 5 gs exercise and not a quarter over quarter plan.
And absolutely, I made that very transparent. From the outside in, you would say what happens in North America, you are you went 400 basis points ahead in Q3, and then It's 25 basis points in Q4. So what's happening? I tell you very clearly And that's an operational deliberate decision. For us, as I indicated earlier, Nabil, We were not happy with our overall performance in North America, and that also always starts with the top line.
If you don't if you are losing too much ground on the top line, you can chase margins like Q3. You will never succeed. So for us, the clear target was to get stability to the top line. And if I look at our performance in the top line in Q4, I'm actually fine with that. So the volume development was in key regions for us, Especially good in the Northeast.
It was good in Canada, which for us was a critical market quarter, we were a little bit holding our breath, and it was also strong in other parts, but not as strong quarter in the Northeast and in Canada. Pricing also was intact. As I said earlier, For us, that's fine. Aggregate volume is strong in most areas. So pricing also fine on the aggregate side.
It quarter. I'm not I remain ambitious on this. But I think overall, The top line development actually in North America was fine. And then as I indicated earlier, Nabil, for us, We had a very intense discussion in the management board in going into Q4. As we said, we we took the deliberate decision to then release some stop maintenance spend in the 1st 3 quarters, and it's especially true for North America Because we were cautiously optimistic already at that point for 2021.
And as Laurence said earlier, our management task is to look a little bit ahead. And We wanted to be ready when the market is good, and that's why we don't want to run down our assets. Even if we hold our breath on the CapEx side, We took a deliberate decision to push on maintenance in Q4 in order to be ready with our assets for 2021 because as many of you know, you can have a great operational performance. But if you run your assets to the ground and Your bottleneck assets will not perform, then you are lost in our industry, and that's why we took a very deliberate decision to play on this. And the second point is then on the back of the good development on volumes, we have an inventory impact In North America, this is significant, as I said.
But Please ask for the understanding that we do not now disclose ups and downs that is normally operational up and down quarter over quarter. Quarter. So in North America, in general, as I said, Q January 1 started strong, then we had bad weather now. In Texas, No. But overall, our sentiment for the U.
S. Is intact. Housing is strong. Infrastructure, we are still very confident it will come. Okay, maybe Biden has a preference to first solve the COVID problem Then get to infrastructure, but structurally, I think it will come.
And then we watch very closely the development on the commercial side. So overall, I think our sentiment for Q1 in the U. S. Is before the weather impact now, I think, is good. And then you keep in mind, March There's a lot of working days because Easter goes into April this year.
So we are going against a very strong comp In general, in Q1, because you remember before COVID, Q1 last year was a record Q1. So let's wait and see. But we are, from our perspective, they are on a good track. Dorrance, do you have anything? Thanks, Javier.
Thank you.
The next follow-up comes from Harry Gaut from Berenberg. Welcome, Harry.
Yes. Good afternoon. Thank you very much for taking my questions. I've got a couple, please, both related to the sort of CO2 topic. Can you talk a little bit about, as we go into the Phase 4 of the ETF scheme, how things change with regard to the allowances you receive and any comments on the sort of the extent of the carbon stock and where that keeps the surplus through in the years ahead.
And then secondly, On CapEx related to this topic, you've obviously talked within certain announcements in recent months about carbon capture investment. So when I think about the potential CapEx build for that in the years ahead, can we think about that being reflected SEK 1,200,000,000 net number or would that be incremental to that? I appreciate that's not the next couple of years, but beyond that. Thank you.
Yes. Harry, you also need to give put some questions that our CFO can answer. I think that's not like Okay, come on. Let me start and then if Laurence chips in. Phase 4 ATS team, you know that there is 4 Phase a, that is basically set in stone.
And then there is Phase 4b that is currently under discussions also in the green deal in Brussels. We are very close to that discussion, and I think we've proven in the past that we can also help to manage the political process. You could always be up for the But in that respect, we follow the process very closely. And for us, there are things we can manage, and then there are other things we cannot We can help to educate the politicians in Brussels, but we, as a company, are prepared for A, B, C, D. That's what we are paid for.
And that's why we are clearly pushing it to reduce our CO2 emissions because then it doesn't really matter what the EU decides. For us, it is key. You know that we are long in Europe and as a group. I think That's clearly the case. And we do not have yet the final numbers for 2020 that we will I'll give you in the middle of March.
But I think we are well on track to be long, as we indicated earlier, until 2023 at the latest. And then let's wait and see how that develops with the final numbers of 2020. We will then disclose in March. On the CapEx, I know that many of you and also our investor base is very concerned that this will cost 1,000,000,000,000 in order to solve the problem. I indicated earlier that we have worked hard on our carbon capture projects.
And the CapEx we are consuming there is clearly manageable. That for us is not going to We need to don't we need not to stretch our imagination on that. And as we said earlier in our Capital Market Day, Absolutely. In the €1,200,000,000 you have this CapEx included. So we have until 2025 and 2030, not assume that this will be an additional major CapEx.
The specific CO2 CapEx, We estimate it to be EUR 500,000,000,000 EUR 500,000,000, I'm sure, EUR 500,000,000 EUR 500,000,000 over the next 10 years In order to get to what we have in our CO2 road map. Now I would add one very important point. Our American friends and politicians in America are very pragmatic, and also the investor base seems to be very pragmatic. Once the President changes and he has a different agenda, also the money flows change. So you probably saw the announcement, whether you like him or not, on Bill Gates now pumping €2,000,000,000 of private money into the carbon capture space.
You saw also other investors putting a lot of money into this space. And personally, I see this as very encouraging strong news for us because what will happen, it would accelerate the race to carbon capture technology. And secondly, it will clearly drive down the cost, both in CapEx and OpEx dimensions. So in that respect, guys, I think this is very good news. I don't think the investor base has clearly That's on its radar screen yet.
But personally, I'm pretty convinced that the next years that the year. Under Biden's management and looking at his agenda, we'll also increase significantly the money inflow into this topic. So Harry, that's it from my side. Laurence, do you have anything to add?
No, I don't think I think what's important in the What's important in the European perspective is that there's an equal playing field for everybody. How that's then finally Manage, yes, on the allocation scheme or border adjustment mechanism or whatever is a different question, yes? And I mean, politicians have clearly understood that it wouldn't help to just bring big costs to CO2 in Europe and then import the goods, save the cost, destroy the internal industry in Europe And then import the same product at higher CO2 emissions from abroad. That's the clear case that this will not happen, yes? That is the in Brussels and in Berlin and everywhere in Paris.
So that's a very clear case. Now how in the end The solution looks like we do not know right now. And I would say if the even level playing field is maintained. That's what our expectation is right today. Then it's fairly independent.
It may make little changes, quarter, but it's fairly independent how the solution looks like. Then the competition is the same for everybody producing our products here in Europe. And then we believe that we are very, very well positioned to lead the pack in that direction because here, we are very far advanced in reducing CO2 emissions of our products.
Thank you. Thanks, Harry.
Thanks, Harry.
This one comes from Paul Roger from Exane BNP Parza.
Hi, Roy. Hi, Paul.
Hi, there. Congratulations on the results. That's good to hear also the change in incentive schemes. That obviously sends 2019. A nice powerful message as well.
So I'll keep Chris happy and I'll just keep it to one question actually. Could you comment a bit on the magnitude of price increases you've announced in Europe and North America for this year? And maybe actually just a follow-up. In Europe, particularly. You've just mentioned, obviously, you are long CO2, others are short.
Will that have any impact on your
pricing strategy at all?
You know the J. R.
You know the industry very well, Paul, and I like the last part of your question because that's obviously the multibillion dollar question, what are you doing with your pricing strategy? Now if I look at my pricing chart for the operating plan 2020, it's all green. There is it really We are trying to push the prices from our perspective, and that is our company decision. I cannot talk for the industry. For us, our operating plan clearly has a clear target to advance the prices.
On the back, Laurence was mentioning that earlier, On the back of rising energy costs, it's clear that we need to make up for those costs. And also the structural investments we have to do, as we Earlier in our CO2 topic, we need to advance our pricing, and we do this across the globe. This is not a Specific German or U. K. Or American question, it is really Across the world, and you see price increases between 1% 5%, whatever market you look at.
So We are really pushing. In some markets, we even go up to 10%. So I think this is We are clearly working on the pricing.
Now
your CO2, I commented, I think, on that. But Your second point is, I sense a little bit reading between lines whether we are now deliberately lowering the price in order To create a mess in the market from our perspective, absolutely, that's not the case. Obviously, we have a broad product range. So if I say there is a price increase of XYZ, this does not mean that this is a flat out price increase for all products. We do a very differentiated pricing market by market.
And indeed, we are working in our strategic plan on exactly that. And that has obviously very different dimensions, but it will absolutely take into account going forward also the CO2 footprint That the product carries. This is an additional arrival that plays into the pricing for each of the specific product in each of the specific market in each of the different business lines. So in that respect, a very differentiated view. So there is not a flat 2%, 3%, 4%, 5%, but very differentiated pricing in different markets.
You kept me happy. 1.5 questions, very good. The next question comes from Tobias Werner, Stifel Europe.
Yes. Good morning, gentlemen. Well done on the results and also on your immuno energy policy around CO2. 2 questions, if I may, and thank you for giving me the chance. Number 1, Asia Pacific and Africa did pretty well despite higher coal costs, Maybe still benefiting from your forward policy, forward buying policy.
So should we assume that the impact is going to come later or are the prices in the pipeline more than enough to offset potential pressures there? And secondly, maybe one for Doctor. Nagel, a little bit more granularity. If Volumes normalize, how does that play out in terms of the coke costs being offset? I suspect you would have done some kind of sensitivity analysis for yourselves.
Okay. And Sveinna, thanks a lot for your questions. I'll take first one and then Laurence Nager takes the second one. You're right, Africa was very strong, Especially in Q4, but I would say it's fair to say overall during the year 2020. And To dive into your point, yes, absolutely, there are higher energy costs also in Africa.
But we have developed very strong market positions in some of our key African markets, whether you look at Morocco, whether you look at Israel, whether you look at Tanzania, Whether you look at Togo, whether you look at Ghana, whether you look even at Congo. So in that respect, I think we have very strong market the acquisitions. And I indicated, I think, in the past, we are modest guys, but we also have to face reality. And I think we have a very entrepreneurial, very strong management team. And in markets like Africa, this makes all the difference in the world.
And they will be able to manage flexibility on cost equivalents that's inherent in these markets. Emerging markets Have a higher volatility. And if you have the right management team in place in order to manage that volatility, I stay very confident on our African performance. That will be different market by market. But to your point, if there is increases in energy costs, they will also work on the pricing in order to safeguard their margins, so we stay confident for Africa on the back of what I've said.
Laurence, you want to take the other question? I mean, that's
true not only for Africa, that's true also for the rest Of the company. If you take today prices and apply it for all of the Outstanding energy requirements. And you do not change anything else, just accept the higher prices, Then we would talk about high double digit million additional costs on that. But of course, there is plenty of opportunity To mitigate that by changing the fuel mix, by going through the process, by increasing or changing alternative fuels, Etcetera, etcetera. So the current pure price tag on that does not give you a true and fair picture.
And as I was demonstrating earlier, the company has the ability to react agile and flexible on any challenge. And that can mean to change the fuel mix to change the power mix, to adjust the production to the power price and all of that, but also to adjust the front end price. So I'm very confident that, that will not come through as the figures look right now. So we are quite Clearly, we are quite optimistic that we can mitigate that impact to a significant extent.
Thank you. So we have 5 more gentlemen in the line. The next one comes the next question comes from Matthias Pfeiffenberger from Deutsche Bank.
Thanks for taking my question. Hello.
Can you hear me well? Thanks a lot.
Yes, we can.
So congrats on the results. Two questions from my side. Firstly, on lilac, why has this been relocated? And then also related to that, do you can you confirm that you're basically the global leader, the most advanced the year in CCU, because obviously in Europe, you are very far ahead with the industrial scale projects. And globally, I think there's not so much focus on that.
Okay, Fakim Berger. Lilac 2, as you know, as the name indicates, the 2nd phase of the NILAC project. This is a project we also do together with industry partners and a little bit in a platform approach. It's also funded by the EU and other partners. We have done this project in Our as I said, Lalag 1 was in our Lixir plant in Belgium.
And the pure reason for this change We now scale it up, and the technical requirements to scale it up are more favorable in our Hanover plant in Germany, And that's the pure reason. So there is a technical and cost balance that we strike in order to Where does this make the most sense under the learnings from Lila-one? And then we said, together with our partners, the German plant in Hannover is the best setup. We are fighting. We stay flexibly.
We don't stay stubborn. It is not a guarantee If you have earned the Phase I that you are also set for Phase II and III. So we had to review the situation and then decided In a balance between costs, CapEx and technical requirements, we have to go, and that's why we jointly decided to move to Hanover. On the global leadership on this Calm Captcha technology, We are drawing this conclusion from the fact that in terms of scaling and in terms of coming on stream, we believe that we still have a clear notch ahead of everybody else in that respect Because as I said, Grieg comes on stream in 2024, Railaab 2 in 2025. And in both cases, you do not just talk about a couple of tons.
You talk about 400,000 or 100,000 tons. This is a significant side. I would argue, if I look at the car traffic in Heidelberg, the 400,000 tons, you can stop the full car for a couple of years in order to get to that amount. Just to give you an idea, this is not Mickey Mouse.
Okay. And the second one is basically on chart number 8. I mean, I appreciate all the comments you've made on volumes and pricing. When I look at this bridge, it's basically going to be a much, much better situation on the volumes. And then maybe as far as I understood your comments And Doctor.
Niela's comment, it's probably the price over cost. You fight hard to get this to a positive, but it's more or less the goal to be neutral. And then all the margin enhancing element is basically from the residual self help from the action program in the U. S, but also from the disposals. Is that a fair view of things at this stage, excluding the currency impact, of course?
Yes. I would be a little bit more optimistic. For me, Price over cost to be neutral, half. This we try to push. Ideally, we want to come in positive territory.
I mean, there is clear headwinds from the energy cost side, as Laurence was describing. But as we said, we are Fighting hard to stay in positive territory in price over cost. That's our management DNA, and that's what we are fighting for. Is there a guarantee for that? No.
But our clear target is that we get into a positive territory. So With all what you have said, I think fine. But this one, I would be more optimistic from our own perspective.
Great. That's what I was after. Thanks a lot.
Thanks, Matthias. Next in line is Stefan Bohnhage from MetLife Capital Markets.
First, congratulations to the results. And I will also keep it short with just one question. I think you mentioned in your press release that you That's expected the demand should develop well in many markets this year. But I think this also implies that you are Maybe not optimistic on certain markets in 2. So can you more specify your outlook on your original markets, so where do you expect a strong development?
And on which markets you are more muted with regarding the outlook?
Yes. As we said, Bernardo, we're not going to give a formal outlook at this point. I think that's clear. We just came off a call with our GMs. And I would tell you very clearly, in our key markets, We are optimistic.
And that for me, it's always whether we move the needle In markets like Mozambique, I'm not so sure. So for me, that's not but not so key. But in our quarter. Core markets, U. S, U.
K, Australia, Morocco, just to make Q. We are optimistic. And that for us is key because that will then also move the needle. In a big portfolio, as you well know, there is always ups and downs, but that's the beauty of this portfolio. And that's why the focus clearly is on our core market.
And this is helped by good residential development and also good infrastructure programs. There are clear infrastructure programs in place in the UK, in Australia, U. S. We talked about, In Italy, so I think there are for some of our core markets, there is clearly tailwind in that respect, And we try to capture that. That's the essence of that.
Thanks, Stefan. The third last question comes from Yassine Touri from On Field Research.
Yes, thank you.
Two questions. My first question would be, could you can you hear me? Hello? Is it better now?
Yes.
Hello, can you hear me?
Yes, go ahead.
So my first question would be, could you quantify the energy deflation the term of finance that you experienced in 2020. And what kind of energy inflation you could experience 2021, if power and fuel price remain at their current level. And then My second question would be Okay. If you could look at the Adasan businesses,
Sorry, Arvind, it's Dirk.
Yes, it's Dirk. We understood the other question on the energy, And it was probably the same question we had earlier. So as I said, the current price inflation as it is right now could lead if we do not act, if management goes home, could lead to a double digit million price increase, but management does not go home. So We work on the fuel mix. We work on the on finding better deals on the fuel side, on pet coke side.
We try to increase alternative fuels to substitute, etcetera, so that we are very confident that we can Mitigate a big part of the outstanding cost inflation. As I said earlier, the biggest a big part of the Energy forward buying. We have already locked in to a larger extent than we locked it in, in the previous years. And that will bring us at a favorable cost base to the summertime, and then we will take it from there. We will take the necessary actions and decisions.
And as I said, we will be confident to be able to manage debt cost down to a lower level than it looks on the paper right now.
Okay. And how is the inflation that you had in 2020?
10% EUR 200,000,000 roughly, 10%.
2019. Thank you very much.
The next question comes from Arnaud Lehmann from Bank of America.
Hello, all. Thank you. Hello, hello. Good afternoon. I have two questions, hopefully, Sharpe.
Firstly, what about European capacity closures in 2021, now that you need to Accelerate reduction in CO2 emissions, maybe improve utilization rates to maximize pricing. Could you close capacity, For example, in Italy, that's my first question. And secondly, just coming back on your very interesting new remuneration policy. I think that's quite innovative in the industry. But as
a could you
give an example because as a country manager or plant manager, I need balance my financials with my CO2 emissions. And I'm assuming there is a cost associated with either OpEx or CapEx to reduce CO2 emissions. So how are the plant managers and country managers going to have to balance their financial performance with the reduction in CO2 emissions, please?
Yes. Anurag, great question, especially the second one. Let me dive into both questions. And the majority of the second question, I will pass over To Laurence, he's worked closely with me on this new incentive scheme. And so we'll give you a little bit of flavor on that.
On the European capacity closures, you know that we have already, ahead of others, restructured our footprint in Italy Over the past years, on the back of the Targa M and T acquisition, we have done a couple of follow on deals to get in balance there from our perspective in Italy. So there are no significant capacity closures planned for Italy. The different picture you have in France, you know that we have embarked on a significant master plan for France That includes the big investment in our key plant in Western France. And on the back of that, obviously, there will also be adjustments the Of capacity in France. The master plan in Germany has the majority done here and there.
There could be additional points. But right now, the market is also strong. Let's keep that also in mind. So we as we go along and the volume development is good, we should also make sure that we do not close capacities where we need them. But as we said, we are working on our clinker incorporation to drive that down, and that obviously also frees up some capacity.
So in that respect, we go market by market, but there are not major plant closures On the horizon in 2021. On the remuneration scheme, as I said earlier, The key point is that we want to avoid that we are a purely financially focused the company under the current circumstances. But I know you've been long enough around the block. We also are not a charity company. And so in that respect, It is absolutely clear that we still want to earn money.
You have a very big and fair point that on the in our on all the management levels, we are going away from a purely financially focused decision to a more balanced decision between finance and CO2, so impact on the environment. And obviously, if you take specific examples for the GMs, they are facing and we are already facing those discussions. How do I balance between a financial target and a CO2 target? But Anur, before Laurence gives you details, very clearly, that's what we want to get to. We need entrepreneurs in our country management, And they are paid for making exactly that decision.
We are helping them with all know how and fingertips we can, But that's exactly what we want to get to, and that's why we have pushed ahead with it. And this is why we want to lead the industry on this one because we strongly believe this drives the right decisions from our investors' perspective and from a society perspective. But maybe, Laurence, you bring some more flavor.
Yes. The incentives scheme is a bit tricky. So it's based on the road map, which we have for our CO2 target Where we fixed the target how to reach our 525 kilogram per tonne of cementitious material in 2025. So the headline is 5.25 in 2025. So and this target has been broken down for each plant and every single year.
So each plant and each country has a CO2 target for each year until 2025. Now if I look to 2021, of course, they have a target for 2021. So each plant and therefore, each country has a target, a CO2 emission target quarter 2021. Now the country manager is also a financial target, maybe EBIT, maybe cash flow, maybe net profit depending on what the situation is. Now if at the end of the year, he achieved or she achieved, let's say, 120% 100% target achievement on his financial target, then this will be multiplied with the achievement of the CO2 target.
So if you reach this year 2 target, he gets a factor of 1.0. But if he does not reach the target, he can go down to 70%. Or if you overachieve the target, if it does emit less CO2 in this area of responsibility, That's as much can be as much as 130%. So if you to stay in the example, if you reach 120% On the financial target and reached his CO2 target, then he gets the full bonus. But if he does not Meet his CO2 target.
That can lead to a devaluation of the financial target down to 70% of the initial achievement. So that would be only 84%. But if he emits less CO2 in that respect, yes, then he gets a bonus on top of that. And the 120% can become as much as 156%, which is 1.3x its target. So that's the overall mechanism, yes?
And that All is done in the bracket of the budget. So the CapEx he needs for that is, of course, agreed in the budget discussions and so on. And so that's how that works. And that's for each and every bonus receiving manager In this company, I think that's really a step change, yes? That's really a step change.
And yes, that's what we try now. That's the 1st year. We have to gain periods. And we will see where it ends. But I am 100% sure this will boost both financial performance and CO2 reduction.
And we do everything to reach our road map target, 5.25 in 2025. That's what we do.
Yes. Thanks, Laurence. And I think I know that was an important point. And obviously, that will then also lead to day to day decisions, I think that you were alluding to. If you now buy fuel for your plant, what are you going to buy?
Are you going to buy biomass alternative fuels? Are you going to buy coal? Then you have to face exactly that balance decision, and that is exactly what we want to provoke.
Antonio, I think you won the prize for stipulating the longest answer. It us. So we finish off by Christian Kort, who has the honor to close the Q and A session.
Thank you very much and good afternoon. So, congratulations on the results. It's certainly good that all your hard work paid off. I just have one question on the depreciation and amortization in the 4th quarter. So compared to the previous quarters, this looks to be a little lower.
Can you explain to me where this come from? Is it related to postponed investments or is it maybe related to amortization charges? Or are there maybe any positive one offs in there? I'm just trying to figure out why it is relatively lower compared to recent quarters. Thank you very much.
Yes. I think the answer is It's a bit all of them, yes? We have lower CapEx, which is below our Average depreciation, so that brings it down over time. The second major effect is A number of the Ittai Cementi acquisitions where we have had 5 years amortization on PPA, they are starting to run out, yes? And that brings the depreciation down.
That's a trend which you will also see over the coming quarters that will continue to go down a little bit. And another one is The amortization on IFRS 16 assets. I have earlier outlined that IFRS 16 went down from EUR 1,300,000,000 to EUR 1,100,000,000. This base has also depreciation points and goes down as well. This effect, they all combined to reduce CO2.
Yes, thanks. Thank you very much.
Thank you. So this concludes our trading statement update call for today. Thank you very much for dialing in. I just want to allude you to the next date, which is, of course, 18th March when we release our official results for the full year. And then we go on the road virtually for the next 2 or 3 days and also including the Exane BNP Sector Conference.
So stay tuned until the end of March.
Thanks a lot, guys. Thank you.