Good afternoon, ladies and gentlemen, thank you for standing by. Welcome to Interim Financial Report January to March 2019 conference call. At this time, all participants are in listen only mode. There will be a presentation followed by a question and answer session. If you wish to ask question, you need to press star one on your telephone and wait for your name to be announced. I must advise you that this conference is being recorded today, Thursday, 9th of May 2019. I would like to hand the conference over to our first speaker today, Dr. Bernd Scheifele. Please go ahead, sir.
Okay. Good afternoon or good evening or good morning to everybody from Heidelberg. Thanks a lot for joining us for our Q1 call, which I will present you the figures together with Dr. Näger and our investor relations team with Andreas Schaller and Mr. Kassar. I think you have seen our numbers. I think we have finally delivered a very reassuring Q1 result. I would say this is maybe one of the rare Q1 results which we see more or less all financial metrics have moved in the right directions. Sales are up 15%. We are growing strongly. EBITDA is 26%. Pricing is strong. It's better than cost inflation. Volumes are up except for Asia. Margins are improving. Cash generation has been strong. Net debt is on a like-to-like basis, down by EUR 800 million. We are well on track to deliver on our disposal targets.
If you look to the areas, I think the core message is Europe and Asia are back. We are seeing a clear recovery in Western and Southern Europe and Northern and Eastern Europe continues its strong result trend from last year. We have turned the curve or the wave in Asia. Asia, over the last two or three years, was always negative compared to the year before, driven by the difficult market situation in Indonesia. Now we see a clear turnaround in Indonesia and also in Thailand, which has obviously supported our result in Asia. In Indonesia, pricing is up by about 9% or 10%. We also have a good outlook for the coming month. The first quarter increases our confidence to reach full year targets. That's also underlined.
We just got yesterday evening the preliminary April figures. Also April was a good month for us. We are on LCO level, about 10% up versus last year. That is very significant because last year we had Easter in March. This year, we had Easter in April. In our core markets, Europe and U.S., we are missing about two working days. All areas are up except for Africa, Eastern Mediterranean, where the trouble in Egypt continues. On Q1 overview, chart four, I think the numbers speak for themselves. We are on track to deliver our EUR 50 million SGA saving target for this year. If you look to the cement volumes, you see we grow, you would say only 1.6%, whereas aggregates and ready-mix is significantly higher, the growth rate. What's the reason?
If you look later to the region Asia, our volumes are down by about 1 million tons. That has to do that in two core countries, we had elections. One is India. That is why market growth was weaker and also our focus was more on pricing, especially in the region south. In Indonesia, which is our core market, we had also elections, and in the 1st quarter, market growth was slightly negative with, I think, -0.3% or -0.4%. Chart 5 shows you a little bit the bridge and here the message is pricing is up better than cost. Main driver is here Europe. In Europe, in quite a lot of countries, we have started with price increases, not as usual 1st of April, but we started 1st of January. For example, in Germany, but also in France, also in U.K. and also in Belgium.
That has helped us quite a bit here. Pricing is clearly stronger than last year. That is what I said to the capital market already in conferences during the 1st quarter, that we will see good pricing in Europe. Then you see the negative impact on IFRS 16 or the positive impact on EBITDA level. Chart 6 gives you the split up by area. You see we are only down in the region Africa, East and Mediterranean, that is mainly Egypt and Turkey. Chart 7 gives you a little bit an idea about the energy cost development. The message is coal is clearly down. It is about 20% down versus last year. That trend will continue, we believe, and increase now in the Q2 and Q3. Petcoke is still flat and up. Petcoke will come down, in our opinion, in the coming month.
The only area where we are up is power. That is mainly in Europe. We are now very much hedged in Europe, and we expect power prices in Q2 to come down versus last year, because in last year we had in Europe some extraordinary price peaks. Core message here: energy should be our friend in Q2, Q3, and should support further market margin expansion. I hand over for Chart 8 and 9 on the financial messages to Dr. Näger.
Good afternoon also from my side. Let me shortly report on the financial situation at the end of Q1. We see a significant improvements in both net debt position and free cash flow. Our portfolio review based on quite successful. We had some disposals, especially from the White Cement plant in Egypt, and on the other side, we had some restructuring costs. For the full year, let me say that we have closed the Ukrainian disposal, and we will see a significant negative impact on the P&L, not on the cash position, as the Ukraine position will be recycled, the carrying position from the Ukraine will be recycled through the P&L in Q2, so you will see that. We are very confident that we can compensate that loss to a large extent by a positive income from other disposals. I will come back on that.
Net financial results. The expense increased against our expectation as the part of the leasing payments have been reclassified from financial costs, and that overcompensates the effect from the reducing interest payments. Income taxes are in line. Share of minority profit goes up as profit policy in Indonesia goes up, also Thailand goes up. In Egypt, we have a one-off profit from the sale of El Minya. All those positions are going up, therefore the minority share goes up. Free cash flow in our functional cash flow statement goes up to EUR 1.3 billion, roughly EUR 100 million up compared to Q1. We have to see in Q1 that our funds from operations, the operational cash flow before changes in working capital was significantly up EUR 200 million, based on significantly better results.
March was a very strong month, at the same time, we saw corresponding increase in working capital. The point is that we think that the working capital for end of the year will normalize. This EUR 200 million will come back into the cash. Currently, we see a very good cash flow generation, and this is also reflected in the net debt position, which, before IFRS, improved by EUR 800 million, and therefore, we are quite confident that we will reach our target of EUR 7.7 billion net debt position without IFRS. On Slide 9, you can see that guidance. We had at end of March EUR 9.1 billion pre-IFRS 16. On the IFRS 16, EUR 1.3 billion came on the balance sheet.
There is still a relatively high degree of uncertainty how this position will continue to develop throughout the year as we are changing the policy, and we are not fully sure how that effect will go to the balance sheet. We have a little bit increased our guidance for the net debt position from IFRS 16 towards the end, which we estimate to be at a maximum value of EUR 1.3 billion. That would give us, after IFRS 16 implementation, total net debt position at the end of EUR 9 billion. That's our current understanding. On Slide 9, on the right-hand side, you can see how our portfolio optimization continues. As you know, in 2018, disposals reached EUR 600 million. In Q1, we are again up to EUR 220 million. We are very well ahead of our phasing, which we initially contemplated.
We have now closed the number and contracted the number of transactions, as is Palazzolo Cement Plant, Ukraine, as I said. Sri Lanka, we sold a cement terminal. We signed an agreement to sell a cement plant in Italy and some other assets. We are very confident to achieve or overachieve our guide of EUR 500 million of disposals. Whereas on the investment side, we keep our discipline. Currently, portfolio optimization, we are very well on track. We are confident to achieve our financial targets in 2019. That's more or less from my side on the financial side, and I expect Dr. Scheifele to talk about the area.
Okay. Chart 11 gives you an overview about our areas. North America, maybe a general remark. When we had our budget discussions late November or December last year, and when I was in the West in January, outlook for the industry was positive, but Some concerns about the macroeconomic situation, et cetera. If you talk now to our people from the sales force and you should talk to our key customers, confidence that we will have a good year and the market is solid and the order book is really coming through is clearly up. The feedback from the market for the U.S. markets are very solid. That applies especially for the region North, which is our core region, as you know, which does about 40%-45% of our volumes.
Core markets like Mid-Atlantic or also New York, New York City, but also upstate New York, are clearly in a better shape than last year volume-wise. In the U.S., numbers, we come to that in a minute in more detail. It is also so that due to a very good weather situation, the second half of March, we had a relatively strong draw on our inventories, which led to a negative result effect on LCO level of about EUR 10 million. Let's say the operational result is even better as shown. In Western and Southern Europe, I think, volumes were good, weather was normal, and we had a significant push from pricing. We had strong pricing all over the areas. In Italy, prices are up now versus last year, about EUR 7. The actual cement price in Italy domestic is above EUR 70. It's about EUR 70.5. That's very significant.
France is even up close to EUR 3. That's the first time. It's a long time that in France, the cement prices are moving up again. Ready-mix is up in France. Germany is also up by about EUR 3. Belgium, Holland is up by EUR 3, EUR 3.50. That looks pretty good. Northern Eastern Europe, here, good result development, especially Eastern Europe is clearly coming back. We have significant volume increases in Hungary, Czech Republic, and Romania. Partially weather, partially also due to production shortages in the market where we had to step in. Pricing is strong. In Poland, prices are up close to EUR 9 per ton. Czech Republic, Hungary are up by about EUR 4. Romania is up by about EUR 2.50, very solid development. In Asia, turnaround is supported by Indocement. Indocement has already published their Q1 result a week ago at the end of April.
I think the market reaction was very positive. We were clearly leading the sector in Q1. Our sales price was up by about 9%. Energy cost inflation clearly slowing down. Distribution costs more or less flat. Indocement is back on track. We had also a very good run in Thailand and also in China. In Africa, the key challenges are mainly Egypt and Turkey. In Egypt, the market is down -5%, and at the same time, the army has started to pump cement from the new plant into the market. Go to Chart 12 and you look to North America, look to LCO, then you see life to life, it's up 7.3%. You take the consolidation of White Cement now and also USD on Forex.
The increase in LCO is rather low, but as I told you, we have about close to 11 million or 10 million we have on inventory impact because we had a significant draw on our inventories. If we look to the subregions in the U.S., Region North is very strong, where the LCO is significantly up versus last year, about EUR 20 million, EUR 21 million. Whereas the Region West had a difficult first quarter for us. Volumes were down double-digit due to very wet weather, and here the result is down versus last year by about EUR 10 million or EUR 11 million. South was okay. Canada was a little bit weaker, but only due to weather. Outlook for the U.S. is good. April was in the U.S. a good month, especially Region North did very well. Canada is coming back, so outlook is okay. Western Southern Europe, we have explained the result.
The result is driven by improvement more or less in all countries. A strong improvement in France and Benelux, both up versus last year by about EUR 14 million on LCO level, driven by better volumes, better pricing, and especially no hiccup in production, which has kept down the result last year a little bit. Italy is also up. U.K. is up. Germany is also up. Outlook also is good. April was, again, in that region, was very solid, taking into account the Easter effect. Northern Eastern Europe, Central Asia, result is clearly up. Also here, negative inventory impact of about EUR 3 million, especially in the Nordics, because we had winter repair in Norway and Sweden, and result is very much up. In Romania, Bulgaria, Poland, result all up about EUR 5 million versus last year. Outlook remains strong. Volumes are good. Pricing is strong.
Asia Pacific also clearly up. All markets were growing. All the profitability in all countries is up except for Brunei. Brunei is suffering from the introduction of the Sharia law, which wasn't very well received by foreign investors, and also Bangladesh was a little bit down due to increased input costs, higher clinker price, and lower sales price, whereas the other markets financially are all up. And mainly Indonesia with about EUR 9 million, but also Thailand significantly up, China up, India up. So overall, Asia Pacific outlook is okay, confirmed by a good solid April result. The only area where we are down is Eastern Mediterranean, Africa, and Europe. We are down about EUR 12 million, out of which EUR 11 million comes from Egypt. The rest of the countries are okay. Morocco, Togo are okay. Ghana, we have more competitive pressure due to new market entrants.
If you look to group services, maybe three messages. First of all, clinker, Free on Board Shanghai is moving upwards because China has stopped exporting. China is importing clinker, and that has limited the surplus in Asia. Then we have a totally different development in the Mediterranean. In the Mediterranean, there is more clinker available due to the market collapse in Turkey, where the market is down in the first three or four months by about 40%. Also Iberia became a cement exporter. So we talk now about clinker prices below $30 per ton. On the energy side, coal is down 20%-25%, especially in Newcastle, but also South African coal for Europe. Petcoke will follow in the coming months. Outlook, chart 19. We have not changed any guidance. We said, what is it? A modest or whatever.
Moderate.
Moderate increase in profitability under German definition, that is between 3% and 9%. I am told by Investor Relations that the consensus is at 5.5%. We feel confident at the moment, or even more confident that we are in line with that consensus. Maybe we are even a little bit seeing an upside to that. Message for the next quarter should be two things should play in our favor. Energy is our friend. That should help in the margin. The second one is the pricing trend is good in Europe, and we expect also in North America and in coal markets in Asia. We should see from the margin side, we should see a good development, and we will continue to have strong free cash generation, and we are going to stay disciplined on CapEx.
That is it from our side. Obviously, we are now happy to answer any questions which you might have. Thanks a lot.
Thank you, sir. Ladies and gentlemen, we will now begin the question and answer session. As a reminder, if you wish to ask question, please press star one on your telephone and wait for your name to be announced. You can ask up to question only. Okay, sir. Your first question is coming from Rajesh Patki. Please go ahead. Your line is open.
J.P. Morgan, Rajesh Patki.
Yes. Hi, it is Rajesh Patki from J.P. Morgan. Couple of questions from me. On the previous conference call, you said that you expect energy costs to decline by EUR 60 million this year. Do you still think that is the case, or how has the situation evolved since? Second question is on pricing in Indonesia, which you said was up 9% in the first quarter on a year-on-year basis. Given prices have moved sequentially through last year, where do you see the year-on-year price trend for the full year for 2019? Thank you.
Okay. In Indonesia, it is so that in the first quarter, pricing was up 9%, and that is mainly driven by bagged cement. That is, I think, up 11%, and bulk was more or less flat. That is a little bit the message. What we plan to do, or that is how we have guided the market in the conference call of Indocement is from a volume side of point of view, the first quarter confirmed our view. I told you the market should be flat first half year because we have election, then we have Ramadan, blah. Then we expect the market to grow 6%-8% in the second half, and we confirm that outlook.
On pricing, we expect that we can carry out a similar pricing strategy as last year, meaning after Ramadan to do maybe two or three price increases in bagged cement, increasing bagged cement prices by another 5%-6%. What is then the average price increase for the full year? I have not calculated, but that is our pricing strategy, and that would lead us from a margin point of view in the direction of about 2017. We are on our way back. We discussed that also in one of the last calls, EBITDA cement margin, and we said we should come back to about 25%. This year, I would say 21%, 22%, maybe 23%, depending on energy price and whatever. That would be clearly up. I think last year we ended up in Indocement division only with 18% or 19%.
We are on our way back on margin recovery. On energy, I think, somebody, you got me wrong. I said we might be about EUR 50 million-EUR 60 million below budget.
Yeah.
If I compare it to last year, the numbers are very similar. At the moment, our estimate is that energy all in, including volume and Forex impact. The weaker EUR doesn't help us because energy is typically priced in USD will remain flat. We would expect it to be at about EUR 2.1, EUR 2.11, and that would be spot on compared to our energy bill about last year. Our budget was about EUR 2.16. There might be a little bit even more upside because at the moment, petcoke has not moved yet, and we would expect petcoke to come down and to follow a little bit the trend of coal. Okay. Thank you.
Thank you.
Your next question comes from the line of Phil Roseberg from Bernstein. Please go ahead. Your line is open.
Hi. Good afternoon, gentlemen. Congratulations on the good results. Just going back to the question on energy cost and your slide seven. I just wanted to know how to interpret this slide because you talk about forward rates. Are those rates that you have locked in both on coal and on power? Are they just forward rates that's out there? I just want to sort of understand how secure these sort of benefits that you might get across the next few quarters would be. The second question, again, we saw margins improve in the first quarter. I think if you correct for IFRS, I think they go up from 6.9% in Q1 2018 to 7.5% in Q1 2019. Correct me if I'm wrong. This compares to a sort of a 10.1% that you had in Q1 2017.
My question is, as we progress through the year, obviously Q1 is a volatile quarter. Is the target to get back to 2017 margins? Or is this something that will take more time?
Mr. Roseberg, I saw your note already. We had our general assembly where we have to deal with all these environmental freaks and so on or so ever. I had to come back to the real world now, I saw your note when I was coming back in the car to the headquarter. Sorry, I just shortly checked. Q1 is always difficult as you know, you're on the industry inside. Q1 is about 10% of our results, let's be reasonable. That's why we also did not change our guidance. That's too early. The point is, Q1 weather is always the key. 2017, there was no winter at all. That's why the result exploded, if you want. 2018 was a disaster and 2019 is somewhere in between. You know what I mean? It's reasonable. We have not checked again.
You can go back to Hanson and whatever, that's the main message. 2017, no winter and so on. Also then what you have to see on our margin, if you look to our group margin, you have to be a little bit careful. We have a very strong trading business. If our trading boys sell fuel like hell in the rest of the world at a margin of, I don't know what, EUR 0.30 per ton. That is maybe nice for volume on sales, whether that helps our margin on group level, that's a different story. We have to see a little bit also the sales mix and trading plays from a sales point of view in Q1, an over proportionally big role compared to the full year. That's a little bit the point.
On the coal side, what you're saying and I think what we show now are not the secure, that's just the actual forward rates. It's also clear, we are clearly longer in our coal and energy position this year than we have been last year. We changed a little bit the guideline. We introduced a minimum long position. That's why we expect a clear tailwind from Q2 onwards, as you know, typically in Q1 we are stocked. We are stocking for the winter in October, November, where prices were still relatively high, we are now securing new volumes. At the moment, the spot prices are even below the forward prices at the moment. You should see a clear margin support in Q2, especially in Asia and in Europe from the energy side.
Okay. Thank you.
Yes.
On that question. How far are you hedged forward? On what sort of %? As a sort of an understanding of what is locked in and not.
It depends on what commodities you look at. Certain commodities we cannot really hedge, we do not as we do with some financial hedges. This is mainly all fuels for our yellow machinery, mainly in the aggregate business. There the markets do not allow to do it on a forward buying basis. Also for example, in Indonesia, we cannot contract or we can contract forward, but it won't help us because if our contracts are favorable for us, then our supplier does not deliver for us. We have no way to enforce such things in Indonesia. To put it together on the power side, we are pretty long, maybe at least 80% of the volumes are covered for the remainder of the year. In the fuel side, it may be around 70%.
In coal and Petcoke around 70%, in diesel it may be 20%-30%. It's a very rough feel. Thank you very much.
Thank you.
Next question, please.
Next question. Go on.
Hello?
Hello, sir. Your next question comes from the line of Paul Roger from Exane BNP Paribas.
Hi, everyone. It's Paul Roger from Exane. Just a couple of questions, I guess. The first one's actually on net debt. You're obviously sticking to your target of EUR 7.7 billion for the year-end. On my calculations, I think you can get there actually without any further divestments. Unless I'm missing anything, is that something you agree with? Given what you're commenting about the divestment pipeline, or is there any reason why you can't do much better than that and maybe even hit the EUR 7 billion, which is obviously the 2020 target, maybe a year early? The second one is on Western and Southern European margin. I think in 2018, you lost about 110 basis points.
Given what we've seen in Q1, accepting what you said about it being a small quarter, but also the price cost trend, is there any reason why we can't get back that 110 basis points margin in Western and Southern Europe in 2019?
On the margin, Western, Southern Europe. You look in the region and I look obviously always on country level. I would say margins should be okay in Germany. We will see margin improvement in Italy. I would expect also Spain, France as well. I would still make a little bit of question mark on the U.K., where the volumes are pricing was okay. I would be reasonable. I would expect maybe two-thirds we should recover. I'm not sure whether we're going to do 100%, but obviously, a key target of the stronger price increase is to recoup off the margin as much as possible. On the net debt, I leave that to Dr. Lorenz Näger, but I think overall, your direction is not totally wrong if I-
Yeah
basically understand.
You are right to the extent if I say the net growth CapEx would stay on the level where it is. As I said, our disposals are a bit front-loaded, so that is done very much in the first quarter. There is something coming in the second quarter. We do not yet have the full visibility for quarter three and four. This is the framework. On the other hand, our growth CapEx, we had very limited expense in the first quarter. Now that is a bit back-loaded, so we will get something on the growth CapEx back and how that balances out, let's have a look. For balance at the year-end, as we said, it should be close to zero as we are. There in the moment, we are a little bit ahead with the disposals.
On the other hand, as I said, we have invested in the first quarter much more into working capital than the previous year. We think that we will get back this more money in the remainder of the year. How that balances out at the end, as you know, depends on FX, depends when the winter comes. When winter comes earlier, we have higher flowback. If winter comes later, flowback is lower. Comparison of last year is more like a normal year. There are quite a number of components. I think we are pretty confident to reach the 7.7 and there is a certain potential that we will be able to go even below that.
Great. Just sorry, a follow-up on Western Southern Europe. It is interesting because you have not really flagged the U.K. that much this quarter in the slides and everything. I think from memory, it is now only doing about EUR 40 million OIE a year. Presumably it is not a massive headwind anymore that will pull back your margin performance.
No. In absolute terms, we have suffered a lot in the U.K., so I think we have reached a certain floor level. Obviously the whole Brexit discussion remains a concern and the London market remains weak. Pricing overall in the U.K. has been relatively good. I would say the sweet spot or the critical point in Western Southern Europe at the moment is mainly U.K., whereas the other markets, in our opinion, are in pretty good shape.
Great. Thank you.
Thank you.
We got another question, comes from the line of Robert Gardiner from Davy. Please go ahead. Your line is open.
Thank you. Good afternoon, gentlemen. Two from me. When you mentioned the strength of your order books in the U.S. and your increasing confidence among your team there, is that helping you on pricing? You mentioned in previous call, the North was difficult on price because of imports. Is that order book helping you there in terms of price? One clarification maybe, you mentioned strength of April. You mentioned 10% up year-over-year. Was that an EBITDA number like for like? I'm just wondering what number that was. Thank you.
LCO, like for like, without Forex and IFRS. The other point, on the U.S. it is so that if you look to pricing in the region North, we would expect for the full year, maybe pricing up EUR 0.50 or whatever. Not that much. That has to do mainly with the effect that in the region Northeast and then in the region New York or Boston, we still see clearly pricing pressure from McInnis and also from competitors which are still capacity left. That is then compensated by relatively strong price increases, especially in the Midwest of about EUR 5-EUR 6. Also if you look to the region Mid-Atlantic, that's Virginia and Washington, where also we think we will get EUR 3-EUR 5. That differs really a little bit.
The impact of McInnis in the Northeast obviously flattens a little bit the pricing development in that area. In the rest of the region, in the others, it's different. We think we will get good pricing in the region West of EUR 6-EUR 7 maybe up versus last year. Also, the region South should be up maybe EUR 2-EUR 3. In Canada, we also think we will get, Canada including Washington, we will get maybe EUR 6-EUR 7. I think that's a little bit where we are on cement. On aggregates overall in North America, we expect for us a volume growth between 5%-6%, and on pricing, we would say around 4% up. That should work. Okay?
Okay. Great, Bernd. Thank you.
Thank you.
We got another question, comes from the line of Josep Pujal from Kepler. Please go ahead. Your line is open.
Yes, hello. Thank you. Two for me. The first one is on the cement price increases in Europe in Q1. Please, could you quantify the increase? How much do you think it will be left in Q2 when the base effect plays into account? Because you said that you increased the prices in January instead of in April as traditionally. By the way, do you expect other price increases going forward in the year? That's my first question, and my second one is on disposals. You announced EUR 880 million of disposals between last year and Q1, and you say in the slide that you expect practically no impact on EBITDA. What were the entities which were losing money to get to this neutral impact on EBITDA, please? Thank you.
Okay. On the cement price, as I said, we have in Europe all over good price increasing, ranging from a maximum in Poland of close to EUR 9 to Germany, maybe EUR 3, France, EUR 0. We had about EUR 7 in Italy. We do not foresee, except maybe for the U.K., a second round of price increases during the year. Pricing overall, I would say very solid. I cannot give you an average number for Europe. Sorry, that does not work. We have two areas in Europe. We include Hungary, that's forint currency with GBP, then you can divide it, that doesn't make sense. We have to go country by country. Local business, they're local currencies. That's why I cannot give you an average number.
I know that makes your work difficult because you have European volumes and you want to calculate what's the margin impact. Sorry, our business is more complex than your Excel sheet, and that's why we can only talk country by country. About, what do you say, 8%? I just get from controlling the smart guys, they tell me average 8%, but I don't give you a guarantee on that because that includes local currencies which move around between zloty, Czech crown and whatever. About 8%, it's clearly above inflation. That's the message. The disposals, I leave to Dr. Näger to explain.
On the disposals, there is actually a very limited impact on EBITDA. It means quite a number of making operations, which is especially Ukraine is probably the highest. Also the disposal of Morocco minority share, does that impact on that? There's only a little bit impact on bottom line. India and Egypt has no EBITDA. The other idle assets which we sold, like unused land, et cetera, they have no positive impact. Syria was nothing. Ciment Québec, very limited. Saudi Arabia, nothing. If you take all that together, this simplifies the organization, reduces admin cost, and on the EBITDA level, we have a very limited impact.
Okay, thank you.
That's why I questioned him.
Another question comes from the line of Yassine Touahri from On Field Investments. Please go ahead.
Yes, good afternoon, gentlemen. A couple of questions on my side. First, could you comment on the latest volume trend that you've seen in April and maybe at the beginning of May in Europe and the U.S.? I know that the base effect is a little bit more normal. Have you been notably impacted by the flooding in the U.S.? My second question is more on capital allocation. You've been very proactive and successful with the disposals of non-core assets. You might be in a good position to redeploy capital in the next few years. Could you tell us how will you choose between investments in mature markets, emerging markets, and maybe some return to shareholders? Regarding emerging markets, it seems that local players are gaining market share through acquisition and new investments. What is your position on emerging markets?
Do you want to keep the leadership, or are you okay with the new landscape?
In emerging markets, that differs from company to company. I think with our portfolio, principally, we are buying. That's why we do not plan any major disposals. For example, we do not plan an exit now, let's say, from Indonesia, from India or wherever, or from Ghana or Tanzania. There are smaller markets which we think are not so attractive, like Gambia, Mauritania, Sri Lanka, and Ukraine, where we have questions what's the outlook midterm, and that's where we say we want to get out. That includes also Kuwait and Saudi Arabia and all these more or less attractive countries. In the core emerging markets, we obviously want to keep our positions. Because we have to be careful, the capital market moves its opinion regularly.
Sometimes the emerging markets are really the song to sing, and then for one year, it's only mature markets, and we cannot adapt our portfolio always to the newest song in the markets. That's why we think we are relatively well-positioned. On the volume side, in April compared to last year, we are in cement more or less flattish, and ready-mix slightly up. You have to see, we have about two working days less. That's very significant. What we see is that in Western, Southern Europe, overall, the positive trend has clearly continued. Also in Northern and Eastern Europe, overall, the trend is clearly good. Eastern Europe and Central Asia is even in April, close to 10% up versus last year. Also North America was relatively strongly up overall, about 8.5%. We have been down in Asia a little bit.
Overall, especially North America and Europe, the trend is very good. In Asia, it is mainly the impact of the elections in India and Indonesia. Now Ramadan is starting, so we expect anyway a slowdown, but we expect a strong run in the second half anyway. Okay. Thank you.
Thank you very much.
Your next question comes from the line of Robert Muir from Berenberg. Please go ahead, your line is open.
Thanks very much. Good afternoon, everyone. My first question's on Poland and the price increase of EUR 9 that you recovered in that market. I just wanted to understand what's driving that increase. Is there any impact from, for example, players having to buy carbon in the open market there? Then are there any regions across your European portfolio where you're moving carbon to? So I assume you've got surplus in places like Italy. Are there places like maybe the U.K. or France which are in deficit and you're supplying carbon to those markets, and is that affecting people's thinking about pricing? Thanks a lot.
Okay. Samir, I think that's what we said earlier this year and already last year. It is clear that the development of the carbon CO2 price has obviously disciplined the market and changed a little bit the attitude versus price increases. That's what we see now happening in Europe, because people start to calculate into their calculation also the increase of the CO2 price, and that's obviously helpful. In Poland, I think pricing is compared to Germany and also Czech Republic, still lower, and there is a certain catch-up exercise which needs to be done. At the same time, the market in Poland is relatively strong. Residential is coming back. The government has done a lot for increasing the purchasing power of the local people, and at the same time, infrastructure projects continue to run at relatively high speed.
Overall in Eastern Europe, as I mentioned earlier a little bit, the situation in Czech Republic, Hungary, and also Austria and Poland is also helped by the fact that there are some production shortages in the market, which means that the product is short or the markets are partially sold out. That obviously makes price increases definitely easier than if we have overcapacity in the market. Okay. Thanks a lot.
We take one more.
We take one more. Yeah, okay. Last question.
Okay, sir, your last question comes from the line of John Fraser-Andrews from HSBC. Please go ahead, your line is open.
Thank you. My two questions, please. Firstly, in Indonesia, behind the 9% sales price rise, can you say what's happened, what's behind that? Is there a driver from the consolidation there between number one and number three players? Can you also comment on what's happening to some of the smaller companies that were underwater, and where they stand, and whether that's impacting prices? The second question is in Africa, Middle East. I see that Egypt and Turkey accounted for almost all of the decline. The rest was flat, but can you give a little bit more detail? Is that Morocco up and sub-Saharan Africa down or what's going on in the key countries, please?
No, as I said, we are down in Egypt by about EUR 11 million, I think. I know in Egypt, EUR 11 million. In Turkey, it's about EUR 2 million or EUR 3 million. In Turkey, it's mainly currency-driven. In Turkish lira, we are even flat, our guys are doing a very good job. Just to be clear that you have a certain feeling in Turkey what's happening, the volumes are down, I think 40%-45%. We have now led a price increase in the market. We are the market leader with about 15%. Just to give you an idea how the market is. If you change your British pound or whatever your currency is in Turkish lira and you put it in a deposit, choose a good bank. You get 25% interest. If you go to a Turkish bank and you want to borrow Turkish lira, then you pay 41%.
If you know our industry a little bit, with interest 41%, construction market is dead. Forget it. That's a little bit the situation, and that's not very nice. In Egypt, the message is a good general is maybe a good general. Whether he's a good politician is another question, but clearly he's not a good businessman. The army is behaving in the market, not in a very responsible way. They are pushing, pumping all their volumes now in the market. They have put down prices, and that is not very helpful. On the other hand, the other markets like Morocco. Morocco is up and also Tanzania is up. The other smaller markets, Togo is up, Ghana is about flattish. The other countries are okay. The main point is Egypt. In Turkey, I think we are doing a good job. We are well-positioned.
Our company is debt-free. We will see banks taking over Turkish cement companies now in the coming months because a lot of players are already under the water, and they cannot finance the business anymore. That offers for us rather opportunities. The real trouble for us is Egypt. The rest of Africa is okay. On Indonesia, the price increase, which you have seen in our Q1 numbers, is only a timing effect. As you know, we have done price increases starting from September last year, whereas last year in the first quarter, prices were still going down. What is important is that in the first quarter, where the market was flat or slightly negative. Market growth in Indonesia first quarter, according to the data of the cement industry, if I recall it well, was about -0.4%.
The market was as we expected, flat due to the election campaign, and the pricing remained stable. That was the good news because our concern was that pricing would go down, and we had budgeted internally for a decrease of prices in the first quarter of about 2% or 3%, and then recoup in the second half with stronger volumes. What I told you is that, as Christian said to the market, we will try to repeat the pricing policy of last year, that starting after Ramadan, we will increase bagged cement price in two or three steps with the target to increase by another 5%-6% from the level where we are at the moment.
That should be supported from a margin point of view by lower distribution costs and also energy coming down, and that's why I think midterm from an output point of view, we should move back. We should be on our way to come back to EBITDA margins in cement of 2017. That's a little bit the message. Yeah?
Thank you. Your competitors, the number one player, is he leading on cement and the smaller competitors, what are they up to on pricing?
I think they'll ask themselves. These are very good responsible companies. In the market, especially if you talk about pricing to get it right. If you know Indonesia, the market is about two-thirds or 80% is bag and 20% is bulk. We are clearly the market leader in bagged cement with our premium brand Tiga Roda, where we do TV ads and whatever. When we talk about price increases, we lead price increases typically in the bagged cement and the whole question in the market, what is our premium in pricing versus the next competitor? We get a brand premium, and the key question is if we increase our price, then the question is do the competitors follow in order to keep the price distance between our premium brand and their brand at the same level, or do they not follow?
If we go too far, then the consumer says, "Okay, forget about the brand. I buy the cheaper product." That's the whole game. If you talk about price increase, it's all about bag. Whereas bulk remains flattish. Yeah.
Thank you.
Okay, thanks a lot. That's it. Thanks a lot for your interest. Have a good day. See you on the latest at our Q2 call in July. Thank you.
This concludes our conference for today. Thank you for participating. You may now all disconnect.