Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to business year 2018 conference Call. At this time, all participants are in a listen only mode. And if you wish to ask questions, you need to press star 1 on your telephone and wait for your name to be announced. I must advise you that this conference is being recorded today.
Thursday 21st March 2019. I would like to hand the conference over to your first speaker today, Doctor. Brian Chavala. Please go ahead, sir.
Okay. Hello, to everybody. Good afternoon here from a very sunny Heidelberg. It's the first warm swing days. So it's an excellent day to sell cement and aggregates at least to your in Germany.
And I think in most parts of Western Europe. I see together with Doctor. Nagel and our Investor Relations team with Mr. Shallow and with Hankatha and Mr. Yerythold.
As usual, I will lead you a little bit through the operational results. I will keep that very short because we have reported into until the line of LCO already in our trading statement. And Doctor. Megaw will concentrate on the liquidity details of our items below LCO. Chart 3 overview, okay, revenue overall was up 8% first time Hamburg exceeded 18,000,000,000 sales.
So we had overall a very good a strong growth on the top line. If you look to the EBITDA later, we are more or less flat if you take off Carroll Canyon and the ForEx and the consolidation compared to last year. 2018, I think, was the most challenging year in the industry after the financial crisis. So we had a lot of headwinds from higher energy cost inflation, exceptionally bad weather. Partially at the beginning of the year in Europe and U.
S. And then also in September, again, a very wet weather in the UK, especially in Southstar in Texas. I think if you look to our Q4 numbers, we had overall a good run-in Q4 as especially our cost price relationship had, has improved cash generation in Q4 was very strong, was close to to 1,000,000,000. I think that was okay. If you look to the final numbers, which are important to shareholders, earnings per share is up 25%.
And that's why we want to increase dividends by about 11%. The cash conversion rate is at 42 I think this is our industry, a very good number. So Heidelberg could afford to increase dividends at the same time invest significantly in the market position and also reducing bank debt by about EUR 350,000,000. That shows that we are at a very strong cash generation. Portfolio optimization continued, I think, with a good speed.
We had a full goal of
about 600,000,000 disposals in 2018. We have already done into 2019, 200 1,000,000, so we are confident that we can continue this strength into 2019 in order to reach our target, which communicated to you of 1,500,000,000 over the next, 3 years. The outlook for an, for 2019 is unchanged think there was some confusion about the German term, moderate, and the German definition, this means between 3 and 9 percent growth. There is no change. I think although we had a good start in the year, I think we might talk about that later.
If you talk, if you look to chart 4 and you look to the margins, the cement margin drop is mainly due to Indonesia and partially U. S. Aggregate, if you take, eliminate Carroll Canyon, I think then the margin is okay. If we look to, CHAL 5 operating EBITDA bridge, that's what you see, 4x, down versus last year wasn't 30,000,000. Just to remind you, it's the 3rd year in a row that we had a negative ForEx impact over the last 3 years.
Total impact close to 1,000,000. We expect to swing that back sooner or later. Deconsolidation 53. And then on the right side, you see the total 10,000,000, in fact, of about net 61,000,000 What's interesting to see and that is very consistent what we have seen from our competitors, which have already published their results that price cost component was negative, meaning the industry was not in a position by price increases to compensate the significant increase in, in energy costs, we had last an increase, for example, if you take the new casting codes, a code average price was up 17% or it was up by about 30% And for example, in Germany, electricity, which is a benchmark market for the energy in, for electricity in Western Europe, electricity was up by about 30% charge 6 shows you the key financial metrics. You see revenue, it's very solid revenue growth over the last 3 years earnings share clearly after net debt continues to trend downward.
Chart 7 shows the cash conversion rate of 42% I think, which is, pretty strong. You see that working capital has increased by about 1,000,000. That's communication that we have at least in some countries, relatively strong activities in December. We continue to earn a premium on our cost of Catapult. You see that the we are at 6.96.3, the methodology for the VAT has not changed.
The wet goes down due to the in house 17 Countries of the Mayor can explain that in more detail. We continue with the action plan which we presented in November strict cost management, we're going to save on SG And A about EUR 100,000,000. Margin improvement. We have started, aggressive commercial action on pricing. That looks pretty promising this year.
Cash generation remains high on the agenda. You have seen, I believe we told you last year that we had introduced into '80 for the first time for our country manager's free cash flow targets, and that has obviously worked, I think part of the strong cash generation has also to do that. Has been partially changed to a free cash flow. And we'll go on to limit the gross CapEx to about 700,000,000 over the next 2 years. SG and A, SG and A, we should be quite being launched.
Out of the 100,000,000, we have budgeted to see the savings of about 53,000,000 into 2019, out of which more than 30 coming from overhead in countries. So we are well on our way. Portfolio optimization remains high on the agenda. The target is 1,500,000,000. Of course, today, we had already done 800,000,006 100 last year through the end of this year, 3 areas, non core business, weak market positions and idle assets, eyelaces come to a large extent also from the custom entity transactions where we acquire a lot of assets, which are not necessary to run the business.
We underline again that the disposals will have more or less no impact on EBITDA. You saw that from the disposed to be did already this year. That was a reduction of the stake in Morocco and also Ukraine, there's practically zero impact on ABIC. They are, and we plan to do that. On the areas, I keep it very short.
I jump shortly to North America and just limit my comments on two points per area in North America. Look now the year to date result, it's clearly, down, if the highlights for life was about 10% of the average carol 10 millimeter to take out. So we are still slightly negative. Positive highlights where, from our volume growth, obviously, Canada, including the region, Oregon, meaning Seattle, Portland, yeah, Vancouver, where we had close to double digit growth also in the south. And, whereas we had negative growth in our region north of -2 percent, partially due to the market.
The market there was down about 3% and we lost a little bit share due to Maximus. From a result point of view, Canada was strongly up by around CHF 40,000,000, whereas the regionals was down by about CHF 50,000,000, CHF 50,000,000. If you look to Feston, Southern Europe, a weak result in the UK, yeah, London market was weak. Our result was down by about 1,000,000, and that was more than compensated by a strong run-in Italy, Germany and France where all the results were up double digit. Northern Eastern Europe, we had a good development.
You see that on EBITDA, up 11.4%. Czech Republic was up. Poland was significant. We are Czech Republic and Poland all up double digit Russia was fed on Kazakhstan, was fed on only Ukraine, was weaker. And in Asia Pacific, the is only due to Indonesia, Indocement was down in euro terms, about 47,000,000, and that was to a large extent, compensated by a good result development in China and also in Thailand.
In Africa, I think we did a good job. The margins went up. The result is up like for like 4.7%. Weak spot was Turkey, which had obviously a very difficult second half. And also our recycling in Israel was hit by the stock of one quarry due to end of license, whereas result development in Tanzania, Morocco Egypt was all okay.
And I think from group services, We had a very good year operating income, $31,000,000. That was a new record and also revenues were significantly up. And I think that's it from the operational business in line. That will conclude the call.
Okay. Good morning and good afternoon. Ladies and gentlemen, I would like to lead you through, the financial report which top of on Slide 21. This summary, this year, the headline was carried alive beyond our CEO of the on operational results. We are a little bit weaker on the operational results, but, there's a new on the bookshelf topic you are able to overcompensate this in three financial areas, which is, first of all, our additional all the necessary results shifted from negative to positive and improved by 241,000,000 Secondly, the, highly pertinent insurance, good refinancing condition, and, based on a favorable refinancing term, we were able to decrease and improve our financial results by more than 50,000,000.
And likewise, we benefited from the tax rate decreases in many countries and tax expense decreased, to 460,000,000 and also, cash tax payments decrease. So based on that, we achieved the group share of profit to increase by 25%. And likewise also earnings per share increased by the same percentage. Also, we generated positive cash flow, we generally have a cash conversion from EBITDA to free cash flow of 42%. Best value in the industry, and this allows us, to finance our growth CapEx, to pay an increased dividend and to pay down debt from our operational business So, both sides, capital plans, earning these 2 situations, barely, achieved a return in invested capital of 6 Kamani, I'm saying 0.6 percentage points ahead of our, average cost of capital.
You can see this on slide 22, in the, income statement at all additional ordinary results. Moved from minus 133 to plus Panama Rais, contributing to the profitability. Financial results improved from a cost of $4.18 to $3.67 and the income taxes improved from $5.79 to $4.64. Which leads us to a net result from continued operations of 1,300,000,000 compared to 3.50 of 1,100,000,000. This is the highest value in the history of 5+7.
From ongoing operations only in 20,078. We had higher results than these tows, fixed businesses. From our in preparation of the end and acquisitions. So then if you look to Slide 23, you can see a split up of the additional ordinary, results. Notably, you see that the restructuring expenses drastically reduced, in 2017.
This were mainly the restructuring costs for it has Cementi as you know, it has Cementi integration, is completed. And therefore, we do not see any significant amount in restructuring expense. On the other hand, from our disposal program and portfolio optimization program, we applied a significant amount of, gain 125,000,000 Euromen coming from the sale of the, German limestone break business and the U. S. White cement business.
If you then move to slide
24, you can see further improvement in on our net financial results. This is mainly driven by reduced interest expense and, the reduced interest expense comes from the maturing of high interest bonds, which we issued after the financial crisis and now we replace it with low cost bonds and this reduces our financial And we do expect this development to continue in 2019, 2020. And 2021 as we had the last high yield on maturing in 20 20. So midterm, we expect the cash out and the, financial result to be in the range between 250,001,000,000. Tax expense and tax cash payment continue to develop favorably as you can see from, slide 25 you know, that, I focus on cash tax payment on on and on current tax, but not on deferred tax.
Because that is a very difficult to predict and to plan because it depends from a lot of external inference So you can see here on the chart in cash tax payments from Hydro 7, you can see that in the year 2019, financial crisis. And in 2012, it reached an amount of 50%
or higher. And since then
it consistently trends, down into a range of 20% to 25%, that's exactly what we guided. There are 2 main drivers for fairly favorable tax rate in Ireland. The one is that we observe the overall reduction of, income tax rates the the most significant, being probably US moving from 30 9 effective to 24 effective 21 federal plus 3 percentage points of state tax. But also other countries like Ukraine moved significantly down to take those from before the 27, 28 percent in 2008. Now down to 18% if I'm not mistaken, Eastern European countries are typically around 15% to 20% and also other countries like Canada trend.
551 driver. The 2nd driver is the cyberghost women in virtually all countries has a tax positive result. So there are no, losses, which, do not have a tax shield in the group and that leads to a very even spread, globally of profitability, which then makes the country the company benefit from this low tax rate environment. We also expect this trend to continue and the tax rate to stabilize in the range of 20% to 25%. As I previously stated, we come to the cash flow.
On slide 26. High invoice demand is the cash machine. We have, a cash conversion rate of 45%. Which is clearly ahead of the average of the industry and leaving in the industries on the multi country multi business lines. Level, you can see this on slide 26 on our cash flow statement, cash flow from operating activities based on the level of 2,000,000,000.
Euro, we had a little, increase in working capital by 100,000,000 because the Q4 was very strong. You can also see this in the balance sheet. We were producing and selling high quantities of our products in the Q4, which then led to higher stocks and higher accounts receivable, because this high sales were backed up also by a favorable production environment. So, this contributed to a certain increase in the core working capital. We had in 2018 high investment in our business.
You can see 1,700,000,000. And this includes a significant part of growth CapEx, mainly the 2 big acquisitions in the beginning of 2018, which was cement year in Italy for market consolidation, the €320,000,000 and, freight going on for a year stands and aggregate business for 200,000,000 and this drove up the investments compared to previous years. As a consequence of lower operational results, we compensated the lack of, cash flow from that store by an acceleration and intensuation of our disposal program. So we have successfully disposed of some, noncore assets, noncore being defined as Doctor Scheifele outlined. As being outside of cement, aggregates, whether it's an Arch 5 or being, in geography, so that we can move in the long term, not expect to have a reasonable profitability of market position.
And we continue to intensify our program to dispose of idle assets, which mainly stem from the Italian team and Ryomans. So this let's put this phone in the range of 600,000,000 euro and as we have outlined earlier, we expect enough of 500,000,000 in 20 2019 and another 400,000,000 in 2020. So overall, we enjoy a very a strong cash flow generation. This is depicted then on Slide 27. You can see the horizontal green bar billion free cash flow.
That's what the company is able to generate from its existing business Cope and then below on the blue bar, you can see how the money is allocated on the right hand side, dividend 377 for the high cost dementia holders and 188, pay 2 minorities. You can see if you look left to compare it to 20162017, how we have increased the share, which we paid to our shareholders, over time and following our strategy to share more and more of our free cash flow with our shareholders on the back of this, then the reduced net debt by 1,000,000 And I mean, this is a market that is a cash flow generation, which allows us to pay full dividend to fully develop our portfolio and at the same time pay down debt. Slide at 28 and shows you the balance sheet, nothing specific year. You see a little bit increase in the intent blasted particles from Gemaltea and, right here, you secondly can see an increase in working capital receivable to go up by 38 interest go up by 154 and that's the consequence of, strong business activity and high production levels. In the fourth quarter of 2018.
Maybe slide 29, the impact of IFRS 16 leases. Yeah, you know, in our business, we used to these assets If you look to the lease assets, this is predominantly yellow machines, which we use our quarries. And therefore, it's also predominantly in the aggregates, business. It's through smaller parts in ready mix release, a mix of trucks, and it's to a small extent in the the men's business. The, as you know, IFRS 6 team required leases to be reclassified into depreciation and into interest rates.
And that, the leasing payment, will be reclassified out of APCA into depreciation, and into finance costs. So as a consequence, EBITDA will go up between 250,003,001,000,000 Euro. On the Apple side, a sustaining CapEx will go up tomorrow unless same amount to $60,000,000 to $320,000,000. Therefore, the free cash flow will not be impacted as just a shift from leasing payments into stay in business, the complex. On the upper side, the balance sheet, you'll have to capitalize the discounted, leasing, payments and this will lead to an amount between 1 and 1,200,000,000 you will discount a pleasing payment, which will be shown in the balance sheet as financial liabilities.
Now as a consequence of this, we have started in the board to not continue leasing, especially for yellow machines. And to, buy this equipment in the future, that's why for us to stay in CapEx will then go up the reason is that we will not enjoy the benefits of a life of balance sheet, which was until 2018. The case Secondly, finance costs will decrease because our bank and capital markets have kept capital markets largely are lower. And in the leasing contract, and certainly, gain a more, control over our assets because we then can decide how long we want to run, touch yellow machines or whether we sell them off earlier. So it gives us a higher degree of, flexibility.
That's why we are not going to continue with leasing us to go for direct purchase. Exception of that is company car, which normally comes in a package, and office space, office space doesn't make sense to buy everything. You only need
the car assets in the office space, but
the remainder remains with enormous leasing contracts. So that's what we expect in, a consequence for MiFRS 16, which will then roll into the balance sheet over 2019 and in the following Yes, net debt to EBITDA will go up by 01202 out of the box, meaning in 2019 like for like 2018. And then we will see over the coming years how that will develop. I think, mid term Net debt will go up due to this by 500,000,000. Once the newly acquired yellow trucks and yellow equipment will be written off over time.
It takes 5 or 6 years before we will be steady state here. Then slide 3, I mean, that's of important pension provisions. You can see that the pension application has in systematically managed over the last five years. And by closing down our pension schemes and by reducing the, the benefits from those teams and moving from defined benefit to defined contribution, since you are able to substantially decrease our obligations out of that or from 2013, of 5.9000000000to20184.8000000000 we achieved to reduce this by, more than 1,000,000,000 that's a remarkable achievement in my high from a financial perspective. Then, the tools that I have, meaning the results and the management of the of the assets, the results and in the cost of, in the return on cost of capital.
We achieved 6.9 percent, which is 0.6 percentage points above our rack. We had some comments that our record yields to be low, but I can confirm to you that the calculation is unchanged for more than 10 years. So we haven't changed it, and it is in a really comparable basis. The main reason for the reduction is the change in our portfolio. We have an increasing part of our assets in mature countries after the Sanofi acquisition And secondly, the BetterFAX store, with you significantly over the last 2 years and down from roughly 1.3to0.8.
And and that technique needs to decrease in our leg The second comment, which I would like to make is on the invested capital. This is a 4 quarter average. You know that in our listeners, the fourth quarter end of December has a very low capital employed due to the, stop of activities in the Sanboy just before Christmas time, whereas in summer in spring, the capital invested significantly higher. The swing is roughly 1,500,000,000. And we show in this chart, the 4th quarter average, there is, I'd have seen that
in the
market, some companies tend to show only the year and value rich than gifts of course are higher. Back a higher return on capital and a much lower capital employed. You can also see the effect of our initiatives, for portfolio optimization and streamlining from 2017 to 2018, the capital employed decreased by more than 500,000,000 that's significant. And also, if we look, compare pre device which was until 2015 through 2018. Today, we have an increase in the capital employed of roughly, €4,000,000,000, whereas it has to maintain on to the balance sheet with a total value of 5,500,000,000.
So we achieved to manage down by EUR 1,500,000,000 and this predominantly comes from the sale and streamlining of the Itau cement assets, so that gives us, finally, a much lower, invested capital, for implementing assets compared to what we started initially with. Then slide 32, we see the dividend development over 10 years 37% combined average growth rate. We now achieved our target range of 40% of our adjusted group net profit. And by that, we have now reached the target range one year earlier than initially expected. I'm invested from the financial side, and I would like to get back
to the specialist for the Okay. So on the outlook, chart, so before on the volume, that's unchanged compared to February. We expect the growth in the U. S. Of about 3% to 3% would expect stronger growth, especially in the summer market.
So Texas Georgia, North Carolina, South Carolina, I think the markets are pretty strong. We, what we see that the markets in the North, Northeast, New York are State, New York, Boston, have been weaker, have been disappointing. Last year, we see clearly better signed. This year, in the 1st 2 months, so the volumes are clearly there. The order book seems to be okay.
We expect a good volume growth, especially in California, the California infrastructure program, which provides 5,000,000,000 additional who asked for infrastructure on a yearly basis will have a clear impact. And we see also Oregon. And so the whole of the Seattle opulent market to be a very strong. Europe, overall, grows between 1% 2%, the first two and a half months look pretty good. That's partially a lot better driven.
So France volumes are good. Grand Paris, the Grand Paris project is progressing also Italy in the north. It's okay. 4%, 5% up. Germany is okay.
Eastern Europe remains strong. So we expect another strong year, especially in Czech Republic, but also in Poland and in Hungary, Russia overall flattish Turkey, obviously double digit negative growth. India should have a good year. We would expect 7%, 8% Indonesia, our forecast was about 4%. That looks good at the moment.
The 1st weeks of the year have been better than we expected. They had the election coming now in mid April. Market has been okay with the growth between 3% 5% in January, February. March is now a little bit slower, slightly negative, but that's mainly due to the election, Australia solid. And in Sub Saharan Africa, overall, good growth feature is going to be weak.
If you look to our markets in Chart 35, we would expect a solid result improvement in North America. What we see in quite a couple of key states in state infrastructure spending up, spending is assets. That's for example, in Pennsylvania, which is an important state for us, Connecticut, yeah, I mentioned, Texas is strong, Georgia, is okay. Indiana is good. South Carolina North Carolina State's infrastructure spending is up, Oregon is strong.
Yeah. And we would expect in U. S. Instrument price increases of about between $5 $10 depending on the state. And it equates also between and 5.
Europe overall is doing, growth. I would expect slow growth. But, growing, pricing in Europe overall, what we see is going up that was it's one of the key targets for this year. And for example, in Germany, we are now up maybe 2 or 1,000,000,000. We are pricing first time about 1,000,000 for Tommy, Germany at the moment.
Italy prices are clearly up. We are about now at the moment in March, which is up by about 1,000,000 per ton compared to last year. France is also pricing up by about for the, so that looks good in Poland. We have increased successfully prices by €8 per tonne. So, and in Czech Republic by about 4 years.
So overall price momentum at the moment looks pretty promising. Asia Pacific, maybe one remark on China, growth in China in our industry in Jalal has been good between 2% and 3%. We have to see now half of the Chinese New Year how things are continuing. As a volume goes to 3%, pricing has been stable. However, if there's a certain caveat, we Chinese government has started now a price domestication in the cement sector in China.
That's not a surprise because flight in China went up over the last 2 years by about 40% or 50%. Now there's also a limit to that. Indonesia is doing better. What we expected, mainly driven by reasons. First of all, volume was okay.
As you know, we have touched it for a volume growth of 4% in Indonesia for 2019. Last year's market growth was 5.2%, 5.3%. Our budget assumption was 0 growth in the first half year due to the election and about 8 percent in the second half. However, we see now in the first quarter, that already until now, growth has been slightly positive. So will you please Okay.
Pricing is also good in bagged cement. We are up by about 10% buyback is flat. We had assumed a certain drop of bagged cement price in the first half year, due to the consolidation, not being finished yet. And then I have assumed the price increase in Bexel and I think starting from 1st trial first of August. At the moment that cement price is stable.
That's good news. Other good news is the coal price is clearly down. You know that Indonesia is one of the large coal consumers in our group with about 2,600,000 tons. The new car to index clearly down. So we have also support from lower energy costs.
And finally, the Indonesian Rupya has clearly gained strength. It's much better performing against the U. S. Dollar compared to last year. Last year, we lost about 10%.
As most of you know, 2 thirds of our cost in Indonesia as dollar based. So if the currency is weakening, that fix us also on our operational result. So Indonesia, at the moment, things look good. Australia is doing okay. The market residential sector is weak, especially in spend.
However, the reach invest. Perth is coming back step by step. We gained some good projects in Perth with shopping centers, but also in the mining sector. Melbourne is strong and also in Australia, obviously, the lower coal price helps us in cement Australia, which is quite significant. And the other point is that due to the difficulties now in Indonesia, in Australia, at the moment, basically in Australia is down by about $0.10 per level.
And, this gives us against last year, for example, a saving of about $7,000,000 or $6,000,000 because when sent about 700,000 Ocdouble. So that's quite significant because we ran a big acquisition, but didn't stickiness over there. Okay. Every, Africa Egypt remains troublesome. The army has started to increase prices now.
That's a surprise in a way. The market remains weak. Morocco is okay. The rest of Tanzania is okay. Weak currency in Ghana is a little bit an issue where us, Tanzania, both in Afaza and whatever, is overall okay.
So that's the message that maybe, last point is on the volume side, we think we'll K. Pricing at the moment, euro of North America looks okay, also Indonesia is okay. And then what I already said in February, energy should be our friend. This year, we see clearly lower energy costs, in COVID, even CO2 price in Europe is down. So electricity is cheaper than anticipated.
We see diesel also down. So compared to our it, we assume that probably on the energy costs, we had an upside of about 1,000,000 as we speak, today. Okay. That's it from, from us. And now, obviously, you are happy to answer any questions you might have.
Ladies and gentlemen, we will now begin a question and answer session. As a reminder, if you wish to ask questions just press star 1 on your telephone and wait for your name to be announced. And I would like to remind you that we just limit the question for for only 2. You. First question comes from the line of Paul Roger.
Please ask your question John.
Hi, yes. Good afternoon, everybody. So thanks for taking the question. So I'll just have a couple of ends. So maybe firstly, it starts on European price increases.
I mean, you very kindly quantified the the magnitude. I guess the question really is that I think this is probably like the 3rd or 4th year in a row where we're starting here quite positively, you know, the big increase has been announced. But I think if you if you look at what's actually been achieved in recent years, mid with the exception of a few markets at Italy, generally, it feels like they've been a little bit disappointing. So the question is really, you know, what is different in 2019, and what sort of magnitude of those increases do you think will actually stick this year? And then the second question is on, on Sierra 2.
You've recently announced, I think, a plan to, visit close one of your plants in the Nordics in in Sweden, I think, but to leave the terminal open. And my question is really to what extent is that decision linked to CO2 and whether it's a sign of things to come for Heidelberg, business we approach phase 4 of the UTS. Okay.
Maybe I established towards just a low with the CO2 issue. You know, that we had these carbon, new trading schemes starting in 2021. And it is our assumption, the final points have not already been agreed yet that the, CO2 allocation will be reduced about 20% to 25% for the whole industry and that leads to a cost increased the net cost production increase of about for us. However, we are long until end of 2022, right? So that's the one point.
But it's still if you take, CO2 costs into a car on when you have to watch very careful what you do, with your clinker production, that's why, for example, relatively small and inefficient plant like Elon, we have decided to closed down capacity. And I think there is one issue in the CO2 reform just to be understood. The old system gave you the old system was not very flexible. First of all, It was not possible to transfer CO2 rights in case of plant closures that was difficult or not allowed. And secondly, You got all CO2 certificates if you will exceed in 51% of your, click off, put action type and you've got 100 percent CO2 rights.
The new regulation is in two ways different. First of all, it allows the transfer of CO2 rights from one plant to the other in case of significant production changes, meaning in case of closure. And secondly, in future, you get only CO2 rights according to production and not to the 61, and then you get everything rolling. And that will lead in our opinion to a clear capacity closure. Scenario.
And we have done that, and we think that in Europe, probably around 40,000,000 tons of capacity will go away. With a clear focus on the southern part of Europe, meaning Spain, Italy, France, yes? We acquired significant capacity closure, can midterm be, expected, you know, and, obviously, yeah, watching that, very carefully. On the long run, we believe the big players will benefit, because the market will go or consolidate And at the end of the day, the capacity potential will lead to a higher capacity utilization and in our industry capacity utilization price pricing. So, there will be maybe some short term pains for some players, but from the long run, I think the big wins will will fare better.
On the European pricing, I think maybe think we have seen some progress over the last years, maybe not as much as we had hoped for, but This year is in a way you're referring for 2 reasons. First of all, the energy price hike last year was for everybody as shock in person or could not compensate cost inflation risk prices. So we want to recover margin. That's what you see in the margins, in in Europe, I think everybody has now understood the implication of high CO2 prices, yes? And that's why I think the pricing environment at the moment in Europe is, I think, very good.
And if you look to France, what I told you about France, that the triple net is up for Euro 4b. Environment coal level over the last 6 and then years in France, the price could saw uneven trends going down. So we see a clear change. In Italy, when we bought it from Cementi, I think the pricing was at C65, C560. Now we talked C70, maybe you have hoped for 90, but I think 7 g is already not too bad.
We still want to go up another 5 next year, but we are on our way and also Germany. That's why I mentioned you're the first time about selling with you all, and, that is also the beginning. So I am on pricing in Europe. I think, CO2 is helping in that respect and also the consolidation of the industry. But you are right, the year is still very high.
I agree with that. Okay.
Okay. Thank you.
We got another question. Comes from the line of Phil Grosberg. Please ask your question.
Hi, good afternoon, everyone. My two questions, please, for Doctor. Megan. The first one is about cash conversion rates. First time, we, we, we see those, those numbers, I think, and, like, see that best in the industry if we're comparing.
But, can you tell us what the cash conversion rate was, for instance, for last year? 2017, therefore, so we can compare it to the 42. And what is your target for that? And linked to that question, therefore, is we had a free cash flow before growth, CapEx and disposals of about CHF 1,300,000,000 in 2018. I recall the sort of the Vision 2020 target where I think you've said you're aiming for 1,000,000,000 of cumulative free cash flow over the next 3
years, can you
give us comfort that with that slightly lower figure, we are still on target for that vision 2020 target.
Very nice. Very nice with a nice way of questioning. Cash conversion rate, the calculation is free cash flow after maintenance as of operating cash flow minus maintenance CapEx and for instance CapEx, over EBITDA or RCOBD as we call it, and this rate is 42% in 1018. It was also 42% in 20,021,000 and 17, if you go to slide, which one is it here? Slide 20 Okay.
If you go to Slide 27, you can see previously, and we had 1 in 403. And if you divide it to the indicator of 3,297 EBITDA previous year, then you get more or less the same figure if you exclude the if you exclude the last figures after the comma, in 2016, it was in a similar area we consistently, have this, figure. I now expect it to to go up a little bit in 2019, maybe towards 45% as tax payments and interest payments go down. And we will not have an impact on free cash flow from the IFRS 16. So that should remain in that range.
You are right. We expected a high of, free cash flow on division 2020 when we announced it 2 years ago. The two main impacts which pushed us back on that is, the exchange rate where we lost an EBITDA is 1,000,000. On an annual basis. And secondly, it's a development in Indonesia where we expect the stable results development for Indonesia and we also launched equally $250,000,000 in cash flow.
That makes the main difference to the figure. If you look to the Vision 2020, it is so that the underlying target, meaning our dividend policy, return cash to shareholders, disciplined CapEx policy, c gains in the operational level, in the operation management and also portfolio management. Then we fully speak to, the strategic elements in order to outbalance the, the lower free cash flow. We then have focused more and we have generated much more cash out of a disposal of, of of eyeglasses of non core businesses and of non sustainable market conditions. If you look into even in 2017, we started with that receipt process of close 500.
We reached 600,000,000 this year, clearly ahead of our expectation of roughly 300,000,000. And we will again have a good run from this in 2019. So a good part of that, what free cash flow before, we now can see in our portfolio program. By the way, most of these assets them from, it has cemented, you know, I I would get out of the total problem of 1,000,000,000. 1,000,000,000 is a high level from Itau Cementi and which virtually didn't pay for it because we didn't have it on the screen with our valuations.
Nevertheless, we'll make the cash out of it, but it doesn't appear as a a free cash flow, but it does appear in the in the growth CapEx net in our financial statements. So I think we are well on track. Here we do the best we can. And I think we are, this allows us to achieve our target of an excess of 7 1,000,000,000 by end of 2020 based on pre IFRS 16, accounting rules because that's the benchmark. So I think the other on the way on the cash flow generation, no problem there.
Just to follow-up very quickly on that, the, does that imply that growth CapEx and disposals sort of, should even even out, over time?
In 2019, yes, in 2020, also probably, yes?
Yes. Next number is your own, Mr. Roasto. Exactly. Right.
I've understood that.
But if it's a high disposal side, I I pick them on the disposal. So we are not inactive. We only just just work on the portfolio.
Oh, we got another question. Comes from the line of Regis Patki. Please ask your question.
Thank you. Good afternoon, everyone. I've got two questions as well. So first one is on energy costs. You mentioned in the call that you see a benefit of 60,000,000 this year.
The annual report says, energy costs will see a slight increase. If you can provide some color on the deferring message here. And the second one is on interest costs, where, in the annual report, again, it says, excluding IFRS 16 impact, you expect a slight decline in financial expenses, but after incorporating IFRS 16, you expect slight to moderate increase. Can you please provide some color as I think consensus is expecting a double digit decline in the net financial expense in 2019?
Thanks. Yes. So on energy, hello, on energy, if you're along with the company, you know, the number the last year was about 2,100,000,000 energy costs all in, well, where we stand, yes? And what we are seeing out of which about EUR 900,000,000 is electricity, just to give an idea. We have about 5.50 on coal there, And we had budgeted volume increase all in pricing maybe for 2160s or slight increase.
And what I see now, my latest estimate is maybe 2019, yes? So meaning, we go down compared to plan 6 the EUR 70,000,000 and would be flat versus last year or even slightly down versus last year. That's the message. And the business report has been written in February, and my latest update comes from Monday when I head up needing with our energy guys because in order to be prepared for your calls and meeting with the investors, I just wouldn't have a, a good, updated information on one of my key cost models that this energy is more than today.
Okay. So on the finance cost, to your to your question, as I say, do you think that the, interest cost from our external financing will go down? Roughly an array between $30,000,000 40,000,000 per year, probably years 2019, 2021, always compared to the previous year. And this then will be a little bit diluted by the IFRS 16 interest. Yeah.
That is not the interest to be paid. Yeah. It is the calculation. It depends very much on the on the on the calculation method, and we do not, really, really do not really expect and and do do you really have an estimate on that? So, based on that, we expect the overall financial result has, reported there, to be fairly stable.
It may vary because we have a relatively high degree of uncertainty in the calculation of this, leasing interest or however you call you call this because this is a very artificial figure.
Okay, that's fair. Thank you.
Yes. And this is only accounting. This is the pure accounting no cash item. We know our our payout, our leasing rates. And then whether you reclassify this payment at depreciation, okay, you would see it's a bit arbitrary and this depends on external factors, which we cannot predict.
So it's a bit strange. With IFRS 16. Okay.
We got another we got another question comes from the line of Alain Gabriel. Please ask your question.
Yes. Good afternoon, gentlemen. And two questions from my side. Firstly, on the electricity exposure, can you remind us what your hedging policy is given that we've seen a big spike in electricity prices in the second half of last year, how quickly do you think that should hit the P and L? And the second question is on your capital recycling.
How is, do you mind sharing with us how your thinking is evolving on where the capital is going, of the assets that you're selling? So part of it will be going towards deleveraging which areas or segments or products are you becoming more interested in? Thank you.
No, on the
capital allocation, it is clear, as we've discussed with Mr. Hoesberg, we have a free cash flow after maintenance sustaining CapEx of about 1,300,000,000. This year, last year, 1,400,000,000, and we're going to continue to pay dividends. We've paid overall last year, $550,000,000. So that will continue to go up a little bit.
And, then last year, we spent net CapEx, gross CapEx, EUR 500,000,000, that was a big cross number of more than EUR 1,300,000,000, which came down due to high disposals, what Doctor. Mango explained. And what we said to reverse the economical should go direction 0 and that would lead the bank finance with the bank debt going down. It's very simple. 500, you can see the de leveraging from paying down was about 2.40 If the assumption would be 0, then that would be 700,000,000.
Our math at the moment is 8350,000,000. If you go down 700,000,000, would be 76. Next the same story. Again, then we are at EUR 7,000,000,000. So I'm not an accountant, but it's very simple.
It's very simple. It must just be done. So this is, a single and, if we have a capital, if we talk about gross, gross CapEx, it's what we said. It's not Empire Building. It's bolt on acquisition in existing markets, where synergies are the value driver because we think the company and the management team has a key on integrating companies and businesses, and that's what we are looking for.
So, it's not about growing or dreaming about South America, yes, to be clear. And what was the other one? Energy, the hedging policy is known on the energy side, and that's is very simple. I personally convinced that you will see a clear improvement in the in development, especially in Q2, because at the moment, we are still stuck in our plants with relatively highly paid code and pet code and also relatively highly hedge electricity prices. Obviously, we have got to take a coverage now for the remainder of the year.
Also on electricity, especially in Europe, which is clearly below our budgeted numbers. So you will see the margin expansion driven by lower energy costs and better pricing, especially in Q2. Yes, that's where you will see already is you should see a significant impact because most of the price increases in our industry, especially in North America, they start from 1st April. In Europe, for example, Germany, we have been 1st January. Also Poland is 1st January So, defensively, additionally, we have then 1st January instead of 1st March.
So the 70 year will apply already since January. Normally, that was always 1st March. So in some countries we have moved earlier, but the main impact comes typically when the season starts goes to paper. No questions anymore.
Sir, we got ah, yes, sir. We got another question. Comes from the line of Robert Gardinera. Please ask your question.
Good morning. Thanks for taking the call. I followed the energy question when maybe on transport freight. So similarly, a large bill, about $1,900,000,000 in 2018. And with freight rates on the floor, dollars moving in your favor.
I'm just wondering are there any potential tailwinds there?
And secondly,
I might just go back in Australia. You mentioned and weaker, levy side on the Gold Coast. So that's what's driving the potential of cement price a slight stand there between Veral and Leitner's, is that a function of a weaker construction market or are prices declining there? Thanks.
It's a GV. I'm not, so let's let's make it great. You are right. Freight is also often freight rates are clearly coming down and freight plays an important role as part of energy. That's what I mentioned also for Asia.
That's why in Asia, energy is clearly coming down because freight rates are so down, yes? And that's why I said at the beginning, it obviously should be our offering. Because first of all, cold pack coke is coming down and also freight is coming down. So that should be helpful. You're totally right.
And then the question of Australia was what you say at the Iowa Island phone, I think cement Australia price increase is up 3 to 4 or $4.00. That's what I know, yes? And, we have a certain market weakness here, right, in Brisbane, especially on the Sunshine Coast area. Brisbane has been a little bit overbuild. The market is slowing down.
At the same time, we have new competitors coming in, and coming into the ready mix And we have also 2 independent ready mix players in Brisbane Company as a main terminal, which starts, I think, 1st July. But that's only one market in Sydney. We see also residential clearly slowing. However, we have big infrastructure projects in Sydney City is building a new airport where we got a big job. Sydney is building a a huge, term pipe around the city where we have, awards, which are the already supplying So we think that for the full year, infrastructure in Sydney, we compensate the weaker residential market and the infrastructure work is very well priced.
I personally was in Australia, 4 weeks ago when I was on the site at the airport, but also at the turnpike. And that looks pretty good. So it's very difficult. I know I was very likely for always area of the area. So very different, very different drivers of the market.
We got another question comes from the line of Arnold Lemmon. Please ask your question.
Thank you. Good afternoon, gentlemen. Two questions, if I may. Firstly, just regarding a comment you made about the start of the year being strong. Could you maybe define that a little bit?
Is it better than the moderate, growth that you, that you mentioned in the annual report? So are you already heard of your full year guidance. That's my first question. The second question is regarding Italy. You have a medium term objective to get back to 50,000,000 of EBITDA.
Do you think it's achievable for 2019 or should we wait for next year with further increasing prices? Thank you.
Mr. Lima, immediately, Miracle, I think also a little bit of time. I know a lot of people have been very critical about the Intelligent India acquisition, whatever I told them, we need a bit of time. We are about now to consolidate the market. There are still some 1 or 2 tending smaller deals.
So with the other 2 big players, which should come through in the very foreseeable future. And, I think our EBITDA in Italy last year was about 70, 75. We're going to go up again. So we are on our way. I think the mid term target for Mr.
Carlieri, who's our country manager, who 2020 or whatever or through 'nineteen. So and we are on our way. He will broadly hit these photos. That's the message, Italy last year like for like was also up on was up by about 1,000,000. And now we have the full year synergy effect of, 7 tier in, so, we are on our way, And, I'm not going to speculate about March now.
I think you should expect a solid Q1 meaning the coupon should be resolved wise above last year. And, let's say, the branch is not over yet. So what we only see at the moment, I think we are we do not see any nature, proppant coming up in the car market.
Thank you very much.
We got another question comes from the line of John Messenger. Please ask your question.
Hi. Good afternoon. 2 if I could, please. I'm in the first doctor Chester just on the on the slide on the outlook, Doctor Scheffer, you you talk about the US and a solid, I think a solid result expected. Whereas places like Europe, it's about solid growth.
Can I just ask when you look at the North America business, should we take anything from that in terms of there has been industry talk about pricing in cement, maybe not moving an awful lot this year because of part of the currency, making it more attractive for imports, partly obviously for yourself and the kinase and that accelerating pressure at the back end of last year is that determined in terms of what may put pressure on this year? Just a little bit of a feel as to whether we should be taking a more cautious view on the US, or is that completely the wrong kind of message to take? And and within that US guidance, obviously, 2017 had Tower Canyon Is there anything in the pipeline that is gonna blow the numbers around this year in terms of sizable disposals that may come through? And is that in or outside of your guidance right now. And and the second question for Doctor.
Nager, I just wanted to come back on this free cash flow point I think you described it as kind of best in the industry, but if I just take your CapEx pure spend on expansion out, you're down at about 22 free cash flow conversion, which sounds unbelievable because I had a bit oh, sorry, Lafarge Hoffman around the 28 mark. When we're looking behind that, the biggest thing that you could probably change is the cash spend on provisions, which I thought would have come down as it tells the Minty's restructuring kind of washes through the system, but you're still incurring about 324,000,000 there. Is that a number that is embedded, or should that number drop, or is it really asbestos and all the other things that that continue and will continue to be a cash flow drain? Just so you can understand a little bit what are the other big levers behind our free Tesla conversion. Thank you.
That's all. Hello. Commercial. So all in the U. S, there will be some real estate transaction in the U.
S. As we have not all budgeted, but I think probably this year, another transaction from a P and L impact of the size of Carroll Canyon might be different from a cash impact, yes, because, as you recall, you are close for our industry. We bought the asset of CEMEX in Seattle, which are performing very nicely. And there we bought also 2 or 3 more or less closely those to be exhausted quarries, which are now on the pipeline to sell and which are in the Redmond region. Redmond is Microsoft, so that's a booming area.
And there we are about to turn the wind or other provinces from commercial to residential, and that's going to be a significant double digit dollar issue. However, this has a relatively high book value. So transaction amount might be close to this demand for Carroll Canyon, but it's not the P and L impact. And what I'm telling you about cash wise, we have some nice, we still have some nice pieces of property, especially on the, in the whole Seattle Redmond area, we have access probably which we try to bring to the market over the next 2 years. Now on the U.
S. Market, I think as you know, U. S. Pretty well, it's a very regional issue. The most difficult to understand if the region of that has to do with machinist and that has to do that.
Also, one of our competitors in Europe has expanded and modernized it's plant in Upstate, New York at the Hudson River, and there seems to be still some capacity not utilized them. That's what we see. And that's why the pricing in that area, it was very much. If we start with the bad news, if you look to New York, for example, in New York, a New York Metro prices are at the moment about 90 to 90 3. If you recall, what I told you 1 or 2 years ago, we were at around 100, 2 surprising went down $8, yes?
And our assumption is that we will keep that price seeing around that level, but there will be no price increase in the region on the old Boston Northeast region, yes, because McInnis is still around. And I think they still have capacity above 1,000,000 to sell. They have 2,000,000 tons capacity. Our market intelligence tells us they sold about 400,000,005,001,000 in the Canadian market and they sold 500,000 along the East Coast. So they have still a 1,000,000 to go.
It was helpful that they had some production problems in February, which was published So let's wait and see. Whereas if I look now to Mid Atlantic, so I moved south, that's balancing more washing in Virginia, we think we will get a price increase of about $4 to $5. So pricing should is at the moment when 5.16 a week's to be 19, 110. If we go to the Midwest, yes? So if you talk about Indiana, Ohio or then also Minneapolis and whatever, where we expect price increases between $5 $6 pricing end up in this region, start to get a feeling about the difference.
It's the same U. S. It's about 100 and 25, 100 and 26, yes, just that. So this region really has as a huge variety. And then if you look to the late Ontario, pricing should due to McInnis, again, be flat.
And in Ontario, Greater Koranda, we price maybe about $1.04, so okay. So that's why in the regionals, average price increase for Messenger, maybe $1.50 as last year, whereas years before, if you go back to the notes will see, I told you, $4 to $5, but that's not possible because we have the impact of McInnis. If we go to the south, Texas and whatever, we think we will see a solid pricing between $5 to $8, and we are also pretty, confident on, California that you will get about $8 to $10 in California, especially those insurance could be zoomed out, yes? Typically, in Los Angeles, we always had overcapacity. So we expect now the L.
A price to go beyond 100 and San Francisco should go to 110, 115. So in California, we are pretty bullish and also in Florida, North Carolina, South Carolina, Alabama, we would expect $5 to $8. So as I told you, it is very, very much per region.
Fantastic. Thank you for the flight.
And another message is, at the moment, we do not see new import activities, no new terminal is being built. The only terminal, which is being built, I think, at the moment, is by Oya Simple in the Houston market, yes, where they build 1, but, otherwise, there is no new thermal activity. I was in the U. S. For when we last 2 weeks ago.
And obviously, we discussed the whole import situation on the region East Coast, but also especially Houston. At the moment, import activity especially also in California is quiet. Alright. Now
Okay. I'm sorry, sir. Okay, sir. We got another we got another question.
Yes. But I want to keep the finance so he has to the cash flow, question. And, if I refer to the economic analysis of the cash flow. I refer to Slide 27, yes, and there we have a free cash flow definition, which is commonly used in the industry, which is operating cash flow minus the investment CapEx, which is equal to maintenance CapEx. So this gives due to cash flow or the amount of cash, which the company is generating, if it stays in its existing business scope.
So without consolidation, deconsolidation. And here, we have generated a free cash flow of 1,296,000,000 Again, it's an EBITDA of $30.74, which is the 42.2% which we are talking about previous year was 42.6% in 2016. As far as I can see, was also in the range of 42%. So this is a pretty a a favor figure. Then I'd use the same.
Exactly the same definition. And, La Faroes in the past had used the same definition. Now they have changed and give us free cash flow figures, which also includes growth, CapEx, into fixed assets, but not M and A. So they have to fly a different message, but if you look in their business model page 250, then you can calculate exactly the same figures as we have. And then they get a cash conversion of 320,000,000.
If you look to the figure of cash flow decrease in provisions and cash payments on page 26, which sometimes is a question. And then we have, we showed us as an explicit question, as an explicit figure, the provision the other, the increase in provisions during this business year comes inside the RBCO. We believe it's under CHF25 1,000,000. And typically, in the, additional ordinary 1000, another 100 to 125,000,000 per year, and the remainder comes in discontinued operations or in OCI. So that's how the mechanics work.
If I look to the competitor account, this figure appears in the locking cap I found that's a bit strange, but that, as it is, they show you the change of working capital. It's one of the reasons. I do not want to comment on the other companies, but That's one of the reasons why our facility made such a high, what they call change in working capital, about the 700,000,000 they show there euros, they include roughly CHF 500,000,000 of, payout from provision for restructuring costs. And then it makes it very consistent So I mean, the presentation as I shows on slide 27, it's a very valid and economically very sound provision, then you can look into our account and you can then split the growth, CapEx net, the 501 into our disposals, which is close to 600 and the gross, a growth strategic CapEx, which is roughly one point 1,000,000,000, and then it gives you a fully consistent figure. If you need more information about that, calling, Mr.
Casa or Mr. Toledo, they can give you, each and every detail on this figure. I think our statement is very sound. Okay. Thank you.
And sir, we got another question comes from the line Arnold Binadel. Please ask your question.
I would have a question of India. When I look at the recent news flow we earned on pricing, it looks like the industry is pushing price quite significantly in the south and in the central region of India. And if I'm right, you are extremely well positioned because these two regions are the largest, so I can document. So could you please, update us on the reason why India is pushing such prices? And if we can, be relatively optimistic, for, margin expansion in this country in 2019.
As you know, India, again, the market is very reachable, yes? The south in India has 2 aspects, which of different. When it's positive, when it's negative, the positive one, there's a lot of limestone. That's the big reserve position in India for limestone. And the negative is when they'll too much cement capacity due to the limestone.
So we have a capacity utilization in India and the south, which is typically very low. Which leads from time to time to kind of price fines. That's what happened last year. That's why if you look to the results of the Indian cement players, which are all published, and you put them together in some baskets according to the footprint, you will see the south, the southern companies had lousy numbers, whereas the companies which were more in the center of the south, like the former old Heidelberg cement operations, they had pretty good numbers, yes? And what we see now, there seems to be some rationality back to the south.
Your totally correctly informed. What we see now also in our numbers, we see GEO result in the result improvements driven by significant price improvements in Southern India. And just to give an idea, in the north. And in Central India, last year, the pricing was maybe about 3350 rupee aperton whereas in the south price was maybe 2800 rupee at that point, that gives you about the difference. And now the south is trying to catch up.
And we had to see, we will have our combined discussions with them in the first half of April and then we will see where this goes.
Thank you very much.
Thank you.
Sir, your last question comes from the line of Gruburger Kudlitz. Please ask your question.
Thank you. For squeezing me in. So I have a question just on the net debt because obviously you've commented on pre IFRS 16, but the reality is we are now with IFRS 16 and obviously you're changing your CapEx, a little bit. So can you just give us your target for 2019 2020, as you will actually report it, so including IFRS 16, based on net debt. And then the final, maybe follow-up question on, your EBITDA guidance, which I think there isn't actually one, if if I'm not mistaken.
But just to be crystal clear, when you're talking 3% to 9%, that is also in reference to EBITDA. And I presume on a like for like basis, just just as a point of clarification. And if you sit here today, I think on the last call, 6 weeks ago or so, you were saying you're comfortable with five and a half would you say your confidence increased or decreased, compared to them, or perhaps it's unchanged?
Mr. Kuglitsch, first of all, it's like for like. It's clear. I do not see the, increase of EBITDA due to IFRS, whatever the number is, I think, dollars or $250,000,000, we do not regard this as a management performance. So I may not get any bonus on that.
So it's obviously like for like. And secondly, Today, the sun is out. So today, I mean, it's a bit more optimistic maybe than in the gray time of February. That's, I think, that's a little bit the message from the call, what I've tried to make here on pricing. I think that was very detailed on energy.
Volume for the time being or so partially that the related is okay. So in our major markets in North America, in Europe and especially also in Asia. At the moment, we see that our budgets, which we have put together looks feasible. And compared to last year, we have clearly tailwind from energy. And I think also from pricing, especially also in Europe.
Thank you. Okay. And when it comes to net debt, you can run the ticket. To go down, on a like for like basis without IFRS 16 from the current 8.35 down to, whatever, 7.6 something, 7.6 $7,700,000,000, and that it will go up with IFRS 16, by $1,000,000,000 roughly by end of the year. And then we have to see how it's going to develop because as I said, we switched from leasing to ownership to direct agreed, a purchase of such assets.
And this will again an influence the balance sheet, but it's very difficult to predict, then we will come out with new guidance as soon as we know how difficult we'll develop from there. So it depends on the time of useful life of such assets here. And we currently not know it was quite on time. We would sell such yellow machines if we had some indirect ownership as compared to an obligation to return them facility in a leasing arrangement. Yeah.
That's a big point. That's a gift to serve an uncertainty in this in this figure. And then you have this IFRS 16, you know, I don't like it very much, because at the end depends on discount rate for those things. So that may fluctuate a major amount depending on the, macroeconomic environment. So that's not for me, that's not a very helpful information.
You say you have to listen to this. You are definitely right in that respect. But it makes a lot of sense on us with a different question.
Okay. Thank you very much for the interest in our Lambos Thanks a lot. We're gonna see some of you in the next days. Thanks a lot. Bye bye.
That concludes our conference. For today. Thank you for participating. You may now all disconnect.