Good morning, everyone, and welcome to our finance conference regarding our intention to list our North American business in the U.S. I'm very excited we came to this conclusion or this point in our strategy, where Holcim has been the most successful company in the building space, and now we make the next chapter for value and growth. Very happy to run you through a couple of the slides so that you can get all the background on why we are doing it, and also on how we are doing it. It's the right time for us to do it. We are very successful on the execution of our Strategy 2025. We have achieved the most superior earnings profile in our industry.
We have leading margins on cash flow, on EBIT and EBITDA. We have more than doubled our earnings per share in the last five years, and we have the most solid balance sheet of the industry. We have then developed the company for our customers into more attractive markets, most prominently in North America, doubling the business, but also, of course, opening up a new complementary leg of Holcim's offering with Solutions & Products , where we are already one of the leaders in advanced Roofing and insulation systems. We became the leader in decarbonization, which is not only what our customer wants, more sustainable products and solutions, but also helping us to driving a new chapter of profitable growth, especially in Europe with the Green Deal. And then we have the success.
Our success is based on our operating model, where we empower our people in the local markets. And when we have, we regionalized our company already to a large extent, where North America already is self-sufficient with all the functions, support functions, from legal and other areas. We already have five R&D centers in North America. So this is really the backbone of all our strategy execution, our empowered operating model, which is regional based. Now we are ready for the next level, and I'd like to run you through a couple of the slides. So we have the intention to create the leading pure-play building solutions company in North America. We...
Transaction is intended to be executed as a spin-off to benefit all shareholders and to spin off 100%, so we don't intend to have any cross-shareholding or something. And in the final end, the two companies will be independent, so also not much crossing when it comes to management or the board. We expect the listing to happen in the second half of 2025, and we have many steps we will share with you in this process, and our CFO, Steffen, will talk to you more details later. We see this as the logical step for us. We are already the leading solutions company in the U.S., with more than $11 billion of sales and a leading margins, over 27% EBITDA margins.
Now to take the company to $20 billion, we believe that an independent, U.S.-listed company is the right, is the right step. We will be the biggest pure-play North American business, with the focus on the North American customer. So all those infrastructure projects, all those onshoring activities, and of course, the lack in the housing market, will be addressed 100% by our management. We are able to pursue a U.S. dollar-based, capital structure with capital allocation priorities, so this makes a lot of sense. We get the, the money from the customer in U.S. dollar, we pay our supplier in U.S. dollar, and also the financing and the acquisition will be in U.S. dollar. This is another advantage of the U.S. listing. Of course, we have a dedicated board of directors and leadership team with deep domain expertise.
And then for the people, very important, we're gonna be the most attractive company in the building space to attract talent, and we will offer career opportunities, but also the specialized U.S. incentive schemes. Overall, we will create a very distinct and compelling investment profile for investors. We have, at the moment, we have large U.S. funds who love U.S. companies, who want to invest in the U.S. dollar. They're not invested in Holcim, so we expect quite a lot of inflow of new U.S. investors here for our U.S.-listed entity. When you look at the business, I think we couldn't, we couldn't ask for much more dynamic here in the last few years. Here, we have a proven track record of outstanding profitable growth. Look at the company. We are the number one in cementitious products.
We are already the number 3 in the $40 billion Roofing market, and we have a very good position in Aggregates, number 5, and Ready-Mix, where we have a lot of potential, a lot of development opportunities. The returns already on quite good levels. Our EBITDA margin is above 27% for this North American business, and the growth is, is outstanding. You see here just in the last three years, we grew the business 23% annually and 26% on EBIT. So our leadership team in the U.S. has done a fantastic job here to position this business for the $20 billion we are now, we are now targeting. This is one of my, my favorite slides of the presentation. This is what we have created over the last years.
We have the leading North American building solutions footprint. It's actually, I think it's 871 sites we are having here, and very complementary, from the Roofing operation to cementitious, to Ready-Mix, more than 370 aggregate plants already, and most importantly, we have five R&D centers fully focusing on finding best solutions for our customers. Very strong footprint. Then, of course, we believe this champion will very much benefit from a very big upside in the construction spend in North America. We are targeting an accelerated growth. It's driven by the big infrastructure programs the government has released, most prominently, the Infrastructure Investment and Jobs Act, and then the Anti-Inflation Reduction Act, where people talk about a lot.
Then this is gonna kick in this year, so we're gonna get the first orders for these big infrastructure projects starting this year. We have focused the last three years to be the prime supplier to those projects, and we have already secured 100+ infrastructure projects, where we deliver the needed products. Then what people talk less about, but what is already a significant engine of our growth in the U.S., is all the onshoring investments. You have now a lot of companies from Europe, from Asia, coming to the U.S. for reindustrializing the country and building factories, production facilities, and this is already a big part of our business. And then lastly, we have the housing shortage in the U.S., which is turning at some point.
We have too low build rates still this year, but we expect this to change here over the course of the next months and years. So overall, a very beneficial market here, and we are best positioned with our supply chains, R&D center. As a U.S. company, we will strongly benefit here with above-average growth. The company is perfectly positioned, not only from the supply chains. You see here, we are very balanced now. We have a 50/50 in new construction and repair and refurbishment. I think this is a position you love to be, so you are benefiting from the new construction, which is coming along now for the years to come. At the same time, you have the very resilient and very value-adding repair and refurbishment segment. So very happy we have established this.
From the six segments, you see how complementary we are now, about 1/3 Cementitious, 1/3 Aggregates, Ready-Mix, 1/3 Solutions & Products , and very well positioned here on our way to become a $20 billion company. Track record, I talked already about here, and how dynamic the growth was here, the profitable growth over the last years. Now our new ambition is to become a $20 billion+ company and also have an overproportional increase in margins to around a 25% EBIT margin. I think that would be industry-leading, and this is coming from organic growth. We expect strong organic growth from our company in North America with all the programs. We have all the technologies in-house now, so we have a lot of rollout investments, new insulation board plans.
We're planning for a new production plant for our Roofing business. So we have a lot of organic investments going forward. And then, of course, we want to continue with our successful build on acquisition strategy, which is also included here in this plan to grow more than 8% year-on-year, and then over proportionally for the EBIT. When we come to Holcim post the U.S. listing, there's gonna be another champion. So don't think of this as missing out on the U.S. They have their own strategic plan to accelerate decarbonization, accelerate our sustainability solutions for the customers, and of course, accelerate our financial performance. The company is a starting point, is a $17 billion Swiss franc company with industry-leading margins, EBITDA, EBIT, very strong cash generation, above CHF 2 billion last year, and will be growing to CHF 3 billion.
And we'll go here for the decarbonization in an accelerated matter with our sustainability brands, ECOPact, ECOPlanet, but also with all the way up to carbon capture projects, where we are the leader in Europe. Doing this, and also importantly, we will remain a Swiss-based SMI company, and we are very proud of that, that this will be our future. A few more details I talked already about. Very excited here that Holcim will focus on sustainable solutions for our customers. This is in high demand. People want to have low carbon solutions to build their homes, to build large projects. They want to have properly efficient buildings to reduce the CO2 footprint operating those buildings, and and we are ready here to provide the right solutions.
We have proven that this decarbonization is not at our expense, but this is translated into profitable growth. We are selling value-added solutions at the right price, giving us sufficient margin for our business. The portfolio transformation will continue. We will see an acquisition pipeline is there for this business. We also have maybe a few positions to divest what we have done very successfully. We also believe there are some country positions where maybe a new owner can have better strategies going forward. We're gonna do that. And then, most importantly here, we continue with our shareholder focus capital allocation and with attractive dividends and share buybacks.
When you look a bit in more detail, what's exciting also here is that Europe will be the dominant region in at Holcim, but we still have very exciting emerging markets. We have probably the one best emerging market business in Latin America. High growth rates, but especially high margins and very high cash repatriation. Then we have strong positions in Asia, Middle East, Africa. I think this is a very exciting mix here, where we will have see a lot of growth and a lot of value for the company going forward. I talked about this already here, our strong strategic roadmap now as Holcim, decarbonization, circularity, and providing the most sustainable building solutions for our customers. Haven't talked about circularity before.
This is, for me, the most exciting thing, to take all the construction demolition material back and make a new product out of it. We have already, I think, around 90 recycling platforms, and we're gonna expand that to more than 150 in Europe alone, and this is gonna drive here our mega city business, where we want to be the recycler of choice in all the metropolitan areas Holcim is active. You see the targets we set. We were last year, in Europe alone, recycling 5 million tons of construction demolition materials, and we're gonna quadruple that until 2030. You can see what growth rates we anticipate here for the business, and this will be a big part for Holcim.
We're gonna be the, the chosen and the leading recycler here in the building space, and this will be very beneficial for us. You see also when you look at the financial performance, Holcim will, will be strong. We are targeting a growth of above 4% for the business, up to our ambition, 2030. We want to deliver over proportional EBIT, more than 6% annual growth, and we're gonna remain a very strong cash flow generation, and gonna increase the cash flow by 50% to over CHF 3 billion here to make sure we have the right cash and the right returns. With this, I'm very happy now to hand over to our CFO, Steffen Kindler, who gives us now more details on the transaction.
Thank you very much, Jan, and good morning to everybody on the call. I'm gonna give you a short overview of the transaction, how we're gonna create the leading pure-play building solutions company in North America. So we prepare for a full capital market separation of our $11 billion sales North American business. What does it mean, a full separation? It means we're not gonna hold any participation from Holcim in Switzerland. Both companies are gonna be completely separated. Both companies are gonna have their own governance structure in their respective regions. The transaction is intended to be executed as a spin-off.
More details are gonna come in the second half of 2024, but you can already assume that we're gonna do this as a very efficient and very not too complicated transaction in order to guarantee the success for everybody involved. Capital Market Days are planned for the second half of this year. Two Capital Market Days, actually, one for each company. We're gonna do this probably in September or October, when we got sufficient detail and can present sufficient much content to everybody who's interested. We're gonna need an extraordinary general meeting for shareholder approval of the transaction. We plan this is probably going to happen in the first quarter of 2025, and then the U.S. listing is expected to go live within the first half of 2025. Some financial considerations.
Holcim, post the listing in the U.S., so the Holcim, Holcim that remains here, is expected to remain included in the Swiss Market Index. The ranking is probably gonna be slightly different, but the company is big enough. It depends on the trading volumes, of course, but for all we can see today, we expect it to remain included.
... We're gonna have tailored capital structures to support value creation of both companies. Jan already explained that in detail, but both companies will have sufficient capital structures to be able to do their investments, to be able to remunerate the shareholders, and to drive the business for growth and for value creation. And we're gonna unlock the value by creating two distinct and compelling investment profiles with very attractive shareholder returns. Now, our financial results of 2023 are only gonna be announced in about four weeks time, but when you look back to the nine-month mark, you saw that we are in a unique position of financial strength.
So this, for us, is an ideal point in time to do this transaction, because it puts us also in a situation to equip both companies with the right and sufficient capital structure, but also to support the process as we go along. We have enough firepower to support the share price and to support the success of this process as we go along. So not only from a strategic standpoint, this is the right point in time, we feel that also from a financial standpoint, this is the ideal point in time, because we have the means to do this process. So we're coming from a position of strength, and we're very excited to do this now. With that, I will say thank you for listening so far, and we hand over to Bénédicte to guide us through the Q&A. No?
Absolutely. Good morning, everyone. I am Bénédicte Mayer from the investor relations team, and I will be moderating this Q&A. A few technical elements here. If you would like to ask a question, please click on the Q&A link, which is visible on your screen. And if you are joining us by phone today, you can ask your question by clicking or pressing star one four on your device. And if you would like to withdraw from the queue, simply press star one five. So, with that, we'll be waiting for the first questions. Maybe I will repeat a few technical elements. Again, you have a link that you can click with the Q&A icon to get and follow the instructions. And, you can also ask your question via phone. For that, just press star one four on your device.
We will now open up the line, and the first question is coming from Cedar Ekblom, from Morgan Stanley. Cedar, the floor is yours. Good morning.
Good morning. Thanks very much for taking the question. First question, could you talk about the costs of the split? Jan, you spoke about how the business in the North American region already has five R&D centers. It's got its own legal and financial structures, but are we going to need to see significant incremental holding company costs, or, sorry, head office costs, incurred in order to build that business out? And are there any dis-synergies that we need to think about? Maybe, Steffen, that's a question for you around tax costs to do the deal. So that, that's the one question. The second question, could you confirm if your Mexican business will sit with the North American assets or if that will go with the LATAM portfolio? And then finally, can you talk about the assets within the remaining business that are not within Europe?
In the past, you've spoken about a desire to maybe exit some of the emerging market regions within that portfolio over the medium term. Is that still part of the agenda, or are we now actually saying that all of the assets in the ex-North American business are cool? Thank you.
Hi, Cedar. Good morning, and thank you for the question. So, your first question on the transaction cost or the any carve-out costs, I think we are in a unique position here that over the last years, we have already positioned the operating model that we run the company regionalized. So actually, we, we don't plan any headcount reduction. We will not announce any restructuring because we can do this in the normal course of business. And also from the setup of the company, we have our North American assets, lined up in a, in, in a good holding structure, which also makes it for us, quite simple to do this U.S. listing and the carve out, and, and we will provide more details in the course of the transaction.
We have to, of course, still work on making this the most efficient transaction to benefit, yeah, especially the shareholders. On Mexico, Mexico will not be part of the U.S. listing. It will remain a strong part of our Latin American business. We of course looked at different options here. We believe to keep North American and a pure play, a pure play in U.S. dollar-based business is a big advantage going forward, and we are best handling Mexico with the currency and also with all the emerging market parameters, best with our strong leadership in Latin America. On the emerging market, I think we have done our transformation.
We are, we have divested a significant number of countries, most prominently India, but also Brazil, Indonesia, Malaysia, and, and I think we have done here 80% of the transformation. When you look at our country positions we are having now, this is where we want to be, including emerging markets like Latin America, which are more than emerging markets. They are developed markets, where obviously we have very strong returns. And I think we are where we want to be from the country mix, and very, very happy. And you can see that also from our earnings profile that, that we have selected the markets which have, high returns for Holcim in the future.
... Thank you, Jan. We can go to the next question coming from Brijesh Kumar from HSBC. Good morning, Brijesh.
Hi, good morning, and team. I have two questions. The first one is on when you thought about splitting the company, have you thought about kind of instead of splitting to kind of take the listing to the U.S. and then to move the listing to the U.S., was that an option? And what are the kind of pros and cons you found out in that? And the second one is coming back to the residual business, which is, I mean, clearly on X growth now. And you talked about couple of divestments.
You, you, have done it, but the reality is that quite a few assets in Africa, Middle East, and Asia, that is suffering from overcapacity, and you probably would have tried to achieve that as well, but that hasn't been successful. So in that scenario, what's the future for the rest of the business will be?
Hi, Brijesh. Yes, thank you. Look, of course, the board of directors together with the management, we have looked at all options going forward, and we believe the pure play listing has all the advantages we need to make it a $20 billion business. So we don't believe it's an option for us to do a co-listing or something just for some share price considerations or something. We believe the strategic setup of creating the largest pure play building company in the U.S. has a huge advantage. It allows us to strengthen our strategic priorities for the market requirements. It's a growth market, so to get the infrastructure projects, be the leading supplier on onshoring and also focusing on the housing needs, that's a big advantage.
At the same time, in Europe, we have a different strategic priorities, where decarbonization, sustainable solutions, will be driving our growth and our returns and not the volumes. I believe this is very strong from us, that we have this distinct two investment equity stories, with different strategic priorities, about strong earning profiles, and this is what we wanted to create. On the divestment side, as I just answered to Cedar, I think we are 80% where we want to be, so that doesn't exclude that we have a few more divestments, but in principle, we have done the transformation we intended to do from a country viewpoint.
We will now take the next question from Martin Hüsler from ZKB. Good morning, Martin. You're now live.
Yes, thank you for taking my question. I have a question on the new Holcim, so the ex-North America business. I think you expect something like 4% sales growth in the future. First of all, is this an organic indication? And secondly, I think you mentioned on the Capital Market Day about decarbonization for Europe, a growth of at least 4%. And I was just wondering whether this means that the regions outside Europe don't grow stronger than Europe, which usually I would expect. Can you tell me if you agree to that, or how do you see the growth outside of Europe for the non-North America business of Holcim?
Hey, Martin, good morning. Yes, look, you always have to see when we dig, when we give guidance, we give targets. We do this in a very responsible way at Holcim, and we have delivered every year all our guidance. So you can just see our numbers on a conservative or proven base. Your observation is, of course, correct. We expect significant growth from the sustainability here in Europe, especially. So the growth number is actually above 4%, so... and it doesn't include much acquisitions. So we have quite a positive outlook on the growth, and then, of course, we have Latin America in there, emerging market growth stories. So we say bigger than 4%, and that's a number we can achieve.
Okay, well, understood. And then maybe adding to that, I think you, you're mentioning, for Holcim, Europe or non-North America, that, in solution and products, it's more focused on advanced mortars and insulation systems. Does this then mean that Roofing for Europe is not really a strategic growth path?
Yes, Martin. Look, in Europe, they have built up a successful base for mortars, for refurbishment, for facade system. It's a great business, and this is already a CHF 600 million base, and this will be the, I think, the prime focus to expand. They also have a smaller Roofing business, maybe CHF 250 million, which is another platform. So we will, as a Holcim, continue to grow Solutions & Products , but with slightly different priorities compared to North America.
Okay, thanks a lot.
Thank you, Martin. We will go to the next question from the line of Gregor Kuglitsch from UBS. Good morning, Gregor. The floor is yours.
Thanks for taking my questions. I've got a few. Can I just probably a bit on the growth in the U.S.? I think you sort of have a well north of 10% EBIT kind of CAGR forecast or target.
Just want to understand how much acquisitions you bake into this, and whether part of the idea is that you kind of, you know, obviously get a hopefully higher valuation in North America, and that you can use that as currency. Is that sort of part of the idea here? Just give us a little bit more color. How do you get to that kind of growth target of, I think, arithmetically implies more than 12% annual EBIT growth. Secondly, as I mean, I appreciate, Jan, you're going to oversee the separation, but I suspect, or maybe I'm mistaken, you won't be running the U.S. business. So can you give us more, a bit of a sense who will be in charge of the U.S.?
And then finally, I think you were quite clear, no, no real separation costs and so on. But, but with tax, are you, are you thinking there could be a tax issue here, capital gains or, or, otherwise to consider, or, or, too early to say? Thank you.
Hey, Gregor. Look, we obviously are very optimistic in our projections for the sales growth in North America. You can expect this number, which is, I think, above 8% annually, is strongly focused on organic growth. We have now all the technologies. We have 871 production sites. We invest in more sites, and this will be complemented by bolt-on acquisitions. We like to welcome family-run businesses into our operations, which we have been doing successfully. And so, so the above 8% sales growth is based on strong organic growth, plus bolt-on acquisitions. We don't have transformational larger transactions in sight. So this is, I think, also a solid base here. I think you ask about the currency. I think, again, it will help us to be a U.S. dollar consolidating business.
So we have our whole flow from customer to suppliers to financing to acquisition, U.S. dollar based. I think this is quite a advantage for us going forward, and we will benefit from that. You ask about myself. Maybe we also have the announcement of the CEO succession, and I'm, I'm very proud here to, to have Miljan taking over already in May. This will give us extra power to run the company. Miljan has promised the board he will make 2024 the best Holcim year ever, and, and of course, we support that objective. And then I will have time, as the chair of the company, to focus on making this listing in the U.S., a real success stories.
So we have to, from filing all the documents with the stock exchange, to defining the best leadership team, to defining the best expert board of directors, there are a lot of steps to be done, and I'm very, very happy to do that for the company. You have to see myself, I'm the first servant of the shareholders. Always saying it's never about myself. This is some people are asking me: Why do you make two companies? And I said, "Well, I don't have the ego to be to be the king of an empire. I have the ego to make the most successful shareholder return businesses," and that's what I'm doing.
At the end of the process of the listing in the U.S., we're probably gonna have two chairs, one of each side of the Atlantic. We have not taken a decision, the board have not decided yet, and there's no need to decide this yet, but I will most likely be one chair and not two chairs, and I'm very happy to do this as the first servant of the company. With this, I give over to Steffen for the tax question.
Yeah, thanks, Jan. Look, hi, Gregor. There are many different ways how you can go about the structuring of such a transaction, also where you domicile the company. We're working through this, and we're gonna communicate this at a later stage along the process. But what obviously you can be sure about is that tax considerations are one key element to taking this decision. So tax will be one key consideration in how we structure this precisely.
Okay. Thank you.
Thank you. I would like to remind you just a few technical elements. If you're joining us via the online tool, please click on the Q&A link. If you would like to ask a question, you will then be able to follow some instructions. If you are joining by phone and would like to ask a question, please press star one four on the device. We will take the next question from the line of Elodie Rall from JPMorgan. Good morning, Elodie. Please go ahead.
Hi, good morning, everyone. I have a couple questions as well, of course. If you could first start with giving us a little bit of an idea about the initial capital structure and leverage of both entities at first, when once the listing starts. Second, I was wondering if you had start thinking about index configurations. So you told us about the SMI, but for both entities, have you done some work? So, for example, in the U.S., do you have any hope and timeline for entering some of the major US indices, like the S&P? And second, for the European entity, do you anticipate any flowback risk in Europe or selling by tracker funds? Thank you.
Look, I think we are really in a position of strength. We have not only a high cash flow generation, we have low debt, so we have a lot of headroom to make winning capital structures for both companies. In addition, we're gonna have also quite cash to make this a smooth process by supporting share buybacks or whatever is needed. So we are really in a very strong position, and this is why this is now the perfect time to start this project. On the flow back side, there's a lot of discussion on flow backs always, and this, for me, is always a short-term thinking. Of course, I would say we have change in the shareholders, which is not only anticipated, which is welcome.
Most prominently in our U.S. listing, we are at the moment not able to attract these large U.S. funds who are focusing on U.S. companies, who want to stay in the U.S. dollar, and who want to have pure play companies in the U.S. market. So we expect a lot of inflow from those type of investors, and I'm very much looking forward to this, and we will manage this, I think, very successfully. Maybe as I hand over to Steffen, he can talk a little bit about the indices and about our intention for capital structure.
Yeah, so hi, Elodie. For the indices, we're today included in the Swiss Market Index. I think we rank number 9 today, if I remember right. We expect to remain included. We'll probably rank number 14, 15 then, but still, we're still gonna be an SMI company in Switzerland, given our size and our trading volume. In the United States, of course, it is key to be listed in the S&P 500, for example. There are 7 or 8 criteria that you need to fulfill in order to be eligible for listing, and then the S&P board takes the decision. It's at their discretion, so it's not an automatism. They take the decision. But when we look at those 7, 8 criteria to be listed in the S&P 500, we will tick all boxes.
A pure-play American 100% listing is one of those boxes. So one reason why we chose this structure of a full separation is because we tick one of the boxes for the S&P 500 listing. For the capital structure, we said it before today, we have a very comfortable BBB+ credit rating. When you make the math, we're way above the upper end of that. We do have the intention to give both companies an adequate capital structure with an investment-grade rating and then firepower to invest in the business, in CapEx, in M&A, but also to remunerate the shareholders and to mitigate potential impacts from flow backs.
So we think, and I said this at the beginning, given our financial position today that the company has built over the last months and years, we think we're in a unique position to do this now.
Thank you, Steffen.
Thanks very much.
Thank you. We will now take the next question from Remo Rosenau, from Helvetische Bank. Remo, your, your line is up.
Yes, thank you. I would like to come back on the solution products division. I mean, roughly how much will be left in terms of sales after the spin-off, out of these expected CHF 5.8 billion sales in 2023, you know? Do you know that already?
Remo, good morning, first of all, and again, our strategy to build up this new complementary leg of the company will remain, and we are very happy that we had such a rapid expansion. Now, you rightfully see that in the U.S., it's already one-third of the business, so we have achieved our target of this balanced portfolio, and in Europe, we are not there yet. And we will give you the final numbers at the annual result presentation. We don't. We have a blackout period now, so that's why we have to limit a bit the financial information, but you will get the data in four weeks time. But it will remain a part of the strategy in Europe.
Of course, in North America, we are already very happy to have achieved such a strong position.
Okay. Then, my second question: do you already have an idea about how the spin-off will impact your CO2 emissions statistic in terms of emission per unit of sales?
Okay, Remo, we also need to talk about this later. I will take up this point, and let's talk in four weeks' time, and we have all the final data. You have seen that, for 2023, we promised an over 10% further reduction in CO2 per sales. I can share with you, we are far beyond that, and we will give you all the data with the full year results.
Okay, my last question. You decided to do spin-off with the listing, not an IPO, would also have been a possible solutions. Did you consider an IPO by, you know, taking in the money and then distributing it to the shareholders in some way? And if so, why did you decide for a spin-off?
Look, the IPO is depending on certain market condition. That is not a safe thing to do. We of course discussed the IPO and, but we want to—one message today is clear: we do this for the shareholders. So a spin is clear. That's 100% return to the shareholders. If we were to do an IPO, we discussed that we would give also back the money through share buybacks or something, but... But this is our number one priority. We looked into the IPO, and it's a limited opportunity due to market conditions. We will come back with the details of the transaction structure later this year, where we also then will finalize exactly the dates and what's gonna happen.
Okay. Thank you. That's it for me for the moment.
Thank you. Let's move on with the next question, which is coming from Ebrahim Homani from Crédit Mutuel. Ebrahim Homani, please go ahead.
Hello. Thank you very much. I have two questions, if I may. The first one is about your CapEx and cash flow generation, which will be the split between the two entities, as you have maybe more carbon reduction concern in Europe. And my second question is about your twin listing. Do you intend to keep the twin listing indefinitely, or is there maybe a possible strategic maybe your concern about your divestment of some of your European or emerging assets? Thank you.
What was the second one?
So, Ebrahim, could you please repeat the second question? We could not hear you clear.
Yeah. Sure. As you have now two listing, two listing, you will have two listings. Do you intend to keep two listing indefinitely, or is there any possible, is it possible to think about the divestment of some of your European or emerging assets?
Hey, Ebrahim, good morning. Yes, look, I start with the second question. We talked already a little bit about this earlier. I think, we, we have done significant divestments, most prominently in India, Brazil, Indonesia, Malaysia, which was also a driver for our financial strength as we were able to divest them at very good valuations. I said before, I think we are 80% through the divestments or through the geographic transformation, and that means I'm not excluding that we're gonna have some further transformations on the portfolio. But basically, we are very happy with the countries we have selected, and you see this from our results. With such a strong earning profile, it confirms that we have selected the most attractive markets for Holcim.
On the CapEx side, look, we have been, I would say, not CapEx discipline. We have been very CapEx smart. We have done all necessary investments to grow the company. We kept it around CHF 1.4 billion in the last years. And you can expect one thing from us, we are only doing investments with significant returns. So we have all our investments have a ROIC of 20% or higher, and this is also key when you look at our financial targets, where we were on a low ROIC, if you remember, a few years back. And then the target of our strategy is to be double-digit in the ROIC, and we are very well on the way to achieve those numbers.
So, as of today, I cannot give you a CapEx split of the two businesses, but you can assume that will be very high return investments. And per se, I think we have so much organic growth investments in North America, so many opportunities. In Europe, we have a lot of sustainability investments, but which also will pay off with value-added solutions. So I'm not sure how the CapEx will be more intense on what side of the Atlantic, but we give you more data once we go through the process. Already in four weeks time, we can discuss and review what happened in 2023, also on the CapEx side.
Okay, thanks.
Thank you. The next question comes from Ross Harvey at Davy. Ross, your line is live.
Thank you. Good morning. So my question is about the period from now until H1 2025. So I know the strength of the balance sheet is a key pillar for the transaction, and I know you're targeting investment grade for both businesses. So do you need to pause acquisitions until the transaction happens? Or what headroom do you have to spend money on opportunities in 2024?
Hey, Ross. No, you know, we are in full swing. I mean, there is no, there, there's no stopping or something, and I'm, I was, yesterday already, I was addressing all our 200 senior leaders at Holcim, and while, like always, we give them a full, transparent overview on what's happening, their job is also very clear: 2024 are gonna be a record year for Holcim. That's what the Holcim team is working on, and that includes, of course, acquisitions. I think we had a record number of bolt-on acquisitions in 2023, and also this year we have very interesting opportunities in the pipelines. So there's nothing is stopping us. We make sure that, the chairman of Holcim is leading this U.S. listing project, and the leadership team of Holcim is delivering a record year.
Maybe, maybe I-
Excellent.
Maybe I can add to that point. When we said we want to, we want to achieve investment grade credit rating, we don't expect to go down from where we are today. Let's make this very clear. We're in a position of financial strength.... And we will be able to do the M&A, we will be able to support the process without going back in the credit rating. I think this should be, this should be clear. Just to clarify that point.
Yep. Thanks, both.
The next question comes from the line of Yassine Touahri from On Field. Good morning, Yassine. Please go ahead.
Yes, good morning. A few questions. First question would be on your capital allocation strategy at Holcim, excluding North America. I think you're expecting to generate free cash flow of CHF 2 billion, going up to CHF 3 billion. Should we assume that you would be considering to give back half of this free cash flow to shareholder, which is approximately what you've done over the past five years? Or could it be higher? That would be my first question.
So, you asked if we will give half of our free cash flow back to our shareholders. I didn't fully understand the logic of your questions. Could you-
I think if we look at the free cash flow allocation over the past five years, you gave approximately half of it to your shareholders through dividend and share buyback. Do you have any metrics to think about how you're going to allocate this free cash flow between return to shareholder, between dividend and share buyback and between merger and acquisition?
I think. Thank you, thank you for clarifying. I think it would be premature to go into that level of detail today, right? I think we said, keep the credit rating, have firepower to do both investments in the business in form of M&A and CapEx, be able to support the share price throughout the process. Now, the exact percentage of how much of the free cash flow goes back to shareholders in each of which company is a bit premature. We will come with that detail as we get to the Capital Market Days in the second half of the year. But I think for now, we should rest reassured with the cornerstones of the capital structure we gave you today.
Also, rest assured, with the financial strength of the company we have, that we're able to deliver those cornerstones. The exact details will come out later.
But also rest assured that-
Previous percent-
We are very proud, we are very proud of our cash returns to our shareholders and 50% of cash flow. I see no reason why this shouldn't be 50% going forward. We talked already a lot about financial strength, high cash generation, and very solid balance sheet. So don't expect from us that we lower the cash return to the shareholders.
Then the second question on your managerial position, Jan. So there will be two companies. Currently, you will be, like, chairman of Holcim. Would you consider having a position at the board of both companies, or is it too early to say?
Yes, Yassine. Look, first of all, we have to make this U.S. listing a huge success, and this is my responsibility. And then once it's fully spun off and we have two independent champions, we will also need to separate the board of directors, and that means whatever role I might have in the future, it will be with one company and not with both companies. No reason to speculate now. I'm the servant of the company and the shareholders, and I will go where I'm needed, and I will go where the board decides. So, too early to make any decisions. For now, I'm focusing on making this a big success.
And then the very last question, which is a bit more technical. Would you expect any one-off costs related to this US listing? And have you quantified the additional costs on a recurring basis to have a new Investor Relations department and to take care of this U.S. investor situation?
Yeah, yeah. No, we do not anticipate any major one-off costs, right? Okay, we're gonna have some advisors, the usual people that you need in order to make something like that happen. That's standard, but we do not expect any specific one-off costs. So when you look at our company today, we're practically ideally placed today already to execute such a transaction, because our head office is extremely lean. We have all our operations out in the countries and in the regions. Our structure in terms of shared services, IT, all of these things, they're already very regional. We're able to flip the switch relatively fast and implement this regionalization from a managerial, structural, and technical standpoint. So we see very little one-offs.
Here in the headquarters, as I said, it's relatively lean. So, maybe one or two people in one or two departments, we're gonna not need. But there's not gonna be any big program or so. No one-off costs.
Thank you very much.
All right, let's, let's take our next question from Arnaud Lehmann from Bank of America. Good morning, Arnaud.
Thank you so much. Good morning, everybody. My first question is on the valuation of the entities. There was a number floating around this morning, $30 billion for the U.S. business. I don't know if that came from the press, from your bankers or from yourself, Jan. So can you comment on the $30 billion? And if you don't mind, also give us an equivalent for the Swiss entity as well. That would be excellent.
Hey, Arnaud, good morning. Yes, look, we are not—I'm not competent to talk about valuations. I think, foremost, we are doing this creation of two champions from a strategic viewpoint, that we can sharpen the strategic profile, we can accelerate the growth of both companies. We do this for the future of both companies. At the same time, we believe we have also more compelling profiles for our investors. I talked about it before. I expect a lot of inflow from U.S. investors, very keen to welcome them in our U.S.-listed company. So we expect, of course, as a second aspect, we expect quite an uplift in the valuation. We don't provide any numbers, of course.
I think it's a bit your job, Arnaud, to come out what Holcim is worth in the initial phase, and then what is Holcim worth if we execute these accelerated growth strategies.
Fair enough. I'll, I'll work on it. Thank you. My second question is on Holcim Switzerland, or ex-North America. The entity is going to lose most of the product diversification, because all of the Roofing in North America. You mentioned, you talked a little bit about buybacks and bolt-ons, but should we expect large transformational M&A from Holcim Switzerland?
Look, we have a very strong business with Holcim. You saw the data. It's a CHF 17 billion company, will be listed in the, or continue to be listed in the SMI, high cash generation, and a very good growth profile going forward. We have included, we discussed this with Martin earlier, there are some bolt-ons included, but mostly the growth target is based on organic growth, and then transformational is always possible. Keep in mind, this is also a question of the opportunity. So, and we have been super disciplined with all our transactions, be it on the transformational one, be it on the bolt-ons one, be it on the divestments.
We make clear that we do this in the smart way, and this is one foundation of our big financial success, that we did this whole transformation. I think we did, in the last five years, 94 transactions at Holcim, and we have done this, obviously, in a very efficient way. And this you can expect from us going forward. And transformational, we have to see what comes along.
Thank you for that. My third question is on Holcim North America. Now, obviously, we're going to zoom a lot more on those operations, and you're trying to give us some sales split, but it would be helpful as well to have maybe the split of at EBIT level between Cement, Roofing and Aggregates and Ready-Mix. Maybe the share of Canada in North America, and some data on Aggregates reserves would be great.
Absolutely. Look, I know I can give you just a bit of background right away. So I, of course, appreciate the fact you want to have more data, and we will provide more data throughout the process. Now, what you can already see from the data we provided is that it's a high-margin business. So we are above 27% EBITDA margin for this $11 billion+ business. So there is no low-margin business in there. We have, I would say, the most successful businesses in the North American building market. So you can see that already. And is it in the U.S.? Is it in Canada? Is it whatever one of the three segments? We are generating already more than 27% EBITDA, and we are targeting a further increase going forward.
So you can see that already, and you can be confident. On the reserve question, it's a great question, Arnaud. We're going to give you all the details. I can just tell you, it's a great number, and I don't want to give you a wrong number, but we are on par with the leading aggregate companies in North America when it comes to reserves, when it comes to brownfield investment, when it comes to greenfield investment. And I'm super excited to put our leadership team on stage to demonstrate how we are, we can be leaders also in this segment, which is one of my favorite segments.
Very good. Thank you so much. Maybe a quick one. Congratulations to Miljan Gutovic for being the new CEO of Holcim. Can you give us a bit of background on the board decision to name Miljan as CEO?
Look, I, the board is very, very satisfied with the decision. It was always important to us to promote internal candidates first, who know the company, who have been successful, who will be successful, and who can take over with no delay. So we're very happy we have Miljan. It's a, it's a PhD civil engineer. I couldn't ask for a bigger expert in building to bring Holcim into the next level of building solutions. He's very passionate about this. This will be good for the company. He has run already two regions. He started Middle East Africa, now he was running Europe very successfully, and this is an ideal ideal candidate with the ideal talents. And I'm personally happy that we have someone who can run from day one and who promised us a record 2024.
This is, I think, an ideal combination, and then I have time to work with my colleagues on the board, and then especially I have this project which will occupy a large part of my time.
Very clear. Thank you so much.
Thank you. Before we take the next question, I would like to remind you that if you are joining through the online platform, you can ask a question by clicking on the Q&A icon and following the instructions. If you are joining by phone and would like to ask a question, press star one four. The next question is coming from the line of Glynis Johnson from Jefferies. Good morning, Glynis.
Thank you. I have two, if I may. The first one just in terms of the financials. In terms of the overhead costs, the corporate costs, should we assume that the part of that that's attributable to the North American business is proportionate to revenue? Is that how we should allocate it?
Yeah, Glynis. Look, we are very lean at the headquarters. We have already a lot of the functions, the support function, are regionalized at Holcim, so we actually don't amass the corporate costs. You can just take them by region. It's not a very significant number. Or you can maybe take a larger part for Holcim and a lower part for North America. That will be probably more accurate. We're gonna give you more numbers in due course, but this is nothing which... As we said before, we don't plan any restructuring. We don't have any carve-out exercise.
This is gonna be a very simple listing in the U.S., and our people working today, they have full workloads going forward, so we don't have any restructuring we are looking at. That's the most important, besides, of course, your wish to fine-tune the margins and the outlook by region. I understand that, and we will give you more data, but for us to make this the two most successful companies, it's important that the resources are at the right place, and this is where they are.
Thank you. And the second question is just the background to this announcement. Has it always been the intention to split off the U.S. assets? Is this something that Holcim is just being nimble on because you've seen what others have done? And I guess I'm trying to put that in the context of, as Solutions & Products used to be combined within North America. This is the first year when actually you've separated it out for us. Is this a turnaround from what you expected to do?
Well, I think it's a natural evolution of our strategy. Like we talked about before, we have already regionalized the company to a far extent. We have been more than successful, especially in North America, where we need now to organize for the next chapter of growth. So this is a natural evolution, and of course, the board took all the time needed to discuss, define, and we looked at all different options, and I think we come out with the most attractive one.
Thank you.
Thank you. The next question come from Harry Goad at Berenberg. Harry, please go ahead.
Yeah. Hi, good morning. A couple of questions from me, please. Firstly, you talked very positively about the outlook, the midterm growth outlook for US construction, and I imagine that was a key rationale for this action. Does the prospect of a presidential election in the second half of the year, anything about unwinding some of these favorable policies concern you in any way? And then the second question would be, when we think about, I know you said it was predominantly organic growth in terms of your thoughts on U.S. growth, but where you will be making those bold acquisitions, would this be primarily focused in Solutions & Products , or would you still be interested in traditional sorts of Aggregates, Ready-Mix type assets as well? Thank you.
Hey, hey, Glen. Hey, Harry, thank you for the question. Look, in North America, I think the current president has followed up on the economic policy of the past president, and while maybe they, they communicate differently, the economic policy has been pretty much the same. And, so the former president, who pushed for reindustrialization of the U.S., who pushed also for infrastructure programs, he had in all his campaign a big push for big infrastructure projects, and the current administration has then put this all in laws in the big bills, and has fully continued with the policy, even in a more stringent way. So, so we actually saw, first of all, no change from current administration to the past administration.
And then, I believe, looking forward by, again, all the debates you might have and different styles you have, I see that all these programs are strongly supported. You see already in our slides, we have already secured more than 100 of the infrastructure projects, which are fully funded, and I think this reindustrialization of the U.S. is going in full swing and will not stop with whatever outcome we have in the November elections. Your question about the segments, look, we talked already about Solutions & Products . We talked about the Aggregates. We can talk about the Cementitious products, and we think we have a unique setup for the customer with all three segments.
When you look at our overview on these 871 manufacturing sites, we are super well positioned, and we want to grow in all segments. We want to make money in all segments, so we are not excluding any expansion, or we don't limit ourselves in the expansion of those three segments.
Thank you very much.
All right. Let's go to the next question from the line of Carlos Garcia from Bestinver. Good morning, Carlos. Carlos, we can't hear you. Maybe you're on mute. Okay. All right, so let's go to the next question. I think we have some technical issue with Carlos. So the next question comes from the line of Ileana Hagen from APG. Elena, please go ahead. Elena, we can't hear your question. All right, shall we take the next call? So let's take the next one. The next question is coming from Holger Frisch from ZKB. Yeah. It seems that now we have some technical issues, so we'll just pause for a moment. Are we ready to take the next call?
So I would like to remind you, if you would like to ask your question, we're almost at the end of our session, but please, use the right function on your phone, star one four, if you'd like to ask a question, or the Q&A link, which is also available on the online tool. All right, so the next question comes from Darren Hook from MUFG. Hi, Darren.
Hi. Thanks for taking my question. So it was obviously reassuring to hear you expect to retain your ratings, your current ratings. But when I look at the flexibility within the S&P ratings, for example, you know, it's relatively limited compared to where it was, that's for sure. So can you maybe be a bit clearer in terms of that ratings commitment? So if you need to, would you be prepared to allocate capital to ensure you maintain your high BB B ratings, or under the right circumstances, would you allow it to drop one notch temporarily? And that takes me on to the next part of the question, because obviously, the business risk profile is gonna be weaker, you know, when you look at it.
You know, 1/3 of your sales, I think you predict or you know will be divested, and it's North America, leaving you more exposed to emerging markets. So, you know, you'd assume the capital structure has to shrink. So can you confirm that, you know, you would assume you're likely to take out some of the or a chunk of the debt currently sitting at the Holcim level? And the final question would be just your understanding as to whether you can confirm you don't believe you require bondholder consent for the disposal of what is a very material business. Thank you.
Look, Darren, I mean, just to be clear here on the matter, we are fully committed to BB B+ credit rating for both entities. And for us, this is rather comfortable to achieve. We are already far beyond the requirements for that, and there's no reason for us to change it. We still have a lot of headroom for capital allocation, capital structure decisions. But I think the BB B+ , we of course calculated already in detail. That's a number one priority for us and, but doesn't hinder us because, again, we have a lot of headroom here to... for capital allocation decisions going forward. Stefan, do you wanna add something to this?
No, Jan, you said it. We are committed to a strong investment grade rating, which means BB B+ for us. We're acting from a position of strength. It's absolutely right.
All right. Shall we move to the next question and take it from Bendo Gallica from LKB? Bendo, your line is live.
I guess our session is getting too long. People are maybe already-
Okay
H ave more important things to do. Again, I like, from my side, to thank you all. It was very important for us to give you the first-hand information on this planned listing in the U.S. Please now, don't be shy to reach out to you. We are available for you to clarify and very happy to take you along all the process over the coming months. Also, I like to remind you, we have in four weeks' time, we have an exciting day on our full year results, 2023. We plan this as a personal event in the Kunsthaus in Zurich, and it would be my delight if you could all come to give us some quality time together to discuss the achievements and the future of Holcim.
Please make sure you put our full year results in your calendar, and I hope I see you all in person.