Good morning, and welcome to the 2020 result presentation of LafargeHolcim today. I'm very happy to have you all here with me digitally. I'm here in the studio together with our CFO, Geraldine Picot. We firstly would like to run you through our results, and then we go to our Q and A session. Well, 2020 was a very challenging year, I think, for all of us.
I'm very proud. Our people managed this so well. We kept everyone safe and healthy. And at the same time, we also took good care of our business. You see in our results that we had a very strong momentum in Q4.
Net sales were growing again, and operating profit was growing over proportionally. This is a result of demand, which is coming back fastly in the building material spectrum, and it's also due to our action plan, health, cost and cash, which helped us very strongly to reduce the cost, increase the cash flow and come back on growth track. As a result, we have a record free cash flow, over CHF3.2 billion achieved in 2020. And following this, we had a further strengthening of our balance sheet, and our net debt leverage is now as low as 1.4 times. That's also a record new low level achieved in 2020.
Exciting milestone with the acquisition of Firestone Building Products. This is a new growth platform and a new chapter for the company on our way to be the most innovative and sustainable building materials company in the world. Our efforts to become the most sustainable company have further accelerated in 2020. And for example, we achieved the A List ranking with CDP. Later, I talk about the outlook.
We go with a great momentum and a good demand pattern into 2021. Let me just share with you some more details on the results before Geraldine goes into the financial performance in more detail. So it has been an amazing year. You see here again our quarterly results with the big disruption in the Q2 and then a very fast recovery, our cement volumes back almost 2019 levels. Sales even buffed that for quarter 4, and you see also the over proportional operating profit increase.
So I think a very strong shows the resilience of our business and how strong we come out of this crisis here 2020. If you look at one of the reasons we are so strong in the crisis is our branded product sales. You see here the numbers in the second half. We had a volume growth of over 4% for our cement bags, and you see here all the exciting brands we have. This is especially important in the emerging market space.
This also is a very good indicator fear for the running year where we expect this trend to continue strongly. If you look at our action plan, health cost and cash, we already gave you an announcement as early as in March, what we intend to do, number one priority is the health of our people, of our partners, of our communities. That was, I think, very amazing how our people were helping locally, a big plus for us to be a locally organized a company where we can react very fast to the different stages of the pandemic and the different rules we have in our markets. We have then on the cost side overachieved. We promised a reduction of €300,000,000 in fixed Cost, we achieved close to €400,000,000 Also the same for third party products and service costs where we overachieved here our targets for the year.
We have on the CapEx side interesting development. We were after 3 quarters well ahead of the target. And with the strong demand in the 4th quarter, we shifted gears and allowed the companies, of course, to make all promising and necessary investment. That's why in quarter 4, we are a little bit short of the target, but for the right reasons. So all of that enabled us to show an overproportional increase in profitability, which means our price over cost ratio I developed very strongly, and we have increasing margins in all of our 5 regions.
And consequently cash flow on a record level. If you remember, we had a record cash flow already above €3,000,000,000 in 2019, and I'm very proud of the team that we could confirm this performance already in the consecutive year and even achieving a new record of above €3,200,000,000 free cash flow. If you look at the Firestone acquisition, I that's a great new milestone for us. I just want to give you a small progress update. First of all, the business runs very well.
The 2020 results are better than initially communicated to you. This is the same true for the outlook. We are very excited here for 2021, especially with the New President's Biden program in the U. S, Build Back Better, that's an amazing support program For Firestone Products to make buildings more sustainable, meaning more insulation, better waterproofing. So this is really the home turf of Firestone Building Products, and we really acquired this company at the right point in time.
The closing also earlier than planned at the moment. We believe we can even close it next month, end of March. So meaning that April 1, this business is fully in the Lafarge Holcim family. Same for financing, we have already secured very attractive financing conditions for this acquisition. €2,000,000,000 of the acquisition price comes from simple U.
S. Dollar cash and the remaining $1,400,000,000 was financed via 2 bonds. So very well done and going to be exciting part of our future. Hold on acquisitions also accelerated even in this difficult year where to do due diligence or negotiations was not easy to do. Nevertheless, we made 8 Very attractive bolt ons, focusing especially on our aggregates business, adding new quarries to our business in the most attractive markets in the U.
S, in Canada, in the U. K, Switzerland, but also in Australia. Huge acceleration of all sustainability, and I mentioned in the beginning already this very prestigious organization, CDP, they put us on their A list where very few Companies are listed, so that's fantastic. We just became a founding member of the MIT initiative for climate and sustainability. And I'm the most excited about the rollout of our new green products, especially our EcoPact, our new green concrete, which has a 30% up to 100% more sustainable footprint than traditional concrete.
It's a product which is in high demand with our customers, and I'm very proud that we rolled this out from Europe to North America over to India. Good. I think with this, I want to make a last comment about the momentum in a few minutes. And before that, I give the floor to Geraldine, who gives us more details on the financial performance.
Thank you, Janelle. Good morning, ladies and gentlemen. So before going into our full year 2020 results, we feel it is important to give you another view of the Q4 results. And this is actually a better reflection of the prevailing positive business trends. You can see here that our Cement volumes are almost stable compared to Q4 last year.
That on a like for like basis, Our net sales returned to growth at +1.5 percent, and that was driven by a price increase of +2.6 percent in the quarter. Such price increase more than covered the cost, allowing for an outstanding and over proportionate improvement in our profitability. Indeed, the recurring EBIT exceeded 14% on a like for like basis. The group EBIT margin improved by 170 basis points in Q4. So let's now move on to the full year 2020 results, which are a fairly resilient set of results.
Here, Of course, our activity and profits have been impacted by the lockdowns of some construction sites, notably at the beginning of the year. But as Jan explained, we have been always able to adapt our cost and spending in order completely too much and to generate this recurring over proportionate recurring EBIT of minus 1.9% that you see here. We have also made some progress on all the categories of expenses below the recurring EBIT. So we have reduced further the financing expenses. We have also reduced the restructuring expenses, this in the context of crisis.
And we have further reduced the effective tax rate from 26% to 25% this year. And this leads to an earnings per share of CHF3.07. Pushed by our discipline and the cash protection measures, We have generated our best free cash flow ever recorded at above CHF3.2 billion. CHF Swiss francs. And this is coming from an intense focus on our working capital as well as a close management of our CapEx.
Let's now move on to the performance of all the regions. And what you can see here is that the recurring EBIT margin has improved in all regions. The metro market, Europe and North America, yes, have been impacted by COVID, but managed to quickly adapt the cost, have said, and also maintain a very good pricing. All the emerging market and you see the outstanding performance of LATAM here, but Overall, all our emerging markets have done quite well, thanks to the success of our branded products. So let's now move on to the free cash flow and give you a bit more detail on this.
Again, here, despite the crisis, We have been able to generate our best free cash flow ever, even better than the 2019 one by CHF230 million, which was already at an exceptional level. So let's start. You can see the recurring EBITDA was down CHF561 1,000,000 and this is almost entirely attributable to the negative currency conversion. This has been fully offset. It has been fully offset, thanks to the very good execution of our health cost and cash program.
Firstly, the working capital. We have further optimized working capital, as you can see here, by an addition of CHF146 1,000,000. This is coming from The good monitoring of our inventory as well as a good collection on our receivables, which is quite important in the context of crisis. We have also further reduced the restructuring and the litigation and other non recurring expenses. And as said, in line with our commitment, we have limited our CapEx by CHF 370,000,000 reduction.
That leads me to the net debt. Here again, despite the crisis, we have been able to further reduce the net debt. So firstly, as just said, we have the business has generated a free cash flow of CHF3.2 billion, And this is after all leases and after all CapEx. Then we have expensed net of disposal CHF124 1,000,000 mainly on our bolt on acquisitions. We have then distributed CHF1.5 billion of dividend, out of which CHF1.2 billion To the Lafarge Holcim shareholders through the CHF2 dividend and the shareholders of our minority the minority shareholder of our control subsidiaries have received CHF280 1,000,000.
Well, we are very proud to report a net debt below CHF 8,500,000,000 at year end 2020. So this is the leverage, also record level, as Jan said. We are now at 1.4x. It has reduced by 0.1x compared to 2019, which leaves us plenty of headroom to finance the Firestone acquisition and to remain below 2 times. Let me add a few words on our sustainability.
The sustainability KPIs are part of the metrics that we follow as closely as regularly as the financial KPIs. So in 2020 here, what you can see is that our CO2 emission amounted to 5.55 kilos per tonne of cement, And this is an improvement compared to last year. So how have we obtained these results? By implementing several levers. Firstly, we have further increased the use of alternative fuel versus fossil fuels in all of our plants.
You have to realize that we have 20 plants that are today using more than 70% of alternative fuel. Secondly, we increased the use of mineral components to decrease the clinker in the cement production. And finally, we have developed all range of low carbon cement and low carbon concrete products. Jan, as an example, mentioned EcoPact and the EcoLabel. Of course, waste recycled and water withdrawn are APIs that we follow very closely and where we have also improved.
And talking about people in 2020, We have provided COVID support here to our communities, reaching more than 6,000,000 people. So before handing back to Jan, I'm very happy to confirm that we will propose to the AGM a CHF2 francs dividend per share. Despite the crisis, we stick to our commitment announced in our strategy 2022. It will be a cash dividend fully paid out of the foreign capital contribution reserves, and therefore, it will not be subject To Swiss withholding tax for all our shareholders.
Could thank you, Geraldine. We come to the outlook and the guidance, and we are quite confident. We saw the growth momentum already in the Q4, and we see that going into 2021. We have a good demand patterns in all of our regions, good order books. And then in the second half of the year, we are expecting that the stimulus promises of basically all our key markets will hit our order books.
We have summarized a few of the key stimulus programs with the most prominent one, maybe the Build Back Better plan from in the U. S, which is an amazing program and probably will be the biggest infrastructure and housing program we have seen in many, many years in the U. S, we are very excited here. We will benefit from infrastructure. We expect a new highway build, and we are very excited also for our Firestone products for building better, which means more sustainable, and we have the right solutions for that.
Very exciting, very exciting also in the right time where we now make onethree of the company turnover is in North America. So we are, I would say, here at the right time as strengthened with the latest acquisition of Firestone. You see the other stimulus programs from North America down to Latin America, Mexico, Brazil, we listed over to Europe and then over to India, even to Australia. So we're very excited to be part of that build back better programs, which the governments here have announced, and we expect this to hit our order books already in the second half of this business year. Then we look at the other guidance we want to share with you.
We want to now start the Firestone growth platform already from April onwards. We are very excited here to make this a global business. We just announced the global leader for solutions and products, a member of the executive committee. So that's going to be a very big part here of our future solutions and products to develop into a strong foundation for our future. We have then the bolt on acquisitions.
You have seen we were able to do 8 in the year of the pandemic, and we expect now and we target to increase that number to a double digit number for 2021. When you look at the profitability, we think we are fully on track for 2022 targets. Some targets, cash conversion, debt leverage were well achieved in 2020 already. Nevertheless, we want to restate that we will stay financially disciplined. So we expect an EBIT growth of at least 7% for the year.
Our cash conversion will be above 40% debt leverage, as Geraldine explained, we'll keep below 2x. And also the CapEx will go back to €1,400,000,000 but this is the maximum value. Also here, we stay financially disciplined. I think with this outlook, I'm very happy now to start the Q and A session.
The first question comes from the conference call from Mr. Johannes Ritter with FAZ. Please go ahead.
Good morning. If I remember it correctly, you were also very When Tom took over and in reference to his infrastructure programs. Now you're again very excited. What's the difference now with Bayer's program? Could you elaborate on that a bit?
Yes, good morning, Mr. Ritter, and thank you for the question. I think it's correct. When Trump ran for presidency back then. He had an infrastructure program, which was focused on roads am focused on airports.
And you are right, this never really got started under that administration. I think one reason was that actually the economy was running very well. I think that's the big difference we see now we have now a new administration who has to support the people, avoid unemployment and at the same time, make the promises for sustainability true. So that's why we strongly believe that Build Back Better will be executed and will have a big support for Lafarge Holcim.
Okay. Sustainability, I'd like to ask you about that as well. Your share price does not really lift up. Is that due to the fact that your industry is one of the worst in respect to carbon emissions?
I think it's, of course, our target to be the most innovative and sustainable building materials company. We are on the way to achieve that. We just launched our newest low carbon cement and concrete types. We have now a Firestone, the most sustainable solutions for roofing. So we are doing that, but I think we have to further execute here, achieve the results, and then I'm sure we get also the benefit from the share price.
You mentioned that there's a high demand for believe logical, friendly products can give some figures, how high are the sales or where the sales of these products Correct so far.
We will later this year, we will give you a precise figure. But at the moment, we are almost sold out for this new eco products simply because the demand is actually more dynamic than expected is a good thing, and We are very busy to make the right supply chains to provide enough product because we are basically sold out in key markets, Switzerland, Germany, but also in the U. S. After launching these new eco products.
Are clients willing to pay more for these products I
think they pay for the value. I think we shouldn't say they pay more. They pay more because it's a high value product. And yes, is correct that we have a big demand from the consumer. So basically from the house owner, but also from the architects, they all want to have CO2 free buildings, and that's why we are facing a very, very attractive demand for those products.
But are these products more expensive than the normal ones or not?
Oh, it has to be more expensive. It's a higher value. We do recycling of demolition waste, so we have a high content of the products. It's simply recycling of old buildings, old infrastructure. So certainly, that comes with certain costs.
And also, at the same time, we have a leading position with those products, and that's why we can also ask for a premium price.
And are your margins Higher or lower than to you.
That's a very detailed question. I answer you throughout the year, but we have a very good margin situation with the Ecoline products.
Okay. Last question concerning this topic. Is your bonus Your bonus connected to the progress in your environmental targets.
Yes. We have this already since last year. So we were, I think the 1st company in the building materials sector who has introduced targets for sustainability. So I have a target for CO2 reduction, a target for water reduction and a target for increasing recycling of waste. So the chart presented by Geraldine for the targets and sustainability are the targets the all senior leaders globally have in their incentives.
The next question comes from the video conference and is from Ms. Angelica Gruber. Please go ahead, madam.
Yes. Hello, and good morning. Thanks very much. I also have a question on sustainability. So you said you Made progress in reducing your CO2 targets.
And I was wondering whether also COVID helped you a little bit. And then I saw that you're already quite close to your 2022 targets. You're nearly there. So can you do better than your targets? Or will emissions increase in 2021 again?
Hey, Angelica, good morning and thank you. No, we do a fair measurement. So basically, Just you see are also reduction per tonne of material. So we measure this effective per tonne and not because we have for the entire year, we had a reduction in volumes. We don't take that in account.
Our targets are measured by tonne, and that's why we make Very good progress. Thanks for realizing that we are quite well on track for the 2022 targets, I think we basically fulfill all of them except for the return on invested capital where we are close. I hope this is a number we can already achieve in this business here. And then maybe it's time to set us more ambitious target maybe later this year or beginning of next year.
The next question comes also from the video conference and is from Mr. John Redo. Please go ahead, sir.
Hello, Jan, and hello, Geraldine. I've got a couple of questions, if I may. Your outlook is quite positive This year. But I was wondering, also we're not out of the woods with COVID yet and the 3rd wave and new variants. What sort of risk do you see of kind of a 3rd wave kind of dampening demand in the construction sector?
That's my first question. The second one is also you've been quite upbeat about stimulus forthcoming in the U. S. But recall the company in the past was quite upbeat about stimulus in under Mr. Trump and that never actually kind of happened.
So what are your concerns? I mean, Biden's stimulus is actually going to come through on this scale that he wants, it's €1,900,000,000,000 because that's a bit more than Everybody else wants, so how big do you think that's going to be? And do you think it's going to be enough? And then the final question is just you did a few more deals on the M and A from last Pierre, can you give us a bit more guidance on what's the plan this year on the M and A front, please? Thank you.
Hey, John. Thank you. So first, I think on the waves, I think we just are in a wave right now in most countries. The difference to the first wave is that Basically, all construction sites remain open. So we had when we had the 1st wave March, April, May, There were some closures of construction sites in various countries around the globe, and that was disrupting our business, as you can see in our quarterly overview.
We don't see this at this point in time. So even in December, when we went into quite strict lockdowns in many, many countries, Our cement volumes were actually up against 2019. We also see the beginning of the year a lot of lockdowns. Construction remains essential part of the business as defined by the governments, and we do our part to support that and to keep the activities running. On your second question with the stimulus, I think I already answered to Mr.
Rita that, of course, the proof of the pudding is in the eating, and we have to see what's happened. But I would say we have a very precise announcement by the new administration in the U. S, not only for infrastructure, highways and so on, but also for housing and making them more sustainable. I personally would be surprised if this is not going to happen. And but we will see that throughout the year.
I think important to notice that it's not the only stimulus. We have this across the globe as shown to you in the graph. On the acquisition front, first of all, I'm very happy. We put the company on more efficiency, so we did a lot of homework over the last three years, and now is the time to grow the business. And we have done that with bolt on acquisitions, with the Firestone acquisition, but also with launching the new green products for organic growth.
For this year, we have to see what opportunities come up. We are ready. We have a strong balance sheet. However, keep in mind, we keep financially disciplined. We only make deals which make financially sense.
I hope so. But Charles Schwunding, is there any kind of number of deals you might be going in? And after Firestone, is that it on the big deal front or
No, we look, we are ready. John, we are ready. What comes up, we are ready. You look at our balance sheet. I think results are better than expected.
The cash flow will also be strong in 2021 for us. So we expect very solid balance sheet. So we can do many things if the opportunity comes up. If there's no looks like we have no more questions. Therefore, I really appreciate you joined us today digitally.
I very much hope we can meet in person maybe later this year. I think it should be possible. And until then, I wish you happy writing.
Sorry.
Yes?
Sorry to interrupt. Mr. Janisch, we have a question from the telephone from Mr. Philippe Ray from La Jaffee. Please go ahead,
sir. Good morning. I have a question. You will develop the FOURUS Business Segment Solutions products into a strong driver of growth and sustainability, Which return on invested capital can you grow in particular organically with this business? And you will accelerate bolt on acquisitions.
Does it mean that it will orient it Towards rather towards this new business area.
Yes. Bonjour, Philippe. Thank you for your question. We do both. So first of all, we are very excited to have the opportunity now to have a groundbreaking acquisition with Firestone.
So the Solutions and Products segment really is kick started now. We will now have the opportunity to take that U. S. Or broadly U. S.-based business also into Latin America and into Europe.
This will be done mostly by organic growth and also by bolt on acquisitions. We are then also interested to expand into other technologies for our customers, so we are open to add other businesses to solutions and products. At the same time, we have many opportunities to also do bolt on acquisitions for our aggregates and the concrete business. As you have seen in 2020, we did 8 of these bolt on deals, all for aggregates and for concrete. And you can expect this to continue also in the new business here.
As I shared with you, we hope to have an acceleration here, and we are hoping to even have more than 10 deals in 2021.
As you can reach one recent that is capital about 10%
Philippe, can you speak a bit louder? We can hear you.
Can you hear me now?
Yes.
Yes. Okay. You can grow with an above average Return on invested capital, it is a goal of course above double digit return on invested capital And this business area.
Yes, it's correct, Filip. This Solutions and Products business is rather low capital intense. So we are very excited also for organic investments. Even with very significantly low investments, you can make significant impact for organic growth.
Okay. And maybe one last question. You have reduced Substantially, the fixed cost last year, can you further reduce the fixed cost in this year? Which scope?
Yes. I think we made a great progress on the cost in general. The fixed cost we shared with you are more than promised, but also on the variable side, we were able to reduce the cost significantly. We expect those costs to stay on that level or further improve. We have launched this action plan in the crisis health cost and cash, and we continue to execute on this program also this year.
So we expect quite a solid cost improvement and a further improvement of our margins.
Thank you very much, Matthew.
We have a follow-up question from the video conference coming from Mr. Rebo. Please go ahead.
Yes. I just didn't quite catch the back end of Philippe's answer there. Was it about 10 bolt ons you were looking at to do this year? Were they going to be mainly kind of in this Building Solutions and Products area, do you think? Is that the area you should be focusing
So we made progress. We started with the bolt on acquisitions really 3 years ago. We started before a year. Now we made 8 even during the pandemic. So I think our target for 2021 has to be 10 plus bolt ons.
And let me say specifically to your question, and these 10 plus will be for aggregates and ready mix. And for solutions and products, this will be an additional acquisition space we try to occupy.
All right. So but solutions and products, is that going to be a particular kind of focus for you guys in addition, because you say it's very low capital intensive. So is that a priority area as well?
Absolutely. Yes, we want to be the leader in flat roofing systems. And we also have interest to add other technologies. So that's, of course, a primary focus for us.
Okay. So it's going to be about 10 in ready mix and aggregates and then some additional ones on top for the solutions?
There are no more questions at this time.
Good. So thank you again for joining us today, even only digital, and I very much hope we can connect in person later this year. Until then, I wish you happy writing, and stay safe and healthy and look forward to seeing you very soon.