Buzzi S.p.A. (BZU) Earnings Call Transcript & Summary

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Buzzi Unicem First Half 2022 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Pietro Buzzi, Managing Director of Buzzi Unicem. Mr. Buzzi, you have the floor.

Hello. Thank you. Welcome to our semi-annual conference call where we are going to illustrate as quickly as possible our first half results, which has been disclosed and published 2 hours ago, sorry, approximately. Well, you have seen that the first half showed fairly stable results across the consolidation area. We enjoyed, in the first half, overall fairly stable demand in most of the regions, somewhere, as usual, better, somewhere worse. But overall, the demand was fairly stable. And this, regardless the very high inflation environment and a lot of uncertainties and challenges related to the geopolitical tension, particularly in Eastern Europe. We also enjoyed, during the semester, some very significant and sequential price increases, which were the only way actually to somehow offset the production cost spike, which unfortunately, we faced across, again, all countries, somewhere much more, somewhere less but this was quite general. And price increases were particularly strong in Italy, Eastern Europe and also U.S.A. If we look at the margins at the, let's say, price over cost, we were able to almost, I would say, offset the cost inflation in absolute terms. But clearly, also due to the fact that prices have changed so significantly during the semester, the EBITDA margin went down quite significantly from approximately 22% last year to something about 19% this year, so 250 basis points down. So the net sales growth, which was meaningful, as I said, in all regions, did not really translate into higher profitability. We were able to more or less stabilize the cost inflation but it was really impossible to maintain the same level of, let's say, operating profitability. The net cash position by the end of the semester is positive as it was last year. Net financial position is positive as it was last year end of 2021. It improved some versus end of March but it's still lower versus the end of 2021, mainly due to the let's say, working capital trends, which have been quite unfavorable in a sense. And the share buyback and the dividend payment with which they all occurred during the first 6 months. Following the results that we were able to achieve during the first quarter, we also revised the guidance for the full year. And we now expect our recurring EBITDA to be at the level which we mentioned or we described as similar to 2021. What does it mean exactly? Well, it's not so easy to tell but let's say, something closer, which could be something more or something less, according to what is going to happen in many different variables during the next 6 months. Looking now at Page 3 of the presentation that should be already available to you, here, we are showing the volume variance during the semester. So we are down in cement by approximately 4%, positive development in Central Europe. U.S.A, negative, quite negative in Italy, unfortunately, following the second quarter, which was very difficult. And in Eastern Europe, also negative, but with, of course, a mix quite different between the European Union countries and the Ukraine and Russia and Eastern European country, particularly Ukraine, mostly affected by the conflict and difficult environment to produce and sell. Ready-mix volumes are somewhat flatter, more similar to last year. Again, Central Europe up, Eastern Europe, flat. U.S.A. is opposed cement, down also due to difficulties in our distribution, let's say, staff truck drivers difficulties to really find people to deliver concrete to the customer. And Italy is suffering, having cement a little less than cement due to our involvement in some of the infrastructure works that continue to move on and [indiscernible] to those was able to continue. On the following page, we give you an idea about the energy cost impact during the semester. It's important to mention here that we are excluding Russia, so all items, all different periods that you see in the graph are consistent. So we took out Russia across the entire, let's say, time line. Why? Because basically, we don't have this information anymore. So we are receiving information from the Russian business but the information that we receive is purely financial and only the one or the kind of information that we need to complete the consolidation process and prepare consolidated financial statements. But we do not have, let's say, any more available details like the one that we would need to complete this graph and this calculation appropriately. So that said, you see how things change in terms of cost of energy and, let's say, weight of the energy cost on our total revenues. This is, of course, the highest level ever. And even if we would go, of course, to the left of the [indiscernible], we could never find something similar. On the right side, you can see that most of the pressure or the majority of the pressure is coming from the power cost. So the electrical energy cost is showing definitely greater inflation rate than you will but also fuel has been going up quite significantly. As you know, and as far as fuel is concerned, we are in several countries, we do have some kind of natural edge associated with the use of alternative fuel, which we do not have in terms of power incentives, power is power. Of course, we do have some countries where the cost of power has been somehow hedged but not so frequently, and it's not been so common. So we are mostly buying at the spot price, which has been dramatically worsening in the last few months. If we move at the following page, there is analysis of the EBITDA, the so-called EBITDA bridge. You can see that we start from EUR 352 million last year. Volume impact wage for about EUR 20 million negative. Prices, a very significant improvement, EUR 217 million but unfortunately, almost fully offset or fully offset if you consider the volumes by the trend of variable cost and fixed cost. The issue is really more of the variable cost, and in particularly, let's say, raw material, fuel and power. But at the end, let's say, the price recovery has been very significant but necessary in a sense, to be able again to offset this strong rise, this very high cost pressure that we have been facing and we are still facing. Other items are not changing much. They don't have a very major impact on the EBITDA variance. We do have an important, I would say, foreign exchange effect of EUR 19 million coming mainly from the dollar and also the ruble and other, let's say, less important currencies showed revaluation against the euro during this first semester. Another point that is worth mentioning, it's not a difference versus last year, as you can see. I'm talking about the CO2. But it's important to remember that CO2 cost, according to the way we are accounting for, the CO2 allowances and, let's say, free allowances allow us that we have to buy and surrender, let's say, at the end of the period are not still visible in the first half because we are still, let's say, using the allowances that we are granted for free at the beginning of the year. However, these allowances, as you all know, are not enough to cover our needs for the full year. So when we will be enter, let's say, into a so-called short position, we will start to have also a visible, let's say, CO2 cost in our books. Just to give you an idea of the forecast for the full year in terms of CO2 cost, it's EUR 47 million but this will be visible only by year-end. Moving forward, region by region, some more detail about Italy first and then the rest will follow. We had a significant slowdown in demand in Q2. For sure, this was due to a strong inflationary environment, also to the fact that we were forced to increase prices more than what we were initially planning at the beginning of the year or in budget. And it is true that cement demand is mostly inelastic but when the prices are going up in such a way, some kind of impact on the demand does exist. And we started to see some postponement particularly in the field of the private investments. Production cost, again, steep rise. Fuels and power, more than double during the semester versus the same period last year. So we did implemented sequential price increase in Q1 and Q2 but again, with some impact on the demand unfortunately. If we look at the ratio between price and cost, this has been negative. Prices lately are catching up but a lot on the final results for the full year will depend on the grant or not grant of the tax credit, which was, let's say, available until June for the so-called energy-intensive industry. So you see here in the page that the tax credits amounted to approximately EUR 13 million on a total EBITDA of 35% for the first half. So really a very large portion of it is coming from this tax benefit. So also for the full year, the outcome or the outlook for the country is strongly related to this kind of benefit or non-benefit because we are not very optimistic about the volume. The prices, yes, they may go up further, but the impact on the volume, it could be anyway unfavorable. So without the tax credit or confirmation of the tax credit in the second half, the results of the first half are really not meaningful of what could happen in the second or for the full year. In the graph on the right bottom side of the slide, and this is available also for the other region, you see the bridge for net sales. Volume impact, negative in this case and price impact to the, let's say, 17% increase that we enjoyed in the first half. Moving to the U.S.A, this is clearly in terms of, let's say, demand and some less the strongest market we are in so far. We had also in the second quarter after a strong first one, confirmation of the, let's say, support in the construction activity overall but particularly in the residential sector. So cement volumes actually improved almost 3% in the first 6 months. We were somehow penalized in the ready-mix business due to the lack of drivers and also due to the, let's say, our tactics or decision not to let's say, push too much in ready-mix sales because we are anyway running almost stable at full capacity also without the captive ready-mix business. U.S., they also suffer from an overall significant increase in cost items, not as much as in Europe. We are clearly still enjoying in the U.S. a power cost, which is, yes, definitely much greater than it used to be but nothing similar to what we are experiencing in Italy, Poland, Luxembourg or even Germany. But also the fact of being in a very tight supply position, let's say, as a consequence of this was also the higher maintenance costs that we had to bear because of the timing, because of, say, machine running at a very high utilization rate, so this translated into higher cost inflation for fixed cost, let's say, in U.S., which instead in Europe, typically, the inflation we suffered was related with variable cost. Also, staff cost in U.S. is increasing in a more evident way. In general, let's say, not only drivers but lack of labor turnover and salary increases are a challenge that we are facing daily right now. So the U.S. did improve the prices in a quite significant way. There was a first round already in January, postponed to April as far as the Southwest, the Texas market is concerned. And there should be a second price increase available or realizable, let's say, starting from July. Clearly, here, the pricing power of the producer is higher than Europe due to the fact that most of them, if not all of them, are very close to full capacity utilization and imports arising to cover the demand. For how long this will last, it's difficult to tell. There are many indicators that are, let's say, signaling some kind of down going forward. This is well possible, associated with the rising interest rate, the inflation. So we could be, let's say, at the peak of a cycle but our visibility so far for the second half is still positive. And we hope that even if the market is not able to stay at this level going forward, the recession or the downward trend will not be so, let's say, meaningful or so important in the coming year. Important to mention also about the U.S. that more than 80% of our production has already switched to Type 1L, which is the so-called Portland-limestone cement, an important move, both from, let's call it, more environmental CO2 emission standpoint and also in terms of potential new capacity available in terms of clinker, thanks to the reduction in the clinker to cement ratio. The EBITDA margin in the U.S., even if the situation was favorable, suffered from the cost pressure that I mentioned before. So we are actually, in dollar terms, almost minus 10%. And thanks to the strength of the dollar, we are ending the first half at the same level of last year but the dollar impact has been quite significant and should be even more significant in the second half if we remain at this level. Going to the Central European market, Germany, Luxembourg, the Netherlands, as far ready-mix is concerned, strong first half, definitely positive developments across the area. Yes, we started to see some slowdown of demand during Q2 and things may turn worse in the second half but so far, let's say, so far, so good. So the story is not very different when we are talking about the rising production cost, it was very significant here too but if you wish more under control, the reason that I mentioned before, so the high usage of alternative fuel, and also in the case of Germany, a partial hedging of the power cost, which we are still enjoying so far. So pricing was quite solid. And as you can see, we were able to, I would say, fully offset in absolute term, the cost increases. The EBITDA for the 6 months moved from 67% to 69%. We are below last year in terms of margin because the top line is much, let's say, higher, is much greater, but we can be definitely happy about the outcome of this region, at least so far. You see that both volume and prices contributed to the increase in the net sales and EBITDA was at a good level, achieved a good level in the first 6 months. Eastern Europe, Eastern Europe [indiscernible] 2, let's say, groups, positive development overall of the construction investment activity in Poland and Czech Republic, even though when we compare, let's say, Q1 with Q2, clearly, you're starting to notice a slowdown associated with the, let's say, geopolitical situation and the inflation pressure. But both countries closed H1 with favorable cement volumes differential. In Ukraine, we were able, by the end of March, to restart the commercial and production activity only in 1 of the 2 plants, so only in Berlin, which is located in the north area and west of Kiev. Meanwhile, we are still basically idle in Nikolayev in the South. So due to this and due to the fact that any way the economy is clearly in an [ exceptionary ] mode, our sales are basically half of what they have been last year in H1 with a negative EBITDA of approximately EUR 3.5 million for the first 6 months. But let's say that this is a little better than what we were expecting or assuming back in March when the war started. Price increases have been significant across the entire area. And we had a positive contribution from FX, more significant from Russia, from the ruble. But even the Ukrainian hryvnia is giving us a positive foreign exchange impact on our figures. You see that, overall, the EBITDA for the region is up about EUR 9 million and EBITDA margin is the same as last year. So even considering the negative contribution from Ukraine, the region as a whole was not worse than last year. Going to the joint ventures, Mexico and Brazil, let's say, mixed feelings. In a sense that we have seen, for example, in Mexico, a volume trend, which was definitely lower than last year. We closed the first half with minus 12%. But in terms of profitability, as you see on the right, thanks to 2 reasons, I would say, a significant price increase and second, the fact that power cost in Mexico remained at the same level of last year. Basically, it did not change. Let's say, the price increase was enough to offset the inflation coming at this point, mainly from the fuels and okay, the general fixed cost, the general inflation of the country. So I don't think we can complain too much about the Mexican situation, it still remains the key market and a key, let's say, contributor at least to the net results for our company with a very, very strong performance regardless of the decline in volumes. So as we say here, price over cost has been stable start to be slightly negative in Q2 but we think that by year-end, probably cement volumes will recover some and we can confirm the same trend for the full year, also helped by the exchange rate, as you can see. Brazil, also overall favorable results. Of course, here, still the scope changes are playing a big role in the analysis of the results. As you can see, the increase in net sales is almost 70% but like-for-like. So adjusting for the change in scope that occurred last year, we are 13% up. And in terms of volumes, we are basically flat with last year if we consider again the like-for-like data. So demand not particularly vibrant, not particularly strong. We had also some issue with the weather, particularly in the Southeast, a lot of rain in the first part of the year. But it seems that even if we are not moving or going to a very strong year similar to Mexico, we can say that the profitability should remain at a similar level as last year with the help, to some extent, also the exchange rate, the devaluation of the real has been not so important but yes, let's say, helpful in keeping our euro-denominated figures at a good level or at a level comparable with last year. Some more comments about the outlook. I was already making some before when we were illustrating the different countries. Well, we see that H2 in Italy, in Central Europe and also, let's say, some European countries like Poland and Czech could be penalized by a less favorable development in the residential sector. And unfortunately, let's say, the private sector is the one that has to face and there, in a way, the higher financing cost, the rising interest rates and also the materials costs that are still rising, unfortunately, not yet stabilized. And this will be coupled likely with some delay in the implementation of infrastructure plans because also the public player projects, particularly the ones that still have to start, are feeling the impact of the cost inflation and some of the projects that were originally may be budgeted for 100 now are becoming 150 or 200 and this will make the public financing less easy. There was just yesterday, the study by the PCA. Here, I was talking about it in Central Europe but even in the U.S., the study of the PCA, which refers to the so-called infrastructure plan is showing that, let's say, the recent inflation on project cost, there were another impact, let's say, the cement consumption associated with the infrastructure projects that are going to start, let's say, in the future. So if this is the money available, inevitably, in a way or another, either some project will not start or will be postponed or will likely well cost more. But again, if they cost more and the financing is not adjustable, this means that also some consumption will be somehow impacted and the favorable development associated with this project will not be as favorable, for sure, still favorable but probably not as favorable as originally expected. We expect also the selling prices, and we are commenting about the different area before to continue to increase revenue in H2. Okay, I mean, clearly, it's important, I mean it's better than nothing but we are not so interested in inflating, let's say, our net sales. Unfortunately, it's a necessity that we need to focus on and continue to try to achieve but it's just a necessity to be able to offset the costs. So yes, we're inflating the numbers but unfortunately, the profit are not following with the same pace. Production costs, yes, expected to remain at record levels. It is true that in H2 last year, we started to face the challenges of the cost inflation. So we should have in H2, an easier comparison in terms of energy cost. We mentioned except for Italy because for Italy, so far, the power cost has continued to rise quite significantly. So we don't see there an either comparison base yet at least. So to conclude, after 6 months, we have usually a better visibility on the full year. And we think that versus the previous indication, which we are very pessimistic. In particularly about Ukraine and Russia, we can adjust, we are able to adjust our guidance and assume that results could be in line with the 2021 levels. In this assumption, we do consider a strong, let's say, favorable impact from the foreign exchange. -- which has been already there in the first half but if the ruble and the dollar remain where they are now, it will be even more significant in the second half. So okay, we have an appendix with more detail but maybe we can use them during the Q&A session. Well, let me just mention something, if you switch to Page 19, on the cash flow statement, you can see that cash generated from operations and also net cash by operating at is definitely much lower than last year. This is due mainly to the working capital trends. So the increase in accounts receivable was very significant because the prices went up, because the sales revenues went up, net sales went up. We do have also an increase in inventory, which includes the advanced purchasing of CO2 rights, which we have made back in March that, of course, are absorbing, let's say, working capital. And accounts payable when also up because we are facing, let's say, higher cost from supplier but to a lower extent in absolute term versus the accounts receivable and the inventory. And this translated into a quite significant difference, as you can see here on the cash generated from operation and net cash by operating activities. Nevertheless, I mean, we were able to, let's say close the semester with a positive, let's say, cash generation. Positive if we, let's say, do not consider the buyback completed during the first quarter. We have EUR 123 million buyback and EUR 121 million negative change in net debt. So without that specific, let's say, item or a transaction, we would have been positive but nothing wrong, let's say, with the buyback. So I think, yes, we can close this first part of the conference. And I would like to let the operator open the Q&A session. Thank you for listening.

[Operator Instructions] The first question is from Elodie Rall with JPMorgan.

I have a couple. To start with, could you please give us an update on what you intend to do with regard to your Russian operations? That's my first question. Second question is with regards to your corporate structure change that you intend to do with Italy no longer looking to be strategic for you? What does that mean? What do you consider doing with the rest of the group? Would you consider listing it somewhere else, for example, in the U.S., if that made more sense? My third question is with regard the infra plans in the U.S. You've mentioned higher cost inflation could actually lead to some delays or considerations? Do you think that infra-spending in the U.S. could turn negative next year? I mean you said it was still favorable but not as favorable as originally expected. So what does that mean in terms of outlook for next year for U.S. in far? I'll stop here and come back to the queue for more questions.

Okay. Well, very easy to answer. Update on Russian operation. Well, well, we made the required changes back in the beginning of May to make sure that we are, let's say, compliant with the norms about the EU sanction and so we withdraw completely from the operations of the entity. When I was speaking before about the data about the energy cost to give an example, it's something that we have not available anymore. So we are, let's say, today, more passive investor rather than an active managing position as we used to be before. And this is the best option that we found or we thought could fit to our group to the way we are and we don't see any major changes from this situation going forward. Clearly, this is not ideal. I mean it's not something that we like a lot. It's not the preferred way that we have to run a business, and this is also quite important business overall. But we think that in the current situation and also in perspective, as long as the sanctioned scheme remain the same, this is the best way to, let's say, keep Russia within the group and not lose or close or abandon it or sell it maybe for a low price to someone else. On the corporate structure changes, well, no, I think you're giving too much importance or you're going into a direction which is not the one that we are thinking of. So this is simply an internal change, which has the main purpose to adjust better, let's say, our internal organizational structure to the corporate structure to this company, let's say, structure. So we are simply adjusting also for some legal reason that I would not mention now because they are too technical but adjusting our, let's say, organizational structure, the way we are set up internally in terms of executive management with the corporate structure, so with the actual, let's say, legal entities that are involved in the different businesses. So for the moment, really, no substantial changes. So just a better structure more fitted to the way we are running the business and that's it. On the infrastructure plan and consumption to turn negative next year, I don't know. Again, I don't know how much you rely on the PCA forecast because they change frequency, and they often make mistakes. But yes, for example, if you look at the PCA forecast for 2023, 2023 is turning slightly negative. The impact is coming mainly from the residential but also non-residential turning somewhat negative. So they are assuming some 3% decline of volumes for 2023. Is that likely, not likely? I think the likelihood of 2023 with volumes improving is low. Whether it will be minus 2%, minus 3% or 0? I don't know. It's hard to tell. We are, let's say, internally more betting on, again, soft lending and minor decline for the next year. In the infrastructure plans, yes, again, there is a study which is very recent from the PCA, again, which is assessing the inflation impacts on the different projects. And they think that some of the projects will be at risk due to this inflation erosion and the increase in construction cost that we have seen since the bill authorization.

So you're talking about 3% decline in volumes in cement in the U.S. Do you have a better mix guidance? Could you give us a bit of your thinking between infra and residential and non-residential and how you get to minus 3%?

No, we don't have a different thinking so far versus the PCA. The PCA is minus 7% for residential and they see non-residential at minus 2% and public positive by 1% approximately. But again, this is something that we will internally maybe discuss later in the year when we are ready to prepare the budget or are in the budget process. But again, it's worse, of course, something because they analyze a lot of data and they have a lot of information available but it's not the cost too.

The next question is from Yuri Serov with Redburn.

Can I ask a question [indiscernible]?

Sure.

So can we talk about prices first? I mean the price increases have been quite stunning, especially for fragmented markets like Italy or Germany. And me personally, I'm struggling to believe that this is sustainable. The latest release for PPI indices by the European Union already showed that the prices in Italy in June were slightly lower. What do you think? I mean, why can we believe that these prices can be sustained? There is competition, I mean nobody canceled that, right? So companies compete with each other. How is this going to develop?

Well, it really depends on the margins and on the price cost structure of every competitor, which is, you're right, I mean, it's not the same. For sure, there are competitors that are today in a better position and some others that are in a worse position. But I think that each one also looking at what's happened and what is happening now is trying to make sure that his income statement is at least balanced, I mean, not losing cash. The problem is really, in my opinion, not so much the fact that every producer will somehow have a similar, let's say behavior but how much these prices will affect the demand. On the other hand, I was mentioning before, today, the pressure is mostly on labor cost. So also, let's call it, if you reduce your volumes, so if you lose, let's say, market share because someone is more competitive than you, this is somehow less important than it used to be in the past because the terrible cost component is much more important than it used to be. But it's sustainable? I don't know. We think that at least, if you're talking about domestic producers like in Italy, Germany, et cetera, we don't see a real difference in the cost structure versus ourselves. So we think that each one of these producers will try to somehow offset its cost. The risk for Italy probably versus other countries is more of the imports. Even the imports are becoming much more costly because the logistic is more costly. They don't have the CO2 but they're also suffering in Turkey from definitely much higher fuel cost. They have a high inflation. So I see more, let's say, the risk of a decline in demand rather than a risk of falling prices going forward.

But at some point, losing volumes becomes not attractive and you say that variable costs are more important but if you are faced with stoppages, then fixed costs will very quickly become very important too?

Yes, yes. I mean it's not ideal. Our goal is certainly not to lose volume but we have to stay on the market as usual but we have to stay in a way that is reflecting our cost. Do you want to add something?

Maybe one thing you have also consider when you talk about sustainable price increase is you have to consider that the CO2 pricing cost increases that are not fully digested by the cement sector yet will need the force further price increases or at least confirm the price increases because they need to be somehow reflected in the cement price as well. And this is not fully integrated yet, so you have to take this into consideration as well.

Another point which I did not mention before is that, when you compare anyway, the trend of cement cost versus other building materials, we are no worse off. So for example, we were discussing in Mexico some months ago with an important, let's say, builder there. And he said, I'm changing, let's say, all my projects from the one that included steel or more structural steel to projects that are more concrete, let's say, intensive. So also, fortunately, in expense, we are not the only ones that are forced to increase prices. And among the building materials, cement is not the one that increased the most.

But prices for steel are on the way down. I understand that they are on the way down from a much higher level but the less your customers are seeing prices going down, how does that influence the discussions?

Anyway, we have to stay in the market, this is clear. I mean, if we are, for some reason, facing an evident way declining in the volumes, we will have to react somehow.

Can I ask you about Russia? And not about what you're planning to do with the market but just talking of the results, they are quite stunning. What's going on there? I mean, Russia is again #3 in your portfolio in terms of the size of EBITDA.

It's not that I do not want to answer but we don't have many details. We can just tell you that in terms of volumes, let's say, they lost about 5% in the first 6 months but pricing was very favorable in local currency. And in addition to that, we had a revaluation of the ruble, which was not very little because we had a 5% if you look at the first 6 months but if you compare the averages for the first 6 months with the current foreign exchange, potentially in the next 6 months could be much more than that.

I'm not talking about the number. The margin was up. That's the surprising part.

Well, we are selling 1L cement to a relatively large portion of our sales. This is the trend of 1L cement is related to the trend of, say, oil and gas prices. And this is usually a better margin business than in cement.

I have a couple of short questions. So the margin that you're showing in Brazil in the first half, I mean, with the acquisition of CRA's assets, we were trying to understand what the normal margin is. And obviously, it has been moving around. But what we're seeing now is that the more normal margin for that business?

Probably, yes. It is clear. Well, we mentioned it already in the past that the acquisition was variable in many, many respects and we do not absolutely regret what we have done but the plants, let's say, that came into the scope are less efficient than the ones of Renan.

So for the future, we can basically model it by...

Probably, in terms of margin, this year is not great. Let's say, it's good, it's not great. So it could be, in my opinion, 2% more than that in a more, let's say, favorable environment. But yes, we will not be back to the levels of the, let's say, Brennan only plans.

And then another question, completely different, share buybacks. So you still have a lot of cash on your balance sheet. The business is okay. I mean, we were worried that it was going to be disaster, it isn't, your EBITDA is not falling. What are your plans? What is your thinking?

I mean, we've just completed one a few months ago. Yes, the occasion for taking the resolution was the AGM because it's the moment when you usually take the resolution. And we are not in a hurry in a sense that also, if you look back to the last year, we distributed, if you consider dividend, extraordinary dividend, share buyback, a very meaningful amount of money, EUR 190 million in the first half of 2021, another 190 basically including buyback and dividend this first month. So these are, I mean, very, very meaningful amount. I mean, I do not make the right comparison with other similar companies but I think there are very few that were able to return, let's say, to shareholder such amount in the same period. I mean in the meantime, also the share, I mean, okay, you can say that it's undervalued, maybe, but did not perform so badly. I mean, lately, the share performance was, let's say, okay, so we don't feel any rush about it.

You say that you paid a lot of dividends but you still have too much cash, so...

No, I forgot to mention. I forgot to mention that, as you can see on the page of the net financial position, we have anyway debt repayment of about EUR 620 million to EUR 350 million coming up in the next few months. So yes, we have the cash to repay and we can also partly refinance but we need to plan a little carefully. I mean these are a big amount of money. Also, the way the cash is in the group, it's a bit, let's say, spread among different countries. So we will have uses of cash, for example, to lower the gross debt position, important ones in the coming months.

I mean one topic that is in my mind is about the U.S. and you were talking kind of cautiously about next year but you're still positive for the second half of this year. And I wonder why? I mean, if the soft landing begins in the U.S., why is it in January rather than in September?

I did not say it's exactly in [indiscernible] will not start from January 1. You're right. It is true that last year, we had a very strong fourth quarter, also due to weather, and this will be difficult to repeat. We have a strong help from the FX that I mentioned before. Unfortunately, yes, I mean if you look at the results, they are not that great in dollar because minus 10% with a positive volume and price of the area is not that great. So we are offsetting with the FX. We should have a better second half in terms of price cost, say, development because we do expect, as I mentioned before, price improved and then possibly, at least in the U.S., not such a, let's say, additional cost increase. So the impression is that, so far, the volumes are holding well. We have July, let's say, behind us, so good months. We think that, yes, a slowdown is likely to come but not so quickly and hopefully not so important.

The next question is from Yassine Touahri with Field Investment Research.

So my first question would be on energy inflation. So what kind of energy inflation did you see in the first semester of 2022? What kind of energy inflation do you expect for the second semester of 2022? And the other point is, have you started to hedge your energy for 2023 and if you have, could you give us a bit more color about what you're expecting for next year in terms of energy cost development?

Well, it's difficult to give a real just one figure, and there are very differentiated, let's say, situation. And again, we have countries that are more than double, as we said before, their energy cost H1 '21 versus H1 '22. The minimum, I think, was 20% up where we are mostly hedged, which is Germany. And be average, I would say, 80%, 90% up more or less. Weighted average or let's say, of the different countries, this first half '22 versus the first half '21, I think this is probably likely to stay, let's say, as an average. With the trend that we are seeing right now in Europe for power cost, it's difficult to imagine something completely different by year-end. So I would assume that this is the trend for the full year. And you may have something looking at the...

In same line with the forecasts.

Yes.

Regarding the hedges, I mean, of course, right now, it's not very interesting to hedge at these levels. From 2024 onwards, maybe, but not before. And then there are maybe some tranches still in some countries, small mature markets where steel hedge is ongoing but overall, new hedges are very difficult right now. So therefore, we are rather more going with the spot price at present.

If energy price remains very high, could you see more energy cost increases in 2023?

We don't know. We don't know. I mean, the curves are indicating some softening, not very meaningful but some softening depending on the account. Yes, depending on the country, but in Europe, difficult to tell. That would be very difficult to tell. It could be a little lower. Pet coke has been increasing very significantly but we don't have right now a clear idea on the trend of pet coke, for example, which remains our main fuel anyway within the group.

And the second question would be on the change in corporate structure. You mentioned a technical legal reason. I'm just wondering why you didn't do it before this corporate restructuring? Is there a change where you can benefit from a tax advantage? Is it a managed advantage? Is it a cash flow management advantage? I'm just trying to understand why you do this change in Italy today and why you didn't do it 5 years ago?

Well, why we did not do it until now, it's something that has been in our mind, let's say, already since some years. And then there was always something, let's say, more important or could I say, higher priorities. So the timing does not mean that we did not have that in mind already since some years. So the fact that it's occurring now, yes, I mean, it's what it is but it does not really change the reason or the, let's call it, motivation behind it. For the rest, no, there are no particular advantages in terms of cash management or tax planning, we will be basically as we are now. There are some other advantages of reasons, as I mentioned before, in terms of how we manage and particularly how we assign responsibilities to our, let's say, executive people, in particular, let's say, the Italian business is concerned.

And then the third question on pricing. On the evolution of margin in 2023, is it fair to say that if you've got a volume decline in the U.S., you will first cut your import and that the imports are not very profitable, so the volume decline would not impact too much to EBITDA?

Yes.

And how much of your cement is imported in the U.S?

This year, it's going to be significant, more than 700,000 tonnes.

So it means that the first 5%, 10% decline in volume could come from a reduction in imports?

Yes. Yes.

Is it fair to assume that the margin on imports are very low today compared to the...

Not very low but definitely lower than the self-produced, let's say, cement. This is the flexibility. You're right, it's the flexibility that we do have.

In Europe, is it fair to say that approximately 10%, 15% of your production in Italy, Luxembourg and Poland is not covered by CO2 allowance?

It's correct, yes.

And so does it mean that, let's say, if you got a 5%, 10% decline in volume in Europe, you will just stop selling this production, which is not profitable because it's not covered by CO2?

This is more complicated than that because if you go below the 15% reference, then you also receive less allowances, to make it simple but it's not that simple. But anyway, there is a range within which you will be able to maintain the same level of allowances, okay, then there is the linear factor which goes down anyway. So every year, you receive less regardless of what you are producing. But, let's say, if you go outside this range, so you go below, again, to make it simple, the 15%, you will also receive less allowances.

Do you see a risk in any country because is it fair to assume that in Czech Republic, Poland, Luxembourg, you should be okay because volumes are up but there might be a bit more risk in Italy?

Exactly, yes. That's correct. Yes.

And the last question, it's small bit picture question. Your valuation is very low. You've got a very strong balance sheet. What is the benefit for business to remain listed in the stock market versus becoming private?

The benefit is to have the possibility to speak with you, to speak with the investors, let's say, [indiscernible] conference call, I'm joking, but I mean there are some benefits. I would say that for a company like ours, which is also somehow strongly related to a family and with a number of shareholders that are not following, let's say, the business directly but they are the import shareholders, the listed status is giving them a high degree of confidence, let's say, on what we are doing and what the company is doing, what the Board is doing. The help from independent, let's say, board members is also something that we consider very meaningful, very important. I mean, in general, let's say, I would say, governance of a listed company is giving to any shareholders, including the ones that are, let's call it, the majority and obviously, the ones that are instead representing the minority a greater degree of confidence on the way the business is carried out. I think this is probably one of the main advantages.

The next question is from Brijesh Siya with HSBC.

I have a couple. So starting with Italy one, the corporate transaction or the hiring of the cement business, is there any particular reason why cement is only high trough or it's the ready-mix and the aggregate business are already in a separate entity, hence you're doing only cement now?

Say it again, because I missed something. Can you speak a little bit louder?

Sure. I was talking about the Italy corporate structure change. You are mentioning that you are kind of moving Italy cement business only to a separate entity and which subsidiary. What about ready-mix and aggregate business? Are there other subsidiaries or you're going to.

No. They are already separate, they will remain in separate entity. They are both below, let's say, what is going to be let's call it the holding or the parent. So we have one entity in Italy already now, which is the ready-mix so-called business. And the new entity after the contribution is same kind will be the cement entity, yes.