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 S.p.A Full Year 2023 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Pietro Buzzi, Chief Executive Officer of Buzzi. Mr. Buzzi, please go ahead.

Thank you. Welcome, everyone, to our annual results conference call, and I assume that you have available, either in front of you or through the website, the presentation that we have been preparing for this event, for this conference. So I will go through a part of it, probably not all. And then we could use it as a reference for the Q&A session. So starting from the summary that we have on Page 1, the 2023 financial year was certainly a very good one. And we closed with sales up about 11%. This was the data figure that already disclosed back in February. And then recurring EBITDA, which was also drafted in February, eventually closed at EUR 1.24 billion basically, which is a very solid plus 44% versus last year. And also, as we mentioned here, the higher results ever in the group history. So really exceptional results in terms of profitability, which was coming from additional contribution, especially from Italy, Germany and the U.S. Also, the margins besides the absolute value did improve significantly about more than 600 basis points to almost 29%, which also represents certainly a record for our company, for our group. Besides the economic results, cash generation was also increasing very nicely. There was somehow a lower impact from the working capital absorption due to also, let's say, a kind of a price momentum, which was still very favorable, but not as much as in the previous year. And also considering higher CapEx, so the net cash generation was able to more than the offset the higher CapEx spending that we went through during 2023. Return on capital employed and -- over the weighted average working capital was also strengthening. And this did happen considering the higher cost of capital that we had during the year due to, in some cases, say, higher risk of certain countries or also higher, let's say, equity versus debt. So our balance between equity and debt was more skewed towards equity than debt due to the positive net financial position increasing during the year. We are proposing through the AGM a significant dividend increase, 33% at EUR 0.60 per share. And we can be happy I think about the development of the share price, which if we look back at the last 2 years, it's been up 133%, so quite an achievement also here. Reduction targets, looking at the sustainability program road map are on track. Our targets are confirmed. We will be publishing -- we are publishing together with the financial results. Also, the sustainability report with all the details about our targets, achievements, goals and we feel, let's say, confident and comfortable to be able to continue to follow closely the pattern that was published 2 years ago with our road map, let's say, our journey to net zero. We will discuss more in detail the outlook for the current year of 2024 as a whole, but we are clearly committed to perform as usual, let's say, at best to continue to, in a sense, follow as much as possible the price of our cost evolution and being able to remain a very high profitability level in a similar way like we did in 2023 after closing. Shifting to Page 2. You see the key figures, 3-year developments, very nice improvement in net sales, EBITDA, even better, margins even better with a small -- we had a small negative variance in 2022, which was, again, fully recovered, much more than recover, a nice rebound in 2023. Return on capital employed, about 14%. So quite a significant number also compared to peers and to the industry average. Dividend per share, a very significant improvement, as we mentioned before, from 42 years ago to EUR 0.60 this year in proposal to the AGM. When we look at the volume variance in the following page, you see that these results came in, in a moment, let's say, macro economical industry moment, which was not very favorable for the volumes, generally speaking. So we had stable results, slightly better in Italy for cement and ready-mix. Eastern Europe, thanks also to the rebound in Ukraine versus last year, basically flat. U.S. slightly negative. But generally speaking, also not very different from the previous year. More trouble, let's say, the situation in Central Europe, Germany, Luxembourg, the Netherlands, where the market was definitely more under pressure in terms of residential and industrial activity and volumes lowering between 20% and 25%, so quite a significant decline. However, this unfortunately did not translate in unfavorable economic results as we saw, thanks to the good performance of prices and also an overall cost environment, which was definitely more favorable than what we expected at the time of the budget approval. So at the time, let's say, the last 3 months of 2022, where the cost outlook was definitely much worse than the way it really came in and translated into practice during 2023. On the following page, we can see a similar exercise. So devoted by -- breakdown by regions, but devoted to the impact or to the different variances or to the main variances that are associated with the turnover figure in the net sales. So where we are in the euro area, no foreign exchange effect, like in Italy, you see slightly better volume variance and significant price areas. Even though in Italy, pricing did not really change during 2023. It was more carryforward from the previous increases. We had several increases during 2022 and then stable pricing during 2023. Instead, in Germany, pricing was much quieter, if you wish, during 2022 and increased much more significantly in 2023. At the same time, volume is softer. And as you can see, the amount or the unfavorable there associated with volumes was EUR 200 million, so quite significant. Eastern Europe, as we said before, our mixed trends, mixed variances. Also here, strong pricing overall, more flattish, let's say, volumes variance and negative effects, foreign exchange effect that is coming mainly from, let's say, Ukraine and Russia. The 2 weaker currencies among, let's say, the Eastern European countries. Meanwhile, the Czech koruna and the Polish zloty remained quite stable, quite unchanged versus the previous year. In the U.S.A., worsening of the dollar exchange rate, not too significant, but of course, since the business is very large, the absolute impact was not too small, minus EUR 50 million approximately coming from the devaluation of the dollar. Some negative varies limited associated with volumes and strong pricing to more than offset both the volume and foreign exchange and negative impacts. Overall, you see, as we said before, we had approximately 11% improvement like-for-like versus last year in the net sales figure. When we move to the following page, you have an idea of what has been the contribution during the year, both in terms of turnover and EBITDA. And you see also from the graph which countries or which areas are above average in terms of profitability and which one instead are below. So versus 2022, still the U.S., they still continue to represent, by far, let's say, the strongest country, the strongest contributor to our overall results and profitability. Even though, fortunately, in a sense, other areas like mainly Italy, but also the Central European area perform better, relatively speaking, and are giving a greater additional contribution versus the previous year. And you can see that the system in Europe is more or less average. In terms of profitability, U.S. is above average. Central Europe and Italy are below average, but particularly looking at Italy considering if we look back in the last, let's say, 10 years, the results that we have been achieving in the previous year and this year, really, really excellent and really representing a completely turnaround versus what we were used to see or to experience, let's say, to be either only a few years ago. Next page, you see the EBITDA bridge. What has been the development from '22 to '23. Again, volume and prices, we did comment already about it. You see here in total, what has been the contribution and the effect in real and absolute terms and favorable in the case of volumes, very, very favorable in terms of pricing. And this was associated and was the key, if you wish, of the greater profitability associated with a much more stable environment in terms of variable cost, which in part is due to the fact that production was lower. But also to the fact that, generally speaking, energy cost, both fuel and power did not increase or in some cases, in some area, actually went down versus 2022. We continue to experience some inflation in the raw material environment. Raw material means both raw materials for either the raw mix, so the preparation of the cement mix or raw materials that are used for the finish grinding so for the final phase of the cement production. This has been still under a short-term inflationary trend. But the main, let's say energy factor were represented in several areas, more a tailwind than the opposite. In terms of fixed cost, inflation was still somehow present. We have here mainly labor and staff costs, let's say, maintenance. Staff costs, to give you an idea out of the 58 increased by about EUR 42 million, favorable, let's say, variance. This is mainly, I would say, a consequence of the delay in a sense in inflationary trends. Usually, labor cost does not react, let's say, immediately and tends to be somehow postponed before catching up with the inflation rate, and this is what happened also to us during this year. So you have more unfavorable variance than the one we had in the previous year. CO2 cost was also a significant, let's say, tailwind. This is because production -- two reasons, because production went down. So we had much less need of CO2 rights to be purchased, let's say, deficit. And also CO2 costs, in general during the year 2023,, were declining. So the cost of CO2 rights went down. Both things, let's say, both the volume, the need for CO2 rights and the cost has been favorable during 2023. Some negative impact as we saw before from the foreign exchange. And others, various fixed costs, including also the inventory changes that had an unfavorable outcome during 2023. Meaning, for example, travel and legal expenses, insurance and other professional expenses that are more, again, similar possibly to staff costs as we mentioned, subject to some kind of delay in inflation during this year translated into a heavier burden. But overall, as you can see, thanks to some major variances like price and some minor variances under the other items, the overall impact on EBITDA was definitely very favorable and bringing the figure to a level which is a record, as we mentioned before. A brief focus on energy cost on the following page. Our energy bill, this refers -- this page refers specifically to the cement business. And it includes only energy, electrical power and if you will. So our energy bill did increase still some during the year from EUR 529 million to EUR 565 million, but obviously, much less than what it had been during 2022 versus '21. We are apparently, let's say, stabilizing at a level which is about double of what used to be before, let's say, the energy crisis before the war, et cetera. In terms of weight on revenues, thanks to the strong development of pricing, we are at around 20% in 2023. Same figure, the similar reference was 2022 -- '21-'22, 1 year before, and it used to be more 16%, 17% when at the time, let's say, over, let's call it, inflation or much lower energy prices. So there has been certainly a kind of a step-up which we have to -- probably we have to live with. And that overall, certainly, we have been able to manage in terms of financial performance, particularly in the last year, but also starting from 2022 on. On the right, you can see the differences between power and fuel. And clearly, what has been between the two, the more favorable trend is associated with fuel. So fuel has been overall less of a burden than power. Similar to the right, on the left, we see that when we look at the weight or the impact on revenues, 2023, thanks to the growth of revenues and the fact that these costs remain, let's say, relatively stable, which is showing a favorable, let's say, trend, a favorable evolution in terms of weight on the unit revenue. So overall, not -- I mean, still pressure on the cost side, but the ability of the industry or of the company to manage it in a way not to worsen our operating and, let's say, overall financial results. If we move to the following section, there is a focus in the different countries. We start from the United States because it's the biggest and also has been the best performer. Development of sales, EBITDA, EBITDA margins were all quite positive. Clearly, this is one of the country where, thanks to the volume development, our, let's say, production capacity utilization remained pretty high, which is together with strong -- with the, say, favorable price environment, one of the major reason of our high margins. So when you couple a favorable trend in pricing, high-capacity utilization and a relatively stable cost environment, particularly for the energy cost, this usually translates into a significant improvement of profitability, which is what has been happening, but what happened this year with 5.4% for the mix and 40 basis point improvement in EBITDA and EBITDA margins. Italy was also really showing quite a nice improvement. Italy was coming -- still is coming from a much more depressed or subdued situation. So it's easier in a sense to see a bigger improvement in results because the comparison base, it's easier while -- I mean, while the comparison base of the U.S. is much or more challenging. But even considering this fact, we can say that our performance was certainly meeting our expectation. Cement volumes, of course, helped in a sense that we did not suffer any decline. And as we mentioned at the beginning, we had a carryover effect on pricing and deflation which we did not expect actually before the beginning of the year in energy cost, which clearly improved the margin. And even considering less tax credit on energy cost because last year, it was EUR 38 million, last year meaning 2022, and this year, EUR 12 million. So there's quite a difference in this income stream or revenue stream. Still our EBITDA basically doubled, and our margins increased almost 1,000 basis points. So from 12% to 21%, which is a figure that for a country like Italy and relatively mature and with much lower capacity utilization compared to the U.S. can be considered a strong and, I would say, very positive achievement. Central Europe is a mix because we have inside here, of course, countries that perform in a very negative way, I would say, about volumes, other that still with a negative volume trend did not suffer as much as, for example, Germany and Luxembourg. So there's a kind of a mixed year. But considering, let's say, the region as a whole, the trend was, in a sense, not so different because we were able in all countries, let's say, to increase prices. Basically, we had a profitability improvement everywhere. It was strong in Germany, than in countries like Poland and Czechia, but the overall trend, let's say, was not very different from one country to another. So whereby, let's say, the volumes were more depressed. The price impact had a strong effect in those regions where volumes were still down, but not as much. Price impact was not as important, but still able to more than counter the negative volume trends. Also, the improvements in EBITDA margins here overall are quite significant. And also, in general, I think in general, in absolute term is also quite significant. The comments that you see here on the right, I guess, are in line with what I was mentioning before. So we had margin improvements in Germany in Benelux. Yes, lower CO2 cost is an important point because meanwhile, in Italy, we are still benefiting from, let's say, CO2 emission rights reserve, which are coming from the previous period. So we are not in the need to buy 2 rights. The Central European instead last year, but also this year to a small extent, is in the need to cover, let's say, the surplus -- the deficit of CO2 buying CO2 rights. But it's a bit of an absurd, let's say, consequence. But when you're going down in volumes like it happened this year in Central Europe, your CO2 deficit is much more limited, in some countries was even zero. And so you are -- actually, it's the opposite of the operating leverage in a sense because it's true that you're using your capacity utilization, normally, higher capacity utilization is bringing, let's call it, a lower variable cost -- sorry, lower -- greater absorption of fixed cost. In this case, in general, under the ETS environment, the greater capacity utilization can translate into higher variable cost. This year, lower capacity utilization translated into lower variable cost and also -- so less need of buying CO2 and also less cost for the CO2 that we have been buying because the trend of CO2 rights during the year went also down together with the trend of energy cost in general. Eastern Europe, well, this is let's say, a combination, of course, of countries that are inside the ETS and that are outside Ukraine and Russia. Ukraine performed relatively well considering the situation. Russia is probably the only country where we went down in absolute terms and also somewhat, relatively speaking, for EBITDA. To a large extent, Russia was driven by the negative Forex. But overall, this area, let's say, has taken -- all together was not performing very different from the Central European market because we saw, let's say, volumes decreasing. Somehow net sales increasing due to price effect, EBITDA increasing and EBITDA margins also increasing, not as much because we have started from a level which is definitely much higher than the one of Italy or the Central European country. Looking at the joint ventures, they are also a very important companies for us even though they are not reflected directly into net sales EBITDA. So of course, we use the one-line consolidation equity method, both for Mexico and Brazil. Certainly, the Mexican performance has been a very good one, very, very positive, volume up, one of the few countries where we actually experienced growth in cement volumes and ready-mix volumes, higher pricing and fairly stable, let's say, production costs. So you see that the outcome was a clear improvement in total EBITDA numbers, figures and also in EBITDA margins, which for Mexico clearly are at the top of the group because we are -- what we've been enjoying, as I just said, both favorable volume and prices. But also, we are running at a very high-capacity utilization level and our factories, let's say, our plants are very competitive in terms of cost. And we are enjoying, let's say, cost leadership position in the country. So whenever the prices are going up, we're certainly benefiting more than other competitors with higher production costs. Brazil was a little bit disappointing in a sense that it's basically the only area, the only country where EBITDA suffered versus the previous year. This happened due to industry environment, the marketing environment where cement volumes declined slightly. In part, this was due to also weather reasons in the first part of the year and the part of the 2023. And as opposed to other areas in market that we have been commenting, prices did not actually improve. There was a strong competitive environment, particularly in the Southeast area. And our joint venture was actually unable to improve pricing during the year. And due to that, our margins did not -- were weaker, at the end somewhat weaker versus the 2022. So variable costs are fairly stable, but fixed costs, like maintenance and SG&A expenses were greater than the previous year. To some extent, also inventory changes affecting the EBITDA in a favorable way and small changes in the FX contribution. And the outcome was not satisfactory. But I think that in an economical and also competitive environment like we experienced last year in Brazil, we cannot be fully satisfied, but we know the reason, let's say, why this happened, and we are certainly more optimistic about what could be the outcome or the results for the following year. So we're starting from, as opposed to other countries, with an easier comparison base, certainly in this area versus what has been happening or the results that have been achieved during 2023 in all other regions. When we move to the outlook for 2024, I think that we can briefly comment on the outline of this page. There are, in general, let's say, macroeconomic conditions that are not too favorable for construction investment, particularly when we are talking about residential activity in all the regions and you can consider that the residential activities, activity can range between 35%, 40%, sometimes 45% of the total. So it does represent typically, considering both the new residential and maintenance or restructuring, a quite significant portion of the overall cement demand. And we are not very positive about this specific portion of the demand for 2024 in all regions. We hope that, and I think we have a good probability, good chances to see a support from -- to experience support from the infrastructure projects, particularly in Italy and U.S., maybe a little less in Germany, where the overall economic condition of the country or infrastructure industry will still suffer some. But this is our picture, pretty similar across the region in terms of volumes. Looking a little more closely region by region, we see that the U.S. cement should be supported and let's say, driven by structure spending, including also, it's not, let's say, infrastructure but reshoring activity in terms of industrial investments. In Italy, similar. We see demand stabilizing. Difficult to imagine really significant improvement versus 2023, but yes, a similar level possible if the, particularly if the so-called recovery plan or plan of national recovery will be implemented and is being implemented. Of course, there are always delays and complicated issues to be able to come for all the projects to enter into the execution phase. But we are seeing that this plan has been carried out and will translate into a strong support for cement consumption during 2024. Central Europe, Germany, Poland, Czechia, we don't see really a possibility for the volume to rebound this year. On the other hand, we do not expect a similar decline as we experienced during 2022 -- '23, sorry, mainly because of the weakness in the residential activity, like we were mentioning at the beginning. When we consider then the joint venture, we see a pretty stable -- we expect, let's say, a pretty stable environment for Mexico. So certainly in good shape like it was in 2023. There are nearshoring activities related to the U.S. industry, U.S. industrial sector, but also some acceleration in infrastructure with the President coming to an end. There will certainly be some projects that will be completed and will help cement demand during the first half, but also the second half of the year. In Brazil, we are more optimistic. We think that cement demand will be more supportive, probably not big steps up and on no big changes. But yes, there is a possibility for the volumes to go up. There are social housing programs. And we are starting -- or we are at the level of interest rates that are quite high, and we should see some loosening -- I mean, easing of the monetary policy, which can translate into definitely better environment for the construction industry during 2023. On the energy cost side, we are fairly optimistic in a sense that we don't see a reason for the cost -- for the energy cost to increase further. We are also to a relatively high extent already hedged overall, particularly as far as the power cost is concerned across our different regions. So the power cost component is hedged at about the level of 50% to 60%. And the fuel component should represent a more tailwind than the opposite. In particular, this includes also our efforts and our, let's say, projects to increase the usage of alternative fuels that together with the benefits associated with the CO2 emission, they are also bringing benefits in terms of fuel costs. So we do have also some -- but this will not represent a huge improvement, but we do have also some energy projects and renewable energy projects that will be entering into production and will produce energy for our plants directly without the need of buying, let's say, energy outside. And altogether, this means that our energy cost bill is expected to be quite stable and not a big risk for the current year. We'll try to continue our efforts really to drive the prices in a way that price over cost will remain favorable or as favorable as we experienced in 2023. It doesn't mean that we will fully achieve this result. It will depend on the market from the competition. Certainly, this is an easier task in all countries where capacity utilization is high. It's a more difficult task in countries where capacity utilization is lower. But we've been successful so far in the last 2 years, and we try to be as successful as much as possible, at least also during 2024 and in the coming months. That's why our vision, let's say, our view for the full 2024 results is to be able to consolidate and to remain in line, pretty much in line, with the 2023 level. And if we do that, if we are able to do that, this would be certainly -- not in my opinion, in our opinion, quite an achievement because we are talking about results that are exceptionally strong and extremely high. So certainly, it is a challenging goal. And none -- we are, I think, exposed to more downside risk than upside due to the situation, but we're certainly committed to achieve it as much as possible. And of course, depending on the outside, the economic demand and competitive environment, as I said before, it will be probably, as usual, I mean, easier in some markets and not as easy in other markets, but we'll try to do our best as usual to achieve it. I think probably in the sake of time, we have more information in the presentation about the sustainability results, also interesting, but maybe we can go into that if you have specific questions, and then we have an appendix with more information on the financial results, detailed trends on volume prices by country, EBITDA by country. But I think that the cash flow statement, retail income statement detailed net financial position. But again, as I said, not to carry on too much with maybe themes or topics that are not necessarily of interest to you, I would prefer to close here my speech and open the Q&A question (sic) [session] and possibly use again the slide and the pages for the questions that will come. So thank you for listening so far, and I kindly ask the operator to open the Q&A question -- session, sorry. Thank you.

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

My first question is on pricing. In the U.S., you have mentioned that overall, you expect a little bit of pressure from customers, in particular, when it's about imported cement. So I was wondering, first of all, what kind of pressure are you seeing? And if you do expect overall some -- like what kind of price increase overall you expect for your U.S. exposure? And if you could remind us what are the regions of imports for you and which they are. My second question is on pricing in Europe. This time if you have been able to push some pricing through, in which countries and a bit of a summary of the outlook by country for pricing. And lastly, if I could ask, why you have proposed to introduce an enhanced voting rights up to double voting rights per share? What was the rationale behind that? And lastly, what are your thoughts about U.S. listing given we've seen a lot of your peers going that way?

Which going -- sorry, the last one on the voting rights, you said U.S. listing going that way. You mean…

What are your thoughts about a potential U.S. listing given we've seen a number of your peers listing in the U.S.?

I was so far from this theme that I did not get it because it's actually something that I don't think we are considering at all. Okay. Well, on the pricing, I think there was the beginning of the year, in general, across, I would say, all regions, an attempt to move prices up. We are talking about relatively small price increases. So in line with the, let's call it, expected inflation can be 2%, 3%, something like so. So just to, as I mentioned before, to be able to offset a trend, particularly in fixed costs that we expect is still somewhat inflationary. And in some regions, the fact that we may -- we are likely still to suffer from negative volume variance. How much this move is going to be successful, still a bit early to really assess it, I mean in a positive way or in a certain way because we have to see how the market is going to move both in terms of volume and in terms of competition. So there is, I think, a possibility, there is a chance, certainly for the market to receive, let's say, to expect this kind of increases, which are much smaller, much less significant than what happened in the past 2 years. But this is due to the, let's call it, deflationary environment that is almost overall. I mean also with the goal of bringing inflation down to a more natural or let's say, yes, natural level in the EU, but also in the U.S., which is what is happening. So I think cement will follow, in general, a similar pattern. So moderate price increases. And easier, as I was mentioning before, to be able to actually realize these price increases where the volumes are stronger and where the capacity utilization is greater. So where we are closer to high usage, high utilization rates, it should be easier, I think it will be easier. Where we are suffering more from volumes and lower capacity utilization, certainly more difficult. So you know how we are doing there, the areas where capacity utilization is greater or capacity utilization has been weakening in a more significant way. And this is where I think even face more challenges. In the U.S., similar concept, certainly, unfortunately, we're still in a phase where capacity utilization is relatively high. It's not as high as 2 years ago, but we did not decline significantly in our sales volume. It is true that the pressure is coming mainly from imports. So specific to some regions where the imports can actually enter the country. And it is true that there are some customers that also are particularly big. So they can, of course, represent in both sides, an opportunity or risk in terms of volumes. And these bigger customers, some of them have also the possibility to enforce cement. So they have a direct, let's say, comparison between local price or local cement price or for a cement price. And we may be in the need to match, let's say, certain import prices, assuming that we want to preserve a certain customer. So this is a typical, let's say, marketing strategy, which we have to decide on a case-by-case basis. And yes, I understand whether we want to give more preference to volumes or more preference or more priority to pricing level. And I think this describes pretty well the situation not only for the U.S., I mean, this -- it's true also in other countries. It's always true. But the country where this strategy with -- let's say, marketing strategy will be more difficult. Our goals will be more difficult to achieve is certainly where the capacity station is suffering or is going below a certain level. In terms of double voting, well, this is something that I say, we don't see anything negative coming from the double vote. We and the Board has been considered this as an opportunity, as something that could tomorrow, give us -- I say, tomorrow because there will be at least 2 years now before an actual change. And so it's something that we have to look in the long run, so beyond 2 years. And it's an additional tool, let's say, that the company have or can have in pocket, and it's in order to potentially use the shares, let's say, the equity for growth projects combinations or whatever. At the same time, possibly maintaining from the standpoint of the family controlling stake, even in a situation that could come, may come or may not come. It's just, as I said, something that -- an additional tool. I mean, an opportunity that we could use or not use that may allow us to do something that we would not do without the double vote. I don't know if I give the correct idea, but there are certainly -- the future, of course, nobody knows, but there are some opportunity, growth opportunities that could come about where you could use, let's say, the capital, the shares combination that would allow the company to go in a certain way and possibly do that without keeping, let's say, as much as possible the control in the end of the family, which we think is also a key has been and we think will continue to be a key to the success of the company.

The next question is from Yassine Touahri of On Field Investment.

Yes, a couple of questions. Just to come back on your comments on pricing in the U.S. Is it fair to assume that the price pressure is mostly in -- around the coastal area around Houston and maybe Louisiana? And is it fair to assume that prices in this region may be like down like 3%, 4%? At the same time, I hear that from your competitor, then you had high single-digit price increase that were announced in the Northeast on the Mississippi River in land. Is it what you see? That would be my question on the U.S.

I mean, we have been following the general price trend. So where the announcements or the actual changes in the market has been of this magnitude, which actually I don't think we had in any in any of our markets so far. But still, in some cases, yes, we were able to go up. If there is a trend, let's say, in that direction, we will certainly follow. Just to remind you that one thing is the announcement and one is the actual implementation and realization of the price improvements because clearly, it takes, I would say, at least 2 months to have an idea if certain press announcement will actually hold. So we are still in a phase where we're trying to ascertain and trying to understand how the competition is moving, if there is a clear direction, if there's not a clear direction, how the customers are reacting and very often also in increased prices is not for everyone. So yes, there is a trend in that direction, but what is the actual realization for your average price level can be very different.

And what is your exposure? If we look at your U.S. operations, how much of your business is exposed to the coastal area? Is it fair to assume that it's maybe like 15%, 20% of your operation only that are on the coasts?

Yes, that is correct number. Yes. But you mentioned Louisiana in a sense that, yes, we are of course, a big operator in the Louisiana market. But if the cement is landing in Louisiana, it can move up all the way to Chicago. So actually, the impact can be along the Mississippi River because a competitive import terminal or asset in Louisiana would be able to be competitive also going upstream all the way to Chicago.

The second question would be on your comments about using your shares to develop the company. Is it fair to assume that if you had the opportunity to combine with another company or to acquire some assets in shares, this is something that you could look at. I'm just thinking about, what this company in Colombia, did Cementos Argos combining with some material, it was something which was a value accretive. I'd just like to understand, when you're thinking about the future of Buzzi, do you think about the fact that you've got some assets in the U.S. that are not properly valued in your share price? Or do you think more about the very long term and how to build the company which is growing and strong for the next generation?

No. I think both options in theory are available. And again, the idea about introducing double vote gives us simply more possibilities because actually, the double voting, okay, clearly won't be like this. But if everyone was keeping shares for 2 years or more than 2 years, it doesn't change anything. But since this is not going to be the case and since instead the controlling entity is likely -- is committed, let's say, to keep its shares for the long-time horizon, I think that, yes, this is opening up potentially. That doesn't mean that this is going to happen. But certainly, potentially is opening up more possibilities. So I don't see nothing really negative about that because the control of the company -- yes?

I think the question is that I see it could be positive, but I'm just trying to understand because it means you could use your shares to develop the company either by merging with another entity or using your shares to grow. And I'm just trying to see -- to understand in which direction you would like Buzzi to go. Is it more exposure to U.S., more exposure to emerging markets becoming global, focusing on another kind of a business than cement? It would be great to get a bit of a color about the way you're thinking about where you would like Buzzi to be in the next 5 to 10 years?

I understand. Well, normally, what we have seen so far also in our history is that the opportunities, you may have a certain strategic vision, and we do have one, which is clearly the one of strengthening our position where we are already and maybe but less likely opening up a new position or new geographic areas. And so one thing is the strategic vision. The other is what can actually occur, can actually happen, which comes -- very often is coming about when it's coming on the table without any, how could I say, previous bias or without being -- something that you have to decide or to, yes, evaluate and assess sometimes from one day to another because things are changing very, very quickly. And so that said, I do not rule out completely the possibility of tomorrow having, let's say, a growth pattern in a kind of combination with someone else. It could certainly happen. I mean, it depends from the ingredients. There has to be all the ingredients, financial, strategic, governance or whatever. So if all the ingredients are there, this could be certainly an outcome for the company. And the fact of having, let's say, the double votes in the hands of the controlling entity makes this, I don't say more likely because I don't know, but let's say, certainly easier to evaluate than the opposite because some combination that maybe yesterday, we will not have considered because they could translate into the minority position or we may consider it because they do not translate in the minority position.

The next question is from Alessandro Tortora of Mediobanca.

Pietro. I have, let's say, three questions if I may. The first one is related to, if you can give us an update on the situation, let's say, in Ukraine, considering that there is still, let's say, all industry waiting, let's say, for the final approval, the sale of the assets in Ukraine? And the second also on Brazil, if you can comment a little bit also on, let's say, the possibility, a little bit on the seller side, how do you consider if it's something likely that may be, let's say, by the end of June, the seller can decide not to implement the option? That's the first question.

Well, Ukraine is getting long, but we did expect that is not something that we did not expect. There was a first, let's call it, exam by the antitrust authority, which was not sufficient. So we are entering into, let's call it, the second phase, a more focused, more information, more yes, inquiries which will take another probably at least 3 to 4 months. And then we will see the outcome. There is also, from the buyer side, the possibility in this second phase, if there was a negative, let's call it, assessment evaluation by the antitrust to present already some, let's call it, corrective measures, which they may have in mind, but they may have in mind CRH. So I think we are off 50% -- 50% to 60% change. So going through the way it was agreed, and yes, in 4 months, I would say, time, we will know if it's 50-50 or 100. This is the situation. In Brazil, we don't know in any sense that it's not a topic that we discuss directly with our partners. We believe, I would say that there is more than 50% likelihood that they will exercise the option this year because it's difficult to imagine really a significant change in their, let's call it, pricing their return, looking at the, you call it, 3 years or 36 months, let's say, period, difficult to imagine that to stay longer, will translate into a much better result. So I think they are strongly considering to exercise the option already this year, which will trigger another antitrust investigation where we don't have any risk, I think, but simply, it is a matter of time of examining, let's say, the transaction. And so if this happens, I would expect the acquisition to be completed by probably last quarter, at the end of third quarter or, yes, fourth quarter.

Okay. Okay. And then, let's say -- I don't want to say a clarification, but let's say just some major assumption behind the target to consolidate 2023 EBITDA. Is it already possible to have an idea of, let's say, there will be some up and down by country, but do you already see, let's say, some countries you mentioned before, the U.S., but also maybe Italy potentially more than consolidating the EBITDA? And on the other side, as you mentioned before, some countries in Europe may be suffering and for reporting lower operating results considering the, let's say, weakness in the residential.

Yes. I mean what you're saying is what we have been saying. So yes, I think we have definitely more chances in the U.S. and in Italy to do better than in Germany. So overall, I think there are a -- I mean there is a certain -- the level reached in 2023 is so high. So let's say, favorable setting, let's say, the bar is setting really very high levels. So that's why to imagine to easily overcome this level, it's really not a likely option, not a likely scenario. There will be -- there's likely to be a mix of improvements and negative or unfavorable variances. Which of the two will prevail, it's a bit difficult to assess now. And yes, I think we can be more precise after 3, 4 months, we have a better idea. The year started not too well, let's say, there was also some weather impact early, for example, as you know, had a lot of rain in March. So they are not months with a very important. The second quarter, of course, will be much more important. We have the Easter week this year in the first quarter. So definitely less working days. So I do not expect the first quarter showing a clear direction towards better results, probably more likely to be somewhat weaker, but I will not from that extrapolate necessarily towards the end of the year. So first quarter, and so probably second quarter, we have to see and then we can be more precise. But yes, I do expect a mix result and a very challenging, let's say, comparison base certainly.

Okay. And then, let's say, the last question is just to, if you can give us an idea of the step-up in CapEx. You forecast this year compared to the around EUR 300 million. But also, let's say, comment on the tax rate that they, last year, 2023 was pretty low. So just to give us an idea of a sustainable level also for the year 2024.

Probably not in terms of tax rate because we had 2 impacts. They are both associated with the -- in one case is a deferred tax and the other case is, let's call it, negative taxes, which are kind of a dream, but sometimes they do happen. But they are related mainly to the -- in one case is that we did recognize by about EUR 40 million additional deferred income taxes positive, let's say, deferred assets -- tax assets. Because by running, let's say, the projections for the next 5, 6 years, we realized according to the financial plans, let's say, in terms of financial plans that we have more possibilities or more chances to recover tax loss carryforwards than in the past year. So there were some deferred tax assets that were not recognized until last year. And this year, we did recognize. And then there was a similar effect associated with our tax, let's say, consolidation, which is carried out at the level of the parent, which was -- there was a transfer, let's say, of the tax credits from the operating companies to the holding companies, which also translated into another similar effect, almost another EUR 35 million, more than EUR 30 million. So in total, it's more than EUR 60 million, which is really nonrecurring and nothing to do with the -- well, formally, it has to do with the current tax for the year, in part -- current in part deferred, but is not repetitive, it's not recurring for sure. So I would expect the tax. Last year, we had the opposite because we had non-deductible expenses. And so the 2 are really not comparable. We should go back to something that is more, I don't know, 18, 20 our, let's call it, ordinary tax rate in the current year.

Okay. And the last one was on the CapEx.

Yes. The CapEx, well, we always have challenging budget. I mean the budget where we are willing, let's say, and trying to put into the pipeline and realize an important project. And usually, we are not always able, but let's say that, in our opinion, will certainly be no less than EUR 350 million, maybe EUR 380 million if the organization is able to really go through all the engineering and execution purchasing. We have no delay on the supply procurement, et cetera, but let's say, EUR 350 million, EUR 380 million.

The next question is from Brijesh Siya of HSBC.

So I have possibly three. Starting with the dual-voting, is that more related to the decarbonization CapEx, which you are expecting in the future? I know you previously talked about the used cost attached with it and the partnership that is required to do to ensure that there's a solution. So can you give us a bit more color about what you think about decarbonization CapEx? Because just linked to your balance sheet trend, you have EUR 800 million of cash, and you talked about having a dividend of only EUR 0.60. So you're holding gas on one hand. On the other hand, you have this decarbonization CapEx. So how do you kind of balance between shareholder return and the future requirements for Capex?

I didn't get you to match your question in the sense that where you mentioned the double vote at the beginning of your question.

Well, I think yes, double for, so my question is whether that is more related to you're trying to kind of combine with another company to have this decarbonisation CapEx kind of said by others.

No, no, no. As I said before, it's something that we think we should have in our grower. We think we should be one of the tool available, but it's not that we are thinking to carry out our decarbonization plan. I mean, we will be able without the need to combine with someone else, our decarbonization plan fully. So the combination -- the potential combination with someone else is something totally different, as I was explaining before, can be an opportunity if all the conditions are out there and double vote can be helpful, but it's nothing to do with our decarbonization plan, our road map and our willingness to be able to accomplish that on a stand-alone basis. So that's our clear direction.

And in terms of the pricing in the U.S. and import pricing, I believe you continue to kind of export from Italy to the U.S. East Coast. So when you look at the arbitrage between your export to U.S. and what the local production is, are you able to kind of find any arbitrate where you can kind of use the import as a mean to kind of reduce your cost base and hence possibly compete more effectively with the marketplace?

No. We -- I mean, the volumes that we have been shipping and we probably ship also this year from Italy to U.S. is simply substitute of another volume coming from somewhere else in a sense that if we look at our capacity utilization in Texas in the Houston area, but also lending in New Orleans and moving up to the river. We need some cement from outside sources. And as long as this is economically feasible and also, of course, fully in line with all the transfer prices regulation, we try to do it from plants that have capacity available. We have a plant in Italy directly at the C side that can load, let's say, ships in a very effective way, and that's why we do it. If it's a win-win situation between the 2 countries, there's no reason why not to do it.

Understood. And in terms of your U.S. growth plan, you talked previously about thinking about plant, but cost was a major issue. Is it still in consideration about doing a brownfield or thinking about a greenfield in the U.S.?

Yes. Well, greenfield is extremely difficult. I do not say impossible because nothing is impossible, but extremely difficult. Certainly, on the brownfield, this is something where we -- there's no, let's say, decision being made, but there are 1 or 2 options under assessment, under study that will bring us to a decision sooner rather than later because anyway, both considering, let's say, the prospects of the demand, the age of some plants and our regional network, we'll certainly -- if not today, in some years' time, we were in the middle of some significant renovation, which will bring together with that also lower CO2, higher energy efficiency, et cetera. So a number of benefits.

Understood. And the final question on the shareholder return. You rightfully kind of raised the dividend per share. But I think the buybacks could have been -- given your balance trend, would you kind of -- I mean you haven't done for 2023, but is that something still in plan to probably raise it further in '24 when you see those cash flows continue to flow in?

I see it is a possibility. It is certainly a possibility. Clearly, the share price is less attractive if you -- I'm very glad that the share price went up so significantly, so nicely and this is a big advantage for our shareholders, certainly. On the other hand, this makes the buyback option a little less attractive. It doesn't mean that we will not consider it. We can certainly consider it but not with the same amount that you can put on the table. You will buy the shares. It's clear. But that's a good thing and still represent an advantage for the shareholders as a whole.

The next question is from Lukha Aggarwal of Bank of America.

Just two quick ones from me. One is on the optionality on the net cash position. I just wanted to know what your thoughts are on what's the kind of most likely use of that. Is it expansion of CapEx, shareholder distribution, M&A, good to hear thoughts on that? And the second is kind of relates actually on the decarbonization program. There's been a couple -- I mean, this year, I guess, carbon capture is kind of focus with Heidelberg's cement -- carbon capture plant going online. Holcim has announced quite a few projects in that area. And given you have this kind of net cash position, I was wondering if we could expect acceleration of the decompensation program and if you may invest in these type of technologies in the near term.

What was the last...

Invest in the carbon capture technologies in the near term.

Yes, Well, sure. This is best, one of the key topics. And it's a topic that will certainly require a significant amount of money, and there is a bit of delay between the cash generation and the actual usage because these topics, these projects require a lot of time and studies and before becoming mature and also before going to the real industrial level from the pilot or industrial pilot or big size. So yes, there is already something in the pipeline, something we are committed. There are some others where we are in the starting process. And the outlook for that, I mean, smaller projects or small industrial pilot is relatively short term, meaning, I would say, 2, 3 years. Much bigger projects, still, if you look at our road map, they will occur more likely in the, let's call it, second year, so between 2030 and 2050. So in the meantime, we may be building more positive financial position, which will allow us on one side to be able to face these bigger projects when they come about and on the other, to consider certainly other options. The one that you mentioned, in theory, they are all available. And the fact of being more and more liquid makes them also, at least from a financial standpoint, certainly more feasible. Doesn't mean that we have to necessarily spend the money if we are not convinced. In the same time, and we will try to follow as much as possible also policy or program of shareholder returns, which goes up, doesn't go down. I think we can show that this has been happening in the last 2, 3 years. The increase in dividend is one example. Dividend level that we have set today, the idea behind it is to have a level which is sustainable and can grow. We have always been following a certain policy. As regard -- as far as dividend payment is concerned, that has been, if you wish, conservative or prudent, but the idea is to do something that we can be sustainable in being the long run, so to avoid the possibility tomorrow to reduce it or to cut it. I think this is the idea behind us. In addition to that, legally speaking, the dividend payment is coming out of the legal entity. So it's true that we are looking at the results always from a consolidated standpoint. But when we are talking about the dividend, legally speaking, this is a payment made by the company, where the results are not certainly similar or much lower than the overall group results. And so there is not a perfect match. So I think, again, it's good to have more options available, and we will try to use to put this money at work in the best possible way.

The next question is from Gregor Kuglitsch of UBS.

So a couple of questions. Can you remind us what the Brazil consideration would be? Perhaps you can tell us the equity check that you would have to pay if the option gets exercised now? And I guess also the debt that is -- I know it's a sort of intercompany loan, but I think you put it on -- you kind of take it off your net cash. So essentially what I'm looking for is the net cash reduction or net debt increase all in ideally?

Yes, the net impact we should be around EUR 500 million, of which around EUR 350 million is the actual cash out. And then the other EUR 200 million is the impact following the deconsolidation of the entity because we have currently an intercompany loan towards the Brazilian entity, credit as a receivable, which is included in the net financial position because it's an interest-bearing receivable that will disappear and it will be eliminated through the consolidation and the net financial position of the Brazilian entity will enter the consolidated statement, but this is practically speaking, zero. So it's balanced. They don't have basically either liquidity or net debt or debt. So they are basically at zero today. So the outcome on the net financial position is, we think, around EUR 500 million.

Okay. And the second question is coming back to your energy slide. So you're saying the energy bill was EUR 565 million. That's excluding Russia fund. So what I'm trying to figure out is, I'm looking here over time, it looks to me like your energy bill, I don't know, maybe a few years ago, let's say, fuel, for example, used to be EUR 150 million, now it's EUR 270 million; electricity, EUR 160 million, now to EUR 300 million. But we're seeing pet coke pricing come down a lot. We're seeing coal pricing come down a lot, Electricity is higher than it used to be, but it's still coming down a lot. So a bit surprised about your statement of a flat energy bill for this year. I just wanted to understand how conservative that is or if there's a timing or if I'm missing something -- I guess I would expect it to drop quite considerably at some stage. But obviously, I don't know your hedge position, I just want understand, yes.

No. I mean, meanwhile, on the fuel, we are basically very little hedged. We are basically on the spot market. So if there is -- like, yes, it's happening for pet coke, you're right, there is a tailwind or a benefit we should see it in our book. Yes, with the delay always with because usually we purchased, let's say, 6 months, as you mentioned, we are not hedged. But anyway, we have to make sure that we have the fuel available. So we are obviously part of dealing, let's say, about 6 months in advance for the needs. On the energy, it is a little different because the hedging that I was mentioning was done during 2022 -- 2023, sorry, to cover the 2024 needs up to, let's say, 50%, 60%. So we have been buying the 2024 needs at 2023 levels -- average levels during the year. And that's why we may need 1 more year to see the full benefits. So this kind of 1-year delay for about 50% of the total. For the rest, if there is a benefit, we will get it, let's say, immediately.

Okay. And could you give us a rough idea because I'm looking here at our costs, I don't know, EUR 70, EUR 80 per megawatt hour if you buy forward spots even lower, but let's say that's the kind of forward pricing. Where would you say your bill was last year, double that, roughly? Is that fair?

Yes. More or less. On the contrary...

Okay. And then I think on Monday, there was quite a few announcements from the U.S. Department of Energy regarding a number of subsidies, two were for carbon capture. I think one was for Vicat, one was for Heidelberg. But there were also quite a few kind of calcium clay projects from a number of competitors. So I wanted to understand whether you're also trying to get these subsidies? And if not, why not? And what your kind of view is on perhaps expanding capacity through other means, I'm talking specifically about obviously, clinker ratio, calcium clay rather than building new clinker plants?

Well, clay, it's an interesting subject, but we have been working significantly on that topic, but we see more possibilities overall to find the right sources or the right quantities to really impact, let's say, our overall CO2 footprint. So there could be some regions, some clients where we will be able to use or produce or to consign, let's say, this product -- this project. But at least in our geographies, we did not find enough, let's call it, interesting sources to really invest or think about and make a project on that. On the other subsidies, Lorenzo can tell a little bit more. Certainly, we are looking at it, and I think we may be successful.

Yes, we are, I mean, looking for subsidies is definitely part of the road map, and we are actively looking at these opportunities, I would say, in every country, in every region, starting from, again, country-by-country approach. So trying to really take all the advantages that every country could offer. And also, I would say, leverage on the innovation fund opportunities, which are absolutely fine, and we have some projects that could be a part of the story and also in the U.S. Again, same for the other regions, we are looking at opportunities funding subsidies from the DOE regarding, I would say, all the low-hanging fruit in our road map. So starting from reducing winter factor from -- to renewable energy sources, but also in carbon capture, I would say, U.S. are a place that offer quite interesting opportunities.

And then maybe one final question. I think in your statement, you referenced the sort of risk of meeting certain thresholds. I guess you mean the ETS threshold sort of the famous 85%. I don't know exactly. Could you just tell us where in your network that you think that's a risk? How you think you'll be dealing with it? I guess we saw, like, I don't know, for example, one of your large competitors simply shut down a plant, I think to kind of sort it out. So what do you think, how you can manage that situation?

We did not understand actually that the decision. It was not totally clear to us at least because it didn't seem necessary. But yes, in general, if you look longer term with the gradual declining location, let's say, of the free allowances certainly -- and in some countries where the capacity utilization is declining, certainly, there is a strategic vision about which plant should continue to produce and which ones should not. Up to now, in terms of, let's say, free allowances granted, we are still, I would say, within the 85% in most of the kilns. So we are not -- we are losing some free allowances because of the declining factor. So this is -- and we will lose, of course, more with the introduction of the CBAM. The pure, let's say, interval 85%, plus 15, minus 15, we can live with it. Even though clearly, in some countries like Germany, this could trigger some competitive behavior, which is not -- let's say, which is not what we would like because it can translate into more pressure on the price side. This is what I was commenting in the beginning, speaking about countries where capacity utilization is getting down. So there is one more reason again to be aggressive on volumes if you -- if there is a risk to lose the free allowances.

Okay. Then maybe, sorry, one final question coming back to this whole voting right merger thing. I mean I guess my question to you would be, if you look at the multiple of your shares, I don't know, 4x -- 3x, 4x, something like that, EBITDA, I guess, how do you think -- how would you stack that up if somebody -- you merge with somebody? Would you care particularly of difference in multiples? Or would that be a consideration as well? Because it obviously will determine also sort of value creation for the family and I guess all the shareholders?

No. Clearly, if you enter into this kind of discussion or real project, the market is a reference because it does exist and the market is always true in sense because the market is the market. But I think that it will not be the only reference point. I mean we have to, I think, consider valuation, which is looking at, yes, market multiples, but not only. I mean we are not certainly here or willing to underscore the value of the company in case of any combination.

[Operator Instructions] The next question is a follow-up from Yassine Touahri of On Field Investment.

Yes, just a follow-up on the strategy and where you would like busy to be in the medium term. Would you like to have a larger exposure to the United States where there is a lot of growth potential medium term? Would you consider investing more into Europe? Or would you prefer to grow in more in emerging markets? I just like to understand how you're thinking like it had a blank sheet of paper, what will be the ideal geographical point of Buzzi?

I would say that certainly, the priority would be towards, let's say, countries where we already operate for good reason, many good reason that we know. I mean, we know the market. And if you do something in an area where you already operate to extract synergies is much easier. You have An organization in place, which is already working in effectively. And so this is certainly the preference. So -- and within the market where we operate, Europe has got -- is not the same interest or the same potential interest as, for example, the U.S. or other countries where we operate like Mexico, Brazil, mainly because of the regulation, the constraints, the pressure, the norms associated with the decarbonization, et cetera, which makes it at the end a little less competitive and less interesting. So it doesn't mean that we don't want to reach our goals, but to do that with more flexibility or a different approach like is happening in the U.S. or Brazil or Mexico is certainly better than a highly regulated area like Europe.

And would you like to -- I think in the U.S., you have a lot of -- you have a big position in cement, in ready-mix concrete, but you didn't have aggregate. Do you feel that is something that is missing in your portfolio? Or you feel that you don't probably need it?

I think you would surely have less priority than cement or ready-mix.

And when I'm looking at your exposure in Latin America, could you consider other countries, such as, let's say, Colombia, Argentina, which are consolidated and at an interesting long-term prospect? Or would you prefer to focus on your existing footprint in Brazil and Mexico?

As I said, yes, I prefer to focus on the existing. Other countries totally new, we may consider them. It's not, no -- I mean, straight no, but less likely, and of course, each country is different from one another. So each one has a position, let's say, in the priority list certainly, yes.

And maybe a very last question. When you think about your listing, your listing is in Italy. I think a lot of investors are not valuing your assets fairly in the U.S. Would you consider in a combination, the opportunity to move your listing in the U.S., where investors are much happier to pay the full price of the assets in cement?

I mean the way we are now, no, because we don't think that overall, the cost would be greater than the benefits. In a combination, a potential combination, maybe.

There are no more questions registered at this time.

Thank you. Thank you so much for listening. I know many of you are still listening. This has been a long afternoon. But anyway, thank you. I hope the conference was helpful and informative enough. And enjoy the next week, Easter week. If you do have some vacation, enjoy them. If not, enjoy the week anyway. And yes, we stay in touch. Thank you. Bye-bye.

Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones. Thank you.