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 Full Year 2024 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Pietro Buzzi, CEO of Buzzi. Please go ahead, sir.

Hello. Good afternoon to everyone. Thank you for being with us. It's a little late, so we'll try to keep it as short as possible being also a Friday. But I hope that we can provide some interesting information to you. I assume that you do have either in front of you or in your hands, let's say, the presentation that was published on the website before the conference. So I will mainly follow that. So if we look at 2024 financial year, I think we can be quite happy about the achievement and the accomplishment of the group. We were able to maintain and actually slightly improve the profitability, both in absolute term and even more remarkable, in my opinion, on a percentage basis, you see the EBITDA margin going up almost 1% but particularly the absolute level continues to be quite good. In terms of, let's say, balance sheet figures or cash flow, CapEx went up quite significantly. But nevertheless, we were able to remain basically at the same net cash position of last year. And this morning, the Board decided to increase the dividend by approximately -- dividend per share by approximately 17%. And this coupled with the buyback that we carried out during the year, last year and let's say, in this year, we believe that the shareholder return was overall, and we can see the figure later, quite increased during '24 and '25 in the last, let's say, 12 months. If we move to the second page, you can see that 2024 and also 2025 -- beginning of 2025, since we are already in the new year, we can mention that, and these are public information, were affected or in any way influenced to a significant extent by some extraordinary transaction. In particularly, we can mention the acquisition of the remaining 50% stake in Brazil. So the full line-by-line consolidation of the company starting from the fourth quarter, which also enable us in a sense to maintain the same profitability level in absolute terms that we had last year. On the other hand, we had a negative change in the scope of consolidation. So a decrease of scope associated with the closing of the agreement to sell the assets in Ukraine. This also occurred at the same time. So basically, the new scope of the group started to become effective in the fourth quarter. Then in January 2025, this is not a huge thing, but anyway, some does have an impact on the Italian business. We sold to Alpacem, the Wietersdorfer, Alpacem Wietersdorfer group from Austria. our plant, our cement plant in Fanna, which is in for those that are from Italy, let's say, in the Northeast, Pordenone province. And in a sense, we exchanged that sale with a 25% stake, minority stake in the overall Alpacem group, which includes -- we already have, let's say, this 25% position in the Slovenian asset, the so-called Alpacem Slovenia. But now we are also shareholders in the entire, let's say, Alpacem organization, which has position in Austria, Slovenia and also Italy. Together with Fanna, they already had some Italian operation always in the Northwest -- Northeast sorry, region. And we are now, let's say, together with them, a minority partner across this entire group of operations. Very, very recently, we entered into this deal to acquire a block trade in Gulf Cement company, Emirates, Ras Al-Khaimah. And we are in the process of this mandatory tender offer, which was triggered, let's say, by this block trade. And we should be able, we think, quite likely that we will be able to gain a majority at the end of the tender offer. Exactly which stake we don't know. We will know, let's say, later, but there are very high chances to become a majority. If we move to Page 3, you have a good description of what happened at the net sales turnover level, which remain, as we said, basically the same as last year, but with different dynamics and trends across the geographies. In Italy, basically, volume slightly down, but completely offset by a favorable price trend. So stable volumes and greater profitability as we will see later. In Central Europe, which includes Germany, Luxembourg and the Netherlands, suffering, not good the volume trends as we all noticed and acknowledge, let's say, during the year. Pricing basically flat, some improvements at the beginning of the year, but then the price curve trend was flattened due to the difficult volume environment and small changes in scope associated with the sale of ready-mix that we used to have in Luxembourg and France across that area. Eastern Europe, much better, let's say, than Central Europe. Inside here, we have Poland, Czech, Ukraine and Russia and favorable price environment and also overall favorable volume environment. Also after, let's say, after including, let's say, the decrease associated with the Ukrainian deconsolidation. FX, the only favorable effect is coming from the Czech koruna. Meanwhile, the Ukrainian Polish and Russian currency, they will suffer some kind of devaluation. And the scope changes are associated with the Ukrainian deconsolidation. U.S.A., volume, a little bit disappointing. We are already now 2 years in a row with a negative volume trend, which is not different from the overall market trend. So yes, it's true that we do not cover the entire 50 or 51 states, but we do cover those states which have most of the cement consumption in the country. So the decline is basically the same that the industry suffered overall the entire country. Positive price environment, not fully able to offset and stable exchange rate. The average exchange rate was very, very similar in 2024 versus '23. Brazil it's an addition to the turnover and the fourth quarter contribution is EUR 86 million and is helping us, as we were saying before at the beginning, to maintain the same turnover for the full year despite some other deconsolidation moves. The Page 4 is addressing the EBITDA bridge, showing an interesting, I think, showing an interesting view and an interesting analysis. Our volume were not great. Certainly, the impact of the slowdown in Central Europe is the one that most affected us in terms of volumes, but also some other markets, including Italy, did not perform better than the previous year. Pricing overall able to offset not fully, but to a significant extent, again, with a different mix, not all countries really contribute positively to the price development, but some of the important one, yes. And from the variable cost, certainly, both power, fuels, partly the logistics and also raw materials to some extent, we enjoyed really significant tailwinds coming from the main variable production cost. And fixed cost instead, they are reflecting more the inflation trend. Here, we have mainly staff maintenance cost. And there, we did see some -- we did, let's say, had to somehow include in our books and in our profitability, higher fixed cost. And other items are a mix, including inventory changes that were somehow affecting us in a sense of decreasing versus the previous year. Another advantage, if you wish, coming from the lower production level is the fact that we didn't have basically any CO2 cost or 0 CO2 cost being -- remaining within, let's say, the range of the minus 15. We also did not lose any free allocation for the following year, but there was no need to buy CO2 rights here. We are talking clearly about the ETS countries, so Italy, Germany, Poland, Czech and Luxembourg. They were all able to produce what was needed by the market by our customer last year without the need to purchase CO2 rights. FX, slightly negative due to Russia, Ukraine, Poland mainly, also Brazil to a little extent. And scope, this is a net EUR 28 million is a net between the positive contribution of Brazil, which is clearly much more significant and the negative contribution coming from the deconsolidation of Ukraine. Overall, we end up with not a great improvement, but anyway an improvement and an improvement versus something that is -- was already very, very positive, very remarkably, let's say, high in 2024. So to be able to confirm this level, I think, is -- I do consider it a very good result. On Page 5, we see some other important, let's say, figures or trends. Operating cash flow improving versus last year. CapEx going up mainly due to programs that are partly maintenance and partly expansion and within the maintenance, sometimes within the expansion, we include also all the roadmap or decarbonization projects that we are in the process of carrying out according to the so-called our journey to Net Zero road map. And then what I was mentioning in the beginning, return of cash to shareholders, looking at the dividends and the buyback, we arrive at about EUR 258 million for the year. Now moving to the trading and market condition in the different areas, starting from the U.S., which continues to be for us the main contributor. It represents more than 50% of our results. You can see that the year was at the end, pretty similar to the previous year, thanks mainly to the tailwind that I was mentioning before on cost because -- and also, let's say, positive price environment, both because thanks to the positive price environment, net revenue remained very, very close to last year level, considering a volume effect -- a negative volume effect. So we basically offset the negative volume effect with the pricing. Margin strengthened due to lower cost. So fuel and energy saving were more important like we see here than other increasing cost items like raw material, labor, et cetera. Effect -- foreign exchange effect was very minor. And overall, the performance went up to a very high level, which is I think to my knowledge, to my remembers, let's say, the highest ever. In Italy, we are -- we continue with a very solid and strong performance following the results of last year. Similar story, if you look at the net sales, so declining volumes, but some price improvements able to keep the turnover at the same level of last year. EBITDA helped by the variable cost decline, fuel, also energy to some extent. So price over cost definitely improved, and you see that also from the margins that moved from '22 to '24, which is something that for Italy, we have not been seeing since a very long time. So we are not at the same absolute and relative level of the pre-financial crisis period. But clearly, we are talking about the volumes that are 40% or 50% below those levels and to achieve a 24% EBITDA margin in a country where the capacity utilization is still relatively low, I think that can be considered a very good result. In Central Europe, that's the weak spot certainly for this year. Already last year, it wasn't great. But last year, pricing was stronger and the impact on our result '23 versus '22 was not as negative. Meanwhile, this year, we are losing I would say, not in a very significant way. But yes, the economic situation, the fact that volumes were being affected by low demand, the fact that capacity utilization went down in a significant way translated into what you see in this #9 page. So a decline of EBITDA from EUR 214 million to EUR 174 million and minus 2% approximately in EBITDA margins. This includes also not only Germany, but also Benelux, where I mentioned it before, it's not a great impact, but anyway, it does have an influence on the number. We also had a negative scope change on net sales and EBITDA. And the market in the Netherlands for ready-mix was also particularly affected this year with a challenging, let's say, demand and economic situation and margins that were definitely lower than usual. So this is the, I would say, let's call it, the negative spot in 2024, which we hope will mark, let's say, an end to the decline. And hopefully, we will be able to see, if not a clear recovery, at least some stabilization for the next year in this area. Eastern Europe on Page 10, relatively well. We have certainly a strong business in Poland and Czech Republic. You know that these 2 countries have always been somehow performing at a high level of capacity utilization. They enjoy high substitution in terms of alternative fuel. So relatively low fuel cost compared to other areas compared to Italy, for example. And they also enjoy particularly Czechia, a very strong ready-mix business, so very strong vertical integration and ready-mix business, which is, I would say, above average in terms of profitability if you consider -- if you compare with other country. There is the impact of the Ukrainian deconsolidation, but it's not so significant. And the performance of Russia was fairly good. At the end, they suffer certainly some on the volume side, but the pricing was pretty strong. So in terms of local currency results, they were absolutely at a very good level. Then after translation, we accounted -- we are accounting for some negative variance. But I would say that the help, at least in the consolidated figure coming from Russia, the contribution remained pretty steady and quite favorable. In this country, as opposed to other countries that I mentioned before, the impact of energy expenses, energy cost was sometimes the opposite way. So we suffer from higher power cost, particularly in Poland. This is related to their local market and also sometimes to the hedging or the fixing of prices, depending on which time in which period you have been, let's say, hedging or fixing the power prices. And then when this, say, fixed prices ends, the effectiveness of the hedging comes to an end, it can be reflected like in this case, it was reflected into higher energy expenses. On Page 11, Brazil is not totally a new entry because anyway, we have been involved in the country as a joint venture since 2018 already. The performance, I think we consider it in a positive way, in a favorable way, particularly because it was able to improve the profitability of the country, let's say, our local business was able to improve profitability even in a situation where prices were not -- did not show an improvement. And also -- yes, okay, volumes there, yes, they did improve some around 2%, 3%, but prices remain under pressure. So all the improvements actually came from better cost management in part and as in other countries, by some kind of general deflation concerning or related to power and fuel cost. So I think there is potentially a lot to improve in the country. Certainly, it will depend on the local economy, on the demand, on the trends and particularly on the price level, which today, if you compare it to the, let's call it, international price, as far as -- as much as the comparison can be done because any country has its own market and feature and cost, but remains quite depressed. So if with a depressed price, we are able to achieve a margin, which is 25%, 26%, if the prices somehow will go up, which is possible because there's certainly a competitive situation that may become, let's say, more rationally in the future, the margin or the scope for improvement in our opinion, is very significant. But we will see. In the meantime, I think we are managing well on the cost side and also on the sales side to be able to do better even in a, let's call it, muted price environment. On Page 12, Mexico. Mexico is not fully consolidated. It is equity accounted. And it remains, let's say, a star in our group, if you consider the EBITDA and EBITDA margin, extremely positive. So really very, very remarkable performance. Last year was not a year of growth. The economy suffered a bit from -- mainly from the, let's call it, uncertainties and also some political decision -- local political decision uncertainties coming from the relationship with the U.S. and some political decision that have not been particularly friendly towards foreign investors and also the fact that some of the large infrastructure projects that were -- that began with the election of AMLO 4 years ago, basically came to an end before the end of its mandate before the end of 2024. So there is some uncertainties. There are some uncertainties about the future development of volume, like we mentioned also in our outlook. But overall, the country remains, let's say, a great contributor to our net result and keeps going very well. If we go to the outlook 2025, what can we see, what we have seen so far also clearly, 2, 3 months are not very, very meaningful. Seasonality, the cold rain and winter in the continental area of our group. I think we have a view that has been basically confirmed by the -- at least initially by the 3 months that we have behind us that sees the possibility to increase volume, not very high, not very likely to be able in neither of our geography to see a clear improvement in volumes, maybe with the exception of Brazil, where we do see an improvement in volumes, but it limited to maybe 3%, 4%, not much more. In the rest of the geographies, difficult to imagine a clear recovery. In the U.S., potentially, there is a support and there is, let's say, pent-up demand coming mainly from the infrastructure project. But we haven't seen it so clearly so far. Beginning of the year is not really great. We think it's mainly due to weather, but there's no clear rebound yet versus last year. So we are more likely -- we consider more likely a year which will show similar volume. Pricing is a bit of a question mark. As usual, it depends on the area and the market. I think there are good chances to be able to make some improvements locally, so -- but also on average, not very significant in terms of percentage or absolute value. But without a clear, let's say, recovery of the volumes that is not really showing that is not so far. It can be challenging. It can be tricky. We have to see also what is the impact of the -- some of the changes that occurred lately in the industry structure like the merger or acquisition more than the merger of Summit by Quikrete. So there are some changes in the market that can affect and can have an impact both on volume and on prices for us. Italy is okay, let's say, doesn't seem to be declining really -- shouldn't be declining versus last year. It will depend a lot on the public works on the civil works, the implementation of the infrastructure plan, the recovery -- European recovery funds and residential doesn't look really strong, also renovation, residential renovation, even if it's not so important for us, not so much cement intensity is going down after the period of the tax abatements. So also here, if there is a deployment of the recovery plan, we will likely see stable results, but not much more. And on the other hand, we have to consider what I was saying at the beginning, the fact that we are anyway losing a plant within our scope, which will have an impact on volumes, not necessarily, let's say, on result, but yes, on volume, yes. Central Europe, likely to stabilize. We think that the decline that we experienced in the last 2 years was quite significant. There is a change in Germany, not so immediate, but let's say, maybe in terms of psychology and potential recovery coming from the recent political election, recent change in the leadership. So we think that we can remain where we have been in a better case, which we do not rule out completely, we see the possibility to start to go back to a higher level of capacity utilization. We are more confident on the Czech Republic and Poland, where we see difficult to imagine also a great improvement here because we are running close to full capacity. But we are also working in Poland, for example, to improve our capacity and Czechia in a way that also to make let's say, more cement with less clinker, which is part of the decarbonization road map. And we are substantially positive on these two countries, and we do see the possibility to confirm or maybe improve some our results versus last year. Brazil, I already mentioned, I think it will depend a lot on the price level on the internal industry dynamics. But on the volume side, we are quite confident. Mexico, we may see a further decline in volumes, not huge. But in general, the country is suffering from the uncertainty from the tariff war. Let's see how this settles, let's say, between Mexico and U.S. But in general, it's unlikely that 2025 will be for Mexico, at least Mexico construction industry, a year of growth. So we will have to manage carefully on the cost side and on the price side. On the cost, again, generally speaking, what we see for 2025 is a more difficult environment versus 2024 where we explain how much -- how important was the tailwind coming from the fuel and power and sometimes some other costs, too. We think that this trend is basically over. We have seen it already in the -- for example, in the price of petcoke moving up. Of course, when the petcoke move up, there's always a delay in our books because we do have a certain inventory to be depleted. But the trend, for example, for pet coke recently has been clearly more costly pet coke. And energy, too, I mean, there's a lot, particularly in Italian newspaper complaints about the power cost. And yes, this is true. It is going up. At least we are not enjoying any more an advantage on that side like we had last year. So it will be challenging. I mean, as usual, pricing will play a role, very important one. So how much we will be able to offset this situation of weak volumes and probably rising cost with the price improvement is a bit of a question mark. We will see. It will depend, yes, the geographies, capacity utilization level demand industry behavior, we'll try. I mean, we'll try clearly, the idea is to make it to maintain as much as possible this level is not -- we cannot be positive about that, but we'll try our best. So overall, we think that including the scope difference or the scope variance coming from Brazil, there are good chances to be able to maintain these results. So we have in our idea, in our budget, the goal to possibly improve them. We are not so certain. We think that there are more potentially risk -- downward risk than the opposite, but we'll try our best. Clearly, everybody knows, I mean, it's been discussed on the newspaper. We are living in a moment which is not helping. The degree of uncertainty and volatility is increasing, and we have to keep our direction, let's say, our route very stable as usual without being too much concerned by the external environment. The tariff war, let's call it, for cement has a relatively low impact in the sense that, as you all know, cement is in most of the market is a local product that doesn't travel too much. In the U.S., where there is more dependency of the market from import, I don't know, apparently -- well, maybe on Canada, there will be some tariffs. So this could actually, for the local producer represent, let's say, a chance -- a more positive chance than the opposite because if some of the imported cement, which is needed for the country becomes more expensive in this area -- in those areas where the imports are -- they do have a significant stake, our domestic prices could also go up. In other country, difficult to imagine really a significant impact on our business. The impact will be more on the general economy, on the, let's say, on the business mood of certain countries, which can be affected and postpone certain CapEx because of the uncertainty about the tariffs. So that's the way we see so far 2025, and we believe it will be, again, I think another good year, but difficult to imagine a year of significant growth. Well, we have a page on sustainability, which I will just comment briefly. Actually, if you will be willing to go through the entire CSRD new report is, I don't know, 100 pages or even more. So there is a lot of data, very difficult, in my opinion, to understand to assess. It is very questionable this way of presenting the data. But if we look at the main key driver or key indicator for us, which is the kilogram of CO2 per ton of cementitious product, we can see that our trend, let's say, our direction is at least so far going in the way we were assuming. So it means that the assumption that we have made in the road map were at least so far correct. And we are moving in that direction, at least as far as 2030 is concerned. And later on, clearly, it will become more difficult, but there are a number of other impacts and other decisions to be made, which are it's difficult to advance today. But for what we can do so far, I think we are on a good trend, and we are fulfilling, let's say, the expectation or the announcements that we made back in 2022 when the road map was disclosed for the first time. So maybe I spoke too much, but I would let you go through the following pages, which have a lot of details, interesting information without commenting right now all of them. And I would now move to the Q&A session. So please, operator, let's open the Q&A session. Thank you.

Thank you. This is the Chorus Call conference operator. [Operator Instructions] The first question is from Brijesh Siya of HSBC.

So a couple of questions from my side. Starting with the pricing comment, in the U.S. you talk about flat pricing at this point in time. And at the same time, you say that there is a risk that if the tariffs be put on cement, and there's a chance that domestic prices will go up. So I have two questions on that. One is what proportion of your cement comes as an import, i.e., from Italy or elsewhere in Middle East? Maybe in Algeria, you might be getting something. But yes, if you can tell us what proportion of your cement you sell it in U.S. comes from other markets? And the second question is there's a kind of renewed interest for the investment in oil-well cement. I know in the past, you used to have a higher oil well cement sale, but that probably would have kind of dipped down. If you could remind us where the share is. And if I recollect, that used to be priced at a higher level. So there could be a chance that, that could number be kind of significant as we move towards '26. And the second question is more on the kind of pricing in Germany. You're talking about pricing will -- what do you call, the demand will be stabilizing at a lower level. That's understood. But in the last 2 years, we're seeing a decline. I know there was some small price decline last year, but we haven't seen anything material as such. But yes, that was supported by energy cost deflation as well. But when we are looking at a stabilized volume this year and a potential recovery towards second half, what kind of -- what's the risk you see that really there could be a pricing decline in Germany as well?

Well, let's start from the first one. Imported cement for us, the one that we manage directly, we did have some, let's say, I think the very maximum we achieved was maybe more or less what was 7%, 8% of our sales at the time when we were really fully utilized, which is not so much -- it is not the case of the last 2 years. So already in '23, it went down the share of imported cement. And in '24, we will continue to have some but probably in the range of 5% of our sales, something like so. That's something that we need, particularly in the Texas market, the Houston, San Antonio market because otherwise, we will not be able to serve our customers in full. In oil-well cement has been a good driver, let's say, of our profitability. Certainly, we are, I think since 2 years in a growing trend. We -- how much was 9% of our sales, a little less -- less little less...

5%, more or less 5% of the total U.S. sales and slightly more for the -- just for the Russian market.

Yes. Okay. The Russian market, Russian market is another story. Yes, Russian market is -- the share of cement has always been very significant. This -- we do have in our budget a further growth of this product, which is certainly relatively speaking, more profitable than gray cement. So in this respect, the Trump policy, let's say, or should help us in a sense that if really the drilling increases and there are no more restriction, let's say, on this industry, we can see an improvement in our oil-well cement sales and also maybe prices. I mean, prices in oil cement is much easier in a sense to manage because you have -- you deal with companies -- a limited number of companies and companies that certainly are interested in -- they're able to pay more if you provide the right product. It usually is a kind of a tailor-made product, even if you fall under certain specific category of oil cement. If we are talking about Germany, Germany, yes, I mean, you can see the curve. There was an effort to increase prices at the beginning of last year. And then due to the weak demand and the fact that we are having the feeling, let's say, of losing market share more than we should than we would like. It was necessary clearly to adjust prices. They did not -- there was not a vertical fall, absolutely. I mean, it was a kind of flattening of the curve. I agree with you. I don't see really a reason for the prices to collapse or going down in a significant way, particularly this year due to the fact that we should see some volume stabilization. So with the volume stabilizing, I think prices will also tend to stabilize and costs are, I think, increasing for everyone, not only because of, let's call it, inflation, but also because of lower capacity utilization, so less operating leverage. So I think we can expect a fairly stable to slightly positive price environment for this year, assuming that the volumes will not decline further, which is our, let's say, main case.

And just one last one on the carbon border adjustment mechanism. Is that -- have you had any discussion with your -- to your association with the EU, whether that's still coming from 1st of January 2026?

There are discussions going on. Certainly, as of now, there are no changes, let's say, really envisaged. So we can expect our, let's say, our plans, our -- the way we are preparing in a sense is based on, yes, an introduction -- initial introduction starting for 2026. Is this really the way to protect the European industry? Probably not. I mean it's not -- so it's not such a great idea, even if theoretically, it could spend. So I think there will be discussions. Certainly in this year, there will continue to be -- I think probably the automotive today is more under scrutiny, it's more -- maybe more important than cement. But also the cement producer and maybe the steel producer, other heavy industry with a high level of CO2 intensity will start to push in a certain direction because I personally don't think it will be the solution. It will not really have an influence on lowering the CO2 for either for Europe or for the world.

And just lastly, on the recent trends -- sorry, on Germany infrastructure, you have this 8 million tonne-odd plant and the utilization is probably roughly slightly more than 50% at this point in time. So would it be fair to assume when the volume starts picking up, you will probably say -- probably get a disproportionate operating leverage on your EBITDA and bottom.

Yes, we should. We should -- certainly, there's a big step-up in the margins when you reach when you go above, let's say, 2/3 of capacity utilization, which we are not right now. So if the volume really pick up and there is -- we exceed, let's say, 2/3 of capacity utilization, this is when the impact of the fixed cost on the following, let's call it, 1/3 or 10% or 20% is almost zero. So yes, this can be a game changer. Then the cost of CO2, the CBAM and all the stuff associated with the, let's call it, ETS scheme is something different. So and can maybe somehow not give you the same advantage that you will have in a business as usual environment because today, we know that our marginal cost, including CO2 and assume that CO2, you have to pay for it or you have to buy it. When you go above a certain level of production, your marginal cost increases instead of going down, everything else being equal. So on one side, you do better because you increase the operating leverage. On the other, your marginal cost goes up because you have to pay for CO2.

That's clear.

The next question is from Ephrem Ravi of Citigroup.

I've just two very quick questions. Firstly, can you give us your thinking behind the acquisition of Gulf Cement? Is this an isolated kind of plant acquisition? Or is it indicative of a broader push into the Persian Gulf region or Asia in general? And secondly, I kind of get the EBITDA guidance, but specifically looking at volumes, do you see sort of 2024 as a trough for the volumes? Or are we looking at another year of declining volumes, excluding scope impacts?

Yes. Well, United Arab Emirates is kind of, I call it, opportunity. We hope that it will be an opportunity that came about. We were not looking, let's say, really actively to it for a number of reasons. It came about, and it seems something that could be interesting to us, mainly because we see the potential to restructure, let's say, or to improve significantly the profitability of the company in a relatively short time because today it's not really great. It will depend in part from the local market. Clearly, today, there is an overcapacity in the region. And so if the local market improves and which is also our base case, it will be easier. But even if we remain at this production level, we think that there are some levers that we can activate and transform somehow this company from, I don't know, today, EUR 7 million or EUR 8 million EBITDA at least to EUR 15 million, maybe to EUR 20 million in 2, 3 years' time. We think -- so we saw that kind of, let's say, opportunity. Second, we also consider that somehow it would be a kind of insurance against CBAM or other strange European decision, which will -- which may force somehow more a longer-term horizon. But anyway, to the industry to either shut down plants or really shrinking because of the too high cost associated with the CO2 and the ETS scheme in general. We may also -- it could also be considered a potential -- the plant is very well located for the loading of big ships. So an extremely favorable capacity or loading capacity for big ships of cement at 30,000, 40,000 tonnes. So not today because we mentioned before, there's not a big need currently in the U.S. But with a potential recovery in the U.S., a growing market in the U.S. and tariff despite -- I don't know, despite or not despite we'll see the tariff or not tariff, but the costs are low in the area. So even with tariffs, you could be able to export to the U.S. directly manage from us. So what we have been buying in the past, for example, from Italy could come in a much more competitive way from this plant. Does this mean that there will be further growth and changes internal growth in the area? I don't think so in the next, let's say, 2, 3 years. And then I don't know. It will depend how happy we are, how we're able to manage, let's say, in effective and, let's say, favorable way this company. So kind of more opportunistic move, and these are the most important strategic reason behind it.

The next question is from Alessandro Tortora of Mediobanca.

Say, three-part question, okay, very, very brief, if I may. So the first one, it's a follow-up with your discussion on the carbon border. So let's assume that it will be a topic under discussion for your sector in the coming months. What is, let's say, the best option for you? So coming back to ETS, maybe with a declining rate, a faster declining rate. So just to understand what is a realistic proposal, for instance, the sector could do instead of the CBAM.

I would -- I personally always against this kind of, let's call it, guided or economy that is somehow driven by politician, by political direction versus, let's call it, free market. So I think the idea would be, in my opinion, to make probably if there should be a political help like the wants to be in a sense, I think it should be more the direction of an industrial policy in the European country, which makes the decarbonization or the lowering of the CO2 easier. For example, gas, if you use gas instead of petcoke, you are down in CO2 almost 50% versus burning petcoke. But the -- why, we cannot use gas today because it's extremely costly. So if gas would be somehow would become much cheaper, which is not easy, I understand. But for example, this could be a goal of the European industrial policy. You could reduce significantly CO2 burning gas. Alternative fuels, again, we have a tough time in achieving -- in getting the permit to burn alternative fuels, there will be more openness of the public administration towards alternative fuels, we can reduce CO2 significantly. For the rest, I think that -- yes, the cost of CO2 is -- I understand that it is somehow making the difference. It is mainly the item that is making the difference with the Turkish cement that is coming in. But I think that the CBAM, let's say, together with the gradual or eventually total cancellation of free CO2 rights will make -- continue to make the European cement the end more expensive. So we will have to raise prices. This is not good for the consumer or for the customers. And the price of cement coming from Turkey, for example, even with the tariff -- tariffs associated with the CBAM will continue to be lower. So the key, I think, or the mistake stays in the ETS scheme at the end of the ETS scheme like it is today is too penalizing and will make anyway a country without such kind of scheme able to compete effectively even with the CBAM in place.

Okay. Okay. Then the second question is considering again the regulation or let's say, under discussion or under test and so on, if we need to think about any possible carbon capture storage project for you, should we think about a company maybe in a kind of wait and see or standby and see what happens or you believe that maybe in the coming, let's say, by 2030, you could do maybe a test in a single two plants in terms of this technology?

No, I don't think we can consider ourselves stand by. There are significant hurdles to overcome before being able to really launch a project today. And this is clear from what you see across the industry because at the end, besides the famous [indiscernible] or what is called, there is really not much going on. First of all, you have technological hurdles. You don't know if the technology is working or not or the way which is working. And that's why we are testing. Of course, we are testing on a smaller scale. But for example, for climate projects will be relatively significant, let's say, scale. So at least from this project, we will understand whether the oxyfuel can be an option or cannot be an option or it's too expensive or what other drawbacks, et cetera. And second is the -- a little bit what I was saying before is surrounding environment, the fact that it's not easy to be -- to receive, let's say, funds for this transformation, which is nonsense in my opinion, because all the funds that are going into the ETS scheme that are being raised, let's say, by Europe through the ETS scheme should flow back to the big CO2 producer if you want them to be able to decarbonize in an economic way. And the infrastructure is not ready because even if you have the technology, the willingness and the money to do it, the following step, which is transportation and storage is not ready. So it's hard to imagine something without a view which goes beyond really the view of the single producer. So this single producer can have it's really best effort or best willingness to do something in that direction, but you would be able to do it only where these external conditions are fulfilled. Probably the [indiscernible] case is one of it, which is the one we are thinking of. There are the external conditions, at least in terms of logistics, say, transportation, not so much in terms of subsidies or -- so it will be more, again, kind of a research and project to understand whether the technology works on a large scale. But elsewhere, we have a ranking, let's say, internal ranking of plants where it could make sense, where it could make more sense than other. But each one of them today is missing something. We're missing something to be able to give really green light to a project, which anyway cost you EUR 200 million, EUR 300 million or EUR 400 million.

Okay. Okay. And then the last two questions, sorry. The first one is you mentioned before a quick, let's say, consolidation on. Can you remind us, let's say, how important is this client for you in terms of, let's say, U.S. volumes?

Number one?

Number one. Okay. Okay. Okay. And for what you see, let's say, today...?

They are busy with the closing. They are not yet, let's say, managing some indirectly. But yes, it's number one.

Okay. Okay. Good. And -- sorry, the last one is, I see, let's say, a very low tax rate, okay, in last year and maybe there are some activation deferred tax Yes, can you help me understand, let's say, a normal level the level of tax rate?

Yes, there are. Yes.

Yes. Can you help me understand, let's say, at normal level, the level of tax rate?

You have to deduct the EUR 90 million approximately even more, I think, a little more. EUR 90 million of deferred tax asset, which was booked this year following the -- basically the impairment calculation, the plans associated with the impairment calculation until last year, you probably remember that due to the difficult -- very difficult times in Italy, we accumulated a significant amount of tax losses -- tax loss carried forward. So until last year, the plants were not showing, let's say, high chances of being able to recover them. After the results of '23 and '24, our plans are more optimistic going forward. So we have room and we must do it. I must say, unfortunately, because it's simply a booking and accounting, let's say, entry, we must recognize this kind of deferred tax asset, which should be recoverable. So without that, income tax would have been EUR 90 million more.

The next question is from Gregor Kuglitsch of UBS.

I've got a few questions. So the first one is, I think you were thinking about potentially constructing a new plant in the U.S. I don't want to understand what you're thinking or latest thinking on that is or what maybe the plant could be and what -- where you are in that thinking process? I don't know if you mentioned already what you -- so that's question one. Question two is, can we get a sense what kind of price increases you've gone out with in the U.S.? Maybe I missed it earlier. And then the third question, which is easy, hopefully, in your guidance, what's the net scope M&A? There's obviously a few disposals, a few acquisitions. Just what's the net assumed in EBITDA that you're assuming?

Yes. Well, starting from the last one, more or less is Brazil, let's say, the difference because Ukraine is relatively minor. And Brazil is worth in 1 year, EUR 90 million, EUR 95 million, maybe depends on the exchange rate, but in Europe would be EUR 90 million, EUR 95 million. But that's the real significant one. Price increase, they were very significant movements so far. I'm talking about the U.S. very minor in certain -- and also, it's always difficult to identify or to move from the so-called announcement to the actual realization because the announcement can be $4, let's say, $5, but then you really understand 2, 3 months down the road, whether this $4 or $5 will stick or it will become, I don't know, $2 or $3 or zero. So the idea for the moment in U.S. is but also in some other countries is to increase not to -- or let's say, to avoid a decline because if you do nothing, there is clearly a risk of prices or a continuous erosion. If you do something, you might be more or less successful, but you are less likely to face some kind of price erosion. But the volumes have been not so supportive in the first 3 months. So also in some area, some announcements have been postponed. So maybe the initial idea was, I don't know, March 1 and then it can become April 1. On the construction of a new plant, it's not really a new plant. The idea is to modernize completely, at least one plant because in our framework, let's say, in our structure, there are certainly one or two plants that are becoming a bit too old, and they are suffering from low operating efficiency, low cash flow generation, et cetera. So the idea is to contact and to modernize completely one plant with the goal also to, in this case, move cement a little further away, so use more the distribution channel and in perspective, shut down the obsolete plant. We have not taken a decision to build a new line yet. I think we will start -- we will do it gradually. The idea is to, first of all, increase the grinding capacity, so the finish mill department. And later on, maybe 2 years down the road, two things, finished grinding and rail spur in a sense of having the possibility to ship the additional cement by rail, which we don't have right now. We are speaking about the San Antonio plant, just to make it clear, where today, we don't ship by rail. And tomorrow, we would like to be able to ship by rail. So increased grinding capacity first give more distribution channel to the plant and maybe 2 years from now, start the construction of a new line.

Okay. And this would then -- you would shut Oklahoma. Is that right? Is that the plant that would shut down?

Yes, this is one. Absolutely, yes.

Okay. And then coming back to the scope, so EUR 95 million, obviously is annual, but you sold one plant in Italy and you sold Unicem so net, what are we saying maybe EUR 30 million, EUR 40 million net. Is that right?

I would say even more.

I think about the disposal or more?

I would say at least EUR 50 million. EUR 50 million, EUR 60 million. The plant in Italy was -- last year was performing pretty well. It was about more than EUR 20 million.

EUR 20 million, okay.

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

Just a question on the U.S. So you were mentioning a little bit of issue with import being competitive. And Quikrete is your biggest client. Is it fair to assume that Quikrete might be like 5%, 6% of your sales in the U.S.?

I cannot tell you.

Okay. But my question would be, when I look at your footprint in the U.S., you've got cement. You've got a little bit -- you've got some concrete in Texas, but you don't have aggregates. And a lot of other cement producers see vertical integration into aggregate as a way to have more control over their market over imports and to have more bargaining power with our clients. What do you think about vertical integration? Is it something that you could consider?

It come from our story really is the fact that we have always been busy also in growing our cement plants, our cement capacity. If you look back starting from 2009, we replaced completely Festus and then was [indiscernible]. We just focus on our cement assets mainly. And yes, we didn't have enough, if you wish, maybe today, we would, but enough willingness, let's say, to diversify into that. Anyway, we do have some. I mean, it's not so evident. It's not a clear line of business versus others. But for example, in Texas, in Austin, San Antonio, where most of our ready-mix plants are, we do have basically 100% of vertical integration upstream into aggregates are two important quarries, one in San Antonio and the other one in Austin. And they -- I mean, they help us a lot in the -- clearly in the -- in managing also the aggregate pricing and making the ready-mix business more profitable in that area. I think that if we look forward as a strategic drive I believe that if there is a choice, we would be more interested in some area in increasing the vertical integration into ready-mix than in aggregates because at the end, is what drives or help you maintain a high degree of capacity utilization or maybe improve a lower degree of capacity utilization in your cement plants. So we're not looking at say today actively at the aggregate sector in the U.S. And by the way, it can be also very, very expensive. You buy a lot of -- I mean, you buy upfront a lot of reserves that can be very valuable. Then I agree with you that usually, it can be a good business in the U.S. Elsewhere, more questionable. In the U.S., it can be...

And when you look at the company like 5 years from now, how do you think about the European business? Will you say like you see much higher prices, better volume? Or is it just like you're struggling because it's too difficult with the uncertainty on the policies?

No. I mean we are here. We cannot really complain about today, at least about the results of the European business. So far, we have been able to manage it fairly well through at least the first period of the ETS. We will see with the season coming what's happening. Yes, it's not a business where you want to invest for increasing capacity or modernize capacity like we are planning, for example, in the U.S. the effort, the CapEx effort will be more in the direction of the decarbonization for sure. There will be some kind, I think, some kind of concentration going forward, more -- less fragmented industry structure is highly fragmented, but let's say, even less fragmented, especially in some markets. And this could be an opportunity to, yes, improve capacity utilization in your plants, focus on a lower number of assets and devote more time and effort. both technical and then financial into a fewer number of assets. And I think -- I hope so. I mean, I think that cement even 20 years from now will continue to be produced in Europe. If not, we will remain with the U.S., Mexico and Brazil, and that's it. Anyway.

And maybe a very last question. So you had some nice energy cost deflation in 2024.

Yes, yes.

Do you have a view based on the current price of coal, petcoke, electricity, do you have a feeling of what could be the energy cost inflation in 2025? Is it something like a couple of percent, 2%, 3%, 5%? Is it an order of magnitude that good?

Across the scope with differences clearly, but I would say 5%, yes.

And the idea is that you would try to offset that by prices, but it's not possible everywhere. It will depend on the volume.

That's it. Correct. Yes.

But it might be possible, but it's too early to say and it would depend on whether volume are better.

Totally, totally agree. Totally agree.

Okay.

The next question is from [ Simon Chu ] of [ Share Rollout and Associates ]. Please go ahead.

Pietro, can you comment more on the outlook for U.S. imports and its impact on competition in the local market? I know tariff would be a benefit, but just setting that aside, because I know there's a couple more sort of independent import terminals that's either constructed in the U.S. or will be constructed. So maybe just your outlook on import competition in that context.

Well, it's, again, mostly a local issue in a sense that there are areas of the country where imports play a significant role and increasing role as you can see from the Texas cement tax statistics, what happened, let's say, in the last few years. But also last year, they also suffer at the end because anyway, with the decline in the overall market, clearly, this buffer works well for the importers when there is a strong demand, a little less well when the demand is declining. So, I think, apparently, the tariff impact, if it goes into effect, it is not yet clear to me, but let's say, will affect mainly the trading between Canada and the U.S., which for us really -- well, can be -- can have an impact on the plant we have in Pennsylvania because some -- because this trading between Canada and the U.S. occurs mainly in the Great Lakes area. And for example, there is a big plant at the exit, as you say, of the St. Lawrence River, which is shipping towards, let's say, the Northeast, the Boston and New York area, which is also a market for us from Pennsylvania. So if this plant or the product coming from this plant becomes more expensive, there is an opportunity, say, for the plant in Pennsylvania to gain in terms of pricing. On the other hand, we have for -- okay, California is not a market for us. But in the Southeast, Southwest is mainly Turkey. Greece, a little bit Vietnam, but Greece is mainly Titan itself. Okay, they are also shipping to the Northeast and then they ship to Florida where they are. And this country are unlikely to be under, let's say, to be subject to tariff. So they most likely they will continue to ship cement as they've been doing so far. So, again, the impact on prices can be significant if the demand is not so strong and if the pricing power of the domestic producer is not as high because of lower demand. If we believe that the demand can go back to the '22, or exceed, let's say, the '22, '23 levels, yes, they may, they may be able to gain a larger market share of the demand in certain areas, but without a major impact on profitability, I don't think so.

Just to follow up on that, is the independent import terminals becoming a bigger threat? Because in the past, a lot of the terminals are owned by the local cement players as well.

Yes, there are some new that are independent. You're right. Yes, they are already a bigger threat. They've been one of the reasons why also last year in Texas, cement prices did not move up or if they did, it was in a very minor way.

Got it. And just one quick question on the share buyback authorization. I think the authorization is for EUR 400 million. Is the intention to use some of it, half of it, most of it? Like what's the intention behind the authorization?

We will have to discuss. The idea is not to have the AGM authorized that in May. And then we will -- yes, we will discuss it at the level, whether to activate the buyback and when -- yes, it could be done like you're saying also in different tranches. -- absolutely, could be a way. Now clearly, and we are all happy for that. I think the share price had a very good rally. I'm not saying that this price is too high. But anyway, let's say it makes it less compelling versus last year to activate a share buyback program at least immediately. But we will see. We are certainly, let's say, open to discuss it within the Board and decide which way to go after having received the shareholders' authorization.

The next question is a follow-up from Yassine Touahri of On Field Investment Research.

Yes. Just a quick follow-up on the import cost in the U.S. We see that there might be some road construction going on at some point in the Middle East and in Ukraine. In this context, if you start to see a big increase in price in Turkey because Turkey is busy exporting cement to Syria or to Gaza or to Ukraine, what would be the impact on your operation? Will it be something that would be positive on pricing in Texas? Or do you think it's going to be -- it's not going to have an impact because you can also source from Vietnam?

No, I think it should be positive certainly. I mean, Turkey, yes, it's very competitive. But anyway, for them, like I believe in Vietnam, too, I know a little less for them, if there is a chance to sell closer with less logistic cost, it's certainly advantageous. So they will target this kind of market first. So I guess that not so much in terms of pricing towards the U.S., maybe not changing too much also because they have hyperinflation. I mean they have the need in a sense of selling to a stronger currency environment. But in terms of the product availability, maybe this will work in a sense of favoring a less -- a lower -- smaller, let's say, import flow toward the U.S. versus other countries where they can ship with -- in an easier way and they are closer.

Let's say if we see a $10 increase in the FOB prices in the Mediterranean, how would this impact your operation in Texas? Would it be -- would you be able to pass, let's say, would you think like the independent importer would have to increase prices and then it would be -- you would be in a better position to increase prices and margin? Or is it more complicated than that?

No, no, no. Well, it's always not like this in a sense that you have to be able to achieve it is not so immediate. But at least think in some area where the import has been putting a lot of pressure and assuming it will depend a lot on the volumes because if the volumes are stronger and there are not too many alternative of supply in the market, it's easier to move in one direction if the volumes are weaker or not really showing a strong improvement, even maybe without a competitor like the export that can be aggressive, a customer can always be -- could always be able to find a different supply maybe at the competitive. So it's really a question of demand and offer with the export or the imports in this case being, yes, a potential cause or reason for a price challenge, let's call it.

[Operator Instructions] Mr. Buzzi, there are no more questions registered at this time.

Okay. Thank you. Sorry for being late, but okay, we did what we could, and I think it's important to be able to answer to any one of you when you ask a question. And yes, good evening. Have a nice weekend, and we stay in touch. Bye, bye.

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