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 Half Year 2026 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Pietro Buzzi, CEO of Buzzi S.p.A. Mr. Buzzi, you have the floor.

Okay. Thank you. Welcome, everyone. Good afternoon. The idea, as usual, is to go over our presentation that was made available for you. And like the operator said, starting later on some Q&A session on the matter that can be more of interest to you. The results that we released this early afternoon, are I would say, not as true as the previous 2 years but still pretty sound, at least in our opinion. We were able to stabilize the turnover basically remain at the same level as last year, even considering some very challenging conditions in some of our geographies. The cement volumes, if we consider the reported figure are actually 5% above last year. It is true that there have been influenced quite significantly by some scope changes. But still, they are showing favorable trend. We are instead somewhat lower than last year if you look at our ready-mix volumes, about 4% low. And this is also due to the fact that the -- our ready-mix presence, most of our vertical integration is located in the market. So the reason that suffer the most in terms of, let's say, demand softness. In terms of EBITDA, we are going down about [ 8% ] versus the same period of last year. There is some impact coming from let's say, scope effect and also currency, which we will describe better later. And obviously, a bit disappointing, but somehow associated to the trend of the geographies -- of two geographies, in particular, which performed, let's say, worse than last year that are usually also showing margins above average or stronger profitability in absolute terms in the U.S. and Russia. Some other geographies actually performed better than last year or at the same level for some times much better than last year. So we are also some more hopeful that in the second part of the year, we can recover at least in part the decline that we -- in the first six months. Moving to the analysis of our turnover, which you find on Page 2. You can see that in Italy, the performance in terms of sales volume remain somewhat weak. You certainly remember that the first quarter across Europe was characterized by wet and cold weather. So it was not helpful the first three months of the year were not helpful in terms of sales delivery and cement ready-mix deliveries. But also in the second half -- in the second quarter, sorry, so for the full six months, we did not see really nearly in Italy or Germany or Central Europe, clear recoveries or the gap that somehow was accumulated in the first quarter. Yes, it closed somewhat, but not to the extent that we were budgeting. So -- and this is something that we believe, is likely to continue also over the next six months, although maybe to a somewhat minor extent. But likely to see really the design the difference, let's say, the various turning favorable or turning positive for the full year. Instead, going back to the Italian situation, we do have a favorable price effect. And of the minor favorable, let's say, scope effect that there is associated with asset purchases in the ready-mix business. Similar situation in the Central Europe with the volumes suffering some and price effect positive, favorable, not as much in Italy to a lesser extent and also some benefit coming from the scope changes again, associated with asset purchasing in the readiness in the vertical integration of our cement business. Europe is a bit, I say, the impact -- I mean, it includes, as you know, area that performed a real different way from one another because the Eastern Europe countries within European Union overall, they did well, okay, let's say, according to expectation. I mean Poland, Czech Republic. Poland, yes, declining in terms of volumes, but also -- or mainly due to the fact that our comparison base was extremely high last year. And it's a country where we believe or it's a market where we believe we can actually close the gap going forward in the next six months. The Republic stable to slightly positive, and instead a significant drop in Russia, which I was mentioning at the beginning that is affecting the overall, contribution turnover of that macro area. The FX impact was particularly favorable in Russia. So Russia perform definitely worse than last year if you look at volume, prices and profitability. But in part this negative unfavorable performance was, let's say, partly offset by the strength of the ruble in the first six months. You say they did well, also, I would say, better than expected in terms of volumes. We are slightly above last year with the first quarter was definitely stronger than the second one. But still, we continue to remain at a higher production and delivery level than last year. We suffered some on the pricing side. The regional -- it's time a regional effect mainly, I would say, the difficulties in the price level remains mainly in Texas. In other parts, in other states, we had some improvements or any way no declines. But on average, we are showing a slight favorable variance. And in addition to that, the weakness of the dollar was affecting the turnover by about EUR 50 million, so a relatively large amount. Going to Brazil, everything okay, so far so good. I think volumes could have been even better. Because in the Southeast, and particularly, the rainy season was more, let's say, rainy than usual. And so again, the prospects for the second half are probably better in terms of volume for the Southeast region than what we have experienced, let's say, so far. And the pricing level was definitely improving, quite significantly driven by higher capacity utilization, higher demand, but also some rising costs, but certainly, the spread was favorable. And we had also the currency impact favorable, which is normally or normally, I mean, not always so particularly for, let's call it, a currency like the real that -- can have a lot of volatility. But in this case, the volatility was giving a favorable sign, so improving further our turnover. The UAE is -- represents, let's say, the only significant scope change for the first half. You may remember that last year, we had two months, basically May and June. So first three number, volume, negative 1; price, positive 7; and FX, negative 5% referred to the comparison between this last May and June, let's say, months. Meanwhile, the EUR 53 million is the first 4 months of coming over. Of course, the UAE is the is the most affected directly by the geopolitical retentions. So definitely suffering in terms of volume. But I think overall, the management of the new acquired company took some was able to take, let's say, some interesting measure to offset any way, these advantages coming from the situation and making sure that our results, we perform in the right direction. Of course, it's you may say that it's relatively easy to do better when you start from a low level. But I think that we have to give merit really to the strategy that was applied and to the results that have been achieved. It's not so evident, I would say. So I think we can be fairly happy with the results, particularly in the current situation. Moving to the following page, we have the EBITDA bridge. So the difference between the EUR 526 million of the first half of last year to the EUR 483 million. Volume impact overall somewhat negative, because as we mentioned at the beginning. Price impact overall favorable. So most of the country were able to achieve an improving the pricing level. Unfortunately, some important ones did not like we said. Variable cost, in part of a, this is associated to the lower, let's say, somewhat lower volumes, lower production level. But actually, we had some significant benefit, for example, in Italy for the cost of power. We will maybe comment briefly later on the so-called the release factor, which was definitely a big plus for the Italian profitability. And also fuel so far in the first six months, even if there is some cost pressure on the fossil fuel remain more or less at the level of last year. On the fixed cost instead, we had an unfavorable variance. This is mostly related to staff cost, maintenance also in part to the scope changes, clearly, which are adding some of the -- some stuff to the previous setup. And these were more difficult to keep under control. Just to give you an example, in the U.S., the tariff impact on the maintenance cost on the spare parts, the better that we buy and that are subject to tariff itself themself they accounted for about EUR 2 million, which is not little, if you consider the overall favorable variance. On the other unfavorable changes, we had to consider mainly the inventory adjustment, which is affecting -- has been affecting also the cash generated from operation, the working capital impact. This is -- we basically absorbed during the first half more clinkers of our clinker inventory went down during the first half quite significantly and this translated into this kind of, let's call it, unfavorable impact of about EUR 15 million, out of which the inventory is well. Clearly, this is also something that during the year over the next six months can the opposite way if we have a, let's say, different -- not necessarily a different management of our linker inventory. CO2 so far has not represented any cost similar to last year. The reason is associated with the way we account for CO2 rights. So we do not consider them at a cost until we go -- we enter into the so-called deficit. So since the free allowances are usually able to cover in full the first half of our production and also somewhat more going on the CSP cost will appear in the second half probably in the last quarter or between the third and the last quarter. And we keep our, say, forecast of about EUR 35 million to EUR 40 million of CO2 cost for the full year, depending, of course, on the production of how the different countries will perform, et cetera. The foreign exchange impact on the EBITDA has been EUR 9 million. That's a net between the different countries again. So negative for particularly for the dollar, positive for the real, positive for the ruble. And -- yes, I mean a net result, a negative result of EUR 9 million. And then we have the EUR 9 million of scope coming from the UAE, we were commenting before in terms of, relatively speaking, a good performance for this newly acquired entity. If we move to the next page, we have an overview of our, let's call it, cash flow statement. And again, what I was mentioning before, cash generated from operation is, I would say, not as good as one might expect or somewhat lower, you can see also on the right comparing to the previous year. It's true that our margins went down, but net cash flow from operations suffer, as I said, mainly from the working capital adjustment. This is where we absorb more liquidity cash flow than we did versus last year. So inventory adjustment, as I said, also the trade receivable, the trade payables. So the combination of these two factors is what mainly drove drop down the net cash from operations. CapEx are slightly higher than last year, this was expected. We are in line or maybe even somewhat below our budget for the full year. But we are -- I mean nothing unexpected there. Equity investment, there are small, let's say, position of entity either capital increases in joint ventures or a subsidiary, but these are all, let's say, related clearly to the industrial footprint of the company. Dividend payments remain even with last year, also, let's say, due to the fact that the dividend per share did not change. Dividends received they are somewhat greater than last year, but this is mainly a temporary disalignment regarding the -- from the Mexican joint venture. So over the year, they should more or less match what we received in the previous year. Share buyback was an important item during the period because it was a use of EUR 180 million in the first six months, which was then became EUR 200 million by the July '17, if I recall correctly, when the -- we officially closed this tranche, which was opened in late February. We expect it to run potentially until the end of August, but it was closed somewhat earlier. So right in the 6 months, the interim report. And other item of various origin, different origin, EUR 462 million, which brought the net cash position, bringing the net debt position to EUR 896 million at the end of June, which is obviously very sound that give us a lot of flexibility as usual. Moving to the focusing a little bit more on the geographical area on the main markets. The U.S., as I said at the beginning, were also due to the size the business there, we suffer the most in lower EBITDA, lower -- and coupled with lower turnover. So the increase in volumes was not sufficient to keep the turnover at the same level, mainly because of the currency impact. You see that on a like-for-like basis, we are minus 0.6. So even, but the weakness of the dollar then impacted quite significantly, about EUR 50 million. And on the EBITDA like-for-like, minus -- 15% with a negative foreign exchange impact of about EUR 13 million. The issue there was the, certainly, the negative, price level or the unfavorable price level, which we faced during the six months. And second, production costs that remain not very different from the previous year in terms of variable cost, also unit fixed cost. But yes, increasing logistic cost to transfer, let's say, cement across the distribution network. And other fixed cost the same as we mentioned before, not -- partly related to production, partly related to general expenses like labor cost or property taxes, which went up quite significantly. And we don't have here. We are not sure. We usually don't show a split between the profitability of the cement business versus the profitability of the ready-mix business in the U.S. But thirdly, we can say that profitability of the decline in the profitability of the ready-mix business was much more significant than the decline of the profitability investment business. The ready-mix business is located mainly in Texas. Texas is the region that suffered the most during the first six months. The revenue business typically has greater volatility versus the result of the cement business. And this was clear certainly in the first half, the kind of -- this kind of decline which we faced particularly in that business. The EBITDA margin went down about 4.5%. This is not a good result, but again, is the outcome coming from the variables and the trend that I just mentioned on the, let's call it, revenue and prices and cost. Jump a little bit forward looking down the road in the next six months. We are, I would say, somewhat more confident that we can recover not in full versus last year because this is very unlikely. But to a large extent, the unfavorable variance of the first six months, particularly in terms of EBITDA margin. So -- yes, we will remain below because the market situation is such that it does not allow for a full recovery, plus we have the foreign exchange impact. But we do believe that the second half will be definitely less penalizing than the previous -- than the first one. On the Italian situation, which almost next, basically more favorable. We are same level actually a somewhat lower level in terms of turnover, but we improve EBITDA and, of course, also EBITDA margin. What is the reason? The reason is mainly a cost trend, which was particularly favorable if you look at the power cost. So our cost enjoy quite a significant decline coming from the energy release program. The synergy release programs had an impact both on the 2025 and 2026. So we are actually including in this 26%, a nonrecurring item of about EUR 7.5 million, if I recall correctly, which is the energy release accrual for 2025. But we have another Machinery is for this year 2026...

Around 11%.

For the full year?

For the full year, yes.

For the full year, we expect another EUR 11 million, EUR 12 million which is already in part included in the first six months, so more or less half of it of advantage on the power cost. So if you consider basically these benefits on the power cost and you cleared from the first six months you come to a level which is very similar to last year. So not very different. But however, is certainly a good result, which we can confirm also in the in the following months. And the price level was also somewhat better. So on one side, yes, lower volumes but better pricing and lower cost, in particular power cost, low margin expansion, certainly confirm and with the possibility to confirm it also in the coming months. In Central Europe, a little bit disappointing also here. Main reason is the weak demand, with demand conditions with declines both in cement and ready mix in some region, also quite significantly, like the Netherlands ready-mix volumes went down by approximately 8%. So we are in a situation where particularly in Germany, I would say, which is the largest contributor to this region. The expectation for recovering demand has not been met yet at least. And the pricing trend was, yes, somewhat favorable, but only slightly favorable, so unable really to offset the demand decline. And again, on the ready-mix results, which are normally similar to what we said to the U.S. and more volatile and more affected when the volumes are going down. We have been suffering in Germany, but also in the Netherlands. And that's why the cement margins came somewhat under pressure, and they were impacted by the cost inflation in the region without the possibility really to improve pricing or is likely. And also so you recall that in Germany, we are still -- we were already running low capacity utilization level. And this trend was not counter affected, let's say, in the first six months. So to regain a certain margin level, we definitely need to have some improvements in the capacity utilization because pricing can be helpful, but capacity utilization is certainly even -- it's normally even more helpful. That's why we are currently in a situation which is not satisfactory. On the Europe, again, a mix with Poland below last year in terms of volumes, not with a better past comparison base. So looking for equalizing last year in the second half, take good expansion of the construction activity and of our volume stable to slightly improving, let's say, results. And again, Russia, which is part of the region. But obviously, it's a kind of different and several features suffered from quite a significant volume decline, about 9% and also pricing pressure. The ruble helped somewhat, but not enough to really offset the profitability decline that we experienced in Russia. So I would say no big worries. Actually, good feelings from Poland and Czech Republic also for the second half. Russia, probably not changing much in the second half, but could be somewhat better as the second six months versus the first six. Going to Brazil, which is Page 10. Very favorable conditions overall, even in a market which has not been growing very significantly because we are talking about volumes up between 3% and 4%. There's actually a regional difference between the Northeast and the Southeast. I mentioned already before the more difficulties in the Southeast due to weather and also to a different -- an actual a different trend of the demand. So high capacity utilization anyway, particularly in the Northeast but also the Southeast is starting to get closer and closer to full capacity organization, which is also giving possibilities or more possibility to improve prices. Costs went up, mainly logistics associated with -- cost associated will be minimum transportation there, I will call it, tables. So there are some transportation cost in Brazil are somehow regulated and clearly also with the changes in the fuel cost and the daily cost. Brazil is almost basically not using any kind of logistics means difference from trucks. So they don't have distribution by river or by train. So this cost has an immediate impact on the back logistics, which is basically the only one. And following that, clearly, the price -- the deliver price went up, but also the price at the plant went up, and we were able to let's say, bring the margins to a nice improvement because when you compare with last year or anyway, 2 years ago, you had kind of, let's say, 4%, 5% improvements in the margins, which is quite nice. Also EBITDA. In this case, the help from the currency was about EUR 2.5 million, but still almost 50% increase in like-for-like condition. So prospects for this year remain favorable. Yes, Brazil is going through the Presidential election, which is certainly favorable overall, let's say, at least until the Presidential election. After the election, we don't know, of course, it depends partly from the outcome. But anyway any potential changing trend will not happen right away. So we remain pretty confident that the country and also the company is considering enter into positive phase of the cycle, which can last certainly longer than 1 year. The rates are okay, relatively small addition to the group. Not much to add versus what I was just commenting before. The domestic construction activity continues to be quite strong. Clearly, there is a decline or a slowdown in the residential or touristic projects, but investment in infrastructure and energy projects continue to be pretty strong and will remain so also in the coming years, also as a consequence of the attention between U.S. and even -- the price growth was an outcome, let's say, of two variables. One is actually the price of cement itself. But another one -- important one is the mix. So the fact that the company has been shifting its focus on -- its commercial focus more on cement, less on export, less on clinker. So more domestic cement, less on export and less on clinker. And this translating into a mix which is giving us a more favorable average price level. In addition to that, we also the cement price went up some. So here, you see the figures -- we were starting from a low level last year, but the improvement is quite significant. And the second half unless really the overall situation worsened significantly can continue to perform in a similar way. Mexico, our JV extremely good, I would say, extremely favorable results for the first six months. Good performance in terms of cement volumes. The pricing effect is also somewhat favorable. We are running at a high capacity utilization. Production costs, yes, are increasing, but they have been offset or mostly offset by the price effect. And that's why you see that the margins, the EBITDA margin continues to be at the level -- basically at the level of the previous 2 years. And EBITDA overall is reaching EUR 265 million, which is an extremely high value. Here, we are talking about 100%, let's say, of the company. So obviously, our share results reflects basically 1/3 of that. But still in terms of the effort and involvement, we are -- we consider ourselves at 50%, which is actually the case together with our Spanish partners. So there are some uncertainties. Let's say, going forward, the macroeconomic situation is acceptable, but it's not really too strong. And the relationship with the U.S. and the signing or not signing or signing a condition of the U.S. MCA treaty is a critical path. But let's say, for the development of the country and also the cement industry going forward. So if satisfactory these will be signed soon. I think the expectation and the forecast will continue to be favorable, not as much if this is not -- this goal is not -- will not be reached in a short time. But so far, I would say, very positive performance and very good numbers, nothing really be able to do something better. On the outlook, well, I tried already to cover it when I was speaking about the different geographies. So what can we add. We don't see big changes in the trends through year-end versus what we experienced, we faced in first half, we see trends that should be pretty much consistent with the H1 performance. Probably, in general, slightly better than the worst, I mentioned already, a country where we have to do better. But the overall underlying trend should be pretty similar. U.S., we spend I think the first half was affected by some factors and reasons and customer situation, which were particularly damaging in a sense. And things are looking somewhat better for the second half. Italy, the energy incentive, the power cost incentives are extremely significant, should continue. And residential activity, not rate infrastructure slowing down. But overall, I would say, a good balance between volume, price and cost. Central Europe, this is probably the most disappointing situation in terms of demand because we're still waiting for the support of the federal infrastructure plan in Germany. Will it become visible? Will not, when it's a bit of a question mark, but certainly, it's very much needed to improve capacity utilization and through that lower production cost in the country. Eastern Europe, no big issues, fortunately, good support from government initiatives in Czech Republic and Poland. Russia programmatic -- problematic situation, which I'm not sure whether it will adjust. And Brazil we said, hopefully, there will be also some efforts or some decision by the Central Bank to lower interest rates, which is way it is the direction, but the absolute level is still very high, and it is affecting the construction activity. But there is a low unemployment overall in the country. Demand for residential is supported by the government. The government is also involved into some infrastructure projects, and we are seeing good development for cement demand going forward, as we said. UAE, just -- they are contributing positive results in line with maybe even a more in line or -- yes, more than what we were expecting initially, at least, and particularly consisting the critical situation in the Gulf and the -- how much this has affected the traveling, the tourism, et cetera, in the region. Mexico, yes, very strong performance first half. USMCA development, we'll see can change somewhat the picture, but for the moment, the trends are quite favorable. So here, we are in a situation which is not excluded in the previous two years, but still quite favorable in our opinion. And the weakness of the U.S. dollar, yes, is an important factor, but this may also somehow reduce versus the original forecast. And overall, this takes us to a level of profitability which we project in the range of EUR 1.1 billion, EUR 1.2 billion. If we ended up at the upper level of the range, it will be, yes, a decline versus last year. But in my opinion, not so significant or not so negative, considering the overall situation that we have been facing and we are facing during 2026. So we are totally shipping or trying to do as much as possible to stay in the -- not only in the interval, possibly at the upper range of the interval -- partly will be depend on us, partly not as usual. But again, not a year with results as excellent or outstanding the last two, but still, in our opinion, they found very favorable and giving us, again, a good cash flow generation, good flexibility to move forward -- look at the cement market and our geographies for CapEx road map expansion. I mean, we have picture from us that as to this result, we can manage and achieve very well. In the following pages, there are more details which maybe we can use the Q&A session if you need it. So we have an over by country, EBITDA by country. The full income statement, the cash flow statement, which we commented pretty much already and the detail of the net cash position between short term and long term. It took almost one hour, so I think it's enough to let -- to give, let's say, the floor to the listeners and to the ones that are willing to ask some questions. So please, let's go to the Q&A session. Thank you.

First question is from Ben Rada Martin, Goldman Sachs.

I've had three questions, please. My first is on price costs into the second half give us valuable to hear some of the moving parts, I guess, in the first quarter or the first half, gram-positive pricing in some of those savings on variable costs. I guess as we look into the second half more pressure from energy inflation. Do you still expect to offset some of these costs? Or could we see incrementally a little bit more pressure in terms of price cost than the first half? . The second question would just be on the because you've seen more details in the last few weeks on potential changes there. Does that change your decarbonization business cases at all in Europe? Are there any areas that you think are more interesting now in some of those changes around funding and conditional allowances in particular? And then my final question was just around M&A. I know we've seen some time at the last results speaking about some of the opportunities that it'd be worth doing from you, how I guess you see the opportunities at the moment in any regions in particular where you think there would be a good fit for your portfolio?

Can you repeat the third question because we were not fully able to understand it.

Sorry. Third question was just around M&A. I know we spent some time at the last results, speaking about the optionality within M&A in each regions. Is this something that you're still looking at closely. Are there any regions in focus?

Okay, good. Okay. Well, on the power cost, well, I think that in Europe, there is certainly a trend, they need pressure coming from the -- well, particularly energy-intensive businesses. But in general, to somehow make energy, particularly power, let's say, more available in somehow at a lower cost versus what been so far and also when you compare towards other geographies. Certainly, the competitiveness of the European industry is related to a large extent to the cost of power. So my impression is that what -- this is could see benefits or some subsidies in a sense that were introduced in the first half will continue, [indiscernible] which we are following was not yet say fully achieved in the sense that we cannot yet recognize from an accounting standpoint, the benefit because we are working on it. But there is a possibility or already, I would say, in the second half of this year to enter into the program and then to receive this kind of benefits. So for Europe, I think, fairly confident that we will see a new level at the energy cost in the biggest market, like Italy and Germany that should stay for some time. On the fuel, it's different because the fuel is clearly more an international market. This is more affected by the fossil fuel trends. So there the volatility, there are increases. And the only way we have -- or the main way we have to offset is to introduce as much as possible waste-derived fuel, which is also part of the decarbonization road map. So this is, again, significant management effort, which has been, I would say, successfully certainly so far in almost any countries where we operate our substitution rate has gone up. And we need to continue to go that way, let's say, as much as possible according to our targets that are valid both for decarbonization, but also for cost management. It's one of the few items were a couple, let's say, road map target with lower cost. On the I think it's a little early to really discuss in detail what has been what has been proposed by the way because it's still a proposal. So not necessarily, it will remain the same. Yes, in Canada is pretty much what we expected. There are give some more time in a sense. So we if you wish, postponed -- certain postponement moving forward, decreasing somewhat the reduction factor of the allowances. So that would be -- which is good, being a little more time to achieve the target. And then, yes, they are also introducing some new or different funding and the possibility to some extent, to use -- to create, let's say, credits outside of Europe and being able to use it in Europe, and these are all, I would say, decision which we agree with, and they go into the right direction. The full details are not clear. They have to be well studied, well identified. So the actual availability and possibilities to be -- has to be -- they have to be clear very well. But again, it's a small step but probably more step, let's say, in the right direction. I think it will not be the last one. But for the time being. That's the available step and say, the new advantages that we can. [indiscernible] We have seen movements, particularly in the U.S. at multiples that are very, very high, difficult, let's say, to justify. So at the end when you see this kind of multiple, you also compare them, at least, we compare them with the possibility to improve significant your industrial footprint through either vertical integration or also in the equipment modernization of the plants because it's true that your M&A target can increase your size from one day to another. But also by keeping, let's say, your industrial footprint in good shape and particularly very cost efficient or as cost efficient as possible is even more helpful in times when maybe the cycle terms that or I can give you, let's say, a lot of possibility in terms of managing your overall production network and logistic cost, for example. So there are a number of interesting things to do besides the M&A. There are other countries where the multiples are not as crazy where maybe there we can take a closer look at what comes on the market. So I would say, rational approach certainly more interest into reinforcing the existing either through internal growth. And yes, always compare, let's say, internal growth, internal expansion with external because country, as I said, this comparison, in my opinion, is somewhat shifting.

Next question is from Ephrem Ravi, Citi Group.

Sir, two questions, specifically on Brazil, there was a very strong performance. The acquisition of the rest of the 50% was -- it looks like it was very well timed. Congratulations for that. But do you have plans on growing significantly in Brazil, especially given that there are some of your competitors who are looking to sell assets? Is there given the outlook for the market and your performance so far? Is that one place where you are, in particular, kind of looking to grow? And secondly, in terms of the U.S. outlook. You kind of mentioned the weakness in residential and nonresidential demand and offset by data center infrastructure investments, North Texas is supposed to be one of those data center hubs is -- are you looking to further grow volumes in the data center aspect? And can you give a sense as to what percentage of your sales go into that particular subsegment of the market there?

Okay. Yes, Brazil, we are already there. I think in some years, like you said, moving from a JV to a fully owned company timing, yes, I don't know if it was good. But of course, the external conditions, we always play a significant role. The advantage now for the country is the recovery in volumes. The higher capacity utilization and also the fact that they were starting from a relatively low level, both in volume and prices. But I'm -- yes, I think the industry structure is going and will go under some changes, also significant, potentially significant. So -- yes, we are interested in following this kind of development. And -- yes, to find possibility to grow our foot footprint there. There is certainly one of the countries where we think we have, yes, the possibility because sometimes you would like to do something, but you cannot because there are no options on the table. In this case, there are probably on the table. So it's up to us, let's say, to -- yes, somehow find the right option or the right solution. But yes, there is certainly an interest to do that. There are data centers are all over. We have seen, let's say, projects across the country many different states different market is -- yes, Texas is certainly due to the size of the economy, in the population, the side of the town of destination for this kind of projects. It's not that we can always choose whether because like on any construction project, it depends on who is building the relationship with customers, with the specific customer. Is there a bidding process? How do they select the cement or ready-mix supply? But yes, I mean, we are well there. We have a large significant, let's say, market share in the state. So we can certainly participate. If we look at the previous -- I mean in the first six months, actually almost 10% of volumes in the country went into this kind of project, which is a lot. And -- so it was probably one of the main reasons of the market grow, not really even forecasted correctly by the American Cement Association. Other changes or American Cement Association changed a bit. It's forecast. They came out just lately with their summer forecast, which is showing an improvement in volume versus the previous forecast and it's certainly driven to a large extent by this kind of hubs or, let's say, yes, big tent. So we try. We'll try to lower debt supplying them. Yes.

Next question is from Yassine Touahri, On Field Investment Research.

I have a few on the U.S. So on U.S. pricing, are you planning any increases later this summer or in the second half? And with GCC bringing around 1 million tonnes of new capacity, would you prioritize maintaining pricing even if it means giving back a bit of a market share? And have you already seen more competition from GCC in West Texas, I mean, San Antonio and Data Fort Worth? And then regarding the Section 301 tariffs, what was your view on the impact of the 12.5% tariff? Was it lower than what the industry was hoping for? And what would be your view then on the likely outcome of an antidumping investigation on Vietnam imports? What do you think the timing could be? And maybe on U.S. volumes, how are your volumes in July? Has it improved in the second -- versus the second quarter given the Texas weather disruptions are behind us? Maybe if I can ask the last one on capital expenditure. If the Texas plant upgrade goes ahead, is around EUR 500 million CapEx for the year, still a reasonable assumption? Or could it increase to maybe EUR 700 million if you have to go through with the CapEx on the take subgrade?

Okay. There are price increases in U.S. Again, particularly in the Midwest area, there is they attempt or more than an attempt to go up. So it's quite scattered, let's say, the pricing situation is not -- there are definitely area like -- like South Texas really with the imports in Houston that continues to actually somewhat increase or putting pressure on the prices. We have also in as -- it's not a new player, but in a sense, a new player because when quickly took over, let's say, the middle of plant. It's another potential point of self-supply versus maybe buying from other competitors. So which again, is somehow translating into some conflict, let's say, between producer. But yes, I think by year-end, probably if we look at the average price for the U.S. we can move from a slightly negative sign to slightly positive. But it will be quite differentiated between states and regions. . As you see, yes, of course. It's a new -- not really a new player because in part, they were anyway bringing cement from Mexico to prepare for the commissioning of the new line. I think most of the competition in this case is an cement, not so much on the gray cement, which is kind of an issue but a profitable one and -- but also very volatile in terms of demand because it's strictly related to the number of active, let's say, oil wells. And yes, there we need to defend ourselves. I think we can because our let's call it, quality and service is pretty good, but it will be certainly more challenging. On the -- the following question was...

On the Section 301, tariffs?

Yes, exactly. Yes, I'll let -- can intervene because it's more knowledge than me on this subject.

As we've been discussing throughout the 6 months, we haven't really planned around that. We were just waiting for the outcome alone came end of July and substantially nothing has really changed. For most countries, the tariff increase was just 2.5% [indiscernible] And when you convert it to like dollar per ton, it's basically nothing, so not impactful. So it's not going to help us, but we weren't really forecasting or around that...

What was somehow unexpected was additional tariff on the Canada the last one.

Yet the Canadian tariff, the 60% on is going to be somehow replaced by action...

Exactly. But of course, if a significant increase on Canadian tariffs can have an impact on the Northeast [indiscernible] favorable, if you wish, for the domestic producer. But -- is it I mean to be seen, if it actually will remain like this because the trading between Northeast in the -- great lakes area has always been pretty significant as a kind of a necessity for the country. July volumes, U.S. said slightly up versus last year. So I would say, okay. And there's plans. Well, we have approved the first phase, which is the execution implementation is not so quick. I think we are biting about EUR 70 million this year coming from $30 million, let's say, coming from the phase, which is the new grinding capacity that you finish grinding, let's say department meal together with a number of other related jobs which I cannot -- well, it's not worth mention in describing in detail that they are in a specialty for not only the new grinding mill, but to prepare the plant for the potential, let's say, or likely future installation of the line. We need to do a lot of changes in the, call it, the landscape or the structure of the building, the location of the building, the electrical substation. I mean a number of items that are coming together. But -- so we are starting but the impact on this year will be relatively minor. So I think if we end up at EUR 550 million, EUR 560 million, all -- I mean, for the entire group, I think this is the likely number.

Next question is from Alessandro Tortora, Mediobanca.

[indiscernible] I have a follow question, okay. The first one is just a follow-up on what you said before -- so you said this year, maybe we land at, let's say -- 50 or something in terms of CapEx. Now -- if we take into account that we have the ABL phase of this CapEx plan in the U.S. in the coming years, which kind of level of CapEx do you see maybe still, let's say, close to this, let's say, EUR 0.5 billion level. So just to understand the trend going forward because this is just, let's say, the start of the from this CapEx plan in the U.S.?

If we move on with the new line, but I think it will take another years, let's say, before really designing. We need to finish the finish meal, we need to finish the okay, terminal, let's say, embayment, which has to do with the new line, but not necessarily, but anyway, it's undergoing. And when we are -- and we will, I think, -- start also inside the San Antonio plant, the railway terminal. So finish and terminal -- plus the new terminal in the import terminal, which is not store can be necessarily for cemented also for other materials in -- Once we have this, let's call it, new taxes set up running and also looking at the trend of the demand expectations, et cetera, we can decide on the new line. So I think for the next 2 years, I think we will be in that range can go up 1 year to [ 600 ]? Yes, it can, but probably not beyond that level. And if we really start then the second -- the new line, it will become more significant.

Then the second question is on, let's say, the situation in Russia. Clearly, I know that you don't have the cell disclosure about the underlying performance. But considering the huge drop into the EBITDA we saw in the first half. Can you give us a sense of what is happening there? Is it cost? Is it, let's say, this decline in prices now you mentioned the press release. So just a because it gets a -- let's say, held up pretty well, decent in the past years and now we are disclosing the domestics?

It's true. We came altogether, I think was a general consequence of the -- general impact from the long period of war, where at the beginning, there were some, let's call it, excitement and more production mode and now less and less than you had the interest rates rising to 15%, 16%. And there is also certainly some competitive situation, which is making things worse. There was a change of ownership in one of our competitors, not too far in sensor in terms of Russian geography, but let's say, somehow competing on the civil market in Russia. As you know I mean as opposed to Brazil, you all cement by train, so you'll go very far. So -- and this new ownership is clearly targeting increasing market share, which we are not willing to give up and is effecting the prices. So the volume trend is something general more and more related to the macroeconomic environment. The pricing trend is kind of specific could have been better in a normal situation, which is not right now due to competitive price pressure.