Cementir Holding N.V. (CEM) Earnings Call Transcript & Summary

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Cementir Holding Preliminary 2021 Results and Plan Update Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Marco Maria Bianconi, Head of M&A and Investor Relations of Cementir Holding. Please go ahead, sir.

Thank you. Welcome, everybody. Good evening, and welcome to Cementir Holding preliminary 2021 results highlights and also some update. I'll go through quickly through our presentation deck that should be distributed, and then I leave the questions for our Chairman and Chief Executive, Francesco Caltagirone, who is here with me.

Good afternoon.

So moving on to the presentation. I'll start with Slide #3. You can see that 2021 has been for Cementir a record year with historical record of revenues of EUR 1.36 billion, up 11% year-on-year due to good performance in all geographies. Volumes were up 4.1% in cement, around 15% in ready-mix and around 8% in aggregates. Also EBITDA set a historical record of EUR 311 million, up around 18% year-on-year. If we strip out EUR 11 million of net one-off positive impact, recurring EBITDA reached EUR 300 million, up 14% year-on-year. Q4 EBITDA was up 12% and recurring EBITDA was up 6%. EBIT reached EUR 197.8 million, up 25.8% from last year. Net financial debt declined by around EUR 82 million to EUR 40.4 million, including IFRS 16 impact, around EUR 25 million of share buyback, around EUR 22 million of dividend distributed and EUR 4 million of a small aggregates acquisition in Turkey. I remind you that Cementir is rated investment grade with a BBB- rating and stable outlook by Standard & Poor's. Moving on to Page #4, guidance for this year. We expect to exceed EUR 1.5 billion of revenues, reach an EBITDA range between EUR 305 million and EUR 315 million, reach a net cash position of around EUR 60 million with a CapEx of EUR 95 million. Clearly, the guidance refers to like-for-like ongoing and recurring operations, barring any further COVID outbreak. Moving on to the Industrial Plan update for the year '22-'24 referring to Slide #6. Let me quickly, as far as strategy, there is no change from the past. We continue our virtuous path toward decarbonization with a 2030 road map and a 2050 ambition. We want to strengthen our white cement global leadership, focusing on high value-added solutions, and we keep on leveraging on the vertical integrated platforms we have in the Nordics, in Belgium and in Turkey. We also want to keep improving profitability and operating efficiency. Just a few highlights on the slide, EUR 97 million of cumulative green CapEx over the year of the '22-'24 Industrial Plan period. This is around 7% of sales. We want to deliver on the Science Based Targets initiative carbon reduction targets. And clearly, we plan to roll out our FUTURECEM technology across the product range, pushing towards circularity. We also want to keep increasing our competitive position. We want to decarbonize our drive across the value chain and point with lean manufacturing, logistics and smart maintenance are the 3 focus areas. As far as growth, we want to optimize our industrial footprint, further develop our trading business and seek opportunistic M&A transactions. Moving on to next page, just on Page 7, just a quick highlight about our journey on sustainability. We started with a new organization in 2019. We got the first recognition in 2020 with a B rating from CDP and a further upgrade to A- in 2021. We also got our Science Based Targets initiative evaluated with a 25% GHG reduction. And we have a number of rating agencies following us on a regular basis. Moving on now to Page 8. The path to reach net zero emissions remains unchanged with a net zero emission by 2050 as far as scope 1, 2 and 3 emissions. We want to roll out FUTURECEM across every geography. And we want to try to become 100% fossil fuel-free as far as energy is concerned. We are exploring other technology like carbon capture and storage, if economically viable. We have a clear road map to 2030 with a commitment of a 30% reduction in our GHG scope 1 emissions per ton of cementitious material compared to the 1990 baseline. In gray cement, the target is to reduce our CO2 per ton emissions by 31% to less than 500 kilograms per ton. In white cement, the reduction is 35% to less than 800 kilograms CO2 per ton cement equivalent. In the Industrial Plan that we're just going to get through, we have set GHG emission targets on a yearly basis by plant. And we have invested into the organization incentive plans with ESG targets. Moving on to Page 9. You can see here the reduction targets that I discussed before. On the upper table, gray cement; on the lower table, white cement, 31% and 35% reduction, respectively. You can see here that one of the drivers is going to be a clinker ratio reduction of 190 basis points in gray cement and around 40 basis points in white cement. Moving on to Page #10, you can see the main areas of decarbonization drive across the value chain, starting from the left, raw materials. So we're clearly using a number of cementitious materials that we blend into cement. We want to stress on circularity using materials and waste recycling. In energy, we're switching to natural gas on a number of plants. And by 2025, this is going to happen in Aalborg and in Gaurain. We are pushing on alternative fuels, district heating and green power. As far as process is concerned, we are upgrading our plants, pushing for clinker ratio reduction, overhauling our kiln heat consumption levels and pushing on waste heat recovery as well. We're also trying to improve our logistics with e-procurement, green transportation and smart logistics initiatives. Overall, FUTURECEM rollout across all geographies remains the key theme as well as the development of new technologies. Moving to Page 11 and 12, just a couple of slides on FUTURECEM. As you can see, this is a proprietary technology that allows a 30% reduction in CO2 emissions. And the objective is for FUTURECEM to account for 51% of European volumes by 2030. As you can see on Page 12, you have the rollout plan where you can see that 51% of total volumes sold in Europe and 60% of gray cement volumes will be sold through FUTURECEM technology. Moving on to Page 13, our 2024 financial targets. You see on the left-hand column the 2021 preliminary figures and 2024 targets. You can see that we aim at the EUR 1.65 billion revenue target. This is a 7% compound growth rate from 2021. You can see also that we expect single-digit volume growth across all product lines with price increases across all markets. Our recurring EBITDA target is around EUR 350 million, which is a 5% EBITDA compound growth. As far as CO2 shortage, we expect around 0.5 million average yearly shortage with an indexed mechanism covering excess CO2 costs. As far as yearly CapEx, you can see that the average CapEx is around EUR 104 million, of which 4% to 5% is ordinary CapEx and around 30% is green CapEx, which account for around EUR 97 million cumulative investment for us and includes FUTURECEM, district heating, waste heat recovery and a number of other initiatives. As far as net debt and net cash, from a minus EUR 40 million in 2021, we expect to end in 2024 with an excess of EUR 300 million net cash position, which means a EUR 340 million cumulative free cash flow generation over the period, assuming a dividend payout ratio between 20% to 25%, therefore, growing dividends over the 3-year plan. A couple of slides just to summarize the results. On Page 14, you see the comparison between the new plan and the old plan. You can see that clearly, the EBITDA growth rate is impacted by a higher 2021 base, a sustained reinvestment level with some initiatives being just postponed by a few months, a continued significant cash generation and dependable EBITDA growth trajectory for the group. Page 15, you have the detail about our CapEx. You can see here in green on the histogram on the right the sustainability spending, digitalization in light blue, and then in gray you have the maintenance and expansion CapEx. I think we have touched upon those areas already. So I'll finish off my presentation with a last slide that is Page 16. You have here the waterfall where you can see, visualize the cash generation that continues to be extremely strong for the group, shifting from a minus EUR 40 million to over EUR 300 million of net cash by 2024. And you can see the cash flow generation of EUR 876 million, over EUR 100 million of dividends paid in the period and CapEx of around EUR 312 million and the rest in working capital and other. This ends my presentation. I leave the floor to Mr. Francesco Caltagirone for any questions you may have. Thank you.

[Operator Instructions] The first question is from Emanuele Gallazzi with Equita.

I have 3 questions. The first one is on the cost inflation and in particular on fuel and energy cost. Can you just better clarify the double-digit growth assumed in the 2022 guidance? And also in terms of cement pricing, can you discuss about your assumptions in the business plan? My second question is on the CO2 cost. Can you help us understanding how the indexed mechanism between cement price and CO2 cost actually works? And my final question is on the capital allocation. Basically, you are guiding for over EUR 300 million of net cash position in 2024. You raised the dividend policy, but what we should expect on potential M&A or greenfield initiatives?

Cost inflation, we have seen increase of, let me say, nearly 50% of inflation. Marco?

Yes. I can take this question. On the cost inflation side, I mean, the question is regarding what is embedded in our expectations. I mean, clearly, we have seen a significant cost inflation over the course of Q3 and Q4 of last year which is continuing. So we have embedded in our cost inflation a significant cost inflation in our figures, so especially for energy and electricity. So thermal energy and electricity are growing in our plan at high single-digit to double-digit level. Clearly, this though is compensated by an increase in pricing, which, as you know, is negotiated in our many geography over the course of the second half of each year and which would allow us to recover with some time lag, but you can see from the number that we expect to fully recover the cost inflation in thermal energy and electricity. So this is the picture that we have in our plan. So as far as the guidance for this year, for 2022, I mean, obviously, the range that we have given takes into account these mechanics within our P&L. Let's say that we have hiked the price in all of our geographies, depending on the type of cement, let's say, from 12% to up to 20%. Then you have to take into account that in some geography, you have some headwinds related to the devaluation of the currency. But let's say that we see anyway an increase of at least 10% of our revenues that should, let me say, cover the price increase in energy. And also the CO2 cost that we already put up EUR 8. And it is transparent to our final clients with the CO2. So every month, we pick the official closing, and we will have this cost as a, let me say, as a sort of environmental cost. So if the price increase of the CO2 will increase or decrease, it will decrease. So it's a sort of variable cost like VAT. So something that we charge and then we will then give back to the government. So it's something that also will increase partly the revenues without any EBITDA because this is, I mean, the reality. So this also, we've mentioned the small decline in profitability is not because I think we will be more or less profitable, it's because we have a tax that we charge and then we have to give back to the government. So this is the main. About, I don't remember the last quarter. Otherwise, today is difficult to understand over 10, 20 years. So this is the minimum time frame when we invest in a new asset in cement. As you know, the ETS system have to capture at an average 3% per year to reach during the next 10 years 30% of reduction. Then there will be the border tax adjustment probably that will kick in 2026. And so also the other market will be affected especially for import. So today, where we are, let me say, at the first year and the first month where this is applied, it is difficult. And so we are looking at some, let me say, opportunities, but the issue is that the value that we can give and also the expectation of some of the sellers because for sure you have some risk. You know that a few months ago, the CO2 was at EUR 60. Today, it was close to EUR 100. We don't know what will happen in the next 6, let me say, months or several years. So if you apply a certain pricing, take up another price, you can end up with a completely different profitability. And also the other big question mark is, does the availability of technology to cap the emission especially in the second part of the decade because there will be some technology available, we can mitigate the, let me say, the extra cost. But if any of these type of projects will not be, with the new projects, we will just continue to be forced to, let me say, cap the emission, probably capping the production or buying the CO2 for the extra quantity that the market requires. And so this can also, this will be derived from the CO2. Today, we have to sell one extra ton of cement besides our allowance, we should have the EUR 100 CO2. So I don't think that the market today is ready to pay the cement at more than EUR 200 because we are in an environment of the skyrocketing price for everything that probably in a few years, so we might see the cement around EUR 200. So for this reason, frankly speaking, I don't see and I continue to don't see, I see risk to evaluate properly the assets. So let's say that we are not, let me say, close to any kind of a deal. We are just, let me say, see and also understanding the development of some offsets in some key areas that are there and where we are already present, mainly out on Northern Europe, it's an area for white cement than in the United States, it is too inflated, let me say, the cost of the assets for the time being and also the dollar is too strong.

The next question is from Matteo Bonizzoni with Kepler.

I have a few clarification to ask on the CO2 cost. Precisely, I would like to know, in 2021, what was the shortage or the delta between your emission and your reallocation in Belgium and Denmark. And this shortage was still entirely covered by the stock, right, which you accumulated in the past or not. This is something which you have never, I think, clarified. And I want to know if for 2022 the yearly shortage will be or is in line more or less with this 0.5 million ton or different from that? Basically, what I'm trying to understand is the delta CO2 cost between 2022 and 2021. Also, if you can clarify the role of Turkey. You are helped, if you have been. Because the 0.5 million emission is quite ambitious compared to your track record. It is true that you have FUTURECEM ramp up and so on. But based on official data of the European Union, I mean, this is very ambitious in the next 3 years. So what I'm trying to understand is you have, for example, from the import of clinker from Turkey and what is the magnitude because only that are helpful for us to understand the full picture apart from the sales target. Then I would like to know on pricing, this 12% to 20% price increases. These are unprecedented price increases for cement. Now you will agree, but also the cost increases on the other side, which we are experiencing on fuel, energy and even more CO2 are unprecedented. So this is a new situation, if you want, for the cement sector market. I would like to know if this 12%, 20% price increase you think are in line with the price increases of your peers in different geographies? And now that we are in February, do you have any evidence if they passed or not passed? What is your feeling about the probability that they will pass a nominal value or with some discount? And last question is Turkey because there cannot be a conference call on Cementir without question on Turkey. But now is even more, let's say, important to us because Turkey was strong in 2021. The margin, I think also in Q4, you have not disclosed, but it was probably solid in local currency. There is now a sort of inflation rate which is exceeding 40%. So my question is just to understand if you expect a new margin squeeze in 2022 because of the gap between cement price increases and the imported cost inflation.

I say that we, even if we've seen some issues, but let's say that the average of our shortage in CO2 will be around 500,000 tons per year in the next 3 years in the industrial plan. So we end up last year with, as you know, we were longer, not short of small quantity. For sure, we have the possibility to, let me say, leverage on our industrial portfolio with also with clinker or cement imported from Turkey, especially the more the CO2 increase, the more convenient even if you have freight cost is to import when you can the cement. So for sure, it's part of our business plan until 2025. We told you that without the border tax adjustment, there is a trade-off importing any materials from outside Europe that is not charged with CO2. But I think that is reliable and also the rollout of FUTURECEM is part of this and also taking account that in white cement we have a big position in Aalborg, but also we have a plant that we mentioned that today is running at half capacity and also Egypt is out of the ETS scheme. So this means also that in our 3 years plan, we might switch from Aalborg to Egypt depending on the cost of the CO2. Regarding the pricing, I believe or I can say that more than 80% of the client base have already expected the price increase of, let's say, between 12% and 20%. It's unprecedented, but if you have to finish a house, to complete an infrastructure, you need cement. And also, I've already said in the past, let me say, the direction that I give, today, cement like steel, glass, and other, let me say, you have to consider more like a utility where you have capped capacity and need possibility to find cement in some area, you have the system that is going at full capacity, not full capacity intended, considering the capacity or output of the plant. Full capacity considering the limitation of the quota, of the allowance that everyone wants to cut. So today, we are going there. I mean, the fact that I think in Europe more or less 100% of capacity linked to the ETS system. And for this reason, I think the clients are accepting price hike because otherwise they will remain without cement because in some areas, like happened last year, I remember I told you that in some months that we have that clinker was so few of trucks outside our Belgium plant. If the demand is 110 and the output is 100, somebody will remain without cement. And in some areas, we cannot import from outside. And even if we can import, you need the hardware and you need the dispatching facilities to do that. So we have to consider all this. And also passing the CO2, so for us it's a transfer. The taxes that we reverse in full to the clients. So the clients cannot say, I don't want to accept. The client can decide to build in wood or with other materials. But let's say, if tomorrow the CO2 cost would rise to EUR 150, I mean, with an algorithm as well because it is not EUR 150 that you transfer the clinker from the plant and other things, but let's say part of this increase will be fully charged. So we do not take any kind of risk in CO2 even if we will be short of the 700,000 tons instead of 500,000 or 300,000 tons. The extra risk or opportunity will not end in our balance sheet, frankly speaking, because for us this situation is too risky just to be a lump sum price for a quarter or for the time that we need to complete an infrastructure. It is very difficult for sure for the people that are on the buying side because the infrastructure, I can tell you something that a few weeks ago in Italy, where we are not anymore active, but we have other companies in the group that are active in infrastructure, the railways asked for, let me say, a price for a part of infrastructure for new high-speed train. They started at EUR 120 million. And they didn't receive any offer. Now they are EUR 330 million after 3 months, and they continue not to receive any offer. So the reality is that this probably part of high-speed train today would cost between EUR 370 million, EUR 400 million. And this is why probably today the Minister of Infrastructure say that part of the PNRR fund will finance the inflation of the cost because this is the reality. I believe that infrastructure from now on compared to a couple of years ago will cost around 50% to 100% more because with the gas that cost 600% more, electricity 3x more. And most of the CFO, you are aware that you have all these things. And now also, we expect that probably in the second half of the year to start to see some, let me say, inflation in wages because I believe that, especially in Europe, people cannot survive with gasoline up EUR 2 that we will approach sooner or also let me say, any other kind of price that involve, let me say, oil like plastic. But in Cementir that you have now, we have to take a 20%, between 12% and 20% and considering the CO2 of EUR 80. Because with the CO2 of EUR 100, the price, the final price will be much higher. And it's crystal clear for the customer how this function because we spend the last 3 months, we and also the other player, to explain how this assumption for CO2. Regarding Turkey, that is the last question about inflation and also we have a situation probably, we have the election next year. We have had one with, let me say, where the approach to the economy, the inflation, I think, is between 30% and 40% but also because Turkey is exporting more than, let me say, 30 million tons of cement. In some parts of Turkey, there is lack of cement. And for this reason, even if with the strong devaluation that we have seen near the end of last year, the price in euro was, let me say, satisfying. And we see the situation that is continuing. So far, we don't see any slowdown in the activity for sure everywhere, even in Europe. If the price of everything will continue to increase 20%, the economy will be hit for sure or the central bank will have to increase or hike rates, not 25 basis points, but I think much higher. I believe that today with this kind of cost inflation in Europe is around 8% to 10%. It's not 3%, 4% or 5% of what they are telling to the people. The real inflation here because they are not considering that this is tough to implement the 20%, steel at 50%. Everything with this magnitude, how you can keep inflation of 5% with increasing the rate with just a few basis points. But this is not the, let me say, the argument of our discussion. So I hope that you, let me say, understand the pricing.

The next question is from Tobias Woerner with Stifel Europe.

Yes. Just to clarify, the line is not very good, so I just want to clarify a couple of points. The guidance for 2022, as you rightly say overall, as we can see, is a 10% increase at the top line. Can you give us the split of the volumes you assume and prices you assume there to an extent. I mean, you talked about the significant price increases. If I was to take the average, then that would imply a decline in volumes, which I struggle to see at this point in time. That's the first question. The second question relates to the pricing situation generally and where you think, in which regions you are better positioned than in others, i.e., to give us a sense, let's say, the Nordics are better than Turkey or what have you, but just a bit of a flavor there. And then just lastly, on FUTURECEM, the numbers are still very small. Can you give us kindly a guidance on how this should develop? What's been your experience so far? And what's the price premium to existing products again, if you could remind us?

Starting from the last question, I mean, last year, we sold nearly 40,000 tons of FUTURECEM. This year, we are planning to sell 300,000 tons. As I said, we have a cost parity with the CO2 around EUR 60, EUR 65. So now we say, in terms of profitability, it's more profitable to sell FUTURECEM than normal cement just because we have less clinker and CO2 inside. And in terms of revenues, we are present now selling above 1.5 because for sure, we have some quantity, but the EBITDA is the same. We have some quantity increase that is between 1% and 2%. But let's say that 70% of the price increase is related to cost inflation, another 25% in CO2 and the other 5% is a bit of in wages, in inflation and a bit of margin. In fact, even with, let me say, considering this year, when we say, if we take the middle of the full that is EUR 310 million, we have just an increase of industrial EBITDA of EUR 10 million with an increase of the revenue that is around EUR 150 million. So this is because our main target this year is to recover the full cost, is to let the customer understand how the CO2, let me say, transfer, let me say, the cost, the final cost of cement. And so let's say, we are not pushing too much in terms of profitability. But we see anyway a good market, especially for pricing in Northern Europe, the U.S.A. because we are the only white producer. But more or less, except for Turkey that is impacted by, let me say, the local factor, almost everywhere, whether it's from China, Malaysia, Egypt, costs have been transferred and accepted by the customer. And so we, at the time being, we don't see any issue even because, as I said, there is no substitute for cement. So the only issue with like any commodity in which the price is skyrocketing, it can, let me say, produce a slower demand. But I don't know if, as you know, in the construction cost, the price of cement is around 3% to 4%. Even if you have 20% increase, the cost of building a new house increases 1%. So I don't think this is an issue. For infrastructure, it's a bit different, but the main infrastructure are, let me say, financed by the government. So here it depends how the government will be able to finance or to reduce the scope of some of this infrastructure. But let's say that for the time being, I don't see a big issue, especially because we are coming out of this long, let me say, pandemic. So our view is mildly positive. We are not where we will end up with the price of electricity. So this is when we say that the main probably one factor that we see is that the price of the electricity because coal or pet coke are, let me say, increasing, but not so much. Gas, we start getting. But so far, we will start to use gas at the end of, let me say, this year. And we will use gas by 2025, both in Aalborg and in Belgium. So the price of this year or next year in gas will affect us very little. I don't know if I have answered to all your questions because...

Yes. One follow-up question. I mean, it was already asked about Turkey and the inflation environment now. I mean, when you look at pricing we follow, it seems that the January prices have already reflected inflationary pressures in local currency. It seems that between December and January, prices are up in local currency by 20%, more than 20% versus the end of last year. Is this something, does this make sense? Is this something you're seeing as well?

Yes, even more. But the issue for Turkey is that you have, let me say, an export price that is valued from, I don't know, $30 to $35. And so if you export 30 million of cement, the issue is with the internal price is that if it is lower, people tend to export what they can. So the price then in local currency is more linked in terms of parity to the, let me say, price of export. So today, the lira at TRY 15 against euro, if you have EUR 30, EUR 32, the price of cement is around TRY 500. So this is, I mean, the price that we see today. But this will continue. And also, Turkey is a net importer for energy, isn't part of internal resources. So except for wages, but wages in cement factories is between 10% and 15%. The other cost are imported cost. And when it is imported, so it's very easy for, let me say, that I see a temporary cost that might arise is that the lira devaluates in 1 month. And to the extent that this happens, but then we tend to readjust in full to the, let me say, export price in dollars or euro.

The next question is from Alessandro Tortora with Mediobanca.

I have 2 questions, which are basically some follow-up of some questions already made. The first one is on Denmark. From what I understood, considering also the timing of the price increase in that country, you already made and implemented a price increase, as you commented before, of the acceptance from some clients. Do you think it is possible at a certain point, how can I say, to adjust these prices considering the volatility on the cost side also in a country like Denmark. So this is the first question. The second question is on Turkey. So if I understood well, I mean, in the press release, basically Turkey will be the only country where you see, let's say, an EBITDA basically down over the plan. And the third question is a follow-up on the shortage of the CO2 allowances you mentioned before. I understood that the company is pretty confident to, let's say, pass through any additional CO2 price, increase in CO2 price, but also any potential increase in deficit on the CO2 side. The question is, can you give us an idea of, let's say, the level of clinker import or shipment from Turkey to, let's say, to Denmark?

Denmark regarding shipment.

Yes, in Denmark, yes, last year, in Denmark, we're lagging behind, let me say, the revenue impact because we strike a deal in November in 2021. This year, I mean, the market has accepted. And probably this is not in full because, as I said, we, let me say, contract the energy base 85% and then the other 15% is in spot basis. So cost basis depending on the price of energy or other things. We have hedged most of our energy, electricity and coal price. And so even if the price will continue to soar, I don't think that we'll be hit with a significant divergence in terms of cost. And so for this reason, we don't think that we need to adjust the cost, except for the CO2 that is a variable input, and so it depends on the cost of the CO2 that we will be charged at the end of every month.

The Turkish lira pulling down the EBITDA in Turkish lira.

In Turkey, the cautious approach because of which will be the final value of the lira. One year out, the forward on the lira is in the range of 20%, 25%. And so you have a devaluation that is nearly 70%, 80%, it is difficult, let me say, to say I am sure that in euro I can reach this target. That's why we are in a wait-and-see approach and report. We are confident because we are, it's 20 years we have been already, say, selling and practicing in Turkey. But let me say, for the time being, we don't want to, let me say, to blow up numbers. We want to have, let me say, a cautious approach because we have election, because we don't know if inflation will end up at this level or much more higher or lower. So the market, I think, is in good shape. They are, let me say, exporting nearly 40% of their capacity today. And I believe that if the border tax adjustment is not in place or I don't know if Turkey will join the ETS system, they will export as much as they can because in Turkey today, you have to pay energy in dollars. And so you need to export, especially if you are not a multinational player. Otherwise, you cannot pay energy. In terms of how much is the flow of cement from Turkey, let's say that compared to the cement in Belgium and Denmark, I can tell you that there might be or we have, let me say, a scenario that we can go from 400,000 to 800,000 tons of cement that is mainly coming from Izmir because we have the capacity, export capacity of 1 million from Izmir. But depending on the cost of CO2, the situation of the market, the cost of the freight, our scenario is between 400,000 and 800,000 tons of gray cement.

Okay. Okay. So sorry, just to sum up the point also on, let's say, Denmark, which is a key market for you. The education the company made with, let's say, the major client is, first of all, let's say, to, how can I say, support this monthly adjustment on the CO2 price fluctuation. And on the other side, considering the price increase the company already applied in theory, considering, let's say, the performance of Denmark last year, 2021, Denmark, let's say, should post an EBITDA of, let's say, over the plan.

Yes. You're right.

The next question is from Bruno Permutti with Intesa Sanpaolo.

Yes. A few questions. The first one concerns the U.S. market and the Asian market. If you can give us an idea of what is your view for the demand growth and the price growth in these areas, which perhaps a little bit different of what is happening in Europe from the point of view of the CO2 costs. And the second question regarding the shortage of resources. Is there a chance that the shortage of people can change also the demand growth scenario that you have factored in, in your plan? So in some way, are you seeing that there are some delays, that there are some slowdown in the projects right now or you see a quite normal advance of the infrastructure works? And the very last one, a general question. So regarding the, if you see a chance that in Europe there could be area limit of the CO2 reduction scenario? I mean, that a more pragmatic approach could be adopted and if there are discussions or pressure in this direction considering the problems related to the implementation of the current policy.

Yes. Bruno, it's Marco here speaking. I think the first question about U.S. and Asia, I mean, let's remind everybody that in U.S. and in Asia, we sell white cement. Therefore, it's not a problem there to infrastructure, but it's really geared towards repair and maintenance and housing, these kind of markets. So it may be a, the market we see, so clearly, the U.S., you know there is a wall of money coming through from federal funds on infrastructure, which is not going to impact us materially. But clearly, the whole sector is benefiting from a sort of a wave effect of that. So we expect the U.S. from around the 670,000 tons of volumes sold in 2021 to increase in the low single-digit volume growth year-over-year. So a sound and stable growth projected with relatively solid pricing. I mean, you know that our market will cover around 50% of the market in the U.S. and over half of our sales are imported. The competing products tend to come from exporting countries which are currently hit by an increase in freight rates. So we expect a moderately benign environment on pricing. So this is U.S. As far as Asia, we have Malaysia which, as you know, is mainly an export market. We tend to sell from Malaysia clearly to the domestic market, but a large proportion of our sales go into Southeast Asia and to Australia. After a few tough years, in Australia in particular, we expect recovery of that market. So again, in Malaysia, we expect a mid-single digit volume growth with stable pricing. And so on overall, good Southeast Asian trading environment. In China, I would say this is probably one of the best performing businesses in our portfolio. It's been doing extremely well. We expect it to continue to do well. We clearly have a bit of a cap in volume growth because we are almost at full capacity. So we're trying to do everything we can to optimize production and also to grow at least the volume by some percentage point but we're close to full capacity, but the market is very buoyant. Our product is perceived indeed as a premium quality. we expect that there's going to be some price inflation in China. So the top line is still expected to be in the mid-single digits growth range. So overall, this is the picture for the countries that you asked for. Then as far as the other question, I apologize, but if you could just repeat the other one. I don't know the answer.

Sorry, I didn't get. Yes?

What was the second question?

Yes. Yes. The second one was related to the inventory shortage if you are experiencing, you see that there are some delays in infrastructure projects related to shortage of people or other kind of inputs or production input. And the last one was related to eventual, if you see a chance in the discussion or related to a possible delay, a possible relaxing, rather than relaxing, a possible delay of the stringent CO2 reduction requirement. I mean, if you can imagine that a more pragmatic approach will be adopted, perhaps not soon, but in the medium term, considering that there are several problems and troubles related to all the factors that are impacting the economies in this moment. So is there a chance that, in your view, are there possible discussion on this or this is not something that is on the carpet?

Let's see. We are now on the very first months of this, let me say, this is an artificial system, as you know. And the rationale of this pact is to foster, let me say, a steep and fixed transition to, let me say, other, let me say, greener technology. The issue is that in some sectors, there are no, these technology are not available and won't be available for sure in the next 5 to 7 years. So for the time being, this tax is just producing inflation because it is just fully reverted to the final client and have been through energy cost and all the other costs. So I believe that from the moment that is what I think. Otherwise, they told 6 months ago that they might slow down the counter of this or they widen the window, not 2030, but '35. They won't tell you tomorrow. But if anything, the costs will double and the technology is not available. You just freeze the economy. And this is the real issue. On the other question about shortage of people or delay in projects, it is difficult to, let me say, we sell white cement, except in Scandinavia, Turkey and Belgium. White cement is not used for infrastructure so we don't see any impact on white cement. On the other hand, we have, let me say, I don't see for the time being for the next, let me say, couple of quarters any kind of shortage of truck drivers or other things or any postponement of an infrastructure because you can understand that the postponement that we suffered so far have been, let me say, produced by the COVID. So in this situation, it is difficult to say that an infrastructure can start for 3 months or 6 months later because if you have another wave of COVID in September because I think now we are exiting the year. And then everything will be, let me say, slow down again. So we do not see in our scenario that this might have an impact this year or next year, but who knows because I don't know what will be the development especially of the COVID. And also, the wage inflation that we might see after this huge increase in cost, in input costs everywhere in cost. Because the other issue is that if we are going to see a huge wave of strike in Europe in every sector from transport industry because life cost is soaring and there is not an automatic alignment, as you know, in most of the country. So this is, I think, might be a disruption. So this is one of the reasons that we might see, especially in the second half, strikes that start to hit a lot of sectors because people want and I think it is known that they want to have a wage increase to adjust, let me say, the life cost. This is the increase that I see probably in the next 6 to 24 months.

[Operator Instructions] The next question is from Michele Baldelli with BNP Paribas.

I have a couple of questions. The first one, because you pointed out that FUTURECEM has got already a good positioning with the current cost of the CO2, making it more viable than the gray cement. I was wondering what could happen to your P&L if the penetration rate of CO2 then will go above and beyond your expectations? If you can provide us some of the drivers, how much could be the impact for every like 10% better penetration that you expect something like this? Second question relates to the aggregates in Turkey. If you can provide us a little bit of more color on how it's proceeding in the business, sales and EBITDA progression, which you expect also in 2022 after the ramp-up done.

Yes. I think the first question, I mean, clearly, as was pointed out before, FUTURECEM still represent a small portion of our total sales. We have an ambitious rollout plan. As you know, in 10 years, a bit less than 10 years, we expect it to represent around half of our sales. So if there were to be a meaningful acceleration, I would say, it would not make a meaningful impact in the very short term both because we have been grinding and consigning supplies. And so it would be difficult to exceed significantly the targets also because we are getting ready to ramp up the production so there will be nothing available in the short term. But then if you look in the medium to long term, if we were to exceed the targets, we would be clearly seeing a good chunk of our profitability because the product is more profitable than the average of our product range. I mean, this is for sure. We have not quantified how much because it will depend by how much it would exceed. But for sure, it would be a benefit also, say, product mix effects in the portfolio if FUTURECEM were to exceed our expectations. As far as Turkey, I think is this a question regarding the growth trajectory of the country? Sorry, the line is not very good or you were asking about some other KPI?

Yes. I was referring to the aggregates business in Turkey.

Okay. Okay. Understood. Yes. Thank you for the question because this has been a small M&A transaction that we've done in 2021. We bought for EUR 4 million a business, an aggregates business in Turkey. So we continue to pursue our strategy, our vertical integration in the 3 hubs that we have. That is one of them. The other 2 are Denmark and Belgium. So in Turkey, we're very strong in cement and ready-mix, especially in the Izmir area, but we were a bit short on the aggregates side. So I think this acquisition is quite important to fully vertically integrate upstream our model. So we acquired some important long-term reserve that would secure adequate supply of aggregates for our ready-mix business and also for third-party sales. So there is an enlargement of perimeter. We've highlighted the run rate of 3.6 million tons of aggregates and full run rate of sales. So we think it's a very, I would say, from financing and strategically centered acquisition in a country that we still believe is for us strategically important and will reinforce our competitive positioning in a key sector that for the future secures important flow of materials for our clients. Anyway, we bought 350 million tons of capacity, of reserves, sorry, for EUR 4 million. So today, in Turkey, let me say, aggregates is still, let me say, they're more perceived by the market. But I think to secure this huge amount of reserve that can last 200 years at this very low price, probably not tomorrow, but will enhance, let me say, the performance a lot because the cost is basically 0 and the reserves are, let me say, huge.

Gentlemen, there are no more questions registered at this time.

Thank you very much for your interest in Cementir Holding, and we wish you a pleasant rest of your day and evening. Thank you.

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