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 First Half 2026 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Marco Maria Bianconi, Head of M&A and Investor Relations of Cementir. Please go ahead.

Thank you, and welcome to Cementir Holding First Half Results Presentation. I'm here with our Chairman and Chief Executive, Francesco Caltagirone. We're happy to take your questions at the end of my short presentation. I'll go through the presentation deck that has been distributed ahead of this meeting. Starting with Page 2 with the key takeaways on the results. There has been a significant improvement in the second quarter despite the first quarter that was impacted by exceptionally adverse weather conditions. At constant perimeter, Q2 cement volumes were up 3.4%. Non-GAAP revenue was up 5.3% and EBITDA was up 12.9%, confirming a positive reversal compared to the weak start of the year. On a reported basis, consolidated volume declined across all business lines with cement minus 2.9%; ready-mix, minus 10.9%; and aggregates, minus 2.6%. At constant perimeter, though, excluding the disposal of Kars Cimento, cement volumes were up 1.4% in the first half of the year. There was a positive trend in Belgium and Egypt following the restart of the second kiln. Reported performance was affected by ForEx headwinds, mainly due to the depreciation of the Turkish lira and of the U.S. dollar. This negative impact amounted to EUR 37.4 million on a non-GAAP revenue, and EUR 2.6 million on non-GAAP EBITDA. EBITDA was also affected by lower volumes in Nordic and Baltic and Turkiye due to weather conditions, whilst Egypt, Belgium and North America improved year-on-year. Again, there was a clear improvement in the second quarter, and there was no significant direct impact from geopolitical conflicts on our operations. Energy cost volatility has been largely mitigated through a structured risk management approach and our hedging, while some pressure still persists on pet coke supply and logistics. Our full year 2026 guidance is confirmed despite the very uncertain macroeconomic and geopolitical environment. On Page 3, a few highlights. I'm not going to read it verbatim, but just to give you the highlights that revenue was up 0.2% year-on-year. Non-GAAP was down 1.7% and at constant perimeter was flat. EUR 37.4 million negative FX, mainly due to Turkish lira and U.S. dollar. We talked about the cement volumes already and RMC volumes as well. On the EBITDA basis, the group reported EUR 163.9 million, minus 5.5%. Non-GAAP EBITDA was minus 10% at EUR 153.6 million and it was down 9.5% at constant perimeter. The decline in EBITDA was mainly driven by Nordic and Baltic and Turkiye, EUR 26.6 million, lower volumes and negative FX impact of EUR 2.6 million. Non-GAAP EBITDA margin stood at 19.3% versus 21.2% on the first half of last year. Group net profit was down 15.7% to EUR 62 million. Non-GAAP net profit was down 18.9% to EUR 66 million. Net cash at half year was EUR 276.8 million, an improvement of EUR 132.8 million year-on-year, including EUR 51 million of Kars Cimento disposal, EUR 19.7 million of insurance proceeds, EUR 18.6 million of the Just Transition Fund, and EUR 54.9 million of dividend distributions. We now go to Page 4, starting with the biggest division, accounting for 45% of group EBITDA, Nordic and Baltic. In Denmark, the construction market remained relatively weak, especially the residential part due to restrictive financing conditions and energy cost uncertainty and some projects postponement. Grey domestic cement volumes were down 4% year-on-year, impacted by exceptionally harsh weather and delays to the Fehmarn project, although deliveries improved during the second quarter. White cement was up 12%, supported by stronger demand. Exports were down 16%, mainly due to lower deliveries to Norway and Iceland, partially offset by growth in Poland, France and Finland. RMC and aggregates volumes were down 11% and 21%, respectively. EBITDA was down 21% year-on-year, impacted by lower volumes, higher CO2 taxes and increased variable costs. In Norway, sales volumes were down 5% due to weak demand, lower activity on major projects and some market overcapacity and price competition. EBITDA increased driven by higher prices, partially offset by increased variable costs. The Norwegian krone was up 4.2% versus the euro average. In Sweden, ready-mix sales volumes were up 10%, driven by the recovery from March, the restart of some postponed projects and several new contracts. Aggregates volumes were up 24%, supported by new projects and the temporary closure of a competitor's quarry. Also EBITDA was up and the Swedish krona appreciated by 2.8% versus the euro average. Moving to Page 5. Belgium and France accounting for around 32% of H1 EBITDA. Domestic cement volumes were up 5%, supported by new customer and the major infrastructure projects in the Antwerp area, despite adverse weather at the beginning of the year and unusually high temperatures in the second half of June. Exports were up 17%, mainly to France and Netherlands, driven by new customers and the major project in Antwerp. Ready-mix volumes were down 6% due to weaker performance in Belgium and adverse weather conditions, some Easter-related shutdowns and a high comparison base in the first half of last year. In France, volumes were up 3%. Aggregates volumes were up 2%, mainly in France and the Netherlands, benefiting from stronger infrastructure and construction activity from March onwards. EBITDA was up 7%, reflecting higher cement volumes and lower raw materials and CO2 costs, partially offset by higher costs related to different maintenance schedule and lower RMC volumes and higher variable costs. Moving to Page #6 on Turkiye, accounting for 5% of group EBITDA in the first half of the year. In this country, challenging operating environment continued impacted by hyperinflation, high interest rates and exceptionally adverse weather in the first quarter of the year and weaker post-earthquake reconstruction demand. Domestic cement volumes were down 13%, 2.2%, excluding the disposal of Kars, mainly affected by adverse weather, gradual completion of major post-earthquake reconstruction projects and mixed regional trends with Aegean up 15%, Marmara minus 2% and Eastern Anatolia minus 32%. Export were up 2%, whereas domestic RMC volumes were down 15%. Aggregates were down 26% due to a slowdown in the reconstruction activity, although June showed a strong recovery, supported by some major infrastructure projects in the area of Izmir. Revenues were down 19%, also because of the Turkish lira depreciation. EBITDA declined, reflecting lower volumes and higher variable and fixed costs, only partially offset by price increases. I remind you that we divested of Kars Cimento on December 1, 2025. In the period, the Turkish lira devalued by around 27% versus the euro average. Moving to North America, accounting for 7% of our group EBITDA. Volumes in the U.S. were broadly stable, demonstrating a certain resilience despite a generally softer market environment and weak residential demand. Florida recorded a 10% increase, mainly from demand from new customers, whereas in Texas, volumes were down 7% due to a January snow storm and a competitive pressure from imports. In California, volumes were down 9% due to intense competition. EBITDA was up 1.8%, with cement business impacted by higher variable costs from FX effect and only partially compensated by higher selling prices. The dollar in the period depreciated by around 6.8% versus the euro. Moving on to Egypt, accounting for 5% of group EBITDA in the period. Revenues were up 57% despite a 7.3% depreciation of the Egyptian pound. Macro context remains challenging with high inflation, currency volatility and rising energy costs. Domestic cement volumes were up 31%, supported by stronger commercial positioning and market share gains. Export volumes were up 78%, benefiting from deferred shipment from December of last year and the resolution of some technical issues following the restart of the second production line, particularly supporting sales to the U.S. EBITDA was up 43%, driven by higher volumes and a more favorable geographic mix focused on higher-margin export destination, which more than offset higher energy and production costs. Moving to Page #9 on Asia Pacific, which is the last business unit we're going to talk about, 3% share of group EBITDA. In China, volumes kept declining 6% year-on-year, impacted by weak demand, intense competition and adverse weather. There was also a slowdown around the Chinese New Year. Market environment remains weak despite government stimulus. Revenues were down 10% -- 10.5% year-on-year, reflecting lower volumes and average lower selling prices. EBITDA as a reflection of the top line decline was down 21.4% due to lower volumes and prices and higher fixed costs, partially offset by higher variable cost savings. Renminbi depreciated by 1.1% versus the euro average in the period. In Malaysia, on the contrary, total volumes were up 2%, with domestic volumes, although marginal, declining by 11% due to order timing effect and weaker retail demand. Cement exports grew 14%, supported by higher deliveries to Australia, the Philippines and Vietnam, while clinker export declined by 24%, mainly due to shipment timing difference to Australia. Revenue was up 8.3%, supported by higher export volumes and more favorable product mix. EBITDA was down 55% due to higher variable and fixed costs, particularly distribution and logistics expenses. The Ringgit was up 2.8% in the period versus the euros. A few words about the acquisition of Nymolle, a bolt-on acquisition in the aggregates business, enhancing vertical integration, securing a stronger Nordic platform. On July 1, we completed acquisition of 100% of the share capital of Nymolle Stenindustrier with an enterprise value of DKK 900 million, which is equivalent to around EUR 120 million on a cash and debt-free basis. The expected synergies are around DKK 30 million or EUR 4 million within 24 months through integration with existing Nordic and Baltic operation. Nymolle is the largest aggregate player in Denmark with around 10% share. It operates 26 land-based aggregates quarries across Denmark and holds a well-developed reserve base. The full year results ending April 2026 are for revenues of DKK 230 million, pro forma EBITDA of DKK 93 million. Moving to the last slide of my presentation, guidance, which is confirmed. Despite the uncertain macroeconomic and geopolitical environment, we reiterate our full year guidance, which is for revenues to reach around EUR 1.7 billion and EBITDA range between EUR 400 million and EUR 420 million, net cash position of around EUR 590 million after a CapEx of around EUR 128 million. As you know, our guidance refers to like-for-like, ongoing operations, non-GAAP and excluding any extraordinary items. That said, thank you for your attention, and I'll now leave the floor to you for any questions to our Chairman and Chief Executive. Thank you.

[Operator Instructions] The first question is from Wim Hoste of KBC Securities.

I would have 2, please. The first one would be on cost inflation and pricing initiatives. In the first quarter results conference call, I think a figure of EUR 38 million inflation was mentioned in the context of the conflict in the Middle East. So can you maybe update on that number and also update on the pricing initiatives you might take in some of the zones in order to offset that inflation? So that's the first question. And my second question would be on the strategy. There has been some rumors about M&A recently in Latin America, where Cementir has been mentioned. Without asking you to confirm the rumors, I would like to get a reminder of the overall strategy and priorities when it comes to -- yes, to the cash deployment and the growth of the company? If you can maybe elaborate a little bit on that. So those were my questions.

Okay. Thank you for your question. Yes, so on the cost inflation, you're right that there has been a hit in the first quarter due to the increase in -- especially input costs and raw materials. I would say that in the second quarter, we clawed back some of these hits. And thanks to our hedging, we managed to like offset the majority of the price increases due to average higher input costs, especially for thermal energy and electricity. So I would say there has not been, as we said also in the communique and in the presentation, any meaningful impact on our figures. So if we compare also the electricity and fuels bill in the second quarter compared to the second quarter of last year, there is a delta still unchanged of around EUR 8 million. So I would say that the delta of the first quarter has been kept.

I would add. So good afternoon to everybody that if you see in the first 6 months, we saw a decline in the sales in cement -- cement slightly, ready-mix concrete around 10% and aggregates. And then you can see that in the first half at the same perimeter, the revenues are almost in line. This means that almost everywhere there is, let me say, a hike in the price as we also told in the first quarter to cover the cost. And this is also the reason why, I mean, from the gap compared to last year of around EUR 28 million in EBITDA that we had in the first quarter, now we nearly half this gap because of, let me say, this price increase. Going to your second question about the strategy of the possible enlargement of the perimeter Cementir Holding as I said in the past that we look at -- as it happens several opportunities that might arise from the market. You know that the only part of the world where we are not active today is South America. For sure, this asset, I mean CSN is an asset that is on the market because, I mean, the sellers is forced to sell it. We are looking at it, let me say, as other possible competitors -- other competitors are doing. We are today in a phase that we are estimating and evaluating the asset to, let me say, understand if part of this perimeter because the perimeter alone is, let me say, too big for us, might fit in our perimeter. But let's say, we are still in a sort of preemptive phase. And at this stage, I can only say that it's an opportunity like a lot arise in the last 4, 5 years, and it might be and might not be.

The next question is from Matteo Bonizzoni of Kepler Cheuvreux.

Two questions. Guidance. You have done this 10% EBITDA decline in the first half on a non-GAAP basis despite the recovery in the -- encouraging recovery in the second quarter. So you still need to do a mid- to high single-digit EBITDA growth in the second half to meet your -- the low part of the guidance range, which doesn't seem to be walk in the park in the current market conditions in which Turkey could continue to be weak and also there is uncertainty on the potential recovery in Scandinavia. So I would like to know more precisely what are the basis and the grounds of your confidence to achieve even, I would say, the low part of the guidance range? If you can specifically maybe comment to different geographies? And then a follow-up on the question on the potential M&A in Brazil. So correct me if I'm wrong, but what we read is that it's a pretty crowded context with a lot of potential buyers. And we also read from newspapers, so it's not maybe insider information, but it's public information that the multiples could be pretty stretched. So it seems that compared to your usual M&A style, not to overpay, doesn't fit very much. But maybe can you add a little bit more color also on the general framework as regards to the valuation of these assets?

Starting from your second question, I agree with you that, I mean, on the newspaper all the expectation because everybody that says something want to sell at a higher price. But I am also aware that we have our discipline. For this reason, I told to the previous questions that, let's say, it might be or it might not be because, let's say, one thing is that there is an opportunity to enter in a country. One other thing is that the assets are in a good shape and fit for the strategy. The third thing is that the price is reasonable or not. So I can say that as you are saying that at the price that, let me say, you see or you read or you read in the newspaper is something that probably we are not interested. So it's a crowded process and let's see where and when it will end up. As I said, we are interested, but at a certain condition. And on the other side, as I also said that besides also the price, there is also the size of this, let me say, company -- this can be, let me say, carved out. So it is in the end of the sale that is aware that has a few, let me say, bidders. Probably some of them for the whole and some of them for part of it. So today, we are still in a sort of nonbinding phase, and so we are not aware of what, let me say, even the seller will decide at the end. On your first question, as I said, we are still confident that we can, let me say, reach the guidance. I think that what we have done in the second quarter is in line and the trajectory is to have this kind of recovery. And we are aware that for sure, there are still some headwinds, especially from the 2 wars that are active now, but not more -- not on the cost side because, as you know, we are mostly hedged and so we don't expect weird things from cost side. As probably in other geographies are experiencing, there are some delays in some, let me say, project and this might affect the pipeline of the quantity of the sale. But as I said before, even so far with a mild decline in our footprint, let me say, market, we were able, let me say, to balance and to recover. So we are confident probably, let's say that I am more confident now than 3 months ago.

The next question is from Emanuele Negri of Mediobanca.

I have a couple. The first one is a follow-up on extra cost. During the first quarter conference call, you mentioned around EUR 38 million of extra cost which were expected from geopolitical tension. Now you're talking about around EUR 8 million in the first quarter and around EUR 0 million in the second quarter, if I'm right. Could you elaborate on this delta? What has changed during the quarter to have this reduction in your expectation? And the second one is if you have any update on the ACCSION project in Denmark.

What we think is that at the end of the first quarter, if the condition would have remained the same, we would have expected EUR 38 million in extra, let me say, cost. You have seen that beside, I mean, the last week that then the price of oil went down, I mean, from $120 to around $70. Now in the last 10 days is again up. So it's difficult. So we took, let me say, EUR 8 million because one part of this, let me say, hike that we -- like everybody, let me say, felt in the second quarter. So going forward, I can say that if 1 week from now, they agree on, let me say, to come down the things again, probably the extra cost will be lower, it will be more or less, let me say, what we have seen so far. If the global context will, let me say, mess up again, I think that we must -- we might stick to our forecast. On the ACCSION project as you know, we have been approved, let me say, by the Danish fund financing for 15 years that is up EUR 2.2 billion. Now I mean, as we said, we are waiting because we are part of the project. As I said, the project is capturing the plant then to ship by pipeline, let me say, the CO2 to the site and then there is also the storage area. So we have to be aligned and we expect by early 2027 to be fully aware of the agenda of the other 2 players that is outside the plant just to confirm the agenda and also because we are at the latest stage, I mean there are just a few months to wait to understand if everything is okay in the storage area from seismic from, let me say -- there are no possibility of the leakage so -- in the atmosphere. So this will take, I mean, nearly 30 months. It already started, but the company that is not our [ friend, ] that we think they said that early in 2027 we'll release the final opinion. So far, let me say there are no red flags. This is what I can say.

The next question is from Egor Sonin of AlphaValue.

I have a question on pet coke. Because you called out pet coke supply and logistics as the one area where cost pressure still persists, but at the same time, the part of the group growing fastest is white cement and Egypt specifically. It's actually the part that can't substitute away from it since your own target for white cement is only 8% for color reasons, so you cannot easily substitute pet coke. So my question is, how do you manage that specific exposure through long-term supply contracts, stock levels or mainly pricing, for example? Could you give more color regarding this?

Thanks, Egor, for the question. It's a very good one. As you know, pet coke is a peculiar fuel because supply is generally concentrated in the U.S. Gulf. So there are a few suppliers coming from the U.S. and it's one of the few commodities that you cannot really hedge unless you run a significant delta risk. So we -- actually, the only reason -- the only way that we can materially hedge is just buying forward what we need. And that's what we've done, and that's the reason why you don't see a meaningful movement in the thermal energy bill so far because we've been able to actually buy forward quite a lot of quantities for our needs. Clearly, going forward, we need to monitor very closely the dynamic of this commodity. There is a double effect. One is the dynamic of the dollar; and the other clearly is of the commodity itself in our accounts. But we have a minor third leg to diversify or to try to hedge, to try to like split the purchase into different suppliers. But again, you don't have a very huge alternatives. So we watch the space very carefully. Clearly, in this particular commodity, there's very little we can do in terms of hedging, as I said, besides buying forward. So we see -- we've clearly said in the presentation that this is probably one commodity that has a particular dynamic. But we believe that by buying forward plus diversifying the supply base, we can manage to not control, but at least limit the price hikes. Francesco, would you like to add something?

Yes. I would also want to add that today, especially in Europe, our consumption of pet coke is going lower and lower because of the use of the alternative fuels that both in Denmark and in Belgium is around 75%. In Denmark, we have already working the -- we are going at natural gas. And in Belgium, it will happen next year. In the United States, we are using natural gas. And in Turkey, we use just an opportunistic way, lignite that is a natural, let me say, coal. So let's say that the only countries that today go full pet coke are Egypt, China and Malaysia. That is account in terms of quantity that is less probably than 15%. So let's say, for sure, it's an issue for sure. There is a limited framework where you can hedge. But compared to other players, let's say, the increase of the pet coke affect, let me say, our balance sheet in a minor way.