Cementir Holding N.V. (NL0013995087.SG) Earnings Call Transcript & Summary

Good evening. This is the Chorus Call conference operator. Welcome, and thank you for joining the Cementir Holding First 9 Months 2025 Results 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. Please go ahead, sir.

Thank you. Good afternoon, and good morning, everybody, and welcome to Cementir Holding 2025, 9 months results presentation. I am here with our Chairman and Chief Executive, Francesco Caltagirone, who will be happy to take your questions at the end of my short presentation, I will go through the presentation deck, which has been distributed. Starting with Page #2 with the key takeaways about our results. The first point is that the macroeconomic scenario is still characterized by high uncertainty driven by geopolitical and trade tensions and further exacerbated basis by protectionist measures in the U.S., which would be -- are affecting actually the global economic growth rate first 9 months results were in line with our expectations with the third quarter showing an improvement both in cement and in aggregates volumes. Revenues were broadly stable with slightly lower EBITDA compared to the same period of last year, mainly due to EUR 12.5 million. Negative currency effect and EUR 2.7 million net nonrecurring charges. There were 2 nonrecurring events, which affected the operating performance in the period. First was a fire in the alternative fuel feeding system in Belgium and the second was technical issues with the restart of the second production line in Egypt. Further details will be given later on. The 2025 guidance is confirmed with revenues of around EUR 1.75 billion, EBITDA of around EUR 415 million and net cash of around EUR 410 million at year-end. This forecast excludes any nonrecurring items and are determined on a like-for-like basis. If you can turn the page to Page #3, just a few financial highlights. Revenue reached EUR 1.227 billion minus 0.7% year-over-year. Non-GAAP revenues were up 0.4% to EUR 1.2324 billion. At constant 2024 exchange rate revenue would have been up 5.6%. Cement volumes were up 2.4%, mainly thanks to Turkey, with a slight decline in Belgium and Denmark, whereas RMC volumes were stable and aggregate volumes were up by 5.2%. EBITDA was down 2.9% year-over-year to EUR 287.3 million non-GAAP EBITDA was down only 1.8% year-over-year to EUR 284 million. This lower EBITDA was mainly due to the negative exchange rate effect of EUR 12.5 million mentioned before and nonrecurring charges of EUR 2.7 million. Non-GAAP EBITDA margin reached 23% versus 23.6% on the same period of last year. EBIT was down 7% year-on-year. Non-GAAP EBIT was down 6%. Net financial result was negative by EUR 0.3 million, down from EUR 18.1 million in the first 9 months of '24, mainly due to higher foreign exchange gains recorded in 2024 linked to the over 50% devaluation of the Egyptian pound versus the euro. For this reason, profit before tax. On a reported basis, was down 17.4% and Non-GAAP pretax was down 14.2% year-on-year. Net cash position is very strong, EUR 198.5 million, an improvement of over EUR 118 million year-on-year, including 43.5 million of dividends by the parent company and EUR 6 million of dividends to minorities. Let's go through the main geographies. If you turn to Page 4, Nordic & Baltic, which is the largest region, a 47% share of our group EBITDA. In Denmark, grey and white domestic cement volumes were slightly down versus last year with the residential sector still relatively weak. The Fermern project volumes remain below forecast. Exports were up 4%, mainly to higher deliveries in the region. RMC volumes were down 4% where aggregate volumes were up by 18% with strong demand. EBITDA was up by 5.9%, mainly due to the positive contribution of cement and savings in fuel and electricity consumption. In Norway, RMC volumes were up 9%, supported by favorable weather conditions and the set up some major projects. They are signs of market recovery, although there is still a bit of overcapacity and price competition, EBITDA was up due to higher volumes and cost efficiency. And this despite the Norwegian Krone depreciating by 1.1% versus the euro in the period. Sweden, RMC volumes were slightly up whereas aggregate volumes was slightly down due to the lack of new infrastructure projects. But EBITDA was actually up, driven by higher prices. Swedish Krona revaluated by 2.7% versus the euro average. Turning to Page 5. Belgium and France accounting for a 1/4 of our group EBITDA. The domestic cement volumes declined by around 7% in the first 9 months due to weak demand. Exports also were down by around 6% due to a physiological market slowdown in France following the conclusion of the Paris Olympics. RMC volumes were stable driven by continuation of major projects with different trends between Belgium and France. Aggregate volumes were broadly in line with last year with growth in Belgium and the Netherlands, but a [ full ] in France. EBITDA was up by 3%, including a nonrecurring net charge of $2.7 million due to the fire, in the feeding system of alternative fuels at Gaurain plant, partially offset by a land sale gain. Regarding EBITDA for this reason would have been higher by 6.9% year-on-year. The cement segment was penalized by lower volumes and higher electricity costs, whereas RMC benefited from higher prices and additional services. Turning to Page 6. Third year, accounting for 15% of group EBITDA. Let's remind ourselves that Turkey has considered hyperinflationary since April 2022, so domestic volume -- cement volumes were up by 3% despite ongoing macroeconomic challenges and mixed regional trends. Cement clinker and clinker exports were up 5% and RMC volumes were slightly down, whereas aggregate volumes were up by 18%. Revenue and EBITDA declined by 1% and 12.9%, respectively, penalized mainly by the Turkish lira devaluation, which was around 23% in the period. With regards to the Kars plant sale, it is in progress, and the antitrust review is still pending. Turning to Page 7. North America, accounting for 6% of group EBITDA. Cement volumes remain in line with last year. The residential market continues to be affected by high prices and high market interest rates with uncertainties regarding the tariff policy. Texas saw a sharp decline, impacted mainly by adverse weather and some gas supply interruptions and the York region experienced a mild drop influenced by harsh weather whereas California and Florida volumes recorded a moderate increase. EBITDA was down 4%, mainly due to higher transport and production costs only partially offset by price increases and cost savings. In the period, the U.S. dollar devaluated by around 2.9% versus the euro average. Turning to Page 8. Asia Pacific accounting for 4% of group EBITDA. In China, revenue was down 9.6% due to lower selling prices in the context of stagnant demand and delayed effects from government stimulus measures. Volumes were slightly up and EBITDA was down 26.3% affected by weak pricing despite cost savings. The Renminbi devaluated by 3.2% versus the euro. In Malaysia, revenue was up by 3.3%, driven by higher sales volumes, mainly clinker and cement exports, total volumes increased by 16% mainly due to larger clinker shipments to Australia. Domestic volume, although marginal declined by 5% due to some delays in major projects and some ongoing trade tensions. Cement exports rose by 7%. EBITDA was down by around 8%, mainly due to U.S. dollar and Australian dollar depreciation with 80% of our export denominated in those 2 currencies despite some cost savings and higher sales volumes. In the period, there was a 4% revaluation of the Malaysia ringgit versus the euro. Turning to the last region, Egypt, Page #9, accounting for 2% of group EBITDA. Revenue declined by 1.2%, mainly due to a significant depreciation of the Egyptian pound around 17% versus the euro average, with a 15% increase in local currency. White cement volumes were up 6%, mainly driven by exports to the U.S. to Morocco, France and Italy. Domestic cement volumes were down due to a soft market, high inflation and currency devaluation and rising energy costs. The activation of the second production line, which has been idle for 9 years, caused some production disruptions and clinker quality issues leading to higher third-party purchase cost. These issues were solved by the end of June, but clinker purchases continued in July. EBITDA was down mainly due to currency devaluation and higher operating costs, only partially offset by higher export volumes. A few words about our sustainability achievements on Page 10. We continue to receive a number of recognitions on our ESG efforts. We have been for the second consecutive year, nominated by sustainability among the ESG industry operated companies. We score with an A rating Climate Change and A- in Water for the third consecutive year. We are included since 2025 in Europe -- among Europe Climate Leaders, and we've been included also in 2025 by TIME and Statista in the world's most sustainable companies. We also are among, for the second time, CDP Supplier Engagement Leaders, and we have improved the rating of both Sustainalytics and S&P Global in the period. Among the strategic initiatives on Page 10, the 220 million grant agreement, which was signed with Air Liquide and EU Innovation Fund for the ACCSION project, our CCS project in Denmark. And we launched in the period the D-Carb production line and product line in Malaysia. The first low carbon white cement brand with a 12% lower CO2 impact versus Aalborg Portland. Turning to the last slide of my presentation, 2025 guidance unchanged with revenue expected to be EUR 1.75 billion, plus 6% versus last year. EBITDA of EUR 415 million, 3% up from last year and net cash, EUR 410 million, up EUR 120 million from last year. This guidance refers to like-for-like ongoing operations, non-GAAP and excluding any nonrecurring items. This ends my presentation, and I would like now to leave the floor for our Chairmain and Chief Executive, who is happy to take your questions.

[Operator Instructions]. The first question is from Matteo Bonizzoni of Kepler Cheuvreux.

I have 3 questions. The first one is the Guidance, which you have reiterated for the full year at EUR 450 million. We have seen a positive inflection of the EBITDA in Q3, which shows up on an adjusted basis, non-GAAP around 7%. But this guidance implies an even more robust Q4 with a 13% growth versus Q4 last year. In general terms, can you provide a flavor on the reason for this expected acceleration? Second question relates to Turkey. Turkey was a weaker margin in the first half, 12% EBITDA margin, but the margin doubled to 25% in Q3. Can you elaborate on price versus cost dynamics? I guess that there was an improvement in terms of pricing, which instead was lagging behind in the first half. And so this drove margin expansion. Also related to Turkey. Can you elaborate on the export opportunities in light of the evolution of the current geopolitical situation. Last question is, as we approach 2026, and I guess you are in budgeting phase, what are the key drivers, which could move the middle next year? How do you expect 2026 in general terms without clearly referring to any precise figure, but just your preliminary flavor on what are the key variables to keep in mind for next year.

Regarding the first question, I mean we have -- as you said, a positive third quarter. And also looking at the first 9 months, our 2 main regions that are Nordics and Belgium, France are, let me say, performing better, considering also that the Belgium suffered this fire place during let me say the second quarter. Regarding the gap and that we should feel during the last quarter. As you remember, I already said that we might receive a compensation from insurance. And that if this covers what we have, let me say, lost in this various, let me say, problems. This might rebalance the situation of the gap per that. So in terms of euro, [indiscernible] to recover by the end of the year, it seems a wide guess. But if you ask that some of this, let me say, gap can be fulfilled by the insurance, where we are, let me say, in a positive move to solve by the end of the year. This might, let me say, let us reach a number that is around what we have declared and the same for the net financial position. Regarding the speed or the...

Quantification of this refund, maybe you already said in the last conference call, but just to remind euro/million of the refund around.

As you can imagine, that we are, let me say, in active talk with the insurance. So I cannot let me say now. But let's say that we are talking about something that is more or less between EUR 20 million. And besides, let's say, because we have -- let me say, the major issue where the fire at the Belgium, let me say, plant, another issue that we suffered in Egypt. And then other minor things around that we, let me say, didn't disclose, but they are on the table with the insurance. So let's say that a number more or less around that, we might, let me say, it might fulfill -- let me say the gap that today we might see by the end of the year. Regarding Turkey, as I also said in the first half, the low -- the very low EBITDA was because the cost for the labor cost compared to last year have been retroactive. So now, let's say, the price has been aligned to this, let me say, increase in the labor cost. And now, let's say, we are -- let me say, recovering the loss of what we have suffered, let's say, mainly in the first quarter. In 2026, as you can imagine, we are now in the middle of the process. But let's say that -- and looking at the last quarter, looking at the 2 main regions are, let me say, performing better even if not as much better as we forecast. So the recovery is there, but it's not so strong. And also that this year, we suffered one-off in Belgium and Egypt, and we expect not to suffer another time, let's say that we think that next year should be better than this year, I mean, in the EBITDA and the net financial position. Regarding the revenues, as you can imagine, are deeply impacted by foreign exchange and especially, we don't know Egypt and Turkey what they will reach a terminal exchange rate by the end of the year, but we are -- let me say slightly positive regarding what we expect for '26 compared to '25. In terms of export, sorry, export, let's say, is gaining pace towards Syria. But as you can imagine, there is a huge problem of mine. There are, let me say, the roads are full of mines, and it's very low, let me say, they cleaning up and they gearing up, and then what we expect if this talk will hold is that with Gaza is that the ban to exports from Turkey to Israel should be removed and this is affecting 300,000 tons of our exports in the last couple of years. And this is then, as you can imagine, we have a plant of 50 kilometers that can ship in Egypt cement by land. And cement, I think for the first few years should arrive in Gaza only by land because they don't have a harbor, they don't have terminals, so it will take time. So today, it's a difficult to forecast when, let me say, a final and definitive piece will be -- let me say signed. And also if we will have 1 state, 2 states and every -- so it's very complicate. So today, in our, let me say, forecast for 2026, we don't, let me say, consider any kind of export towards Gaza even towards Syria because, let me say, in the process, we still see that is quite low.

The next question is from Emmanuel Gallazzi of Equita.

I have a couple of questions. Let's start with Denmark. You basically mentioned some ongoing weakness in residential and the infrastructure is lower than expected. Can you just elaborate on the country entering in 2026. Do you see any, let's say, early sign or catalyst supporting demand for 2026 in Denmark. The second one is on the profitability because if we look at the third quarter, clearly, there are some area of strong margin expansion, like clearly Denmark and Belgium. Can you give us a sense on how the input cost like fuel and energy are evolving as they should let's say, a tailwind at least also in the fourth quarter and in early 2026. And the last one is just a clarification on the EUR 2.7 million of nonrecurring charges. Does the amount include also the Egyptian issue or not?

Starting from the last one, not just the -- on Belgium side, because we sold the land and we suffered this fire. So just regarding [indiscernible] of the sum of all the other things. In Denmark, as I said, we are seeing an early phase of recovery. It's not, let me say, strong as we expected, but we continue to see this even in 2026. The Fermern project is, let's say, going slower than what we expected. But at the end that they started and they should finish. So what we are not selling now, we will sell later because this is as usual. But sometimes, let me say, with this, let me say, very difficult and complicated infrastructure. This is, let me say, a tunnel that goes under the sea, there are some -- let me say, delays. And we expect that even in the first half of the year, these delays will continue, and we might, let me say, speed up in the second half of next year.

On the input cost fuel and energy evolution?

Yes. As you can see, let me say, in the last 3 years, including this one, the company has been able, and we said, to maintain the same level of [indiscernible] that is around EUR 400 million. And with quantity, especially in the Nordics and in Belgium that decreased and also ready-mix in Sweden and Norway. We think -- we think we are aware that today, if we just recovered this quantity, quantity that we sold in 2022, we should increase the EBITDA of the group between EUR 50 million and EUR 60 million. So what we expect is that if this recovery of banks will materialize in the next couple of years, we should start to recover this gap because the cost we have hedged on the energy side, the labor cost, the only question market is usually in Turkey, but is, let me say, balanced usually by the exchange rate fall. We don't see major threat, I mean, in the next 2 years in the input cost.

The next question is from Egor Sonin of Alpha Value.