Haci Ömer Sabanci Holding A.S. (SAHOL) Earnings Call Transcript & Summary

Good afternoon, and welcome to Sabanci Holding Building Materials Day. Today, I have Orhun Kostem, Sabanci Holding, Group Chief Financial Officer; and Burak Orhun, Building Materials SPU, President, Sabanci Holding, to discuss about the segments current and recent developments and the strategic ambitions going forward. Before we start, I would like to draw your attention to our disclaimer on the screen right now and remind you that there will be a Q&A session at end. With that, I will leave the floor to Orhun Kostem.

Thank you, Sule. Good morning, good afternoon, everyone. Many thanks for joining us today in Sabanci Group's Building Materials Day. We're very happy to be able to talk to you about an important part of our overall portfolio. When I say important, that's the third largest contributor to Sabanci Group's net asset value, as you see. It does about 15% contribution to the total net asset value of Sabanci Holding? Or if you look on a nonbank basis, of course, it's the second largest with about 24% contribution. So we're talking about a fairly important value contributor to Sabanci Group's overall portfolio. Not only that, we feel that our performance -- the financial performance of the segment is satisfactory. If you first look at the bottom of this page, in the 9 months of 2023 versus 2022, we've seen quite serious top line growth. Having said that, we're also quite happy that our profit performance has been faster than the top line growth. And therefore, we have looked at growth with margin expansion, which -- for those of you who listen to us quite frequently would know that we at least say quality growth is taking place, and that's what we expect to deliver. Now here, I would like to draw your attention to the fact that there has been some changes happening in our network. For example, last year, as you know, Kayseri, Nigde, 2 plants in Turkey have been divested. And these financials that you see at the bottom of this page have been adjusted, so you see this performance on a like-for-like basis. And as far as the EBITDA contribution of the business segment is concerned, if you look at the nonbank contribution of all the businesses, from 10%, last year. The Building Materials segment's EBITDA contribution has increased to 15% between 9 months of 2023 and 9 months of 2022. So in addition to the net asset value contribution, the profit contribution of the segment has been quite substantial in 2023. Given this good performance, given the fact that there has been a number of changes that has been taking place across the segment structurally. We have invited Burak Orhun, the Business Group President, to tell us a bit about the strategy, the future and the outlook for our Building Materials unit. Burak, welcome.

Thank you. Thank you, everyone. Thank you very much, Orhun, and thank you, everyone, for joining Sabanci Building Materials, SPU Investor Day. It's been actually a while about 2 years since we have done our event at Building Materials day and as such, there has been a lot of progress and a good amount of changes within the group. So instead of going on one by one or we change, we wanted to prepare a short film, a short video to share with you all the things that happened in the last 2 years. And then afterwards, we can discuss and share some more maybe information with you about how we see the future for our group. Let's have a look at video together first. [Presentation]

Thank you for coming back again. as you can see from the video, as I mentioned, a good amount of accomplishments and changes since our last meeting. But since it's been almost 2 years now, I just want to get refresh, who we are and what companies will make up the SPU actually. So first of all, we have 3 companies. The first 1 is Akçansa. As you know, it's a joint venture, a long and successful joint venture with Heidelberg materials, 3 integrated gray cement plants, 2 of international ports through which highly export-oriented, in fact, one of the largest exporters of low-alkali cement to U.S and the current market valuation hovers around $1 billion. The next one is actually Çimsa, Çimsa also 3 integrated cement plants. But in Çimsa, we have -- on top of grade, we have white cement and calcium-aluminate cement as well. In white cement,Çimsa is one of the key players, in fact, in the Western Hemisphere, excluding China, has the largest white cement capacity, actually, and as such, one of the key players. And through the latest expansion of calcium-aluminate cement capacity, it's also becoming one of the key players in calcium-aluminate cement market as well. Together with Afyon cement, which is also a public company and a subsidiary of Çimsa, the total market valuation is around recently $1.3 billion. And then the next one is Sabanci Building Solutions, which you might remember, we have established about 2 years ago, right before we acquired our Buñol plant in Spain, and the purpose and the mission of the company was to combine the financial strength, the balance sheet strength of Sabanci Holding with operational strength and know-how of Çimsa to help the growth of Sabanci building materials actually outside of Turkey. But now we believe the Sabanci building solutions, that purpose or that task has been completed, and as such, you might have seen the news on Friday, Çimsa has announced that it has acquired 10.1% of Sabanci Building Solutions shares. And as such, from now on, Çimsa will start consolidating all the financial and operational results of Sabanci Building Solutions and we will be operating basically and managing all our cement operations outside of Turkey, under one entity. And I will touch that transaction in a minute on a separate slide as well. And under Sabanci Building Solutions, as you know, we have our Spanish plant in Buñol, white cement plant. We have one cement grinding station in U.S. and 6 terminals across various countries in mostly in Europe which are very, very important and to get closer to our customers and as such, increased profitability. Now before we go any further, I would like to touch briefly on how we see the global cement world as of today. So first of all, when we look at on the demand side, with the -- to fight the inflation, as you know, the policy rates are increased globally. And as such, that dampened the investments construction, meaning also [ cementment ]. So going forward, throughout '23 and going forward into '24, we are expecting stable to negative growth across the world for cement but that depends also a lot actually on the region. So for example, when we look into U.S., U.S. proves to be one of the more resilient regions and as such, it has grown in '23, and we expect it will further grow and continue to grow in '24 as well. However, when we look at the next region, China is unfortunately one of the problematic regions because of the real estate crisis, which also lowered the demand for construction materials as well as for cement. The low cement demand continued in '23, and we expect it will continue so in '24 as well. But the low demand in China not only causes a problem for demand specifically, but also causes a problem for supply side as well, which I will touch in a second. Come to Europe, we know Europe is lagging in terms of economic growth and mainly because of the monetary tightening to fight inflation again. And so we see the impacts on the cement and construction materials overall as well. So we expect low demand to continue as well in '24. Coming to our country, Turkey, we had a very good year in terms of growth, in terms of cement growth in '23 for various reasons, including the earthquake impact some of the urban transformation projects, some infrastructure projects, et cetera. But especially in the second half, especially recently because of the interest rate increases, policy rate increases, we see some early indications that '24 will be maybe not as fast growth as '23. The early indications include housing sales and construction permits, which we observe coming down actually. So for '24, we expect more or less stable cement demand for '24. Now coming to supply side. Unfortunately, for Turkish cement industry, the supplies -- the issues faced by this industry, they are mainly on the supply side actually. So the first one, new capacities are coming online across the world, including Turkey. In Turkey, we have about 10 million -- around 50 million tonnes excess capacity as of today. But we expect another 5 million to 6 million tonnes additional capacity coming online within '24. As such, the excess capacity will increase to 20 million tonnes. Now if you look outside though, in our traditional export markets for Turkey, meaning Europe and Western Africa, we see that Northern Africa, Middle Eastern and even Asian players are becoming more and more competitive, mainly because of the subsidies they are receiving in their home countries, energy subsidies as well as the very low freight rates. Also driven again by the Chinese economy slowing down, which has an impact on the global trade. Speaking of Asia, Vietnam is something in the country we need to underline because Vietnam is the largest exporter of cement in the world, but it used to export everything to China. Now with the Chinese demand coming down, it's looking for new distribution channels, new markets for itself and as such, reaching to Europe and to enter U.S. East Coast, where it has not been before. So overall weak demand, combined with excess capacity overall, impacting price resilience globally. So when we look at for Sabanci Group, we are actually working full capacity, and we will continue working full capacity at our plants as well as our terminals. However as I mentioned, price resiliency because of oversupply issues seems to be the major challenge for the upcoming years. Now we talked about -- whether about the cement market global, but I want to elevate ourselves a little bit and maybe talk also for the macro trends we see in the construction materials world because at the end of the day, we are looking for not just for '24, but for the next 5 years, how we want to shape the portfolio. So when we look at the macro trends, we really see 3 main trends ongoing in the construction materials. One, green construction, the consumers want low carbon materials to be used in the construction as well as they want the construction to be done in a sustainable fashion, meaning less water usage and less labor usage as well. So which brings the digitalization and modular construction actually to the front page. The second, consumers want to live -- want the buildings to be sustainable through their life cycle -- lifetime, meaning life cycle sustainability. And for that, obviously, that brings up the thermal insulation, external cladding and water footprint, wood footprint and businesses around these subjects to the front, and they become more important. And the last but not least, the consumers now want the -- once the building ends his lifetime. The consumer wants this -- the materials, the demolition materials to be reused again recycled or reused again. And that's something along with all the global cement players. We are working on very close day as well, mostly focusing on recycled concrete. There's one more trend actually that I have not put here, but I want to mention, which is the so-called intention gap. While the consumer wants all of this, it is -- we still observe that the consumer is not ready yet to pay the high premium, some of these trends deserve our demand. As such, there is this willingness to gap -- willingness to pay gap. So whatever solution we come up with to address these trends, they need to be also affordable. That's actually the fourth trend I wanted to underline. So I'm not going to go too much over the accomplishments because I believe the video was very clear on that. But we are very happy about the first one, the Sabanci Technology Center, because exactly with the platform where we're going to come up with new solutions in an affordable fashion so that the consumers -- we can address the concerns of the consumers. And so we can get closer to the consumers basically. There are some new investments we have already announced including the U.S. grinding plant, we are adding additional capacity to the U.S. in term -- for gray cement grinding capacity. So with that capacity or grinding capacity, actually, what I just described a minute ago as excess capacity in Turkey which is a concern for the overall industry. It will become an opportunity for Sabanci Group, because that excess capacity, we will be able to utilize as our clinker source basically once this U.S. grinding plant becomes operational. We are working together with NSA on [indiscernible] wastage recovery. And ultimately, our ultimate goal is for all our group to be energy self-sufficient, meaning at least in the next 3, 4 years, 50% of the electricity we want to produce through our own production or generation facilities, solar, wind and wastage recovery. And the last but not least, including also not only in Turkey, but also in Spain, we are investing into solar power plants. So our Spanish plant actually becomes energy self-sufficient as well. And obviously, all these events are to help the profitability of our companies but also to address the sustainability issue, which is one of the challenges that, overall, the cement industry is challenging, and sustainability has become -- is not an initiative for us anymore. It's become a business as usual part of our operations. And every decision we make before even profitability, we make it to sustainability criteria. And then together with sustainability, how we can generate more margins and more profitability from the sustainability initiative or product, et cetera. Obviously, these are recognized both by Akçansa and Çimsa through third parties. For example, Akçansa received -- actually Akçansa increased its Refinitiv ESG performance to 87, which is one of the highest ones actually in the list, it's actually placed second globally across construction materials. And Çimsa, for example, is listed as the first and only cement company listed in BIST 25 Sustainability Index. I wanted to mention that the alternative fuel usage ratio because that's one of the reasons or tools we use to achieve our sustainability targets and over the years, we have taken the necessary steps to increase our alternative fuel usage ratio much higher than Turkey, which is around 10% on the average in Turkey, our is 26%, but it's even slightly higher than the 25% average of among global cement players. And for the coming years, we are actually planning 30%. We can even go even higher. Technically, we can do that, but lack of alternative fuel or limited availability of alternative fuel in Turkey because RDF [ refuse ] derived fuel, et cetera, import is limited in Turkey. As such, we are limited by the availability of alternative fuel here in Turkey. Now after going all this listing what we have accomplished so far? Where we are today? So what are we planning to do for the next 5 years? What is our strategy road map for Sabanci Building Materials Group. So I have shared this vision before. Let me repeat it again, our high-level vision is to move from pure cement to building materials from local to glocal, and from gray to green. I believe that sums up really nicely on what we want to achieve in the next 5 years. And what we mean by glocal, let me actually open that up a little bit. We define glocal as having local skill sets or capabilities within a global framework. So our terminals, for example, our new U.S. grinder capacity in U.S. is a perfect example for us. moving from local to glocal. Now we have based or we are basing our strategy for the next 5 years on 3 pillars really. The first one is we will maximize the value of our core business, which is the cement business. We will maximize the value of our core assets. Number two, we will transform the value of the portfolio by expanding into other noncement businesses to diversify the portfolio in terms of product and in terms of sustainability, actually. And then the last one, the last pillar is investing into future value. because we believe we have to start investing now to catch up some of the trends, which will become a reality in the next 10, 15 years. And for that reason, we have a very focused R&D at our global Technology Center in [ Munich ], and we are investing into venture capital and start-ups that are directly involved in construction materials or new construction methodologies or technologies. Now how -- looking at the first pillar, how do we maximize value of the core. The first one is -- or the first step is actually continuous, and I should add ruthless network optimization. And under network optimization, I don't just mean assets, but also carbon and energy optimization. So when I say asset optimization, I believe we gave a good example of how to create value through asset optimization or what we call the portfolio reshuffling because as Orhun also mentioned a minute ago, in 2022, we have divested our Kayseri and Nigde plants not because they were bad plants, but they were actually landlocked and very limited export capabilities. We have divested those assets for $123 million, and we are reinvesting those into a, Çimsa Americas into our new U.S. grinder capacity; and b, in Turkey, to our expansion of calcium-aluiminate cement capacity, which will -- both of these investments will strengthen our global footprint. And increase our -- so not only our gains or earnings will increase in terms of absolute value, but also the quality of earnings will increase because almost 100% of these earnings will come from hard currency. And the capacity expansion will make us among the top 3 producers of calcium-aluminate cement globally. Another network or value creation through network optimization tool we have utilized is actually what I mentioned is this structural change in the SBS ownership. As of -- as you can see on the slide, on the left, as end of first half 2023, Sabanci Holding used to own 60% of Sabanci Building Solutions and Çimsa own 40% of the company. With our recent announcement on Friday, Çimsa acquired 10.1% of the shares. And from now on, as I mentioned, will consolidate operational and financial results, which will bring more optimization opportunities, more value-added and bottom line increasing optimization opportunities managerial efficiencies as well as operational efficiencies. So all in all, with this transaction, we believe both Çimsa and Sabanci shareholders, we see more value in the future as well. And I mentioned already the energy optimization as well. This is a Çimsa example, but we are doing more or less the same actions on our Akçansa side. So as I mentioned, even today, we are procuring most of our electricity from renewable sources by our aim is until in the next 5 years to be able to actually generate half of our consumption on our own through renewable sources such as wind, wastage recovery and solar. So going back to the strategy house again. We talked about the continuous network optimization. Second point is customer proximity in export markets. I mentioned our terminals help us a lot to get closer to our customers. And as such, increase our profitability margins. We want to actually expand on that. We want to increase our light -- what we call light asset expansions. It can be terminal. It can be conversion warehouses. In Europe and in various other countries, it can be in Latin America, et cetera. We are looking for different opportunities, but that will bring us closer to our customers. The third one is vertical integration. As we get closer to our customers and as we know the market, for example, in U.S., the idea is to go further down the value chain in areas we know, especially in ready-mix concrete. As you know, we know ready-mix concrete very well from Çimsa and Akçansa. And the next step on our value maximization for the core is in the export markets where we have presence, going further on the value chain and expanding into ready-mix concrete. And the last but not least is commercializing sustainability and innovation. We talked a lot on the sustainability and we are doing a lot, and we have achieved a lot. And we will make sure that sustainability also pays off in terms of bottom line profitability as well and creates value for all our shareholders of Sabanci Group. That actually means coming up with new products that are sustainable as well as actually adds to the bottom line in terms of higher margin and the customer is willing to pay for it, meaning it's also affordable. So Flycrete, for example, is shown in video is one of these examples. It addresses directly a concern of the customers. It's a sustainable product, but it also lowers the cost of the customer. And adds also to our margin, it's also a higher margin product compared to our other products. So it's almost like a win-win-win product for the entire ecosystem. On the Akçansa side, we have all our green for cement and green for concrete products, which more or less help the same purpose. Coming to the transformation of the portfolio. We talked about maximizing the value of the core. But as I mentioned, a big task for us and the big initiative for us is adding noncement businesses to our portfolio so we can diversify our products, diversify the portfolio from a sustainability perspective and decrease the CO2 of our CO2 intensity, CO2 per revenue decreased basically. So for that, we are looking constantly for opportunities. And for sustainable building materials, we have -- for now, we have prioritized insulation, roofing solutions and prefabrication, which are pretty much in line with the macro trends I have shown here on a previous slide. Obviously, these are not written on stone, meaning if there are further opportunities, we can always look -- we always do look into these other opportunities as well. But these are, as I mentioned, for us, priority areas, we have our pipeline. And we have looked in the past in the last 2 years to some actually major opportunities, especially in U.S. as well. Some of them actually were in the news as well, showing Sabanci Group as one of the -- as a potential candidate for -- to acquire some of the assets. Because of the macro volatilities in the world as well as in Turkey, we decided not to go forward, but I believe that's an indication that we are always looking, and we were ready to take the action if and when we find the right opportunity for us to transform the portfolio, which in itself implies actually the opportunity has to be a big ticket item because we cannot transform the portfolio by small ticket transactions. And the last one, as I mentioned, is investing into the future value of this portfolio by investing into venture capital start-ups, and basically being on the forefront of emerging new technologies. So net-net, I'll just repeat our vision again from pure cement to building materials, from local to glocal, and from gray to green. Where do we want to take this under this vision? As of today, our revenues are about 4% to 5% FX-based revenue. It's not bad, but we want to make this higher, take it at least 6% to 7%. As of today, about 20% of our revenues come from our international operations. We want to make this definitely higher. And maybe more importantly, only 2% of our revenues come from non-cement today, definitely, we want to increase that with the transformation pillar I just explained. And at the end, we want to achieve a diversified and sustainable product portfolio. We really believe in this plan our main shareholders from Sabanci Board believes in this plan. We have a hard-working team day in, day out, actually focusing on this plan and working on initiatives to achieve this plan and I certainly believe that we will be able to achieve this in the next -- in the coming years, basically. So with that, I want to finish my presentation. And thank you again for everyone to join. And I'll give the word to Sule for maybe Q&A session.

Thank you. Thank you, Burak-bey. That brings us to the end of the presentation. Now we can start Q&A session. So we have a couple of questions on the line. Let me start with the first one. we observed that both Çimsa and Akçansa shifted their volumes from export to domestic market in 2023. Do you expect that it will continue in 2024 as well? Could we say that export volume levels will stay same in 2024?

Thank you, Sule and thank you -- It's a good question actually. I believe, yes, that is correct. We did shift both companies from export to domestic market in '23 because the growth and the demand in domestic market needed that shift basically, and we wanted to support our country rather than exporting. That, in our way, shows also the agility and flexibility of our companies by shifting from domestic -- from export to domestic. And if need be, we can shift again from domestic, if there is excess lower demand here. We can shift again to export. For '24, we expect the domestic demand, as I mentioned, around '24 levels. So stable demand, not too much growth because there are increasing rates. Investments are actually slowing down because macroeconomic policies are intentionally slowing down the economy to actually control inflation. Having said that, there are upsides as well to compensate such as the urban transformation activities, which might start actually in especially after the election. So we expect a stable demand and the export versus domestic composition, we expect more or less to be the same in 24 as well. However, as I said, we are agile and flexible. We can always shift from one to another depending on the need, depending on where we can create more value basically for all our stakeholders, including the -- including Turkey as well.

The second question is, what are your expectations in fuel and electricity prices in 2024? Is normalization observed in 2023 to continue and support margins in 2024 as well?

Thank you. Another good question. Yes, in '23 -- actually, we ended '22 at high levels. But throughout '23, we observed the fuel and energy costs to come down. For '24, we expect them to be around these levels because as long as China low demand and the impact on global trend continues. If China recovers, if somehow China shows a sudden recovery and starts to grow faster again, that the fuel and energy prices might start climbing up. However, that's not our base assumption. Our base assumption is that is that electricity as well as energy costs will remain around today's levels throughout '24.

The next question, is there any plan to merge Akçansa and Çimsa in the near future?

You know that both Akçansa and Çimsa have a totally different partnership structures, shareholder structures. They are both public companies. Akçansa is a very successful and a long-term joint venture with high direct materials. And they have different regions, different focus in a way. So at this point, in the short term, there are now such plans to merge these 2 companies.

Thank you Burak-bey, the next question is how do you make your projections about sustainable operating margins and operating income for the next 5 years as Sabanci Holding? Do you believe Sabanci section is going to provide to holding growing cash flows?

Orhun-bey is that a question to you or to me?

Either way...

Okay. So first of all, for the Building Materials Group, if you respond as Building Materials Group, our operating margins, if anything, we expect them to go higher because as we diversify our portfolio towards more sustainable products, which either are lower cost or demand and deserve a premium when we are selling on the market, that obviously has a positive impact on the bottom line and our profit margins. So we expect -- and as we diversify our portfolio also to more sustainable and high value-added products, what I call the commercialization of sustainability and innovation. We expect our profit and earnings margins to go to slightly go up as well along with that portfolio transformation. Maybe that I can give you the [ word ] here.

Sure. Thank you, Burak. I think we believe, first of all, the example you see in the building materials as far as the portfolio expectations going forward. I should give you an idea of what to expect across Sabanci portfolio as well. Here in the building materials, what we are talking about is 2 very successful companies, great domestic presence and operations, which they complement with exports, which is a sizable portion of their revenue. And today, we hope we have been able to tell a little bit about to you, as Burak was also explaining. On top of this base, we are providing new revenue streams for these businesses in niche value-added areas, growth outside of Turkey and in many different ways. Now -- and when we talk about -- just to make sure, when Burak was talking about ESG or sustainability to be at the heart of our decision-making for us, at least from a financial point of view, this is ensuring our portfolio performance, profitability and value performance going forward because our investments there, we believe, is going to mitigate any potential incremental costs we may encounter as we go in the next 3, 5, 7, 10 years. Now you can take this and implement it in other segments like energy business we have in a good base in Turkey with NSA and Energy and the generation business of Enerjisa Üretim. And now we're complementing it with revenue streams outside of Turkey as well. Take our industrial business, Brisa, Temsa, Skoda joint venture, these are great, let's say, Turkish based businesses with exports as well. And take Kordsa's business who is an avenue for growth, especially after the composite acquisition a few years back going forward. So the pattern is the same. We're looking at, obviously, sustainable growth of our profits and cash flow generation.

Thank you, Orhun-bey. The next question is, could you please explain about your actions on reducing carbon footprint?

Sure. [indiscernible]. Thank you very much for the questions. I've been waiting for this question actually because we are taking a good amount of actions almost on par, maybe even better in terms of the global cement players actually. So for any global cement player, for any cement player, there are really certain ways tools to reduce the carbon footprint, a, reducing the -- increasing the alternative fuel, meaning instead of coal and pet coke using bio-based fuels, b, renewable energy, as I mentioned, as we are doing. And c, reducing the clinker ratio and the cement we are producing, meaning releasing less CO2 by using less limestone basically in our product, but -- and we are doing all the steps and we are, especially on the low clinker products, we have come up, and we are almost the market leader in promoting and bringing to our customers low clinker ratio products. so that our CO2 footprint is reduced, not only ours, but overall for the ecosystem basically. And both of our companies made SBTI applications. And these SBTi Science Based Target Initiative applications basically sets the target to reduce the CO2 per cementitious material in line with the 1.5% global reduction target. And on top of that, obviously, so we are -- we can -- and any global, as I mentioned, cement player, after doing all this to reduce the CO2 of the cement we are producing. There's really a certain level you can come down to. Afterwards, it's really new technology, meaning carbon capturing, storage and utilization. So we are also working very hard as a group, not only Building Materials group, but as Sabanci Group, together with Industrials Group, Energy Group and Building Materials on carbon capturing projects and not only carbon capturing, but utilization as well because carbon capturing methodologies and technologies are already technically and commercially available. However, the problem is what you will do with that carbon you have captured and our country, unfortunately, is poor in terms of carbon storage sinks, natural carbon storage, depositories. So we have to utilize that. And that's what we are working on. How we can utilize that CO2? We will capture from our chimneys, from our kilns, such as in green hydrogen, for example. There are projects ongoing between our companies and NSA and there is -- and with the authorities as well in the Hydrogen Valley to utilize some of the CO2 that will be captured at our plants to produce green hydrogen. So these are basically all the steps, reduce the clinker ratio, increase the alternate-fuel, increase the alternative raw materials, and the nirvana of it all is invest into carbon capturing and utilization technologies.

Thank you, Burak-bey. Next question is any color on the M&A pipeline for SBS?

Sure. I already mentioned the 3 areas: insulation, roofing solutions and prefabrication that are as priority areas. But again, these are not just only the 3 limits. I mean if there are opportunities outside of areas we are more than happy, and we do look into those opportunities as well. And the other color maybe I can share is that we are looking for opportunities, mainly in Europe and U.S. We are looking for opportunities that are above a certain size such that they will have the capacity and capability to transform the portfolio in terms of contribution revenue as well as EBITDA contribution they will make. And so -- and first and foremost, they need to be in a sustainable building materials basically. So that we can diversify and balance in a way our portfolio. So these are the colors I can share maybe on the M&A pipeline. We do have all an existing pipeline. We do work with investment banks together to fill in the pipeline and make it a living and breathing, let's call it, pipeline, but it will be not appropriate to share any names at this point.

Next question is what will be the SBS contribution to Çimsa financials? And what will be the leverage after share purchase?

So the -- after we add -- after Çimsa starts consolidating SBS as which started actually as of Friday. We expect the earnings of Çimsa will go up around 25%, let's say, 25%, 30% up. And that will be the contribution of SBS. That's excluding the new investment we are making in the U.S. that's excluding the new [ judge ] calcium-aluminate cement capacity. This is just the existing businesses, existing assets. On top of that, obviously, we will get the U.S. grinder contribution, the new calcium-aluminate cement capacity contribution, et cetera. And when we look at the leverage projections, they are -- when we combine these 2 assets, or these 2 companies. On a consolidated fashion, the leverage ratio are still below acceptable levels. I guess I can share numbers are still below 2x EBITDA levels. which for us and for Sabanci Group as well acceptable levels, which still gives room to us to optimize our balance sheet basically.

We do not have any more questions. [Operator Instructions]. So it looks like we have come to the end of the Q&A part as well. Thank you. Thank you, everyone, for participating us today in Sabanci Holding Building Materials Day 2023. This day will be uploaded in Investor Relations website for your convenience. And of course, any follow-ups, you can contact the Investor Relations team. Thank you very much again. Have a good day.

Thank you very much.