Holcim AG (HOLN) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the conference call on the acquisition of Firestone Building Products. I am Alice, the Chorus Call operator. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Jan Jenisch, CEO. Please go ahead, sir.

Yes, good morning, everyone, and a very warm welcome to this maybe rather early and rather unexpected first call we are having this year. I'm very much excited to start off the year like this with such a transformational acquisition and very happy that you are all able to join this morning. First of all, I wish you all a very successful and rewarding 2021. And my big wish is that we will soon meet each other again in person, which is something I think we all missed very much in the past year, and I hope we can achieve that maybe after the next couple of months. All right. For now, let's talk about the acquisition of Firestone Building Products. That's a real milestone for us in transforming LafargeHolcim into a company with the most innovative and most sustainable building materials products for the future. I think I'm starting off today by -- let me tell you a little bit about Firestone Building Products and why flat roofing systems are so exciting. I think you all received our presentation already, and I'd like to start a bit. So we are -- I feel very fortunate to have the opportunity to partner with such an iconic company like Firestone Building Products. They are a leader in the U.S. market. They are the leader in the most attractive flat roofing systems, and they are the leader in systems selling, selling all those insulated roofs, solar roofs, cool roofs, green roofs. So they are really building the roofs for our future. The company size is significant with sales of $1.8 billion, almost 90% in the U.S., which I think is great. The leader in roofing systems in the #1 building materials market of the world which is the USA. A healthy company, you will see the margins, especially the EBIT margins already at 12% to 13%, but certainly a lot of potential to further increase, but we are buying a very solid business here for future growth and future margins. So again, very, very happy to do that. If you look then a little bit more in the details, they are the leader in system selling. This is something which just developed, I would say, over the course of the past 10 years where the customer is demanding not only a waterproofing membrane or waterproofing system, but they want to have the whole buildup of the roof from one company. So that means you start with the waterproofing membrane but then you also specify the whole insulation system and the whole buildup of the roof out of one hand. Here, Firestone is the leader, and you also see from the manufacturing footprint that we are also producing all these key components here for those roofing systems. So very exciting footprint. We have 15 state-of-the-art manufacturing facilities, was a personal highlight for me. Looking at the plants, they are state-of-the-art, I mean, a company run by Bridgestone. There are no shortcuts. They have the highest standard in manufacturing, in health and safety, and all the technology, so this was a very good finding we had from looking closer at the business during the last couple of weeks. If you -- and look at the trends in roofing or what innovation is ahead of us. Firestone is here leading the field. You have one exciting slide in your presentation, it's Slide 11, where you see how Firestone is making urban areas and megacities more sustainable. They are really at the forefront of sustainability. So you see here from the green roofs, which are really making big progress basically in all the cities of the world. People want not to have boring roofs. They want to have green roofs. And we continue -- we have cooler roofs where the roof can reflect the sun to keep the influence of the sun away from the inside temperature and the energy control, the same for solar roofs, which in some cities, is already becoming a requirement for new roofs to have solar energy production on top. And then one of the biggest topic, I think, driving also the success of Firestone is the whole energy-efficient roofing, especially with these integrated insulation systems, which is a requirement by law in most of the markets already and this will be a huge driver also going forward. Then building roof is, of course, a process which can be improved further. Here, Firestone is the leader in self-adhered systems, where you don't even have to put any mechanical fastening anymore or any liquid applied adhesives, but the roof comes already or the membrane comes ready to be installed. So very exciting. And maybe the last strength I want to mention is all these changing weather conditions, which we experienced in the U.S. very much with all these hurricane and storm seasons which obviously get more and more intense. But also, in Europe, we feel it with this changing weather patterns, which basically need also better roofs going forward. With all this, please keep in mind that the roofing is the area of the house or of the building where you lose up to 60% of the energy. And this is a key area to be taken care of going into the future, and here very proud to have Firestone already on top of all those trends. So I think, in summary, again, I feel very fortunate to have the opportunity to have such an iconic company joining us. This is something normally not for sale, and we are very lucky here to have the opportunity here to welcome Firestone Building Products in our group. I talked about -- we have a company has leading innovation. We have 3 technology centers. We have the most patents in the industry. And all this, you can expect to continue here or to accelerate with full speed. Very good to see that they already have 60% of their sales in repair and refurbishment, a market very resilient, and we see it during all those crisis that this is a very stable market, so very happy here to come up with more exciting profile also for us here to focus more on repair and refurbishment. The last thing maybe to say about Firestone, they are technology leader, which is acknowledged by the customers, so you see in the presentation a few pictures from Apple to Nike, and we are the most preferred brand by all those big companies who like to roof their retail outlets or their warehouses or all these booming data centers or booming logistics centers of Amazon and the likes. They want to be roofed by the best roofing system supplier, Firestone. So very exciting. And you have seen that the flat roofing market will grow above market. Because basically, the urbanization is built with flat roofs. And then on top of that, the technology of choice are those single ply materials, especially the EPDM membrane and the TPO membrane of Firestone. So we have an above-market growth here organically. This is then also the way we go forward. We will, I think, now do everything to support the management team of Firestone with our own footprint now to accelerate the growth story. We have still a lot to do in the U.S. market. We are far away from having the right size. You saw the total flat roofing market is $50 billion globally and has a much more significant potential also in the U.S. So very excited here to continue to grow in the U.S. Then, of course, we have a great opportunity here to accelerate the expansion in Europe with the LafargeHolcim footprint in all the key markets, I think we can support here a lot of smart, organic investments but also some bolt-on acquisitions here to multiply our sales and our market position in Europe. I think the same we will do in Latin America where we have future opportunities. We have 2,300 Disensa retail stores, with more than 3,000 SKUs already. This is the stores, the preferred stores for smaller house builders and craftsmen. And this is, by the way, growing very much. We are opening a new Disensa store about every second day of the year. So this is a very dynamic growth story. And here, we are very happy now to introduce Firestone products. Here, especially the liquid applied membranes will be a hot seller for the Latin American market. So the acquisition is really -- is a growth story. Also, in the U.S., you imagine we are now suddenly having a $6 billion business in the most attractive U.S. market, and you see the profile, what a fantastic move we make now towards solutions and products closer to the customer as now this business segment will account already for more than 1/3 of our sales in the U.S. market, and this is really very exciting for us here going forward. We have a lot of complementary opportunities in the distribution channels. As you know, we are the market leader in cement and strong in concrete in the U.S., and now we are meeting the #1 player in the roofing system. So very attractive, and we have quite some synergies here in sharing our distribution channels going forward here. We have more opportunities for specification selling. Firestone, of course, is historically stronger than us in specifying big infrastructure projects, bigger buildings, but we are also catching up. And I think together, we will have quite an exciting future here to talk to owners, talk to architects, talk to civil engineers and main contractors and make sure the building is perfectly specified from concrete up to the roof. We have -- so you can see I'm very excited about the growth synergies we are having in this new growth platform of roofing systems. And it also goes well, I think, on the footprint side, so we have quite significant cost synergies with this. Also, Firestone is a very -- has a big footprint in many locations, a lot of distribution, logistics. And here, we will also have quite some good synergies joining forces from the back office to optimization of logistics and procurement, which looks very, very exciting to me. I think with all of this, again, it's fantastic to start the new year like this. We have a milestone in the transformation of LafargeHolcim on our way to be the global leader in innovative and sustainable building materials and solutions. Very -- we have this new growth innovation platform. We want to become the global leader in flat roofing systems, which I think is very realistic. We'll see in the near future very smart organic investments we want to put into the business. And as obviously, it's a fragmented market segment still, so we will have opportunities here for further consolidation, and we are ready to do that. On the environmental side, very exciting to see while Firestone is at the forefront of sustainability. LafargeHolcim is also at the forefront of sustainability with our commitment to Net Zero. And I think together, this is really a perfect fit, and I'm very excited here with the new colleagues to start also innovating the next building materials for the future here to become here even stronger and define our leadership. I think with this, I really want to start to give you a little bit more details here on Firestone and how exciting and attractive the business is, and I think you have probably plenty of questions and comments. So I'm very happy now to start the Q&A session. And we have enough time -- friends, so we have enough time to talk today, but I appreciate if you maybe limit to 2 questions at a time and you can always come back. And also, of course, Investor Relation team, myself, the CFO, we are fully available for you also later today and in the days to come because I think we need to talk about this and explain it and discuss whatever comment or question you have. So let's start Q&A. Happy to have your questions.

The first question comes from the line of Paul Roger with Exane.

Happy New Year. Exciting start to 2021. Yes. Okay. So just 2 questions then. I think the first one, looking at Firestone's profitability, the $270 million figure, I mean, you obviously mentioned that's a sort of 12% to 13% EBIT margin. And I'm just trying to understand really how depressed or not that is. And in particular, whether it benefited from any cost tailwinds last year or maybe even some costs that were allocated to the Bridgestone group. So any commentary on the sustainability of that EBIT margin pre-synergies would be helpful. And I think the second one would be on return on capital. If I'm doing the math correctly, I think this implies a 7% return including synergies. Do you agree with that calculation? And how much further do you think you can get that up? Or is this really a growth rather than return story?

Right. Paul, thank you. Good to have you. Also, Happy New Year to you. Yes, to your questions, I think, first of all, I'm very happy to find this business in such a solid condition, right? So you're saying we have $270 million EBITDA, which is maybe not fully exciting at this point. On the other hand, we have a very strong EBIT as this business is not very capital-intense, right? So we rather look at the EBIT, which is already at $230 million. Now going forward, we can add the $110 million of synergies to that, and this is going to happen within the next 2 years already. So you are right. We are seeing quite some potential to increase the margins here. While, of course, the focus is also to grow the business to be market leader in this flat roofing segment, which is quite a step to do. We are -- while we are in the U.S., the leader, we are globally #4. So we have quite some tasks to do here to multiply the business to be the true leader globally. So that's from the -- I think synergy margin side, you can imagine, we are quite optimistic that we can achieve the next level. I think, Geraldine, do you want to take the question on the return on capital?

Yes. I think, Paul, you need to add a bit of synergies on the tax as well. You can imagine we have structured the acquisition in such a way that we can benefit from full deduction of the financial interest and also of the goodwill in the U.S., which will be amortized for tax purposes. So all in all, we are having all the math for you to prove that we are going to be above 8%.

The next question comes from the line of Elodie Rall with JPMorgan.

Jan and Geraldine, Happy New Year, first of all, and congrats on the transaction. So my 2 questions will be, therefore, first of all, could you give us a little bit of background on your involvement in the transaction, the backdrop -- the background, given that we are aware the transaction was previously expected to close earlier and you didn't seem to be on the first front in the transaction. So could you explain to us a little bit how you got involved in Firestone? And my second question would be on Slide '21 on the synergies. I mean you gave a lot of reasons there on revenues and costs and the synergies you're targeting are quite material, given the EBITDA of Firestone. If you were to give us like the main 2 sources of synergies, like, which one would there be? Like, it would be helpful to understand a little bit the breakdown between all the synergies listed here in revenues and costs to have a better understanding for that first sight, roofing and cement? I didn't think there was a lot of synergies, to be honest, that would be helpful. And within that question, do we expect restructuring costs for 2021?

Cool. Hey, Elodie, great to hear you so early in the year, and also Happy New Year to you. On the process a bid this involvement, yes, that was quite an intense process. I actually didn't think we can sign so soon, considering the COVID-19 situation and all that, but it went very smooth. Also, to say, Bridgestone has done a fantastic job to work together with us. So we didn't expect it to close so fast. We were then basically talking with them on a daily basis, over Christmas and New Year, which is not ideal, but maybe in a COVID-19 year, it gives you a bit of excitement and a bit of other things to do as we are, more or less, we’re all sitting at home. But it was a very intense process, very properly due diligence from us. We have -- you have to imagine, we were visiting all the sites, which was challenging. We were fortunate here. We have a strong U.S. team, so we could rely on them also to make sure we can make this in this challenging times. So this all went very well, and I have to say also in very good cooperation with Bridgestone. You can see a bit here the background also with the joint media release we did that this is really a very good handover, which is planned to take -- to happen here. On the synergy side, I think I'm more excited about -- so when you look at the chart '21, you mentioned, we have revenue and cost synergies. I'm more -- and they are about 50-50 at this point. I think I'm much more excited about the growth opportunities. This -- I think, the cost side, it will come very automatically here on the synergy side, maybe also worth to mention that the business is -- while it is a standalone, there's certain carve-out for back-office functions, and here, we will get rather very lean resources. So we actually we have no plans to restructure or no need here. There will be no layoffs. We will fully take over the Firestone employees, and we will get a very lean backbone. So we actually have to, most likely, use some of the LafargeHolcim existing resources to run the business, which is a great position to start. So to answer your question, the costs will come very naturally. Also here we have also fortunate that the Firestone management team will fully stay on board, and they are also excited about the opportunity. You can read the leader of the business, Taylor is also being quote in the press release, and we are working now hand-in-hand to set up the business for the future. No restructuring. We will stay in Nashville for the headquarter. And again, it's a lean carve-out, so a very good starting point.

The next question comes from the line of Lars Kjellberg with Crédit Suisse.

Happy New Year to all of you. So 2 questions. Jan, you just called out the excitement comes really on the growth prospects, and you seem to have identified multiple opportunities there both in Europe and in Lat Am. Can you help us understand what sort of revenue opportunities you're seeing in the sort of near to medium term? And also, how much money you need to spend to get there? And the other question is about the market outlook itself. Appreciating 60% of this business is refurbishment and et cetera, but 40% is new build and the outlook for commercial roofing or commercial construction generally seems to be somewhat subdued. So how should we put that into context of the near to medium term growth opportunity for this business?

Super. Lars, Happy New Year. Great to have you with us this morning. So your first question on the revenue opportunities, well, as I mentioned, very exciting. We will -- we have existing network in Latin America, which we will now smartly feed with Firestone products. Of course, there's certain cost involved to make the right marketing and the right selection of products in all of this. But I think this is a normal cost of doing business. That looks very -- no big investments needed for Latin America. Europe might be a bit different. We have here big opportunities. Firestone has already established business, I think, USD 120 million, USD 130 million of sales, also with quite some iconic buildings. Here, we have also the advantage that we are the preferred supplier for certain key owners and they take us globally with their business. So very good starting point. What you can expect in Europe from us, we will have some smart organic investments. And then we will have some smart bolt-on acquisitions. And to say the least, the bolt-on acquisitions will have different multiples for the acquisition price, right? We play to be paid, I think, a fair price for Firestone Building Products, but the bolt-ons will be on a different level. So for Europe, you have to consider some CapEx, and we have to consider some money for bolt-ons, but obviously, we believe that has a very fast and very, very good payback terms. Market outlook, that's a very good question. We have good order books here. I mean we generally see the U.S. market is in a great condition, right? And going forward now, also with the new stimuli decision, which has just taken place earlier this week. I'm quite -- I'm very bullish on the U.S. market, I think will be great projects coming for infrastructure, but also for all these cities who need so much work, who need so much better living conditions and all these green solutions we are offering. So we see a very good project flow for Firestone in the U.S. and very excited to go through. We gave a small hint in the presentation. I think is somewhere on the last page or something where we talked about -- like, next year outlook that we expect actually a mid-single-digit organic growth for Firestone globally. Just to give some, I think, comfort that the business is running well.

The next question comes from the line of Martin Hüsler with ZKB.

Yes. [Foreign Language] to all of you. My 2 questions. First of all, I see it's only building roofing membranes. I was just wondering whether there might be in the future further applications such as, for example, for tunneling or if this is something completely different? And the second question is rather accounting one, have you already identified how much goodwill you will have through these acquisitions? And what intangibles you need to amortize in the future?

Martin, [Foreign Language] Yes. So first of all, we are excited that we have this leading technologies for the flat roofing systems. And so I think we have to focus on that application because it's a $50 billion market globally. So you are right, we can expand in other fields. But this market is significant size, so our #1 priority is now to become the leader for flat roofing systems globally, and that's a big task for us to do. And new ideas beyond, of course, we could go tunneling, of course, we could have the insulation and the waterproofing also for facades, for the building envelope, so that are very attractive opportunities. But I think for this year and next year, we will focus on roofing systems because it's such a significant potential we have. On the goodwill, I think it all looks good, but maybe Geraldine will give us some more background.

Sure. But then we will do the valuation exercise post-closing, so we have some time to do that. I think for the purpose of the computation, if this is what you need, you can take an average, an approximate 3% on the revenues to identify the purchase price allocation.

Okay. Just to understand this well, so 3% is amortizable substance or yearly?

Yes, exactly. Again, the exercise will be done in due course during 2021. If it's just for the purpose of doing estimates, I would recommend you take 3% on the revenue, as an estimate.

The next question comes from the line of Glynis Johnson with Jefferies.

Happy New Year from me too. My 2 questions really address trying to explore the business that you have brought. Just give us a little bit more background? I wonder if you can help us out with the 1 to 3 and the sort of 5 to 6 of the industry, just who are the competitors in there? And then just give us a little bit more about the breakdown of the business. How much is actually flat roofing systems and how much is just the membrane? I guess, I'm trying to get to some sort of idea as well about how much of your business is currently used by the smaller contractors, and therefore, it's easy to expand into Latin America? And how much is sort of the tunnel specification, the much larger contractors, and therefore, evolves, actually a slightly different way of trying to enter the market?

Yes. Thank you for the question. I had a bit of hard time to fully understand. I'll start with the last part of your questions. Because I could hear that well and then maybe someone can help me out with the first part. So you're asking about the route to market, so how the business are sold, that's a great question, and it's really a very dense network they are having. They are having, of course, direct sales, and then they have a significant part of the business is distribution sales to service all the smaller contractors. It's a very nice push-and-pull situation. As I mentioned before, we are very happy to have all these approvals from the large owners. And you see in the presentation all these fantastic buildings, which are roofed and protected by Firestone products. But at the same time, not to underestimate, there's a very dense network of smaller contractors, which appreciate maybe even more that they can have the cool system from Firestone. So not only the membrane but also the insulation and the whole installation systematic. So this is really good. So we have a very, I would say, sound route to market here for this business. Can someone help me with the first part of the question that was our competitors. Yes, competitors, you have one slide which we shared with you on the competition, where we showed the market size, and we are focusing on the flat roofing market with $50 billion of sales already. Also important to know, we expect 4% to 5% of growth for our line of business, which brings us already the next 5, 6 years to $65 billion market. So it's a good market to be in. On the competitor side, you'll see on Slide 16, market is still fragmented. Even you have big opportunities to set the same technology standards, products and systems globally. It's a fragmented market. We are currently #4 position with only 4% market share, and you see 3 companies globally ahead of us. I will not -- I can name one-to-one -- we can talk about names, but I don't like to talk about competition by name. So -- but it's a good situation, and we are trying now to move up here step-by-step over the next few years. Did that answer your questions?

I'll follow up online and try and push it a little bit harder in terms of getting those names.

The next question comes from the line of Arnaud Lehmann with Bank of America.

Happy New Year, Jan, Geraldine and the team. My first question is just really stepping back and trying to understand why you want to become the world leader in flat roof. Is it a question of opportunities because this business became available, and you believe you can make something out of it? I guess, my question is also around -- initially, it said, like, construction and chemicals was possibly a more natural fit for LafargeHolcim because there was -- there have been more kind of product synergies? So I guess, what's flat roof part of your potential product diversification plans? Or is it an opportunistic move because this large business became available? That's my first question. And my second question that maybe I'll just split into 2 very briefly: could you give us a split of Firestone between new residential and renovation? And also what are the key raw materials?

Yes. Happy New Year, and thanks for the question. We had, of course -- when we came out with the strategy 2022, about almost 3 years ago, we had the fourth segment officially started, solutions and products, with the clear target to be closer to the customer, have products more specified with more innovation, and that was always our target, and roofing was part of it. So we have -- our strategy [ paper ] has a couple of application fields which fit our business well, and roofing was among them. And then, of course, you need the right opportunity and you have to stick to your principles. So you are mentioning last year, we were in the process for a different business and -- which also -- the BSF business also had waterproofing as one key technology and application field. So -- but again, we didn't -- we couldn't come to a conclusion back then because we didn't see our financial dimensions being achieved. So now we are very excited to have this opportunity. Again, it's an iconic company. It's on the, I think, on the wish list for many of us, and that's great to do. You see from the fit side, you -- really, when you go into the specification of future infrastructure and buildings, you see how well concrete will go with roofing solutions on the sustainability side, both companies are at the forefront, and we will combine that to be stronger together. And the last comment, I think, is here that the attractivity of this flat roofing business is really tremendous from the market growth, but also from the technologies Firestone has to offer the full system with state-of-the-art membranes down to the full fixation and insulation of the roof. So we are very, very excited here on that part.

The next question comes from the line of Ahmed, Nabil...

Sorry, sorry, we have -- it was a question on residential or refurbishment?

Just the split between new res and renovation for Firestone and the key raw materials of the business, please?

Oh, yes, yes. Thank you. So the key raw materials, first, maybe we are using polymers from the chemical industry. We have the TPO, which is basically an advanced reinforced plastic material, which is one of the longest lasting roofing materials. And then we have the EPDM where Firestone is traditional innovator and leader in the field, which is a rubber-based technology. So we are having, I would say, the 2 leading roofing materials because they are the best for UV resistance, for long-lasting and gives you the most opportunities for the future of roofs compared to other roofing materials, which I don't want to name now high technology, but which are having less potential for the future. So very excited for this one. On your question, repair and refurbishment, already 60% of Firestone sales are from reroofing. And this is something which will just grow because basically every roof needs to be reroofed at some point, and now all the reroofing will be done usually at higher specifications. Because traditionally, the roof is not insulated. The roof is not having a solar roof. It's not a cool roof. So usually, reroofing offers you a lot of upselling opportunities. Also, here, lot of regulations will require insulation or even some cities have started to require green roofs or solar roofs. So very, very exciting, and this will grow. You can imagine, if you have a Firestone roof, the likelihood that you will reroof with Firestone, I think, is 70% to 80%. So we have very strong brand loyalty in that segment and very exciting here to continue to grow this business.

The next question comes from the line of Ahmed, Nabil with Barclays.

Happy New Year. Actually, the first one is actually following up on what Arnaud started to discuss. I mean it looks like a rather fragmented industry, which is, of course, exciting in terms of consolidation potential, but could you please talk a little bit about how disciplined this industry has been historically pricing-wise? I'm trying to get a sense, given the last share of materials and raw materials with some volatility, presumably on pricing on whether you've seen severe ups and downs margin-wise over the past few years? Or if the industry has a tendency to pass on cost deflation, inflation to customers in a relatively disciplined manner? So that would be my first question. The second one would be probably looking a little bit ahead and at the future. Should we assume that this is a large -- first large acquisition to digest, and therefore, we could see a pause in terms of M&A, time for you to digest that acquisition, generate the synergies? Or could we see LafargeHolcim doing another mid-size or large-size acquisition in other field? And if that's the case, how much you think you got in terms of financial firepower left for this year?

Super. Yes, yes. Thank you for the questions. I think when you look at pricing power, that's a very exciting business. I think, first of all, it has a very solid volume demand even in maybe more difficult times due to the large part being repair and refurbishment. And then maybe more important, it is big on system selling and on innovation and on branding. So you have a very solid set of differentiators in the business. And I think this has just started. I think the importance of the roof has just started to kick in the last 10 years with all these new requirements on saving energy, on having better buildings and to stop having 60% of the energy leaving the building through the roof. So this has just started. So I think going forward, we will see very strong margins from the business. When you look at the P&L, the EBIT is strong. It's very small capital-intense. So you can expect very strong returns. You think we gave some indication on the cash conversion which was at 66% for the last reporting, but we expect this to continue above 50% on the cash conversion side. So we have a very strong return. And you can imagine, whatever happens on the cost side, we will have a very good pricing going forward. Then I think on the M&A side, I'm very happy we can do the deal now and keeping our newly achieved financial performance, right? So we already confirm now that our net debt ratio will stay below 2x, yes, and we can confirm this already, and that's important to us. You will not see from us any deals in the future basically violating our financial discipline. So we will keep below 2x. I'm very optimistic on the cash flow for 2020, which we already also guided. And I think we're going to have a great 2021 on the cash flow side. So I think we will get quite some headroom to maneuver here on the M&A side. But I think, as you mentioned, this one now needs our proper attention, and we have a lot of jobs to do organically, but also for bolt-on acquisitions. So this is what we focus on now for this year and next year. And we will keep -- but most important message, we will keep our financial discipline. So we will not go above 2x of net debt. So we will not go into a situation where we don't achieve our cash conversion above 40%. So this you can always expect from us.

On the first question, sorry, did I understand it well that, actually, you were implying that there's been some margin volatility historically, but you expect that to change given the increased importance of roofing and all the factors you mentioned that are structural drivers for the business. Is that a fair understanding of what you said?

I think it's fair when you see also the new products being launched, the self-adhered roofs. Firestone also just launched a new high-fire resistant insulation board material. So we have really plenty in the pipeline to make us the choice of the owner, the choice of architects, civil engineers and the choice of the contractor. This is a business you want to be their preferred supplier. And I think Firestone has a strong history and with the megatrends for the flat roofing market, I think this will be even stronger going forward.

The next question comes from the line of Angelika Gruber with Tamedia.

Happy New Year from me as well. I would have 2 questions. The first one would be on the M&A process. Could you do a proper due diligence with travel restrictions around? Because it was a company from Europe buying a business in the U.S. from a seller from Japan. So how much of an issue was COVID at all? And the second one is a pretty basic one. Why is LafargeHolcim, as a cement company, buying a buildings material company because roofing systems seems more the core business of your former employer, Sika. So I'm wondering whether you want to transform LafargeHolcim a little bit into a second Sika?

Yes. Thank you. [Foreign Language] Yes, well, the M&A process was -- that was a challenge because when we started the process, maybe 3, 4 months ago, there was an ambitious time line, and I did not think it will happen so soon, but again, both sides did a very good job. We had -- Bridgestone was super coordinating with us and you could feel they were interested to find the right future and owner for the employees and the customers. They are not a business like maximizing something in the short term. So that was, I think, one important criteria. And then we were planning for all scenarios. So first of all, we have already a $4.5 billion business in the U.S. So you can imagine, we have -- it's actually our biggest single market at LafargeHolcim. So we had a full team from the U.S., working here on the due diligence. I thought the site visits might be the biggest challenge for us. But honestly, we visited all the sites. That went very well. To be honest with you, maybe it would be more difficult now. So I think we just did it in the right window. Basically, it happened in late November, early December, and we were lucky that was a window where free travel was possible, and we did all that because you cannot afford a shortcut in the due diligence. So we saw all the plants. We met all the people. The management team of Firestone is amazing. They were with us the whole time. So we had a very good due diligence. And I think I mentioned before, we have had a very intense Christmas and New Year time where the team basically was talking to each other on a daily basis, which I personally found exciting because sitting at home with -- in COVID-19 times, at least I had to video conference to look forward to once a day. So maybe that was not so bad. I don't know about the other team members if they felt the same, but we did this in a very positive and good manner. And again, we made a very thorough check and that was all, I think, all well done. I think on your second question, we are not trying to become a second Sika. That's not the goal of the company. We are the leading building materials company in the world. We said in our strategy that we want to go closer to the customer. So we want to have applications, products and systems which go closer to the customer. And then roofing systems are one of them. So we are very excited here to start this new global platform for us. When you look at our synergy slides, I think we have a lot of synergies together. We will specify future infrastructure, future buildings together, from concrete to the roofing systems to, I would say, most important areas for any building. So we have very positive synergies and very excited to execute here together with the new team members.

The next question comes from the line of Leonard Kehnscherper with Bloomberg.

Can you hear me?

We hear you well. Yes, please.

Great. So I apologize if you already answered this question earlier. It's about the debt financing plans. And did you already say when you might offer the bonds? And if it's going to be -- might sell the bonds and if it's going to be in dollars or euros?

Very good question. So first of all, I’m -- as we said before, we're very happy to be now in such a solid situation. We're going to have a super cash flow in 2020. And of course, we have a very smart CFO who has already financed the deal in a very smart way. I don't know how much she wants to talk about it, but I'm happy if you give some details how well you can finance it out of cash and a little bit financing activities, Geraldine?

Sure. So it's a traditional way. We have cash and dollars available to finance the deal. And you're right, we will -- we would probably issue bonds. And whether it's euro we swap in dollars or directly dollars will decide in due course.

That's good to know.

Sure.

But pleased to say, I mean, we don't need to finance the full consideration of $3.4 billion. Maybe we're going to have a financing of half of it and half of it comes from cash, which already is available in U.S. dollar, thanks to our very nice cash generation business in the U.S. So from the finance side, very solid. And of course, you can imagine, with also our solid credit rating, we are -- the financing is on very competitive rate. So very happy to be in this situation.

What's the cash part again? How big is it?

I would say, we can say 50-50, we will probably pay about half of cash and half will be financed.

The next question comes from the line of John Revill with Thomson Reuters.

It's just a follow-up on the Sika question. I was wondering, was this an area of the business that you're particularly interested in because of your experience at Sika, Jan? And how much of a competitor do you think Sika will be in the future for you guys? Will you be bigger than them with this acquisition in roofing or smaller? And how do you see the future going on this front?

Well, again, the target is not here to copy or make another Sika. These are 2 different companies. I think we are very happy to enter the roofing systems market. And to be fair, we are maybe competing a bit with Sika in that field, that's clear. We are #4 in the world in roofing systems. I think Sika is not there. So we have some competition, but Firestone is obviously is, I think, a bigger player in this roofing segment.

So it's not actually an attack on Sika or anything like that you'd say?

John, say again, sorry?

It's not like -- because your experience with Sika that in this building chemicals business. So was that -- did that kind of help -- did that give you some kind of background interest or information about this market that kind of helped you make this kind of seem attractive to you, would you say?

Well, John, I hope I helped the company. Whatever I do, I hope I can add to the company. However, I mean, you have to be ensured we have very strong teams at LafargeHolcim in the U.S., for the specific team also here in Switzerland. So this is not about myself. This is about LafargeHolcim making the right step, and we have very competent people. But I like your question that also I can add something sometimes.

The next question comes from the line of Cedar Ekblom with Morgan Stanley.

One housekeeping question. Are there any contingencies on the deal completing? There's nothing I've seen mentioned in the release on that. And then secondly, I'm really interested on the cross-selling opportunity. Firstly, as it relates to the regional opportunity and then as it relates to your concrete business. So on the regional opportunity, you talk about Europe and Lat Am being areas for growth. And obviously, this business looks underrepresented in that market. How easy would it be to sell these products through your existing distribution network? Do you have the right technical people involved? The right access to customers to actually seemingly bolt in the Firestone offering to your cement and aggregates business? So do you really need to build out a separate sales channel in Europe and in Lat Am? And then secondly, on the cross-selling opportunity, what percentage of your concrete and cement business today is actually going to roofing applications? How well represented are you in Firestone's market? And how easy is it to sell the system solution to a customer where you would bolt in the concrete product as well as obviously the roofing membrane, et cetera? Basically, want to unpack the growth upside from this acquisition, if any?

Yes, thank you for the question. I think, again, I'm very excited about the growth opportunities here for the business. Different things. Maybe the most easy to understand is Latin America. We have 2,300 retail outlets, they are called Disensa, very strong in the markets in Latin America. We have already 3,000 SKUs. We are selling already Firestone type of products in those outlets. So I think this will be a very exciting exercise here now to put together the right Firestone package for those 2,300 outlets, which by the way is a key growth driver for our very successful Latin American business. So we are -- I think at the moment, we have a rate of opening a new store every second day of the year. So we have huge plans to further expand. And in that store, we are selling cement, and we are selling waterproofing, liquid applied membranes and other products. So this is, I think, the -- I would say, the most straightforward sales synergy we have, so very, very exciting. When you go to the U.S. market, here, 2 market leaders are joining, right? We are the #1 in cement, they are the #1 in flat roofing systems. So this is very exciting now to see joining us. We have a lot in common for starting with sustainability, where in the U.S., the LEED certification is very important for new buildings, right? And we will together, and we are already together. We are leaders for ourselves, but now we can put together a much stronger LEEDs package going forward to be, again, the selected supplier from concrete to roofing. I think the people who are interested in this, which are the owners of the building, and then the creator with architects, civil engineers and the main contractors, they will be very excited here to talk to us here to have full system solutions. So quite a lot, I think we’ll go on in the U.S. with these 2 #1 positions joining. In Europe, it is very exciting. We will not -- now train our sales force to become roofing sales force here. But here, we have a good start. We have Firestone already has 2 manufacturing facilities in Europe. They have a training center and R&D center, and they have 4 sales offices. So it's a footprint which is, of course, not sufficient to be the leader, but it's a great starting point and great people we have there. And now we're going to build that up. And here, it helps, of course, with our footprint in Europe, where we are a leading building material company with close to $8 billion in sales and 21,000 employees in all our footprint with offices. So it will be much easier now to have an expansion plan for Firestone products going forward. So very exciting and then plus, of course, the bolt-ons. So I think on the synergy side, I'm very confident about the opportunities. For me, the trick will be to stay focused, right, not to go for too many ideas. We heard a question regarding if we go now into connected areas, from tunneling or facade or something, we have to be very careful and now really roll out this fantastic Firestone system within the LafargeHolcim world. Did I answer your question?

You did. I think it makes sense from a regional perspective. I'm just wondering how easy it is to bolt in your cement and concrete business into the roofing offering. But I suppose we'll have to see that over time. And then the other question was just on contingencies of the deal. Any competition issues or anything that we should be aware of for the deal to complete?

I think this is the beauty of the deal that, of course, I think there were many companies interested in Firestone and also many competitors interested, and then it would end up into a longer regulatory process, and we don't expect that. We are guiding now that we expect the closing already in the second quarter of the year. I expected rather at the beginning of the quarter than at the end.

Can you give us a number, just on the cross-selling thing, can you give us a number on how much of your cement or concrete actually goes to roofing applications in the U.S. at the moment? I don't know if that's a figure you could share. What's your roofing exposure...

I don't have a precise number for you right now. The trick will be here about the specification. So for us, the volume is one aspect, but I want to be the specifier of the most sustainable buildings and infrastructure projects in the future having the highest lead score, and that's our target and to combine all that. I don't have the number. We – let -- give us a bit of time maybe to give you a bit more granular view on this one, so you feel comfortable. But for now, it's a very exciting opportunity, and that's what we try to achieve.

The next question comes from the line of [ Manu Ren ] with Schweizer Radio SRF.

I have a question concerning the negotiations. Who started the negotiations? Was it your initiative? Or was it Bridgestone that came to you? And how long were the negotiations going? Second question is concerning Sika. Could you consider a merger with Sika or buying their flat roof business? Because it's obvious they are doing exactly the same in the flat roof systems. So there might be a cooperation in the European market? And my third question is about the synergies. You saying you're going closer to the customers, isn't it something completely different, selling cement and building roofs? I have seen in other companies, they also wanted to go closer to the customers and they failed in this point? And did you really think well about this point?

Okay. Thank you, and thank you for the questions. I think on the negotiation side, I commented already a little bit. We were also intense process, the last 3 to 4 months. Bridgestone, obviously, has started the process because they have also big plans for their tire and mobility business. So they -- I think they were not happy about it, but they see the need to let go their building products business as it was a stand-alone business within their tire and mobility service business, so they started. And then -- but again, we had a very positive interaction with Bridgestone and with the Firestone team, this was very positive and not always a normal case in such a process. So we -- that's why we also came to a very firm conclusion so early in the year, which is also a bit unusual to finish such a deal over Christmas and New Year. Actually, I have -- I cannot recall in my career that I ever did any deal between mid-December and mid-January. But that was -- is a positive sign. And you can see it from the press release that we have the right level of harmony and trust and that both parties are interested to find the best future for the business. Your Sika question. Well, again, it's 2 separate companies, and we're not trying to be the next Sika or something. We're just now developing our business as we define in our strategy to get closer to the customer. And this is something we have already started doing. When you look at our products the last 12 months with the launch of ECOPact, the most sustainable concrete product, that's something now which we are selling basically to the house owner. We are selling to the architect, we are selling to the cities who are the -- have the biggest interest to build greener, to build more sustainable. So we have already a big shift in our traditional business that we're not just supplying to a craftsman or building contractor. But our materials, they're becoming greener every day, and this is something which needs to be closer put at the heart of the customer because they are the ones who want to have a more sustainable and more greener buildings. So when you look at ECOPact, when you look at our latest cement, Susteno, already having 20% recycling material inside cement. These are all products you can see, we move to the customer, and that's going to be our future. And here, again, the roofing system perfectly fits. When you look at sustainability, we have both companies at the forefront to make from concrete to roofing, to make a greener future for all of us. So very excited to do that and that's going to be great. And as you mentioned, the proof is in the doing. So we have -- we are not celebrating at the moment. We are sitting together and having our execution plans, and then we go to work. Are we -- can you -- are we still on? Are you -- that’s -- is that answering your question?

My question was answered.

The next question comes from the line of Yuri Serov with Redburn.

I would like to probe you a bit more on your synergy promises or estimates rather. So you're saying that you have $110 million of synergies split about 50-50 to revenue and cost. The question was asked already, but I just want to understand it better. So on the cost side, when somebody asked you the question, how you're going to achieve the synergies. You started saying that you will get a very lean organization from the seller and your own people will start having to do some work and some back-office processes. Does that mean that they are actually transferring less cost to you than what they are using now and you will automatically get to higher EBITDA straight away? Or do you need to do anything there? I mean your chart talks about procurement, global sourcing, infrastructure and things like that as well. So how much of that is coming in. And so what are the main drivers of the cost synergies? And on the revenue side, you were just talking about expanding the business in Latin America and Europe and in the U.S. as well. When I look at the numbers, they suggest to me that to achieve your revenue synergy, you need to increase the sales of this business by 20% over the next 2 years. How realistic does that sound to you?

Yes. Thank you. The second part, I have to increase 20%, what number?

Well, if you achieve $110 million in cost synergies, 50% of that is revenue. So you get 50% benefit in your cost through increasing the revenue at 15% margin that you have, that means that your revenue needs to go up by about [ $360 million ], which is about 20% of today's sales over the period of 2 years. That's the mathematics that I get from this.

All right. I start with that question. That's actually not a bad math you are doing. And brings me to the point that we see some rather faster sales synergies, which, as we said, in Latin America, I think also in the U.S., we have some complementary opportunities in distribution channels. And then also in Europe, I think we're going to have some exciting rather fast synergies. So I think on the growth side, we are a bit conservative. So we put a very doable fast synergies in the plan. The real story in order to become the global leader of flat roofing systems is not in the $110 million synergies. That's on top of that. So to -- let's say, to double the business. So whatever exact number we probably going to talk to you about later this year, this is not here calculated. So I think your math is about correct for the synergies. We're going to have in the next 2 years in sales. And yes, that is on the sales side. I think on the cost side, you are also, I think, expecting here the right thing. So we see that the carve-out is lean, which normally is not the case. So I think it's a bit fortunate for us that we get, maybe, say, a lean headcount from the Bridgestone side, which gives us the opportunity for some shared services or shared FTE. We are not planning here to have any extra cost, but to have less cost. In addition to this, again, we are 2 market leaders in the U.S. in building materials. So quite extensive footprint. So you can imagine, on the logistics side, for example, I think Firestone can benefit a lot from LafargeHolcim as we're having much more logistic volumes and probably much better rate. So here, we have also an immediate cost synergy. But also on the procurement side, as mentioned we -- I think the teams will meet, and we're going to have some good opportunities here. So overall, I expect here to have a rather fast synergies on the cost side and not based on restructuring, but just based on sharing resources and sharing the knowledge.

And I'm sorry, can I actually just test you on this procurement question. The products that this business buys, the materials seem very different from what you buy for your traditional heavy side businesses. I mean, obviously, there are some auxiliary purchases that happen. Is that going to be the source of the synergies here?

Yes. Well, if you look at the procurement side, you could argue now that maybe 50% is not directly related, but that means that 50% is related starting from logistics to location management, starting to all the channel cost. And as we are both in building materials, we're talking about the same distribution channels. So we have a lot of synergies. And even on the pure raw material side, you will be surprised that we have certain minerals or other products, which we both buy. So again, I don't want to make a too rosy story, but we have quite a strong procurement overlap where we can have quite some impact.

The next question comes from the line of Tobias Woerner with Stifel Europe.

Yes. Can you hear me?

Yes, we hear you well.

Yes. Okay. Happy New Year to you all. Two questions, if I may. Number one, obviously, this is biased towards the U.S., and you want to expand over time internationally or globally and make this a leader, which is commendable. But at the same time, we're entering a weaker dollar period and dollar periods can last anywhere from 6 to 7 years, whether that's strength or weakness. And weakness tends to favor emerging markets, commodities, et cetera. So my first question is are you still intent on reducing your emerging market exposure now through such a deal? And what your long-term perspective of that is in context of that situation? And the second question is probably more for Geraldine, if I may, and it's around financials. You kindly show the breakdown of the various products globally in the presentation. I'd like to understand what it is within the business as well according to these lines roughly? And secondly, as a financial sub-question is the operating margin historically, what is the trough and what is the peak we have seen? How cyclical is it?

So first of all, I think it's exciting to make this acquisition in the U.S., which has been the most exciting market...

Excuse me, Jan, we can hardly hear you.

Oh, sorry, sorry, I was on mute. Can you -- it's better now?

Yes, much better.

Okay. Okay. Yes, Tobias. So first of all, I think it's very fortunate that we have this platform coming from the U.S. because simply, the U.S. market has been the best market for building materials in the past and will be the best markets for building materials when it comes to growth, innovation, but also when it comes to margins. So this is very, I think, fortunate and very excited also in these times where, I think, the U.S. has just launched the new stimulus program earlier this week. So we have a great timing now basically to add another 30% to our U.S. business. So really excited I think and you can see it from the new growth profile we have now in the U.S., how this is transforming our company. Regarding emerging markets, you can see we made some steps, right? We divested in Southeast Asia, which is emerging market. And I don't want to make a big outlook or target here. We look at the portfolio actively. You can expect we're doing 1, 2 more changes maybe. But I'm very happy that we are in a situation now where our financial position, I think, is so sound and will stay sound that we don't need to make any urgent divestments or any drastic action. So this is, I think, on that front. I hand over to Geraldine in 1 second, just on the margin side, you see this business properly run has very solid recurring margins due to the stable volumes and especially due to the very stable, resilient 60% of repair and refurbishment business. So you have very ongoing strong margins and good pricing power. Geraldine, you want to take over from here?

Yes, sure. Tobias, I think your question is a bit more how we were going to position this acquisition in our presentation, and that's fully part of the solutions and product segment, as Jan mentioned.

No, no, no. The question was in the presentation on Slide 15, you give the global market breakdown. And there is, by the various subproducts. But for us to better understand what subproducts you actually have in your -- in the new portfolio as a percentage, it would be good to get a sense there from you. How much are the various components of the systems within the $1.8 billion of revenues?

Okay. I see. Yes, we'll provide that later.

The next question comes from the line of Jean-Christophe Lefèvre-Moulenq with CIC Market Solutions.

Yes. [Foreign Language] I have 2 questions, if you allow me. First, moving again to Slides 15 and 16. Could we have maybe a breakdown between the 2 main business channels? First, the contracting and secondly, the distribution to craftsman and distribution in both in Europe and in the U.S. is a key? And how are your relationship with American distributors, mainly in terms of bargaining power. In U.S., I think the distribution is specialized by brand. Second issue, could we have maybe for Geraldine, in order of magnitude of the yearly investment or yearly CapEx in this new acquisition?

Yes. So on the route to market, we have a very balanced model here out of push and pull. So I would say the fair mix is maybe 50-50, 50% direct sales, 50% distribution sales. But not to forget that even the distribution sales is usually -- or half of them is triggered by pull, so by specifications. So we specify the building the roof and then the smaller craftsman maybe has to order the product via the distributor. So this is a very strong push and pull. And I think when I look a little bit about the roofing universe in the U.S., we have maybe a very strong position with the distributors, which is a good platform here to move ahead. But it's a very exciting push and pull. And I think Firestone did a great job with certifying the contractors, leading the market with innovation. And of course, bringing all the innovations from system selling to self-adhered membranes to really be the selected brand, no matter if it's ordered directly or if it's ordered through distributor. But for now, I think the fair assumption is something like 50-50, but it's a bit more granular behind that.

Okay. For the CapEx, please?

And on the Capex, Jean-Christophe, it's a low capital-intensive business. So we estimate between $40 million to $60 million a year.

The next question comes from the line of Remo Rosenau with Helvetische Bank.

Yes. Geraldine, Jan, within the due diligence of the acquisition, you must certainly determine the organic growth CAGR of Firestone over the -- in the past. Could you share this number with us, i.e., what kind of average organic growth Firestone achieved, let's say, over the last 10 years or so?

All right. I think it's such a business, I can -- it's a positive growth, of course. We have a structural growth in the segment. We had a good growth with the system selling in Firestone. But we don't want to share the due diligence finding. It's not a public information. We don't want to also hear -- violate our relationship with Bridgestone where we signed the confidentiality to not open up numbers, which are not in the public domain. So it was a positive situation. As you can see from the slide, it's a growing -- has been a growing market for the last 10 years, will be a growing market for the last 10 years, and Firestone is very actively participating in that. And sorry, I cannot give you your exact request, but we have to respect a bit the confidentiality we had to sign for the due diligence.

But you could at least confirm that the growth from -- I mean the company was only founded in 1980 and now has $1.8 billion sales, that most of the growth is achieved or a significant part of it was not only achieved by acquisitions but by organic growth. Can you confirm that?

Oh, of course, the Firestone company has the tradition of organic growth. I think it's also true for the mother company of Bridgestone, always committed to R&D, innovation, product, solutions and not to M&A. We had, however, we had a beautiful acquisition at Firestone about 3 years ago. They bought the Gaco business, which is liquid applied membrane. That's maybe the single most growing technology in this market, and they bought one of the leaders in the U.S. market in 2017. So that was one of the also technology-driven acquisitions, which I'm very happy they did. So you are right. This is mostly organic growth. And I think besides Gaco, there were 1, 2 other smaller acquisitions happening in the past 30 years or so.

Great. My second question, I think a bit earlier, you mentioned to expect 4% to 5% growth for Firestone going forward. Just to be clear, did this refer to organic growth only? Or did this number already include bolt-on acquisitions?

Yes, we wanted to give some comfort. So this is just the organic growth, what we see on the current project pipeline of Firestone. We believe it's solid to assume that Firestone organically will grow maybe mid-single digit. But this is without bolt-ons, and this is without the sale synergies which we laid out.

The next question comes from the line of Yassine Touahri with On Field Investment Research.

Yes. So 2 question on my side. Could you give us a split of nonresidential and residential construction for the business? And how confident are you in your outlook for organic revenue growth, given the latest leading [ data ] on the U.S. nonresidential construction? I think the IBI was at 46, which suggests that there might be a drop in nonresidential activity in the second part of 2021 or maybe in 2022. And the second question is, given your experience at Sika on waterproofing, what kind of return did you experience on organic CapEx and bolt-on acquisitions?

Yes. Great. That's a great question on the residential versus nonresidential. I think for this business, we like to look at it a bit differently because this business is about urban areas and cities. So when you look at flat roof systems, they are used in the cities, where basically everyone -- everything is flat roof to make the most efficient use of the space. While on the country side, you still have a lot of pitched roofs, right? So we don't -- so like the residential build rate that doesn't mean much for us for this business. We have to look at the development of the urban centers. And here, wow, we have super trends. I mean the global whole population growth is happening in the cities. So this whole urbanization trend that's driving our business. We have then all the new legislation regulations for greener roofs, greener buildings, more thermal insulation. All this is the mega trends, which is driving this business. So looking at the core market for us, the U.S., we are very confident because we focus on the big cities. So the residential build rate doesn't mean much for us in this business. We are interested to help to develop the cities.

And you cannot give us a broad split between nonresidential and residential? Or is it...

Honestly, I don't have that split for you today. And again, it doesn't mean much for us because even residential in city is usually nowadays flat roof. So we are excited about residential in cities. Outside of cities is not really our market. So that's what the focus is on. So we can get you the split, but it doesn't mean much. We are in the business of developing cities. And that's our key focus. Your second question is on waterproofing. You can see, I'm very excited about waterproofing roofing systems from the margins, from the growth perspective, so from the sustainability. So I think we have -- we're hitting all the right buttons here. That's all good. The margins are good. And your question was, I think, a little bit geared towards capital intensity, which obviously is in the right area. I think we provided the numbers for EBITDA and EBIT for the running year, which are very close together. So you can see that the depreciation level of Firestone at the moment is even below 2% of sales. I think this is a bit on the low side. So we are very excited here to maybe go to 3% and make sure we make the right investments, not only in bolt-ons, but I can also imagine we're going to build one new manufacturing facility every year now to make sure we feed the market demand for the business and still stay within a 3% depreciation threshold. So very exciting, I think, going forward, and that's what we will do.

Actually, the question was more on the return on capital employed on the new CapEx and on the bolt-on acquisition, which may be higher than the -- when you did some new -- when you build new facilities for waterproofing or when you make a bolt-on acquisition, what kind of return on capital employed did you get in the past? And what do you expect in the future?

This is, of course, this is on a very high level. This is always has to be double digit. I mentioned earlier, even bolt-ons, they will usually trade for lower multiples so that you already start with a return on capital employed, which is in line with the group and then plus synergies, it will be double digit. And organic investments usually are -- or have to be clearly double digit, and that's how we will execute.

The next question comes from the line of Gregor Kuglitsch with UBS.

I hope I'm kind of towards the end for probably your sanity sake, so Happy New Year. I've got 2 questions. The first one is just explore the synergy side, the calculation a little bit more. Maybe just a question for Geraldine, I think if you just simply multiply $3.4 billion times 8%, which I think is what you're talking about, but correct me if I'm wrong, or over 8, I guess. You're talking $270 million of sort of post-tax, NOPAT or whatever. Can you just walk us through how you gross that up? Is it what you're assuming in terms of -- I think you mentioned something around tax reduction on goodwill and stuff like that. So if you could just maybe give us some granularity on the math there? Then secondly, on the margin, and it's maybe bit related. I think there's only one competitor of yours that's listed, which is Carlisle and I think they make a margin -- EBITDA margin at a little bit over 20%. So I guess my question is, why do you think or why is Firestone lower than that? I mean I understand there was some management turnover and some operational issues in the past few years, I believe, at Firestone. So if you could just maybe walk us through what kind of is the bridge between that best-in-class margin and what Firestone produces and when do you think you can also get there?

Gregor, and let me just before Geraldine steps in. That's an interesting benchmark you're giving us for the U.S. and this is exactly what we are discussing. There is no structural reason. And for sure, no technology reason why we should not have the highest margin in the industry. Let me just say that, and this is something we work on now, and I think we will see here margin improvements going forward. Nevertheless, I mentioned before, this is a very solid, very sound business, we're the preferred roofing supplier for all key owners. So this is a rock solid, very well-run business from the products, from the systems, from the quality, and that's key for me. And then how we improve the margin now from X to Y, we have plans for that. But important is the starting point is rock solid.

Yes. So Gregor, if you do the -- well, first, you have to do the computation in 2023 and take some growth element into the profit. That, of course, is then accretive to our ROIC target of 8%. The tax benefit effectively have to be also factored in. Actually, if you do the computation already for 2021, and we have the uncertainty on the purchase price allocation. So if you take a $50 million, for instance, and you add the tax benefits, you're arriving to a NOPAT at $270 million, a little bit more. So you have the 8%.

To be clear, your NOPAT is after the PPA. So after the $50 million, which is essentially also what the tax break is, yes? Is that broadly the right way to think about it?

A little bit lower than $50 million. The tax benefit is lower than $50 million. But that's where you get -- but you have to add it, yes.

The next question comes from the line of Arnaud Pinatel with On Field Investment Research.

Yes. I will have just one. In 1997, Lafarge acquired Redland. And part of the failure of this acquisition was the fact that concrete products, concrete pipes were commoditized. When we had the remarks last -- I think it was Tuesday about LafargeHolcim potentially acquiring Firestone. We had several pushbacks from clients telling us that a lot of this business is commoditized based on what the Japanese analysts were mentioning. I'm not very familiar with Firestone. So I would like you to -- if you can explain to us what percentage of the sales of Firestone are -- could be considered as commodity products and what is -- what I will call value-added systems and the ones that can make this acquisition a success?

Yes, yes. Thank you. You are correct. I think Lafarge was operating a business in roofing, which is completely different from this business. This was a business based on shingle and tiles mainly for pitched roofs. So we are talking about commodity technology back then, and that's even more commodity nowadays. That's why I think it's so important to realize here the future of roofing systems with flat roofs and with all this state-of-the-art and new innovations. And let's say this, I think that Firestone has no commodities. They have specified systems, and you can see throughout the presentations from their systems, if it's for solar roofs, for insulated roofs and the all system selling approach is that's a totally different area than this old business you were referring to. So there's no overlap to that and then the future is flat. The future is green and the future is insulated. This is what we do now with the Firestone flat roof systems.

Let me ask it differently. When I look at Slide 16, when I look at the global market for flat roofing systems that you are providing by technology, would you consider that Firestone has more or less the same breakdown as the one of the global market?

Yes, that's a great question. That's a great question. So basically, we are not -- we have one manufacturing facility for bituminous membranes only. That's not really our core product. And if you look at the innovation or the movement in the industry, you will see they go from bituminous or asphalt to single ply technologies so to the EPDM and TPO. So we have it in the range, but this is a small part of our sales. And we are focusing on liquid applied membranes and the single ply membranes and the insulation and then the smart assembly components. So that's so we are -- yes?

Sorry, sorry, I don't want to interrupt you.

Yes. So this is a bit our mix. So our mix will be different. Bituminous will be a very small part of our sales, and we are not targeting to grow that part. Instead, we want to transform the customer from bituminous to single ply and to liquid applied membranes.

Okay. So there is a reserve of market share for Firestone, if you are able to replace within the global market, the bituminous membrane by the solution developed Firestone. So you can gain market share whatever the underlying market growth is, is it a fair assumption?

Yes. You see that, I think, a bit on Chart 17, where we differentiated between the roofing market and the flat roofing systems and then the single ply roofing systems where Firestone is the leader. And here, we try to show that this is really the most growing market or technology within these flat roofing systems.

The next question comes from the line of Vora, Ukti with Deutsche Bank.

Just one question from me. I wanted to ask if you guys are considering issuing a hybrid bond?

Sorry. Yes. Thank you. I'll give this question to Geraldine who is expert in hybrid bonds, green bonds and whatever is hot in the bond market.

No, we do not intend to issue a hybrid bond. We don't need. It will be a vanilla one.

And again, I want to really stress here, we have achieved already end of 2019, all our new parameters on the strong balance sheet. And this is what we continue to look out. That's also why I'm very pleased that even we probably financed only 50% of the deal through intermediate and then maybe a bond, and half of it comes straightforward from cash. And if I look at the latest cash numbers for 2020, maybe we even do a bit better. So very solid financial side here for this deal. And just maybe for other questions, we don't intend to do anything with equity. So there will be no hybrid bond, as Geraldine said, we also will have, at the moment, we plan for a straightforward cash dividend, so you don't have to expect any equity financing from us in the future.

The next question comes from the line of Sven Edelfelt with ODDO BHF.

Can you hear me?

Yes. We hear you well.

Sorry about that. Happy New Year to all of you. Two follow-up questions. I wanted to have more information on the plant cost. You bought Firestone for 1.9x revenue, obviously, for a greenfield, it should be lower than that. Can you give us an indication of the money you should invest to get $1 of revenues. That's the first question. And the second one is a follow-up on your exposure to advanced plastic obviously, it should be sensible to oil price. Does that mean if oil price goes up 10%, your cost related to plastic goes up 10%. And can you tell us how much these costs represent in terms of revenue of Firestone?

Yes. Thank you for the question. So obviously, this is a low capital-intense business, meaning that the value of the business is in the technology, the product, systems, all the people in the lab we have, all the specifiers we have and the brand we have and the trust by the customer. So that's the value of the business. On the manufacturing side, fortunately, that's not that heavy. Nevertheless, we have one of the -- maybe the best footprint in the industry with 50 manufacturing facilities, which is excellent and especially also having 8 insulation [ cost ] factories that I think industry leading and I'm very happy that Firestone has set the right priorities here 10 years ago to become the leading system supplier of -- sorry, sorry, I was a bit of mute. I hope you -- could you hear me?

Yes, it was fine for me.

Okay. Super. So very happy that Firestone made wise decisions in the last 10 years to build up that integrated insulating system, which is now industry-leading and will be very value-creating for us also going forward. So on the factory side, we have already now -- we talked about the investments before that, at the moment, we are on a depreciation level of less than 2% of sales. I think in our plan going forward, we allow 3%. So basically, in order to be able to build a new plant maybe every year even because this is possible in that type of segment and technology. So I think a very comfortable position. On your oil price question, we have to see that the products, let's say, the alternative solutions for roofing, let's say, asphalt, they are more depending on the crude oil price or on the upstream than we are. So our products are, I would say, more independent from the oil price. And as I think explained before, we have a very solid set of value creators, giving us the pricing power to adjust the pricing where it needs to be.

The last question for today comes from the line of Mike Betts with Data Based Analysis.

My question relates to -- I think it's Slide 15 and the 39% of the market globally, that's in Asia Pacific. We've not touched, I don't think on it at all on the call. And I'm just wondering, presumably, that's mainly China, Firestone is not there. And I just wonder, is that the basic bitumen felt market there? Is it a market at all for you or for Firestone to be able to go at in Asia Pacific? Question one. And question two, if it is mainly China and no quality bitumen felt, are there any kind of threat in terms of the Chinese companies growing globally?

Mike, yes. Thank you. That's a great question on the country focus. So yes, I think when you look at Asia Pacific, of course, there's -- the biggest part is China, but not also forget about Japan and about India. So I think we want to keep our priorities straight. It's a $50 billion buyer market overall, and it's growing at 4% to 5% for us. So we don't want to make the mistake now to make any step into unchartered territories. So we might come up with a plan for India, but not this year. Maybe that's something for next year because we're going to stick to Europe, North America and Latin America, I think, for the immediate future to keep our priorities straight. When you look at the competition, that's a good question. You will see that we are now really competing at the forefront of innovation and sustainability, which is until now driven by western companies. Also the way we are embedded in those markets is -- there is, at the moment, no competition from China. And due to this embeddedness from the push/pull distribution channels, innovation, local regulations, it's not easy to enter for an outsider. So again, we are always respectful and paranoid about any competition, but I think we are in a good territory here from that perspective. All right. Friends, was exciting. I think we are -- that was the last question for this meeting. Again, I'm very grateful you could all join. Thank you for that. That's a great start of the year. I heard a lot of reports that 2021 might be a great year for M&A. And I'm a bit proud that we maybe have started that to come through and especially under the circumstances. Again, we are very proud to be now with this new iconic company, Firestone Building Products. Thanks very much for joining. Again, we are fully available whenever you need to talk to us the next days, please do so. We are excited to share and discuss. By then, again, Happy New Year to all of you. And hopefully, we can also meet personally later this year. Have a great Thursday, and bye-bye.

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