Holcim AG (HOLN) Earnings Call Transcript & Summary

Good morning, everyone, and a warm welcome to our full year results presentation of Holcim. I I'm here in our conference room at Holcim with our CFO, Geraldine Picaud, and we are very excited to present some more details on our year-end closing, also on the outlook. And then, of course, to have your questions and comments. Before I start with the highlights, I think I would like to convey that our sympathy and our hearts go to the Ukraine this morning, with everything what's happening there since yesterday morning. I think our sympathy is with Ukraine and the people and even that Holcim has no operations there, I think we are all concerned and follow up very closely on the next developments. And I'm sure we're going to talk maybe in a bit with more background later in the QA session. For now, I would like to start to talk a bit about the results, the highlights and especially about the progress we were making with our strategy with building up our new segment solutions and products and also our portfolio transformation. 2021 was a record year. We were able to do everything we promised in our strategy 2022. And I think we achieved fantastic results throughout the year, with high growth level going back even beyond the precrisis level in Swiss francs, then high EBIT growth of more than 25% and also then achieve new records on the profitability, earnings per share reaching CHF 3.98. Record return on invested capital of 8.9% and for the third consecutive year our cash flow which is above CHF 3 billion and also representing a new record for the year at CHF 3.26 billion. And while we made quite a couple of important acquisitions, thanks to the cash flow and the good finance management, we maintained our debt leverage at 1.4x, which gives us the right base now to do the next steps in our new Strategy 2025. Let me go into some details on the strategy side. And I think, first, I want to share with you the targets now. We achieved 1 year in advance. You see this is what we promised to you in March 2018 to put the company on a profitable growth trajectory. This is what we have done. We have grown the business. and we achieved the overproportional growth in EBIT. Then we promised you we're going to fix the cash conversion above 40%. Now it looks like that our new level will be more around 50% cash conversion and very happy to have now for the third consecutive year such strong cash flows and this is something now we are confident to deliver to you also in the years to come. We fixed the return on invested capital and that was the topic, if you remember back and very happy now, we are well above our capital cost and that's also well achieved. And then we also promised you that we're going to deleverage the company to lower debt levels and also this we delivered here in 1 year in advance. So I'm very happy and that's a strong foundation now to go into the next chapter of growth for Holcim. That's why we call our new Strategy 2025 accelerating green growth. When we look at the strategic direction we're going take here, we want to build up our 4 segment solutions and products and last 12 months once we made some super inroads here. First, with the acquisition of Firestone, then following up on Malarkey, another company focusing on roofing. Only these 2 acquisitions, they will already deliver $3 billion of sales in this current business here. So we're very happy that we not only found the right targets, but we really hit the ground running with double-digit growth rates from day 1. We then entered into a second technology platform of [ said ] mortars insulation, with the French PRB group and then also followed up with the Belgium PTB group. So also here, a very promising field where we talk also about renovation, energy efficiency, sustainability and double-digit growth rates. So very excited we could enter. You see here the first results already in the last year with only the 9 months of Firestone, we could already expand solutions and products. We almost doubled it and from 8% of group sales then to 13%. And of course now with the new acquisitions signed, we expect now that we are moving close to, I don't know, 20%, maybe already this year. And then the target for 2025 is 30% is within our reach, and we have more and many more targets we look at and we will here accelerate the expansion. You look a bit in the details. Roofing super exciting segment. Why is that? Because you have a lot of pricing, innovation power, you have growth. All the roofs are functional nowadays. They are insulated, they are solar roof, they are green roofs, huge demand for reroofing. That's where you want to be, especially in the markets of Europe and North America, you want to be in refurbishment and repair, and we have already with Firestone more than 60% of the sales is reroofing. And with Malarkey it's even at 90% of sales is reroofing compared to new buildings. So very exciting growth platform. We established growing like crazy, now. We expect a high double-digit growth for this year for these 2 companies, and I think we're going to have a very value-creative here element of our strategy. We have then the second platform, we established with the PRB Group. So they are into the sales, with with mortars, with insulation, very exciting, right in the sweet spot of renovating Europe to make housing more energy efficient. And also this one, we have full order books, many new products to come, and I'm very excited here to follow up. We made already the next acquisition that field in Belgium, the PTB Group and you can expect also here more to come from our side. A very positive second element of the Solutions & Products segment is that we were able to acquire the roofing companies with a key focus on the U.S. market. And the U.S. market is the single most attractive market for building materials with growth with attractive market for building materials with growth with different segmentations, a lot of pricing power. And you notice here that just within the last 2 acquisitions, we go now from $4 billion of sales in the U.S. to more than $7 billion in just one step. And you see also the portfolio, how we shift solutions and products is now already our largest business segment with more than 40% of our sales. So this is very rewarding for us and shows how much traction we have now with our strategy and with entering here Solutions & Products going into the future. We have on the M&A side. So I talked already about solutions and products with these 4 acquisitions kickstarting our ambition to become a leader in Solutions & Products. We are also very active on the bolt-ons. So all these valuable smaller companies in the local markets to strengthen our aggregates business to strengthen our ready-mix concrete business. And you see here, we made 12 transactions last year. This is I would say, a record number for us since we started with this bolt-on strategy. So a very rewarding acquisitions here in the local markets. Then you also see the divestments. We have signed a divestment for Brazil. We have already sold Northern Ireland, Zambia, Malawi and Indian Ocean, they are all closed. So you see here, we are active to get a bit lighter on emerging cement markets and transform Holcim into Solutions & Products, but also strengthen our aggregates and ready-mix concrete business into the mature markets, Europe and North America. So I'm very happy here. And for those of you who have been with us at the Capital Market Day, you could also see that we did very, I would say, value-accretive transactions. So we were -- we are divesting for good multiples, and we are actually acquiring for attractive multiples. Now sustainability is the next huge pillar for our strategy going forward. We make a lot of progress here. You have seen our target setting from net-zero targets to science-based target initiatives. And maybe, today, I want to share 2 areas which I'm the most excited about. The first one is the launch of our green product ranges, ECOPact, ECOPlanet and then the circular construction, which we are in the middle of making it a reality, and I want to share with you 2 more backgrounds here. First, on the global rollout out of ECOPact, our green concrete. We just started to launch it in 2020. Already now it's in all our key markets. So in the 24 biggest markets. ECOPact is a reality and already quite some traction. We sold more than 1 million cubic meters last year, which is more than 600 ready-mix trucks every single working day delivered to the customer. So quite a lot of traction. This will be ramped up now, and we set the target to be at 25% of concrete sales from the ECOPact green concrete range. So very happy. How we do this, it's very much appreciated by our customers, by the green city councils, by any company who has green procurement in place, and I'm very proud that our people are able here to follow up so fast now with the green solutions going forward. The second area I want to share with you is our scaling up of circular construction. This will be a huge part of Holcim's future. And it's actually already a huge part of Holcim today. We have, last year, recycled 54 million tonnes of waste. 54 million tonnes makes us in the top 3 of all waste recyclers in the world, and we do -- we use it as raw materials, alternative fuel. We use it into cement, into concrete, and one of the most exciting areas, we are taking construction and demolition waste and recycle it straight into new products. It's probably one of the easiest and best products to be recycled is concrete, is cementitious products, you can recycle 100%, and this is what we already do. So last year alone, we did 6.6 million tonnes of construction and demolition waste, which was recycled and put in back into our cementitious products. And this is simply more than 1,000 full truck loads every working day. So you see we are really scaling this up. We set ambitious targets. We want to be now in the next years doubling our -- the recycling of the waste. So while we already had a 17% growth just last year, we target that growth rate now going forward, and we want to reach 100 million tonnes of recycled waste as soon as possible. And that's going to be very exciting as a big part of the future of Holcim. We are scaling up everywhere. Is it in recycling centers, is it to put the waste back into the products and processes, and here, you can expect a lot from us going into the future. This was a of bit the highlights I wanted to share with you from record results to the progress we make in the strategy from sustainability, our 4 segment Solutions & Products to circular construction. And now I pass on to Geraldine, who gives us more details on numbers, results, but also on the regions.

Thank you, Jan, and good morning, ladies and gentlemen. I'm very pleased to share with you some more details on our achievements in 2021 and just not only with regards to the financials, but also the sustainability KPIs in view of our Strategy 2025, accelerating green growth. 2021 has been a record year and has been a year of strong growth. Our net sales were up by more than 11% on a like-for-like basis, driven by both volume and price rises. Also boosted by a strong pricing and cost control, our recurring EBIT grew overproportionally by close to 26% like-for-like. Our earnings per share before impairment and divestment followed the same trend, ending at CHF 3.98 per share. This is 30% above the level of 2020. And once again, we achieved a high cash conversion at 50%. We generated CHF 3.3 billion of free cash flow, which is above the records, which were set the 2 preceding years. Let's move to the volumes. In cement, our volume grew by 5% like-for-like and all the regions contributed to this growth, with some countries recording an excellent performance, such as India, which benefited from a strong volume growth after the severe lockdowns of 2020, but also Latin America recorded an outstanding performance with key markets of Mexico, Argentina, Ecuador, all experiencing strong volume growth from infrastructure projects. Our aggregate business lines in volume grew by 3.9% and to be noted here the good performance of the U.K. and the high double-digit growth of China. Our ready-mix concrete business line grew by 7.3%, driven by the key markets of India, France and Mexico. Let's move on to our net sales. We are proud to report that we reached CHF 26.8 billion of net sales, up 16% compared to 2020 and above the level of 2019. If we look at the price -- at the scope effect to start with, the scope effect of almost CHF 1.6 billion here. This is mainly attributable to the 9 months of consolidation of Firestone Building Products that we acquired beginning of Q2 2021. But also all the bolt-on we have acquired during the last 12 months contributed to this positive impact. The like-for-like growth amounted to 11.3%, and this reflects the rises in prices and in volumes, the pricing impact account for 5.2% the volume impact accounts for 5.1%. Finally, the currency translation was negative and that was mainly due to the Argentinian peso and the Nigerian naira, it accounts for minus 2.2%. Let's go to the profitability. We here have also recorded a record growth and a record level of EBIT. In total, our recurring EBIT grew by 25.5% and it was driven by an impressive like-for-like growth of 25.7%, representing CHF 943 million. The volume performance of CHF 603 million is the first contributor to this impressive result. Also reflecting the strong pricing, we have a price over cost that is positive for 2021 at CHF 317 million, a very solid result achieved despite an energy cost inflation of 24% throughout the 2021 year. The scope effect, you can see here of CHF 154 million represent a growth of 4.2% and it's mainly attributable to Firestone. And we have a negative ForEx impact of minus 4.4%, that is mainly attributable to the Argentinian peso. If we look at our performance across all business segments here, while you can see that all the business segments grew organically with an overproportional recurring EBIT growth and a positive price over cost for all business segments. Our net sales grew by 13.3%, and here you have a volume impact of 5% and an impressive strong pricing impact of 6.7%. Our Aggregates business line in volumes grew by 3.9% and the price impact accounted for 1% on average. On the ready-mix concrete business line, we grew in volume by 7.3%. And here, the price increase accounted for 2.9%. And on our Solutions & Products, well with the recent acquisition of Firestone Building Products, the net sales of Solutions & Products represents actually 15% of the total group net sales in Q4 with the recent announced acquisition of PRB and Malarkey, this share is going to increase further as we embark on our Strategy 2025. If we look at the regions now, well, all the regions have expanded their margins, and I will now comment into more detail. Let's start with North America. North America had an outstanding performance in the year and in Q4, especially with a strong volume demand in Q4. That has been across all the business segment that was boosted by an expanding economy in the U.S. The strong pricing trends were also experienced in Q4 was noting that the price of the cost was positive in North America in Q4. And we look forward to another great year for the region here, as we can see, it's fully supported by a full order book and also with the pipelines -- the bolt-ons we have in our pipelines. If I go to Latin America, the region delivered a very strong performance here. The market demand as in previous quarters was boosted by residential and infrastructure projects. Additionally, we have added new production lines in Mexico and in Argentina, and we are continuing to roll out all the Gaco, Firestone product, the liquid applied membranes through the Disensa retail network. If we move on to Europe, Europe also delivered a very good set of results. And the demand has been strong in Europe for the year. Quite stronger in Western Europe, even stronger growth we've seen in Eastern Europe. We had a positive price over cost for the full year in Europe, which helped to contain the power inflation in Q4. We had a strong execution of our green CapEx going to also deliver good results in 2022 as well as the bolt-on pipeline that we're having, that's going to help to fuel growth. Let's now move on to Middle East and Africa. We had here also a solid set of results in Q4 and for the entire year. Solid and good market trends were seen in Nigeria and in Kenya for the Q4. Egypt saw a significant price improvement despite being impacted by the production quarters for cement output. The region achieved a positive price of a cost in Q4 on the back of a strong pricing. Let's now move on to APAC. APAC delivered a resilient set of results. In 2021, the volume grew across all business segments. We also achieved a positive pricing in the region, which helped to partially offset the cost inflation in Q4. Worth noting, in China, we experienced significant price hike of above 40% in Q4. Let's now look at the full P&L before impairment and capital gain or losses on our divestments. The recurring EBIT grew by 25%, representing CHF 936 million in total as I mentioned before. Then our restructuring litigation and other nonrecurring items grew by CHF 105 million due to a litigation one-off. We have continued to reduce our financial expenses despite the acquisition of Firestone. We have generated CHF 67 million of savings. Our effective tax rate has remained stable at 25%. And finally, the results of our subsidiaries with minority shareholders have improved, especially India. This is why the net income attributable to the noncontrolling interest have increased. Well, all in all, our earnings per share amounted to CHF 3.98 per share. This is a growth of 30% compared to 2020, which is over proportional to the EBIT growth. Let's go to the free cash flow. And here, we are super proud to report a record free cash flow of CHF 3.264 billion. This is 50% of the EBITDA. And effectively, the EBITDA, with the recovery in volume and the strong prices, has increased significantly. But this was mechanically offset by higher working capital and higher CapEx as the business activity rebounded. But worth noting that with regards to the working capital, actually, in terms of numbers of days, we've improved slightly compared to December 2020, showing that this is still an area of focus even as our markets return to growth. So we incurred a nonrecurring litigation item. We paid more tax due to there being higher taxable profits. And this was partially mitigated by reduced financial expenses. So all in all, a record free cash flow, CHF 14 million above the record of last year. As you can see here, this is a third consecutive year where we generate a free cash flow above CHF 3 billion. In total, we are above CHF 9.5 billion of free cash flow generated for the last 3 years. Let's go to the net debt. Our net debt is below CHF 10 billion. We have generated CHF 3.3 billion of free cash flow. We have spent CHF 3.4 billion in acquisitions, mainly Firestone and the bolt-ons. We have distributed close to CHF 1.4 billion of dividends, CHF 1.2 billion -- a little bit more than CHF 1.2 billion to the Holcim shareholders and CHF 0.1 billion to the minority shareholders of our controlled subsidiaries. If I go to the leverage here, well, we have maintained our leverage at 1.4. We've reached the same level as 2020. And this despite the acquisition of Firestone Building Product that leaves us with a very strong balance sheet that will allow us to continue our acquisitions. If I go to the return on invested capital, here, you can see that, in 2020, the continuous improvement has been temporarily stopped due to the crisis. But in 2021, we did a strong catch-up to 8.9%. Therefore, here, our target of the Strategy 2022 of 8% is significantly exceeded 1 year in advance. Following these excellent and record results, we are happy here to confirm that we will propose an increased dividend to the AGM of CHF 2.2 per share. It will be a cash dividend, fully paid out from the foreign contribution -- capital contribution reserve. And as you know, it will not be subject to Swiss withholding tax. And last but not least, let's go to our sustainability KPIs. Here, we have continues to improve and to remain the leader of our industry by improving here the footprint. Our CO2 have -- CO2 emitted per tonne have reduced by 1%. The increased effort that we made during 2021 in green CapEx will deliver even more results in 2022. The recycled waste has increased by 17%, which is above the cement production. And this is also demonstrating what we do in circular economy, which is fully embedded in our strategy. About fresh water consumption, actually, we have continued there with a 5% reduction of freshwater withdrawn. We are well on track to reach our 2025 target and our 2030 target. And last, but not least, we have significantly improved here the money we spent on social initiatives and social projects. With this, I hand over to Jan.

Thank you, Geraldine. We come to the outlook and to the guidance for this business year 2022. We are very confident about the year. This year, 2022, is about growing Holcim. We have good demand levels in all our key markets. So we expect very healthy growth in our traditional business. Then in addition, our expansion in Solutions & Products will show significant results by taking the acquisitions in, but also by double-digit growth rates here from this segment. So 2022 will be about growth, will be about further acceleration towards our sustainability targets. I'm very excited now to scale up our green product ranges, ECOPact, ECOPlanet and also making circular construction a reality. This will be a big part of the Holcim future here to build new with old, and we have everything in place to make this happen. We are also positive on the operating profit growth. We will see another increase in profit. At this early stage of the year, we cannot give a precise guidance on this. We also have cost inflation where we are confident we will balance them out like we did in 2021. But nevertheless, I think we have to wait here a little bit more until we give a more precise guidance, where we are giving a guidance already as of today is on the free cash flow. After 3 years of more than CHF 3 billion of free cash flow, we are confident that this is also the right level for this business here. So we are guiding that we will have a free cash flow of above CHF 3 billion also for 2022. I think with this, I'm excited to open the floor for your questions and comments.

[Operator Instructions] Please note that a recording of this webcast will be published on Holcim website. [Operator Instructions] The first question comes from the line of Elodie Rall with JPMorgan.

I have 2 questions, if I may. I'm sure we'll come back to the price cuts and volume discussion and all that. But since I was [indiscernible] the question, I just would like to have an update on Syria. If there is any news on your discussion ongoing with the DOJ? And second, I'd like to ask about your growth ambition in India because we've seen that ACC and Ambuja in their call last week, have plan to take capacities for each of the companies to 50 million tonnes in the next 3 years versus like 30-ish million tonne at the moment, respectively. So that implies like 35 million tonnes capacity addition over the next 3 years, which is really big. So I was a bit surprised by that. So if you could comment on your ambition in India.

Thank you, Elodie, and good morning to you. I start with the second question, and then, I think, Geraldine can complete your first question. Yes, you noticed in India, we are back on growth. We just are completing 2 new plants in India. We want to participate here in the market development. I think, in India, the forecast is that cementitious products will double over the next 12 years or so. And we are, as the #2 player, in a good position here to take also advantage. So we have now the first 2 new plants commissioned, and we will plan the next steps here how to participate in this market growth.

Yes, Elodie, so about your question on Syria. Of course, as you know, this is a legacy issue related to the alleged conduct of the Lafarge subsidiary in Syria prior to Holcim's merger with Lafarge in 2015. Of course, the alleged conduct, as you know, is in stark contrast with everything that Holcim stands for. Look, we are -- as disclosed in the annual report, discussions continue with DOJ concerning a potential resolution. But at this stage, as we speak, we cannot make an assessment as to the timing or as to the outcome of those discussions. We don't have any further comment.

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

Just want to focus in a bit on the Solutions business and specifically, Firestone. Of course, you have very strong growth. You're talking about double-digit and Malarkey may be the same. Can you comment anything about your profitability in that business, how that is progressing, if that is following? And if there are any meaningful synergies coming through that business? And of course, the obvious question, how do you think generally price over cost in 2022 over -- well, in 2022, which you were pretty good at neutralizing and actually slightly ahead in '21.

So we are very excited about the Firestone and the Malarkey business as it's growing from day 1. So that's fantastic to see. We will continue to grow. And on the other hand, we still have a lot of potential for margin improvement. We see that now where was last year was a challenging year as the raw materials we use for those roofing systems increased very sharply. So we had to also make the necessary adaptations in the pricing with a bit of delay. But now we see, in quarter 4 and going into this year, we have a significant margin improvement. And this is what we want to see from this business. We do not only want to see the double-digit growth, we also want to see an overproportional improvement in margins for both businesses. If you benchmark, and you can benchmark that with a little bit of available public data, you see that there is a very nice and attractive margin differential we are going after. So we're doing exactly what your question points to. We will have a very profitable growth in these new businesses. On price over cost, I think, first, we managed well last year, which was a challenge. We had high cost inflation starting already in May. So we had a year where we had a high number of price adaptations in our key markets, not only beginning of the year or something we were had to be very agile. And we also made sure that we start this year 2022 on the right pricing levels in our market. So I think we did a very good job and makes me confident that the further increased prices we see on energy, but maybe also on logistics and other areas will be covered from our side through cost mitigation, but also through pricing. That looks very promising here beginning of 2022.

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

Two questions, please. The first one, you put may just ask 1 and then next one after you answer. When I look at your Page 5, which shows your -- the pie chart of the future composition of the business. Obviously, you're planning to increase solutions and products to 30%. But if I look at the cement part, it shrinks quite a lot. Are you planning to sell cement assets? I know that you have sold cement assets in emerging markets, a few small ones in Africa and a bigger one in Brazil. But can we expect that Holcim will sell anything in core markets like in North America and Europe? Is that something that we should expect?

Serov, I think what you have seen from us, we have this 1 slide where you see the Solutions & Products, acquisitions, you see the bolt-ons and you see the divestments. You, of course, realize the divestments are basically in emerging cement markets. And I have no announcement to make today, but you see the portfolio was shifted in the last 3 years of divestments in emerging cement, and then we invest in Europe, Latin America and Europe. I would say these are our core regions, both for the bolt-on acquisitions in aggregates and concrete, but also, of course, for Solutions & Products. So you will see that shift doesn't necessarily mean we have now a big -- we didn't have a big sell-off of cement. We had very selected assets, and you can expect that from us also going forward. And the rest of the differential will also come from growth. We want to see Holcim grow, right? And this will be a year of growth here where we will be significantly higher in the net sales than in previous years. And you can see that also from our guidance, which we already lifted more than 6% of sales growth compared to our strategy where we talk about 3% to 5% growth.

Okay. So what I'm hearing from you is that we should not expect you to get to 30% of Solutions & products by actually selling down your cement assets. You made some disposals...

Yes. No, that's clear, Serov. We want to grow solutions and products. So we are very proud that you have seen last year, we almost doubled Solutions & Products. I think, this year, with the new acquisitions coming in, maybe it's realistic, we're going to reach around CHF 5 billion for this segment. And we're going to bring that segment somewhere to CHF 9 billion to CHF 10 billion. That's our target, yes.

CHF 9 billion to CHF 10 billion, you said?

Yes.

Next question, if I may. So other companies in the sector start off or proceeding with share buybacks, you can see that from pretty much everyone. What is your view on this?

I think, first of all, I'm a CEO for shareholders. So I -- we have a great focus on the shareholders. This is why it was also important for us now to have a -- to show that we also increased the dividend by 10% because we have all the financials and the development to do so. On the share buyback, I think maybe it's not -- obviously, we have not announced anything. I think it's maybe not the right time. We have a couple of interesting projects in the pipeline. And maybe, in the future, there will be a point if we are too successful in reducing the debt or reducing the leverage or bringing in high cash flows. So I don't exclude share buybacks for the future. Just, at the moment, I think the timing is -- we have some attractive opportunities we would like to pursue.

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

I've got a quick question on the green products. In the last quarter, you've seen quite a lot of your competitors pushing their green offering to customers. So I'd like to understand, are you seeing any competition in your core markets? And can you talk about then what your value proposition is for the customer, aside from the product just being low CO2 seemingly with more of these products available on the market. Basically trying to understand how you think you can retain that pricing premium in those products as they become more mainstream? And then just on the product itself, does it matter to the customer if the green credentials come from recycled demolition waste or blast furnace slag being used or fly ash? Does it really matter? Or is it just that it's lowest CO2?

Look, I think probably the last 2 years, we saw a big shift in interest from the customer to really start to implement green solutions for buildings which is one part is to build greener, so to have less CO2 footprint in the building materials, but then the bigger part is even to be more energy efficient throughout the lifetime of the building because that's the bigger part of the CO2 footprint. And we've seen a big shift from owners, architects to really make this a reality. And this is why we launched our green product ranges, right? ECOPact, ECOPlanet, and we have a huge demand and a huge interest for those solutions. And I'm glad that through this global branding, we have the right framework to also properly inform actually the customer that they can already make a choice today to build more sustainable. And as you point out, the customer is interested in both in the circular construction, but also, of course, in the decarbonization. They go hand in hand, but you are right in some instances, circular construction doesn't mean the CO2 footprint necessarily is much improved. So that goes hand in hand together, and we're very happy here to lead the development. You've seen our numbers, right? We are already at more than 600 trucks a day on ECOPact to concrete. We are already more than 1,000 truckloads a day on demolition, construction, demolition waste. So very happy about this. Now you're saying that some people are maybe following. I welcome that. I think we have a mission in to make circular construction and decarbonization a reality in the world for buildings, for infrastructure. And I just welcome everyone to follow us because that's the right path to go. And a lot of effort needs to be -- needs to be taken. This is why, on the slides, we just tried to translate it into truckloads because that shows you what a tremendous volumes are behind that. And you can imagine to adjust our supply chain now to take in 1,000 trucks a day with construction, demolition waste. That needs proper terminals, that needs proper recycling, then we get different grades of recycling out of that. Some go into road construction, some go into concrete, some go into cement. So that's our road map to make it happen. And anyone joining us is more than welcome because that has to be the future of construction to make it circular and sustainable.

The next question comes from telephone is from Mr. Remo Rosenau with Helvetische Bank.

Your energy bill increased by CHF 630 million in '21 and from 9.2% to 10.3% of sales. So you lost 110 basis points there. But on the other hand, I was surprised to see that the distribution and selling expenses, which are much higher number, of course, grew under proportionately. So you gained actually 80 basis points on the margin with distribution and selling expenses. So in balance, you only lost 30 basis points with these 2 elements, which are most affected by all these inflationary developments. Has this to do -- I mean this underproportional growth in distribution and selling has this to do with the changed business mix with a higher proportion of Solutions & Products, or -- because I was a bit surprised that this didn't increase more. And should we, hence, expect a similar development in '22, i.e., still higher energy bill, of course, but a lower proportion of distribution and selling expenses?

Good morning, Remo, thank you, and thank you for noticing our efforts to mitigate the cost where they come from, I remember, we had on logistics. We had a big program throughout the pandemic. If you recall, we made already in March 2020, our action plan to come out of the pandemic with much more competitive cost. And I think that's a big part of what you describe. And of course, now the trends are reversing and we have to now be very agile on the pricing. But we are working very hard to make both ends meet and to have a positive price over cost. Maybe, Geraldine, you would like to add something more details to this?

No, I think it's right to say that the energy cost inflation has been very high in 2021. I mentioned 24% of pure price increase in energy. We did not have such an increase in distribution and query cost, as you mentioned, Remo. We also, as you know, have a very strong procurement teams and that also -- with the digital tools we have put in place, are also helping to decrease the unit cost when it comes to distribution. So -- and this will continue, of course, to service as we go in 2022.

Okay. But it's also true that the business mix also helps a bit? I mean the higher the importance of Solutions & Products get they are not that energy intensive, of course, and also not that much this -- I mean -- and also on -- distribution and selling is probably not that cost intensive, right?

That's correct, Remo. That's correct. Yes.

Okay. Now my second question is on the different regions. You mentioned the positive price over cost. And you said in Europe and Asia, there was a positive price over cost effect for the full year, but you didn't mention it for Q4, whereas in the other 3 regions, LatAm, Mid East and North America, you also said that there was a positive price over cost effect for the fourth quarter, but not for Europe and Asia. So are these the 2 regions where you have to struggle most in order to get this price over cost balance positive?

Yes, it's correct, Remo. The -- as you know, the energy bill increased even further in Q4, 38% in terms of price in Q4. And Europe contained more or less the power inflation, and APAC also, let's say, mitigate partially contained the energy hikes in Q4. The other 3 regions, as you mentioned, were positive price over cost.

Okay. But to sum it up, as Jan said, just to be very clear here, your target still is to get an overproportional increase in EBIT versus sales?

Remo, we don't say it to this point in time. I think like always, we have a -- we have, I think, a well-founded outlook. So we promised a year of growth. We promised EBIT will grow. We promised a healthy cash flow. So I think that's already a lot for start of the year and then let us see a little bit the latest developments we have in Eastern Europe now with this terrible conflict. Let's wait a little bit how things are falling in place, but we are confident. What we -- the performance we showed in 2021, we see no reason why we wouldn't do that again in 2022.

We now have a question coming from the video conference and coming from Mr. Arnaud Lehmann.

I hope you can hear me and see me?

Yes, Arnaud.

Perfect. Excellent. The question is on Solutions & Products. Obviously, you've been very active with acquisitions recently and you're hinting that there could be more. Now you end up with the Firestone business, which is roofing solutions. Malarkey, which I understand it well, is styles for roofs. PRB, which is what you call specialty building solutions, and that comes on top of the precast, the [ ash fly ] and the mortar that were already there. So I guess my question is, what are you trying to achieve with these businesses, which might be interesting on their role, but are not necessarily all consistent with each other. Or essentially, do you think you're going to have synergies between the businesses or the idea is just to be opportunistic and maybe even further extend the product portfolio in the division?

Yes, Arnaud, thank you. No, look, we are in building materials. We are in construction. So first of all, from cement aggregates to ready-mix concrete now to roofing or to mortars is a very natural development. You have a lot of synergies when it comes to logistics, when it comes to key accounts, also when it comes to locations as we operate a very granular network of more than 2,300 production sites. So we have a lot of synergies doing that, and this all comes together in our ambition to be the most innovative and most sustainable building solution provider in the world. And this is why it makes so much sense now to go to the roof and especially in the markets in North America and in Europe to extend our range of solutions closer to the customer and also closer to sustainability as the companies we are buying are really at the front of the sustainable development. If I can take your question, Arnaud, just to explain a bit why we are so excited about these 4 companies, we acquired here in Solutions & Products. So you will find that these are growth platforms because there's more and more demand for those type of solutions. And the demand is driven by -- it has a big function for the future. So you talk about the roof. 20, 30 years ago, the roof was just to protect from rain, from water. And nowadays, it has a function. It has an insulation, can be a solar roof, can be a green roof, and this all leads to much increased value per square meter of roof applied, right? So you talk about double or triple the value from those functional rules compared to traditional roofing. And then, of course, at the same time, you have a huge growth from this development and also from the further demand to reroof, to improve buildings, to make them more energy efficient, to make them solar energy generating, or to make them green livable for the city. So this is why we are so excited about that. At the same time, it's a very strong business through the cycles because most of the business is repair and refurbishment. So we are not so bound to the build cycles or something for new buildings. We can really do, every year, the same number of new jobs to reroof and repair. So very exciting. And then lastly, also this all comes with good pricing power because of innovation. So what I just described to offer all the roofing systems of the future, we have quite a big R&D lab doing that. We are working on the latest application technologies, so self-adhered roofs. And this is really exciting going forward. You will see much more also recycling in our roofs in the future where we also can use construction, demolition waste inside. So I'm very excited. We really bought into the right aspect and we link that very closely to Holcim going into the future for the synergies.

We now come back to the questions from the phone. And the next one comes from Gregor Kuglitsch with UBS.

I wanted to touch sort of on the prices that have been paid for the various acquisitions. And I think Firestone I think made sense. I guess the one that looked a little bit high was Malarkey. So you could just share with us what's special about that business in your view to pay that kind of multiple for roofing shingles business in the United States? The second question, please, maybe coming back to the cost inflation and the sort of recovery efforts. So can you just tell us what you think at this stage, and I appreciate it's extremely volatile, but what your best guess is for '22 cost inflation, please? And then -- so one of your competitors, I think, talked about exit rate of price sort of, I think, north of 10%, 13%. Can you tell us what you're observing in terms of pricing as we head into 2022, please?

Gregor, and I take the first question and Geraldine will talk a bit about, I think, cost inflation, exit rate and how much and how often we increase prices last year and also start of the year. I think we were very fortunate with our acquisitions. If you look at the multiples we paid for Firestone or Malarkey, I think they are in a very good ballpark if you look at the high multiples or valuations of this light side building materials sector. So we are very, I think, fortunate to make this happen. And you look at Malarkey, you asked specifically, that's a beautiful business because that's growing at tremendous growth rates of something like 15% to 20%. And the reason is they're very smartly focused on reroofing in their markets, and they have the most advanced products for this residential roofing, which is polymer-enhanced shingles, which is stronger and more flexible and gives them a competitive edge in the market. The market of these shingles is -- that's an amazing championship segment, I think the entire shingle market is around $20 billion in the U.S. alone. And the product range we are offering participates in $12 billion of market and growing. If you look at the trends of new builds for residential, which is almost an all-time low, and then you see the tremendous demand for reroof and repair. This is really a growth engine. At the same time, the market is already quite consolidated. There are only 5, 6 players in this $12 billion segment. So I think we were very -- we were very happy to enter here, and we have plans to continue. We have -- at Malarkey, we have currently 3 manufacturing sites, and we are now planning already for the fourth one because we expect that this year already, we're going to reach capacity utilization with the 3 plants. So we do everything now to expand the volumes further because we want to grow that business obviously to more than $1 billion in the next few years.

Yes. Gregor, also on the cost inflation, whether it is energy or the rest, we see the same trend going into 2022 as in 2021. But I guess you've noted the solid performance we achieved in our price over cost during 2021 for all quarters, slightly negative in Q4, but always very positive, driven by the strong pricing discipline that we had, and we had it very early in the year in 2021. And you can look at all the pricing components that we have done quarter after quarter, it's speaking for itself, right? Now when we're entering 2022, we have announced strong price increases as we go into 2022. It's double-digit in value in the U.S. It's double-digit in percentage in Europe. We are entering with a high trend of price increases 2022.

The next question comes from the conference call and is from Tobias Woerner with Stifel.

The first one relates to the exit rate of price increases in Q4. And maybe while you're at it, Geraldine can give us the breakup of the Q4 price over cost spread, which I think is minus CHF 42 million. The second question relates to green CapEx. And you've updated this -- as on this in the past, but I'd like to hear a little bit more on your thoughts here why you think your budgeted amount is enough to deal with that situation at least over the next few years? And what you assume annually then?

Okay. So the exit rate price increase for Q4 and a bit of granularity on the price of cost for Q4, Tobias. Sure. Actually, in Q4, we had a very strong price increase of 6.8% that represent a CHF 400 million -- more than CHF 430 million of your price increase. Then we had to bear an energy cost inflation that I mentioned was very high in Q4. In terms of price, it was 38%, that represented about CHF 230 million. And we had also for another CHF 140 million of raw material in distribution and maintenance increases linked to the inflation. So the green CapEx, that's also your questions. Yes, of course, you've seen that in the Capital Market Day, we have set ourselves to reach CHF 500 million in green CapEx by 2025. This is something that we are controlling. We want to, of course, lead the way in decarbonization of the industry and the green CapEx are instrumental for that. So yes, we have enough to do and to reach the targets which we have set for 2025 and for 2030.

Okay. So you don't feel that this could inflate up further?

No, we don't.

[Operator Instructions] We now take 1 further question on the phone coming from Martin Husler with ZKB.

It's also turning around fuel cost. I was just wondering if you could give us kind of a breakdown of this CHF 1.5 billion fuel costs if we look at energy sources such as gulf, petcoke, coal and oil, just to get a rough idea of well understand thing that there are regional differences here. And the second question actually is also turning on this topic. You have the target to increase your TSR from 21% to roughly 37% in the year 2030. I was just wondering what this could mean also if you look at inflation for biomass waste? Do you see there any inflation already? Or what do you think how this can develop in the future?

Let me -- Martin, first of all, welcome. Let me start a bit to talk about the different fuels. And I think, Geraldine, if she's comfortable can give us some more background on the numbers itself. So what we have seen now in the last years with these tremendous hikes in energy prices for all sorts of energy, this is helping a lot for alternative fuels. So at the moment, we try to accelerate further. And while this overall number you're mentioning are -- seem to be rather low is because we have in North America and especially also in India, we have low rates or low availability of alternative fuels. We -- especially important that in Europe, we accelerate here also to master the CO2 challenge we have here and turn this into a CO2 opportunity. So at the moment, what we see alternative fuel is highly attractive, and we invest now a lot and try to accelerate. The same is true for renewable energy. We have the first wind and solar parks in our plants. And while this was always challenging to have a return on investment with the current energy prices, this has totally changed, and we also want to further accelerate here to go for renewable energies here for all our sites.

Yes, Martin. So the breakdown of the CHF 1.5 billion, actually, you have about 55% that is on petcoke and coal. You have a 19% on gas and you've got the rest. Look, I think it's important. We are very agile. And the goal here is always to source the most competitive source of energy. That's really what animates the teams.

Okay. And just if I look -- because a lot of, obviously, companies try to go for alternative fuels. I was just wondering whether you see already there kind of a cost or price inflation as well?

I think we are in a good situation here, Martin. Of course, there will be eventually price inflation, but it's still it's so valuable to make this available and you have to make the plant ready for alternative fuel. You have to source the alternative fuel, you have to prepare it. And we are working on all of that, and it's very rewarding. It's very rewarding and that's our plan going forward.

Today's last question is coming from the phone and it's from Mr. Harry Goad with Berenberg.

I just got one on pricing in Europe and in the context of the carbon price. When you think about the price increases that you're hoping to get in Europe, is this going to reflect underlying sort of energy cost inflation and the movement in the carbon price in the last year? Or do you think that's too much to ask of your customers this year? I'd be interested to hear your thoughts on that.

Yes. Harry, and that's, of course, what we do. That's what we successfully did in 2021, and that's what we're going to do also this year. There is the CO2 cost you're mentioning in Europe, they obviously have risen sharply. I think it's a positive thing because it enables us to accelerate the decarbonization, make the necessary investments and it will be displayed in the pricing. So the question is not if you are able to compensate. The question is, are you fast enough? Or are you in a better position maybe compared to other companies? And this is what we try to do. And if you look at our European results for 2021, you see that we have been successfully doing that last year, and this is what we exactly want to do this year. So cost inflation, CO2 cost inflation, we want to fully compensate.

That was the last question for today, back to you for any closing remarks.

Well, again, thank you for joining us today in these challenging times with the Ukraine conflict rising yesterday morning. Very, very happy we could connect today. Happy we shared the positive developments, and I very much look forward to deliver what we promised in our Strategy 2025, also what we promised in our outlook for this year and look very much forward to, hopefully, see you very soon in person again and discuss the progress Holcim is making. So thank you very much. Have a good day, and please stay safe and healthy.