Imerys S.A. (NK) Earnings Call Transcript & Summary

Good morning to all of you, and thank you for joining us today to review Imerys Q4 and 2021 Financial Results. With me here, as usual, Sébastien Rouge, our CFO. Before we enter in detail, let me summarize in a few words the year that we just closed. A year which confirmed again Imerys strong financial performance and resilience in a very challenging context. Activity rebounded strongly at the beginning of 2021, certainly more than we had ever expected. Imerys was able to ramp up production rapidly and managed clearly to gain market shares versus competition. Early in the year, logistic issues started to impact worldwide supply chain with repercussion on Imerys, but also more important, on the industries we serve. Finally, around midyear onwards, inflation became the main topic, with prices of raw materials, chemicals and energy reaching record levels. Even in this context, Imerys managed to close the year with a positive price contribution on variable costs. And again, more details in a few minutes. So all in all, a profitable growth year for this group. Now let me enter into some details and a few highlights of the year. The group continued to outperform markets by delivering double-digit organic growth. Over the full year, we posted 15.6% growth, supported by our strong commercial performance, market share gains and, of course, a robust recovery in most end markets. In Q4, Organic growth remained healthy with a 10.7% increase even with a high comparative basis of last year, I remind you, Q4 2020 was a good one. Current EBITDA grew by 21% versus previous year to reach EUR 761 million, above the guidance we had communicated in November of last year. It corresponds to an EBITDA margin of 17.4%, 80 basis points higher than 2020, and close to the '19 level even though we had to face record high inflation on all input costs. Indeed, the group managed to raise its selling pricings and offset such inflation to a large extent, as we will see in the following slides. The group generated a strong cash flow at EUR 255 million despite inflation and a significant increase in the level of activity. Imerys has also raised the spending on strategic CapEx, especially to support future growth. I will comment again more later on. Finally, the increased EBITDA and the decrease of net financial debt allowed the group to reduce its financial ratio from 2.4x at the end of 2020 to 1.9x at the end of 2021. Thanks to the strong results, the Board of Directors will propose to the General Meeting of Shareholders to pay a cash dividend of EUR 1.55 per share, representing an increase of 35% on last year. Let's now have a look at the development of our sales volumes. As you can see in this chart on the left, we had a good year, and the momentum remained strong also in the fourth quarter. Volumes were up almost 5% on a high comparative basis of last year Q4. Growth on the full year was 12.4%, well compensating the 11.4% drop of last year due to COVID, confirming that the demand recovery across almost all underlying markets despite all the headwinds on logistics and supply chain. On the right side of the slide, our businesses, all of them contributed to this performance. And in particular, I would like to underline the High Temperature Materials & Solutions segment, which posted an exceptional 17% growth year-on-year, driven largely by the recovery of the iron and steel markets. If we now look on organic growth at constant perimeter and FX, you can see revenues continue to rebound in Q4 with another quarter of double-digit organic growth at almost 11%. On the right, classic Imerys exposure to end markets. We will deep dive on all of them in the following slides. But what I can say is that most markets have now returned to precrisis levels with the exception probably of automotive and paper. In the pie chart, we have added a qualitative indicator on current market dynamics with these plus and minuses that you see, intuitive, but I will go in more detail as we walk through each market. Let's start with construction, our most important market today. Markets enjoyed a healthy level of activity again despite, in some countries and areas, shortage of workforce and raw materials. We believe that the big growth, the big catch-up post-COVID is largely behind us. Some help in future growth might come from the recently announced infrastructure program in the U.S., to be seen as we move ahead. On iron and steel, after an exceptional, I would say, exceptional really Q3, Q4 was another good quarter of growth with the exception of China, which is dragging down all indicators that you see in the table for Asia. We believe that the reduction in domestic production in China is due partly to the temporary weakening of the construction sector, well known, but also to the more stringent controls on CO2 emissions. In this regard, I would like to point out that if China pursues a definitive reduction of steel and aluminum production in the country, this could have a tremendous impact on the rest of the world, especially European and American producers. Needless to say that this will come to the benefit of Imerys as we are much more exposed in these areas than we are in China today. The next slide. A few words on consumer goods markets, which continue to progress well, thanks to the end of confinement measures in most countries. COVID-19 is still here. Its resurgence might continue to impact consumption, though we have seen it varies from country to country as we learn to live with the virus. We have added a new market that we will track in the future, energy, electronics and EV, because it is of growing importance for this group. These have been very dynamic markets, driven by high energy prices and the green transition. Also, electronics and electric vehicles showed strong growth, boosting demand for lithium-ion batteries, mainly in China and in Europe. On the next slide. Automotive, certainly the most disappointing market lately. As you can see, posted again a massive decline in production practically everywhere in the world. We know very well this is due to the persisting shortage of electronic components. We assume that the situation will last certainly into the first part of '22, maybe the entire year, and it will impact our sales. Automotive is an important market for Imerys. There are several hypotheses on when this will be over, and my guess is just as good as anybody else's. What I know is we can expect a strong rebound on the back of healthy existing demand once the availability constraints are finally removed. In paper, after a very strong Q3, market is stabilizing with continued growth, even if at a slower pace, partly due to capacity reductions taken in the past. Let's now focus a bit on costs, variable costs especially, and prices and probably addressing some of the questions you might have. I would like to start with the right side of the slide. Imerys has managed to fully offset the explosion of inflation through price increases on a full year basis. I think this is exceptional given really the context we find ourselves in. This being said, if you look in detail by quarter and compare with past communications of the group, you will notice that the balance was negative in Q4. In fact, Inflation has been accelerating in Q3 and especially in Q4 at a record pace, especially energy in Europe. We experienced increases above 100% in some areas in some countries. The group reacted, reacted rapidly. As much as possible, we want to preserve the relationship with our customers to the long -- for the long-term benefit. You'll see on the left side our actions. Pricing efforts continued and grew constantly during the year 2021 with an increase of almost 6% in Q4. And if I break down the Q4, I can tell you, December alone was around 7.5% increase on the previous year. Incredible levels for this industry or these industries but needed to preserve the profitability of this group in the long term. All these actions are not yet fully reflected in our financial figures as they are ramping up as we talk. What about the future for 2022? We expect inflation to be persistent. And consequently, we are targeting further price increases in all our businesses in all geographies. This is necessary to guarantee a positive balance, first of all, between variable costs and prices, but also to confirm Imerys' ability to pass through to the market inflation. Let's move on to something more forward-looking, innovation. The group launched this year -- sorry, in 2021, 80 new products with a specific focus around 3 big areas: green mobility, sustainable construction and natural solutions for consumer goods and life sciences. Each innovation project today is screened with the so-called Portfolio Sustainability Assessment Framework, which was developed by the World Business Council for Sustainable Development and is verified by an external independent body. Why do I mention this? We want our products of the future to be sustainable. Our target is for 2022 to have at least 50%, 100% eventually as we move along. We have also launched a specific label for products with the highest sustainability rating, and this is having a great resonance with our environmental-sensible customers. Next frontier, for me, recyclability of minerals. And we are investing and working a lot on this topic, more for the future. A few words now on CapEx. The group has stepped up its capacity expansion projects in 2021 to support and prepare future growth while keeping recurring CapEx under control, as you can see on the table, even after a year of constraints as 2020 was. For 2022, we plan to invest more, between EUR 350 million and EUR 400 million of CapEx, driven specifically by an increase in strategic and growth investments, especially around green mobility, sustainable construction. For your information, our synthetic graphite expansion for lithium-ion batteries announced last year was commissioned before the end of the year and is up and running at full capacity. Carbon black will be commissioned before the end of the year, in plan. And we have launched a new project for mineral solution for polymers lightweighting in China. More details on this CapEx, other CapEx which are in the pipeline will be made public in the weeks or months to come through dedicated communications. The last slide on my side before going in details into the figures, ESG. We have made significant progress in our SustainAgility program in 2021 across all the 6 pillars we have set in our goals. I remind them: safety & health, human capital, environmental stewardship, climate change, business conduct and portfolio management. On the slide here, only a few selected achievements. The full list will be available in the URD, all Science-Based Targets and tracking reviewed by auditors. Also of importance, I believe this year, the appointment of a Board member as ESG Referent to underline our commitment in this matter. The introduction of an internal price for carbon emissions every time we assess a capital expenditure, by the way, we raised it from EUR 50 per tonne to EUR 80 per tonne; and the issue in May of our first sustainability-linked bond, indexed on the reduction of 36% of our greenhouse gas emissions by 2030 as you can see, in our -- in the table above, we are well advanced on this achievement and probably well ahead of schedule. I now hand over to Sébastien for a detailed review of our financials.

Thank you, Alessandro. Good morning, everyone. Let me walk through the main components of our financial performance. We'll start with revenues. They averaged EUR 4.4 billion, up 15.4% compared to last year, all of that driven by organic growth, mostly following the sharp increase of volume plus EUR 462 million. We had a positive contribution of the price-mix, EUR 119 million, plus 3.1%. As said, if we look at Q4 alone, this 3.1% is actually 5.9% in the last quarter. This figure also include a negative currency impact, minus EUR 54 million, which is down from the peak we had in H1 and follows mostly the relationship between euro and dollar. Last point, we wanted to note the positive contribution of the perimeter changes mostly linked with our Haznedar Group acquisition in Turkey. If we look now at the detail of our 2 main segments, starting with Performance Minerals with EUR 2.4 billion. It reaches 55% of Imerys total revenue. All geographies saw improved trends as compared to 2020 with 13.2% increase year-on-year. Even though the group faces persistent logistic difficulties, especially in the Americas with an order backlog which remains still high at the end of the year. If we look by market, on the positive side, the overall rebound of activity was supported by products going into the construction: paint, rubber, ceramics, and also a good performance of our filtration and agriculture markets. We also had a high demand for carbon black and synthetic graphite that goes into mobile energy. We noted also an improvement in the paper and board demand, mostly in Asia. On the other hand, the automotive market continued to suffer from the global semiconductor shortage, and it was particularly visible for Imerys in Europe in Q4. Current EBITDA for the segment reached EUR 497 million. Looking now at our HTMS segment. With EUR 2 billion, it represents 45% of Imerys consolidated revenue. In the last quarter, the growth continued to be very solid in all geographical areas. Q4 sales were up 21%, while on a full year basis, the increase is 18.4%. The business continued to benefit from dedicated commercial initiatives and strong underlying markets. The rebound was supported by the high demand worldwide of iron and steel, but also abrasive and foundry segments. Two specific points in Turkey. Haznedar integration continued to perform above expectations. And in India, our new greenfield plant in Vizag continues right now to ramp up and serve the dynamic domestic refractory and construction businesses. Current EBITDA increased 48% in this segment, reaching EUR 279 million. If we look now at the profitability of the group as a whole. Current EBITDA for '21 reached EUR 761 million, up 21% as compared to last year. This evolution reflects a strong volume contribution, EUR 224 million, with an average ratio on sales around 50% and a breakeven position, a good contribution of the price-mix, EUR 97 million, which has compensated for the net increase in variable cost, consequence of the very high inflation on freight, raw material and energy, in particular in Q4. We have an increase with the increase of volumes of fixed costs and overhead of EUR 115 million. As a result, current EBITDA margin improved from 16.6% to 17.4%. And you will note that the margin on the perimeter change is actually relative as compared to the group. If we look at the fourth quarter alone. The profitability was a little bit softer as we did not yet benefit in full of the price increase that will kick in early 2022. If we look now at the other elements of our income statement. You will see that the increase of current EBITDA drives a bigger increase in current operating income. That has gone up by EUR 153 million. Net financial result was negative EUR 40 million, better than last year, mostly thanks to forex and ageing impact. Income tax, EUR 111 million, corresponds to an effective tax rate of 27% as compared to 27.8% last year. Thus, net income from current operation reaches EUR 288 million, up 72% as compared to last year. When we have it by share, it reaches EUR 3.4 per share. And you know that it's the reference point for the proposal of dividend. Finally, the net other operating and expenses, which are mostly driven by small site closure and reorganization, were very low last year, EUR 48 million, thus driving a very big increase of the net income group share reaching EUR 240 million as compared to EUR 30 million in 2020. Looking now at the cash generation of the group. We report a solid current free operating cash flow of EUR 255 million, thanks to disciplined working capital management in this very strong recovery phase. The figure includes EUR 336 million in paid capital expenditure, out of which EUR 45 million are linked to the growth CapEx that Alessandro was mentioning previously. I would say, only EUR 19 million of increase in operating income capital as compared to December last year, despite inflation and activity rebound, this increase of working capital has been way smaller than the increase of revenues. How does it translate now into the financial structure of the group? 2021 drives a further strengthening of Imerys' financial structure. Under flows, the EUR 255 million net current free operating cash flow covered the cash outflow related to debt servicing, to other income and expenses, mostly restructuring, and the EUR 107 million dividend payments corresponding mainly to Imerys S.A. dividend. We can note that disposal and acquisition generated a net positive cash proceed of EUR 19 million, and it does not include the cash in that will come from the 2 disposals that are about to close in the next week. As a result, the net debt decreased slightly in absolute term, reaching EUR 1.45 billion as of December 2021. With the sharp increase of EBITDA, we have then a significant deleveraging as compared to last year level. at the end of '21, net financial debt represents 1.9x the EBITDA where it was 2.4% last year. Net debt-to-equity also reduced and reached 45%. Now back to Alessandro for the conclusion and the outlook.

Thank you, Sébastien. Let me now wrap up this presentation with a few takeaways for the future. The group is confident that business will remain strong in the coming quarters across most market segments, even if the comparison basis, 2021, certainly a different one, and the booming recovery is behind us. A boost to growth could come from the automotive sector once semiconductor shortages and the supply chain constraints have disappeared. I remind you, an important market for the group. Continued price discipline and the full effect of recent actions are expected to support the profitability of this group into 2022. Tight cost management will remain a focus in an environment which remains highly inflationary. Active portfolio management and an acceleration of growth CapEx projects will boost the group's long-term expansion. We see the ongoing ecological transition as an opportunity, a great opportunity for Imerys as natural mineral solutions will gradually replace less environmentally friendly products. Thank you for your attention, and I now open the floor to questions.

[Operator Instructions] And the first question comes from the line of Sven Edelfelt from ODDO.

The first question, on lithium. You didn't mention this subject in your presentation. And I see that Sébastien has done yesterday a parallel analyst meeting. I was not there. So maybe can you come back on this topic? So I understand you found some lithium in one of your Caroline mine in [ Bouvoir ]. And it seems a big enough for you to mention. So could it be a blockbuster for you? That's the first question. The second question is on asbestos. I would like to please come back on the case. If I'm not mistaken, you still expect a positive outcome in H2. So that means that we should expect the new vote to pop up in Q2. Is it a fair assessment? And maybe a third question on Calderys. Can you give us some metrics. Revenue on EBITDA would be great to better assess the group margin since I think Haznedar is now part of this activity.

Sven, thank you for asking the questions, which we will address immediately and let you think about what details can we do on specific activities. We communicate around business segments. But Sébastien, the last question is probably for you. On lithium, Sven, there is no secret and there is no parallel analyst meeting. This is our official and only communication. We did receive some questions yesterday after the publication of the press release. But once again, there is no other parallel meetings for your information. The answer is yes, we have found lithium below a mine in the Massif Central, in the central part of France, an active mine which is being exploited for Caroline. It's too early to say and that's why we are cautious. It's too early to say if it's the next blockbuster or not. What we are investigating now is how much lithium is there and is this lithium economically and environmentally exploitable. We are investing significant money. I do not exclude it. You will not see it. But we are putting something like [ EUR 15 million ] of -- mostly on money, at work to understand. Lithium is a scarce mineral today. I think Europe shall target its independence. As it is pushing the world towards the EV vehicles or towards battery vehicles, I think being independent is a key. So once we have more information, more knowledge on what we have, is it usable, we will definitely communicate because it might be one day a very important subject. On asbestos, to remind you, today, there is a mediation promoted by the court -- by the judge, by the court, going on, on one side with the insurers, which has nothing to do with the process itself, but would remove an obstacle to a final closure. The mediation is around how much contribution should the insurers pay into the trust based on their commitments. And the second mediation, which is among the different claimants, past and future, on how to split the potential money available in the trust between ovarian and -- assumed ovarian and assumed mesothelioma cancers. So Imerys is not participating because the deal we have signed last year is still, in its terms and condition, absolutely valid. That's why we have confirmed that the provision currently in the books is considered largely sufficient to cover our potential liabilities. And we are waiting the outcome of these 2 mediations, Yes, I do believe that 2022 should be the year to put this subject behind us. But a final calendar will be should only when the court comes with the calendar with the proposal for the approval hearing for the voting and for the confirmation hearing. So we have missed dates in the past. I would like to avoid proposing new ones until we do have visibility directly from the court. Then on Calderys, if you want to...

So you give me the answer that I'm not allowed to -- a question I'm not allowed to answer. So that's good. I would say we disclose by segment, as you know, Sven. One point maybe to be considered, our HTS division is actually a little bit less capital-intensive than the rest. So the main difference in terms of P&L structure would be that you have less difference between EBIT and EBITDA. For the rest, it's not fundamentally different from whatever you can see in the financial statement.

The next question comes from the line of Adrien Tamagno from Berenberg.

I have 2, please. So first, in Performance Minerals in the Americas, you mentioned that you have a backlog of orders that are still expected to be realized in Q1 and Q2 this year, I assume. I was just curious if you had the ability to update your pricing on these pre-agreed, let's say, volumes. That's the first one. And secondly, you mentioned the recyclability of minerals. So can you mention in which vertical this could be the most promising?

Adrien, first on the backlog. It is particularly evident, as you say, in the Americas. I was recently in Los Angeles. I can tell you, when you fly in and out, you see the number of vessels sitting outside the ports. We're talking about above 100 vessels waiting to dock in and be loaded or unloaded, probably both. Never seen before. So we don't expect this to be gone in weeks, rather in months, which creates this backlog. We're talking about several millions. We have done -- I don't know if we have proper numbers to say compared to a normal year. Sébastien, do we...

No. We disclosed that it was a few tens of millions for the group, and it's true that it's still stable between Q3 and Q4 and has not really reduced.

Then the goods that are on their way to a customer, stuck at the port or in a vessel, frankly, no. The price is what it was invoiced a departure, confirmed invoiced as we shipped. But a few millions on Imerys or a few tens of millions on Imerys, that's not where we are looking for price increases. It's more structural and more on the big bulk. So on this one, for sure, no changes. On your second question, recyclability. For me, it's really an open -- a great opportunity and open door to the future. There are some businesses which are today already more advanced. HTS or Calderys, which is only a part of HTS, High Temperature Solution, today, it's between 17% and 20% of recycled raw materials in the end product and is by far the most advanced. There are some very interesting projects around paper, recycling paper waste, recovering the minerals out of paper waste. There are some interesting projects in ceramics. When you dismiss water sink, toilet, tablewares or a plate, it is typically thrown away. The minerals inside are useful and largely reusable. So there are some projects. There is a long road in terms of economy of recovery, in terms of recovery of the waste and in terms of regulations to maybe support this industry. But we will talk a lot around this in the future, and we are launching even -- working with start-ups on very new ideas. And I'm sure one day we'll be able to tell you more on this, but blackboards to be written.

The next question comes from the line of Mourad Lahmidi from BNP Paribas.

I have 2. The first one is on pricing. So you mentioned 7% exit rate for pricing in December. Assuming that, I guess, that you're going to implement some further price hikes at the beginning of 2022, if not already done, so what should we look for in terms of price effect on a full year basis? Is it 7%? Or if you annualize, it's going to be less than that? My second question is more on volumes. So you said that the boom behind, the recovery behind. Should we also expect the volume effect to be more consistent with your blended end market growth in 2022? That's my 2 questions.

Thank you, Mourad. On the first one, you're absolutely right. There will be a further ramp-up of pricing in 2022. Partly is the actions launched, which we'll deliver fully; and partly, it is further price increases that we had to communicate to our customers, especially in Europe, frankly, to reflect recent developments, once again, on gas, oil and energy being the main driver. It varies a lot product by product. More energy-intensive products will be subject to higher price increases, and we are talking sometimes up to 20%. Less energy-intensive products may be less. If I try to give you a number, I believe next year, we should see on a full year basis compared to last -- sorry, next year 2022, compared to 2021, we should be, on average, we should see a price increase in the region of 8%, which if you add it to what we have behind us in average on the year, 3% to 4%, will lead probably to something around 11%, 12% compared to January 2021. Volumes, yes, an organic growth of 15% in a year in Minerals is exceptional. And that's what I mean to when I say the big recovery, the big rebound post-COVID is behind us. Still, we read that the economy in 2022, the economies worldwide basically, will remain healthy. 3%, 4%, 5%, 8% in India, 6% in China, we will see. But nobody is talking about neither a recession nor the low growth. So we will be, for sure, more aligned to our average blended, as you called it, end markets. But we do believe there will be growth in volumes as well as in prices in 2022. My really strong hope is on the automotive industry. You see, when you talk about 20%, 25%, 30% drop last year, on 2020, which was a low year, it means since 2 years, people -- the world struggles to buy a new car. Cars break, get old, norms change. And therefore, people want to have more modern, more efficient, more environmental friendly cars. So I'm sure at the moment, these constraints around semiconductors especially are removed or resolved, we should see a strong, strong rebound. And I'm sure we will benefit from it given our exposure to this market. When? This is really difficult today to say. Whereas we start reading in newspaper, and I'm sure you do too, that some more positive news. It's -- we see the end, we see potentially new capacities coming on stream in semiconductors. So let's see when.

Great. I have a follow-up one on the variable cost start. So you've seen variable costs pick up to almost EUR 100 million in the second half 2021. Is it something that we should expect of the same magnitude in the first half of 2022 and then receding in the second half? Is it fair to make that assumption given the level of raw material costs at the moment?

Sébastien, do you want to answer a few figures on -- we commented on variable costs -- unexpected variable cost increases in Q2 and Q3. I'll let you summarize.

So we have, as you say, mostly in Q3 and Q4 the effect of the variable cost increase. We have now something which is in the EUR 120 million, EUR 130 million range, all on 2021, very much concentrated towards the end of the year. What we see right now is also that it will carry on. And I think that was your question in -- at least in the first 2 quarters of 2022.

Mourad, if I may add on this. We have been shocked by the rapidity of the increases in -- especially in Q4 And once again, energy is a good example. That we have entered 2022 by saying we have to assume that this will stay. It might go up. The probability is low. But nobody can guarantee today that it goes down. Electricity, energy, gas, oil is not going down. Freight rates are not going down. So we are entering the year assuming costs will be there. And therefore, we have to protect the profitability of this company by implementing what is needed to cover fully current costs. If we have a good surprise in H2, maybe welcome. And we know that typically on a deflationary phase, this group profits from the inertia in transferring to customers. But today, frankly, to say it's going to be much better in H2, risky. And even more risky to say, "Since it will be better we don't need to increase prices so much." That's -- and by the way, personally, I believe inflation will remain at high levels, maybe not as high as today, but at high levels for longer.

If I may, let me just add a follow-up one on that subject in particular. So you -- in case inflation [indiscernible] significantly, just a scenario here. Do you pass that on to customers in terms of price reduction? Because from my recollection, I've never seen a negative price effect at Imerys history. So is that something that you are looking to prevent a decline for that?

You're right. If you look back, I don't remind a price reduction in the history. I hope I will not be the first CEO to announce the price reductions at group level for a full year. It is also true that I do not recall any inflation at this level on all geographies, all markets, all products as well. This year will not be the case because I don't think it will reverse in the year so much that the full year becomes negative, never. And we are already in February and we have visibility over the next 2, 3 months. But frankly, if we come back to some halfway normal world, we will have -- and we will be happy to pass on some of the savings, future savings to our customers. It is a matter of relationship. It is a matter of a long-term cooperation. Frankly, we will be happy even to do it. Will it go down so much that the whole becomes negative? I don't see it at all at the moment. As I said, I remain convinced that we will see some higher inflation than the last 10 years for longer. So negative pricing in this context doesn't seem to me an option.

The next question comes from the line of Kevin Kerdoudi from Bank of America.

Just a follow-up on the price-mix and volumes. So you're saying that like, yes, you've been shocked by the price increases. I guess your clients, your customers have been like even more shocked. You're also saying that likely the growth of your volume should be in line with the growth of the different economies in which you are involved. Do you -- what is your view on demand disruptions that could come with like price increases at like 6%, 7%, 8%? Do you think that like your customers can still match those price increases? And in terms of volumes, do you expect any reduction in terms of volume because of those price increases in 2022?

Time will tell, Kevin. Time will tell. Today, we see healthy demand on our side, on our competitor side and on our customer side. So today, yes, they are shocked. I confirm they are shocked. It's -- as I said before, it's never seen in this industry. It has happened in the past on one mineral, on one product, on one geography for specific reasons, never on such a wide scope. So they are also shocked. Today, they get more to receive the goods on time, the quality, the service because their demand is just as healthy as ours. So short term, I'm not worried. Demand will eventually rebalance over time as logistics relaxes, probably will rebalance. Normally, if demand rebalances, then also inflation tends to become less of a topic. And therefore, here we come. We have to be proactive the moment that it happens to approach our customer and give them part of what we have asked today. But it's not going to be short term. And I believe that today, really, the key is to be able to supply our customers. And part of the reason why we have gained market shares in the last, I would say, at least 12 months, probably 18 months is, yes, our organization, yes, our push, focus and great commercial performance, but also because we have been extremely agile ramping up productions. We are the largest. We are the one to satisfying the demand. Customers see that. I hope they will also remember it when it turns to a more balanced market. We are the ones that have a global presence. And today, with the disruption in logistics, you really want to have your supplier next to you. We see a lot of coming back to Europe, going back to America, being the global one supplying global customers. So difficult discussions, but customers understand and are ready within good relationship and cooperation, ready to accept typically these price increases. This will have an effect, I believe, downstream. And that's why my comment of before, I believe we will see high inflation for longer because part of the price actions that you don't see in our Q4 because they are coming, our customers are seeing them now. They will pass them on into their finished products tomorrow. And we, consumers will see them the day after tomorrow. That's why I think there is a tail coming of inflation that is probably today underestimated.

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

Let me ask 3 questions if possible. The first one, follow up on price hikes. So there is, I think, a gap between price hike implemented in Performance Minerals, 4.5%, and in HTS, only 1.3%. Could we have an explanation? Secondly, looking at amortization in 2022, could we have an order of magnitude of the amortization this year? And last question, looking at the HTS division, we have 2 business units, first, the RAC; and secondly, the High Temperature Solutions. And curiously, in both business units, we have refractories. Could we have an explanation?

Thank you, Jean-Christophe. We'll start with the third one and let Sébastien prepare himself on the DNA of the group last year and next year. And if you have some specificity on prices, what I can say forehead is that everybody is doing his job his duty on pricing. Clearly, where we have more energy consumption, we tend to be more pushy rather than per business area division or business is really intrinsic in the product that we sell. But I'll let Sébastien give you more details in a minute. On HTS, you're right. HTS or High Temperature Materials & Solutions is a business segment where we have 2 parts, what we call RAC, refractory abrasive construction, the large part. It produces mineral solutions that go to the construction industry, self-leveling floors, a lot of interesting projects around sustainable construction. It goes to abrasive, so typically to industrial activities. And partly, it goes as a raw material to downstream business, HTS, for cement, for foundry, for iron and steel and other industries. The HTS or High Temperature Solutions is, let's say, a formulation business, which is downstream to minerals. It purchases minerals from the group as well as on the open market and offers engineering to customers in the steel industry, in foundry, in cement, incinerators and petrochem solutions to their heat resistance problem, installation, new formulations, new ideas. And that's where they put value. HTS is smaller than RAC. So there is a bit of refractories in RAC, and it is largely a refractory business, if you wish, in HTS.

So we expect, I would say, a relatively soft increase of depreciation next year as compared to the [ EUR 350 million ] that you can see in our cash flow report right now, mostly driven by increase of CapEx that we had. So you had a few tens of millions, and you'll get there.

[Operator Instructions] And your next question comes from the line of Sven Edelfelt from ODDO.

I would have 2 follow-ups. The first one, Alessandro, you mentioned some market share gains on your growth in Q4, I know it's a tough question, but on your [ 4.7% ] growth in Q4, what portion is market share gain and what represents the underlying growth? That's the first question, if you have rough estimation, that would be great. And the second, I think you had the conclusion from your asset review for more than 1 year now. So when should we expect to see some information picking up?

Yes, Sven, I'll -- on our market share, why do I feel confident? Once again, it's -- we serve several markets, and many of these markets do not publish statistics that everybody can read and assess. It is based on what we track very often. And it's based on, I would say, publications of peers or competitors of the industry, a few of them are a public company, as we are. And public, and I'm sure you can -- you know exactly what I'm talking about. We are normally ahead of the bunch. We publish much earlier than everybody else. So this comparison can be done only afterwards, in our case. And we have checked Q1, Q2 and Q3, and we have posted better growth than, frankly, all of them this year. We'll see what the full year. In Q4, I tend to believe it will be the case as well. Only 1 published numbers -- an American company published numbers around 10 days ago. And if we compare growth by business and as a whole, organic growth, like-for-like, we have been a couple of points better. And therefore, this leads me to say -- to confirm that we have gained market shares. Asset rotation [indiscernible], we have done some moves. You've seen the announcement on some graphite assets that we don't consider core in our business. You have seen in July last year, some kaolin assets, larger operations in the U.S., both of them are being closed. It is our duty to always assess the portfolio and decide what is good for this company and for each single business. It will not pop up by case. It will be properly communicated when the time is right. Our moves remain confidential, as you can imagine. I mentioned it before, we hope in presence to do a Capital Markets Day before the summer. We were waiting to see a bit of improvement on the sanitary side. Such an event will not be done on video. We want to do it with our analysts, with our investors in physical so that we can really share our feelings, our emotions, our plans, our views and our strategy. So I would say soon, we will communicate the dates. But we are confident it will be before the summer, and as I said, in presence. And then maybe we can go in more details on the strategy of the future.

The next question comes from the line of Adrien Tamagno from Berenberg.

I just have another question on automotive. You seem pretty optimistic on the impact it can have on Imerys' top line. So just wanted to understand a bit more what level of outperformance compared with cars production should we expect for Imerys with the ramp-up of new graphite and black carbon capacity?

I'm not so sure I get the question, but I'll try to answer. Why is automotive important? First, you have a lot of steel by definition. Iron and steel, our refractory business, upstream and downstream. You have steel, it means you need to process it, cut it, grind it, polish it, abrasives, our RAC business. Then you typically paint it. Paint, big user of natural minerals, very important for us. Then you have a lot of plastics. In polymers, you have typically a lot of fillers. Here, for instance, an area where we will outperform the underlying markets simply because more and more parts of a car, because of lightweighting, are moving to a little smaller or changing from metal being aluminum, magnesia, iron, it doesn't matter, from metal to plastic. To give resistance to plastic, you need to load it with fillers that increase resistance. It could be optic fiber -- sorry, glass fiber. It could be typically one of our minerals, being carbonate or specific form of talc. The kilo of talc into a car have grown 50% in the last 5, 6 years from -- if I don't recall wrong, 7 kilo to 10 kilo. So not only whatever the car industry will generate is growth, you put on top more of our products. Then finally, lithium-ion batteries. More and more cars moving to hybrid, which is, for us, the perfect solution because we will have the steel, we will have the foundry. I forgot, by the way, foundry. Many parts in the car come from the foundry industry. And the battery, for us, the ideal solution. Lithium-ion, we have our carbon black and our synthetic graphite solutions, conductive additives, small parts, they make a battery perform. Charge rapidly, discharge and ramp up rapidly. We invested almost EUR 100 million last year. Soon, we will announce further capacity increases, I'm convinced, we are working on feasibility studies. Our customers love our products. We are going into more and more cooperations, long-term ones. So it's an incredible avenue of growth for the future. So that's why I believe. When? I don't know. I don't even want to guess. But when the industry ramps up and produces as demand should ask for, then we will see a big impact on our top line and bottom line. Typically, these are products with high margins, high added value, high average price, unique solutions. So it's what we would call a mix, so a positive mix because these products normally deliver a very nice profitability.

There are no further questions on the phone line.

We have a question on the screen, I guess, is from the chat area. I will read it for you. In which areas do you see high-growth applications for 2022, especially for Europe? Well, I mentioned it. I would say that, for sure, the biggest number will come from lithium-ion, and therefore, in our synthetic graphite and carbon black products. Europe as well as everywhere else in the world, I think Europe is building up its capacity to deliver batteries. So we bring production home and we have -- our assets today are mostly located in Europe, therefore it's very welcome for us. I see, once again, automotive. And therefore, all the minerals solutions I mentioned before, this application will be key. I see quite a push around so called -- we now call sustainable constructions, becoming greener. I see great opportunities in finding helping cement makers to find solutions to reduce their footprint using more expensive raw materials, our minerals. A lot of discussions ongoing. When CO2 reached recently almost EUR 100 per tonne, this will put a lot of pressure not only on the environmental side, but also bottom line on the cost side. And therefore, as ETS credits drop, the interest for our minerals can only grow. So I do see some great potential going forward. And there are a lot of cooperations going on. We try to substitute some flammable products in construction through natural solutions. Unfortunately, we have lived -- we've seen in television some bad accidents in the past. So there is a lot of work on going away from typical, I would say, oil-based, flammable products towards nonflammable typically mineral solution. So there are really interesting areas. Might not deliver in the next 6 months or 12, but this will be, for me, what we shall focus on to deliver long-term growth. We see a new question. I will read it. An important product for the automotive sector is [indiscernible] for reinforcing plastics. With the expected recovery of the market for the second half of 2022, is Imerys making efforts to reduce the high CO2 footprint of these products in the energy-intensive manufacturing process? This is also an important issue for the automotive manufacturers. The answer is clearly yes. We have taken -- we've set ourselves a target, 36% decrease in 11 years. We set it in '18, starting with 2019 until 2030. So an 11-year trajectory, 36%. We are in year 3, '19. '20. '21, and we are at 24%. So we have done 2/3 of the path in only 3 years. We keep studying solutions. We keep challenging ourselves, looking at new technologies, and where it's not possible, to limit or use better solutions. I remind you, one of the big CapEx which is being commissioned as we talk, was the substitution of all our burners in a large plant in the U.S., which used to burn coal. We move to biomass, which is peanuts shells or hulls with an incredible improvement of the footprint. It's one of the examples. We are investing where we -- and we are reviewing interesting projects on photovoltaic. Our footprint is typically very large because of the mining areas and so on. So we have a lot of land available. So we are reviewing some very interesting photovoltaic project. It's an ongoing effort. And yes, we have to, and we will, and we want to reduce our CO2 footprint as we can. New one coming in. If the freight costs fall again, the competition from China will regain market share. Then Imerys will have to adjust its prices again. Would -- when do you expect this? It's a very good point. Before the high freight costs, there were normal freight costs and Imerys was profitable. And our price variable cost contribution was positive. So it was possible before. I remain confident it will be possible afterwards. We will adapt when we get there. As I said before, I don't see it coming in 2, 3 months, maybe probably in the second part of the year. There is still a lot of congestion. And before this will be absorbed, it will take a bit of time. My only fear, and I think this question is an interesting one that we keep discussing internally, is the position of Europe. Europe today is building a competitive disadvantage. The price of gas energy in Europe has increased and is today significantly above what it is in the U.S. and what it is in Asia, largely above what it is in Asia partly because Asia is regulated. So the day -- and this will not affect Imerys only, but the day that logistics goes back to some kind of normality, our continent risks of being at a disadvantage. And I hope that we realize that, all of us, our governments, and we find solutions to bring our energy costs to a more balanced level compared to the rest of the world. This will be a big challenge if and when it happens, if there is no movement before. No more questions on the chat line. So I believe if there are no more questions on the phone, I think we have reached the end. Thank you very much for dedicating this good hour of really quality discussions with us, and we do look forward to deliver on our promises in 2022. Thank you very much.

Thank you.