Titan S.A. (TITC) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. I am Maria, your Chorus Call operator. Welcome, and thank you for joining the Titan Cement Group conference call and live webcast to present and discuss the full year 2020 results. Please note, this call and presentation is intended for analysts and investors only. [Operator Instructions] The conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Michael Colakides, Group CFO; Mr. Dimitrios Papalexopoulos, Chairman of the Group Executive Committee; Mr. Yanni Paniaras, Group Executive Director, Europe and Sustainability. Mr. Colakides, you may now proceed.

Thank you. Ladies and gentlemen, thank you for being with us today, and we hope that you and your families are all keeping well and safe. We are presenting today our full year 2020 results. And together with me is Mr. Dimitrios Papalexopoulos and Mr. Yanni Paniaras. Turning to Slide 2. Titan Cement Group delivered strong results in 2020 despite the uncertainty caused by the COVID pandemic. Group consolidated revenue at EUR 1.6 billion was at par to 2019. While in local currency, growth was recorded across all regions. EBITDA posted a 7.1% increase to EUR 286 million, the highest EBITDA recorded since 2010. Resilient sales volumes across most of our markets, showed pricing dynamics, a favorable energy cost environment, combined with the successful management of the group's cost base, all contributed to enhanced profitability. A EUR 7 million provision for the impairment of inventories reduced Q4 results. Net profit after taxes dropped to EUR 1.5 million compared to EUR 51 million in 2019 as a result of significant noncash charges booked related to Egypt. There was a full write-off of $46.6 million of the goodwill of Titan Cement Egypt and derecognition of EUR 17 million of cumulated deferred tax assets. Well, it's not for the one-off charges, net profit after taxes would have been EUR 65.4 million. Year-end net debt declined to EUR 684 million, a reduction of EUR 155 million, reflecting the EBITDA increase by the CapEx and the reduction in debt levels of non-euro debt due to the stronger euro. CO2 emissions reached 674 kilos per ton of CO2 -- per ton of cementitious product, declining by 13.4% compared to 1990 levels. The employee frequency of lost time incidents per million worked hours was reduced from 1.44 in 2019 to 0.57, the lowest value recorded since 2013. At yesterday's meeting of the Board of Directors of the company, it was decided the return of capital of EUR 0.40 per share compared to EUR 0.20 per share distributed last year as well as a cancellation of 5% of TCI shares held as treasury stock, expected to be completed in Q2. Turning to the next slide. Performance in 2020 was supported by resilient sales volumes across most of our markets. In the U.S., sales were sustained at high levels along all product lines with the exception of fly ash. In Greece, demand showed further recovery. In Southeastern Europe, performance was robust, while Turkey posted strong domestic and export growth, while demand also improved in Brazil. Performance in Egypt was disappointing due to the ongoing challenges of that market. Group EBITDA profitability was up 7% to EUR 286 million, with Titan America continuing its profitable performance at EUR 176 million, Southeast Europe posting a strong 25% increase to EUR 96 million, Greece recording a EUR 5.3 million increase to EUR 17 million, while East Med, mostly due to Egypt, underperformed. Looking at our P&L on the next slide. Despite COVID and despite the weakening of several currencies such as the U.S. dollar, Egyptian pound, Turkish lira compared to the euro, consolidated revenue March 2019, holding stable at EUR 1.6 billion. Close cost management and lower energy costs resulted to a EUR 19 million improvement of EBITDA to EUR 286 million. Below this slide, we have the EUR 46.6 million Egypt goodwill impairment booked in Q4, leading to reduced profit before taxes at EUR 37.5 million and increased tax charges, including the EUR 17 million of DTA's derecognition. And EUR 11 million improvement in finance cost was offset by EUR 13 million of FX losses, split between the U.S. dollar, Egyptian pound and Turkish lira. Bottom line, net profit after taxes at EUR 1.5 million is EUR 64 million lower than what it would have been if the Egyptian noncash charges had not been taken. Our balance sheet, on the next slide, looks about 7% deflated, a result of the weakening versus the euro of the currencies of a number of countries of our operations, such as the U.S., Turkey, Egypt and Brazil. FX translation losses reduced equity by EUR 121 million. On the other hand, the leverage position has improved with a reduction of gross debt and a jump of cash reserves to EUR 206 million. Turning to Slide 6 on volumes. Following the restrictions on activity in the second quarter of the year, construction activity rebounded once lockdown restrictions were eased. And by the end of the year, all our 3 main products recorded sales volume increases. Group materials sales increased by 1% compared to 2019, reaching 17.1 million ton s. Ready-mix concrete sales increased by 3%, reaching 5.4 million cubic meters on the back of stronger sales in Greece, Southeast Europe, East Med and Brazil. Aggregate sales volumes increased by 5% year-on-year, reaching 12 -- 20 million ton s, mainly due to growth in the Greek market. Aggregate sales in the U.S., which is a key contributor in the aggregate segment remained stable at high levels. Turning to Slide 8. We see that in 2020 the group generated a strong operating cash flow at EUR 225 million, an increase of EUR 50 million compared to 2019 as a result of higher EBITDA, tighter capital expenditures and contained working capital requirements. Group capital expenditures during the year amounted to EUR 84 million, lower than the EUR 109 million of 2019 as a result of the suspension of a number of projects in the first half of the year in order to save cash liquidity due to COVID. We are now back to normal and no CapEx restrictions apply. Operating free cash flow of EUR 225 million, aided by favorable FX effect of EUR 26 million, led to the net debt reduction of EUR 155 million. Turning to the next slide. Year-end net debt declined to EUR 684 million compared to EUR 840 million at the end of 2019, and was reflective of the strong operating cash flow. This decline in net debt reduced leverage, enabling the net debt-to-EBITDA ratio to improve to 2.35, which has a direct beneficial impact on the pricing of credit facilities available to the group. Now taking a look at our debt profile. Last July, Titan Global Finance concluded a EUR 250 million 7-year bond issue with an annual coupon of 2.75%. The proceeds were used to purchase pursuant with that offer prior to maturity EUR 109 million out of the EUR 300 million bond issue maturing in June 2021 and also for general corporate purposes, including the repayment of bank debt. The group's next important maturity is in June 2021 for the remaining EUR 163 million of outstanding bonds. Now reviewing performance by region and starting with the U.S. on Slide 11. Titan's U.S. operations had a strong year. Our performance was supported by the resilience demonstrated by construction as well as the gains accrued by operational efficiencies achieved. Our revenue and EBITDA were stable in local currency and declined only marginally in euro terms versus 2019 as operations recovered and market conditions improved in the second half of the year. COVID-19 had a limited impact on our operations with cement consumption in the New York metro area experiencing more of a downturn. Lower interest rates, low housing stock and positive demographics, all led to increased housing demand, driving to growth in residential construction. Infrastructure spending continued on a steady pace, while large commercial projects faced some delays. Price initiatives were successful in areas recording market growth while there was resistance in COVID-hit areas. Quick adaptability to market conditions and careful cost control underpinned Titan America's resilient profitability, which we expect to see continuing in 2021. Turning to Greece on Slide 12. In Greece, 2020 was a year of improved performance. Total revenue was only marginally up for the year despite lower clinker exports, with recovery staging a rebound in the second half of the year. EBITDA increased by 24% despite a EUR 7 million inventory impairment booked in Q4. Sales volumes in the domestic market increased with municipal infrastructure works, projects in logistics and the residential housing segment driving demand. Certain large-scale infrastructure projects are also picking up speed. On the exports front, the group opted to contain lower-margin clinker exports so as to optimize the use of CO2 allowances, thereby strengthening our inventory of CO2 allowances. Significant savings from lower pet coke prices were partly offset by higher electricity charges. Results were further enhanced by increased operational efficiencies from digital optimization projects and an increase in alternative fuel usage. Looking ahead, funding from EU stimulus and projects supported by existing financing mechanism should fuel demand further. Next, in Southeast Europe, the construction market after an abrupt slowdown in Q2 due to the pandemic swiftly recovered to record very strong Q3 and Q4 sales, bouncing back to net growth for the region in 2020. As a result, both revenue and EBITDA posted growth. Demand growth in the second half of the year maintained a strong momentum until year-end, supported by a mix of residential, commercial and infrastructure works. Profitability was aided by resilient prices as well as lower fuel costs and a drop in electricity prices on top of efficiency improvements and cost containment measures. As a result, EBITDA for the year reached EUR 96 million, an increase of EUR 19 million compared to 2019. East Mediterranean, condition in the East Med remained challenging amidst the fragile economic environment. Nevertheless, revenue increased both in euro terms and local currency, largely due to the strong performance of Turkey, while EBITDA was negative EUR 3 million compared to negative EUR 1 million in 2019. In Egypt, preexisting structural market limitations were further exacerbated by the government's imposition of a 6-month suspension of construction permits and the delayed effects of the outbreak of COVID-19. The gradual receding of the restrictions in Q4 resulted in a pickup in demand, which, however, was not sufficient to reverse the overall picture for the year. Prices remain stagnant at low levels. The continuing challenges of the Egyptian cement loss-making sector and the recurring weak performance of Titan Cement Egypt necessitated a reassessment of the group's covering value of goodwill as well as a derecognition of deferred tax assets. This exercise resulted in a total of EUR 64 million noncash charges for the P&L of the group. In Turkey, Adocim’s sales capitalized on sharply growing demand for private housing and public infrastructure projects. Adocim strongly increased its export activity. Sales growth, combined with competitive production cost base, resulted to increase in overall profitability. The depreciation of the Turkish lira against the euro by 26.7% for the year, was the only mitigating factor in an otherwise impressively strong year. Concluding the regional reviews with Brazil. The Brazilian cement market enjoyed growth for a second year in a row. Cement demand grew by 10.7% with cement consumption reaching 60.5 million tons. The north and northeast, the markets of our joint venture Apodi, grew at 14%. Apodi increased its sales volumes by continuing to increase its presence in the bulk segment through a focus on the precast industry, the expansion of Fortaleza's airport as well as subway, highway and dam projects. The second half of the year, in particular, saw an increase in construction activity and associated cement demand despite the severity of the pandemic in the country. Driven by increased demand and prices, Apodi's net profit reached EUR 5.2 million, of which 50% is attributable to Titan, compared to EUR 2.1 million loss in 2019. I will now turn you to Yanni Paniaras to talk about our ESG initiatives and developments. Yanni?

Thank you, Michael. Hello. Let me start with what is for sure a top-of-mind issue, climate change mitigation and CO2 reduction. Our ultimate target is carbon neutrality at the level of concrete by 2050 and the sharp reduction of CO2 emissions well before them by 2030. This is in line both with the European Green deal and the global effort to maintain the rising temperatures well below the 2-degree scenario. In 2020, we reduced further the CO2 emissions of our operations, the Scope 1 emissions, down to 674 kilos per ton. What is more important is the fact that we invested in infrastructure, which will enable us to reduce CO2 emissions further in the coming years. For example, we expanded our capacity for processing alternative fuels in our plants in Florida and Northern Macedonia. And more recently, in 2021, we announced the implementation of a significant alternative fuel capacity expansion investment in our Kamari plant in Greece. Another example is the infrastructure that we have installed and tested in our plants in the U.S. and in Bulgaria, that give us the optionality to switch from solid fuels to natural gas. On the product side, as you know, the key driver is the clinker to cement ratio. The aim being to have products with low clinker components, and therefore, lower CO2. In this context, we have developed in the U.S. a new proprietary technology that converts landfilled ash from a wet sludge into a low-carbon cementitious product used in concrete, and the fly ash used as a feedstock in cement making, and this without relying on high-temperature combustion of the residual carbon. Looking further into the future, we obtained a patent for nano clinker product that can be used to enhance cement properties at lower clinker ratios. And we are also engaged as part of a consortium in a European-funded carbon capture and use innovation project, which aims to use the captured CO2 for chemicals production. For this project, our company was recognized actually by the European Commission as a key innovator. We want our performance with regards to CO2 to be open and transparent. Our key metrics are provided in our annual report and the full disclosure is made to the globally recognized Carbon Disclosure Project, CDP. Of course, the focus on CO2 does not distract us from actively managing the rest of environmental footprint. For example, we have developed biodiversity management plans at 9 out of the 10 relevant sites of the group that have been identified as areas of high biodiversity value. And we believe by the way that biodiversity will soon rise in the global awareness as another challenge in addition to climate change. We further reduced our water consumption, addressing another global challenge, water security. To drive further the energy efficiency of our operations, we added more of our plants in the ISO 5001 certification and now have 55% of our production covered. And in terms of waste management, our plant in Florida became the first cement production facility to achieve platinum certification for 0 waste. This demonstrates our commitment to the circular economy and is something we're expanding to other countries of operations as well. On the next slide, we move to the social pillar of our sustainability actions. The COVID pandemic was obviously also for us a major, completely new challenge. Our focus was and remains on helping protect the health of our employees, contributing to the broader effort against the pandemic, while maintaining our plants in operation and our supply chain secure. From the beginning of the pandemic, we introduced remote working for over 1/3 of our personnel, providing them with the necessary infrastructure. We maintained extensive communication and support across the organization to cover the lack of direct physical contact. And for those working on site, we instituted measures to ensure that they do so under the safest possible conditions following the appropriate protocols. Beyond the perimeter of our plants, we offered assistance and donations to neighboring communities, supported our business partners and contractors and worked closely with the authorities in the effort to contain the spread of the virus. With regards to safety, our achievement of a world-class performance in terms of the very low frequency of low lost time interest of our employees at 0.57 was unfortunately overshadowed by 2 fatalities, involving contractors and 1 involving a direct employee. We are continuing our safety work, improving further our risk assessment protocols. And we reinforced with every opportunity, our vision to achieve 0 accidents, creating a safe and healthy workplace for all. Before closing this section, I would like to also refer to our commitment and efforts to support diversity and inclusion. This is happening both at group level where we have rolled out a global long-term plan promoting D&I, and in specific countries, in particular, the U.S., where we launched an unconscious bias training plan for all managers and set up 2 employee resource groups. Youth and youth employment remained also a priority. For example, in Greece, we linked this to our digitalization initiatives and implemented the tailor-made digital academy program, together with local partners, where we trained young graduates in data science, offered them experience and supported them in finding employment, some of them retained directly by us. On the next slide, I would like to shift the focus now from the past year to the future and to the new targets that we recently announced for 2025 and beyond. We have set these targets after engaging with our stakeholders at global and local level in order to understand and prioritize the issues that are material in relation to our company and its ESG impact. As a result, we have 20 targets that focus on 4 pillars, all underpinned by good governance, transparency and business ethics. The first pillar focus on decarbonization and digitalization. Our aim is to transform our business, focusing on resilience, on innovation and solutions that will serve our customers more efficiently as we all move towards the carbon neutral digital future. A major target under this pillar is, among others, a new CO2 reduction target at 35% by 2030 compared to 1990 levels, which will bring our Scope 1 emissions down to 500 kilos per ton. This performance on a 3-year rolling basis towards this target has been included as a component of the variable compensation of top management. We have also set a target for Scope 2 emissions and are monitoring Scope 3 emissions in our supply chain for opportunities to reduce also this smaller part of the total CO2 emissions. The second pillar focuses on our work environment. Our aim here is to cultivate an inclusive culture and to provide equal opportunities to all our people to grow professionally within a safe and healthy work environment. Relevant targets here are our commitment to be among the global leaders in safety with 0 fatalities and an employee LTIFR performance among the 3 best in the cement sector. Another target is the promotion of equal opportunities for everyone without bias or discrimination. We also target to increase by 20% the female participation in senior roles. The next pillar relates to the local impact of our operations. Here, our aim is to enable our business operations and our people to contribute to the prosperity of the local communities where we operate and to address with them the local ESG objectives. Targets here include the objective to have biodiversity plans for 100% of our relevant quarries and to have community engagement plans for 100% of our cement operations in line with the local material issues. The fourth pillar looks at our supply chain and responsible sourcing. We want to empower our business partners to incorporate ESG in their business decisions and in their daily behaviors. And we want to ensure that we source and use natural resources responsibly. A target under this pillar is to have 70% of our key suppliers meeting the highest ESG performance standards. These 4 pillars and the 20 targets are published and explained on our website following our press release last week. All our targets are aligned with the UN SDGs 2030. Our performance against them in the coming years will be verified by independent auditors, as we always do, while the Scope 1 and 2 emissions targets will also be validated by the Science Based Targets initiative, the SBTi. We're really excited about these targets. We stand fully with our decarbonization and digitalization initiatives. They are obviously forward-looking, they are transformative, and they are inclusive, building on our long tradition of active engagement with all our stakeholders. And we look forward to updating you on the progress we will make over the coming quarters and years. Thank you, Michael. Back to Dimitrios now.

Thank you, Yanni, for that summary. Now before looking ahead to 2021, let me start with a few reflections on what we learned in 2020. The first one is that construction markets have proven more resilient -- quite resilient in the context of the pandemic as have indeed the building materials, manufacturing and operations. There was a blip in the second quarter, of course, before more or less returning to prior trends and dynamics. The second reflection is that there is -- seems to be a growing premium on adaptability and flexibility, as we are witnessing increased volatility, whether in input costs or demand shifts or logistics or energy. The third reflection is on the growing importance of sustainability in the broad sense of the word as just addressed by Yanni to cover anything -- everything, including environment, society, our employees, culture, governance, transparency and so on and so forth. And finally, a fourth reflection is that the 2 ongoing major transformations we are undergoing, digitalization and decarbonization, have, if anything, been accelerated by the pandemic rather than slowed down. Based on those 4 observations, I do believe we will emerge from the pandemic stronger than before. Our business model has proved resilient. We have demonstrated once again our ability to react effectively to disruptions. Sustainability has been an authentic priority for decades and place for cultural strengths, and we are comfortable with the commitments that Yanni just outlined. And finally, the world -- the work we have been doing on digitalization and decarbonization is bearing fruit already and holds promise for the future. So even though we are not out of the woods yet as far as the pandemic goes, and visibility is still limited, the focus is shifting. Increasingly in our management discussions, it's the growth and transformation agendas that get most airtime. Different ways of addressing our energy needs, new products and services; how to use data to our advantage; increased innovation capacity; different ways to capture value and serve customers across the entire value chain. Of course, as we build our digitized and decarbonized future, we also need to make sure we deliver performance in our current operations. So let me turn to the current year outlook. The fundamentals for 2021 remain quite supportive. Broadly speaking, we see positive trends in revenue, both volumes and prices, but also short-term headwinds on the cost side. In the U.S., a strong economic rebound is now expected, fueled by low interest rates, fiscal stimulus and pent-up demand. The outlook for the residential sector is clearly positive. Bigger projects and longer-term commitments on infrastructure are also coming through. Our backlogs point increasingly -- to increasing activity levels. There is indeed an emerging sense in the U.S. of a new growth cycle in construction activity. A big federal infrastructure initiative on which there seems to be bipartisan agreement with the numbers of trillions of dollars passed around like peanuts, would certainly not harm. Price increase announcements across all geographies and products have gone out, some for January and some for April, and they seem to be supported and likely to be successful. The challenge we face is in the logistics and service delivery side so that we can capture growth, keep customers happy and contain costs. We're working on both short-term and long-term solutions to do so effectively. In Greece too, it seems that after a decade of very low demand we are entering a period of growth. Housing demand is coming back from a very low starting point. Major projects are at various stages of taking off or are nearly there. European Union funds amounting to over EUR 70 billion over the next 5 years or so, if one adds all kinds of funds available together, should also fuel demand. So despite weakness in tourism-related demand, we expect building materials' demand to grow in 2021 and beyond at a healthy clip. Having said that, we anticipate that this year's financial results from Greece will be held back by combined short-term headwinds, higher fuel prices, a big spike in shipping costs and a lower dollar rate versus the euro. In Southeastern Europe, following a year with greatly improved results, we still expect a solid positive performance despite energy headwinds. In Egypt, we expect a growing economy and the end of the 6-month moratorium on building permits to lead to an increase in cement consumption. However, the industry's structural issues have been exacerbated rather than helped by the government's actions. At this time, despite very promising longer-term fundamentals, we do not yet see a catalyst for meaningful short-term improvement. In Turkey, we are experiencing strong market growth, driven by both real needs and government policy. Of course, here, one should keep in mind the considerable macro risks that Turkey is currently facing. And finally, in Brazil, following a strong 2020, we expect demand will remain at high levels in 2021 as well. That summarizes from Michael, Yanni and myself, our situation outlook for the year. And with that, I'd like to open it up for questions. Thank you.

[Operator Instructions] The first question is from the line of Ouyang, Xintong with On Field Investment Research.

I've got 3, if I may. The first one is you've talked about the price increase in the U.S. across regions. But I'm just wondering if you can provide a little bit more color on the price increase in Florida and Mid-Atlantic? We've heard from other industry players it's around $5 to $7 per ton. Just wondering if that's what you see or if it's in a reasonable range? And then the second question would be, what kind of impact are you seeing from the devaluation of lira and on the FOB prices? Just a little bit of flavor there to understand what kind of price impact that you're seeing there. And then the third question would be whether you see the exported cement from Turkey to put a cap on the cement prices in the Bulgarian and Greek market, as I would assume, the FOB prices is lower than the domestic prices? So a little bit of view on that would also be very helpful.

Okay. Starting with the prices increases in the U.S. We announced an $8 price increase January for Florida and April for Mid-Atlantic. We don't expect the full amount to be absorbed and will obviously reflect the relative market dynamics of areas. What we've seen in 2020 is that in regions where there were strong market dynamics, we were successful in passing price increases. We were -- there was a decline due to COVID. There was much more resistance and we couldn't and -- weren't able to succeed. We are optimistic that at least on average, maybe half of that increase will be -- will become effective. Now coming to the Turkish lira part. First, to mention that the Turkey cement industry is practically fully sold out, both because of the growth in the domestic market, where always everybody gives priority as well as their export book. So short-term increase in Turkish exports is not a realistic expectation. The macroeconomic and currency situation in Turkey is evolving as we speak. The lira fluctuated very violently in the last few days. There has been one more central banker removed and a new one coming in with rather, let's say, controversial principles, sharing their President's belief that reducing interest rates they will reduce inflation. The markets have reacted very negatively to that declaration. So it's very hard to tell how the Turkish lira will behave? How -- whether there will be any exchange controls as has been rumored? And beyond that, how inflation will respond?

I see. Great. And that's very helpful. And then just on the third one on the Bulgarian and Greek market. Would the Turkish export actually put a cap on the domestic prices?

I think let me perhaps add something to what Michael said on that question. If you look at the impact from both volume and prices perspective from the Turkish surge in exports, it actually happened in 2020, more than 2021. If you look at export prices and export volumes, 2020 -- in 2020. So in 2021, what we're actually seeing, as Michael pointed out, is less availability of Turkish product and less impact on -- or further impact on prices. So this is a cyclical business. We'll have to wait as Mike implied to see how things develop. But we haven't seen any transformative change in any of our markets because of the pressure from Turkish imports.

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

Two questions from my side, please. Number one, could you also give us sort of the rough absolute levels of pricing in Turkey? Are we already back above the EUR 30 level, admittedly adjusted for the FX movements over the last few days? Or maybe also give us an indication of what local currency move relative to its low point the last year? The second question is more general. You've been a leading member of the PCA in the U.S. What sense do you get on the stimulus packages or infrastructure program coming up and being discussed as we speak?

If I may start with the Turkey question Tobias, that's a moving target as you understand in euro and dollar terms.

Where price increases at the beginning of the year as well.

Prices have been moving -- improving constantly in Turkish lira terms. They have been moving up and down in euro and dollar terms. And I think for all intents and purposes, you can think of them in the low 30s in euros in domestic prices, if that's helpful. Now on the stimulus package. One thing that I think is -- we've talked about before and one should keep in mind is that infrastructure spending in the states is dependent more on the individual states than federal money. So one should try and look at state spending patterns, revenue and spending as well as a federal side. The second observation is that they almost always take more time than one hopes for. But at this point in time, it looks as if it's proceeding apace. As I indicated in the outlook statement, we are quite encouraged, although the big difference we are seeing, and I implied as much is that both at the public sector, the private sector level, there is a much more willing -- seems to be a lot more willingness to commit to projects that have a longer-term horizon. So they require funding over considerable periods of time rather than in a sort of spend-as-you-go sort of spending that doesn't favor cement intensive construction. So we are seeing both a qualitative and a quantitative change in the outlook, which leads us to the conclusion -- the tentative conclusion that we're heading for a sort of medium-term construction growth cycle looking ahead. I'm not sure that's quite what you were looking for Tobias. Does that help?

Yes, it gives me an indication, but I was wondering whether it's part of the PCA, there was some sort of more tangible things circulating.

To be honest, I'm not aware at this point of anything specific.

We are having ongoing discussion. I mean, even yesterday, there were -- Biden has been talking about the $3 billion -- $3 trillion new package of which $1 trillion will be for infrastructure and so on. So I think the political -- it's a politician who will determine what will be spent in the end for construction.

Okay. And following up on my previous speaker or person asking questions. Baltic freight rates have obviously gone up quite significantly. Are you seeing -- or is this starting to be helpful in terms of pricing in the larger markets around the world, especially in the U.S.?

It is too early to make a judgment on that. People take a longer-term view in our markets generally and a spike of this sort, we don't know how long it will last, does not -- is not convincingly sustainable enough to drive behavior over a long period of time. So prices generally move in slower patterns than freight rates in the shipping market.

And also, if we look in the forward market, you will see that rates are much lower for the second half of the year.

The next question comes from the line of Betts, Mike with Data Based Analysis.

I had 2 questions as well, if I could. The first one, Q4 in the U.S., sales went up, the EBITDA fell about 12%, I think, in U.S. dollar terms. Could you maybe give a bit more explanation as to what happened there in Q4 in the U.S.? And then coming back to Greece, where I think it says that you've preserved carbon permits and reduced exports in 2020. I mean, given what we've seen happen to the carbon price since the year-end or towards the second half as well, would you -- are you planning to accelerate that trend in 2021? And could you talk just a little bit about the accounting, what happens there? Obviously, if you cut exports, you lose the profits on the exports. Is there anything counteracting in terms of the P&L on the carbon permits? Or do they just get transferred or kept at 0 cost?

Let me take the first question and ask Yanni, who oversees Greece among other things to take a shot at the second one, if I may. On Q4 performance, first of all, in the U.S. -- first of all, you have to remember that the currency rate differences between dollar and euro, right? So that might explain part of the difference. But part of the answer is also in something I mentioned in an effort to find a combination between taking advantage of growth opportunities, serving customers and keeping them happy and keeping costs contained. And the -- our business is as much a manufacturing business as a logistics business as it is a manufacturing business. And we said earlier that we are in a situation of high volatility of demand among other things. And I think we -- it is fair to say we did leave some money on the table this year in trying to find that balance between serving customers well and ensuring our future growth and taking care of current profitability as well.

Q4 had more imports into the U.S. than, let's say, than average.

Sorry, more import.

Yes. So the market was served with more imports than originally planned. Yes.

Yanni, do you want to take a shot at the...

Yes, the question on Greece and export is something that Michael alluded to in his presentation with the way the European ETS system works. There is a level of production that you need to have in order to optimize your returns. And this is something that runs over 2 years. So based on that, we have stopped some low-margin exports. This is a level that fluctuates every 2 years. So this year, we expect to have higher production volumes than last year and more exports.

It's rolling 2 years basis.

And then a year after that, again, it's going to go back down. But on the levels that you are seeing, assuming that the current ETS system continues operating like that. On your question on whether this shows on the P&L, obviously, you don't see the -- we...

You don't see the benefits.

You don't see the benefits.

We have been increasing our inventory of CO2 rights, but that doesn't show on the P&L. It's -- since it's acquired for free they are recorded at 0 value.

And the last part of the question was whether the recent increase in the CO2 price will influence that strategy, and it will not -- what we have set out as our plan is not affected by that.

[Operator Instructions] Your next question comes from the line of Polo Boulougouris, Alexandros with Wood & Co.

A quick question on your CapEx plan for 2021 and maybe 2022. I mean besides the usual maintenance CapEx, what else should we expect? I know you announced the EUR 25 million upgrade of the Kamari plant, but is there anything else we should input in our numbers? That's my first question. And my second maybe a bit regarding margins overall for the group. You mentioned the short-term headwinds from energy and freight rates. I mean EBITDA margins improved in 2020. Should we expect some stability in 2021? Or you think it will be difficult to maintain the levels of 2020 given these headwinds? That would be my question.

I think Dimitrios partially resorted to the second part, but we expect both volume and price increases in 2021. So that's to a large extent should offset, hopefully, the cost inflation that we are facing. Now in terms of CapEx, there is nothing exceptional or I think -- or nor in aggregate that will lead to any spike in our CapEx spending. Our normalized, let's say, CapEx spend is a bit north of EUR 100 million. EUR 100 million to EUR 110 million order of magnitude for both '21 and '22 as a ballpark target. So that includes, of course, the Kamari project as well as a number of projects in the U.S. There are some relatively bigger ones, not the half of EUR 1 million. There are some bigger ones, but all those are within the envelope that I mentioned.

[Operator Instructions]

We see a question coming from...

The webcast. There should be some questions that will be read out, I believe.

Of course, the first question from our webcast comes from [indiscernible] Intesa Sanpaolo, and I quote, what are the long-term plans for USA operations in regards to expansion?

I think we addressed that in the remarks. We do view the U.S. as coming -- as being on a medium-term growth cycle. We have an integrated presence in the U.S. covering cement, ready-mix concrete, aggregates, block, fly ash across our geographies. And we are working to make sure that we can benefit from that coming growth in an integrated way. Michael -- as Michael just alluded in his previous answer, part of our CapEx spending -- a good part of our CapEx spending going forward is going to the U.S. in order to be able to capture that growth. We have some in-built flexibility in the system, the way we are structured to be able to do that growth, to take advantage of our growth without major capital spending based on both debottlenecking, local operations and increasing imports as and if necessary.

The following question from our webcast participants is from [indiscernible] with ODDO BHF, and I quote, how many spare local capacity do you have left in the U.S.? And how much additional clinker can be shipped to better serve and benefit from the USD 2 billion Build Back Better program? Alternative fuel was at 13% in 2020. How much investments need to be made to jump to 10 points to 23%? You recently announced a EUR 25 million investment in your Kamari Cement plant. How does this investment increase the alternative fuel at group level. How does the Phase 4 of CO2 allowances in Europe affects the clinker trading dynamics in 2020? Are you perhaps planning to...

Can we ask you to take a break because this is about 10 questions. And by the time we go to the last, we forget. Ask the first 3, and then we can take them in batches.

Of course. So how many spare local capacity do you have left in the U.S. and how much additional clinker can be shipped to better serve and benefit from the USD 2 billion Build Back Better program?

We already just answered that question. We have spare capacity to take advantage of a significant increase in demand if it comes over the next few years through a combination of local capacity and import capacity.

And just for clarification, we export cement to the U.S. and North America.

Okay. Alternative fuel was at 13% in 2020, how much investments need to be made to jump to 10 points to 23%?

Yes. And let's link this with the next question that you have on the Kamari investment because they are addressing the same issue. As I mentioned, we have -- we're actually ahead in our investments in alternative fuels. So all the increase, not just the 10%, but all the increase that we will need in order to meet our 2030 targets will be covered by investments that are well within our current CapEx envelope. The Kamari investment is one of the largest ones. And just to give you a feel for that, putting a calciner on a line, on a cement production line, brings for that particular line the replacement ratio to over 80%. So there is spare capacity for alternative fuels and enough there to help us increase that percent in the coming years.

While at the same time, if I may add, helping us address a significant part of the Athens metropolitan area's waste management issue going ahead.

Okay. And he continues with saying how does the Phase 4 of CO2 allowances in Europe affects the clinker trading dynamics in 2020? Are you perhaps planning to export less this year compared to previous year?

I think that has been already addressed. So let's move on.

Okay. We have a question from [indiscernible] with Alpha Asset Management. Which framework do you use for reporting ESG-related metrics? Are you going to use SASB or TCFD? Are they going to be disclosed once a year?

Yes. We are disclosing according to the SASB methodology and are being verified as such. Not just that, we are also disclosing in accordance with the United Nations Global Compact in accordance with the GCCA and the Carbon Disclosure Project, so a lot of relevant standard. TCFD is something that is incorporated in this. So we will be following that as well, especially for -- as a European company, this is something we expect to become more prominent over the year. I believe we are disclosing the full range of data once a year and selected data on quarterly and semiannual basis.

Our integrated annual report, which will become public on the 9th of April, if I'm not mistaken -- 12th, okay, has a very detailed reporting on nonfinancial, on environmental performance, on employment-related indicators. If you take a look at -- if you have the time to take a look at, you will be impressed by the detailed information that you will find there.

Ladies and gentlemen, there are no further questions at this time. I'll now turn the conference over to Mr. Colakides for any closing comments. Thank you.

Okay. Thank you all for attending the conference. So our next meeting will be just before our annual general assembly. The general assembly is on March 13. And the Q1 results announcement is the day before -- same day in the morning of same day. So thank you very much, and goodbye.

Ladies and gentlemen, the conference is now concluded. You may disconnect your telephone. Thank you for calling, and have a good afternoon.