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

Ladies and gentlemen, thank you for standing by. I'm Constantino, 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 2021 financial results. Please note, this call and presentation is intended for analysts and investors only. [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 and Committee; and Mr. Yanni Paniaras, Group Executive Director, Europe and Sustainability. Mr. Colakides, you may now proceed.

Thank you. Good afternoon, ladies and gentlemen, and welcome to our full year 2021 results conference call. Now 2021 marked the year with sales revenue growth recorded across all regions and products for the group, a growth of 6.7% to a record EUR 1.7 billion. On the other hand, due to the unexpected spike of input costs in the second semester and despite pricing initiatives that partly alleviated the burden, EBITDA declined by 4.6% to EUR 272 million. The energy cost impact was steep with negative price effect in excess of EUR 50 million for the year. The group reacted with a new round of price increases, starting in the last quarter of the year. Net profit for the year reached EUR 89 million, compared to just EUR 1 million in the previous year, largely reflecting the lower finance costs, better foreign exchange results and the lower tax charge. As a reminder, the previous year 2020 was penalized by one-off cash charge related to Egypt of EUR 64 million. Finally, the net debt for the year was higher by EUR 28 million at EUR 713 million due to the increased CapEx, higher working capital needs to serve the growth in revenues and turnover and the last payment of the IFC relating to the acquisition of their minority stakes in Southeast Europe and Egypt. Group-specific CO2 emissions were reduced by 4%, in line with achieving the group's 2030 targets, driven by an increase in the use of alternative fuels and the reduction in the clinker content of our products. In the course of 2021, the group's digitalization journey progressed further in collaboration with an ecosystem of start-ups, universities, equipment manufacturers and specialized advisers. Significant innovations have already been implemented with measurable impacts in operational efficiency. Turning to the next slide. Delivery was strong across all product -- all group markets, reflecting the recovery in construction activity, while the global increase in input costs in the last 2 quarters outpaced the increase in prices. U.S. operations marked a new milestone with sales revenue of $1.16 billion, reaching record levels, almost 9% up in dollar terms, thanks to growing demand underpinned by healthy macroeconomic conditions which continue to support residential construction activity in particular. Rising import shipping freight costs and higher domestic costs led to lower EBITDA by 8% in U.S. dollars or in Euro by 12% at EUR 155 million. To capture the market upside, the group launched an extensive investment program, which is underway to expand its effective cement supply capacity and reduce logistics costs. In Greece, the market continued its positive performance, lending further support to the belief that demand is solid in an upward path. With export volumes also increasing, revenue was up by 9%, reaching EUR 268 million and EBITDA jumped to EUR 24 million. In Southeast Europe, performance remained strong. Revenue grew to EUR 291 million, up 7% compared to the year before, while EBITDA decreased by almost 15% to EUR 82 million as price increases were not sufficient to cover the very sharp rise in both fuel and electricity costs. Performance in the East Med turned positive, thanks to the mix of demand pickup and better pricing dynamics in Egypt, following the government-imposed quota system on production. While Turkey, domestic demand remained strong despite the volatile economic situation. As such, the group revenue for the region grew by 14%, reaching EUR 173 million while EBITDA reached EUR 12 million after a EUR 3 million loss in 2020. Finally, our Brazilian operations continued to grow with revenue up by almost 19% while increased costs resulted in a marginally higher net profit attributable to Titan at EUR 2.7 million. Turning to our P&L. Group revenue growth, as quoted was 6.7% higher at EUR 1.71 billion. EBITDA declined by 4.6% or by $13.2 million compared to 2020, reflecting the sharp rise in energy distribution costs in the second semester of the year. Below the EBITDA line, we had lower interest expense, thanks to successful refinancing of debt as well as elimination of FX losses and the lower tax charge contributing to a higher net profit after tax, which ended the year at EUR 89.6 million. Again, the reminder that last year, we had the one-off EUR 64 million charge relating to Egypt. Our sales volumes, trends in domestic sales volumes were positive across all regions, especially in cement, where growth of 7% was recorded year-on-year, reaching 18.3 million tons with U.S. being the main contributor of this increase. Ready-mix concrete sales increased by 2% in 2021, reaching 5.5 million cubic meters on the back of stronger sales in U.S. and Greece, while aggregate sales increased by 1%, reaching 20.2 million tons, thanks to the strength of the Greek market primarily. Our operating free cash flow for the year reached EUR 105 million compared to EUR 225 million in 2020. Lower operating cash flow was primarily due to the higher capital expenditures by EUR 41 million after the 2020 COVID-19 restrained investment program. And higher working capital needs by EUR 46 million resulting from stronger business activity as well as higher levels of fuel inventories at the end of the year. Also in 2021, the group paid to IFC the last EUR 41 million tranche for the acquisition of the minority stakes in the Balkans and Egypt. Group capital expenditures during the year reached EUR 125 million compared to EUR 84 million the year before, with most of the funding directed to investments focusing on production efficiencies, improved logistics capacities and reduction of carbon footprint with financially attractive investments. As we see in the next slide, covering our debt picture, group net debt at the end of 2021 was EUR 713 million, EUR 28 million higher compared to the year before, while the group's gross debt declined by EUR 98.4 million. In the prevailing low interest environment, the group took a number of initiatives that succeeded in both lowering its finance costs and extending the debt maturity profile. The group repaid the maturing EUR 163 million of the 2016 bond and has now 2 bonds outstanding. The next significant maturities are a bond issue of EUR 350 million maturing in November 2024 and another issue of EUR 250 million maturing in mid-July 2027. As at 31st of December 2021, the group's leverage ratio net debt to EBITDA stood at 2.6. It is important to note as well that in December, last December, Standard & Poor's affirmed its rating for Titan Cement International of BB with stable outlook. Now let's look at the group's performance region by region, starting on the next slide. 2021 was a record year for sales for Titan America with revenue reaching close to $1.2 billion, an increase of 8.6% in dollar terms. Consumption in our markets grew considerably above U.S. average as Florida benefits from its development into a vibrant business and financial center, while the internal migration trends generate increased housing demand and attendant nonresidential construction. Cement consumption also increased in Mid-Atlantic, driven by private construction, while infrastructure activity continued being solid. The group continued apace with its efforts to reduce its carbon footprint through the channeling into the market of the Type IL Portland limestone cement, which accounted for over 50% of cement sold by Titan America. Operational profitability was constrained by increased labor and logistics costs as well as the spike in freight costs from cement imports that peaked last October and subsequently partially receded. Revenue for Titan's U.S. operations increased compared to 2020, reaching $1.16 billion, an increase of 8.6% while in euro terms, the revenue increase was 4.7% to EUR 984 million. EBITDA reached $184 million or EUR 155 million, a decline of 8.4% in dollar terms. As operational profitability was constrained by the global cost headwinds and supply chain disruptions, which reflected negatively on import freight, energy, logistics and labor costs. Turning to Greece, where cement demand continued to grow at a strong rate, similar to the one recorded in 2020 as reflected in revenue for the region, which grew by 9% to EUR 268 million. EBITDA increased to EUR 24 million. Operating in line with optimization of our CO2 emissions production increased, allowing us to capture the market's growth as well as increasing the company and third-party exports. The domestic market was driven by the increased levels of activity in public and municipal infrastructure projects as well as growth in residential construction and development in the broader real estate and logistics projects. Tourist activity also picked up following the slowdown caused by the pandemic, while large infrastructure projects are gradually scaling up. Profitability was nevertheless impacted by the unexpected steep rise in higher fuel and electricity costs that had a big impact on profitability. The group was able to partly mitigate the effects through the notable increase in alternative fuel utilization, which are now over 30% in the Greek operations and by further operational efficiencies that resulted from an increased number of digitalization projects across our plants as well as by a price increase at the end of October. Turning to Southeast Europe, where performance was again solid, driven by higher demand and improved pricing. Revenue was up by 7% to EUR 291 million, while EBITDA declined by 15% to EUR 82 million. Residential and private commercial works provided the key sources of demand. The group continued investing in expanding plant operational efficiency. We took the group's plans in the region, reaching 10-year production highs while still maintaining effective capacity to be utilized across the regional network. Despite the strength of the market and successful price increases during the year, the increase in electricity and fuel costs in excess of $20 million incremental cost, which serves especially in the second half of the year, inevitably softened profitability. Alternative fuel utilization is increasing as is the promotion of new products with a lower carbon footprint throughout our regional presence. Turning to the Eastern Mediterranean, where we saw -- where a return to positive performance was observed in 2021 amidst continued demand growth despite the local macroeconomic uncertainties. Revenue increased by 14% to EUR 173 million, while EBITDA turned positive to EUR 12 million against a EUR 3 million loss in 2020. In Egypt, cement demand started to recover after 4 years, growing by 6% as a result of stronger construction activity coming from national infrastructure projects and construction of affordable housing. Moreover, the production regulation agreement set by the Egyptian government on all cement producers in July of last year has narrowed the gap between supply and demand, leading selling prices to much healthier levels. In Turkey, domestic demand strengthened by 7%, driven primarily by private activity. Export volumes at country level remained very high, while price increases in local currency outpaced inflation and the spike in energy costs. As a result, EBITDA improved both in local currency and in euro terms. The group is further aligning its local asset base to step up global trading activity with investments to facilitate its export capacity. Finally, turning to our joint venture operations in Brazil. The improved economic environment led to stronger construction activity and cement demand grew for a third consecutive year, reaching 65 million metric tons, 6.6% up higher year-on-year. Nevertheless, our joint venture Apodi increased its sales volume at a higher rate than the national average by continuing to penetrate the bulk cement market with a focus on the precast industry, the growing regional wind park sector and projects in the renovation and expansion of infrastructure, such as the Fortaleza Airport. In the second half of 2021, the market witnessed a slight slowdown as inflationary pressures started to mount and interest rates increased. Selling prices saw a significant increase partly offsetting rising costs, while the local currency depreciated by 8% in the year. Net profit attributed to the group increased from EUR 2.6 million to EUR 2.7 million. So this completes the financial presentation. And now I turn you to Yanni Paniaras for our ESG performance.

Thank you, Michael. Hello, everybody. Just a reminder from my side that when we're talking about ESG, we are actually bringing together here the key issues that have been identified as the most material both to the Titan and to our stakeholders. Now these issues are shown on this slide. They are put together in 4 focus areas. The first one is the transformational forces of decarbonization and digitalization; the second one relates to our people and having a growth-enabling work environment; the third one, local communities and how can we have a positive impact on these communities and the environment; and the fourth one, responsible sourcing, how we source and how we interact with our suppliers. Now for each of this focus area, we have specific actions and specific targets, a total number of 28 targets, both for 2025 and for 2030. The main message is that on these targets, we are well on track to meet them, and we are especially pleased with the progress that we're making regarding decarbonization, which ranks first in importance among our material issues, obviously linked to climate change. Looking at this first pillar, we have a clear path to reduce our CO2 emissions down to 500 by 2030 and are among the first cement companies worldwide, where our targets have been validated by the Science Based Targets initiative. Going even beyond 2030, we have cosigned the UN SBTi-led business ambition for 1.5 degrees C. That's a commitment letter where -- through which we commit to reach net zero emissions by 2050. Looking now at the last year, specifically, we've managed to reduce our specific emissions to 654 kilos of CO2 per ton of cementitious product, and this is through an increase in use of alternative fuels and energy efficiency and low-carbon products. I will show more on that later on. On disclosure, which is particularly important for investors, we have started implementing the recommendations of the task force on climate-related financial disclosures, and that relates to governance, to strategy, to risk management and to the metrics that we use to monitor the physical transitional impacts of climate change and the opportunities that arise from that. And on digital, we are proud to be among the pioneers in the building materials sector, having rolled out several initiatives, again something I will talk about later on. Looking at the other 3 pillars only in a highlight form for this presentation today. On the second pillar, which is our people. We are very happy to be among the leaders in our peer group with an employee LTI frequency rate below 1 and no fatalities. One of our key priorities has been safeguarding our people and our operations in the time of COVID and we have managed to deal effectively with the waves of this ongoing pandemic. On diversity, we are committed to promote equal opportunities for all and inclusion of everyone in our team, and we have launched a new policy and removed potential biases from other people-related policies, setting again the mechanisms that we need to monitor the relevant trends. And as you know, we have and we continue on a strong legacy on caring for the well-being of our employees. This year, we launched over 100 initiatives addressing primarily the physical and mental well-being. The third pillar relates a lot to our local communities, again, one of strong legacies of TITAN. We touched this year almost 0.5 million people through our local community initiatives. Also related to local environment, we have identified all the quarries that are close to areas of high biodiversity value, and have already planned for the management of more than 80% of these sites. The final pillar relates to our supply chain and to sourcing where we have implemented energy management systems on 86% of our production, thereby improving the use of our energy. We have also a strong focus on reducing our waste and have actually more than half of our production certified with the achievement of zero waste to landfill. And as a final point, we have extended our reach to suppliers and contractors in order to spread the good practices that we have in our CSR through a policy that relates to group procurement. Moving on to the next slide, that is a focus on decarbonization. We have improved last year our net Scope 1 specific emissions by almost 20 kilos of CO2 per ton of cementitious product and that is a 16% reduction compared to the levels of 1990. Our alternative fuel thermal substitution rate increased and has reached 15.5% in 2021. And biomass in that alternative fuel also increased, reaching a substitution rate of 4.8%. We have achieved that by implementing investments of about $20 million across several of our cement plants, specifically in alternative fuel processing facilities and expect as these are getting closer to completion and startup to have another significant further jump in alternative fuel utilization in 2022 and beyond. Going beyond fuels, we have also reduced the carbon footprint of our products by shifting to lower carbon cements, especially in the U.S., in Greece, in Egypt and in North Macedonia. As a result, our clinker-to-cement ratio which has a direct impact on CO2, has decreased by almost 1%. We actually believe to be among the leaders in low carbon cement in the U.S., where since September, approximately half of our cement output consists of the lower carbon Type IL cement. This has also affected positively our Greek plants, which also export this less carbon-intensive product to the U.S. market. Looking at other cementitious materials, we commissioned last year the first industrial scale plant to reclaim landfill fly ash, producing low carbon materials to be used both in cement and in concrete. Looking at the longer term, we are implementing a pilot scale carbon capture use and carbon capture and storage projects, mainly in Europe with European funding and mainly in Greece. We are actually installing now a pilot facility that will chemically bind the CO2 and convert it into cement additives, grinding aids and other products. We are also using hydrogen successfully as a catalyst so far, which contributes significantly to energy efficiency and alternative fuel utilization, and we're seeking to expand the use of hydrogen through R&D project H2CEM, which is now in the level of prenotification as an important project of common European interest. All in all, we have invested more than EUR 10 million in research and innovation in 2021. On my last slide, and I'll focus on digital and the 3 main areas where we have rolled out successful initiatives. The first one are the real-time optimizers where we are improving the running of our key equipment through AI-based systems that optimize operating parameters in real time. That increases throughput which is especially important to markets that are close to capacity and reduces energy consumption, also very important at times of very high energy and electricity costs. The second area is machine learning in order to predict failures before they happen. This is using an extensive network of sensors to highlight operating anomalies and potential future failures. That improves reliability, therefore, again, improves throughput, but also reduces our maintenance costs. And finally, with access to large databases of what used to be a collection of nonuniform codes and characteristics, we're now able to process that, optimize inventories and hence, optimize and reduce our working capital. This requires skills and partnerships. We are now on the third -- we launched a few weeks ago, our third academy, where we are training digital employees, digital students and keeping a very big part of them within our organization. And of course, as we mentioned also in the beginning, as Michael mentioned, we are operating as part of a growing ecosystem, including start-ups, platforms, experts, consultants, OEMs and others. So to close my part, we are -- the main message is that we are very well on track on our ESG targets for 2025 and 2030, and that we are particularly excited to be really up and running with good results on both our decarbonization and our digital journeys. Over to you, Dimitri.

Thank you, Yanni, and thank you, Michael. Let me in my turn, say a few things about the outlook. Given the circumstances, I will go maybe a little more detail on the state of the current situation than I normally would. Let me start with the appropriate, of course, disclaimers about the broader context. First, the world has changed as of February 24, and the ramifications will play out over time. I know it's a very overused expression, but uncertainty is quite high right now. Second, it's not yet clear how and when the current phase of the crisis will end. Quite divergent scenarios are possible, and it would be premature to make forecasts and predictions at this time. Third, the macroeconomic risks have clearly increased. The inflationary pressures have grown, interest rates are heading up, and the probability of a slowdown is real, especially in Europe, far less so in the U.S. And finally, as everyone is aware, energy prices have been destabilized and predicting how soon and how far they will come back to earth is a fool's errand. So where does all this leave? Where does TCI stand on all of this? Again, a couple of observations. First, we don't have any first order or immediate hits. We have no operations or sales at this time in Russia or the Ukraine. We do not -- we do normally buy some coal from those countries for Southeastern Europe and Greek operations. As a matter of fact, we did have one solid fuel cargo pending, which has been disrupted but nothing really meaningful. And we are using almost no natural gas in Europe. So no really first order effects. We're also not facing any supply or operations disruptions. We are operating normally everywhere, and we are well supplied and inventoried. Demand has also not been meaningfully impacted until this time. Backlogs are strong and the momentum is still positive, again, especially in the U.S. The most significant impact so far has obviously come from energy prices which have skyrocketed to record levels. Electricity and solid fuel prices in Europe are sort of 4 to 6x "normal levels" whatever normal means these days. So let me say a few more words on cost -- costs, prices and volumes in terms of the outlook as we see it today. On costs, starting with electricity costs, most of our needs, well over 50% are covered by hedging or annual contracts, and we are mostly not exposed to the current frenzy. In some geographies, we are exposed. For example, in Southeastern Europe, we had a hedging counterparty going bankrupt and leaving us uncovered. And there, we are suffering where we have to pay current market prices, leaves a really a big impact. Regarding thermal energy, a part of our needs is covered by alternative fuels, waste, and we are pushing, as Yanni pointed out, to grow that part. We also have sufficient solid fuel inventories and contracts so that we will need to buy little more -- relatively little more until the summer. Of course, should current exorbitant prices last much longer, that is a tangible risk. Another exposure is transportation costs to which we are exposed in a number of ways: diesel for land transportation, bunkers for maritime transportation and of course, shipping costs where we've been suffering from high shipping costs for the last several months, as Michael pointed out. There, the deltas since February are less extreme and again, we are partially hedged. Shipping rates were already high enough that they were not further impacted significantly by Ukraine. So the flip side of all that out of control cost situation is that we are, broadly speaking, have had a very supportive context in which to obtain price increases. There is a big market and mindset shift in that regard. For example, even traditional price protections for ongoing or existing projects are being questioned and future cover for projects to be started are not being offered by the market. In Greece, we have had 2 rounds of price increases, 1 in late October, 1 in early March, each of, say, roughly 10%, which have stuck. In Southeastern European markets, timing differs, but mostly a first price increase in 2021 has been or is being followed by a second one around this time. And in the important U.S. market, the January 1 price increases have found very good traction in the market and new increases have been announced for June 1. Brazil, Egypt and Turkey, each for different reasons are special cases, but there too, pricing has been very strong. And finally, let's come to volumes. In the short term, as already discussed earlier, the momentum remains positive. Longer term, we believe that given macro stability, the bullish case for construction is still very strong, especially in our key markets in the U.S. and Greece. Without going into the details, which has been much discussed and presented over the last period of time, infrastructure needs a huge ramp-up of planning, permitting and financing is there for a multiyear growth cycle. Housing indicators and needs are also positively oriented. All of these are still very much there. In a sense, this is a very different crisis from, say, the crisis in 2008 when a bubble in construction was at the epicenter of the economic earthquake that dragged down the rest of the economy. This time, it's probably the other way around. It is, of course, a fair question to ask what the effect of a broad macroeconomic slowdown might be on construction. But even in such a scenario, it seems likely to be resilient. So my final observation following up on what Yanni has talked about in the last few minutes is that as is always the case in a volatile industry like ours, it's important to keep one focused in the long -- on the long-term strategic priorities at the same time as one manages the uncertainty and volatility of the short-term environment. And we will continue our focus on sustainability, especially decarbonization, digitalization and our growth agenda, investing in a more innovative and transformative future that we will need in the years ahead. And let me stop there for now, and we've been talking for 35, 40 minutes. So let me -- let us open up the floor for questions. Thank you.

[Operator Instructions] The first question is from the line of Tobias Woerner with Stifel Europe.

Can you hear me now?

Yes, we can, Mr. Woerner.

Apologies for that. I just wanted to get a sense of, firstly, whether there was a shift in Southeast European activities post the developments in Ukraine, Russia, at the end of February, beginning of March. That's number one. Number two, in Egypt, obviously seeing significant price increases at the moment because of the government intervention. Do you also see that the demand is starting to pick up? And just remind us in terms of the energy use in Egypt, is it largely gas for the various cement plants? Or what are you using there?

Let me start with the second question and I will then pass on to Yanni or Michael for the first one maybe. On Egypt, we are using -- we can use both. So we have the equipment to use solid fuels and natural gas. At this time, we are using mostly solid fuels but we have that flexibility. But as you pointed out, the situation in Egypt is not exactly a fully functioning free market. Government policy and intervention on anything in pricing and availability is key. But we -- the main point here is that we have that flexibility. And we also have been investing in waste usage there as well. The numbers are lower than in some other countries, but growing. So we're working on all fronts in Egypt on the cost side. In terms of volumes, after a weak period of almost 4 years, they have been heading up again, so that's encouraging. Now how the current crisis impacts Egypt macroeconomically and what impact that will have is too early to tell. For example, the food situation in Egypt, which is very dependent on Ukraine is a question mark. So we'll see how it turns out. But so far, the volume outlook, recent volume outlook in the short term we see is positive.

It was 6% up last year and seems to continue.

Just follow-up before you answer the other question. Sorry, you're saying you can use gas and solid fuels. Gas, Egypt is a producer of gas or has its own gas resources? How does the pricing work in relation to global prices or European prices?

You should ask the Egyptian government.

The Egyptian Army. In essence, what they practically do right now is that they prefer to export their quantities rather than to give it to the domestic market. So for the time being, we rely mostly on the solid fuels.

Yes. This is Yanni. Just to answer Woerner, your question on Southeast Europe relating to the events in the Ukraine. Obviously, this is -- it's -- the months of February and March are traditionally slow months because of the weather. So it is very hard to discern any major trends in the demand. Up until at least a week ago, we had not observed anything, but we need to monitor that more closely as traditionally demand picks up. I think the main effect -- direct effect of Ukraine has been what Dimitri mentioned already, the very high impact on electricity costs. And this has actually forced us to incorporate this cost increase in our pricing, and we have already announced in 3 of the 5 countries where we're operating in March an additional price increase to cover that. That's where we are now in South of Europe.

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

You mentioned an additional EUR 50 million of [ convertible ] cost in 2021. Does that mean the overall envelope for the group was in the range of EUR 260 million? And how much should we expect these to increase at current spot price? I'm not asking for a guidance, but at current spot price, how much increase that could be? That's the first question. Second, you mentioned a project to export from Egypt. When do you believe those will be up and running? And how much CapEx does this represent? And then a final question. On CO2, you reduced your CO2 footprint by 43-kilogram of CO2 per ton this year, which is a very strong and nice achievement. Can you maintain such a pace of decline in the coming years, especially given you invested last year and you're pushing hard on different CO2 projects. Shouldn't you be considering revising your target to be more aggressive, I'm talking about your 2030 target? Yes, that's my question.

Okay. Let me answer on energy, misunderstanding. The in excess of EUR 50 million that I referred to was on an annual basis and not on a quarterly basis. Most of the increases came in the second half of the year, the bulk of the increase, but it relates to the whole year. Now on Egyptian exports, I don't recall mentioning anything about a project per se. What we have been talking about is that we hope that exports out of Egypt will become more competitive if the Egyptian ports modernization projects are accelerated, especially the one in Alexandria, which is very, very close to our own plant and that is something which is in progress. So we may see some light there, but it's not imminent. Finally, on CO2, the 43 kilos improvement is on Scope 1 plus scope 2 plus Scope 3. So it's the overall improvement. Scope 1 as Yanni showed in this slide was about 20 kilos and Scope 2 another 10.

Michael, on that, yes, the reduction is 4% for both scopes and a little bit less than that, but not significantly less than that in Scope 1. I think that the main gist of your question is whether we can continue on that trend and what we are seeing because we have a year-by-year plan going forward to 2030, is that we are actually expecting to see a better trend going forward as some of the investments that we have implemented or have approved from implementation are coming on stream. And yes, you're right. This means we are without any changes in external conditions, we are confident about the 500. And as we revise these blueprints every year, we will see what the appropriate target is going to be relating to this milestone. The ultimate objective, of course, is going well beyond 2030 and having a decarbonized business model for 2015.

[Operator Instructions] The next question is from the line of Mike Betts with Data Based Analysis.

Yes. I just had one follow-up question, if I could, and it was on the comment that I think you made that you had enough fuel till the summer, maybe just needing to top it up between now and then. My question was, is that fuel that you've already got at the plant? Or is that fuel that you've contracted? And I guess what I'm trying to get at is the amount that you might have under contract or hedged that maybe people will not deliver. And as part of that, could you just maybe give an indication of whether the risks in your view would be greater in terms of pet coke and coal and if necessary, how easily you can switch between the 2?

I think there is a little bit -- a bit of all is the answer to your question. I think a good part is already safely in our plants as inventory, some is contracted, paid for or being paid and underway. And yes, for -- in a couple of cases, we are also -- it's fair to say, is there a risk of nonperformance? We are in crazy times, and we're rolling with the punches. But it's not as if all of it is somewhere out of our control.

There is also the alternative fuels element as well as the natural gas in the U.S. and elsewhere.

And what's the split between pet coke and coal? And how can you -- how easy is it to alter them? I assume -- have most of the plants got burners that allow them to burn either pet coke or coal, the change between?

We have over decades, always been able to shift from coal to pet coke and back in most of our plants or go for high sulfur material where that's much cheaper or back to lower sulfur material. So we always adjust that mix. It is not painless. It is not at the drop of a hat. And sometimes it costs some efficiencies, but it does -- it can work. So we won't -- we don't have plans to do just one or the other and cannot -- or are stuck. Is that helpful?

It is helpful. And my very last question. Where does most of your solid fuel come from? I mean is it South African coal? Is it Australian coal? Is it pet coke from Venezuela? Where does most of it come from?

We -- again, it depends on the times -- we buy from Russia and we buy from South Africa. We buy from the Gulf of Mexico. Pet coke is, especially from -- more from that part of the world. So it's the usual suspects, I would say. Again, no dependency on just one region. But clearly, the -- at this point in time, if Russia is removed from the mix, then the supply-demand balance shifts no matter where you're currently buying from. So the answer to your question is that we are opportunistic. We don't have -- we aren't structurally tied to one or the other.

Direct purchasing from Russia hasn't been that much. It's been very little. But in Russia, if coal is not available to others, then those others will go to our suppliers. Then we will still have the same issue.

Understood. And I said last question. Apologies, just one very final one, given the importance of the topic. I mean, generally, has the policy been to sort of have 4 or 6 months in inventory? Or has the policy been to also have some hedging layers further out? I'm just wondering what the policy typically for Titan normally is in terms of fuel purchase and whether you've changed that at all? Because presumably, you don't want to get locked into these high prices if hopefully, they do start to drop again.

I would say there is no fixed policy. We closed the year with high inventories in solid fuels and that was because of the uncertainty. I mean it was much higher at the end of this year compared to last year.

In a volatile world, we try to adapt to what's happening. So we don't have a fixed policy on either inventory or hedging. One of the problems is that if you look at pet coke, for example, and you know the industry, Mike. You cannot fix the price of pet coke. It's always tied to pace. So the only way to have a fixed price is to have it on the ground. Coal is a bit different. So each country, each logistics system, because the logistics are a big part of the cost as well is different. And depending on prices and the situation, we adapt.

[Operator Instructions] There are no further audio questions at this time. We will now move to our webcast questions. The first webcast question is from [ Flores Ditsraw ] with [ Aperture ], and I quote. "Thank you for your presentation. Could you please tell us the EBITDA margin on second half 2021 or fourth quarter '21 and the effects of electricity and transport costs? Additionally, what are your expectations for margins going forward? And can you pass on the cost to customers?"

The EBITDA margin on the last quarter is shown on the first slide in the appendix. And of course, it shows there by region. And I believe somewhere in the presentation, it must be for the group as well. The specific cost increase in the fourth quarter, I do not have the numbers for the quarter to give you. But in terms of the last part, where I think is the most important, it is the expectation going forward, as we mentioned before, we had the price increases starting with the 2 key markets, in Greece with 2 price increases, October and a couple of weeks ago, both significant order of magnitude of 10%, and they were both successful. In the U.S., again, we had very successful price increases announced for the beginning of the year, which are practically absorbed by the market. And in fact, for Florida, a second one has already been announced for June. We like to draw comparison with the steel industry where it's another significant building material and the price increases there have been over 100% and already absorbed by the market. Practically as long as it's an industry-wide impact, price increases are easier to pass on to customers if it was just 1 player being -- trying to pass the prices, it wouldn't be easy. So our expectation is that the price increases that we have implemented, again, as Yanni has mentioned, in 3 countries, Southeast Europe, also implemented. We see that prices do go all the way to the customers as long as we remain competitive. If we try to push prices much higher than competition, obviously, we would have a problem.

The next webcast question is from Lawrence [ Vertaille ] with [ Vertaille Onsale ] and I quote, "Do you use the financial market in order to cover the Titan exposure to energy costs?"

We do use the financial markets. Where there is -- there are relevant traded commodities or indices. For example, for gas in the U.S. we are quite active and we have managed to contain our cost by hedging in the market. We have done, to a limited extent, some hedging for coal and a lot of hedging on the shipping freight side as well.

The next webcast question is from Alexander [ Gross ] with Deutsche Bank, and I quote: "First question is, in terms of energy costs, can you comment on the impact on EBITDA for the first quarter 2022, please? Second question is, where do you see EBITDA in first quarter for the SEE operations given the bankruptcy of one counterparty?"

We obviously don't comment on the first quarter of '22, which is not even not out yet, it is not publicly announced. But the price increases that we have announced are expected to cover the increase in costs. Now the specific reference that was made to one of the suppliers who went bankrupt in Southeast Europe, that was last summer, already -- has already been substituted by an alternative supplier. The impact was that we had a lower cost contracted with the specific one who went bankrupt and it did cost us, I mean, something like EUR 1 million, not a great amount to substitute.

The next webcast question is from [ Arlean Jacourte ] with [indiscernible] and I quote: "Have you raised prices over the first quarter 2022 in your key markets? If so, by how much? Could you remind us the price increases negotiated over the fourth quarter 2021?"

We have covered this.

I think we have covered that.

I mean more than once we have commented on that.

Moving on to our next webcast questions. Our next webcast question is from Lawrence [ Vertaille ] with [ Vertaille Onsale ] and I quote: "Concerning the spare parts for running your business, are some of them coming from China?"

Very little, not -- nothing material, significant.

We do have a couple, but nothing systemically significant.

The key equipment is mostly German, it's European and partially American.

The next webcast question is from [ Clare Tikmarsh ] with [ River ] and I quote: "What is your CapEx budget for 2022? And how much flexibility do you have to adjust that -- to adjust that as the year progresses, given the higher level of geopolitical uncertainty?"

We have a high budget for 2022, especially for investments in the U.S., aiming to capture the growth and to improve our efficiencies and our logistics in the U.S. We have announced the construction of 2 new domes at our import terminals in Tampa and Norfolk, which is something like over $60 million for the 2 over the next 2 years. The budget for the year is for over EUR 150 million in CapEx, and we do have considerable flexibility as shown in 2020, where we had a budget of over EUR 120 million and we only executed EUR 80 million as a result of freezing some projects for COVID. So once some projects are approved or even initiated, there is a lot of discretion as to how much to spend within a year.

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

Well, just to thank everyone for joining. This is the end of the call. The next -- the next conference call for our results coincides with the date for our general assembly on May 12. We'll be issuing the results in the morning and having the general assembly later on. And I should also point out that on the 11th of April, our integrated annual report will be available on our site with plenty of more detailed information for whoever is interested. So thank you very much for attending.

Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for calling, and have a pleasant evening.