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

Ladies and gentlemen, thank you for standing by. I am Gailey, your Chorus Call operator. Welcome, and thank you for joining the Titan Cement Group conference call and live webcast to present and discuss the first half 2024 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. Marcel Cobuz, Chairman of the Group Executive Committee; Mr. Michael Colakides, Group CFO; and Mr. Bill Zarkalis, President and CEO of Titan America. Mr. Cobuz, you may now proceed.

Thank you. Good morning, good afternoon, everyone, very happy to be with you today, and I'm joined here by Michael, our Managing Director and Group CFO; and our CEO of Titan America, Bill Zarkalis, and looking forward to an interactive session and your questions. Very happy to report today an excellent performance for quarter 2 and first half of the year. This is marked by top sales growth, 7.6% over proportional EBITDA growth of 16.7% or 20% if we exclude some nonrecurring items. And that's mainly thanks to our good performance in U.S., in Greece, in Southeast Europe, thanks to volume growth, stable pricing and operational efficiencies, which impact cost performance. Good to mention also that quarter 2 is a growing quarter. It's a profitable quarter, with more than 9% in sales, and that's the ninth consecutive growth quarter for TITAN Group. What I can share is that we are also pleased with the level of margins we have achieved at the end of the quarter, which are around 35% versus 22% of June last year. That gives us more assurance to continue with our high-level CapEx projects, a lot on the growth CapEx and Michael will give more color around the key investments, around aggregate reserves, ready-mix network and energy mix, which would impact positively as of second half of the year and throughout 2025. Few words about our Green Growth Strategy that we have highlighted with you last year. We are well on track. Very happy to report what we have signed or complete with 4 bolt-ons, which are supporting our growth of sales and impacting positively the margins. That's mainly in aggregate, and in new cementitious materials like pozzolan and clay. We are seeing also green margin expansion, thanks to a record level of alternative fuel usage, which for our group is reaching 23% in June, an excellent performance given the low start that we had a couple of years ago, but also the relatively different legislation framework in markets where we operate in turning waste into fuels. In terms of decarbonization, but also customers commercial transformation. We have done some nice strides this last quarter, this last half, not only reaching new levels of sustainable product sales, but we have launched also a new family of brands, commercial brands, Titan Edge, we have sustainability in which performance and Titan Premium for high value-added services, which will be increasingly available in all our markets. and as of next quarter, we will publish this performance. To finish on our Green Growth Strategy. I think the ratings have been exceptional around ESG. We have included some of them in the press release, and we have given also some guidance that our projects around carbon capture and storage and the one in Athens, which addresses 20% of our Scope 1 Direct CO2 emissions as well as a new project where the group is having a strategy from the Department of Energy on calcined clay technologies in Virginia. So these 2 projects are entering feasibility phase, work more to say in the next quarters. Michael will give some details about our listing process and the planned IPO. On my side, very pleased to report that this is progressing as planned, and we will keep the deadline of early 2025 for listing our U.S. subsidiary in one of the New York markets. More news on the shares. I think you have seen that our stock is now included in FTSE Russell Large Cap, FTSE4Good Index. That's a good recognition of both our results but also the impact of sustainability in ESG ratings. And we have announced today that yesterday in the Board meeting, the Board of Directors decided to continue the share buyback program for another EUR 20 million. Finally, you will hear from us an optimistic view on the rest of the year as we maintain a positive outlook and we'll give more color market by market. So very happy with the results and passing the floor now to Michael, and then we'll have built all the U.S. results, performance and we'll finish with capital elements and outlook. Thank you.

Thank you, Marcel. Good morning and good afternoon to everybody from me as well. We are indeed very pleased to report a strong year-to-date performance driven by robust sales, operational cost efficiencies and profitability growth coming from our core markets of the U.S., Southeast Europe and Greece. The group achieved robust sales growth of 7.6% year-on-year with sales reaching EUR 1.3 billion with all our region supporting the top line growth and overall volumes increasing across all product lines. The EBITDA of the first half rose to EUR 281 million, up by 16.7% over the first semester of last year or 20% on a like-for-like basis, excluding some one-off costs, reflecting stable pricing and operational cost performance. The last 12-month EBITDA margin strengthened to 22%. Net profit increased by 34% to EUR 149 million, following the robust EBITDA results. Subsequently, earnings per share for the first half reached EUR 2 compared to EUR 1.48 last year. In the second quarter, sales grew to EUR 699 million, up 9% compared to the second quarter of 2023, while the EBITDA rose to EUR 172 million, posting 28% growth year-over-year. With regards to volumes, we saw increased sales volumes of cement in Europe and solid demand levels in the U.S. With regards to pricing, in cement prices remain broadly stable with, however, some selective price increases. Our cost base has improved, thanks to benefits stemming from the continuous improvements in plant modernization, digitalization, alternative fuels utilization and the addition of solar plants. Net debt at the end of June 2024 dropped by EUR 20 million to EUR 640 million, resulting in a low leverage level of 1.1x. CapEx continued at high levels, focusing on improved energy mix performance, digitalization projects, the expansion of quarry reserves and investments in logistics and storage capacity. The Titan Green Growth Strategy, 2026 execution is well on track, as Marcel commented before. As announced last May, the plan to list our U.S. operations in New York exchange is on track. We cannot provide further details. What I would like to update you is that we are progressing according to schedule and on time, aiming for the first quarter of next year. A new EUR 20 million share buyback program was approved yesterday by the Board, and this will start upon the termination of the existing one at the end of August. Meanwhile, the EUR 0.85 dividend per share for 2023 was paid on July 3 to our shareholders. Last, Titan stock has been included in 2 more indices, the FTSE Russell large cap index effective last March and the FTSE4Good index effective in the second quarter. Turning to the next slide, where we have the graphs of the first half of 2024, and of the second quarter alone below, which I just described and indicate the high growth rates in sales, 7.6%, EBITDA 16.7% and net profit after tax, 34%. Our EBITDA margin rose in the first half to 21.3%, a significant improvement compared to previous periods. In the coming slide, we highlight the last 12 months figures on sales, EBITDA and net profit after tax and show the continuous growth performance trend. The last 12 months sales sum up to EUR 2.64 billion, a growth rate of 6.7% and while the EBITDA at above EUR 580 million, which is 33.1% higher, while the net profit after tax rate is even higher at 74%. EBITDA margin has improved to 22%, a 4.4 percentage point increase compared to the previous 12 months. On the bottom of the slide, you can also see the quarterly evolution of the 12-month rolling EBITDA, which has been on a continuously upward trend for 9 quarters since the second quarter of 2022. Taking a look at our P&L on the next slide, you can see that our sales growth has outpaced costs, and our EBITDA growth was 17%. The growth in SG&A includes about EUR 9 million of one-off costs, representing expenses for the preparation of the U.S. IPO as well as the cost of an early retirement program in Greece. Finance cost declined and net profit after tax increased by 34%, resulting to EUR 2 per share earnings. On Slide 6, we have the chart of some critical cost factors after some sharp increases in the quite volatile period since mid-2021. For the past 12 months, we are witnessing relative stability, albeit at higher levels compared to pre-pandemic years. The outlook for this cost for the remaining of the year appears fairly stable. Turning to our sales volumes. The positive dynamics of demand in our markets have been mirrored across all product lines, recording moderate volume growth across all main products. Domestic cement volume grew to 8.7 million tons, increasing by 3% year-on-year, while higher cement and clinker exports were also achieved. Similar growth trends were recorded in our downstream products with ready-mix volumes increasing by 8% year-on-year as those aggregates by 3%. A similar pattern was experienced in Q2 as well. Now looking at our cash flow. As expected, the robust EBITDA of the cement sales at EUR 281 million was conducive to the strong positive operating free cash flow of EUR 110 million. And despite higher costs for acquisitions and taxes, we have been able to further reduce debt by EUR 20 million. Taking a look at our capital expenditure levels, which were high at EUR 109 million, containing many growth projects. The investments channel to the U.S. focus on the modernization of the ready-mix fleet, production capacity increases in ready-mix and in the Pennsuco plant, logistics improvements and capacity expansion in concrete block units. While those in Europe focused on a number of initiatives of the energy costs through higher utilization of alternative fuels and for the photovoltaic installations. Moreover, we concluded for bolt-on acquisitions in cementitious materials and aggregates. With regards to our debt picture in the next slide, a further reduction in net debt was achieved with the June net debt closing at EUR 640 million, lower by EUR 122 million compared to the same period of last year and by EUR 20 million compared to June of 2023. The net debt-to-EBITDA ratio improved, reaching a record low of 1.07x. With regards to the second graph, the maturity profile of debt, the next significant bond maturity is a EUR 350 million issue maturing next November. And it is intended to be repaid from own liquidity and the use of bank lines. Now moving to the review of the regions and starting with the U.S. Titan America delivered another stable performance with solid top line growth and robust profitability despite the very wet weather, which characterized the semester across our regions. Sales reached $836 million, which is a 5.2% increase year-over-year. Sales benefited from firm pricing in cement and selected price increases in aggregates and ready-mix as well as from improved volumes in ready-mix and building blocks. EBITDA reached $177 million, a 21% increase. Profitability was aided by the lower cost of reported cement, the optimization of energy costs and by the operational efficiencies achieved following investments in manufacturing and across the supply chain. Cost nevertheless, remain high, especially raw materials, labor and distribution costs, much above the pre-pandemic cost levels. Overall, we see a resilient market in the U.S. with positive demand fundamentals. While inflation and high interest rates put pressure on the residential markets, continuous investments in large infrastructure, industrial and commercial projects support demand and our order books remain strong. Our group is committed to its investment in the U.S. market with CapEx being channeled on key projects, which will support growth and the development of new downstream cement products, while in ready-mix, we expand our capacity, we enlarge and modernize our fleet. And in aggregates, we continuously look to expand our reserves by acquiring new quarries. The new import goals in Tampa and Norfolk are now complete up and running, offering larger capacity, broader product availability and reduced operating costs. We continue our efforts towards digitalization where we transform our production, achieving higher throughput and reduced energy costs. In parallel, we completed further breakthroughs in logistics and on the customer experience front. Overall, significant investments have been completed in the U.S., triggering operational efficiencies, and these are manifested in our results. Turning to Greece now, where the first half of the year was very strong with double-digit volume growth achieved across all our products, cement, ready-mix, motors and aggregates. Total sales for Greece and Western Europe reached EUR 219 million, a 10.7% increase year-on-year, supported in addition to volumes by the resilient pricing in cement and price increases in ready-mix aggregates and mortars. EBITDA, however, dropped to EUR 30.9 million as a cement export towards our own terminals in the U.S. and Western Europe, we are conducted in line with the market at lower export prices compared to levels of last year. Also, the cost of higher electricity costs weighed negatively on the profitability of the first half. Overall, the cement market in Greece, we estimate increased by about 43% over the last 5 years, fueled by strong demand for residential infrastructure to real estate. Our group continues to invest in CapEx in the region with our green initiatives having reached significant milestones such as increased alternative fuel utilization and a continuously lower clinker to cement ratio. Furthermore, our investments in new silos, ready-mix plants and trucks as well as the expansion of our aggregate capabilities, coupled with digitalization initiatives have resulted in increased capacity and efficiencies. Moving now to Southeast Europe, where the region recorded another very strong performance this semester driven by continuous increased demand across almost all the countries. Sales reached EUR 215 million, up by 10.4%, supported by volume growth as well as by overall price stability. EBITDA reached EUR 83 million, assisted by an improved cost structure, thanks to energy cost savings, deployment of real-time optimizes in cement production, increase alternative fuel usage and also covering of a part of electricity needs with owned photovoltaic plants. In this market, growth continues to be driven by residential infrastructure and tourists, while thanks to the specific geographic characteristics of the region, the countries operate as a cluster, providing flexibility and as leading to productivity gains. Our group has been focusing on decarbonization and initiatives in the region to further expand its green product offerings and improve the clinker to cement ratio. Now turning to Eastern Mediterranean, a region that continues to be penalized by challenging macroeconomic conditions, which bear a negative impact on the group's figures. Sales in the region grew to EUR 115 million in this first half, up by 13.3%. This was mainly underpinned by the strong domestic cement sales growth in Turkey of around 20% as well as by increased export activity of both clinker and cementitious materials. EBITDA dropped to EUR 3.7 million as the currency devaluation, especially that of the Egyptian pound had a severe impact in our euro reported figures. While overall cement consumption in Egypt remains stable, this is not representative of the underlying activity as currently is picking up on the ground with major real estate and to projects expected through foreign direct investments. In this environment, the group maximized its operational efficiencies by expanding its export volumes and by streamlining costs with plants increasing alternative fuels utilization rates at above 40% in Alexandria and about 30% in Beni Suef. In Turkey, which also battles with high inflation in interest rates, domestic cement volumes recorded a strong growth, driven by the reconstruction activity post last year earthquake, the strengthening of the existing building stock as a replacement of the older one. Prices remain well oriented, slightly lagging the Turkish lira devaluation and the cost inflation with however, further increases announced very recently. The group benefited from a lower energy cost in Europe reported terms, while it is continuously shifting to cement price with lower clinker content. A couple of words for Brazil, where, as a reminder, we consolidate the consolidated figures are on an equity basis. Cement consumption in Brazil increased by 1.5% in the first 6 months, while in the Northeast, the region where our own joint venture operates a 4% increase was posted. Elevated interest rates, lower disposable income and macroeconomic uncertainty affects cement consumption as well as public investment policy, which faces fiscal constraints. In the first half of the year, Apodi's cement sales volume were marginally lower, but ready-mix volumes almost doubled, resulting in sales remaining stable at EUR 60 million, almost flat, while the EBITDA increased by EUR 2.8 million, reaching EUR 8.8 million. And now some comments on digitalization and decarbonization. Moving first to decarbonization. Titan has intensified its efforts to achieve decarbonization goals, achieving new records of alternative fuel substitution of above 20% and of clinker to cement ratio of 76.6%. However, specific CO2 emissions rose to 618 kilos per ton from 611 kilos due to the increased production and sale of clinker exports from Egypt. Now let me outline a few developments for which we are proud. A significant milestone was the official inauguration of the new calciner installation at the Kamari plant in Athens in early April and EUR 26 million investment, which will cut CO2 emissions by 150,000 tons annually and enable us to use of nearly 200,000 tons of waste derived fuels. We are also proud of our recognition as a climate leader by both CDP and Financial Times as well as our inclusion in the FTSE4Good Index Series. Titan also signed a memorandum of understanding with Sinoma CBMI, a global leader in cement technology and engineering system integration to explore new business opportunities and drive technological innovations aimed at decarbonizing and digitalizing cement manufacturing, a partnership that will enhance Titan's Green Growth Strategy in 2026. Earlier in the year, Titan America Roanoke cement plan in Virginia was selected by the U.S. Department of Energy to negotiate an award of up to $61.7 million. This will support the pioneering deployment of a calcined clays production line significantly reducing CO2 additions. As we also recently announced, Titan has acquired concession rights to the Vezirhan, pozzolan quarry in East Marmara in Turkey, securing further pozzolan reserves for internal use and trade, facilitating the launch of new low-carbon products and cement is solutions. Last, the group unveiled a solar plant added Zlatna plant in the cement in Bulgaria, expecting to supply 14% of the plant's annual power needs with clean renewable energy. And now on digital, on the manufacturing side of digital, the group continued the rollout of its globally innovative artificial intentions based real-time optimizers for its cement manufacturing lines and completed 2 more end-to-end RTO-enabled plants. The rollout of RTOs in several more as across the group is carried out as planned, in line with the goal of installing RTOs in all of the group's cement manufacturing assets by 2026. It has been estimated that the improvements in throughput can be over 10%, while reduction in energy consumption had reached up to 10%. In addition, we have already completed the rollout of our machine learning-based failure prediction system to all our cement plants. The group's first digital business, semi marking the unique digital service making this unique digital service available to global cement manufacturers continue to expand its customer base, offering very fast payback from increased reliability, decreased maintenance costs and reduced downtime. Finally, the group continues to work on new AI-based digital solutions on cement quality optimization in the U.S. plant, while expanding its AI-based digital solutions portfolio to the area of manufacturing of ready-mix concrete. In the integrated supply chain domain, we completed the rollout of our new world-class dynamic logistics solution for ready-mix concrete in all our operations employed. This new digital solution, leveraging big data, artificial intelligence and advanced analytics, improve significantly the productivity of the supply chain and offers better customer service. It is now being prepared to accelerate its rollout to the other major ready-mix concrete operations of the group in the U.S. as well as in other countries. On the customer experience side, the group is digitalizing the way it interacts with its customers to offer superior customer experience, extra services and user convenience. With digital customer portals operating in 50% of business units, we work on enhancing the functionalities and user experience of these portals as well as deploying sophisticated digital portals to the rest of the business units. With this part, I complete the presentation of our activities for the second half. And before we go to Marcel for his comments on our outlook, we will be asking Bill Zarkalis, the President and CEO of RBS Operations, to give you his personal feedback on how our U.S. business is performing. Bill?

Thank you, Michael. Appreciate it. And good morning, good afternoon to everybody from Miami, Florida, and thank you for investing the time and joining us in this presentation. I'm just going to give a few broad comments on Titan America performance and a bit about the economy here. And then we can leave any details, any specific questions for the Q&A segment. As Mike mentioned in the second quarter, Titan America delivered a very strong performance, one that sets us firmly on track to achieve another record year both in revenue and operating profit in Titan America. In the second quarter in dollar terms, we delivered revenue growth of 7.9% and EBITDA growth of 46.9%, 47% almost. We mentioned last time that the first quarter results were disadvantages by the timing of the annual maintenance shut down of our Pennsuco mega site. Conversely, the second quarter results are favored. For a like-to-like comparison, we have to look at the first half results, whereby, as Mike mentioned, Titan America achieved in dollar terms, revenue growth of 5.2% and EBITDA growth of 21.1%. And keep in mind that this includes exceptional charges and the IPO preparation is part of that exceptional charges as well. I must point out that this accomplishment came against an unfavorable backdrop as demand in the second quarter was affected by severe weather phenomenon, heavy rainfall in all the areas where we operate that forced the job sites to shut down and some projects to be delayed or even rescheduled. The underlying in 2024 market backdrop remains as we discussed the last time, a tail, as we said, countervailing trends. On one hand, softer demand in the residential segment, both single-family and multifamily, which are offset by strong demand in infrastructure, public works and manufacturing reshoring with a surge, I must mention in investment in data centers, especially in the state of Virginia, which emerges as a data center capital of the United States. Coming to the residential market softness that I mentioned, the Fed interest rate hikes had multiple impacts but the clearest one by far was the one on the housing market. Both the high mortgage rates and the low house affordability led to a softness in the 2024 demand. However, there are good news. It seems we are at the bottom of this mini cycle for the residential segment, one induced by the restrictive monetary policy. Since finally, that the soft landing may be in sight. The U.S. economy is still growing in the second quarter. I'm sure you read the news. The Fed appears to be closer to tame in the inflation. The labor market is cooling down with an employment inching up but fell at controllable and not recessionary levels. And finally, we see the consumer confidence being slightly impacted, but still at healthy levels of spending. All these are very favorable elements for a soft landing. As soon as the Fed goes into the interest rate unwinding cycle, we expect the underlying strong positive trends of the housing demand to start kicking in. So the house demand will be supported by the structural underbuilt and a strong demand driven by a boost in the household formation. The resurgence of the residential demand in combination with the growth of the one in essential investment in infrastructure that takes place in the United States and also the unprecedented manufacturing reshoring makes us overall very optimistic about the rest of the year and also into 25 and the years to come. And with this broad comments, let me pass it on to Marcel for comments on the outlook.

Thank you, Bill. Thank you, Michael. So a couple of comments you have already heard, Bill and Michael, on the expected 12 months rolling results as well as a couple of directionally indicators from U.S. As I mention at the beginning, we maintained a positive outlook for the rest of the year. Traditionally, we do -- this is based on the macro analysis and the segment analysis in the markets we operate. I think Bill has made a very assertive argumentation that U.S. economy, particularly in the markets where we operate is projected to sustain this growth. The residential segment should stabilize before starting to grow in 2025. And as these are regions experiencing population growth, this will be a nice tailwind for the faster rebound. Our good exposure to infrastructure segment is poised to bring additional growth as we see federal estate investments in transportation and other projects. And the industrial and warehouse construction is also going well forward. I think in Greece. Greece is in the post pandemic recovery growth remains well above the euro area average. And the backlog is very strong over the next couple of years. That's driven by private consumptions, investment in construction and tourists, and we do have specific offers by segments, particularly for infrastructure and hotels. And that's also financed through the implementation of recovery and resilience facility with an increasing focus on sustainable construction practices. So overall, a good period to come. Similarly, the mix of private construction, foreign investments, the foreign residents remittances, this is impacting positively the regional growth in Southeastern Europe regions, so stable trends there. We see improved fiscal conditions. We see public and private investments, and we see moderate inflation. So again, that strengthens our positive outlook scenario. Without going into too many details, we see normalization signs in Egypt. And I think Turkey also macroeconomic policies promised to solidify the dynamics underlying the country's potential where we see volume growth, full pricing and improving margins. So good times to come from us today in this meeting. I think with this Spyros Kamizoulis, our Investor Relations and I think the operator, let's open it up for Q&A.

[Operator Instructions] The first question is from the line of Touahri Yassine with On Field Investment Research.

I think I would like to better understand your performance in the U.S. Could you give us an order of magnitude of the amount of cement that you import in the U.S.? Is it fair to assume that you might be importing 0.5 million tons to 1 million tons of cement and that you had a cost reduction of maybe like $10, $15 versus last year on your cement imports? I would just like to understand the trend? And then second question, we see a little a bit more about the medium term in Florida. We see a couple of independent import facilities being built up in Palm Beach and in Jacksonville. When it looks like on paper, they could import up to a couple of million tons in Florida and Georgia. Is it -- do you see a risk that they would take market share if you're focusing on pricing? Or do you see a risk that it might make it harder for you to increase prices in this region? And then the third question, which is somewhat related to that is your decision to invest into Calcined Clay, a way to become less dependent to import and to be more competitive because it's more effective to produce Calcined Clay then to import cement from Greece or Turkey?

Yes. Thank you, Yassine. Maybe I will start, and then please, Bill complement. So I think you've seen last year, when we presented the strategy of the group and we announced our plans for the U.S., we have insisted on how important it is for us to double down on cementitious materials and aggregates as well as to keep investing in logistics in the U.S. And I think we reconfirmed our model of a long supply chain, where U.S., particularly our operations at the net importer market will piggyback on our manufacturing capabilities and shipping capabilities for operations like the ones in Greece at market conditions. Going forward, of course, it's our ambition to achieve more self-sufficiency in terms of importing capabilities of several materials. And for this reason, we have finalized 2 large investments in multiproduct hubs in Tampa and Norfolk, which will allow not only to optimize the imports, but also to grow across blended cement imported but also cementitious. So that's pretty much in line with our targets, and we see already the signs -- the positive signs of investing in the multiproduct hub and investing also in clay and new technologies. Bill, do you want to give more color on the specifics?

Of course. Thank you, Marcel. And thank you, Touahri, for your questions. Coming to your first question in relation to imports. As you know, we have -- we are an integrated supplier. And overall U.S. market is a deficit market. So it will always need imports. As part of our strategy, we focus on maximizing our production capabilities, so being a local supplier, an American supplier. And we are complementing our capabilities to support our customers everywhere they operate with our 3 mega import terminals in Tampa, in Norfolk and also in New Jersey, now in Essex, which serves the metro New Jersey and New York areas. Our import capabilities are up to 6 million tons and can be more than that. And we import roughly more than 2 million tons is going to be [indiscernible] in this year to support the growth of our markets and our customers. Coming to your question about the independent and the announcements that you see out there. First, I'm sure you know better than anybody that adding capacities of relevant, but this doesn't really reflect what is going to happen. So I think the numbers of what the capabilities potentially of these terminals are and assuming that these terminals will be bringing 2 million tons in the market is grossly exaggerated. But let me come to the fundamentals. We don't see any impact in the market in '24. And we think that overall, if you look at the imports in the U.S. overall across the U.S. market, they remained stable over the last 3 years, '22, '23. And this year, so far, the official data that we have saw a slight decline. So we've seen this announcement as well in relation to what is planned in the market, but we don't feel that this is going to affect us. This doesn't change our price, our strategy, which is to increase to keep on growing, but at the same time, increase our prices, and this is what we have done this year. We have increased our prices in cement in single digits. We increased prices in ready-mix and aggregate in middle to double digits and block. So overall, we continue our strategy to focus on growth in the markets we operate based on our product mix and our logistics capabilities and our customer service or our new product, high-performance products developments. And I think this is where we're going to see this market really focusing. This market is transitioning, transforming in a high demand market, into a market that has high value, high growth value pools that require integrated suppliers, fully integrated suppliers that can meet the demands of our customers. Now coming to the Calcined Clay. We don't see it as a replacement of cement. Calcined Clay really opens the door to new capabilities to new products. This is not going to be a single product market in the future. We see it happening already as we approach our customers with new demands for data centers, for new construction technologies. All these dynamic transformation themes for a market that is decarbonizing that requires circular economy solutions, infrastructure modernization, resilient organization, always requires new products. And we see cementitious materials like Calcined Clay and pozzolan and other elements really supporting growth through new product development. And this is how we see it, not as a replacement of cement. It's far more complex, far more interesting like that. And may I add that already we have secured reserves, local reserves of clay for our future plans for development of blended cements and new formulations and engineered mixes that include clays or pozzolan or other cementitious materials. Thank you for your question.

And maybe just a follow-up question on the cement prices. You said you managed to increase prices by a single-digit percentage or a single-digit number in terms of dollars in the U.S. this year?

When we compare first half with the first half, cement prices increased by middle to upper single digits. When we compare what has happened in the last quarter, then we're talking about low single digits.

Okay. That's very clear. Maybe just another follow-up on the new kind of cement. Do you have a discussion with the Department of Transportation and other on the regulator to allow for you to offer some new kind of cement that are not yet approved by construction standards?

What I can say right now is that in both major areas where we operate, we have already approved by the DOT new product formulations based on blended cements.

The next question is from the line of Athanasoulias Nikos with Eurobank Equities.

Two short questions from my end. The first one is regarding the Investor Day that you announced in the previous call. When do you schedule or do you plan to host this? And the second question is regarding the previous buyback program that will be completed in next month. Are you planning -- what are you planning to do with these shares that through this program, are you planning to pass for them? And if yes, what is the time line on that?

The question to both is the following. Regarding Investor Day, we have been advised by our advisers in the U.S. that we cannot have one until after the IPO. Because if we give any signals about the group, given the size of the American operations, we would be giving indirect information about the U.S., which is not allowed. So you will have to wait for next year. Regarding the buyback, we are now still below the 5% mark that we have reached some time last year, then we had awards of long-term incentive plans and reduced us. So we are now replenishing if you wish, what has been granted. There are no plans for no shares to be canceled at this stage, and there is definitely no intention to have them throw back into the market. We've never done that.

The next question comes from the line of Kollias Vasilis with Pantelakis Securities.

Congratulations for the robust set of results. My first question is regarding the IPO proceeds. Is there any thought for [indiscernible] and has shareholder remuneration or IPO proceeds will channel exclusively towards acquisition for products related optimization? My second question is about the percentage of cement sales. During the last year's presentation, you mentioned that by 2026, the percentage of cement sales would drop below 45%. This will be achieved through acquisitions or is there or from the current product slate? And my third question is regarding that is the bottom line. Could you please state the hyperinflation gains in half 1 and up of this net profit for the same period?

I will give a very quick answer to the first question, which is that we are not allowed to discuss that subject. So regarding the cement.

I think there was -- there's a third question on the net profit of Apodi and the [indiscernible].

Apodi doesn't have inflation is only Turkey, and there is some 5 million benefit, but it shows on one line and then there are minuses on other lines. So it's not a net impact. And Apodi is plus or minus EUR 1 billion. It's really limited the impact on the bottom line.

Yes. And I think regarding 2026 strategy, thanks for the question. What we have guided last year is on top line or sales growth of high single digit and over proportional growth of high digits and even high single -- high double digit for EBITDA and [ ROCE ]. And then we guided on the fact that cement will continue to be the bread winner for the group when we doubled down in investments and developments of our reserves in aggregates and cementitious. As a result, also of a strengthening of our vertical integration, particularly through investments in ready-mix and pickup. We have guided to the presentation last year that the relative weight in a bigger group of cement may be below 50%. Now of course, what we said last year is that the top line growth will come primarily from organic growth, but we do not exclude the impact of M&A. And I think when we will have more to say on this, we will definitely communicate to the market. But we reconfirm our 2026 direction.

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

Two, if I may, on myself. Number one, when you look at Greece, obviously, a very strong performance at a very low base for a number of years now. The sense I'd like to get is around the EU next-generation recovery plan. It's a '21-'27 plan. And I'd like to get a sense from you where you see the timing of this in actual output for you, i.e., was '22, '23, all about planning and is '24 and beyond really about output? Secondly, when we look at Southeastern Europe, again, a very strong performance. In terms of capacity utilizations there, you in my view, you probably started to get to full utilizations. How will you be managing this going forward if growth continues? Obviously, from a pricing side, that should be hopefully helpful. But what can you do about volumes?

Thank you, Tobias. It's a very valid question. So we see a positive impact from the resilience and performance plans and EU next generation, particularly through the backlog of construction projects, industrial engineering projects here in Greece, which is as per data collected from large construction companies is EUR 6 billion to EUR 7 billion for the 3 years to come. And that's progressing, I would say, quite nicely. Of course, there are always challenges with construction workers, there are challenges in terms of planning and permitting. But what we can say is that we do have a share of wallet which is nice exposure of this project. And we also have a good mix of these public projects with private projects. I think in one of our previous meetings, we have told you about this project here in Athens Marina, which is 3x the size of Monaco, which is Hellinikon project, which is also consuming a lot of cement, ready-mix and aggregates. We have put even ready-mix plants in the premises, and we are working on premiumizing our products there. So good timing for the years to come and being a highly integrated player, we do fire from all engines. On Southeastern Europe, I think you're right, we are running at high utilization rate. And given the fact that the plants are not very far one from each other, we do have positive effects of network. In other words, we do have occasionally transfers of volumes, clinker or cement between the networks. So far, we have managed any peak of demand with no disruption.

And we also have the improvement in throughput through the digital applications, through the lower clinker to cement ratio products, which again increased the effective cement production capacity. So technically, we're also working on growing the level of our capacity.

And I think just to finish on this, of course, the clinker capacity is critical in our industry, particularly on the cost side, but the grinding capacity is becoming even more important as the intake of supplementary cementitious materials is becoming more important. These are countries which -- where the market is generally accepting rather fast the blended cement. And I think we have disclosed in the last quarter that we have completed the transaction by entering a joint venture in pozzolanic materials here in Greece, which gives us ample access to reserves in excess of 100 million tons of pozzolan. So this is only one of the actions in bringing more cementitious materials to the market in addition to the ample results of fly ash, which you can still find in this part of the world.

If I may follow up on that, the SCMs, which you are securing, are you eventually looking to make this another business line, which you will also supply externally or is this for the time being only for your own internal use?

As part of our commercial transformation, and you have seen that we are launching also a new family of commercial brands, which will qualify our more sustainable but most performing products and services, be it in cement, embedded cement, in recycled aggregates, in high value-added concrete. I think the supplementary cementitious material will play a critical role. We have an excellent playground here in Greece, where all these products are already in place. We do have a positive cannibalization of, let's say, lower -- or higher carbon products by lower carbon products by using additional pozzolan as the market acceptance and as the economics of these new offerings will confirm, we will be aggressively promoting low-carbon segments in this market.

And then just if I may follow up on Greece again. You talked about residential as well in terms of the demand. Is this so far purely from foreign buyers or is the Greek buyer starting to come back as well or builder, let's put it this way, housebuilder?

I think we are following the number of permits, a number of permits put in construction, and we see a positive growth there. And you're right, the foreign buyers of existing housing stock is there moving the market, but we see an improving trend on the private holders constructing or extending existing houses. We see also positive trends on the renovation market. And there are also a couple of incentives still provided by the government, like the VAT exemption and others, which I think will still fuel the market positively.

Yes. The next question is from the line of Kourtesis Iakovos with Piraeus Securities.

Yes. In terms of your cost base, this first question, if you could quantify for us, taking into account the investment of the last year's investments of the last years in terms of digitalization, decarbonization, what is the benefit on your cost base as net amount currently? And where do you see it by 2026? Second question has to do with CapEx for this and the coming year. Where do you see it saving for 2024 and 2025. What part of this will be directed to the U.S.? And what part of this will be directed to the projects of decarbonization and digitalization? And third thing has to do with your dividend policy. Leaving aside any use of IPO proceeds, which you cannot obviously comment. How should we think of it going forward as a payout ratio? That will be from my side.

Well, the investment, we obviously do not have a breakdown by categorizing the investments and their returns and the improvement in the performance. What I can say, if you look at the performance of the underlying cost factors and on the other hand, the improvement in our margins, and a lot of that is coming from the investments that have been performed over the last 3 years. Again, very crude numbers by bigger than 10, digitalization. It's over 10% in the first year in the U.S., I recall, and then we have 2 more plants. So year-on-year, there is an improvement, but then it reaches a plateau. I mean we don't have for the single plant 10% every year. It is 10% the first year and then very limited. So the more we apply across our plant network, we will keep seeing further improvements. If we look to carbonization, again, very different from one plant to the other and from one project to the other alternative fuels in Greece, for example, where we source alternative fuels from international markets, there is a more significant benefit. The benefit in Egypt, where the cost of alternative fuels is higher is much less and so on. So difficult to assess, it much more difficult to project. CapEx for this year and next year. This year, we expect it will be order of magnitude of EUR 240 million mark. Next year is still premature. We haven't worked on any budgets yet. And again, given the U.S. situation, we are quite cautiously giving quantitative feedback for 2025. But I wouldn't expect it to be less, although many of the significant projects have been completed. But fortunately, new opportunities come up. So I would not be surprised if 2025 is even higher with new opportunities, which we may not have yet been aware of when they will come up from the countries during budget time. Dividend policy, as we said at the Investor Day last year, we intend to keep the pace of decreasing the dividend to be aligned with the EBITDA and net profit increase. I know that this year, we have been a bit more conservative. We did not follow that pace because of the big jump in profitability, but the trend will continue into next year.

The next question is a question from one of our webcast participants, [indiscernible]. And I quote, congratulations on a solid set of results. A question from my side. We saw strong margins in the second quarter of the year, while at the same time, CO2 emissions increased, bringing them at 2022 levels. What are the reasons behind the increase? And in that sense, what sort of improvement in margins could we expect if you give us some more color for the second half of the year? Many thanks in advance.

Spyros Kamizoulis here will provide more details as needed. But simply, it's related to the sales mix. We had an increased sales on clinker sales, particularly from Egypt, and that comes with an impact on CO2. But we are on the right trajectory, only that one, and now we have switched the clinker sales to cement sales, so that is behind us. And that is responsible for close to 20 to 30 kilograms of CO2. So this is just one point in time. What is important is that it's a positive trajectory of our CO2 per ton of cementitious. As we have reported today, we have achieved one of the highest level of alternate fuels usage that's more than 23%. One of the lowest level of utilization of clinker in our cement and that continues. So I think you should expect improvement for the rest of -- for the year, and we stay firm on track for achieving the 550 kilograms of CO2 per ton of cementitious for 2026 as per our strategy. I think that brings us, Michael and Bill, that brings us to the end of today's meeting. We thank you all for being with us and for a very good number of questions we had. I think Investor Day as much as we would like to meet soon, we will have to be legally permitted by U.S. authorities, and we will keep you informed when this can be done early next year. But of course, reach out to Spyros, reach out to Michael, they are Globetrotters on the planet and happy to answer any questions. As for all of us, we will continue to work hard on achieving our strategy and achieving long-term value creation on the -- on our results and of course, being successful also on the short term. I think next time we will meet on the 7th of November when we intend to publish our third quarter and 9-months results. Thank you. Thank you, everyone, and have a nice day ahead or good evening.

Enjoy your vacations.

And enjoy vacation [indiscernible].

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