Vicat S.A. (VCT) Earnings Call Transcript & Summary

Welcome to the Vicat 2026 Half-Year Results presentation. [Operator Instructions]. Now, I will hand the conference over to Hugues Chomel, Deputy CEO and Group CFO, and Pierre Pedrosa, Head of Investor Relations. Please go ahead.

Good afternoon, ladies and gentlemen. Welcome to the Vicat first half 2026 result presentation. I am Hugues Chomel, Deputy CEO and CFO of the Vicat Group. I'm joined today by Pierre Pedrosa, Head of Investor Relations. On slide two, as a preliminary remark, we would like to draw your attention to the fact that the forward-looking information presented here reflects our current assessment of expected trends across the group markets and should not be regarded as forecast. Let me start with the key highlights of the first half on slide 3. In an international environment that remains complex, the group delivered strong results. Organic sales growth reached 10.8%, driven by the stabilization in Europe, the recovery in the United States, and an acceleration in emerging countries. EBITDA was EUR 367 million, up 13.6% like-for-like, with a particularly strong contribution from emerging countries. On the back of this solid performance, we are upgrading our full year 2026 guidance to like-for-like growth of 7%-9% in both sales and EBITDA. Last but not least, on the climate front, we achieved an important milestone with the startup and the inauguration of the Catch4Climate, our joint venture with three other leading cement producers. This R&D pilot in Germany, dedicated to second generation of oxy-fuel technology, represents a significant step forward for carbon capture. Slide 4 provides our simplified P&L. Group sales came in at EUR 2.036 billion, up 10.8% on a like-for-like basis. On the reported basis, sales growth was 8%, taking into account FX that remained headwind through the first half. EBITDA reached EUR 367 million, up 13.6% like-for-like, with the margin improving to 18%. Net income group share was up 14.7% on a reported basis to EUR 117 million and diluted EPS amounted to EUR 2.6 over the first half, up 14.5%. Overall, the first half numbers demonstrate our ability to convert top-line momentum into profit growth despite persistent currency headwinds. On slide 5, we take a closer look at our sales performance, which was primarily driven by strong momentum in emerging countries. As I mentioned, organic growth reached 10.8% in the first half. While all 4 regions posted positive organic growth in the first half, momentum was particularly strong in Asia, Mediterranean, and Africa regions. Starting with Europe, which posted a moderate organic growth of plus 0.9%, volumes were slightly down in France in the context of the continued soft landing of the residential market. They were stable in Switzerland, despite a particularly high comparison basis in the first half of 2025. Prices continued to rise across Europe, reflecting the integration of CO2 cost, as well as higher energy electricity cost in France following the implementation of the CRPM contract with EDF at the beginning of the year. In the Americas, sales were up 7% organically. In the U.S., cement activity rebounded in H1, thanks to volume growth in our two regions. In Brazil, cement continued its strong momentum, supported by demand in the U.S. region, the integration of [indiscernible], which supports volume growth, and the positive price momentum. The Asia/Mediterranean region was particularly dynamic, with organic growth of 27.7%, thanks to the contribution of all countries. In particular, volumes rose in India, Turkey, and on the Egyptian domestic market, while pricing was very dynamic in Egypt and Kazakhstan. Although currency effects remain strongly negative, this solid performance still resulted in a 14% reported growth for the region. Africa delivered similar strong growth at 26.3% organically, mainly driven by Senegal. Cement benefited from higher volumes and some recovery in domestic prices, while aggregate posted strong growth supported by major infrastructure projects. Mali and Mauritania also contributed positively. Overall, the first half showed solid sales momentum for the group. Europe is stabilizing thanks to positive pricing. U.S. volumes are recovering, and we are clearly benefiting from our presence in emerging markets. Change in scope added 0.9% points to the group revenue growth, reflecting the contribution of [indiscernible] in Brazil. As expected, foreign exchange remained a significant headwind, with a -3.7% impact. However FX pressure eased materially in Q2, where the impact was limited to 1.7% compared to 5.9% in Q1. Moving now to EBITDA on slide 6. Like-for-like growth was 13.6% or EUR 45 million in the first half of 2026. Volumes contributed a positive EUR 33 million effect driven by Africa, Turkey, India, as well as the recovery in the United States. Pricing remained a major performance lever. It contributed positively for EUR 140 million, reflecting price increases implemented across Europe and the emerging countries. It allowed the group to absorb EUR 134 million of additional costs, driven mainly by energy cost increase, both volume and prices, as well as high maintenance costs in Turkey and [indiscernible] in the United States, which are expected to normalize in H2. Industrial performance improved, notably thanks to Kiln 6 in Senegal. Scope added EUR 1 million, and foreign exchange represented a tailwind of EUR 10 million or -3%. All in all, reported EBITDA rose by 10.8%. This is a solid performance for the group, demonstrating our ability to improve our profitability despite an economic environment that remained highly challenging. Let's now take a look at EBITDA growth by region on slide 7. As you can see from the chart, 13.6% like-for-like EBITDA growth was entirely driven by emerging markets. Starting from the left, in Europe, EBITDA was down by EUR 2 million or -1.3% like-for-like, demonstrating resilience in the context of low volumes in France and rising costs, thanks to solid pricing momentum. In the Americas, the Americas were slightly similarly stable, down by only EUR 1 million, as a marked improvement in the profitability in Brazil was offset by the United States, affected by a negative price-cost differential and exceptionally high maintenance cost in the Southeast, which again should normalize in H2. Our emerging markets made the difference. Asia/Mediterranean added EUR 11 million of EBITDA on a like-for-like basis, up 14.8%, on the back of a strong performance in Egypt and Kazakhstan. As expected, Africa was clearly the major driver, contributing EUR 36 million as the ramp-up of Kiln 6 in Senegal delivered a strong improvement in our cost base, compounded by cement price increases. So, the United States are showing some -- let's now deep dive in some of our key geographies, starting with the U.S. on slide 8. Recovery is underway in U.S. markets. In California, cement volumes rebounded in the first half, turning to positive growth in both Q1 and Q2 2026. This recovery was supported by a particularly favorable base effect. In Q1 2025, activity had been affected by the Los Angeles fires as well as adverse weather. The pickup in volumes is broad-based across the different segments in California. This is illustrated by the projects such as the Beverly Plaza mixed-use development in Beverly Hills that you can see on the first picture. In the Southeast, volume growth accelerated in the first half of 2026 after having already outperformed a subdued market throughout 2025. Demand remains well-oriented, driven in particular by the non-residential segment and data centers demand. The second picture show the construction site of Equinix new hyperscale data center in Georgia. The United States are showing some encouraging signs of volume recovery and strong exposure to some of the most attractive segment in the non-residential market. Looking ahead, we did announce price increases early summer onward. Turning to Egypt on slide 9, where the group is delivering another semester of strong profitability. The EBITDA margin in Egypt progressed further in the first half of 2026 to 41.7%. This is an outstanding turnaround story as we were only breakeven in 2022. Our Egyptian business continues to benefit from strong export momentum, drawing on two significant competitive advantages: industry-leading cash cost and a clear logistic advantage with our Sinai plant located 50 kilometers away from El Arish port. Over the period, export volumes were slightly lower, largely offset by strong price realization across our export markets. At the same time, domestic market continued to pick up, supported by large-scale real estate developments and by major infrastructure projects like the Cairo Monorail. Demographic and economic growth should support long-term cement consumption patterns. On top of this, Egypt provides exposure to attractive long-term opportunities in the region, including potential reconstruction need in post-conflict areas. Moving to Senegal on slide 10 and starting with our cement activity. The new Kiln 6 is already contributing to the improvement of our industrial performance, energy efficiency, and profitability. In the first half of the year, cement EBITDA in Senegal increased very significantly by EUR 23 million to reach EUR 32 million. This achievement reflects more of the impact of Kiln 6 and the increase in domestic prices. The industrial ramp-up of Kiln 6 is progressing, and it has already allowed us to fully substitute incoming imports, shut down two older kilns, start improving energy efficiency. It is a major step forward in terms of industrial efficiency and margin enhancements. Kiln 6 is clearly a major midterm EBITDA growth driver for the group. Once fully ramped up and operating with a 70% alternative fuel substitution rate, the plant will generate run rate cost saving of around EUR 20 per ton. Let's stay in Senegal on slide 11, but moving to the aggregate business, which is also delivering strong results. Aggregate EBITDA rose by EUR 8 million to EUR 13 million in the first half. This performance was driven by an acceleration in volumes since the second quarter of 2025, supported by strong infrastructure demand. In particular, the business is benefiting from the demand from basalt riprap used in major public work projects. Altogether, Senegal is becoming a robust regional growth platform for Vicat with a step change in cement industrial performance and profitability, as well as a fast-growing aggregate business supported by major infrastructure needs. Let me now turn to our cost base on slide 12. Energy cost, excluding transport, increased by 11.6% in the first half. This increase was mainly volume-driven. Excluding the volume effect, energy cost inflation remained contained, reflecting the effectiveness of our hedging policy. Transportation costs were also impacted by higher oil prices at 27% in the first half. Most of the group transportation contracts include indexation clauses, allowing us to pass through higher [diesel] costs to the market. As we have explained in the past, our hedging policy provides protection against short-term volatility, basically six months on average, but does not make us immune to a prolonged increase in energy prices. Given the global energy cost inflation we are facing, we expect the impact on our P&L to become more visible in the second half of the year. To summarize, cost inflation remains a headwind, and the increase in energy costs should accelerate in the second half. The group successfully implemented price increases in the first half in most markets to absorb these higher costs and limit their impact on profitability. Slide 13 illustrates how EBITDA momentum translate into EPS growth. Net financial income improved by EUR 11 million compared to the first half of 2025. This reflects two factors: foreign exchange gain on hard currency cash in emerging country, and a lower average cost of gross debt after hedging. Our effective tax rate of the group came down slightly to 26.1%. Altogether, this translated into earning per share growth of 14.5% in the first half on a diluted basis, a direct result of strong operational execution combined with unabated financial discipline. Turning to investments and cash generation on slide 14. Net capital expenditures amounted to EUR 113 million, broadly stable year-on-year, and still including payments related to Kiln 6 in Senegal. We are maintaining strict investment discipline, and we confirm in full the objective of net industrial CapEx dispersed around EUR 290 million. Free cash flow stood at -EUR 36 million in the first half, including working capital outflow in H1, driven by strong revenue growth, business seasonality, and fuel cost inflation. Let me remind you that our free cash flow generation is highly seasonal, both from an EBITDA and working capital perspective, as you will see on the next slide. On slide 15, this is the monthly evolution of the group year-to-date free cash flow. You can see the pronounced seasonality pattern, where our free cash flow generation is heavily weighted towards the second half of the year. You can also see that the H1 2026 profile is fully consistent with that usual pattern. We are highly confident in our ability to deliver another year of strong free cash flow generation in 2026. The group balance sheet on slide 16, is characterized by a balanced debt structure and strong liquidity. Our deleveraging continued into H1 2026, with a net debt of EUR 1.3 billion at the end of June, down EUR 48 million over one year. This brought our leverage ratio to 1.65 times from 1.81 a year earlier. It was lower at year-end 2025 at 1.49 times due to the seasonality of our working capital requirement. Our gross debt of EUR 1.8 billion is well diversified across instrument and maturities, with an average maturity of 4.7 years and an average interest rate of 3.78% after hedging, which is down from 3.9% at end June 2025. With EUR 491 million of cash and EUR 578 million of undrawn credit lines at the end of June, Vicat benefits from a solid financial structure and ample liquidity to pursue its development. Turning now to climate performance on slide 17. In the first half, our specific emissions were temporarily penalized by higher emissions in the United States and India, and by an unfavorable geographic mix driven by strong sales growth in territories which carry a higher clinker content in Maharashtra, in India, in Egypt and in the United States. We continue to make strong progress in Europe and particularly in France, where the alternative fuel rate rose by 5 points year-on-year to more than 70%, with three plants, Créchy, [indiscernible], and Montalieu, now above 80%. Clinker factor in France is also decreased, supported by the commercial success of our DECA range. Together with Paprec, we also commissioned a new waste recovery facility with a 50,000 tons capacity, capable of processing refuse-derived fuel to supply our La Grave plant in France. Beyond short-term volatility, we stay firmly committed to our decarbonization trajectory. On slide 18, I would like to focus on Catch4Climate, a major step forward in CO2 capture in our industry. Together with three other leading cement producers, we inaugurated the Catch4Climate facility on July 8th in Mergelstetten in Germany, dedicated to second-generation oxy-fuel technology to facilitate carbon capture. The principle is to produce clinker using pure oxygen in the kiln instead of ambient air. This generates highly concentrated CO2 exhaust gases. Since the startup, the plant is already showing promising results with CO2 concentration above 90%, compared with only around 30% for conventional cement plant. This is a world premiere. This higher concentration is the key to the economics. Carbon capture is very costly because of the separation step required. The more concentrated CO2 stream allows for a simpler, less expensive carbon capture process. Studies show that this second generation of oxy-fuel technology could lower the cost of capture, combining both CapEx and OpEx, by around 30% compared with the conventional amine-based technologies. This project is a breakthrough innovation in the cement industry and a concrete illustration of how we intend to make decarbonization technically and economically viable at industrial scale. Moving to artificial intelligence on slide 19. On June 16, we announced the acquisition of Araïko, a French startup specialized in AI solutions for industrial companies. This transaction is an important step in our digital and AI roadmap. Araïko brings strong expertise in generative AI, agentic AI, multi-agent system, and data science with a focus on improving knowledge sharing within industrial organizations. This expertise is highly complementary to Vicat in-house digital factory, [indiscernible], which has been developing AI-driven solutions since 2021, particularly in machine learning, real-time optimization, industrial process, and product formulation improvement. This combination clearly accelerates Vicat AI roadmap. It is also in line with our strategy to build more AI capabilities in-house. For us, this means not only protecting our data, but also retaining control of the models, algorithm, and know-how that increasingly support our industrial competitiveness. Lastly, it creates opportunities for external expansion through client portfolio synergies. We have big ambitions in AI, which we view as a powerful operational lever that can deliver meaningful gains. Let's now turn to full-year guidance on slide 20. Following a strong first half, we are upgrading our 2026 full-year guidance. We now expect like-for-like growth of 7%-9% in both sales and EBITDA, up from the slight growth we guided previously. Our net CapEx objective is unchanged at around EUR 290 million. The guidance takes into account more demanding second half with higher energy costs and a tougher comparison base in some countries, namely Turkey, Brazil, Egypt, Senegal. It also assumes no further significant deterioration of the Middle East conflicts, given its potential impact on our activities. Overall, this upgrade guidance confirms both the quality of the first half performance and our confidence in Vicat's ability to continue delivering profitable growth in a still uncertain environment. Slide 21 recaps our medium-term priorities. The first priority is to maintain a strong profitability with an EBITDA margin of at least 20% over the 2025-2027 period. Our second priority is to continue deleveraging with a leverage ratio at or below 1 by 2027. This is subject to potential bolt-on acquisition opportunities in our existing geographies as we want to remain agile and keep the flexibility to seize value-creating opportunities. Third priority is to accelerate our climate roadmap and continue promoting our low-carbon products. Together, these priorities reflect the balance we want to maintain in the medium term: strong profitability, financial discipline, and continued progress on decarbonization. Finally, on slide 22, I would like to reiterate that Vicat is well positioned to benefit from several midterm growth catalysts. Kiln 6 in Senegal is already contributing meaningfully to our performance. [indiscernible] railway infrastructure project in France has only started to contribute. Additional levers upside over the coming years, including the recovery of residential market in France and in the United States. Lastly, the Mediterranean region offer attractive growth optionality with the reconstruction of post-conflict areas when it materializes. This is what gives us confidence in the Vicat medium-term trajectory. We combine a well-balanced geographical footprint, high-quality industrial asset, financial discipline, and clear operational levers to drive profitable growth. Thank you for your attention. I will now take your questions.

Please note that we will take audio questions from analysts only. [Operator Instructions].

First question comes from Ebrahim Homani from CIC.

Thank you for taking my questions. I have two, if I may. The first one is on your guidance. Given the organic growth of H1, the lower part of your guidance implies an increase of, let's say, EUR 7 million in H2. My question is very simple. What would be the Senegal contribution in H2? What are the [indiscernible]… Okay, thank you. My first question is on your guidance on the organic growth and if we take the lower part of your guidance, it is an increase of, let's say, EUR 7 million in H2. What will be the Senegal contribution in H2 and what are the geographies in which we have to be more cautious? My second question is about free cash flow generation. I understand the seasonality H1 versus H2, but just to be clear, the free cash flow generation will increase in 2026 or will be at the same level than 2025. Thank you.

Thank you, Ebrahim. Our guidance reflects our assessment of expected performance of the group through H2 and considering the strong realization of H1. You have to keep in mind that we will have less easy or less favorable comparison base in quite a few countries that did accelerate last year, namely Brazil, Egypt, that was very strong in H2 last year. Turkey, that did accelerate at the end of H1 last year, as well as aggregates of Senegal. As well, Senegal, as the Kiln 6 started to contribute already in H2 last year. The comparison base is very different from the one we had in H1. Second point, as stated during the presentation, we do expect the energy cost to pick up in H2 and to be therefore less favorable even if we have implemented price increases to offset those costs. An additional point you may keep in mind is that our guidance does not integrate any more volume recovery in France in H2, as we do not see it happening. If this was to materialize, it would be, of course -- first of all, we would be ready to supply it as we have the industrial setting to do it and happy to do so. It would be an [upside risk], of course. To respond more specifically on free cash flow. As you know, we do not guide on the free cash flow. We have provided in the backup slides of the presentation, a history of semiannual free cash flow generation that illustrates pretty clearly the seasonality, both of EBITDA generation and of working capital requirement variation. Regarding working cap, I may give a word of explanation. We have delivered in H1 a strong organic growth, that drives increase in working capital requirement. We do see the usual seasonality pattern, and there is already some inflation impacts of energy in inventory. Just in terms of days, you have to keep in mind that working capital has increased only by three days of operation. So, that's a minor variation. Most of it is activity and seasonality driven. I reiterate our commitment to deliver strong free cash flow this year.

Thank you very much and congrats for the results.

Thanks, Ebrahim.

The next question comes from Arthus Piot from On Field Investment Research.

You are very far away. Please speak up.

Sorry. Is it better now?

Yeah, that's better.