Earnings Transcript for HCMLY - Q4 Fiscal Year 2021

Jan Jenisch: Good morning, everyone and a warm welcome to our Full-Year Results Presentation of Holcim. I'm here in our conference room at Holcim with our CFO, Geraldine Picaud, and we are very excited to present some more details on our year-end closing. Also on the outlook and then of course, to have your questions and comments. Before I start with the highlights, I think would like to convey that our sympathy and our hearts go to the Ukraine this morning with everything what's happening there since yesterday morning. I think our sympathy is with Ukraine and the people and even at Holcim has no operations there, I think we are all concerned and follow-up very closely on the next developments. And I'm sure we're going to talk maybe and a bit more background later in the Q&A session. For now, I would like to start to talk a bit about the results, the highlights, and especially about the progress we were making with our strategy with building up our new segments solutions and products, and also our portfolio transformation. 2021 was a record year. We were able to do everything we promised in our strategy 2022. And I think we achieved the fantastic results throughout the year with high growth level going back even beyond the pre -crisis level in Swiss francs and high EBIT, growth of more than 25%. And also then achieving new records on the profitability earnings per share reaching three CHF98 a record return on invested capital of 8.9%. And for the third consecutive year, cash flow which is above CHF 3 billion. And also representing a new record for the year at 3.26 billion. And while we made quite a couple of important acquisitions, thanks to the cash flow and the good finance management. We maintained our debt leverage at 1.4 times, which gives us the right base now to do the next steps in our new strategy, 2025. Let me go into some details on the strategy side and I think first I want to share with you the targets now we achieved one year in advance. You see this is what we promised to you in March 2018 to put the company on a profitable growth trajectory. This is what we have done. We have grown the business and we achieved the over-proportional growth in EBIT. Then we promised you we're going to fix the cash conversion above 40% and now it looks like that our new level will be more around. Steve percent cash conversion and very happy to have now for the third consecutive year such strong cash flows, and this is something now we are confident to deliver to you. Also, in the years to come. I fixed the return on invested capital. That was always a topic if you remember back, and very happy now we are well above our capital costs, and that's also well achieved. And then we also promised to you that we're going to deleverage the company to lower debt levels and also this be delivered here one year in advance. So I'm very happy. And that's a strong foundation now to go into the next chapter of growth for Holcim. That's why we call our new Strategy 2025 Accelerating Green Growth. When you look at the strategic direction we're going to take here, we want to build up our fourth segment, Solutions and Products. And last 12 months, we made some super inroads here. First 50 acquisition of Firestone, then following up on Malarkey, another company focusing on roofing. Only these two acquisitions they will already deliver $3 billion of sales in this current business year. So we're very happy that we not only found the right targets, but we really hit the ground running with double-digit growth rates from day one. We then entered into a second technology platform of the said mode of installation with the French PIV group. And then also followed up with the Belgian PTB group. Also here very promising field that we talk also about renovation, energy efficiency sustainability, and double-digit growth rates. So very excited, we could enter. You see here the first results already in the last year, with only nine months of Firestone, we could already expand Solutions and Products. We almost doubled it, and from 8% of group sales then to 13%. And of course, now, with the new acquisitions assigned, we expect now that we are moving close to 20% maybe already this year. And then the target for 2025 is 30% is within our reach and we have more -- many more targets we look at and we will here accelerate the expansion. You look a bit in the details, roofing, super exciting segment. Why is that? Because you have a lot of pricing, innovation, power. You have growth. All the rules are functional nowadays. They are insulated. They're solar roofs, they're green roofs. A huge demand for reroofing. That's where you want to be, especially in the markets of Europe and North America, you want to be in refurbishment and repair. And we have already with Firestone more than 60% of the sales is reroofing. And with Malarkey is even at 90% of sales is reroofing compared to new buildings. So very exciting growth platform we established, growing like crazy. Now, we expect a high double-digit growth for this year for these two companies. And I think we're going to have a very value creative here element of our strategy. We have then the second platform we established with the PIB Group. So they are into sales with more to us. Insulation, very exciting, right in the sweet spot of renovating Europe to make housing more energy efficient. And also this one we have full order books, many new products to come. And I'm very excited here to follow up. We made already the next acquisition that field in Belgium, the PTB Group. And you can expect also here more to come from our side. A very positive second element of this Solutions and Products segment is that we were able to acquire the roofing companies with a key focus on the U.S. market. And the U.S. market is the single most attractive market for building materials, with growth, with different segmentations, a lot of pricing power. And you notice here that just within the last two acquisitions, we go now from $4 billion of sales in the U.S. to more than $7 billion in just one step. And you see us of the portfolio, how we shift Solutions and Products is now already our largest business segment with more than 40% of our sales. So this is very rewarding for us and shows how much traction we have now with our strategy and with entering here, Solutions and Products going into the future. We have on the M&A side. So I talked already about Solutions and Products. If these four acquisitions kick stopping our ambition to become a leader in Solutions and Products. We are also very active on the bold - ons. All these valuable smaller companies in local markets to strengthen our aggregates business, to strengthen our ready-mix concrete business. And you see here we made 12 transactions last year. This is a say, a record number for us since we started with this bolt-on strategy. So we're in very rewarding acquisition here in the local markets, then you also see the divestment of, we have signed the divestment for Brazil. We have already sold Northern Ireland, Zambia, Malawi and the India Ocean, they are all close. So you see here we are active to get a bit lighter on emerging cement markets and transform Holcim into solutions and products, but also strengthened our aggregates and Ready-mix concrete business into the mature markets Europe and North America. I'm very happy here and for those of you who have been with us at the [Indiscernible] market days, you could also see that we did very, I would say value accretive transaction. So we were divesting for good multiples and we are actually acquiring for attractive multiples. Now, sustainability is the next huge pillar for our strategy going forward. We make a lot of progress here. You have seen our target setting for net-zero targets to science-based target initiatives. And maybe today, I want to share with you two areas, which I'm the most excited about. The first one is the launch of our green product ranges, ECOPact, ECO Planet, and then the circular construction, which we are in the middle of making it a reality. And I want to share with you two more background here. First, on the global roll-outs of ECOPact, our green concrete. We just started to launch it in 2020 already now it's in all our key markets, so in the 24 biggest markets ECOPact is the reality and already quite some traction. We sold more than 1 million cubic meters last year, which is more than 600 ready-mix trucks every single working day delivered to the customer. So quite a lot of traction. This will be ramped up now and we set the target to be at 25% of concrete sales from the ECO packed green concrete range. So very happy how we do this is very much appreciated by our customers, by the green city council, by any company who has green procurement in place. And I'm very proud that our people are able here to follow up so fast now with the green solutions, going forward. The second area I want to share with you is our scaling up of [Indiscernible] construction. This will be a huge part of Holcim 's future, and it's actually already a huge part of Holcim today. We have last year recycled 54 million tonnes of waste, 54 million tonnes makes us in the top three of always recyclers in the world. And we do use it as a raw material, alternative fuel, we use it into cement, into concrete. And one of the most exciting areas, we are taking construction demolition waste, and recycle it straight into new products. It's probably one of the easiest and best products to be recycled is concrete, cementitious products, you can recycle 100% and this is what we already do. So last year alone we did 6.6 million tons of construction demolition waste, which was recycled and putting back into our cementitious products. And this is simply more than 1,000 full truck loads every working day, so you see we are really scaling this up. We set ambitious targets, we want to be now in the next years, doubling our -- the recycling of the waste. So while we already had a 17% growth just last year, we target that growth rate now going forward and we want to reach 100 million tons of recycled waste as soon as possible. And that's going to be very exciting as a big part of the future of housing scaling up everywhere. Is it in recycling centers? Is it to put the race back in the products and processes? And here you can expect a lot from us going into the future. This was a bit the highlights I wanted to change a few from record results to the progress we are making the strategy from sustainability, four segments, Solutions and Products to circle a construction. And now I pass on to Geraldine who gives us a more details on numbers results, but also on the regions.

Geraldine Picaud: Thank you, Jan. And good morning, ladies and gentlemen. I'm very pleased to share with you some more details on our achievements in 2021, and just not only with regards to the financials, but also the sustainability KPIs in view, our Strategy 2025, Accelerating Green Growth. 2021 has been a record year and has been a year of strong growth. Our net sales, we're up by more is in 11% on a like-for-like basis, driven by both volume and price rises. Also boosted by a strong pricing and cost control, our recurring EBIT grew over proportionally by close to 26% like-for-like. Our earnings per share before impairment and divestment followed the same trend ending at CHF3.98 per share. This is 30% percent above the level of 2020. And once again, we achieved a high cash conversion at 50%. We generated 3.3 billion of free cash flow, which is above the records, which were set at two preceding years. That's moved to the volumes. And cement or volume grew by 5% like-for-like and all the regions contributed to this growth, with some countries recording an excellent performance such as India, which benefited from a strong volume growth after the severe lockdowns of 2020. But also Latin America, recorded an outstanding performance with key markets of Mexico, Argentina, a quarter or experiencing strong volume growth from infrastructure projects. Our aggregate business lines in volume grew by 3.9%. And to be noted here, the good performance of the UK and the high double-digit growth of China. Our ready mix concrete business sign grew by 7.3% driven by the key markets of India, France, and Mexico. Let's move on to our net sales. We are proud to report that we reached CHF26.8 billion of net sales up 16% compared to 2020 and above the level of 2019. If we look at the price -- at the scope effect to start with, the scope effect of almost CHF1.6 billion here, this is mainly attributable to the nine months of consolidation of Firestone Building Products that we acquired beginning of Q2 2021. But also all the bolt - ons we have acquired during the last 12 months contributed to this positive impact. The like-for-like growth amounted to 11.3%, and this reflects the rises in prices and in volumes. The pricing impact accounted for 5.2%. The volume impact accounts for 5.1%. Finally, the currency translation was negative and that was mainly due to the Argentinean Peso and the Nigerian Naira. It accounts for minus 2.2%. Let's go to the profitability. We here have also recorded a record growth and a record level of EBIT. In total our recurring EBIT grew by 25.5% and it was driven by an impressive like-for-like growth of 25.7%, representing CHF943 million. The volume performance of CHF603 million is a first contributor through this impressive results. Also reflecting the strong pricing, we have a price of a cost that is positive for 2021 at CHF317 million. A very solid result achieved despite an energy cost inflation of 24% throughout the 2021 year. The scope effect you can see here of CHF154 million represent a gross of 4.2%, and it's mainly attributable to Firestone. And we have a negative forex impact of minus 4.4%, that is mainly attributable to the Argentinean peso. If we look at our performance across all business segments here, while you can see that all the business segments grew organically with an over-proportional recurring EBIT growth and a positive price over cost for all business segments. Our net sales grew by 13.3%, and here you have a volume impact of 5% on an impressive strong pricing impact of 6.7%. Our aggregates business line in volumes grew by 3.9%, and the price impact accounted for 1% on average. On the ready-mix concrete business line, we grew in volume by 7.3%., and here the price increase accounted for 2.9%. And all know Solutions and Products while with the recent acquisition of Firestone Building Products, the net sales of Solutions and Products represents, actually 15% of the total group net sales in Q4. With the recent announced acquisition of PRB and Malarkey disease share is going to increase further as we embark on our Strategy 2025. If we look at the regions now, well, all the regions have expanded their margins and I will now comment into more detail. Let's start with North America. North America had an outstanding performance in the year and in Q4, especially with a strong volume demand in Q4, that has been across all the business segment that was boosted by an expanding economy in the U.S. There's tone pricing trends well so experienced in Q4 was noting that the price of the cost was positive in North America in Q4. And we look forward to another great year for the region here. As we can see, it's fully supported by a full order book and also with the pipelines, the bolt-ons we have in our pipelines. If I go to Latin America, the region delivered a very strong performance here. The market demand, as in previous quarters, was boosted by residential and infrastructure projects. Additionally, we have added new production lines in Mexico and in Argentina. And we are continuing to roll out all the [Indiscernible] Firestone products, the liquid applied membranes through the Dispense retail network. If we move on to Europe, for Europe also delivered a very good set of results. And the demand has been strong in Europe for the year. Quite stronger in Western Europe, even stronger growth we've seen in Eastern Europe. We had a positive price over cost for the full year in Europe, which helped to contain the power inflation in Q4. We had as tooling execution of our Green capex going to also deliver good results in 2022, as well as the bolt-on pipeline that we having that going to help to fuel growth. Let's now move on to Middle East and Africa. We had here also a solid set of results in Q4 and for the entire year. Solid and good market trends were seen in Nigeria and in Kenya for the Q4. Egypt saw a significant price improvement despite being impacted by the production quotas for cement output. The region achieved a positive price over cost in Q4 on the back of the strong pricing. Let's now move on to APAC. APAC delivered a resilient set of results in 2021, the volume grew across all business segments. We also achieved a positive pricing in the region which helped to partially offset the cost inflation in Q4. Worth noting in China, we experienced significant price high cycles of both 40% in Q4. Let's now look at the full P&L before impairment and capital gain or losses on our divestments. The recurring EBIT grew by 25%, representing CHF936 million in total. As I mentioned before. Our restructuring litigation and other non-recurring items grew by a CHF105 million due to litigation one-off. We have continued to reduce our financial expenses despite the acquisition of Firestone. We have generated CHF67 million of savings. Our effective tax rate has remained stable at 25%.%. And finally, the results of our subsidiaries with minorities shareholders have improved, especially India. This is why the net income attributable to the non-controlling interest have increased. Well, all-in-all our earnings-per-share amounted to CHF3.98 per share, this is a growth of 30% compared to 2020, which is over-proportional to EBIT growth. Let's go to the free cash flow. And here we are super proud to report a record of free cash flow of CHF3,264 million, this is 50% of the EBITDA, and effectively the EBITDA with the recovery in volume and the strong prices has increased significantly. But this was mechanically offset by higher working capital and higher capex as of this next activity rebounded. But was nothing that with regards to the working capital, actually, in terms of numbers of days, we've improved slightly compared to December 2020 showing that this is still an area of focus even as our markets return to growth. We incurred non-recurring litigation item, we paid more tax due to their being higher taxable profits and this was partially mitigated by reduced financial expenses. All in all, our record free cash flow, $14 million above the record of last year. As you can see here, this is a third consecutive year where we generate a free cash flow both CHF3 billion. In total, we are above CHF9.5 billion of free cash flow generated for the last three years. Let's go to the net debt. On our debt is below CHF10 billion. We have generated CHF3.3 billion of free cash flow. We have spent CHF3.4 billion in acquisitions, mainly Firestone and the bolt-ons. We have distributed close to CHF 1.4 billion of dividends, CHF1.2 -- a little bit more than CHF1.2 to the Holcim shareholders, and CHF0.1 billion to the minority shareholders of our controlled subsidiaries. If I go to the leverage here, well, we have maintained our leverage at 1.4. We've reached the same level as 2020 and this despite the acquisition of Firestone Building Products that leaves us with a very strong balance sheet that will allow us to continue our acquisitions. If I go to the region on invested capital here, you can see that in 2020 the continuous improvement has been temporarily stopped due to the prices. But in 2021, we did a strong catch up to 8.9%. Therefore, here our target of the Strategy 2022 of 8% is significantly exceeded one year in advance. Following these excellent and record results, we're happy here to confirm that we will propose an increased dividend to the AGM of CHF2.2 per share, it will be a cash dividend, fully paid out from the foreign debatable contribution contribution reserve. And as you know, it will not be subject to Swiss withholding tax. And last but not the least, let's go to our sustainability KPIs. Here we have continued to improve and to remain the leader of our industry by improving the footprint. Our CO2 have -- CO2 MTD Futon have reduced by 1%, the increase before that we made during 2021 in Green capex will deliver even more results in 2022. The recycled waste has increased by 17%, which is above the cement production. And this is also demonstrating, or what we do in circular economy, which is fully embedded in our strategy. About freshwater consumption. Actually, we have continued there with a 5% reduction of freshwater withdrawn. We are well on track to reach our 2025 target and our 2030 target. And last but not least, we have significantly improved here the money we spent on social initiatives and social projects. With this, I hand over to Jan.

Jan Jenisch: Thank you, Geraldine. We come to the outlook and to the guidance for this business year 2022, we are very confident about the year, this year 2022 is about growing Holcim. We have good demand levels in all of our key markets, so we expect very healthy growth in our traditional business. Then in addition, our expansion in Solutions and Products will show significant results by taking the acquisitions in but also by double-digit growth rates here from this segment. So 2022 will be about growth, will be about further acceleration towards our sustainability targets. I'm very excited now to scale up our green products ranges, ECOPact, ECOPlanet, and also making Circular Construction a reality. This will be a big part of the Holcim future here to build new with old, and we have everything in place to make this happen. We also positive on the operating profit growth. We will see another increase in profit at this early stage of the year we cannot give a precise guidance on this. You also have cost inflation where we are confident, we will balance them out like we did in 2021. But nevertheless, I think we have to wait here a little bit more till we give a more precise guidance. Where we are giving a guidance already as of today is on the free cash flow for three years of more than $3 billion of free cash flow we are confident that this is also the right level for this business. We also we are guiding that we will have a free cash flow of above CHF3 billion also for 2021. I think this time are excited to open the floor for your questions and comments.

Operator: We will now begin the question-and-answer session. Webcast viewers may ask their questions by videoconference, by clicking on the video Q&A button, an operator will click quickly check your line and give you access to the video Q&A session. It will be live for everybody. You will now that show once the operator will announce your name as next questioner. [Operator Instructions] And we come the, ask you to limit your questions to two and register again for any follow-ups. Please note that the recording of this webcast will be published on hosting website. Anyone who has a question or comments may click on the video Q&A button or, [Operators Instructions] The first question comes from the line of Elodie Rall with JP Morgan. Please go ahead madam.

Elodie Rall: Hello. Hi. Thanks for taking my question. Good morning. I have two questions if I may. I'm sure we'll come back to the price card and volume decision and all that, but since I was [Indiscernible] question it, I just would like to have an update on Syria if there is any news on your discussion ongoing with the DOJ. And second, I'd like to ask about your growth ambition in India because we've seen that ACC in Abuja in their call last week have planned to take capacities for each of the companies to 50 million tons in the next two years versus like 30ish million to respectively. So that implies 35 million tons capacity addition over the next three years, which is really big. I was a bit surprised by that. So if you could comment on your ambition in India. Thank you very much.

Jan Jenisch: Thank you, Elodie. And good morning to you. I start with the second question and then I think Geraldine can complete your first question. Yes. You notice in India we are back on growth. We're just are completing two new plants in India. We want to participate here in the market development. I think in India the forecast is that cementitious products will double over the next 12 years or so, and we are as the number two player in a good position here too. To take also advantage so we have now the first two new plants commissioned, and we will plan the next steps here, how to participate in this market growth.

Geraldine Picaud: Yes, Elodie. So about your question on Syria. Of course, as you know, this is a legacy issue related to the alleged contract of the Lafarge subsidiary in Syria prior to Holcim's merger with Lafarge in 2015. Of course, the alleged conduct as you know, is in stark contrast with everything that Holcim stands for. Look, we are as disclosed in the annual report, discussions continue with DOJ concerning a potential resolution. But at this stage, as we speak, we cannot make an assessment as to the timing or as to the outcome of those discussions, we don't have any further comment.

Elodie Rall: Thanks very much.

Operator: The next question comes from the line of Lars Kjellberg with Crédit Suisse, please go ahead.

Lars Kjellberg: Thank you. Just want to focus a bit on the solutions business and specifically, Firestone. Of course you have very strong growth. You're talking about double-digit and Malarkey maybe the same. Can you comment anything about your profitability in that business, how that is progressing, if that was following an expert. Are any meaningful synergies coming through in that business? And of course, the obvious question, how do you think generally price over cost in 2022 over -- well, in 2022, which you were pretty good at neutralizing and actually is likely had in '21? Thank you.

Jan Jenisch: Hey, good morning, Lars. Thank you for the question. So we are very excited about the Firestone and Malarkey business as it's growing from day one, so that's fantastic to see. We will continue to grow and on the other hand, we still have a lot of potential for margin improvement. You see that now; last year was a challenging year as the raw materials we use for those roofing systems increased very sharply. So we had to also make the necessary adaptions in the pricing with a bit of delay. But now we see in quarter four and going into this year we have significant margin improvement. And this is what we want to see for most business, we've not only want to see the double-digit growth, we also want to see and over-proportional improvement in margins for both businesses. If you benchmark and you can benchmark that with a little bit of available. Public data. You see that there is a very nice and attractive March differential we are going after, so we're redoing executive what you are what your question points to, we will have a very profitable growth in these new businesses. On price over cost, I think first we managed well last year, which was a challenge. We had high cost inflation starting already in May. So we had a year where we had high number of price adaptations in our key markets, not only beginning the year or something. We had to be very agile, and we also made sure that we started this year 2022 on the right pricing levels in our markets. So I think we did a very good job and makes me confident that the further increased prices you see on energy, up maybe also on logistics and other areas, will be covered from our side through cost mitigation, but also through pricing. That looks very promising here beginning of 2022.

Lars Kjellberg: Thank you.

Operator: The next question comes from the line of Yuri Serov with Redburn. Please go ahead.

Yuri Serov: Yes. Good morning. Two questions, please. First one, if I may just ask one and then next one after you answer. When I look at your Page 5, which shows your -- the pie chart of the future composition of the business. Obviously, you're planning to increase Solutions and Products to 30%. But if I look at the cement part, it shrinks quite a lot. Are you planning to sell cement assets? I know that you have sold cement assets in emerging markets. A few small ones in African and a bigger one in Brazil. But can we expect that Holcim will sell anything in core markets like in North America and Europe? Is that something that we should expect?

Jan Jenisch: I said -- thank you, and good morning. I think what you have seen from us, we have this one slide where you see the Solutions and Products acquisitions, you see the bolt-ons, and you see the divestments. You, of course, realize the divestments are basically in emerging cement markets. And I have no announcements to make today, but you see the portfolio was shifted in the last three years, divestments in emerging cement, and then we invest in Europe -- Latin America, and Europe. I would say these our core regions both for the bolt-on acquisitions, in aggregates and concrete, but also of course for Solutions and Products. So you will see that shift doesn't necessarily mean we have now a big -- we didn't have a big sell-off of cement. We had very selected assets and you can expect that from us also going forward. And the rest of the differential will also come from growth. We want to see wholesome grow, and this will be a year of growth here where we will be significantly higher in the net sales than in previous years. And you can see that also from our guidance, which we already lifted more than 6% of sales growth compared to our strategy where we talk about 3% to 5% growth.

Yuri Serov: So what I'm hearing from you is that we should not expect you to get to 30% of Solutions and Products by actually selling down your cement assets.

Jan Jenisch: [Indiscernible] Know that. on to grow Solutions and Products that we're very proud that you've seen last we almost doubled Solutions and Products, this year with the new acquisitions coming in, maybe it's realistic, we're going to reach around CHF5 billion for this segment. And we're going to bring that segment somewhere to nine to 10 billion Swiss franc. That's our targets, yeah.

Yuri Serov: They're 9% to 10%?

Jan Jenisch: Yes.

Yuri Serov: Okay. Next question, if I may. So other companies in the sector start up or proceeding with share buybacks, you can see that from pretty much everyone. What is your view on this?

Jan Jenisch: I think first of all, I am a CEO for shareholders, so I do have a great focus on the shareholders. This is why it was also important for us now to have a -- to show that we also increased the dividend by 10% because we have all the financial and the development to do so. On the share buyback, I think maybe it's not -- obviously we have not announced anything. I think it's maybe not the right time we have a couple of interesting projects in the pipeline and maybe in the future there will be a point if we are too successful in reducing the depth or the -- reducing the leverage or bringing in high cash flows. So I don't exclude share buybacks for the future just at the moment, I think the timing is we have some attractive opportunities we would like to pursue.

Yuri Serov: Okay. Thank you.

Operator: The next question comes from the line of Cedar Ekblom with Morgan Stanley. Please go ahead.

Cedar Ekblom: Thanks very much. Hi, Jan. Hi, Geraldine. I've got a quick question on the green products. In the last quarter, you've seen quite a lot of your competitors pushing their Green offering to customers. So I'd like to understand, are you seeing any competition in your core markets, and can you talk about then what your value proposition is for the customer, aside from the product just being low CO2, seemingly with more of these products available on the market, basically trying to understand how you think you can retain that pricing premium in those products as it become more mainstream? And then just on the product itself, does it matter to the customer if the green credentials come from recycled demolition waste, or loss furnace slag being used, or fly ash? Does it really matter, or is it just that it's low as CO2? Thank you.

Jan Jenisch: Hi, Cedar. Good morning. Thank you. Look, I think probably the last two years, we saw a big shift in interest from the customer to really start to implement green solutions for buildings, which is one part is to build greenhouse so to have lesser to footprint in the building materials. But then the bigger partners, even to be more energy efficient throughout the lifetime of the building because that's the bigger part of the CO2 footprint. And we've seen our big shifts from owner’s architects to really make this a reality. And this is why we launched our green product ranges, right? The ECOPact, ECOPlanet, and we have a huge demand and a huge interest for those solutions. And I'm glad that through this global branding, we have the right framework to also properly inform actually the customer that they can already make a choice today to build more sustainable. And as you point out, the customers interested in Bofa, in the circular construction but also of course, in the de - carbonization, they go hand-in-hand, but you are right in some instances, several constructions don’t mean that CO2 footprint necessarily is much improved. So that goes hand-in-hand together and we're very happy here to lead the development. You've seen our numbers; we are already at more than 600 trucks a day on Eco Pack to Concrete. We are already more than 1,000 truckloads a day on demolitions -- construction demolition. We're very happy about this. Now, you are saying that some people are maybe following. I welcome that. I think we have a mission in to make circular construction and decarburization a reality in the roads for buildings, for infrastructure. And I just welcome everyone to follow us because that's the right path to go. And a lot of effort needs to be to be taken. This is why on the slides, we just try to translate it into truck loads because that shows you what a tremendous volume are behind that and you can imagine to adjust our supply chain now to take in 1,000 trucks a day with construction demolition rates that needs proper terminals, that needs proper recycling, then we get different grades of recycling out of that. Some go into road construction, some go into concrete, some go into cement. So that's our roadmap to make it happen. And anyone joining us is more than welcome because that has to be the future of construction, to make it circular and sustainable.

Operator: The next question comes from telephone and is from Mr. Remo Rosenau with the Helvetische Bank. Please go ahead.

Remo Rosenau: Yes. Good morning. Thank you very much. Your energy bill increased by 630 million in '21 and from 9.2% to 10.3% of sales. So you lost 110 basis points there. But on the other hand, I was surprised to see that distribution and selling expenses, which are a much higher number of growth, grew unproportionally. So you gained actually 80 basis points on the margin with distribution and selling expenses. So in balance, you only lost 30 basis points with these two elements, which are most affected by all these inflationary developments. Has this to do, I mean this on the proportional growth with distribution and setting, has this to do with the changed business mix, with a higher proportion of Solutions and Products, or -- because I was a bit surprised that this didn't increase more. And should we hence expect a similar development in '22, i.e. still higher energy bill, of course, bought a lower proportion of distribution and selling expenses.

Jan Jenisch: Hi, good morning. I'm [Indiscernible] thank you. And thank you for noticing our efforts to mitigate the cost where they come from. I remember we had on logistics, we had a big program throughout the pandemic, if you recall, we made already in March 2020 our action plan to come out of the pandemic with much more competitive cost. And I think that's a big part of what you described. And of course now the trend reversing and we have to now be very agile on the pricing. But we are working very hard to make both fans meat and to have a positive price over cost. Maybe, Geraldine, you'd like to add something more details to this?

Geraldine Picaud: No, I think it's right to say that the energy cost inflation has been very high in 2021. I mentioned 24% of pure price increase in energy. We did not have such an increase in distribution and quarry cost, as you mentioned, Remo. We also, as you know, have a very strong procurement teams, and that also, with the digital tools we've put in place, also helping to decrease the unit cost when it comes to distribution. And this will continue, of course, to serve us as we go in 2022

Remo Rosenau: Okay. But it's also true that the business mix also helps a bit. I mean, the higher the importance of solutions and products get, they are not that energy intensive of course, and also not that much, I mean, and also on distribution and selling it's probably not that cost-intensive, right?

Jan Jenisch: That's correct, Remo. That's correct, yes.

Remo Rosenau: Okay. Now, my second question is on the different regions, you mentioned the positive price over cost, and you said in Europe and Asia there was a positive price over cost effect for the full-year, but you didn't mention it for Q4, whereas in the other three regions latter Mideast and North America. Are -- you also said that there was a positive price over cost effect for the fourth quarter, but not for Europe and Asia. So all these, the two regions that you have to struggle most in order to get this price over cost balance positive? Yes. It's correct, Remo. As you know the energy bill increased even further in Q4, 38% in terms of price in Q4. And Europe all contained more or less the power inflation and APAC also let's say, mitigate -- partially contained the energy hikes in Q4. The other three regions, as you mentioned, were positive price over cost. Okay. But to sum it up, as Jan said, just to be very clear here, your target still is to get an over-proportional increase in EBIT versus sales?

Jan Jenisch: We don't say it to this point in time. I think, like always we have a I think a well-founded outlook, so we promise a year of growth. We promise EBIT will grow. We promise healthy cash flow. So I think that's already a lot for start of the year. And then let us see a little bit the latest developments we have in Eastern Europe now with this terrible conflict. Let's wait a little bit how things are falling in place. But we are confident. What we -- The performance we showed in 2021, we see no reason why we wouldn't do that again in 2022.

Remo Rosenau: Great. Fair enough and thank you.

Operator: We now have a question coming from the videoconference and coming from unidentified analyst. Your line is open, unidentified analyst

Unidentified Analyst: Thank you very much, I hope you can hear me and see me.

Jan Jenisch: Yes, perfect. Arnaud.

Unidentified Analyst: Excellent. Thank you so much. The question is, on Solutions and Products. Obviously, you've been very active with acquisitions recently and your hinting that there could be more. Now you end up, we've the Firestone business, which is roofing solutions. Malarkey, which I understand it well is tiles for roofs. PRB which is what you call Specialty Building Solutions. And that comes on top of the free [Indiscernible] filed for the most that's were already there. So I guess my question is, what are you trying to achieve with these businesses which might be interesting on their role, but are not necessarily all consistent with each other or essentially, do you think you're going to have synergy between the businesses, or the idea is just to be optimistic and maybe even further expand the product portfolio in the division?

Jan Jenisch: Yea, [Indiscernible], thank you. No, look, we are in building materials, we are in construction. So first of all, you know, from cement, aggregates, to ready-mix concrete, now to roofing or to mortars is a very natural development. You have a lot of [Indiscernible], when it comes to logistics, when it comes to key accounts, also when it comes to locations as we operate a very granular net throughout off more than 2300 production side. So we have a lot of synergies during that and this all comes together in our ambition to be the most innovative and most sustainable building solution provider in the world. And this is why it makes so much sense now, to go to the roof, and especially in the markets in North America and in Europe, to extend our range of solutions closer to the customer and also closer to sustainability as the companies we are buying are really at the front of the sustainable development. If I can take your question on just to explain a bit why we are so excited about these four companies, we acquired here in Solutions and Products. So you will find that these are growth platforms because there's more and more demand for those type of solutions. And the demand is driven by -- it has a big function for the future. So you talk about the roof, 20-30 years ago, the roof was just to protect from rain, from water. And now a day it has a function. It has insulation, can be a solar roof, can be a green roof, and this all leads to much increased value per square meter of roof applied, right? So you talk about double or triple the value from those functional roofs compared to traditional roofing. And then, of course at the same time, you have a huge growth from this development and also from the further demand to reroof, to improve buildings to make them more energy-efficient, to make them solar-energy-generating, or to make them Green livable for the city. So this is why we are so excited about that, at the same time it's a very, very strong business through the cycles because most of the business is repair and refurbishment. So they're not so bound to the build cycle. So something for new buildings, we can really do every year the same number of new jobs to re-roof and repair. So very exciting. And then lastly, also, this all comes with good pricing power because of innovation. So what I just described to offer all the roofing systems of the future, we have quite a big R&D lab during that we're working on the latest application technology, so self-adhered roofs. And this is really exciting going forward, you will see much more also recycling in our roofs in the future that we also can use a construction demolition waste inside. So I'm very excited. We really bought into the right aspect and we will link that very closely to wholesome going into the future for the synergies.

Unidentified Analyst: Thank you very much.

Operator: We now come back to the questions from the phone. And the next one comes from Gregor Kuglitsch with UBS. Please go ahead.

Gregor Kuglitsch: Hi. Good morning. I wanted to touch sort of on the prices that have been paid for the various acquisitions. And I think Firestone I think made sense. I guess the one that looked a little bit high was Malarkey. So if you can just share with us what's special about that business in your view to pay that kind of multiple for roofing shingles business in the United States. The second question, please, maybe coming back to the cost inflation and the sort of recovery efforts. So can you just tell us what you think at this stage and I appreciate it's extremely volatile, but we -- what your best guess is for '22 cost inflation, please. And then -- so one of your competitors, I think, talked about exit rate of price, north of 10%, 13%. Can you tell us what you're observing in terms of pricing as we head into? 2022, please? Thank you.

Jan Jenisch: Hi Gregor. And I take the first question and Geraldine will talk a bit about, I think, cost, cost inflation, exit rate, and how much and how often we increased prices last year and also start of the year. I think we were very fortunate with our acquisitions. If you look at the multiples we paid for Firestone or Malarkey, I think they are in a very good ballpark. If you look at the high multiples of valuations of these light site building material sector. So we're very, I think, fortunate to make this happen. And when you look at Malarkey, you asked specifically, that's a beautiful business because that's growing at tremendous growth rates of something like 15% to 20%. And the reason is they are very smartly focused on re-roofing and their markets. And they have the most advanced products for this residential roofing, which is polymer enhanced shindles, which is a stronger and more flexible and gives them a competitive edge in the market. The market of these shindles -- that's an amazing championship segment. I think the entire shingle market is around $20 billion in the U.S. alone. And the product range we are offering participates in $12 billion of market. A growing, if you look at. The trends of newbuilds for residential reaches, almost an old time low. And then you see the tremendous demand for re-roof and prepare. This is a really a growth engine. At the same time, the market already quite consolidated. They're only five, six players in this $12 billion segments. So I think we were very, very happy to enter here and now we have plans to continue. We have at Malarkey, we have currently three manufacturing sites and we are now planning already for the fourth one because we expect that this year already we're going to reach capacity utilization with the three plants. So we do everything now to expand the volumes further because we want to grow that business, obviously, to more than a billion dollars in the next few years.

Geraldine Picaud: Yes. Can I go also on the cost of inflation, whether it is in energy or the rest. We see the same trend going into 2022 as in 2021, but I guess you've noted the solid performance we achieved in our price over cost during 202. For all quarters, slightly negative in Q4, but always very positive driven by the strong pricing discipline that we had, and we had it very early in the year in 2021. And you can look at all the pricing components that we have done quarter-after-quarter, it's speaking for itself. right? Now when we entering 2022, we have announced [Indiscernible] price increases. As we go into 2022, it's double-digit in value in the U.S., it's double-digit in percentage in Europe, we are entering with a high trend of price increases 2022. Thank you.

Operator: The next question comes from the conference call and is from Tobias Woerner with Stifel. Please go ahead.

Tobias Woerner: Yes. Good morning, Jan, Geraldine and [Indiscernible] and thanks for taking my two questions. The first one relates to the exit rate of price increases in Q4, and maybe while you answer, Geraldine, can give us the breakup of the Q4 price over cost spread, which I think is minus CHF42 million. The second question relates to green capex, and you've updated this -- us on this in the past, but I'd like to hear a little bit more on your thoughts here, why you think your bunch of that amount is enough to deal with that situation at least over the next few years, and what you assume annually then? Thank you.

Geraldine Picaud: Okay. So the exit rate price increase for Q4 and a bit of granularity on the price of it costs for Q4 to VS sure. Actually in Q4, we had a very strong price, price increase of 6.8%. that represent more than CHF430 million of pure price increase. Then we had to bear an energy cost inflation that I mentioned was very high in Q4 in terms of price with 38%, that represented about CHF2 30 million, and we had also for another CHF140 million of raw material and distribution and maintenance increases linked to the inflation. So the Green capex, that's also your question. Yes, of course, you've seen that in the capital market that we have set ourselves to reach CHF500 million in Green capex by 2025. This is something that we are controlling. We want to, of course, lead the way in decarbonization of the industry and the Green capex are instrumental for that. So yes, we have enough to do and to reach the targets which we have set in for 2025 and for 2030.

Tobias Woerner: Okay. So you don't feel that this could inflate up further?

Geraldine Picaud: No, we don't.

Tobias Woerner: Thank you very much.

Operator: Reminder fleet questions from the phone, [Operators Instructions]. We now take one further question on the phone coming from Martin Husler, with ZKB. Please go ahead, sir.

Martin Husler: Good afternoon, and thank you for taking my question. It's also turning around fuel cost. I was just wondering if you could give us kind of a breakdown of this 1.5 billion fuel costs. If we look at energy sources such as [Indiscernible] petcoke, coal, and oil, just to get a rough idea of fell understand thing that there are regional differences here. And the second question actually is also turning on this topic. You have to target to increase your TSR from 21% to roughly 37% in the year 2030. I was just wondering what this could mean also, if you look at inflation for biomass waste, do you see there any inflation already? Or what do you think? How these can develop in the future?

Jan Jenisch: Let me -- Martin, first of all good afternoon and welcome. Let me start a bit to talk about the different fuels and I think as Geraldine, if she's comfortable can give us some more background on the numbers itself. So what have seen now in the last year since this tremendous hikes in energy prices for all sorts of energy, this is helping a lot for alternative fuel. So at the moment we tried to accelerate further, and while this overall number you're mentioning seem to be rather low, it's because we have enough America and especially also in India, we have low rates or low availability of alternative fuels. We -- especially important that in Europe, they accelerate here also to master the CO2 challenge we have here and turn this into a CO2 opportunity. So at the moment, what we see alternative fuel is highly attractive and we invest now a lot and try to accelerate. The same is true for renewable energy. We have the first wintered solar parks in our plans. And while these force always challenging to have a return on investment with the current energy prices has totally changed, and we also want to further accelerate here to go for renewable energies here for all our sites.

Geraldine Picaud: Yes, Martin. So the breakdown of the 1.5 billion actually you have about 55% that is on [Indiscernible] and coal. You having 19% on gas and you've got the rest. Look, I think it's important, we are very agile and the goal here is to always to source the most competitive source of energy. That's really what animates the teams.

Martin Husler: Okay. Thank you. And just if I look, because a lot of, obviously, companies try to go for alternative fuels. I was just wondering, but you see already their kind of a cost or price inflation as well.

Jan Jenisch: I think we're in a good situation here, Martin. Of course, there will be eventually price inflation, but it's still -- it's so valuable to make this available. And you have to make the plans ready for alternative fuel. You have to source alternative fuel. You have to prepare it, and we are working all of that, and it's very rewarding. It's very rewarding, and that's our plan going forward.

Martin Husler: Okay. Thank you.

Operator: Today's last question is coming from the phone and is from Mr. Harry Goad with Berenberg. Please go ahead.

Harry Goad: Good morning. Thank you for taking my question. I just got one on pricing in Europe and in the context of the carbon price. When do you think about the price increases that you're hoping to get in Europe. It is going to reflect underlying solar energy cost inflation, and the movement in the carbon price in the last year or do you think that's too much to ask if your customers this year being [Indiscernible]. Thank you.

Jan Jenisch: Yes. Hey, hi, Harry. And that's of course what we do, that's what we successfully did in 2021, and that's what we're going to do also this year. There is the CO2 cost you are mentioning in Europe; they are obviously have risen sharply. I think it's a positive thing because it enables us to accelerate the decarbonization, make the necessary investments, and it will be displayed in the pricing. So the question is not if you are able to compensate, the question is being you fast enough or are you in a better position maybe compared to other companies. And this is what we tried to do and if you look at our European results for 2021, you'll see that we have been successfully doing that last year, and this is what we exactly want to do this year. So our cost inflation -- CO2 cost inflation, we want to fully compensate.

Harry Goad: Thank you.

Operator: That was the last question for today, back to you for any closing remarks.

Jan Jenisch: Well, again, thank you for joining us today in these challenging times of the Ukraine conflict rising yesterday morning. Very happy we could connect today. Happy we shared the positive developments, and I very much look forward to deliver what we promise in our Strategy 2025. Also, what we promised in our outlook for this year, and look very much forward to hopefully see you very soon in-person again and discuss the progress Holcim is making. So thank you very much. Have a good day and please stay safe and healthy.