Holcim (SIX:HOLN) has announced its full-year results for 2023, showcasing a significant milestone with a record free cash flow exceeding CHF 3.7 billion and the early achievement of its Strategy 2025 financial targets. The company has seen strong growth in sustainable building solutions, with its ECOPlanet and ECOPact brands generating substantial sales. Holcim plans to further reward shareholders with a 12% dividend increase and a CHF 1 billion share buyback program. The company's focus on decarbonization and circular construction, along with strategic acquisitions and divestments, has positioned it for continued growth in the coming year.
Key Takeaways
- Record free cash flow of over CHF 3.7 billion for the fifth consecutive year.
- Financial targets for Strategy 2025 achieved two years ahead of plan.
- 97 transactions completed in the past five years, including 78 acquisitions and 19 divestments.
- ECOPlanet, ECOPact, and ECOCycle brands driving sustainable solutions and significant sales.
- Dividend increase by 12% and CHF 1 billion share buyback program announced.
- Organic sales growth of 6.1% and organic recurring EBIT growth of 14.7% for the full year.
- Net debt level at CHF 7.9 billion, with a debt leverage of 1.2.
- Continued commitment to decarbonization and circular construction as growth drivers.
Company Outlook
- Anticipates organic net sales growth over 4% and additional M&A growth over 2% in 2024.
- EBIT margin target set at 18% for 2024.
- Plans to maintain a strong free cash flow above CHF 3 billion for the next five years.
- Focus on sustainable growth, particularly in decarbonization and circularity.
Bearish Highlights
- Net debt increased to CHF 7.9 billion in 2023, with a higher debt leverage of 1.2.
- Latin America's fourth-quarter margin decreased due to overproportional price increases.
Bullish Highlights
- Strong brand portfolio with ECOPlanet, ECOPact, and ECOCycle contributing significantly to turnover.
- Positive developments in decarbonization, including carbon capture and zero-carbon cement plant projects.
- Expectations for double-digit growth in the Solutions & Products segment.
- Strong cash generation supporting increased shareholder returns and investment in sustainability initiatives.
Misses
- Start-up costs for acquired businesses impacted EBIT contributions in the initial months.
Q&A Highlights
- Decarbonization and circularity remain priorities in Europe.
- Good cash repatriation from Latin America, with active cash management at the corporate level.
- CEO and CFO emphasized strong cash flow generation, dividend increase, and share buyback program.
- Company focuses on bolt-on acquisitions with disciplined M&A strategy.
- Decarbonization seen as a competitive advantage and key to sustainable growth.
Holcim (ticker: HOLN) expects to deliver superior performance and is confident about its growth prospects, leveraging its strong position in sustainable building materials and a disciplined approach to acquisitions and capital allocation. The company's commitment to sustainability and profitability is clear as it continues to invest in innovative solutions like ECOCycle and capitalize on opportunities in key markets such as North America and Europe.
Full transcript - None (HCMLF) Q4 2023:
Nesrine Gharbi: Good morning, and welcome, everybody, to Holcim 2023 Full Year Results. This is the analyst and investor conference. I'm Nesrine Gharbi and I'll be your host today. I'm very pleased to be joined by our Chairman and CEO, Mr. Jan Jenisch, our CEO Designate; Mr. Miljan Gutovic; and our CFO, Mr. Steffen Kindler. After their presentation, you will have the opportunity to ask questions. We will start by taking questions from the room. [Operator Instructions] And with this, I'm handing you over to Mr. Chairman and CEO. Jan, the floor is yours.
Jan Jenisch: Yes. Thank you. And from my side, good morning, and a very big welcome to our analyst conference for the full year results. Very excited. We have a full house here today to be in this wonderful Kunsthaus, maybe the single most exciting atmos in Europe or in the world. And the most exciting part you're not aware of, it's built with ECOPlanet/Susteno. This shows you the new growth path for Holcim. This is built with the first cement globally where we have 20% construction and demolition material insight. So we literally, we take back the construction demolition waste, concrete, bricks, and we recycle them 100% and put them back into our new product. And then it looks like this. Very stunning. And for those of you who have not the pleasure to be with us today in person, please visit the Kunsthaus during the next visit in Zurich and be impressed by ECOPlanet/Susteno and what Holcim can build now sustainable and fully circular. Great time to meet. We have the full year results. I'm very excited to speak a bit about some of the highlights, and then I will pass over to our CFO, Steffen, who gives you more view on the region and the individual performance and then our incoming CEO will do the outlook for 2024. 2023 has been, I would say, a very fulfilling year for us, what I like best top performance and at the same time setting the strategy right for the future, strengthening all the strong pillars. The results we're going to speak in more detail later, very happy. We have a record free cash flow more than CHF 3.7 billion. This is now the fifth consecutive year with a cash flow above CHF 3 billion, and that enables Holcim to not only strengthen the balance sheet, not only return a lot of money to the shareholder, but to build a stronger foundation for the future with all the acquisitions and all the investments in decarbonization. On the strategy, I will quickly talk about the strong pillars we have from the transformation with our M&A to the rapid expansion we see in the new segment of Solutions & products for the company then our fast pace in decarbonization, but also into circular construction. And I will talk today a little bit also about branding, this is big for us going forward to have advanced branded solutions for the customers. And then I talk a little bit about the performance culture at Holcim. You have the presentation. I will not go into the detail of how we made this company with the strongest earnings profiles in the whole sector over the last few years, but I'd like to point out the quarter 4, maybe of last year. And you see here the slide that we have not -- we can -- we have delivered quarter-by-quarter in 2023. And you see the chart, we have actually increased the performance quarter-by-quarter. And I promised you this when we were meeting a year earlier, I told you that our margin will see increases quarter-by-quarter as the costs are still very high in the first half of the year. And this is what we delivered here also for the full year. We had the best quarter was quarter 4, which is great and gives us a great confidence also going with the right momentum into 2024. A bit details here. Very happy to see this fourth quarter analysis, you see the sales 5.5% organic sales growth. And on top of that, what you don't see, we made another 3.8% growth by acquisition. So Holcim was growing more than 9% at constant currency in the fourth quarter of 2023. And this enabled us to fully offset the strong Swiss franc and even in Swiss franc grow by a bit more than 2%. And then, of course, on the EBIT line, like you can expect from us, this increasing margin throughout the year, achieving more than 17% of EBIT growth organically, but also in the Swiss franc, more than 8% EBIT growth in Swiss franc for Q4. So this is really fantastic, and this is exactly where we wanted Holcim to be to finish the year with the strongest quarter and taking this position of strength into the 2024. So we have achieved the financial targets of Strategy 2025, 2 years ahead of plan. Good, great timing. We have -- 4 weeks ago, we announced our new strategy by listing our North American business in the U.S. and creating 2 champions, 2 growth companies with different strategic profiles, different investor profiles, and this is a perfect time to do it. We have done all the financial targets and now we're going to unleash the next level of profitable growth for Holcim. I could show you this chart for the next 2 hours or so because it shows how much we have done and how strong the base is now. You see the EBIT margin. I would say it's a sector-leading EBIT margin here. And now we promise that in '24, it will increase to 18%. So we are, I think, here also with the right momentum, earnings per share you see here. Even in the strong Swiss franc, we were able to grow more than 15% on average by year. If you make this calculation in euro and U.S. dollar, you're close to 20% of annual growth rate, earnings per share. Cash flow, very important. We have questions, how sustainable the cash flow is. And very simple, we have now delivered 5 years of CHF 3 billion plus cash flow, and we have just started. I don't think the ambition of the new CEO is to have any weaker cash flow. This is clear. And if you draw the trend line, you can maybe anticipate where the cash flow is going to be in the future. Very happy. You see the cash conversion is above 50% also on a sustainable level and very happy we have now this high performance organization established. Let's go to the balance sheet. You all know the numbers. This is for me very important. You need the entrepreneurial freedom to realize opportunities without always asking the banks to finance it, and we have established this for Holcim. We have a strong balance sheet, 1.2x net debt leverage. You've seen we have decreased the net debt by more than CHF 5 billion over the last few years, and this is the right level of balance strength you can also expect from us in the future. Dividend, very happy, and I think I'll leave this to Steffen to talk about the dividend and the share buyback later. What is very important that the successful transformation we made at Holcim to build up the new segment solutions and products to focus geographically much more into North America, but also strength in Europe and Latin America is also driven by M&A. We did 97 transactions over the last 5 years, 97, 19 divestments, 78 acquisitions, and all value accretive from day 1, I would say, very well executed. And I want to share detail with you. You all know this that we do this very value discipline. You see here even solutions and products businesses normally well in the double-digit multiple. I think we bought them on reasonable levels with high synergies. The bolt-ons, you see around 5x multiple. So high synergistic. And then on the divestment side, we were also very disciplined to sell here for significant valuations. And all that helped us then to have this strong balance sheet and have all the cash we can also distribute to shareholders. I think this is very important. And this we have been working on for the last years that we really have the most successful M&A machine. We have done 28 acquisitions last year. This is more than 2 a month. And you see our results. We don't have any watering down of the results. We don't have any special reporting. We take these acquisitions and we make them accretive from the first year. And here's just a couple of points I want to share with you. We just talked about that the M&A is now a very positive part of the growth, 3.8% sales growth in Q4 alone. And on the 28 acquisitions, that is around 4% pro forma growth. So a big part. And you can expect this to continue. We gave you a guidance for this year that we're going to have more than 2% growth coming by acquisition in addition to the organic growth, which will be also above 4%. Important to me, I like to buy family-owned companies. So 80% of the acquisitions are family-owned businesses. Family-owned businesses, they have the values we look for. They have high-quality products. They have high-quality production, longtime employees. At the same time, they're not optimized in some processes like procurement. So we are able to integrate and to execute synergies on a very significant level. We have a super M&A team in place. You see our average time from signing to closing is only 4 months which is very important because you don't want that company being in uncertain times, and you want to start to integrate and realize synergies, of course, as fast as possible. So this is a very important part of the Holcim way of M&A to have the shortest time period from signing to closing. We have a full team globally. Our local people are fully accountable on these transactions, and on the business plans and the synergies. And then finally, I think it pays off when you see our results, they are not diluted by acquisitions because they are EPS accretive from year 1. And also on the ROIC, they are double-digit already on year 3. Maybe the last thing I want to share with you is our people, you know our decarbonization story, we have reduced the CO2 per net sales another 20% in 2023 alone. So we come into totally new levels of decarbonization, which is now a big part of our success, especially in Europe. I want to talk about the brands with you. This is now the new Holcim, is about the most successful brands in Building Materials. We have just started the upper 3 brands, they were just introduced in the last 4 years. So this is our low carbon or our sustainable building solution brands. We have launched ECOPlanet. It's already more than CHF 2 billion in sales. So it's our biggest cement brand globally. We have our ECOPact, also our at least 30% CO2 reduced concrete. It's also more than CHF 1 billion in sales already. And now we introduced ECOCycle, which stands for circular construction, taking all the construction and demolition materials back and building the Kunsthaus in Zurich. That's our ECOCycle brand, it's already huge. We have recycled last year, 8.4 million tons of construction demolition material. This is 1,500 full truck loads every single working day of the year. 1,500 full truck loads coming in, being recycled and reused as a raw material or in the finished product. Fantastic story, and we can talk more about it, how this is profitable, and this is a totally new growth segment for Holcim going forward. Then we have very strong brands on the other side of the Atlantic, we have in Latin America. We have the flagship brands for cementitious, Apasco and Fuerte, both together, also CHF 1 billion brands. And they are the flagship brands. People go to the store. They don't buy cement, they buy Apasco, they buy Fuerte. And in North America, our story is very branded. We have the biggest, most successful cementitious brand with OneCem. It's a CHF 2 billion brand already. And we have our roofing business is branded under -- for flat roofing is branded under Elevate, also CHF 2 billion brand. So altogether, only the 6 brands you're seeing, they account for 30% of Holcim's turnover, and this is the way going forward. Everything we do, we want to brand for the customer with having the high-quality, high sustainability promise for the customer. Our people. And you know where I'm -- we have been -- we are big on a performance culture at Holcim, and this is a bit the background around it. We have this deeply embedded performance culture at Holcim more than 500 profit and loss leaders. Every single Swiss franc has only 1 owner at Holcim. And we have established that over the last 5 years. And it enables us, of course, to have the accountability, have the responsibility and at the same time, be the closest to the customer. I don't want to take a decision from Switzerland on a U.S. customer or a Mexican customer or a customer in Spain. This is best done by our locally empowered people. But to do that, you need to give them the empowerment, but also, of course, you have to put them in your performance framework, which is the second bullet. We have a transparent and accountable performance management. We all work around the globe on the same KPIs, starting with growth, EBIT, free cash flow and return on invested capital and everyone incentivized on the same metrics and -- this is -- if you ask me for one reason, we have the strongest margins in the industry. It is our performance culture. The proven track record we just talked about, our system of M&A, what we have developed over the last 5 years is also around the people. And we have very high satisfaction of our staff. We have the highest employment engagement scores for the scallop employee survey. We have more than 90% of the people participating and very important at Holcim, customers and employees are our 2 highest values in the company. We have our own business school, and we work very hard to make sure we have 85% of our promotions coming from within the company. I think with this is a bit the background, what I think we have established now at Holcim. What I like the best we have performance quarter-by-quarter. At the same time, we established these strategic foundations to go into the future very strongly. And with this, I hand over now to our CFO, Steffen, who gives you more details on the financials.
Steffen Kindler: Thank you very much, Jan, and good morning, everybody, also from my side. I would actually also like to start with Q4. Q4 was our strongest quarter. We had tremendous momentum towards the end of the year, which we intend to carry over into last year. When you look at our Q4 sales, we grew by 5.5% organically, but we grew by more than 2% on an absolute basis against the strong Swiss franc. Something that's worth highlighting here is the 3.8% growth from acquisitions. Remember, in the fourth quarter was the first time where we didn't have the effects anymore from the divestments of India and Brazil because those were completed in Q3 2022. So this is only acquisitions, mainly our bolt-on strategy and the acquisition of Duro-Last and you see a beautiful run rate of 4% here, which also proves to the point that Jan mentioned earlier. Same when we look at our recurring EBIT, again, strong momentum in the last quarter, almost 18% organic growth in recurring EBIT, 8% on an absolute basis showing that with our organic growth, we are able to offset the strong currency headwinds in the last quarter. A couple of records here. The EBIT growth in the last quarter was actually the strongest of every quarter in 2023, the CHF 1.117 billion is the highest third -- fourth quarter we ever had. And so we achieved a couple of new levels here also in the fourth quarter, again, pointing to the momentum I mentioned earlier. Across the regions, in Q4, you see that it was broad-based. We had profitable growth across all regions. You see especially that on the recurring EBIT side, we grew double digit in all of our 5 business segments, again, pointing to the very strong finish of the year. Now let's look at the full year numbers. We start with sales. We achieved sales of a bit more than CHF 27 billion. That's an organic growth of 6.1%, you see in the column left to that, acquisitions and divestments had a negative impact of almost CHF 1.8 billion. That is driven by the divestment of India and Brazil and the acquisitions of Duro-Last and our bolt-on strategy. As I said earlier, in the first 3 quarters here, still the divestments have an impact. And we have foreign exchange effects last year of almost 7% on sales. Recurring EBIT, a similar picture. We had recurring EBIT growth of 14.7% organically. We achieved a new record of CHF 4.76 billion recurring EBIT. So we're slightly up against last year against the strong Swiss franc. And what you see on this chart, which I want to highlight is we offset more than CHF 300 million -- CHF 400 million of translation effects from currencies. These are about 60% in mature markets, 40% in emerging markets. So it's across the board. The strong Swiss franc is something that we work to overcome every year. Now let me quickly go through the regions with you. What you see here that we had a very strong earnings profile with a broad-based growth across all our regions. And we see a bit more detail on the next page is just a few highlights by region, starting with North America. We had record net sales and recurring EBIT here with a strong margin of almost 22%. Latin America is the 14th consecutive quarter of profitable growth, with record recurring EBIT and a strong margin of above 34%. Europe, strong record in net sales and recurring EBIT with a margin of almost 16%. Asia, Middle East and Africa, strong margin expansion here of almost 6% -- more than 5 percentage points to 21.2%. And here also remarkable divestments that we signed last year and that will be concluded in this year. Looking at Solutions & Products. We talked about a lot about solutions and products in the last quarterly earnings calls. Now we can reaffirm that we had positive growth momentum in the fourth quarter of last year. And with the sales stabilized now, we also see the margin expanding again. For the sake of completeness, I showed you this chart, I think, since the half year mark, to explain to you what the stocking and destocking means. So I'm probably going to show it for the last time now because that story is complete. You see the effect of stocking here in Q2, Q3 2022. And you see the reverse effect of destocking in Q4 '22 and Q1 '23, but then you see now that the levels of our revenues are normalized. So I think we retired this chart now and call the story complete. When we look at our financial performance in the P&L, we start with a record recurring EBIT that I already mentioned of CHF 4.76 billion. And then you see in the lines in between here, actually, you see not a lot. This is because in our company, we put everything into a recurring EBIT. There, we don't put a lot of entries in those lines below. And therefore, what we do in recurring EBIT is really also reflected in our EPS. You see down here, we have a record EPS of CHF 5.42 per share. That's up more than 9% before divestments impairments and we allow ourselves here to exclude the DOJ resolution from last year in order to make this comparable. So a very strong increase in earnings per share. Record free cash flow. We talked about that a lot, CHF 3.7 billion or a bit more than CHF 3.7 billion free cash flow. You see the bridge here. It's nothing unexpected. The change in working capital, the CapEx, taxes, financial expenses and a mix of other things. What I want to highlight on this chart is there are no one-off effects here. There's nothing that we did in 1 year that will not be repeated. We have cash flow above CHF 3 billion since 5 years in a row, and we achieved this level consistently, a record this year, but with very, very good opportunities into next year again. Looking at our net debt, you see the bridge here. Remember, please, that our net debt in 2022 was particularly low at the debt leverage of 0.9 because we had the proceeds from the sale of India. And now this year, you can see with the free cash flow, the acquisitions that we did, but also with the more than CHF 3 billion returned to shareholders in 2023, we're now at a net debt level of CHF 7.9 billion, which is a debt leverage of 1.2. Very important here for us to say we're committed to a strong investment-grade credit rating, BBB+ and our balance sheet comfortably affords that. Looking a little bit into shareholder returns. So we have good results. So the next question is what does that mean for the shareholder? Well, what has it meant for the shareholder in the past? In the past years, you see we returned CHF 8.8 billion to the shareholder, roughly CHF 2 billion of those to buyback, CHF 6 billion of those to dividends. And while we strengthened our balance sheet, we returned to the shareholder and strengthened our balance sheet, and this is why we're coming from a position of financial strength, and what does that mean going forward? That means 2 things. Number one, we increased our dividend by 12% from CHF 2.5 to CHF 2.8. Remember, we pay this dividend from foreign capital contribution, so there's no withholding tax. We think we probably have the best dividend policy in the SMI. And -- what we also do, we launched a share buyback program of CHF 1 billion to be completed in 2024. Remember, in 2023, we already had a share buyback program of CHF 2 billion that was rather triggered by the strong proceeds from the India sales. Now this share buyback program is triggered by our strong financial results, the strong cash flow and a very healthy balance sheet. We're going to pay this out of cash on corporate level. There's no additional bonds or debt going to be issued. It's going to be paid out of cash. With that, I would like to pass on to Miljan for the outlook.
Miljan Gutovic: Good morning, and a warm welcome to all of you. You have seen it, record performance again from Holcim quarter-by-quarter in 2023. This is driven by our superior earnings profile from our best-in-class EBIT margin to our strong balance sheet. And as Jan explained, deeply embedded performance culture with more than 500 P&L leaders across the world. That's why we believe Holcim is well positioned to capture further growth and we are confident about 2024. And therefore, we are guiding for organic net sales growth of more than 4% plus additional growth of more than 2% from our well-run M&A activities. This all will result in overproportional EBIT growth. We discussed our industry-leading EBIT margin of 17.6%, this was really driven by transformation and shift from volume to value, from more attractive markets, markets that are growing and markets that are profitable. That's why we are confident that EBIT margin in 2024 will reach 18%. Jan said it, we don't have a choice. Free cash flow has to continue 5 years above CHF 3 billion. So nothing will change in 2024. We need to have strong cash flow to continue to invest in profitable growth and at the same time, provide value creation to our shareholders. Circularity and decarbonization is at the heart of our strategy. And that's why we will continue to invest in these profitable growth driver. Here, you see our commitment for construction and demolition material recycling. ECOCycle platform was initiated to accelerate the recycling on the cost of construction and demolition materials. We have reached 8.4 million tons last year, which is 24% above prior year and we will continue to deliver another great result this year of 20% to be close to 10 million tons. And at the end, in conclusion, Holcim will continue to deliver superior performance. And this is indeed driven by our superior teams by more than 64,000 people that make Holcim a great company to work for. Thank you.
A - Nesrine Gharbi: Well, thank you, Miljan. Now we can take questions. We will start by the room. Arnaud Pinatel, On Field Research, second row.
Arnaud Pinatel: Question. First of all, congratulations for the Q4. They were impressive results. Congratulations also to Miljan for the new position. But my question is around the growth for Holcim in the future because the debate at the moment is what multiples will be applied to both entities when the spin-off will be down. And we have in mind that in Europe, the priority will be decarbonization, and you can make it profitable. It's clear in what you're saying. But do you intend also to grow in Europe in Solution & Products? That will be my first question. Secondly, if you cannot go to the U.S. because it will be obviously the new field for the Holcim USA, knowing that you're exiting also progressively emerging markets, knowing that you are Australian, will you go to Australia? We can see at the moment, it's a very fashionable destination. We have seen CRH (NYSE:CRH), we have seen Saint-Gobain moving fast. So would you grow in Australia and would you like to acquire more critical size in Australia? I guess it will obviously enhance the growth profile of Holcim excluding North America.
Jan Jenisch: Let me answer the question a bit differently to start with, and then Miljan can give us all the details about Europe and Australia. I think what's important to understand is that in Building Materials, this is a growth market. We have all the growth trends of urbanization, increasing population. We have to make our buildings more energy efficient, more sustainable than we have the new stream of making that circular. So we have an amazing megatrends going forward. And that's important. That's why it is important for us at Holcim to have this growth strategy and to have it on both sides of the Atlantic. And the second aspect is the market size is huge. When you look at the North American market, we provided some data with the presentation on January 28. And I think we said this is a CHF 175 billion market for us as of today. And we have a market share from 20% in flat roofing, all the way down to 2% aggregates. So we are really positioned or we have all the potential to grow the company, and it's the same in Europe and same in Australia. Just it's important for me to set the framework right. We have the megatrends for growth and we have plenty of room to grow.
Miljan Gutovic: So let me start with your quote. Sustainability runs with profitability. Your quote. So -- and that's why I'm very, very excited about prospects of decarbonization and circularity in Europe. Yes, Europe has the most advanced and rigid decarbonization framework. But at the same time, there are tools in place to support companies like Holcim to grow. And we discussed it last during our Decarbonization Day. This will lead to consolidation in Europe. This is helping our prices go up. This is the whole shift from volume to value. And do not forget that in Europe, we still have some growth pockets. I am very optimistic about Eastern Europe, for instance, especially our presence in the 2 big countries, Poland and Romania, we are seeing a growth. Also Greece, Spain, they are doing well. So maybe in the short term, we will see soft markets in Europe. But in the long term, I'm thinking we will see -- we will go back to the growth driven by infrastructure, but also come back in residential. So all in all, decarbonization and circularity is the key priority for our business in Europe. And we also have developed a strong platform in solutions and products, motors, Precast and some other business segments. To answer your question about Australia, it's quite encouraging to see the momentum in Australia in the last few weeks, what's happening in all these mega deals. You saw that we are investing in Australia. Last year, we had 2 acquisitions in Australia and New Zealand. We are looking for further opportunities. I believe Australia can have an equally good story on circularity as Europe, and you will probably see more from us on Australian topic.
Arnaud Pinatel: And just a follow-up question, if I may. Regarding the brands because you were very clear, I mean, Jan, on the value of these brands with the spin-off and you have global brands or does it work who is keeping what -- because ECOPlanet and ECOPact are adopted on both sides of the Atlantic. So I suspect that for Holcim and Elevate, it's easier, but for ECOPact...
Jan Jenisch: It's already quite focused. So I mean Holcim will remain Holcim, and we are very happy that we have modernized and this Holcim brand came back to one name and all that. And then for North America, we will introduce a new name later this year. On the branding side, if you look at the 6 brands, you realize that they are already very regionally focused, right? So the ECO brands are dominantly in Europe and also very active in Latin America, where our customers have a high value in a Swiss franc, whereas North America is very much focused on their own branding stories. So it's quite a good fit, and we will push that branding for both companies very strongly.
Nesrine Gharbi: Second question maybe, Remo Rosenau, Helvetische Bank.
Remo Rosenau: I would like to come back partly on one of the questions of Arnaud. After the spin-off, if you look in '20 to '25, Holcim will again, be a much more cement and ready-mix focused company because most of the transformation was focused on North America. So will we see a similar development in Holcim '25 going forward as we have seen in the last 5 years in the sense that we will go rather out of cement, not by divesting, but by acquisitions in other fields comparable to the last 5 years?
Jan Jenisch: Miljan, that's a question for you.
Miljan Gutovic: As I mentioned, we already have established platform for solutions and products in Europe and we have concluded several M&A acquisitions in Latin America. So we will continue to work on this. So to answer your question, yes, solution and products will continue to grow. However, at the moment, for Europe, the priority will be on decarbonization and circularity.
Remo Rosenau: Okay. Then on Latin America. I mean, Latin America generates around 11% of sales, but 21% of EBIT on the group, double the margins as in the average. How much of that cash you generate down there is actually available for the group. I mean, can you take it out of these countries? Can you use it for group purposes? Minorities, there are not that many anymore, I think, but there are other restrictions probably.
Jan Jenisch: Steffen, I would say.
Steffen Kindler: Okay. Happy to answer this one. We actually have a very good cash repatriation out of Latin America, out of all countries. There's -- we look on the corporate level at cash in countries and cash at corporate and almost all of our cash sits at corporate. Also from Latin America, we have a very active approach to repatriating cash whenever windows of opportunities arise. Yes. No issues there.
Remo Rosenau: Okay. Great. And the EBIT margin of 34-point something percent, is that sustainable, will it even go further?
Jan Jenisch: I hope it's increasing. So you have to -- if you -- this is why we tried this time to show you also the development. I mean we have put the performance culture in place, the performance management in place. We go into branding, into to value added. And we have guided also for higher EBIT margin and you can -- again, you can, I think, see that this is not limited to 1 region.
Remo Rosenau: Okay. In the fourth quarter, however, I mean, we've seen very strong sales growth in LatAm. It was, I think, the most positive surprise was there in the regions. Absolute profit also grew, but the margin was down in comparison to last year, has that to do with overproportional price increases?
Jan Jenisch: Let's look at is this here. It's also a quarter only, and we have been so successful in the quarter. Latin America a very smart businessman. They probably were already far ahead in the incentive schemes and maybe made sure they have a strong base for next year. I would not over interpret the quarter for Latin America. They do excellent. We have -- when you go there -- I mean we have also our people. We operate with local people in Latin America, also on the management. But trained by us, of course, and within our performance culture, and they are the most agile managers for all these cycles you're having, right? You have the political cycle, the currency cycle, the economic cycle is all may be more volatile in Latin America compared to other markets, and they are the master in this. From Argentina to Mexico, from Ecuador to Colombia, they do this very well. And market looks strong and we will see strong results this year.
Nesrine Gharbi: We will take the third question from the room, and then we will probably switch to the webcast. Martin Hüsler, ZKB Bank.
Martin Huesler: The first question is about price over cost situation. Now we start '24, can you give there some indications and also maybe if you even see room for further price increases in certain regions. And the second question, maybe a bit related to that, the CO2 prices have come down sharply. What's the immediate impact on you? And then on the whole sector, does this increase price pressure for cement?
Jan Jenisch: No. Look, I'll start with the second question, Martin. Look, the decarbonization, that's one of the mega trends, and especially in Europe where we have the green deal with all the regulation and with the carbon scheme, and I always said this works excellent for Holcim. The company who decarbonizes the fastest, gets a benefit on the cost side and a company who provides the most sustainable building products for the customer benefits on the customer side. And we are now in this sweet spot. So I always said, for us, the CO2 certificates team works excellent at EUR 50. I said before, EUR 100 is a very nice position or anything higher than that. So for us, it's not a concern. We have to see how this is phasing. You also have to see that the current CO2 certificate scheme has a very rapid decrease in certificates starting in '26. So we should not be too short term now and think about what's happening this month with the certificates. I think the long-term trends are very clear. On the pricing, we are pricing -- at Holcim, we are pricing responsibly. Now you asked me a bit for the guidance for the year. We gave already, I think, confident outlook that we believe the EBIT margin will further increase. You can also tell from the momentum quarter-by-quarter that this is the way forward. On the cost side, maybe more important than on the pricing side, you know that we still had quite significant high cost levels in the first half, even in the first 3 quarters of last year. So in principle, we expect now a quite significant cost upside this year. While the energy -- you're all experts to analyze all the different cost buckets and you -- while energy was already easing in the second half of the year, we still have other big cost buckets, logistics, maintenance still on very high levels. And here, we expect this year that we are able to bring this into more favorable cost terms.
Nesrine Gharbi: Maybe next question from the webcast. We have Elodie Rall from JPMorgan (NYSE:JPM). Elodie, can you hear us? In the meantime, we can take other questions from [indiscernible] from Octavian.
Unidentified Analyst: So Jan, can you talk a little bit about the dynamics in Solution & Products because the comp base was relatively low and the organic growth was 2.8% is good, but it's not really dynamic. So what are you seeing there?
Jan Jenisch: I mean simply expect double-digit growth for us this year, nothing less. I mean, we came from the destocking and then the destocking in '24 and to -- that went into October. So we saw very good numbers, November, December, but let's not talk about months. I think we have now a strong '24 ahead of us. And Solutions & Products, while this stocking -- destocking was a unique thing in the last 50 years where we've disrupted supply chains, the very positive aspect of Solutions & Products where we do 70% is repair and refurbishment. That's a very constant demand. This is going into the future. So expect very good results from us this year.
Unidentified Analyst: And if we leave destocking aside, so what do you see from the market dynamics? Is it really getting better because it's mainly a U.S. business?
Jan Jenisch: The market is great. I mean our contractors, they are booked for the year. So this is why we have a very, very confident forecast.
Nesrine Gharbi: Next question may be Cedar Ekblom from Morgan Stanley (NYSE:MS). Can you hear us?
Cedar Ekblom: Can you hear me?
Nesrine Gharbi: Loud and clear.
Cedar Ekblom: So I just got a question on cash flow. In your cash conversion of 58%, is there any difference between your North American business and the remaining assets? And the reason why I'm asking is I want to understand what the cash return profile could be of your ex North American assets post the split? Is this a business that could continue to pay the group dividend even on a much smaller operating basis? Or is the downside risk to your Holcim dividend persisted?
Jan Jenisch: And look, we have provided quite some comprehensive information on the split on January 28. And we also gave you the time line that we need now until the second half of the year to give you the full plan forward, transaction structure, capital structure of the 2 companies and then we bring you all the data or the P&L. So you're sneaking this one in, Cedar, but what you can see from our January 28 presentation, we have 2 strong companies with strong earning profiles. And I think it's fair to assume that both entities have a high cash generation. And I cannot give you more details at this point because we have to sort out what's the capital structure. And if going into the future that has an effect on the cash flow as well. So we're going to bring you that information later, but it's fair to say for today both companies are very significant cash generation.
Cedar Ekblom: Okay. Maybe I can just ask it in a different way then. And I won't ask all the information from the -- when you think about your Solutions & Products business and even the group today, the cash conversion is higher than some life-sized assets. And so do we need to think about Solutions & products being a much higher cash conversion business than the heavy side business? Or is it actually that's our heavy side business is sort of efficiently run with a very tight CapEx profile?
Jan Jenisch: It's kind of, Cedar when you're coming out of cash conversion above 50%, like we do, or you have a cash flow margin above 13% what we have and what we plan for the future it's not -- we are not able to accept any low cash flows from any of our 4 segments. And we have almost similar cash generation in the 4 segments at the moment. On the one hand, you have a lower capital intensity from solutions and products. But if you analyze our results, we have reduced the capital intensity of our traditional segments a lot over recent years, bringing us to a CapEx level of around 5% of sales. So again, we bring you more data in the future, Cedar, but for now, with the high cash conversion and the high cash margins we are having, it's fair to assume there are no dead bodies at Holcim. There's not 1 segment, not significantly contributing to the cash.
Nesrine Gharbi: Next question from Ebrahim, CIC.
Ebrahim Homani: I have two, if I may. The first one is about capital allocation between -- we know that we -- you have CHF 1 billion share buyback program, but on CapEx and acquisition. My second question is about the working capital effect you expect in 2024?
Jan Jenisch: Look, we talked about the cash flow before. We are very proud to have this strong cash generation. This will not go away. We plan another cash rich year. I think even the new CEO is maybe in some competition with the numbers, which is where we want it, where we want him to be. So just, first of all, expect that this cash flow generation will continue for the years to come. And then we have the positive situation that we have a lot of cash to allocate. And we are very happy now, increase the dividend. We are very happy to have the EUR 1 billion share buyback, and it's well covered by this high cash generation. I don't know, Steffen, if you want to talk about it, it's also important to notice that we have the cash at corporate. So the cash all is in Steffen's office. This is another reason. You have companies, they talk about cash and the cash is in Argentina or it's in somewhere else. Our cash is in the CFO office.
Unidentified Company Representative: No. Can you confirm that Steffen...
Steffen Kindler: So we have -- I answered that question before. We're very successful at repatriating cash into Switzerland, and we keep almost all our cash in the corporate group. I also -- you asked about net working capital. Look, I think it's important to understand our free cash flow is driven by EBIT and EBITDA. Our free cash flow is driven by operational results. And our cash flow is driven by managing all the lines below the operational results as well, as I showed you before, we don't allow to be booked one-off and exceptional things. It all goes to the operations. Now working capital is something we manage something we have an eye on. But the driver of our free cash flow is EBITDA. I think that needs to be very clear. And we had a good contribution from working capital in 2023. So we made some good advances there and we'll continue on that, but it's not the main driver of our free cash flow.
Ebrahim Homani: And maybe you tell precisely how much is your cash year-end and how much under your desk?
Steffen Kindler: So our cash year-end is about CHF 6 billion and under my desk is about CHF 5.4 billion.
Ebrahim Homani: We check his office once a day.
Steffen Kindler: My office has a special lock.
Nesrine Gharbi: Next question from the webcast. We have Ephrem Ravi from Citibank. I think Ravi dropped the line. We will take a question from RossHarvey, Davy. Ross, can you hear us. Can you hear us, Ross? All right. We will take next question from the room then. Tobias Woerner from Stifel.
Tobias Woerner: Two, if I may. The first one, you've improved your carbon footprint significantly more than 20% in 2023. When we look at valuations versus the carbon footprint, it tends to improve exponentially from about 1,000 tons of CO2 per million revenue. So would it be possible just to get a sense of your journey going forward on that line? I admit it's our job really, but it would be helpful. And then secondly, there were 2 announcements 3 days ago, 1 from the Federal Ministry of the Economy and Climate Affairs in Germany about CCS that, that should be facilitated. And the second 1 about zero carbon cement plant to be built in the port of Amsterdam, 1.2 million tons. What do you make of those 2 announcements for your business?
Jan Jenisch: I take the first question, then I think Miljan can give us more clarity. I mean, it basically goes to our point that this decarbonization is the new competitive factor in Europe and -- you all know we have in the last 2 years, there were 10 cement plants, granted subsidies by the European Innovation Fund, and we received 6 out of the 10 grants, which I think just made me myself comfortable that our people do a good job because this decarbonization is about step-by-step improvement and it's about being faster than others. It's not about being perfect from the start. So I'm very happy to see that in all these news for us is good news because we are, I would say, leading the sustainability and the decarbonization competition in Europe, and we will be very happy to continue there.
Miljan Gutovic: From my side, I believe, very encouraging news from Germany. As you know, 2 years ago, we have been awarded the EU innovation fund for our project in Lägerdorf in Germany. So German government is now pushing for storage options. We realized that on EU level, without onshore storage, we will not be able to deliver a commitment of 50 million tons per year. That's why alternative is to accelerate onshore storage. Regarding your last question, I don't feel comfortable commenting on competition, but we know we have exactly the same product portfolio, this is based on slag, fly ash and some other alternative supplementary cementitious materials. So we can do that today, but the question is, is it scalable? So for us, we have a clearly defined decarbonization road map, starting with all the levers from alternative fuels, alternative raw materials to the large scale carbon capture projects to go down to net zero.
Nesrine Gharbi: We will try again the webcast. Ephrem Ravi from Citi.
Ephrem Ravi: Can you hear me now?
Nesrine Gharbi: Loud and clear.
Ephrem Ravi: Sorry for the tech glitch. Firstly, you've specified 2% or at least 2% organic growth from M&A. Order of magnitude is about CHF 500 million, if I just put some numbers around it. Does this mean that multibillion Euro or Swiss franc acquisitions are out of the cards for '24 till you do the split? And can you also give us some guidance as to which geographies are you looking at, i.e. Is it more North America? Or is it going to be more in Europe? And second question, ECOPlanet and ECOPact 19%% of sales, quite impressive. My understanding was that you are trying to increase market penetration and brand recognition initially before pushing that pricing more aggressively. At what percentage of sales would you feel that we've had critical mass here and we need to kind of push pricing more aggressively?
Jan Jenisch: Ephrem, I look from our M&A policy, and I was very happy I could share a bit more background information to you today, how we do the deals from family-owned companies at our prime target to our team's spot on valuation, on integration and synergy delivery. And you expect the same from us, please. I think we have on this slide, we have a geographic mix of the acquisitions. And this you can expect from us, we want to acquire in North America. We want to acquire in Europe. We want to acquire in Latin America, where we also made some very good additions. And I would say these are our prime targets, but we also had 2 acquisitions last year in Australia and New Zealand. So expect from us, we did 28 acquisitions last year. I'm not sure if we can do 30 this year or we will do 20 this year, but I would say a range of 20 to 30 is a fair assumption. On the bigger ones, Ephrem, what you see also with us, we have no dilution of our earnings with M&A because we have this disciplined project organization and delivery. And this tends to work better with reasonable sized acquisitions. And you hear that in the newspaper every day, there are some people thinking that every second big acquisition goes in the wrong direction. And this is a bit my observation as well. So we are very careful. We did bigger acquisitions. We did Firestone acquisition, the Malarkey acquisition, the Duro-Last acquisition. So we did 3 acquisitions well beyond CHF 1 billion in valuations. So we don't exclude that. We did actually just it's less than 3 years ago, we closed the Firestone acquisition. Fields are ready that roofing is with us for 10 years. It's with us less than 3 years. And we did 3 major acquisitions in roofing. And you can expect that from us going forward. But you see we did 78 acquisitions in the last 5 years. And we did 3 of them, 5% were really big ticket size, so above CHF 1 billion. And I would love to continue that. But the bread and butter of a growth strategy based on acquisition are bolt-on acquisitions. And you can buy them for reasonable multiples, you can integrate them simple and you have a high synergy -- high synergy delivery, usually 50% to 100% synergies on these family companies. And that's our focus going forward.
Miljan Gutovic: The comment on ECOPact and ECOPlanet. For us, the story will continue. To be frank with you, 4, 3 years ago, when we launched ECOPact and ECOPlanet the other way around, respectively, we were not anticipating such a growth. Today, these products are sold from New York to Sydney, from Mexico City to Dubai, and it's still the only global brand of low carbon cement and low-carbon concrete. This year, we would like to accelerate our activities on ECOCycle because this is the opportunity now that we need to grab. I would like to reiterate, last year, we did 8.4 million tons of construction and demolition materials recycling. We want to increase that to 20%. In Europe alone, we have more than 19 recycling plants dedicated to construction and demolition materials. So that will become our next big momentum in the years to come in addition to ECOPlanet and ECOPact.
Nesrine Gharbi: Next question from the webcast. We will try Ross Harvey from Davy again. Can you hear us?
Ross Harvey: Can you hear me?
Nesrine Gharbi: Yes.
Ross Harvey: Okay. So my question is on Asia, Middle East and Africa. I noticed that Q4 saw another nice sequential pickup. I'm just wondering can you discuss the momentum there into 2024. And maybe just under the new structure, what your capital allocation plans are for the region. I know the annual report mentions a number of sustainability-led initiatives? Will they continue? Do you plan to scale that up? I know it's not a type of market that we usually associate with sustainability, which you might just discuss that.
Jan Jenisch: Ross, look, we are managing that region is maybe the most heterogeneous region. It spans from Australia to China, to parts of Africa and Middle East. And nevertheless, the region is very efficiently led. We have actually the highest margin increase last year was in Asia, Middle East, Africa, and we are running these countries very well. We have done a significant number of divestment in that region. And we will have another few markets maybe where we can find better owners and that's, I think, going forward, we will be very value focused for these regions, and we will have very high returns.
Steffen Kindler: Can you please repeat your question on capital structure that didn't come across very clearly.
Ross Harvey: That was mainly through capital allocation. So I think you touched on it somewhat, but would you look at M&A in the region, which is Holcim acquiring? Or do you think that the reason you're happy with your portfolio there?
Steffen Kindler: Okay. Look, in that region, we have done 2 divestments in 2023. We have 3 divestments we signed with South Africa, Tanzania and Uganda. We have put CapEx into that region. So the capital allocation for the region, EMEA is not something we would comment specifically upon. But the way we go about in that region is we look at each country separately, and you get very, very well running businesses in the North Belt of Africa. We got Australia, and we got a couple of other very, very well-functioning businesses there that we support. And then on the flip side, you saw some of these countries where it's also not easy to repatriate cash. And so over time, we look very closely if it's better owned by us or if it's better owned by somebody else. I would say this is the approach.
Nesrine Gharbi: We will take the next question from Gregor Kuglitsch, UBS Bank. Gregor, can you hear us?
Gregor Kuglitsch: I hope you can hear me. I've got a couple of questions, please. So on the free cash flow, Jan, I kind of heard you say you look at the chart, draw line and that's the trend of the free cash. And obviously, that would imply growth versus the CHF 3.7 billion, the same time you're guiding for over CHF 3 billion, those 2, maybe not inconsistent with each other in theory. But I just want to understand whether that's what you meant or whether we should be thinking of something that could even be down, but still over CHF 3 billion. I just want to understand the sort of growth profile of that free cash, please? The second question is on energy cost. Can you just remind us what they actually did last year? So how much did it decline by? And at this rate, what would you expect them to go down by in '24? It seems like that's going to be a big driver for your growth. And then a clarification question on the Solutions segment. Did you say double-digit growth? Is it top line, bottom line comment for '24? What did you mean to say?
Jan Jenisch: Greg, I take first and third question and I think Steffen takes the second question. Look, on the cash flow, I think hopefully, we appreciate that we give a very detailed guidance for beginning of the year and we give a confidence guidance. Is it growth? Is it EBIT margin? I think also the free cash flow is reassuring above CHF 3 billion. However, we've left some room for the new CEO to make maybe upgrades to the guidance for the next quarterly reports. So we didn't want to take all the fame way and just take it as a confident guidance for this point in time. On the solutions and products. So I think we have rightfully have high expectations for this year. Double digit is the sales growth already. And then you know our style that has to be translated in over proportional EBIT and cash flows.
Steffen Kindler: I take the point on energy cost. Our energy cost was down on a per ton basis in 2023, and we expect a further decline in 2024 of our energy cost of, let's say, low to mid-single digits percent. So that trend will continue.
Gregor Kuglitsch: How much, you said you had a decline, Steffen?
Steffen Kindler: I said we had a decline in 2023 on a per ton basis, and we expect that to continue into 2024, low to mid-single-digit percent.
Nesrine Gharbi: We will take next question from Luis Prieto, Kepler Cheuvreux. Luis, can you hear us?
Luis Prieto: Two from me this morning. I understand the relevance of pricing in the investment case of your European footprint in the context of the spin-off. But in your view, what is the long-term growth potential for volumes in Europe? Has the region gone pretty much ex growth on the volume front and your long-term planning? And the second question very brief, given where CO2 certificates are at the moment in terms of price, would it make any sense for you to purchase some at these levels in order to have more flexibility in the future?
Jan Jenisch: Luis, what region was your first question about?
Luis Prieto: Europe.
Jan Jenisch: Europe. Okay. I'll let this answer with Miljan. But look on the CO2 certificates, I mean we run a very tight performance ship. I always made it clear, I'm not a fan of hedging. So to buy now certificates to waste them in the future. That's not my job. I'm not an investor for Holcim in CO2 certificates. I don't do hedging on other products. We want to have a P&L run on a daily basis, agile and on performance basis. And this is why we will not purchase CO2 certificates. We want to decarbonize and use less certificates. And you would be surprised if I share with you our CO2 certificate balance we have at the moment. You will be surprised how well positioned we are. On the hedging, just another comment that you don't misunderstand me is a lot of people talk about the hedging. And usually always the companies present how great they are on hedging. And I always tell well, if they are so great on hedging, they maybe should be in private equity or hedge funds or something because that's not my job. If I'm good at hedging, I would be much richer and do something else. Now to the hedging, what we like to do is long-term contracting. So in the past, when we talk sometimes about energy hedging, for example, that's not a hedging that are long-term contracts. And we have today about 50%, 60% of our energy sourcing are long-term multiyear contracts even more so for renewables where we invest or commit to multiyear contracts. And that's the right way to do. That gives us a very stable base and no surprises and enables also our management to focus on other areas. I don't want my management to be hedged against energy increases because then they are not sharp enough in the market to ask for the right pricing for our products. This is why hedging for me is that's not my area of competence. We run the company sharp daily basis P&L. And so no CO2 certificates.
Miljan Gutovic: Regarding volumes in Europe, yes, volumes have been soft in the last 2 years. But once again, I would like to reiterate that in Europe, it's not about the volumes. It's about value over volumes. That's why we are talking about ECOPact, ECOPlanet. We are talking about decarbonization and circularity. And this will all drive the growth in the years to come. On the bigger scale, volume softness in Europe is driven by residential sector. We know there is a big drop in residential sector in all our key markets, but the shortage of housing is evident in Europe. So at some stage, we will see the reverse.
Nesrine Gharbi: We will take the next caller, Arnaud Lehmann from BofA.
Arnaud Lehmann: Hello, can you hear me?
Nesrine Gharbi: Loud and clear, Arnaud.
Arnaud Lehmann: Very good. Two questions, if I may. Firstly, on capital allocation in North America, you're going to be a U.S. listed entity, probably a bit less pressure from U.S. investors on decarbonization. So are you still committed to spend CapEx and OpEx on decarbonization in the U.S. And related to that, on your M&A strategy, you have a much larger cement business relative to your aggregate business, which I think cement is large size of your aggregate business. Do you feel the need for more acquisitions in the aggregate space to complement your vertical integration in North America? That's my first question. My second question is just a follow-up on Europe. Margins have expanded quite dramatically in the last 2, 3 years. Do you believe this is a sustainable level of margins? And do you think pricing could remain at least stable for 2024?
Steffen Kindler: So when it comes to Europe and the pricing, we are guiding for resilient pricing in Europe. This is driven by several factors, which we described today. And also we went into details in -- during our Decarbonization Day in November. So I'm confident that even in 2024, we will see a solid price increases in all our key markets in Europe.
Jan Jenisch: Did anyone understand the first question?
Arnaud Lehmann: There was 2 parts. Are you still committed to U.S. decarbonization? And are you still looking to expand your U.S. aggregates business, acquisitions.
Steffen Kindler: Do we need to -- do we invest in decarbonization in U.S.
Jan Jenisch: We have in -- all regions, we have a very strong decarbonization road map and for me, even more important, sustainable building solution road map for the customer. But it differs. We have in Europe now the very strong regulation and incentives from the green deal. And in the U.S., I would say the speed and the regulation is different. So we have an adapted road map for the U.S.
Nesrine Gharbi: We will take next question from the room. Any questions? Gentleman at the first row?
Unidentified Analyst: [indiscernible] Zurich. It just strikes me with the listing in the U.S. You've built a fantastic roofing business, which must have a lot of technology. It's got scale. It's got a lot of things. And now we have a European entity with much less of that. How confident can you be about repeating that? It strikes me as being a very attractive segment to be in. Now I'm talking about Holcim ex U.S. How does the future look in roofing? Is there enough potential out there to repeat the same thing? Is that really a target?
Jan Jenisch: I mean, look, let me just start to answer. So first of all, we are very fortunate to establish that roofing business in the most attractive U.S. market. I think if you can select, that's where you want to be. So very happy to have that. We have so much room now to grow in the U.S., we shared already. It's a $40 billion-plus market. We are just scratching the surface as #3 player. So I think the North American team has to focus on North America. We can double the business there. We can go then also into connected application areas, if you can go into the facade, you can even go stronger in insulation. So there's a lot of vision behind the U.S. business. And I think then for Miljan, it's fair to say that he has built up a very nice smarter platform for solutions and products. He has a small roofing business, but for him, the big growth avenues is decarbonization and circular construction.
Nesrine Gharbi: Next question from the room.
Eugen Perger: Eugen Perger from Research Partners. I have 2 questions. The recycling business is that kind of a business model on its own. Those are profit centers or is it kind of site service to building customers that you deal about their -- the old materials? And the second question is that more or less everybody is hearing up to build up their solutions and products divisions and is there a competition for those roofing companies, consulting companies. And so isn't that a danger that you start to overpay those bolt-on acquisitions as everybody is doing that at the moment?
Jan Jenisch: I take the second question first. It was interesting for me that someone, I don't know, was frustrated that -- well, I was first of all, surprised that it was possible for us to enter the roofing space at such a scale. I think if you turn back time 3 years earlier, I don't think the competition would allow us to buy those iconic companies. Firestone, Malarkey, Duro-Last, I mean, they are the most iconic roofing companies and they're all with us today. So I think while we did this very well, I think there might be a better taste with other people. And again, if you turn back time, maybe the pricing would be different because you see our results, we make this work for us. We have high synergies. We paid very reasonable multiples. So we didn't overpay. We talked about this earlier that our focus is we did 3 large acquisitions above CHF 1 billion. And the other acquisitions are all bolt-on acquisitions, and this is 28 acquisitions last year. So we are feeling very well. We have adjusted our valuation a bit that times are a bit different. Sometimes you have a buyer market, a seller market. So I think our valuations we pay currently for bolt-on is lower than what was paid a year ago or 2 years ago. So actually, to your question, I think you see an opposite trend at the moment. But very important for us, we have that disciplined project, a project organization where we have strict valuations, stand-alone basis, then integrated synergies, and that's the business plan that people are asked to execute on. We're very disciplined. That's why we have no dilution in our results from acquisitions and that you can expect from us going forward.
Miljan Gutovic: So to answer your first question on circularity and construction and demolition materials. It's a fully self-independent P&L, there are a few things related to it. So what does it mean? First of all, for us, it has to be in the big cities, if the position is critical. For example, London is today the biggest urban mine in Europe with tens of millions tons of construction and demolition materials generated each year and majority of this ends up in the landfills. So this is a truly growth opportunity for us that will last in the years to come. Secondly, this business of recycling, construction and demolition materials is highly synergetic to our existing businesses, our existing traditional businesses like cement, ready-mix and aggregates. So we see a great opportunity to grow in volumes, in the net sales at very healthy and profitable margins of double digit.
Nesrine Gharbi: We take more questions from the room.
Jan Jenisch: Time for lunch. We will take Yves and then we go for lunch.
Nesrine Gharbi: All right. Well, next question from Yves Bromehead, Societe Generale (OTC:SCGLY). That will be our last question.
Yves Bromehead: Yes. Can you hear me back?
Nesrine Gharbi: Yes. Go ahead Yves, we can hear you.
Yves Bromehead: Apologies for that. Yes, just a quick question on the scope impact in Q4. Your Q4 EBIT impact from M&A was very, very negligible. I think CHF 4 million versus the impact on revenues, which is around CHF 240 million. So I just wanted to elaborate -- if you elaborate, sorry, on this specific question. And then a second question on PPA amortization, I just wanted to understand how much is booked in 2023 and looking forward '24 as well?
Steffen Kindler: So I will take the one on the Q4 EBIT from M&A. Look, it's a very easy explanation. These businesses that we acquired earlier in the first year, they have start-up costs, they have certain costs to be put in order to get the business up and running. And those costs usually incur at the first 3 to 6 months. So that's why the EBIT contribution in the first month is a little lower and then it catches up with the run rate. We watch this very, very diligently so that we make sure we always hit our business plans at the special -- the milestones that we set. But in the first few months, of course, you have cost to get the business up to speed, get the accounting right, get the IT right, things like that. That's the reason.
Nesrine Gharbi: All right. Well, thank you very much. With this, we close our Q&A. Thank you for joining us, and have a great day.
Jan Jenisch: So again, it's a big pleasure to have you all here in the room. We can later experience a bit more the new Holcim materials recycled and low carbon. We have lunch together. Please note we have the management team around. So we have Oliver, our Head of Latin America is with us. We have Martin, our margin performer from Asia, Middle East, Africa. We have Jamie, Solutions & Products. We have Toufic for North America with us. So please feel free to get more background or details you'd like to have. And look forward to have lunch with you. Thank you.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.