Q2 2026 Heidelberg Materials AG Earnings Call

Speaker #1: and we are accelerating the growth, so a couple of good news to share. First of all, operational performance: 6% up on revenues, and 4% up on RCO.

Speaker #1: I think that moves in the right direction. What is very important for us is to see that for more than 4 years, since Q1 2022, this is the first quarter with a positive volume impact.

Speaker #1: Okay, I think that's one quarter, but I think that's very important to note from our side, that this is since more than 4 years the first quarter with positive volume impact.

Speaker #1: We are accelerating also the unorganic growth, with a couple of M&A transactions that either closed or have been done in the second quarter, so Mars, Australia, will try to close during this year.

Speaker #1: Ameritech in the US has been signed and closed, a very important strategic acquisition in the fastest-growing concrete pipe provider in Texas. Accenture, Turkey, transaction has been closed end of June, very good strong platform for the Mediterranean, both for the Turkish local market, but also export hubs to Africa, US, and other parts of the world.

Speaker #1: Bernco the transaction finally closed at the beginning of Q2, that's a strong market position in the prairie market in Western Canada. Very important also is what we would call the self-help, so we really continue to work on our cylinders when it comes to pricing and surcharges.

Speaker #1: Mitigating the effects that are absolutely there from the Iran situation, that we have increasing energy prices along the full supply chain, and that's why we are working diligently on pricing and surcharges, and that work continues.

Speaker #1: As much as the work on our own cost position, especially the fixed cost side, continues, with the Thai program, transformation accelerator program, where we are now at 440 million euros, so we're moving in the right direction.

Speaker #1: Surcharge of the share buyback, 1.2 billion, has been started and is running well up to 450 million, and then we've specified our outlook to the range of 3.4 to 3.65 billion euros.

Speaker #1: The ROIC will be slightly above 10%, and the CO2 emissions will be around the previous year level, that's mainly due to the Accenture acquisitions in Turkey.

Speaker #1: With that, I turn to page 3. You see the numbers plus 7% like-for-like plus 6% revenue, that's very good, strong growth on the top line.

Speaker #1: Operating EBITDA also moving in the right direction, like-for-like 4% reported 3. Operating margin more or less flat, slightly down, and then operating EBIT also up, like-for-like 5% and reported 4%, so I think that's a good set of numbers for Q2, and that also gets on gets us well into the water for H1, with basically a flat performance year over year on the profit numbers and a slight growth on the top line.

Speaker #1: So in that respect, moving in the right direction. If you go to the Q2 profits, you see that things are shifting a little bit, which is important to see.

Speaker #1: One is the net volume effect increases, so that's good news. As I said, the volumes are coming back. Price over cost is around the zero mark, slightly negative, we'll get into the details, I'm pretty sure in your questions.

Speaker #5: In general, a strong quarter for us, and we are accelerating the growth. So, a couple of good news to share. First of all, operational performance: 6% up on revenues and 4% up on RCO.

Speaker #1: And then we also see scope effect coming from the acquisitions down the road. You will see more coming, so I think that moves in the right direction.

Speaker #5: I think that moves in the right direction. What is very important for us is to see that for more than four years, since Q1 2022, this is the first quarter with a positive volume impact.

Speaker #1: H1, and you see when you flip the page 6 and 5 back and forth, you see the difference there, net volume impact in H1 was noticeably smaller price over cost was again around the zero line, I think you see the shift especially on the net volume side, that is important to note.

Speaker #5: Okay, I think that's one quarter, but I think it's very important to note from our side that this is, for the first time in more than four years, a quarter with a positive volume impact.

Speaker #5: We are also accelerating inorganic growth, with a couple of M&A transactions that either closed or were completed in the second quarter. So, Mars, Australia, we will try to close during this year.

Speaker #1: Then important for us to work on those two legs, as I said earlier, pricing, significant pushes around the globe, we've just finished our quarterly management meetings so significant push around the globe with a big focus continues to be Europe and North America.

Speaker #5: Ameritex in the US has been signed and closed—a very important, strategic acquisition in the fastest-growing concrete pipe provider in Texas. Accenture Turkey transaction has been closed at the end of June.

Speaker #1: When it both comes to top line price increases but also surcharges, so that work continues as we speak. We'll go into the details when we go through the regions.

Speaker #5: Very good, strong platform for the Mediterranean—not only for the Turkish local market, but also as an export hub to Africa, the US, and other parts of the world.

Speaker #1: And then on the right side, the transformation accelerator, the 440 million, and we are very confident here that we will surpass the 500 million saving target that we originally set.

Speaker #5: The Bernco transaction finally closed at the beginning of Q2. That's a strong market position in the prairie market in Western Canada. Very important also is what we would call the self-help.

Speaker #1: Then on page 8, we go to Europe. You see here, I would say a very good performance in Europe. Revenues up, EBITDA up, RCO up, and margins up on cement, slightly around the zero line on aggregates in terms of changes, and slightly up in the total region if you combined everything, so resilient performance in Europe.

Speaker #5: So, we really continue to work on all cylinders when it comes to pricing and surcharges, mitigating the effects that are absolutely there from the Iran situation. We have increasing energy prices along the full supply chain, and that's why we are working diligently on pricing and surcharges, and that work continues.

Speaker #1: Based on good pricing, NRC surcharges are in place, and we are very focused on price over cost, which is positive in the region, that is very important to note.

Speaker #1: Then the volume development on the total group development is supported by also Europe, there are recovery signs in our sluggish markets around Germany, Bene, France, UK, but only very limited.

Speaker #5: As much as the work on our own cost position, especially the fixed cost side, continues with the TAI program, Transformation Accelerator Program, we are now at €440 million.

Speaker #5: So we're moving in the right direction. The share buyback program of €1.2 billion has been started and is running well, up to €450 million so far. And then we've specified our outlook to the range of €3.4 to €3.65 billion.

Speaker #1: The bigger increase is now come from Scandinavia, I think the markets in Sweden and Norway have really rebounded quite a bit, and Italy and most parts of Eastern Europe stay strong, and obviously for us also importantly the situation in Hungary has turned around, so we continue to climb back up in Hungary, which is an important joint venture that contributes also to the European results.

Speaker #5: The ROIC will be slightly above 10%, and the CO2 emissions will be around the previous year’s level. That’s mainly due to the Accenture acquisitions in Turkey.

Speaker #5: With that, I turn to page 3. You see the numbers: plus 7% like-for-like, plus 6% revenue. That's very good, strong growth on the top line.

Speaker #1: And then the team is also doing an excellent job on fixed cost savings, you know that we have worked on our plant network in Europe and we continue to see the lower cost base coming into the results as we speak.

Speaker #5: Operating EBITDA also moving in the right direction: like-for-like up 4%, reported up 3%. Operating margin more or less flat, slightly down, and then operating EBIT also up, like-for-like 5%. That's a good set of numbers for Q2.

Speaker #1: Then North America, I think strong performance on the top line, and also the bottom line, top line up, like-for-like 7 and reported 5. Operating EBITDA almost double digit, like-for-like plus 9%, and 4% on reported.

Speaker #5: And that also gets us well into the water for H1, with basically a flat performance year over year on the profit numbers and slight growth on the top line.

Speaker #1: And RCO like-for-like double digit plus 11 and reported 5%. EBITDA margins come and go in the quarters, that's we've seen this in the past, so cement down, aggregates up, total region basically flat, so that's the picture in North America.

Speaker #5: So in that respect, we are moving in the right direction. If you look at the Q2 profit, you can see that things are shifting a little bit, which is important to note.

Speaker #1: It's clear that there is good volume developments driven mainly also by a couple of very big projects, not so much a rebound in housing at this point, but it's also fair to say that there is inflationary cost pressure in the US, and that weighs on the margin developments.

Speaker #5: One is the net volume effect increases, so that's good news. As I said, the volumes are coming back. Price over cost is around the zero mark, slightly negative.

Speaker #5: We'll get into the details, I'm pretty sure, in your questions. And then we also see scope effect coming from the acquisitions down the road.

Speaker #1: We are continuing to work on pricing, we have announced July-August-September price increases, so I think we are continuing to move on the top line in North America to mitigate the underlying inflation.

Speaker #5: You will see more coming, so I think that moves in the right direction. H1, and you see when you flip pages 6 and 5 back and forth, you see the difference there.

Speaker #5: Net volume impact in H1 was noticeably smaller. Price over cost was again around the zero line. I think you see the shift, especially on the net volume side; that is important to note.

Speaker #1: If we then go to Asia Pacific, page 10, I would say very mixed picture. Very strong rebounding in Australia, the market is very resilient, the team does an excellent job there, good volume development, pricing is moving in the right direction, cost management is moving in the right direction, so overall I'm very positive that we will see good performance out of Australia also for the full year.

Speaker #5: It's important for us to work on those two legs. As I said earlier, pricing—there are significant pushes around the globe. We've just finished our quarterly management meetings, so there is a significant push around the globe, with a big focus continuing to be Europe and North America.

Speaker #1: Asia, I think, is probably one of the weakest link at this point, when it comes to profit development, I think the volumes are actually moving in the right direction, but there is clear underlying inflation and cost pressure, and pricing is clearly has upside potential in our key markets Indonesia and also in India.

Speaker #5: When it comes to both top-line price increases, but also surcharges, that work continues as we speak. We'll go into the details when we go through the regions.

Speaker #5: And then on the right side, the transformation accelerator: the €440 million. We are very confident here that we will surpass the €500 million savings target that we originally set.

Speaker #1: I would say across the board in Asia, that's something that needs to rebound. Then if you go to page 11, Umber, I think again a very strong performance from Umber, top line growth, bottom line growth, and look at the margin development.

Speaker #5: Then, on page 8, we go to Europe. You see here, I would say, a very good performance in Europe. Revenues up, EBITDA up, RCO up, and margins up on cement, slightly around the zero line.

Speaker #1: Margin now in Umber cement, more than 30%, another 300 basis points. I think guys, this really moves in the right direction, the region is now almost at 28%, so very, very strong performance on the top line, and also on the bottom line coming out of Umber, and that moves really in the right direction.

Speaker #5: On aggregates, in terms of changes, we are slightly up in the total region if you combine everything. So, resilient performance in Europe based on good pricing. NRC surcharges are in place, and we are very focused on price over cost, which is positive in the region.

Speaker #1: Good. On Umber. Then when we come to unorganic growth, I think the pipeline is in absolutely intact, and we are executing the deals, the mass transaction I mentioned in Australia, we expect news in the coming weeks here, how this will close, so let's wait and see on this one, would be an important contribution potentially also to this year's result or then at the latest to next year's results.

Speaker #5: That is very important to note. Then the volume development on the total group development is supported also by Europe. There are recovery signs in our sluggish markets around Germany, Benelux, France, and the UK, but only very limited.

Speaker #1: We have already the contribution from Ameritex, that deal is closed, the same is true for Accenture as of July, so there is no impact in Q2, but there will be from Q3 going forward.

Speaker #5: The bigger increase is now coming from Scandinavia. I think the markets in Sweden and Norway have really rebounded quite a bit, and Italy and most parts of Eastern Europe stay strong.

Speaker #5: And obviously, for us, also importantly, the situation in Hungary has turned around. So we continue to climb back up in Hungary, which is an important joint venture that contributes also to the European results.

Speaker #1: Bernco did close beginning of Q2, and then things come and go, you know that we are actively not only acquiring but also disposing the most underperforming assets, and this is the reason why we have sold the position in Eastern Kazakhstan, Bukhtama, very old plant, wet kiln, very difficult in profitability, and also in terms of CO2 footprint, so in that combination we decided to exit during the quarter, the deal is signed and closed.

Speaker #5: And then the team is also doing an excellent job on fixed cost savings. You know that we have worked on our plant network in Europe, and we continue to see the lower cost base coming into the results as we speak.

Speaker #5: Then North America, I think strong performance on the top line and also the bottom line. Top line up, like-for-like 7%, and reported 5%. Operating EBITDA almost double digit—like-for-like plus 9%, and 4% on reported.

Speaker #1: So in that respect, that's it. Sustainability, there was a lot of discussion around the AUATS, I think the water has been cleared to a large extent, the EU Commission has made their proposal how to proceed, we broadly support that proposal, and I think it sends a clear signal that the AUATS is here to stay.

Speaker #5: And RCO like-for-like double digit, plus 11%, and reported 5%. EBITDA margins come and go in the quarters. We've seen this in the past.

Speaker #5: So, cement down, aggregates up, total region basically flat. So that's the picture in North America. It's clear that there is good volume development, driven mainly also by a couple of very big projects.

Speaker #1: And yes, there are some minor adjustments around the linear reduction factor, the benchmark more or less expected, and from our perspective we can live with it, we may adjust here and there, the one or the other investment, but overall I think that moves in the right direction.

Speaker #5: It's not so much a rebound in housing at this point, but it's also fair to say that there is inflationary cost pressure in the US, and that weighs on margin developments.

Speaker #1: We have set completely different tone in terms of CO2 footprint in France, to the opening of the new kiln in Arvaux, reducing the CO2 footprint by nearly 30%, 30%, so that's a significant progress in the right direction.

Speaker #5: We are continuing to work on pricing. We have announced July, August, and September price increases, so I think we are continuing to move on the top line in North America to mitigate the underlying inflation.

Speaker #1: Let alone that this is also financially a very attractive investment. Advancing the technology on carbon capture, at smaller scale at this in this point, but it's a completely new technology, OxyFuel plant, together with three competitors, in a plant in southern Germany, the plant is now up and running, capturing the first CO2, so we are moving also to advance the technology on carbon capture.

Speaker #5: If we then go to Asia-Pacific, page 10, I would say it's a very mixed picture. Very strong rebounding in Australia. The market is very resilient. The team does an excellent job there.

Speaker #5: Good volume development. Pricing is moving in the right direction. Cost management is moving in the right direction. So, overall, I'm very positive that we will see good performance out of Australia also for the full year.

Speaker #5: Asia, I think, is probably one of the weakest links at this point. When it comes to profit development, I think the volumes are actually moving in the right direction, but there is clear underlying inflation and cost pressure.

Speaker #1: And then last but not least, but importantly, you know, when we talk about Dow Jones and FTSE, we are moving further ahead in the indices, to underline our sustainability leadership.

Speaker #5: And pricing clearly has upside potential in our key markets, Indonesia and also India. I would say, across the board in Asia, that's something that needs to rebound.

Speaker #1: If you talk about that, you look at the performance of the KPIs, the broadly move in the right direction, alternative fuel rate up, Klinker Incorporation down, sustainability up, and on the specific net CO2 emissions, it's flat, mainly also driven by, you know, whether we are exporting or importing Klinker, whether we are growing in one area more than in the other, so let's wait for the full year, we are still confident that we will come in with a good performance also on the specific net CO2 emissions.

Speaker #5: Then if you go to page 11, Amber, I think again a very strong performance from Amber: top line growth, bottom line growth, and look at the margin development.

Speaker #5: Margin now in Amber Cement is more than 30%, another 300 basis points. I think, guys, this really moves in the right direction. The region is now almost at 28%.

Speaker #1: That's it for me then really, maybe you take the financial side.

Speaker #2: Yes, thanks Dominik, hello everyone from my side, we are on slide 15, quickly the highlights from the financials of the first six months of the year, our adjusted earnings per share, which means excluding AOR, are up 2%, which shows you already, highlights you that below RCO, the P&L is also in very good shape, and even on a reported basis, our earnings per share is up 7.5%, our net income of the group is up 7.5%.

Speaker #5: So, very, very strong performance on the top line and also on the bottom line coming out of Amber, and that moves really in the right direction.

Speaker #5: Good. On Amber. Then, when we come to inorganic growth, I think the pipeline is absolutely intact and we are executing the deals. The MAS transaction I mentioned in Australia—we expect news in the coming weeks here.

Speaker #5: How this will close, so let's wait and see on this one. It would be an important result, or then at the latest, next year's results.

Speaker #2: If we go to the cash flow, you see here last 12 months rolling is 1.9 billion, it's down, driven by working capital and capex, and I think we will go through the cash flow in a few minutes also year to date, and I explain you the details.

Speaker #5: We have already the contribution from Ameritex; that deal is closed. The same is true for Accenture as of July. And so, there is no impact in Q2, but there will be from Q3 going forward.

Speaker #2: The leverage is around 1.6, 1.7 for H1, similar to prior years, so no big movements over here. And then as part of our strategy, what we have always announced, you know, we increase our M&A, let's say ambitions, which you have seen in the first six months, Dominik has explained what we have done, and we hope to close, let's say, the mass acquisition also this year.

Speaker #5: Berco did close at the beginning of Q2, and then things come and go. You know that we are actively not only acquiring, but also disposing of the most underperforming assets.

Speaker #5: And this is the reason why we have sold the position in Eastern Kazakhstan, Bukhtama, very old plant, wet kiln, very difficult in profitability and also in terms of CO2 footprint.

Speaker #2: And what we also promised is we increase the shareholder return, you see it also here, plus 13%, we're just driven by higher share buyback plus higher dividend.

Speaker #2: Let's go on slide 16, what I said, you see our AOR is 50 million better than last year, which has also to do with revaluating our current Accenture share, because we have now changed from net equity account to consolidation, and then we need to revalue based on the purchase price we have done, so here there's an accounting effect in there.

Speaker #5: So in that combination, we decided to exit during the quarter. The deal is signed and closed, so in that respect, that's it. Sustainability—there was a lot of discussion around the AUATS. I think the water has been cleared to a large extent.

Speaker #5: The EU Commission has made their proposal on how to proceed. We broadly support that proposal, and I think it sends a clear signal that the AUATS is here to stay.

Speaker #2: And what you have read, and Dominik has also alluded to, the Bukhtama cement plant, as well we've mentioned it in our report, there will be an impairment coming of a material amount, but it's not cash relevant, so it's a cleanup of the past, so there's a 100 million impairment will be in the full year books, but again, non-cash item.

Speaker #5: And yes, there are some minor adjustments around the linear reduction factor and the benchmark—more or less expected. And from our perspective, we can live with it.

Speaker #5: We may adjust here and there the one or the other investment, but overall, I think that moves in the right direction. We have set a completely different tone in terms of CO2 footprint in France.

Speaker #2: Financial result, I think very good, flat in that increasing interest in environment, I think good result here also. And from the income tax perspective, you see here 40 million improvement, which is based on a, let's say, provision release of a tax case we have won, which is a good thing, and is here also contributing to our increased net profit.

Speaker #5: To the opening of the new kiln in Arvaux, reducing the CO2 footprint by nearly 30%—three-zero percent. That's significant progress in the right direction.

Speaker #2: Let's go then to slide 17, the free cash flow, I think there are only two items I want to mention, number one, the working capital you see here was minus 99 million, and there's two things, there's 60 million of this is timing, of we have our trading business increased, let's say, the revenue and that the money will come back, we've discussed it with them two days ago, so there's no problem about the 60 of the 100.

Speaker #5: Let alone that this is also, financially, a very attractive investment. Advancing the technology on carbon capture—at smaller scale at this point—but it's a completely new technology.

Speaker #5: The OxyFuel plant, together with three competitors, is located in a plant in southern Germany. The plant is now up and running, capturing the first CO2. So we are also moving to advance the technology on carbon capture.

Speaker #2: And then the rest is inventory buildup, you know, we had to have taken opportunistic approaches when coal was cheap during the quarter, we have probably bought more than we really need, but that will benefit us obviously from a cost perspective in H2.

Speaker #5: And then, last but not least—importantly, when we talk about Dow Jones and FTSE, we are moving further ahead in the indices.

Speaker #5: To underline our sustainability leadership — if you look at that, you see the performance of the KPIs broadly moving in the right direction.

Speaker #2: Then compared to spot, plus, you know, with all the price increases and surcharges, obviously the receivables are going up. But the promise is, it's clear the clear target for us, there will be no cash outflow for working capital by end of the year, so the 99 million should go away in terms of free cash flow input from working capital.

Speaker #5: Alternative fuel rate up, clinker incorporation down, sustainability up. And on the specific net CO2 emissions, it's flat—mainly also driven by, you know, whether we are exporting or importing clinker, whether we are growing in one area more than in the other.

Speaker #2: Again, that interest I say that's probably, that's I say that's flat, taxes flat, and then you have one negative with capex, net minus 115, and it's also mentioned here in the comments, two items contribute to this, first of all, this is a net number, we had 44 million lower divestments, and UFC here 30 million higher capex spend for the CCUS project in Paleswood, and here I guess it's very important to note that it's the capex we spend to build that plant is shared with the UK government, and the part we have, let's say, financed over this, we will get this back during the first five years of operation of the plant.

Speaker #5: So let's wait for the full year. We are still confident that we will come in with a good performance, also on the specific net CO2 emissions.

Speaker #5: That's it for me. Then René, maybe you take the financial side.

Speaker #3: Yes, thanks, Dominik. Hello, everyone, from my side. We are on slide 15. Quickly, the highlights from the financials of the first six months of the year.

Speaker #3: Our adjusted earnings per share, which means excluding AOR, are up 2%, which already shows you—and highlights—that below RCO, the P&L is also in very good shape.

Speaker #3: And even on a reported basis, our earnings per share is up 7.5%. Our net income of the Group is up 7.5%. If we go to the cash flow, you see here last 12 months rolling is €1.9 billion.

Speaker #2: Which is a very good thing, because, you know, we do it now, the pre-financing, that is a fact, but then when the plant is operating, we will get all the money back, which is, I guess, only a timing effect, and therefore I'm very confident with our capex number, our core business capex stays in the disciplined manner we have always said.

Speaker #3: It's down, driven by working capital and capex. And I think we will go through the cash flow in a few minutes, also year to date.

Speaker #3: And I explain to you the details. The leverage is around 1.6, 1.7 for H1, similar to the prior year. So, no big movements here. And then, as part of our strategy, which we have always announced, you know, we increase our seen in the first six months.

Speaker #2: Now the net debt bridge, I just say here, you know, the capex, sorry, the net debt went up 500 million, driven by higher. By 760 million gross capex, and 13% increase of our shareholder return, which is a good thing.

Speaker #3: Dominik has explained what we have done, and we hope to close, let's say, the Maas acquisition also this year. And what we also promised is we increase the share return.

Speaker #2: And if you look at year end, you know, that depends on the mass acquisition, if that comes or not, but if you let's assume we don't do any acquisition in H2, which will not happen, we will be probably 200 million, 150 million to 200 million higher than it was last year, which tells you that the leverage should be around 1.5, excluding mass acquisition, because RCBD grows, our net debt grows slightly, so no problem on the leverage.

Speaker #3: You see it also here, plus 13%, which is driven by higher share buyback plus higher dividend. Let's go on to slide 16. What I said, you see our AOR is €50 million better than last year, which also has to do with revaluating our current Accenture share.

Speaker #3: Because we have now changed from the net equity account to consolidation, we need to revalue based on the purchase price we have paid.

Speaker #2: Also, that's it from my side, Dominik, I hand over to you.

Speaker #1: Yeah, thanks a lot, final page then from me, before we get into your questions and our answers. We have specified our guidance, you know, going down the road during a year, we try to narrow the range that we give you as at the beginning, so we're now at 3.4 to 3.65, the return on invested capital will slightly be above the 10%, CO2 emissions, as I mentioned earlier, will be around previous level, mainly driven by the fact that Accenture comes with a higher CO2 footprint for now, so that's the one driver, and then capex net 1.2 to 1.3, this includes the Paleswood topic that Rene was just alluding to, so overall I think if you put that also with cash conversion into the right dynamics and look at this over many years, I think we are moving in the right direction.

Speaker #3: So here, there's an accounting effect in there. And what you have read—and Dominik has also alluded to—the Bukhtarma cement plant as well.

Speaker #3: We've mentioned it in our report. There will be an impairment coming of a material amount, but it's not cash-relevant. So, it's a clean-up of the past.

Speaker #3: So there's a €100 million impairment that will be in the full-year books, but again, it's a non-cash item. Financial result, I think, is very good—flat in that increasing interest rate environment.

Speaker #3: I think good result here also. And from the income tax perspective, you see here 40 million improvement, which is based on a, let's say, provision release of a tax case we have won, which is a good thing.

Speaker #3: And this is also contributing to our increased net profit. Let's go then to slide 17, the free cash flow. I think there are only two items I want to mention.

Speaker #1: And then leverage, as Rene alluded to, will be in line with the mid-term target around 1.5 times, and then it's clear we continue to increase our shareholder return, with dividends and share buybacks, and I think you see here in the Q2, plus 13%, I think that's a very fair return to shareholders, so that's it from our side, we move to Q&A, thanks.

Speaker #3: Number one, the working capital you see here was minus $99 million. And there are two things. Sixty million of this is timing—with our trading business increased, let's say, the revenue, and that money will come back.

Speaker #3: We discussed it with them two days ago, so there's no problem with the 60 out of the 100. And then the rest is inventory build-up—you know, we had to take opportunistic approaches when coal was cheap during the quarter.

Speaker #3: Thanks, Dominik. Operator, you want to start the Q&A, please?

Speaker #1: Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their telephone.

Speaker #3: We have probably bought more than we really need, but that will benefit us, obviously, from a cost perspective in H2. Then, compared to spot, plus, you know, with all the price increases and surcharges, obviously, the receivables are going up.

Speaker #1: You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two.

Speaker #1: Questioners on the phone are requested to disable the loudspeaker mode while asking a question. In the interest of time, please limit yourself to two questions.

Speaker #3: But the promise is, it's clear. The clear target for us: there will be no cash outflow from working capital by the end of the year.

Speaker #1: Anyone who has a question may press star and one at this time. One moment for the first question, please.

Speaker #3: So the $99 million should go away in terms of free cash flow input from working capital. Again, that interest, I’d say that's probably—I'd say that's flat.

Speaker #3: All right, the first question comes from Ben Rada, Martin from Goldman Sachs. Hi, Ben.

Speaker #3: Tax is flat. And then you have one negative with capex, net minus 115. And it's also mentioned here in the comments—two items contribute to this.

Speaker #4: Excellent, good afternoon. Dominik, Rene, and Chris, thanks for the questions today. My two questions, my first today was on price cost, so it's worth noting, you know, price cost turned negative for the first time in a few years, we've obviously got a backdrop of transport and energy pressure, but do you expect this to turn positive as we go into the second half?

Speaker #3: First of all, this is a net number. We had €44 million lower divestments, and you see here €30 million higher CapEx spend for the CCUS project and Padeswood.

Speaker #3: And here, I guess it's very important to note that the capex we spend to build that plant is shared with the UK government.

Speaker #4: And I guess which regions in particular do you expect to see sequential improvements in, if any, and then the second question would just be on carbon, and I guess your comments around the ETS, we've seen more clarity around the structure of the system, could you provide an update on when you expect some of the carbon cost to come through your European cement business when it comes to which years you expect to start incurring those costs?

Speaker #3: And the part we have, let's say, financed of this, we will get this back during the first five years of operation of the plant.

Speaker #3: Which is a very good thing because, you know, we do it now—the pre-financing. That is a fact. But then, when the plant is operating, we will get all the money back, which is, I guess, only a timing effect.

Speaker #4: Thanks very much.

Speaker #3: Thanks, Ben. Maybe let me do the second one and then Rene does the price over cost one. So on the carbon costs, I think you saw the revision of the scheme, we are long until 2028 minimum, so I think that moves that's the answer to that question overall comfortable for the next couple of years, but then obviously we need to cover the increasing carbon costs.

Speaker #3: And therefore, I'm very confident with our CapEx number. Our core business CapEx stays in the disciplined manner we have always said. Now, the net debt bridge.

Speaker #3: I just say here, you know, the net debt went up $500 million, driven by $760 million gross capex and a 13% increase of our shareholder return, which is a good thing.

Speaker #3: Okay, Ben, let's talk about price over cost. Yes, you are right, the price over cost in the quarter was negative of minus 19 million euro, but half of it, it comes from our let's say joint ventures, especially China, you know that China economy is pretty weak, so half of it comes from joint ventures, so then there's a remaining 10, and to tell you it's clearly not Europe, Europe is very positive for Q2, plus also for H1, so this is very good news, and then as Dominik alluded to, it also I think APEC, the pricing was not covering the higher variable cost, that's probably the answer to that one, and to your further question, how do we see this going forward?

Speaker #3: And if you look at year end, you know, that depends on the mass acquisition. If that comes or not. But if you let's assume we don't do any acquisition in H2, which will not happen, we will be probably 200 million, 150 million to 200 million higher than it was last year, which tells you that the leverage should be around 1.5, excluding mass acquisition because RCOBD grows, our net debt grows slightly, so no problem on the leverage also.

Speaker #3: That's it from my side. Dominik, I hand over to you.

Speaker #2: Yeah, thanks a lot. Final page then from me before we get into your questions and our answers. We have specified our guidance, you know, going down the road during the year.

Speaker #2: We try to narrow the range that we give you as at the beginning. So we're now at €3.4 to €3.65 billion. The return on invested capital will be slightly above 10%.

Speaker #3: It's clear that the Iran war has a certain impact on let's say on a lot of companies, including us, and this we see in higher distribution costs, which we get let's say surcharged from our suppliers, and that is if you look at the margins and our price over cost, this is the only one where we I have margin dilution, yeah, so that means that our own efforts to increase price to cover variable fixed costs are very well intact, because that covers our own cost, additional cost, especially from energy, and inflation, we will cover by ourselves, yeah, and just the ones from suppliers we need to we need to push further, so we will still we are very confident with further price increases to come, that we try to be positive in price over cost, you see it for H1, even with H1 we are already plus 2 million, and again joint ventures is minus 20, so take the joint ventures out, we are plus 22 for H1, and we are confident that we will be positive for the full year.

Speaker #2: CO2 emissions, as I mentioned earlier, will be around previous levels, mainly driven by the fact that Accenture comes with a higher CO2 footprint for now.

Speaker #2: So that's the one driver. And then capex, net €1.2 to €1.3 billion. This includes the Paleswood topic that René was just alluding to. So overall, I think if you put that also with cash conversion into the right dynamics and look at this over many years, I think we are moving in the right direction.

Speaker #2: And then leverage, as René alluded to, will be in line with the mid-term target, around 1.5 times. And then, it's clear we continue to increase our shareholder return with dividends and share buybacks.

Speaker #2: And I think you see here in the Q2, plus 13%. I think that's a very fair return to shareholders. So that's it from our side.

Speaker #2: We move to Q&A. Thanks.

Speaker #1: Thanks, Dominik. Operator, we would like to start the Q&A, please.

Speaker #4: Excellent, thanks very much.

Speaker #3: Thanks, Ben.

Speaker #4: Ladies and gentlemen, we will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their telephone.

Speaker #4: Thanks, Ben.

Speaker #3: Next one comes from Citigroup, Ephrem Ravi.

Speaker #4: Hey Ephrem.

Speaker #3: Ephrem, hello.

Speaker #4: Hi, hello, thank you for the time. Two questions from me as well, firstly on North America, you called out inflationary pressures, but if I look at the margin, aggregate margins are up about 2% points, cement margins are down about 3% points, so can you pinpoint which are the cost inflationary pressures especially in cement that is causing that big diversion in margins?

Speaker #4: You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two.

Speaker #4: Questioners on the phone are requested to disable the loudspeaker mode while asking a question. In the interest of time, please limit yourself to two questions.

Speaker #4: Anyone who has a question may press star then one at this time. One moment for the first question, please.

Speaker #1: All right. The first question comes from Ben Radamartin from Goldman Sachs. Hi, Ben.

Speaker #4: And secondly on Asia Pacific, you know, very strong performance there, any countries sorry, AMWA, any countries in AMWA you would call out, is it Egypt, is it Turkey, is it Morocco, is it Sub-Saharan Africa, which is contributing to the strong growth over there?

Speaker #2: Excellent. Good afternoon. Dominik, René, and Chris—thanks for the questions today. I have two questions. My first today is on price-cost. It's worth noting that price-cost turned negative for the first time in a few years.

Speaker #2: We've obviously got a backdrop of transport and energy pressure, but do you expect this to turn positive as we go into the second half?

Speaker #4: Thank you. Yeah, let me do those two and then Rene, if you want to jump in, I think that's fine. I think North America, it's clear, you know, as I said earlier, Ephrem, margins come and go, I think what is the what is the reason for the good market development in aggregates, it's mainly large projects, that's what that's what I indicated, I think there are there is a lot of large project work in the US, and then it depends a little bit quarter over quarter how this balances out, and on cement, I think Rene has indicated that pricing, you know, underlying inflation is significant, it's a very energy intensive business, cement much more than aggregates, and then if pricing doesn't kick in as much as it probably should, then you see the margins squeeze, and I think that's we are on it, we are fighting in both dimensions, and we are very confident that we fix this in the second half, and then AMWA, to be honest, as I said, it's a portfolio approach, Ephrem, things come and go in AMWA, there are countries in there that are really strong, and that there are countries that are a little bit more weak in this quarter, but overall, again, quarter over quarter, year over year, AMWA is going in the right direction, Sub-Sahara is going well, especially if you go to the east side of the Sub-Sahara, the north side of Sahara is also going strong, and then we'll get Turkey coming into this picture also as we go into H2, so overall we are confident for AMWA, for good performance for H2.

Speaker #2: And I guess, which regions in particular do you expect to see sequential improvements in, if any? And then the second question would just be on carbon.

Speaker #2: And I guess regarding your comments on the ETS, we've seen more clarity around the structure of the system. Could you provide an update on when you expect some of the carbon costs to come through in your European cement business, specifically which years you anticipate starting to incur those costs?

Speaker #2: Thanks very much.

Speaker #1: Thanks, Ben. Maybe let me do the second one, and then René does the price over cost one. So, on the carbon costs, I think you saw the revision of the scheme.

Speaker #1: We are long until 2028 at a minimum. So I think that answers that question—overall, we're comfortable for the next couple of years, but then obviously we need to cover the increasing carbon costs.

Speaker #3: Okay, Ben, let's talk about price over cost. Yes, you are right. The price over cost in the quarter was negative, at minus €19 million.

Speaker #3: But half of it comes from our, let's say, joint ventures—especially China. You know that the Chinese economy is pretty weak, so half of it comes from joint ventures.

Speaker #3: So then there's a remaining 10. And to tell you, it's clearly not Europe. Europe is very positive for Q2, plus also for H1. So this is very good news.

Speaker #3: And then, as Dominik alluded to, I also think in APAC, the pricing was not covering the higher variable cost. That's probably the answer to that one.

Speaker #4: Thank you.

Speaker #3: Thanks, Ephrem. Next question comes from Julian Rattlinger from UBS.

Speaker #4: Hey Julian.

Speaker #3: Julian.

Speaker #3: And to your further question—how do we see this going forward? It's clear that the Iran war has had a certain impact on a lot of companies, including us.

Speaker #4: Hey guys, thanks very much. So I've got I'll start maybe with I've got two questions, I'll start with the one first. So North America was really quite strong in Q2, and especially in aggregates, where your margins went up quite substantially.

Speaker #3: And this we see in higher distribution costs, which we get, let's say, surcharged from our suppliers. And that is, if you look at the margins and our price over cost, this is the only one where we have margin dilution.

Speaker #4: I just wanted to check, is there anything there's nothing in there that was kind of specific that's just that's just price and cost and operating, sorry, price cost, volume, and operating leverage?

Speaker #3: Yeah. So that means that our own efforts to increase prices to cover variable and fixed costs are very well intact, because that covers our own additional costs, especially from energy and inflation.

Speaker #3: Nothing out of the ordinary that we need to note, things come and go in aggregates, there's I think that's it, nothing super material that needs to be noted.

Speaker #3: We will cover by ourselves. Yeah. And just the ones from suppliers, we need to we need to push further. So we will still we are very confident with further price increases to come, that we try to be positive in price over cost.

Speaker #4: Okay. My second question is a bit of a bigger picture one. So if we take a step back, you originally gave a full year guide of organic EBIT growth of something around, I think it was 7% or so, you're now down slightly in H1, obviously we know the story, Q1, whether, et cetera, Q2 was better, but you're basically down slightly in H1.

Speaker #3: You see it for H1. Even with H1, we are already plus $2 million. And again, joint ventures is minus $20 million. So take the joint ventures out, we are plus $22 million for H1.

Speaker #4: There are some international heavy side companies with similar regional exposures that have done a little bit better. I think what investors would really love to understand here is, what exactly drove this H1 underperformance versus your own expectations?

Speaker #3: And we are confident that we will be positive for the full year.

Speaker #2: Excellent. Thanks very much. Thank you, Ben.

Speaker #1: Next one comes from Citigroup, Ephraim Ravid.

Speaker #2: Hey, Ephraim.

Speaker #1: Ephraim, hello.

Speaker #5: Hi. Hello. Thank you for your time. I have two questions as well. First, about inflationary pressures: if I look at the margins, aggregate margins are up about 2 percentage points.

Speaker #4: And really big picture, and when and how will this turn around, is that something we should already see in the second half of the year, or is it something that'll take a little bit longer?

Speaker #5: Cement margins are down about 3 percentage points. So, can you pinpoint which cost inflationary pressures, especially in cement, are causing that big divergence in margins?

Speaker #4: Thank you.

Speaker #2: Yeah, Julian, let's do you want to take the North America, the North America? I've already answered that, that's fine. The EBIT minus 7, I'll go first and then Rene can jump in.

Speaker #5: And secondly, on Asia-Pacific, you know, very strong performance there. Any countries—sorry, AMWA—any? Is it Egypt, is it Turkey, is it Morocco, is it Sub-Saharan Africa?

Speaker #2: If I don't want to correct you, but I would say, you know, when is it going to turn around, I would say we are actually well on track, I think don't underestimate Julian, we said that the first quarter was below our expectations, that's fine, nobody has doubted that, but it was a weather-related impact to a large extent, and we've always said there's nothing structurally going in the wrong direction, we are very confident that we will deliver the guidance that we are giving today, and so from our perspective, it can always be better, but there is nothing structurally that holds us back from operating on a very high level.

Speaker #5: Which is contributing to the strong growth over there? Thank you.

Speaker #2: Yeah. Let me do those two, and then René, if you want to jump in, I think that's fine. I think North America, it's clear—you know, as I said earlier, Ephraim, margins come and go.

Speaker #2: I think the reason for the good market development in aggregates is mainly large projects. That's what I indicated. I think there is a lot of large project work in the US, and then it depends a little bit, quarter over quarter, how this balances out.

Speaker #2: And on cement, I think René has indicated that pricing, you know, underlying inflation is significant. It's a very energy-intensive business—cement much more than aggregates.

Speaker #3: Just, Julian, to add, yes, Q1 was below expectations, we all know this, and admit this, but that was mainly driven by North America, and we said we will come back with North America, and you see, I guess we don't need to hide with our Q2 numbers for North America, top line good, margins good, aggregates result good, I think that was a very convincing result for Q2 for North America, what Dominik and I said in Q1, that North America was mainly weather-related, and it's coming back, and it came back in Q2, and that's probably, you know, we are on track, to deliver and we will hit our guidance, what we have provided to you, and I guess that's we deliver what we promise.

Speaker #2: And then, if pricing doesn't kick in as much as it probably should, then you see the margin squeeze. And I think that's where we are on it.

Speaker #2: We are fighting in both dimensions, and we are very confident that we will fix this in the second half. And then AMWA, to be honest, as I said, it's a portfolio approach.

Speaker #2: Ephraim, things come and go in AMWA. There are countries in there that are really strong, and there are countries that are a little bit more weak in this quarter.

Speaker #2: But overall, again, quarter over quarter, year over year, AMWA is going in the right direction. Sub-Sahara is going well, especially if you go to the east side of the Sub-Sahara. The north side of the Sahara is also going strong.

Speaker #3: Thanks, Julian.

Speaker #4: Okay, and Julian. Thank you.

Speaker #3: Next question comes from Cedar Ekblom from Morgan Stanley.

Speaker #4: Hey Cedar.

Speaker #2: And then we'll get Turkey coming into this picture also as we go into H2. So, overall, we are confident for AMWA, for a good performance in H2.

Speaker #3: Cedar, hi.

Speaker #5: Hi guys, so just can we go back to the North American market? Pricing in that region, I think, has been one of the negatives that we've heard from companies in the last two or three weeks.

Speaker #5: Thank you.

Speaker #1: Thanks, Ephraim. Next question comes from Julian Rottlinger from UBS.

Speaker #5: Most businesses are reporting that pricing is sort of flat in the quarter, can you talk to us about the landscape in the US? It is your single largest region, how we should think about the momentum on pricing as we move into the second half, because I think that that's important in terms of reaching the guide, and then the second question relates to your Asia PAC C business, another quarter I would say of, you know, subpar performance, not much organic growth there at EBITDA, it is a business where you double down on, with your exposure in Indonesia, it is a business where you remain in your Indian asset, can you talk to us about the pathway to that business actually delivering meaningful EBITDA growth, and your view on its relevance in the portfolio?

Speaker #2: Hey, Julian.

Speaker #1: Julian?

Speaker #4: Hey, guys. Thanks very much. So I've got I'll start maybe with I've got two questions. I'll start with the one So North America was really quite strong in Q2 and especially in aggregates where your margins went up quite substantially.

Speaker #4: I just wanted to check, is there anything there's nothing in there that was kind of specific that's just price and cost and operating sorry, price, cost, volume, and operating leverage?

Speaker #2: Nothing out of the ordinary that we need to note. Things come and go in aggregates. I think that's it. Nothing super material that needs to be noted.

Speaker #4: Okay. My second question is a bit more of a big-picture one. So, if we take a step back, you originally gave a full-year guide of organic EBIT growth of something around, I think it was 7% or so.

Speaker #5: Thank you.

Speaker #2: Yeah, thanks, Cedar, let me maybe do the first half of the first answer, and Rene chips in, on the pricing, and then I'll give you the APAC answer.

Speaker #4: You're now down slightly in H1—obviously, we know the story: Q1, weather, etc. Q2 was better, but you're basically down slightly in H1. There are some international heavy side companies with similar regional exposures that have done a little bit better.

Speaker #2: So on the pricing, in North America, you're right, Cedar, it was below our expectations, mainly in cement, not so much in aggregates, and the reason I think is there is import going into the US, I think that is slowing down now, but there is import pressure in the US, and the market structure is also changed a little bit, but overall, as I said, we are going to continue to be pushing prices on in the US, and we are positive for the pricing development in going into H2, because as I mentioned on the page earlier, Cedar, we are implementing price increases as we speak, and the management was very confident that this will also work, so in that respect, okay, anything to add from your side there?

Speaker #4: I think what investors would really love to understand here is what exactly drove this H1 underperformance versus your own expectations? And, really big picture, when and how will this turn around? Is that something we should already see in the second half of the year?

Speaker #4: Or is it something that will take a little bit longer? Thank you.

Speaker #2: Yeah. Julian, do you want to take North America? I've already answered that. That's fine. The EBIT is minus 7. I'll go first and then René can jump in.

Speaker #2: Okay, then on APAC, careful with APAC, I would really split into two parts, APAC for us includes Australia, so I think let's take Australia out, because this is a very meaningful business, especially with the mass acquisition that we now get very significant in Australia, so in that respect, Australia is actually on a very good track, and that will drive the APAC performance forward.

Speaker #2: If I don't want to correct you, but I would say, you know, when is it going to turn around? I would say we are actually well on track.

Speaker #2: I think, don't underestimate Julian. We said that the first quarter was below our expectations. That's fine, nobody has doubted that. But it was a weather-related impact to a large extent.

Speaker #2: Then you have the remaining parts of APAC, which is basically Asia, and that also splits in a couple of maybe more sluggish markets that includes especially China, which is super sluggish, maybe also Hong Kong, as Rene was mentioned earlier, but I think what has changed to the positive, Cedar, to your point, India and Indonesia at least on volume are coming back now quite significantly, and we all know there is a lot of capacity in those markets, if there is no volume, then it's also difficult to move pricing, so my expectation is that that part of Asia will come back, but it needs the volume to come up to then also move on pricing eventually, and from a portfolio perspective, there is no change to what we said, Indonesia is an important part of the group, India we continue to develop, but it's going to be opportunistic if at some point there is an exit trigger, we may think about this, but for the time being, we develop India and just to be clear, we earn money in India.

Speaker #2: And we've always said there's nothing structurally going in the wrong direction. We are very confident that we will deliver the guidance that we are giving today.

Speaker #2: And so from our perspective, it can always be better, but there is nothing structurally that holds us back from operating on a very high level.

Speaker #1: Yeah, and just, Julian, to add: Yes, Q1 was below expectation. We all know this and admit this, but that was mainly driven by North America.

Speaker #1: And we said we will come back with North America. And you see, I guess we don't need to hide with our Q2 numbers for North America.

Speaker #1: Top line good, margins good, aggregates result good. I think that was a very convincing result for Q2 for North America. What Dominik and I said in Q1, that North America was mainly weather-related and it's coming back and it came back in Q2.

Speaker #1: And that's probably, you know, we are on track to deliver, and we will hit our guidance, what we have provided to you. And I guess that's—we deliver what we promise.

Speaker #5: Yeah, can I just follow up, I get your point, but I mean, we had 11% organic in Asia PAC in Q2, and we had no organic at EBITDA, so like how much growth do we actually need at the top line before we're going to start seeing some positive contribution, and I understand the points around cost inflation and Asia PAC is probably more exposed to that energy risk, but like we've been hearing the story on Asia PAC for a number of quarters, and fine, maybe Australia is a different part of the portfolio, but the rest of it, it's just a constant drag on the group, right?

Speaker #1: Thanks, Julian.

Speaker #2: Okay. And Julian?

Speaker #4: Thank you.

Speaker #1: Next question comes from Sita Ekblom from Morgan Stanley.

Speaker #2: Hey, Sita.

Speaker #1: Sita, hi.

Speaker #5: Hi, guys. Can we go back to the North American market? Pricing in that region, I think, has been one of the negatives that we've heard from companies in the last two or three weeks.

Speaker #5: Most businesses are reporting that pricing is sort of flat in the quarter. Can you talk to us about the landscape in the US? It is your single largest region.

Speaker #5: So how much growth do we need at the top line before we can see positive organic at EBITDA, do we need 20% growth at the top line, like what's the number?

Speaker #5: How should we think about the momentum on pricing as we move into the second half? Because I think that's important in terms of reaching the guidance.

Speaker #2: No, I don't think you need much more growth than the current run rate, Cedar, you gave the answer yourself, it's probably the region in the world that is mostly exposed to what happens in Iran, and that's why a quarter over quarter you will see that there is not much EBITDA contribution, but I don't think you can read too much out of this in terms of general trend, and I think, Cedar, if I may say, you've been long enough around the block to know that things come and go, you know, you have also enjoyed days where with a group where we were making super profits in Asia, so let's see how we navigate through this, but I fully agree, and I don't want to play it down, with the current performance is clearly below our expectations.

Speaker #5: And then the second question relates to your Asia Pac business. Another quarter, I would say, of, you know, subpar performance—not much organic growth there at EBITDA.

Speaker #5: It is a business where you double down on your exposure in Indonesia. It is a business where you remain invested in your Indian asset.

Speaker #5: Can you talk to us about the pathway to that business actually delivering meaningful EBITDA growth, and your view on its relevance in the portfolio?

Speaker #5: Thank you.

Speaker #2: Yeah. Thanks, Sita. Let me maybe do the first half of the first answer, and René can chip in. I'll start on the pricing, and then I'll give you the APAC answer.

Speaker #3: Okay, thanks, Cedar. Kepler Chevreux, Luis Prieto is next in line.

Speaker #2: So, on the pricing in North America—you're right, Sita—it was below our expectation, mainly in cement, not so much in aggregates. And the reason, I think, is there is import going into the US.

Speaker #4: Hi, Luis.

Speaker #2: Hey, Luis.

Speaker #4: Thank you. Dominik, Rene and the rest of the team for taking my questions I had too, and I'm sorry for the change in subject.

Speaker #4: With regards with regards to the EU ETS overhaul and in the context of the proposed delay in the phase out of free allowances that we know of and the MSR changes, could the industrial decarbonization banks subsidies for decarb projects in the tune of, I think it was $100 billion euro, save the day regarding the incentive to invest in a low carbon price environment if these measures go through?

Speaker #2: I think that is slowing down now. But there is import pressure in the US, and the market structure has also changed a little bit.

Speaker #2: But overall, as I said, we are going to continue to be pushing prices on in the US, and we are positive for the pricing development going into H2 because, as I mentioned on the page earlier, Sita, we are implementing price increases as we speak.

Speaker #4: My second question is more detailed than anything else, but along the same lines, what is the current BREVIC situation in terms of production of EVO 0 and its profitability?

Speaker #2: And the management was very confident that this will also work. So, in that respect, okay. Anything to add from your side there? Okay. Then on APAC.

Speaker #4: Thank you.

Speaker #2: Luis, I just want to make sure I've understood your first question right, can you just repeat the essence of that question, because I'm not 100% sure whether I got the key point of your first question.

Speaker #2: Careful with APAC. I would really split it into two parts. APAC for us includes Australia, so I think let's take Australia out, because this is a very meaningful business, especially with the mass acquisition that we now get—very significant in Australia.

Speaker #4: Yeah, so basically, we've seen measures within the ETS overhaul proposal that I would assume tend to or would like to see the price of CO2 being relatively low, or moderation, in order not to bankrupt anybody, you know, in other industries, but at the same time, the measure also implements the industrial decarbonization bank, which proposes subsidies that have that are huge, $100 billion euro or whatever, for decarbonization projects, so I just want to know if you have a feeling that those subsidies fix the low potential carbon price environment, if you see what I mean, in terms of how incentivized you are to do CCUS projects going forward.

Speaker #2: So, in that respect, Australia is actually on a very good track, and that will drive the APAC performance forward. Then you have the remaining parts of APAC, which is basically Asia.

Speaker #2: And that also splits into a couple of maybe more sluggish markets, which includes especially China, which is super sluggish—maybe also Hong Kong, as René was mentioning earlier.

Speaker #2: But I think what has changed for the positive, Sita—to your point—is that India and Indonesia, at least on volumes, are coming back now quite significantly.

Speaker #2: And we all know there is a lot of capacity in those markets. If there is no volume, then it's also difficult to move pricing.

Speaker #4: In other words, I just want to ask subsidies to.

Speaker #2: So my expectation is that that part of Asia will come back, but it needs the volume to come up to then also move on pricing eventually. And from a portfolio perspective, there is no change to what we said.

Speaker #2: Yeah, fair enough. First of all, the price of CO2, I mean, let's not play it down too much, because the price of CO2 sits around 80, 82 euros, so that's not such a bad price level of the CO2, that was the original idea this would go down to 40, 50, has not happened, so I think it's been fairly resilient around the 75, 80, 85 mark, so I think we are fine with that price level.

Speaker #2: Indonesia is an important part of the group. In India, we continue to develop, but it's going to be opportunistic—if at some point there is an exit trigger, we may think about this.

Speaker #2: But for the time being, we develop India, and just to be clear, we earn money in India.

Speaker #2: Now, on the marginal call, in terms of specific investments, does that need us to revisit them? Absolutely, and that's what we will do. On the subsidy scheme that you are talking about, early days, I think this is not yet specified, it's not in a legal framework yet, so I ask for your understanding that we don't want to speculate on this.

Speaker #5: Yeah, can I just follow up? I get your point, but, I mean, we had 11% organic in Asia-Pac in Q2, and we had no organic at EBITDA.

Speaker #5: So, like, how much growth do we actually need at the top line before we're going to start seeing some positive contribution? And I understand the points around cost inflation, and Asia-Pac is probably more exposed to that energy risk.

Speaker #2: Honestly, I've also not understood the full details of it at this point, so let us go work through it, you know that it will take probably until the beginning of next year before all of this discussion becomes the legal framework.

Speaker #5: But, like, we've been hearing the story on Asia PAC for a number of quarters, and fine, maybe Australia is a different part of the portfolio, but the rest of it—it's just a constant drag on the group, right?

Speaker #2: Yeah, and BREVIC production, on the capturing of CO2, we are absolutely on track, we are exactly in line with what we planned for 2026, so all our eyes on green, and with EVO 0, with EVO 0 sales, you know that we are very selective in terms of creating the right returns, and the discussions are going keep going very well, and we are taking that opportunity by opportunity, but importantly, the CO2 capturing works technically, and it works also in the volumes we have assumed.

Speaker #5: So how much growth do we need at the top line before we can see positive organic at EBITDA? Do we need 20% growth at the top line?

Speaker #5: Like what's the number?

Speaker #2: No, I don't think you need much more growth than the current run rate, Sita. You gave the answer yourself. It's probably the region in the world that is most exposed to what happens in Iran.

Speaker #2: And that's why a quarter over quarter, you will see that there is not much EBITDA contribution. But I don't think you can read too much out of this in terms of general trend.

Speaker #2: And I think, Sita, if I may say, you’ve been around the block long enough to know that things come and go. You know, you have also enjoyed days with the group where we were making super profits in Asia.

Speaker #4: That's great. Thank you. Thank you.

Speaker #2: Thank you, Luis.

Speaker #3: Next one is from Pujarini Ghosh from Burnstein.

Speaker #2: Hi, Pujarini.

Speaker #5: Hi, hi, thanks for taking my questions. So my first question is on Germany, your home market, where you highlighted that because of the war, the recovery signs seem to have stalled, somewhat, and from what we are hearing from some of your peers, they seem to highlight that, you know, trends are improving.

Speaker #2: So, let's see how we navigate through this. But I fully agree, and I don't want to play it down. The current performance is clearly below our expectations.

Speaker #1: Okay. Thanks, Sita. Kepler Cheuvreux, Louis Prieto is next in line.

Speaker #2: Hi, Louis.

Speaker #3: Hey, Louis.

Speaker #4: Thank you. Dominik, René, rest of the team for taking my questions. I had two. I'm sorry for the change in subject. With regards with regards to the EU ETS overhaul and in the context of the proposed delay in the phase out of free allowances that we know often the MSR changes, could the industrial decarbonization banks subsidies for decarb projects in the tune of, I think it was $100 billion euro, save the day regarding the incentive to invest in a low carbon price environment if these measures go through?

Speaker #5: So could you provide some color on what you are seeing exactly on the ground in Germany, both in terms of volumes as well as pricing, and how do you expect the rest of the year to progress?

Speaker #5: And any signs of the funds from the infrastructure budget coming through, what is the expectation for that, when can we expect to see some movement?

Speaker #5: And my second question is on the exit rates going into Q3, both in terms of volumes, pricing, and price cost, across the different regions.

Speaker #4: My second question is more detailed than anything else, but along the same lines. What is the current Brevic situation in terms of production of EVO Zero and its profitability?

Speaker #4: Thank you.

Speaker #5: So our, you know, my expectation had been that, you know, with costs kind of coming down at the end of June, early July, and you having already passed through some pricing, the price cost spreads or the pressure on the price cost spread would ease, into Q3, what are your expectations on that now, you know, now that the war seemed to have been rekindled?

Speaker #2: Louis, I just want to make sure I've understood your first question right. Can you just repeat the essence of that question? Because I'm not 100% sure whether I got the key point of the first question.

Speaker #4: Yeah. So basically, we've seen measures within the ETS overhaul proposal that I would assume tend to, or would like to see, the price of CO2 being relatively low, or at least moderate, in order not to bankrupt anybody.

Speaker #4: In other industries, but at the same time, the measure also implements the industrial decarbonization bank, which proposes subsidies that have that are huge, $100 billion euro, whatever, for decarbonization projects.

Speaker #5: So yeah.

Speaker #2: Okay, thanks a lot. Let me take the first one and then Rene will take the second one. On the German recovery, yes, it's not gone as fast as we thought, let's go through the segments.

Speaker #4: So, I just want to know if you have a feeling that those subsidies address the low potential carbon price environment—if you see what I mean—in terms of how incentivized you are to do CCUS projects going forward.

Speaker #2: I think housing continues to be sluggish, but there are first signs, you know, that the permits have gone up now for a couple of quarters, so there are first projects coming out of the ground, so I think we've seen the bottom there, but obviously this is also interest rate sensitive, you saw what the ECB has decided, so let's wait and see, but I think we've hopefully seen the bottom there.

Speaker #4: In other words, I just want to know.

Speaker #2: I think I understood, Louis. Yeah, fair enough. First of all, the price of CO2—I mean, let's not play it down too much, because the price of CO2 sits around €80, €82.

Speaker #2: I think the commercial segment is continuing to be sluggish, and the infrastructure, it needs the pipeline. The money is there, as I said before, the pipeline now needs to come, you know, you see that the government themselves have seemed to have realized that something needs to accelerate, they've made a change in their government setup, that's also very much centered around the infrastructure question, so we are hopeful for the H2 and especially also 2027, that the infrastructure money that is there in billions, will actually hit the ground anytime soon, so that's why I would support your point that Germany has seen the worst and we are seeing first sign of recovery.

Speaker #2: So, that's not such a bad price level for CO2. The original idea was that this would go down to 40, 50; that has not happened.

Speaker #2: So, I think it's been fairly resilient around the 75, 80, 85 mark, so I think we are fine with that price level. Now, on the marginal call in terms of specific investments, does that need us to revisit them?

Speaker #2: Absolutely, and that's what we will do. On the subsidy scheme that you are talking about in the early days, I think this is not yet specified.

Speaker #2: It's not in a legal framework yet, so I ask for your understanding that we don't want to speculate on this. Honestly, I have also not understood the full details of it at this point.

Speaker #3: So Pujarini, to your second question, also regarding volumes, I think the July will be an okay month, our end, or June end of the quarter was very good, and July we see is going from a volume perspective okay, from a price over cost perspective, you know, you're working assumption that the cost pressure eases is probably with the current, let's say, restart of the conflict probably not correct, so we assume in our guidance also that the cost will stay where the, for energy, yeah, and probably also surcharges we get, and what Dominik also explained, we will push further price increases to the market, and as I said, already our own costs we are very well managing, our pricing is covering our own costs without any problem, now we just need a little bit more to cover as well, the overhang of distribution costs we get charged by our suppliers, so and as I said before, we are positive to reach also price over cost, positive for the full year.

Speaker #2: So let us go work through it. You know that it will probably take until the beginning of next year before all of this discussion becomes the legal framework.

Speaker #2: Yeah. And Brevik production, on the capturing of CO2, we are absolutely on track. We are exactly in line with what we planned for 2026.

Speaker #2: So all our eyes on green. And with EVO zero, with EVO zero sales, you know that we are very selective in terms of creating the right returns and the discussions are going keep going very well.

Speaker #2: And we are taking that opportunity by opportunity. But importantly, the CO2 capturing works technically, and it works also in the volumes we have assumed.

Speaker #4: That's great. Thank you. Thank you.

Speaker #2: Thank you, Louis.

Speaker #1: Next one is from Puccellini Ghosh from Burnsy.

Speaker #2: All right, Puccellini.

Speaker #5: Hi, thanks for taking my questions. My first question is about Germany, your home market, where you highlighted that because of the war, the recovery signs seem to have stalled.

Speaker #6: And just to add, you know, we have baked in this increase in energy costs that Rene has mentioned between H1 and H2 into the forecast, and then also into this guidance, so this is assumed, if it comes better that would be an upside, but let's not hope on this for the, given the volatility it's baked into the guidance around the current levels.

Speaker #5: Somewhat. And from what we are hearing from some of your peers, they seem to highlight that trends are improving. So, could you provide some color on what you are seeing exactly on the ground in Germany, both in terms of volumes as well as pricing? And how do you expect the rest of the year to progress?

Speaker #2: Yeah.

Speaker #3: Okay, next question comes from, thanks Pujarini. Next question comes from CIC, Ebrahim Houmani.

Speaker #2: Hey Ebrahim.

Speaker #6: Hi Ebrahim.

Speaker #4: Hi guys, thank you for taking my questions. I have two, if I may, the first one is about ANVA, is there room for further development in terms of margin, which is quite high, and my second question, is about the working cap also, do you expect any improvement on the working cap in H2?

Speaker #5: And any signs of the funds from the infrastructure budget coming through? What is the expectation for that? When can we expect to see some movement?

Speaker #5: And my second question is on the exit rates going into Q3, both in terms of volumes, pricing, and price-cost across the different regions.

Speaker #6: Okay.

Speaker #2: Okay, let me do the first and then Rene does the second. ANVA margin, in ANVA the sky is always the limit, you know, as I said, for many years now they have moved in the right direction, we continue to develop the region, so absolutely I think there is room for further improvement, even if we are already on a very good level, but the team is doing an excellent job, we are positive for ANVA.

Speaker #5: So, my expectation had been that with costs kind of coming down at the end of June, early July, and you having already passed through some pricing, the price-cost spread, or the pressure on the price-cost spread, would ease.

Speaker #5: Into Q3, what are your expectations on that now that the war seems to have been rekindled? So, yeah.

Speaker #3: And then for working capital, as I said at the beginning, currently year-to-date June we have minus 99 million outflow due to change in working capital, we will get this back, the target is to be very close to zero in cash movement from working capital by year-end.

Speaker #2: Okay, thanks a lot. Let me take the first one, and then René will take the second one. On the German recovery, yes, it's not gone as fast as we thought.

Speaker #2: Let's go through the segments. I think housing continues to be sluggish, but there are first signs that permits have gone up now for a couple of quarters.

Speaker #4: Thank you very much.

Speaker #3: We're clear.

Speaker #6: Thank you.

Speaker #3: And then the last question comes from Bank of America, Arnaud Lehmann.

Speaker #2: Arnaud.

Speaker #2: So there are first projects coming out of the ground, so I think we've seen the bottom there. But obviously, this is also interest-rate sensitive.

Speaker #7: Hello, thank you for taking my questions. Couple, if I may, firstly just coming back on Europe, you mentioned a positive price cost, however, the margin is a little bit down, the results are broadly stable, so clearly there are some pressure there.

Speaker #2: You saw what the ECB has decided, so let's wait and see. But I think we've hopefully seen the bottom there. I think the commercial segment is continuing to be sluggish.

Speaker #7: Is it all you can relate it, and looking forward, you talk about incremental price increase, but that's probably also incremental cost inflation, do you expect the margin to potentially start expanding in Europe for the second half?

Speaker #2: And the infrastructure, it needs the pipeline. The money is there, as I said before. The pipeline now needs to come. You see that the government themselves seem to have realized that something needs to accelerate.

Speaker #2: They've made a change in their government setup. That's also very much centered around the infrastructure question. So we are hopeful for the H2 and especially also 2027 that the infrastructure money, that is there in billions, will actually hit the ground anytime soon.

Speaker #7: And my second question, probably maybe a bit more for Rene, there was 33 million scope impact in the first half from acquisitions, I think, there's a lot of deals coming through and closed at different dates, could you help us a little bit understand the potential scope effect on EBITDA for the full year or for the second half?

Speaker #2: So that's why I would support your point that Germany has seen the worst, and we are seeing the first signs of recovery.

Speaker #7: Thank you.

Speaker #2: Okay, let me take the first one, Arnaud, and then Rene does the scope one. On the margins in Europe, I think the first message is price over cost is positive, and we continue to be positive that price over cost will continue to be positive in Europe, I think that's very important.

Speaker #1: So, Puccellini, to your second question, also regarding volumes, I think July will be an okay month. Our end of June, end of the quarter, was very good, and July we see is, from a volume perspective, okay.

Speaker #2: Then also margin expansion in Europe, I think that's also a good news, and we continue to believe that that margin expansion will continue, and that's it.

Speaker #1: From a price over cost perspective, you are working assumption that the cost pressure eases is probably with the current, let's say, restart of the conflict probably not correct.

Speaker #2: I think, as I said, the costs are coming up, but prices continue to be moving in the right direction, so that's it on Europe, I think we will get it done.

Speaker #1: So we assume in our guidance also that the cost will stay where for energy, and probably also surcharges we get. And what Dominik also explained, we will push further price increases to the market.

Speaker #3: Okay, Arnaud, let's talk about scope. And I hear the year-to-date, RCO scope H1 is plus 17, when I have it right here on the chart, plus 17.

Speaker #1: And as I said already, our own costs—we are very well managing those; our pricing is covering our own costs without any problem. Now we just need a little bit more to cover as well the overhang of distribution costs we get charged by our suppliers.

Speaker #3: Our guidance obviously includes now also Accenture, because that deal is closed, and here we think we have 65 million scope in the guidance. And that does not include Mars, for example, and any further acquisition, but includes what we have on the chart, we have Accenture, we have the Ameditex, we have the Burnco, we have the, these three are all included, but Mars not yet, but I can't tell you because I don't know if it closes or not, but the full year number in the guidance is 65 million, RCO.

Speaker #1: So, as I said before, we are positive to reach price-over-cost positive for the full year.

Speaker #3: And just to add, we have baked in this increase in energy cost that René has mentioned between H1 and H2 into the forecast, and then also into this guidance.

Speaker #3: So this is assumed. If it comes in better, that would be an upside, but let's not hope for this, given the volatility. It's baked into the guidance around the current levels.

Speaker #2: Yeah.

Speaker #1: Okay, next question comes from—thanks, Puccellini. Next question comes from CIC, Ebrahim Houmani.

Speaker #6: Perfect, thank you.

Speaker #2: Okay. Arnaud, thanks a lot. That concludes, I think, the call. Let me just quickly summarize, good quarter, growth is moving in the right direction with the first quarter since four years of organic volume growth, the pipeline is executing well on the M&A and you should expect more deals in the coming months.

Speaker #2: Hey, Ebrahim.

Speaker #4: Hi, Ebrahim.

Speaker #6: Hi guys. Thank you for taking my questions. I have two, if I may. The first one is about ANVA. Is there room for further development in terms of margin, which is quite high?

Speaker #6: And my second question is about the working cap. Also, do you expect an improvement in the working cap in H2?

Speaker #2: Out of that pipeline, self-help is going on all over the place with pricing surcharges and diligent cost management, the third tranche of the share buyback continues to run, and we've specified our guidance to 3.4 to 3.65 and are very confident to reach this.

Speaker #4: Okay.

Speaker #2: Okay, let me do the first and then René does the second. ANVA margin—in ANVA, the sky is always the limit. As I said, for many years now, they have moved in the right direction.

Speaker #2: Thanks, guys.

Speaker #3: Thanks, everyone. Thanks, everyone. Thanks for listening. And enjoy the summer break, we will see each other in the September conferences in New York, London, Toronto, and Munich.

Speaker #2: We continue to develop the region. So, absolutely, I think there is room for further improvement, even if we are already on a very good level.

Speaker #2: But the team is doing an excellent job. We are positive for ANVA.

Speaker #1: And then for working capital, as I said at the beginning, currently year-to-date June, we have a minus €99 million outflow due to change in working capital.

Speaker #1: We will get this back. The target is to be very close to zero in cash movement from working capital by year-end.

Speaker #6: Thank you very much.

Speaker #1: Very clear.

Speaker #4: Thank you.

Speaker #1: And then the last question comes from Bank of America, Anu Lehman.

Speaker #2: Anu.

Speaker #4: Hello. Thank you for taking my questions. A couple, if I may. Firstly, just coming back on Europe, you mentioned a positive price/cost. However, the margin is a little bit down.

Speaker #4: The results are broadly stable, so clearly there is some pressure there. Is it all UK-related? And looking forward, you talk about incremental price increases, but that's probably also incremental cost inflation.

Speaker #4: Do you expect the margin to potentially start expanding in Europe for the second half? And my second question, probably maybe a bit more for René, there was a €33 million scope impact in the first half from acquisitions, I think.

Speaker #4: There are a lot of deals coming through and closing at different dates. Could you help us better understand the potential scope effect on EBITDA for the full year or for the second half?

Speaker #4: Thank you.

Speaker #3: Okay. Let me take the first one, Anu, and then René does the scope one. On the margins in Europe, I think the first message is: price over cost is positive, and we continue to be positive that price over cost will continue to be positive in Europe.

Speaker #3: I think that's very important. Then also margin expansion in Europe, I think that's also a good news. And we continue to believe that that margin expansion will continue.

Speaker #3: And that's it. I think, as I said, the costs are coming up, but prices continue to be moving in the right direction. So that's it on Europe.

Speaker #3: I think we will get it done.

Speaker #1: Okay, Anu, let's talk about scope. Near the year-to-date, RCO scope H1 is plus 17. I have it right here on the chart—plus 17.

Speaker #1: Our guidance obviously now also includes Akshanza because that deal is closed. Here, we think we have a €65 million scope in the guidance. And that does not include MAS, for example.

Speaker #1: And any further acquisition. But it includes what we have on the chart. We have Akshansa, we have Amelitex, we have Burnco; these three are all included.

Speaker #1: But mass, not yet. I can't tell you because I don't know if it closes or not. But the full-year number in the guidance is €65 million.

Speaker #1: RCO.

Speaker #4: Perfect. Thank you.

Speaker #3: Okay.

Speaker #2: Anu, thanks a lot. That concludes, I think, the call. Let me just quickly summarize: good quarter, growth is moving in the right direction, with the first quarter in four years of organic volume growth.

Speaker #2: The pipeline is executing well on the M&A, and you should expect more deals in the coming months. Out of that pipeline, self-help is going on all over the place with pricing, surcharges, and diligent cost management.

Speaker #2: The third tranche of the share buyback continues to run, and we've specified our guidance to €3.40 to €3.65, and are very confident to reach this.

Speaker #2: Thanks, guys.

Speaker #1: Thanks, everyone. Thanks for listening, and enjoy the summer break. We will see each other at the September conferences in New York, London, Toronto, and Munich.

Speaker #1: Thanks so much. Bye-bye.

Speaker #4: Bye.

Speaker #6: Ladies and gentlemen, the conference is now over. Thank you for choosing KurzCall, and thank you for participating in the conference. You may now disconnect your lines.