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Edited Transcript of BZU.MI earnings conference call or presentation 26-Mar-20 2:00pm GMT

Full Year 2019 Buzzi Unicem SpA Earnings Call

Alessandria Mar 27, 2020 (Thomson StreetEvents) -- Edited Transcript of Buzzi Unicem SpA earnings conference call or presentation Thursday, March 26, 2020 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Patrick Klein

Buzzi Unicem S.p.A. - Group Treasurer & Financial Controller

* Pietro Buzzi

Buzzi Unicem S.p.A. - Chief Executive of Finance & Executive Director

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Conference Call Participants

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* Alessandro Tortora

Mediobanca - Banca di credito finanziario S.p.A., Research Division - Research Analyst

* Andrew Belton

CreditSights Ltd. - Senior Analyst of Global Building Materials & Construction, European Basics and Euro Support Service

* Elodie Rall

JP Morgan Chase & Co, Research Division - Research Analyst

* Gregor Kuglitsch

UBS Investment Bank, Research Division - Executive Director, Head of European Building & Construction Research and Equity Research Analyst

* Robert Gardiner

Davy, Research Division - Industrials Analyst

* Tobias Weimann

Morgan Stanley, Research Division - Equity Analyst

* Tobias Alfred Woerner

MainFirst Bank AG, Research Division - Research Analyst

* Yassine Touahri

On Field Investment Research LLP - Founding Partner

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Presentation

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Operator [1]

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Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Buzzi Unicem Full Year 2019 Results Conference Call. (Operator Instructions) At this time, I would like to turn the conference over to Mr. Pietro Buzzi, Managing Director of Buzzi Unicem. Mr. Buzzi, you have the floor.

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Pietro Buzzi, Buzzi Unicem S.p.A. - Chief Executive of Finance & Executive Director [2]

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Hello. Good afternoon to everyone, and welcome to our conference call. I will try to go through the results, especially some figures and some details that have not been disclosed previously and then later on, leave the floor open to you for all your questions, both on the full year results and maybe even more interesting, on the current trading conditions.

So if we look at the year 2019, I think we can be quite happy with the outcome. Difficult to compare maybe with years like before the demand prices or the scope and the accounting principle was a little different, including the portion of consolidation of Mexico, but for sure, we have achieved results that are among the best, let's say, ever achieved by the company. And this was the combination, as we tried to explain in the press, of a very good trading condition to everywhere, meaning volume increasing, firm pricing, sometimes also increasing pricing level and a favorable foreign exchange rate. Cost inflation, not particularly mild, but anyway, somehow fully offset by the volume and price trend.

So the volume trend was already disclosed at the beginning of February. We had a positive 4% in terms of cement sales in terms with, let's say, favorable variance almost everywhere, except for some minor declines in countries that are already working a bit with capacity like Czech and Poland and a flat trend in Luxembourg. Everywhere else, the volumes trended upward, particularly well in U.S., a very strong second semester, and with the trend in Italy and Germany partly helped, let's say, by the changes of consolidation. And besides, let's say, Czech and Poland, as I said, flat, but it's less stronger down the frame, and also good performance in Russia.

If we look outside the scope of consolidation there. So the joint ventures, let's say, the important one in Mexico was actually the only one country showing some, let's call it, weak trading condition, with a decline in volume of about 7%. Brazil, in terms of volume, performed better, was also an easy comparison base. Due to the factors in 2018, 1 month of shipment was practically unavailable in Q2 due to transportation strikes.

If we look at the ready-mix volumes, a similar trend, even though it's always more difficult or let's say, more volatile with the trend of ready-mix because it can refer like it did to some major jobs that we've been supplying or maybe tend to have, they were not immediately replaced by another job of the same size.

So we have a very strong performance in the U.S. This is a focus coming mainly from the Texas, let's say, area, where most of our ready-mix business -- our ready-mix in the U.S. is basically in Texas, so more than 16% up. And the rest, flat or slightly negative, again, in Czech Republic and in the Netherlands, where we had big job sites coming to an end or closer to completion.

The -- yes, just in terms of volume trend. In terms of product development, again, all countries performed with a positive sign. Talking in local currency, we had a very significant improvement in Poland, again in profit and capacity, also good track development in Czech here, good capacity basically and also, in Ukraine, but this is, of course, the local currency was somehow influenced by the local inflation rate which is fairly high. Russia, also price development, about 4%, 5% up.

Firm pricing in the U.S., and no major changes there in terms of net debt plan, let's say, less than 1% after, with again some differences among the regional areas. So we have regions in the U.S. where, actually, they're really unavailable or there was no possibility to include them. And other, like Texas, for example, I think with some areas, Central Texas, where the price has trended up. And again, this was quite widespread across our scope of consolidation, following also some cost increases that we had to face in an area like the U.S., mainly labor and services, which is the target, let's say, associated with a strong GDP performance and full employment.

And meanwhile, in Europe, particularly the ETS, let's say, country to bear additional costs related to CO2 rights, and this was also true for -- possibly for Germany. And in a country instead, more fund rates, like Ukraine and Russia, strong increases in the fuel and then in power costs. In general, if we look at the energy cost, you should know that, as a whole, like if we look within the group, it was not higher. The amount spent for fuel cost was not greater than last year, instead, it was greater for electrical power. But when we compare that -- the weight of the energy deal on our revenues, it did not really change or was trending somewhat lower due to the stronger, let's say, turnover.

In FX changes, as I said at the beginning, also favorable basically everywhere. The dollar, 5% up. The ruble, 2%. The Ukrainian currency, also almost 10% stronger this year on average. Flat development for the exchange rate in Czech and Poland, no big changes there. And a stronger also Mexican peso, which was helping somehow the translation of the results which were totally declining and instead, a loss of 2.5% for the Brazilian real.

The turnover, our present sales figure was disclosed already at the beginning of February, so no changes there. We are up about 12% in the reported sales figures, with the ForEx turnover change of a Q1 momentum and also favorable scope change of EUR 20 million. This comes from the Italian business and the German business. The Italian business -- the scope in the Italian business came from the acquisition, let's say, effective July, of the 3 plants, let's say, 1 full cycle, 2 running plants from HeidelbergCement in Central and Northwestern Italy. And we have also another EUR 10 million scope change in Germany from the previous year because the Seibel & Söhne acquisition was consolidated effective May 1, 2018.

The Mexican turnover declined by about 5% in euro, but it was actually almost a 10% decline in local currency. The Brazilian turnover improved 1, basically 1%, flat in euro and instead was 4% up in local currency. But again, these figures were already available.

Going to the operating cash flow and EBITDA by country. This was disclosed yesterday. We noticed also, also in this figure, a favorable change in any country where we operate, with only the exception, one exception of Luxembourg and the Netherlands, which were flat against last year. In absolute terms, the main improvements are coming, first of all, from the U.S., a very strong, let's say, performance there, with about 60 million up in the reported figures. Of course, here, the reported figures for 2019 include the impact of IFRS 16 leading, which is favorable, let's say, in any country, and so the difference is a little biased, let's say, upwards. But anyway, in the U.S., performance was very strong.

In absolute terms, also Italy performed very well because we moved from basically flat or minus EUR 2 million EBITDA in 2018, EUR 43 million positive in 2019. The EUR 43 million positive of Italy is worth to mention. To recall, that includes some CO2 rights sales, intercompany. So out of this EUR 43 million, almost EUR 24 million are coming from CO2 intercompany sales to Germany, Luxembourg, the Netherlands, Czech, Poland, et cetera. But anyway, it's evidence, let's say, of a better environment for the Italian business. Also, it just performed pretty well, almost EUR 20 million up in absolute terms. And we had a strong rebound in Ukraine. You remember that 2018 was -- had been particularly weak and on there, with EUR 14 million improvement, also with the help of a stronger currency as we said before. Russia performing well too, with EUR 7 million up from EUR 50 million, to EUR 57 million. In total, we are EUR 728 million. Again, the reported figure is EUR 704 million, the recurring, and the main, let's say, nonrecurring item is the adoption of IFRS 16 for 20 -- approximately EUR 28 million. And then that we have some other minor items, just cost negative of EUR 4 million in 2019 in Italy mainly and in part, in Germany, EUR 16 million in Italy and EUR 0.4 million in Germany.

Looking at the joint ventures. Mexico was down about EUR 36 million, EUR 37 million. But unfortunately, more in local currency due to the stronger peso as we mentioned before. Brazil is -- had a negative variance in the reported figure of about EUR 8 million, but last year, a positive nonrecurring item of EUR 11 million. So actually, the reported figure, even if it's not, let's say, up to now, particularly still in a difficult market environment, the recurring figure is better than the previous year.

In terms of contribution to our, let's say, overall consolidated figures, you see that the weight of the U.S. will continue to be very significant, around 56%, 55%, 50%. Last year, it was slightly greater, also because, in the meantime, we had Italy fortunately moving from a negative to a positive contribution to the overall operating cash flow. Eastern Europe also improved -- will remain basically a 22% contribution, and Germany and Central Europe, let's say, slightly down. They represent, this year, 17% of the EBITDA versus 19% in 2018. The bridge of the EBITDA from reported figures, again from, in fact, EUR 577 million to EUR 728 million, tell us that the volume and then price impact was about 200 -- of the EUR 220 million, EUR 30 million positive, of which, volume is 102, 103.

And then variable cost fairly okay, considering the stronger level of activity because of the EUR 110 million variance, with significant increases in raw material and logistic transportation, but moderating increases, for example, in the case of fuel, as I mentioned before, no increases. So for sure, moderate increase for power. Fixed cost, considering also the, let's say, overall, a greater level of activity, I think, pretty much under control. No big changes in maintenance. Some changes in staff, labor costs, as I mentioned before, 3.4% increase in labor cost in most of the countries, in most of the markets, which means about EUR 32 million variance for fixed cost. And sorry, and the rest, no other major changes. The effects -- positive effects on EBITDA amounts to EUR 24 million, and again, only EUR 28 million impact from IFRS 16 adoption.

If we look at the, let's say, lower portion of the income statement, well, the operating profit is not really affected by IFRS 16. The adoption is almost neutral at the operating profit level. So we have improvement there of EUR 116 million, from EUR 352 million to EUR 468 million. And also, as let's say, operating profitability on sales, we are moving up more than 200 basis points, from 12.2 to 14.5. The lower part of the income statement is a little weaker versus last year because we had less contribution from earnings, I think the earnings of the associates, and particularly, as I said, the Mexican joint venture, which had been not as strong as usual, even though its results continued to be very positive, let's say, and we have higher finance -- net finance cost of EUR 58 million. Last year, it was at EUR 24 million, almost EUR 25 million positive. This is due to the so-called noncash monetary items that fall within this category of cost, particularly unrealized, let's say, foreign, ForEx gains or losses.

Derivative valuation still has an increase and decrease in the year related to the equity, let's say, convertible cash -- sorry, cash settlement option associated with the convertible bond, which had a certain value at the beginning of the year. And then it was exercised during the year, and so this also being a negative. If we look actually at the Q1 interest expense on interest-bearing loans, we had an improvement of about EUR 18 million, including also the interest income. So the difference between the 9%, 10% interest income in '19 was lower than 2018 by EUR 16 million approximately.

Our cost of gross debt, let's say, year-end, so understanding that financial indebtedness is less than 2% currently, it was slightly greater than 2% at the end of 2019.

Looking at the cash flow statement on the consolidated cash flow statement, we had a very strong, let's say, cash generated from operation versus last year due to also certain control and improvement in working capital. So we moved from 450 to 691. And also, after, let's say, the following intermediate results, the net cash operating activities improved significantly following a lower interest payment. As I mentioned before, that this is cash before it was accrued interest payment, but also the cash, let's say, outflow, before the interest, went down from 45 last year to 32 in 2019. Income tax payments were slightly higher due to the great flexible income coming mainly from the U.S., Italy and Germany countries, where also the average tax rate is greater than, for example, Eastern Europe. And so our net cash operating activities that were represented in 2019, about 18% of sales versus less than 12% in the previous year. Also there, you see the very strong, let's say, cash generation.

Capital expenditure, somewhat lower than last year, including also equity or strategic investments, or let's say, the expansion investment last year, recall that we had the outflow associated with the SIBO equity investment, the entrant in the Brazilian market. This year, we did have some special projects, but not as important. So we include here EUR 82 million equity investment associated with the purchase of the cement plant in Italy, which I mentioned before.

And then there's a step-up in the net financial position at the beginning of the year with the IFRS 16 adoption. It's about EUR 94 million. Then the repayment of the convertible bond, since we have been purchasing shares already in 2018, was represented actually a partial, from an accounting standpoint, improvement of the net financial position. Dividends paid were very similar to the previous year. We received similar also in -- coming from spending in terms of dividend. There was less disposal of expansion investment, with EUR 45 million in 2019, EUR 12 million received. And interest received was very similar. So at the end, the change in net debt, including the step-up coming from the IFRS 16 adoption was a favorable EUR 323 million, which is a very significant amount for 1 year of net debt, came down from EUR 890 million to EUR 568 million, let's say, after EUR 94 million additional, which was not included at the beginning of the year.

It's another important point, particularly today, and in the coming, let's say, month, is the principal repayment profile, which is showing, let's say, a -- I would call it, a favorable -- it's giving us some even greater confidence on the sum of our financial position because we -- in 2020, we have principal repayments of EUR 26 million, let's say, only. There is no principal repayment during 2021, and there will be EUR 150 million of principal repayment in 2022. Then the bigger -- or the biggest chunk of our, let's say, debt maturities will be coming due in 2023 maturity of the outstanding eurobond of EUR 500 million. But we do have 3 years of the low or reduced, let's say, principal repayments.

I think we can move to your Q&A session. I hope not to have missed or left behind anything significant. But again, we can address your question both on the, let's say, last year results and the current trading. So can we ask the operator to open the Q&A questions?

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from Elodie Rall with JPMorgan.

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Elodie Rall, JP Morgan Chase & Co, Research Division - Research Analyst [2]

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So I have one on cash, if I may, and your capital allocation, thinking for this, as you say. On the one hand, you have low amount of debt. That's very clear. And you have gone and confirmed the 2019 dividend. So how comfortable are you on this one and 2020 as well? And on the other hand, what we've seen, that you have renewed your buyback program, might actually start that as soon as now. So does it mean you're contemplating, more seriously, buybacks now given the lower share price? Or how do you think about that? Don't you think that at this point of time, it would be maybe safer to protect the balance sheet and the cash? And so that's my first question.

And on the second question, if you could talk a bit more about the volume declines that we've seen currently over the last 2 weeks and how this has progressed, which -- what is the percentage of the decline, maybe comparison, if you have a little bit of color there, if you could give us a little bit of more color on what you see. I'm not sure the differences between Western Europe, Eastern Europe, the U.S., if you have a bit more data.

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Pietro Buzzi, Buzzi Unicem S.p.A. - Chief Executive of Finance & Executive Director [3]

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Yes. Sure. Well, yes, of course, the preservation of cash is, even if our position is strong, is the main goal. So we have to make sure that, of course, we can face any kind of potential, let's say, disruption without incurring way too many troubles.

On the other hand, true that today, I think both if you look at the results of 2019 and also even in a very difficult situation, which I think we would face with everything in 2020, we think that, overall, what has been decided by the Board today, both in terms of dividend and opening of the already approved, let's say, share buyback program, it's not this kind of statement and would allow us to go, we think, to prices in a safe way.

In terms of the buyback program, we don't have to rush. In a sense, the idea is to somehow, with a sign, I think, to the market that, let's say, the company again is comfortable about this financial position and see the possibility to invest some money in itself for future uses because at the end, if you have some of your shares in the portfolio, this can be very useful to model for other reasons, other strategic reasons.

I did not mention it before, but I think everybody or most of us are aware, that, that also could be, I mean, winning directly, but the so-called Kosmos disposal, Kosmos Cement disposal, was completed, executed at the close after year-end and particularly, at the beginning of March this year. We showed support. You can read about it. And there was already a significant distribution of cash additional to what we had at the end of last year. It's about maybe lesser again before the end of March. And this is available. This one can be considered available for, let's say, the buyback program.

We would focus again strongly this year on the -- on how the situation develops because it is really changing -- and I will give you some color, changing quickly, and the worst, it's not changing to the better. So this is clear. But there are still some significant regional differences that we don't know. It's really difficult to tell. Nobody knows whether countries like the U.S. will come to a complete production stop like we have right now in Italy or not and for how long also the Italian production stop is going to last.

So in terms of, again, volume declines, it depends very much from region market to market. After the last governmental decision in Italy, we are not allowed to produce anymore. For the moment, the deadline is set at April 3 for potential reopening, but I don't know really. It may last longer or it may finish by April 3. So when you are -- we are not allowed to produce and not even allowed to sell. So our plants are currently closed, with one exception, which is the plant in the northwest of Italy because this plant is somehow linked to the so-called supply and production chain of the waste disguised as fuel, and particularly, this plant is burning its fuel from household waste, so it would create a problem for the, let's say, waste treatment not to be able to dispose of that through the, let's say, the cement plant. And so it's open. But -- it's open, but at the same time, the market does not exist, used until the inventory will be full. But at a certain point, if there's no reopening, let's say, of the economy, these plants will have to shut down.

So the situation is, by far, the worst. I think we will see this -- not to say, but I don't know. Again, it depends on how long it's going to last. But in the meantime, from when we stopped until the reopening, basically, we could say I don't know, 10% or 20% maximum or what used to be the normal shipment, probably even less.

We have not seen, let's say, yet again anything similar in the other countries. The -- well, not exactly. The only one in a similar situation, which is basically in the phase of shutting down, it is in Luxembourg. The Luxembourg plant is also shipping today's product in, I don't want to say, France and another Benelux country. So that's the one where the lockdown is stricter. In Germany, Eastern Europe, for the moment, there is no similar, again, situation, but clearly, the effect in any way, this is somehow, let's call it, strained or a lot of restriction to people movement, goods movement. This will inevitably translate into a lower demand, again, by how much, very, very difficult to estimate.

U.S., again significant regional differences, kind of a similar lockdown, but not again for production activities like cement in Pennsylvania. The Texas market, which is important for us, not really yet affected by any kind of significant, let's say, attrition besides the recommendation to the people to follow, let's say, to take certain precautions there. So I don't think we will see, by the end of March, any significant worsening for countries that are -- other than Italy. In the coming months, it really depends on the virus spreading. I'm not sure of the many infections and the reaction of the different governments, which I believe, but this is my opinion, it's not likely to be so extreme like it has been, it is right now in Italy, but I might be wrong.

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Operator [4]

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The next question is from Robert Gardiner with Davy.

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Robert Gardiner, Davy, Research Division - Industrials Analyst [5]

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So yes, thanks for the detail you just gave in terms of volumes by market. So we very much recall, from the last 2 weeks, of very strong volumes in places like Germany, Central and Eastern Europe. So I don't know if you could just add any color there in terms of how those markets have traded. And likewise, if you could give us an indication maybe in terms of Mexico, Brazil and your small business in Algeria, just to the extent in which if anything has been impacted, if at all, at this point. And so in terms of the U.S., I know you mentioned there that you're operational, but are you able to ship? Can you move product around? Are you restricted in that regard?

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Pietro Buzzi, Buzzi Unicem S.p.A. - Chief Executive of Finance & Executive Director [6]

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No, in the U.S., for the moment, we can ship. We have more problems in the, let's call it, main office, which is located in Pennsylvania, where people again are using its -- there is this prime recommendation to work from home, which is not impossible, to some extent at least, and not to move around, rather than on the production and shipping. Not, for example, that the Pennsylvania plant is unable to receive certain raw materials, which we purchase outside, this is also one of the critical points -- could be one of the critical points from the U.S. So the, let's call it, are not -- they are not coming -- they are not worried. And so they need to purchase outside using a certain kind of logistic. This could translate into some kind of issues, again either a much higher cost or maybe an availability of the same raw material because the plant has been -- or the producing plant has been shut down.

The trend for the first 2 months has been good. It has been actually better than last year because the weather was almost agreeable in Europe, but also in the U.S., let's say, relatively mild. So we had a -- I would say nothing really, showing no critical signs of, let's say, recession coming soon. But unfortunately, for the first time, I think from one day to another, so I think it will be inevitable to see a significant decline in demand. I mean it will be more evident from the first month, let's say, in Italy, and then we will see gradually, I hope not a similar trend, but for sure, a significant drop in Central Europe going forward. The U.S. is a little more of a question mark also because it's bigger, regions that are not so -- with such a high infection rate, and a region like Texas may continue to, let's say, to be business as usual or almost as usual. So I don't know. This is what I keep saying right now.

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Robert Gardiner, Davy, Research Division - Industrials Analyst [7]

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And sorry, just Mexico, Brazil and...

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Pietro Buzzi, Buzzi Unicem S.p.A. - Chief Executive of Finance & Executive Director [8]

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I'm sorry. Mexico is very -- is entering into a phase where there is some COVID, let's say -19 cases. There is also there some strong, again, recommendation for the moment to stay at home, social distancing, let's say, events that have been canceled, et cetera. We don't have an impact on the plan for right now. The shipments are not particularly strong, but it is coming from, let's say, the current, let's say, condition of the economy, which was already seeming a lot fierce. So next year, we do not see any uptick in our shipments. We are basically flat versus last year, that this is what we actually expected already. We do not see a potential for the, let's say, economy to rebound very quickly.

So in Mexico, we have -- and it is true also for countries like Brazil and Russia. Okay, Russia is more important than Brazil. The fact that it consolidated, we had a significant worsening of the currency. So any translation impact coming from Mexico, Russia and Brazil is likely to be negative, or it's like negative. It depends if this will be changing through the year. But in Russia from one day to another, you know that the payback, the ruble went from 70 to 80 to 83. And of course, this is very impacting, let's say, on our businesses.

The Nigerian situation is again nothing new. We really have nothing so much related to the infection due to the virus. Algeria is suffering from a difficult political situation. Okay, the presidential election went on. They have a new president, but still probably not fully empowering in a sense that the power remain where it used to be and a strong impact, negative impact coming from the oil price because clearly, there is such a low level in oil price that it is going to affect the country quite significantly. So we don't see there -- but we did not forecast even a better year for Algeria already.

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Robert Gardiner, Davy, Research Division - Industrials Analyst [9]

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Okay. And I hope conditions are improving in your country.

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Pietro Buzzi, Buzzi Unicem S.p.A. - Chief Executive of Finance & Executive Director [10]

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Is this a question or a statement?

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Robert Gardiner, Davy, Research Division - Industrials Analyst [11]

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No. It's just I hope that you'll improve...

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Pietro Buzzi, Buzzi Unicem S.p.A. - Chief Executive of Finance & Executive Director [12]

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No -- yes, thank you, but everybody also. And I think they will because the restrictions are so significant that they will obtain some kind of success. But again, the problem is a little bit the chunk of states that it is worse or better than the, how do you call it, than the -- than I believe is exactly. So this is a question mark.

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Operator [13]

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The next question is from Yassine Touahri with On Field Investment Research.

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Yassine Touahri, On Field Investment Research LLP - Founding Partner [14]

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A couple of questions for me. So you were kind enough to give us some color on what has been happening in the past few weeks. Do you think you could give us some order of magnitude of the decline that you have seen? I think that, for example, a high reduction, and you were mentioning a decline of 50% in the north of Italy. Could you just help us to go by like region by region? Is it the similar kind of decline that you've seen in Italy, in Pennsylvania, Germany, Russia? It could be very useful to just get a sense of what is the extent of the decline.

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Pietro Buzzi, Buzzi Unicem S.p.A. - Chief Executive of Finance & Executive Director [15]

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I think it's too early. Well, for Italy, not so much. I think the statement there that was made before the actual closing down, before the -- because we are forced to shut down only 2 days ago. Basically, so I don't remember exactly when they came out, but I think it was earlier, when we were still anyway selling some. So yes, I think it was 50% less. But currently, basically, it is here because it's not -- we could not sell. I mean the gates are closed. There could be maybe some small demand, but that's a possibility to service. So again, I think we will have 15 days basically at 0. Later on, we will see.

If you look at the group as a whole, I mean, any -- I do not say that any guess is valid because I think there is a range, I think, is very wide. So I would prefer not to give a number today because it's very wide. I think we will see a very significant decline in the profitability this year. I'm completely good with this. How much is very significant? You can judge maybe in 2, 3 months' time, I think we can have a better idea. You can have a better idea. We'll see better the impact in the U.S., which for us is fairly very significant. But every original, let's say, guidance or original forecast has to be, in my opinion, discounted significantly.

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Yassine Touahri, On Field Investment Research LLP - Founding Partner [16]

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And if you look at for the past few weeks, what have you seen in Pennsylvania, Germany and Russia?

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Pietro Buzzi, Buzzi Unicem S.p.A. - Chief Executive of Finance & Executive Director [17]

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We did not see yet any significant reduction in volume. I think March for these countries, then, with the exception of Central Europe, Luxembourg, France, et cetera. Poland and Czechia, fairly okay. Russia, that is now after -- they are more conservative coming up, their very recent, let's say, message to engage to the nation. They are talking about introducing significant restriction to the economic activity there. Hopefully, cement stay out, but we're not sure. So.

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Yassine Touahri, On Field Investment Research LLP - Founding Partner [18]

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If you look at Germany, which is a country which is not as impacted as Italy, which part of the construction activity is still going on? Is it still the infrastructure activity? Is it residential? Nonresidential? Is everything still working, but at a slower pace?

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Pietro Buzzi, Buzzi Unicem S.p.A. - Chief Executive of Finance & Executive Director [19]

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I'll obviously say, any kind of job will gradually reduce the pace. There's no -- I don't think at the moment, there's no -- I cannot tell infrastructure is going down as eventually is keeping the same pace. I think what we will see, similar to what happened in Italy, is a gradual reduction in the pace of activity.

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Yassine Touahri, On Field Investment Research LLP - Founding Partner [20]

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And the last question. If the situation remains difficult and if it leads to, let's say, a recession in the second part of the year in 2021, what are your options to reduce cost? And what can you do as well? What is the minimum level of CapEx that you need to invest in...

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Pietro Buzzi, Buzzi Unicem S.p.A. - Chief Executive of Finance & Executive Director [21]

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Yes. Yes, sure. Now this is important. Well, we will -- the idea is to consider, at least for the moment, and I think for the next 6 months at least, this kind of situation is something that will not last forever. And so there are some countries like maybe (inaudible) where we may anticipate we may advance some decision to close capacity that, but are already, let's say, are optimizing the production facility that we have already in mind before. So this is to advance this kind of decision. In other countries, where also the capacity utilization has been fairly good, fairly high, we don't see a reason to restructure in a sense of, let's say, putting that capacity. What we can do is to, let's call, lead as much as possible, at least in this country that have this kind of instruments, the social, let's call it, support for work, the staying at home. I think that most of the European countries at least are somehow introducing this kind of programs, and this should reduce, let's say, the direct labor cost in a significant way temporarily, at least on the fixed cost side, labor cost, legalities aside. The other cost, we will, of course, reduce all expenses at the level that is, let's say, the supposed business level, both maintenance programs. CapEx, yes, we do have some flexibility. Our CapEx program has always been quite generous lately because we thought it was a good idea to introduce some improvement in, let's say, efficiency, et cetera, and having the good cash flow generation. But when the cash flow generation starts to trend down, like it's doing now, I think we have a good subsidy from the CapEx program. I think we can easily reduce by, I don't know, from minimum 50 million, maximum EUR 100 million, versus last year with about EUR 250 million.

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Yassine Touahri, On Field Investment Research LLP - Founding Partner [22]

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Next one would be -- okay. You could be able to go back to the level of 2011 when it was EUR 150 million CapEx...

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Pietro Buzzi, Buzzi Unicem S.p.A. - Chief Executive of Finance & Executive Director [23]

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Yes. And then, of course, there are some projects that have their commitments and purchase orders that have been issued. So you cannot do it, let's say, just like this. Over time, or the trending level, that could become EUR 100 million less, yes.

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Yassine Touahri, On Field Investment Research LLP - Founding Partner [24]

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When we think about the EBITDA, when you're losing, let's say, EUR 100 million of sales, is it fair to assume that because of your viable infrastructure, you would lose something like 50% of that in your EBITDA, and then you can reduce a little bit cost? I think (inaudible) suggested that the (inaudible) through could be between 20% and 50%. Would it be closer to 50% for you, if you don't need to -- if you cannot cut cost outside of Italy? Or just you realize that -- what I'm trying to get is that (inaudible) EUR 100 million of sales, what will be the impact on EBITDA, is it 50 million? Or is it closer to 2013?

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Pietro Buzzi, Buzzi Unicem S.p.A. - Chief Executive of Finance & Executive Director [25]

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It also depends on your, let's say, level of activity because the main, let's say, beyond the percent level of activity, which means in Italy, I don't know, 55%, 70%, you still enjoy usually a good, let's call it, (inaudible) denominator for your fixed cost. If you go below, like it's happening or what's already happening in Italy, will be worse. So I think, again, yes, the big assumption sounds to be fair. I mean, it's something that, yes, it has (inaudible) it's the structure of our business, of our costs.

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Yassine Touahri, On Field Investment Research LLP - Founding Partner [26]

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So it would be fair to assume a level of, let's say, 50% of your (inaudible) in terms of EBITDA? I think (inaudible)

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Pietro Buzzi, Buzzi Unicem S.p.A. - Chief Executive of Finance & Executive Director [27]

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On average, yes...

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Yassine Touahri, On Field Investment Research LLP - Founding Partner [28]

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But it might be lower in ready-mix business, for example, in Texas?

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Pietro Buzzi, Buzzi Unicem S.p.A. - Chief Executive of Finance & Executive Director [29]

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Yes, okay. Our ready-mix is, the variable cost component, of course, is greater, but the margins are also -- are absolutely smaller. So it's very easy in ready-mix when you do not produce or your production goes down 50%. It really depends -- okay, it depends also on the price level, if you can keep up, let's say, with the price level. But in absolute term, you're earnings (inaudible) in a downturn, unless the dividend or less (inaudible) down to 0, too little in (inaudible) way normally.

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Yassine Touahri, On Field Investment Research LLP - Founding Partner [30]

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And maybe a very last question, which is on the pricing. Have you seen any impact on this disruption on pricing? Is it more difficult to push price increase? Or have you seen some of the price increase that were accepted being pushed back right now? Or is it too early to say?

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Pietro Buzzi, Buzzi Unicem S.p.A. - Chief Executive of Finance & Executive Director [31]

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Not yet. Of course, the main market there is also -- is always -- again, let's say, on the U.S. market where price increases were mostly scheduled for, let's say, beginning of April. So I think if the market continues to work, let's say, regularly or maybe not so different from what has been so far, price increase to be (inaudible). If not, I think it will (inaudible)

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Operator [32]

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The next question is from Andrew Belton with CreditSights Ltd.

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Andrew Belton, CreditSights Ltd. - Senior Analyst of Global Building Materials & Construction, European Basics and Euro Support Service [33]

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Just a quick question. I just want to confirm that the 300 million credit facility was undrawn as of the end of the year and is over 22 million (inaudible). Just a confirmation. I recognize that you have a large (inaudible) on the (inaudible) you had the variability of these facilities and that you are currently undrawn.

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Pietro Buzzi, Buzzi Unicem S.p.A. - Chief Executive of Finance & Executive Director [34]

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I did not get the question? Patrick, did you get it?

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Patrick Klein, Buzzi Unicem S.p.A. - Group Treasurer & Financial Controller [35]

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Hello. This is Patrick speaking. I couldn't get the question either. I understood credit facility but not much more than that.

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Pietro Buzzi, Buzzi Unicem S.p.A. - Chief Executive of Finance & Executive Director [36]

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Can you repeat?

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Andrew Belton, CreditSights Ltd. - Senior Analyst of Global Building Materials & Construction, European Basics and Euro Support Service [37]

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Yes. (inaudible) is if your EUR 300 million credit facility was currently undrawn as at the end of the year?

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Patrick Klein, Buzzi Unicem S.p.A. - Group Treasurer & Financial Controller [38]

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Okay. Now the credit facility has been prolonged already in 2019 for another 5 years. This is true for EUR 200 million, that have been -- that are now due in 2023. That facility that will (inaudible) facility. And there is another facility that is through this year that we have already initiated to prolong, but it's not yet here. So this will be seen now in the next couple of months. But again, the EUR 200 million has been already prolonged.

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Operator [39]

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The next question is from Alessandro Tortora with Mediobanca.

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Alessandro Tortora, Mediobanca - Banca di credito finanziario S.p.A., Research Division - Research Analyst [40]

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I have, let's say, 3 maybe small question, okay? So one, if you can elaborate, let's say, before on the cost side. First of all, it's (inaudible) you are going to apply and use the temporary layoff scheme in Italy, so just to have the confirmation that we're allowed.

And in case, do you have a similar deal in places in the U.S. because I know that some states also grant some (inaudible) to the company in the U.S. This is the first question.

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Pietro Buzzi, Buzzi Unicem S.p.A. - Chief Executive of Finance & Executive Director [41]

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Well, we are allowed to use the, let's call, special scheme introduced in the recent, let's say, permanent decision. In principal, we will try to absorb, let's say, first to the existing, let's say, vacation days and (inaudible) to find a balance also to avoid, let's say, too negative impact on the workers, but yes, we are allowed to use.

In the U.S., I think, as a rule, there is nothing very similar. There might be some states or some recent decision that will, let's call it, introduce some kind of social support. So it's necessary, because if we look at today's world, I don't think it should be necessary. If necessary, it would be our decision, the company decision, again, based on the, let's call it, length of the trial, length of potential shutdown of offices. A company decision to, let's say, some (inaudible) or any way do the work. I think we will need them back. Also, I mean, it should be like so if we have a 1-month shutdown, but later on, it will not be a good idea to lay them off.

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Alessandro Tortora, Mediobanca - Banca di credito finanziario S.p.A., Research Division - Research Analyst [42]

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Okay. Okay. The second question, again, on the cost side. You mentioned in the press release, and also before, that fuel cost, clearly considering the collapse in the oil price (inaudible) the cost side. Let's assuming, let's say, the current level, but even, let's say, recovered than the current one, which softer benefit, do you believe, on average, the company can get on the fuel cost side?

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Pietro Buzzi, Buzzi Unicem S.p.A. - Chief Executive of Finance & Executive Director [43]

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If it will not reduce, we don't get any issues. But if I have to go back to production, I think the -- no, I mean, we have seen that oil, also the CO2 prices are increasing significantly, the power cost can decrease significantly. I mean, the decline is between 25%, 30%, so it's quite significant. But we need to produce to be able to somehow take advantage of it, yes.

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Alessandro Tortora, Mediobanca - Banca di credito finanziario S.p.A., Research Division - Research Analyst [44]

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Okay. Okay. And you mentioned the cost (inaudible). Clearly, now, we are full, let's say, focused on the current situation. But next year, we should see the transition to the EPS Phase 4. if you focus our discussion on (inaudible), obviously, you will turn from a surplus to a deficit in terms of allowances. How the company is preparing the scenario in parts in Asia, which is you are putting in place after this to be used in the exposure to the increase in cost.

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Pietro Buzzi, Buzzi Unicem S.p.A. - Chief Executive of Finance & Executive Director [45]

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Yes, we have 2 good direction in places. One is to -- even though this new environment is somehow affecting -- and I would add something later. But -- so one guideline was to somehow balance the production between plants in order to reach the best, let's say, level of CO2 (inaudible) allowances, considering the new way of calculation, so the so-called (inaudible). So in a normal, let's say, market environment, we wouldn't balance production this year in a way to get the maximum, let's say, volume of free allowances.

At that, the target is really to work as much as possible on the reduction per unit of cement producer, which is a long process. It's not something that is, again, changing so quickly. Could also be an idea to -- I think we mentioned it in the past to give somehow some kind of sales, which are, today, or used to be, let's say, profitable because of the different way of assigning all the future location that will not be possible anymore. Starting 2021, typically. Export sales or to reduce somehow the level of activity, which is anyway costing you less than sales that are not profitable anymore, if you (inaudible)

And again, the big gain will be -- there are 2 main ways besides the so called carbon capture to improve our CO2 footprint. One is the introduction or increase the usage of alternative fuels. This is true to mostly in Italy, where we are lacking, let's say, or we are below average or below where we think we would like to be, but there are a lot of regulation and permits and, let's call it, in between before getting to the possible. That's (inaudible). And the other is to continue to work on the (inaudible). So reduce the (inaudible) content in cement possibly using alternative raw materials, which are not so ready available, but the new way, there are some ideas. (inaudible) to share maybe some projects about the usage of (inaudible) to maybe play. That's the strategy for (inaudible). It's a bit 2 main ways.

There is a discussion going on currently (inaudible) to maybe not include the months we will be successful or not but not include 2019 in the calculation because everybody expects 2019 to be very weak. So for the so-called 3-year average, which was originally, let's say, scheduled in the new EPS scheme, where 2019 would have been already included. There is now a proposal by (inaudible) to exclude 2019 due to very low volume expectation across Europe.

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Alessandro Tortora, Mediobanca - Banca di credito finanziario S.p.A., Research Division - Research Analyst [46]

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Sure. Okay. Okay. And just to understand, you -- considering the situation, (inaudible) the possibility to maybe anticipate the closure of some capacity, which level of, let's say, (inaudible) will you consider may reverse for you going forward maybe in 2023, 2022 according to what you mentioned before.

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Pietro Buzzi, Buzzi Unicem S.p.A. - Chief Executive of Finance & Executive Director [47]

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It depends on the CO2 prices, where they go. If they go back to -- can be 5 or 30, where they try to get. I think if we run with (inaudible) between 10% and 15% of our -- of the total requirement. And also Europe, again, maybe today, they are focused on another priority. But not long ago, the so-called carbon border tax, whatever, was confirmed in the so-called new level or whatever, the European asset towards, let's call it, the neutral -- carbon-neutral (inaudible). And so this also should not put at least too much pressure on the prices. So the prices can stay with the (inaudible) deficit of allowances. Maybe the profitability will not be great, but that is sufficient.

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Alessandro Tortora, Mediobanca - Banca di credito finanziario S.p.A., Research Division - Research Analyst [48]

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Okay. Okay. But -- okay. The last question, just to follow, is on Mexico and Brazil. Clearly, these are the countries that we don't see your number. But strategically speaking, there are also the situation on Mexico that is much, much less than compared to 2, 3 years ago when the company was at a peak. What is the company -- what is the view of this 1 to 2 years time in that, let's say, Americas, let's call it hub.

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Pietro Buzzi, Buzzi Unicem S.p.A. - Chief Executive of Finance & Executive Director [49]

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We remain very confident about the Mexican, let's call it, market. It's an economy that any way you can consider modern. Of course, they continue to have very strong link to the U.S. So they are very important in the automotive industry. So today, of course, they're going to go through some pain, I don't think huge ones. The cement market and also the typical reaction to this kind of, let's call it, flat or demand-driven (inaudible) by any kind of (inaudible) processes (inaudible) any way to somehow push for new public projects, which Mexico needs anyway.

We have now, after 2 years of decline, a good level of, let's say, good margin for increasing volumes, because today, we are running the 80 -- a little more than 80% capacity utilization. So there's no real need -- in case of a significant rebound, there's no need to add additional capacity. Margins are still, in such situations, favorable. Let's say, by far, the highest of the group. The return on capital investment in Mexico is by far the best we had in the entire group. So we continue to be positive about the country. We knew that this year was not going to be great like last year. Now if there is a disruption, additional disruption coming from the virus, maybe we need to revise also such in a negative sense. But in the longer run, I think we remain confident.

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Operator [50]

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The next question is from Gregor Kuglitsch with UBS.

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Gregor Kuglitsch, UBS Investment Bank, Research Division - Executive Director, Head of European Building & Construction Research and Equity Research Analyst [51]

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Can you hear me well?

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Pietro Buzzi, Buzzi Unicem S.p.A. - Chief Executive of Finance & Executive Director [52]

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Yes.

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Gregor Kuglitsch, UBS Investment Bank, Research Division - Executive Director, Head of European Building & Construction Research and Equity Research Analyst [53]

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Great. I've got a few questions. Can I ask one about kind of cash costs. Perhaps the best way to ask it is perhaps (inaudible) if you're running -- I think you were kind of implying you're basically down 80%, 90%, how much cash do you borrow for instance in this year? And if you do, perhaps you've done scenarios as you said, if you kind of assume at the group level, kind of discuss the pandemic kind of spread, you have a situation where you know your revenues were down very substantially for a few months, how much cash do you simply burn (inaudible) scenario analysis would be interesting.

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Pietro Buzzi, Buzzi Unicem S.p.A. - Chief Executive of Finance & Executive Director [54]

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(inaudible)

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Gregor Kuglitsch, UBS Investment Bank, Research Division - Executive Director, Head of European Building & Construction Research and Equity Research Analyst [55]

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No, I mean, maybe -- I mean, it's not an easy question to answer, but if I may ask.

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Pietro Buzzi, Buzzi Unicem S.p.A. - Chief Executive of Finance & Executive Director [56]

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Depends a lot on the level of activity. As I said, I think in a worst case scenario, but looking at the entire group, worst case -- I don't think it's worst case. A very negative scenario could be not to be able to produce any cash basically, so stay to a 0 level from now to end of the year. So basically -- of course, for this to happen, we will need to see some market in the space, say (inaudible) talk about going down beside the Italy situation, which is currently -- let me go back to it, I mean, which is currently shut down to see other countries still working some 40% less than what we were able to achieve last year. So if you go down 40% versus, let's say, the previous year, probably you run into a situation where your cash flow is almost 0. I mean, you basically come out on a cash breakeven level. I think this is (inaudible)

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Gregor Kuglitsch, UBS Investment Bank, Research Division - Executive Director, Head of European Building & Construction Research and Equity Research Analyst [57]

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That tends to be (inaudible) that's after CapEx. Or is it before?

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Pietro Buzzi, Buzzi Unicem S.p.A. - Chief Executive of Finance & Executive Director [58]

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No, with CapEx. We are still keeping some -- not considering CapEx of the year, let's say. As I said, after reducing CapEx, of course, significantly, but still, we're not near a 0 0 level.

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Gregor Kuglitsch, UBS Investment Bank, Research Division - Executive Director, Head of European Building & Construction Research and Equity Research Analyst [59]

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Okay. And if you look right now and then if we go down for a few months, how much do you need? EUR 10 million, EUR 20 million, EUR 30 million revenue?

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Pietro Buzzi, Buzzi Unicem S.p.A. - Chief Executive of Finance & Executive Director [60]

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Let me see. I mean -- let me see.

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Gregor Kuglitsch, UBS Investment Bank, Research Division - Executive Director, Head of European Building & Construction Research and Equity Research Analyst [61]

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With negative EBITDA per month, to get a feel, right?

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Pietro Buzzi, Buzzi Unicem S.p.A. - Chief Executive of Finance & Executive Director [62]

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Yes. Fixed cost, approximately -- I think you can run negative, maybe something between -- really 0 production level, 0 sales, between 6, 7, maybe 18 per month, something like so. But it's 0 sales.

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Gregor Kuglitsch, UBS Investment Bank, Research Division - Executive Director, Head of European Building & Construction Research and Equity Research Analyst [63]

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No. No. I think that's something (inaudible) this year. And then coming back to the carbon situation. I guess, 2 questions. When do you think you actually get told what the allowances are for 2021? So when do you have certainty what the numbers are? That's question one. And question two is, are you doing any kind of CapEx that's been kind of put on hold and maybe you never had a plan to reduce carbon intensity, I guess, mainly in Europe, but also globally? And are you doing anything in that regard? And if so, how much is it?

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Pietro Buzzi, Buzzi Unicem S.p.A. - Chief Executive of Finance & Executive Director [64]

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Well, the actual allowances, we're still making some of the, let's say, items needed for consideration. One is, as I mentioned before, the transaction of 2019, assuming that this will be considered, and also the so-called benchmark, which is not officially -- something officially disclosed yet. I mean, we have an idea, but (inaudible) disclosed. So I think we will know more by the second half of the year, for sure. And then to include 2019 for the 3-year evaluation.

CapEx, let's say, on R&D, let's call it, devoted this year to reduction are mainly, let's say, focused on carbon capture. And we have 2 main ones that are also some kind of, let's call it, joint research project together with either, let's call it, resource centers or our industry players. One is in Italy and one is in Germany. It's -- one is called (inaudible) clinker, the carbon capture project on an investment scale. And the same thing will be done in Germany, which is Heidelberg, (inaudible) and (inaudible) a plant to test the so-called fuel process.

On the right, I think, in our, let's call it, CapEx plan, there are a number of things that has some impact on the CO2, not specific -- not approved or introduced just for the reason to (inaudible). But yes, we're able to take a decision also on the return of a certain development. We want to consider and we want to stress, let's say, the CO2 contribution -- or the reduction in CO2 contribution. But this is something we won't really see until now, let's go with the absolute level of our CapEx spending. So it's within what we have usually at, let's call it, gross amount of CapEx for 1 year. The focus, of course, is there are many processes made the past, which did not receive enough priority or whatnot, if you would. Those are now being approved because they do have a significant CO2 impact.

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Operator [65]

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The next question is coming from Tobias Woerner with MainFirst.

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Tobias Alfred Woerner, MainFirst Bank AG, Research Division - Research Analyst [66]

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I have 2 questions, if I may. Number one, if I may just press you again on the energy side and I saw it cannot be delayed in the call. What exactly is your energy bill as of 2019? How much of it is hedged for 4 1 4 in the context? And just remind us roughly (inaudible). That's the first question.

And then the second question, you've closed in the Cosmos transaction, has the cash already been distributed to partners? And is the tax -- what is the gross amount?

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Pietro Buzzi, Buzzi Unicem S.p.A. - Chief Executive of Finance & Executive Director [67]

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No, it's a gross amount. We are able to do them because the transaction closed at the beginning of March, 6 or 7 months, if I recall correctly. So yes, it was, it's a gross amount for the moment because the partnership transition will be, let's say, directly by the 2 partners.

And on the hedging for fuel and energy, in general, we tend to be very cautious. The principle is to, okay, if we see, let's say, some very, very impacting prices on the energy and fuel, we could anticipate some, let's say, purchasing effort to the following year, but not -- usually no more than, let's say, 30% to 24% of the following year. Otherwise, typically a delay of 3, 6 months. And so we are pretty much on the spot market. We are mainly on the spot market. So if the market trend remain one direction in 3, 4 months time, usually, we should be able to achieve this kind of level of the new cost.

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Tobias Alfred Woerner, MainFirst Bank AG, Research Division - Research Analyst [68]

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And if I may just ask what the total energy bill is for you, the cost last year and the split between pet-coke and coal?

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Pietro Buzzi, Buzzi Unicem S.p.A. - Chief Executive of Finance & Executive Director [69]

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I don't have that split, and I think we never really give it. No, I mean, I have a percentage in a sense that if you look at the, let's call it, different fuel mix, last year, for example, as a whole, pet-coke was 37% and coal was 21%. Then you had natural gas, 17%, alternative fuel 24%, and minor, other like oil and gas (inaudible) that's it, 1%. And your other question was?

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Tobias Weimann, Morgan Stanley, Research Division - Equity Analyst [70]

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Total energy bill.

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Pietro Buzzi, Buzzi Unicem S.p.A. - Chief Executive of Finance & Executive Director [71]

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Okay. What I can tell you quickly is the -- if you look at the cement business, so not ready-mix, on the cement, fuel and power, we spent last year EUR 357 million total.

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Operator [72]

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Next question is from Marco (inaudible)

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Unidentified Analyst, [73]

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I have 4 questions, if possible. First question is when and to what extent do you expect a positive impact on cement demand due to increased public investment in infrastructure, particularly in the U.S.? Second question is what is your exposure to the oil sector in terms of fuel volumes, particularly in U.S. and Russia? Third question is, if -- do you expect some write-down on receivables, particularly on customer versus your sectors? And last question is, are you also planning to buy series shares or only your ordinary shares for the buyback?

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Pietro Buzzi, Buzzi Unicem S.p.A. - Chief Executive of Finance & Executive Director [74]

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I hope to recall all of them. Firstly was public intervention, well, according -- already before, let's say, this crisis, according to the EPCA, maybe they will revise the figure. But public spending was already considered one of the most important in the sense of consumption differential as helping the fuel consumption to move forward in the overall U.S. market. It is true -- and it is true everywhere, let's say, not only in the U.S., but from the decision-making to the actual opening of the job site or return of confidence, et cetera, the process is always fairly long.

So once something has been decided and approved and financed to be maybe faster in the U.S. than it is in Italy, but I think you require from minimum 1 year, maybe 2 years. So there is a recovery coming from public spending. I think it will take some time. But we don't see nearly -- an immediate, let's say, impact on the figure.

The second one, I think, was about order cement. Order cement, for us, is significant in Russia, for sure, and this can be a little bit of a concern for what's going on, even though Russia may continue to produce. The concern is more on the oil price and the impact on the currency. What we have seen after the, let's say, discussion between Arabia and Russia and the agreement, et cetera. So it's immediate. So Russia may continue to produce, but the oil price is low. First of all, the economy, to some extent, will suffer. And second, we will suffer even if we sell maybe sufficient volumes or good volumes of order cement when we translate our figures from the ruble into euro. This is something that I was already mentioning at the beginning as one of the major impact this year, together with the expected decline, let's say, in demand due to coronavirus.

In the U.S., it is a little different because our, let's say, presence, our sales are important, but not very important than they are, let's say, in Russia. And we may see a decline there. We are already seeing a decline in oil extraction activity, which will definitely affect our cement sales. But this should not be an issue or not as important in terms of currency translation.

The question was -- we tested that one. No, is it 4 or 3.

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Unidentified Analyst, [75]

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If you expect some write-down of receivables in the...

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Pietro Buzzi, Buzzi Unicem S.p.A. - Chief Executive of Finance & Executive Director [76]

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Ah, yes. Basically, this is a big risk. I think, particularly in Italy, we will be facing a very difficult time for the -- for our, let's say, credit. So the risk of increasing bad debt expense, I think, is very high, particularly in Italy, because it is typically the country where our payment terms are particularly long. And we may -- yes, we may face some significant difficulties there.

Going forward, I mean, let's see when the market reopens. But the liquidity, let's say, of the customer, yes, it is a big concern. A little less elsewhere because, typically, again, the payment terms are not as long. And as it is, so far, we are not seeing similar, let's say, lockdown situations. So more or less, there is some activity going on, Yes, okay, gradually at a lower pace, but the market is still active.

On the buyback, I think we are open to both category. I think it would make sense that you move forward with both the share. Clearly, the ordinary share gives you much greater liquidity. So that will be, I think, much easier to invest significantly, let's say, in the ordinary share due to the liquidity, but we'd not rule out, let's say, the idea of buying some series shares if they're available.

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Operator [77]

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(Operator Instructions) There are no more questions registered at this time.

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Pietro Buzzi, Buzzi Unicem S.p.A. - Chief Executive of Finance & Executive Director [78]

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Okay, very good. Thanks, everyone. We remain, let's say, available. Our offices are still open (inaudible) most of the offices are in Italy. The density, let's say, the population has been very much decreasing, but we remain available from remote on telephone, any kind of means. So again, thank you for listening, and so long.

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Operator [79]

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Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones. Thank you.