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Edited Transcript of CEMI.MI earnings conference call or presentation 13-Nov-19 5:00pm GMT

Q3 2019 Cementir Holding NV Earnings Call and to Discuss Business Plan (2020-2022)

Nov 29, 2019 (Thomson StreetEvents) -- Edited Transcript of Cementir Holding NV earnings conference call or presentation Wednesday, November 13, 2019 at 5:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Francesco C. Caltagirone

Cementir Holding N.V. - Chairman & CEO

* Marco Maria Bianconi

Cementir Holding N.V. - Corporate Development, M&A and Business Integration 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

* Emanuele Gallazzi

Equita SIM S.p.A., Research Division - Research Analyst

* Matteo Bonizzoni

Kepler Cheuvreux, Research Division - Equity Research Analyst

* Tobias Alfred Woerner

MainFirst Bank AG, Research Division - Research Analyst

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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 Cementir Holding 9 Months 2019 Results and 2020-2022 Industrial Plan Conference Call. (Operator Instructions)

At this time, I would like to turn the conference over to Mr. Marco Maria Bianconi, Head of M&A and Investor Relations. Please go ahead, sir.

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Marco Maria Bianconi, Cementir Holding N.V. - Corporate Development, M&A and Business Integration Director [2]

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Thank you. Good evening, everybody, and welcome, and good morning to those in the U.S. Welcome to Cementir Holding Group 2019 9 Months Results and 2022 Industrial Plan. My name is Marco Bianconi. I'm here with the Chairman and Chief Executive, Francesco Caltagirone.

So you should have received a slide deck which I'm going to go through quickly, starting with Page 2 with the 9 months results highlights for 2019, just 3 points. Revenues for the group rose by 1.5% to EUR 906 million. On a like-for-like basis, revenue declined by 2.2% due to difficult trading in Turkey.

EBITDA was up double digits by 11.6% to EUR 181.8 million, including EUR 18.9 million from IFRS 16 impact. We had higher contribution from Nordic & Baltic, Belgium, China, and lower contribution from Turkey. EBITDA margin was up by 182 basis points to 20.1%. The net financial position, including EUR 83.1 million one-off effect from IFRS 16 increase, reached EUR 346.3 million. In the quarter, in the third quarter of 2019, net debt declined by just short of EUR 53 million.

Turning to Page #3, starting with the breakdown by region with the most important area, Nordic & Baltic, accounting for about 50% of 2018 group EBITDA. Trading was good for both cement and ready-mix across Scandinavia. In Denmark, gray cement volumes were up due to renewed activity in the prefabricated market and prices were up with inflation. Also, white cement volumes were up overall and ready-mix concrete volumes were slightly down, although prices were broadly flat. Overall, EBITDA was up 16.2%, thanks to operational leverage, good cost control, including EUR 3.2 million of IFRS 16 impact. Norway ready-mix sales volumes were flat with prices moderately up. And in Sweden, the real estate sector caused a slight reduction in ready-mix volumes sold with the aggregates sales and prices moderately up overall.

Turning to Page #4. Belgium and France accounting for about 1/4 of 2018 group EBITDA show the dynamic activity overall and across the different sectors with cement and clinker volumes increasing alongside with average pricing. Ready-mix concrete volumes were slightly down but prices held up in both Belgium and France. Aggregate volumes are softer from strong comparable base but overall the activity was good. Prices were up moderately thanks to better product mix. If we look at EBITDA, results improved by 26%, thanks to operational leverage and good cost control and EUR 3.2 million impact from IFRS 16.

Turning over to Page 5. North America accounting for about 7% of group EBITDA in 2018. Here, comparison are meaningless due to the first-time consolidation of this company from Q2 2018. Overall, the results were flat. There were some challenging market conditions due to weather in some states and growing competition from imports, especially in southern states. Cement prices were broadly flat with some pockets of weakness due to intense competition. EBITDA benefited from EUR 3.4 million of IFRS 16.

Turning over to Page 6, Turkey and Egypt, accounting for about 11% of EBITDA in 2018. As you probably know, domestic cement volumes were down by around 35%, with cement prices broadly flat with different dynamics across our plants. RMC volumes were down 50% also due to our closure of 5 ready-mix plants, with domestic currency prices up 15%. On top of this, there was a devaluation of the Turkish lira by 15%. Clearly, this, together with the volume decline, impacted EBITDA severely. Waste management reported slightly higher sales.

On the other hand, Egypt was on a recovery mode. Domestic market stabilized and both volumes and prices were up. Operating leverage, good cost control and a 10% Egyptian pound revaluation contributed to around 106% EBITDA increase year-over-year.

Turning over to Asia Pacific, the last region, accounting for 8% of group EBITDA in 2018. China showed good stable growth with both volumes and pricing in the domestic market and good cost control as well underpinned the 11.5% EBITDA progression year-over-year.

In Malaysia, also prices were moderately up and the domestic cement and clinker shipments were up as well. Overall, operational leverage and better cost control helped us achieve 11.9% EBITDA progression year-over-year. So that ends the section on the 9 months results.

On Page 8, you have a highlight on the Industrial Plan 2022 targets. And I would leave the floor to Mr. Francesco Caltagirone, also highlighting that the guidance for the full year, as you can see on Page 8, is reiterated with sales of around EUR 1.2 billion, EBITDA between EUR 250 million and EUR 260 million, an EBITDA margin of around 20% and a yearly CapEx, ordinary CapEx of around EUR 70 million and a net debt target of around EUR 245 million after IFRS 16 impact.

Now I turn over to Mr. Caltagirone for the industrial plan.

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Francesco C. Caltagirone, Cementir Holding N.V. - Chairman & CEO [3]

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Good afternoon and good morning to everybody. I think that the key drivers of this new decision of rolling Industrial Plan 2022 is that the company has decided to put on the table EUR 100 million in the next 3 years to reduce the environmental footprint through various action and also announcing the digitalization in 4 different areas of the manufacturing.

This investment, that will be mainly in the Aalborg plant in Denmark, in Gaurain plant in Belgium and in Izmir plant in Turkey, will start to produce their result starting from the second half of 2022 on a yearly base of nearly EUR 25 million of reduction in cost. The main actions that we are going to do is in Aalborg, we are going to invest in windmill capacity of around 8.4-megawatt that will allow us to go up to 80% with renewable resources of electricity. Then we also enlarge the district heating of up to 50,000 households compared to nearly 30,000 today. Then going to Gaurain, we will upgrade our production capacity. Today, we are running with 2 different kiln. We will revamp only and we will run only with 1 kiln. And this will allow us to go from 40% to 80% of alternative fuel utilization and also to reduce the usage of pet coke. And in Izmir plant, also we are going to build a waste heat recovery power plant that allow us to use for internal use just up to 40% of the electricity that the plant needs. All in all, all these, let me say, 4 main project should bring up to EUR 25 million starting from the second half of 2022.

We also need to consider another important thing that this plan help us to mitigate the CO2 impact. We estimate that from the moment that we are long of CO2, both for Danish and Belgian activities through probably the third quarter of 2021, then to mitigate with an average yearly cost already included in the plan of around EUR 5 million per year starting from 2020. So we expect to have an extra cost with the CO2 at EUR 30 of EUR 15 million, the sum of the 3-year that is average of nearly EUR 5 million per year.

Then I also think that another important thing is that we are also acting to receive some financing for these projects in Denmark, Belgium and Turkey, but this will take from 12 to 18 months. So today, we have put in the plan the full cost that is nearly EUR 100 million. But we think that we can recover by the local financing agency or municipalities from EUR 20 million to EUR 30 million. So it might be that at the end, but today this is not certain at 100%, the real cost can be decreased to EUR 70 million.

I think that then the other important things that it is already considered in the plan is the digitalization. We will do several things just in Denmark and in Belgium. And then we will expand after 2022 in the other plant. This also should bring and is already considered in our savings nearly EUR 15 million in 2022, starting with a small delivery just next year of about a couple of a million.

All in all, all these, let me say, savings will bring our EBITDA, mainly in cost cutting, from our actual around EUR 255 million roughly of this year with, let me say, we think to go above EUR 300 million in 2022. Also, EBITDA margin will be enhanced from 20% to 23%. And also, we will go even after this EUR 100 million of extra investment in environmental, let me say, footprint to go on net cash by the end of 2022. We can say that the cumulative free cash flow generation will be around EUR 370 million for the next 3-year before, let me say, investing the last EUR 10 million. So the industrial free cash flow is quite high. Something probably that is not included is also that the tax rate of the group should be also enhanced, especially because Belgium has lowered from 25% to 22%. And even Turkey will go from 22%, probably below 20%. So this should bring the average tax rate of the group of around 24%.

About probably a possible question that I might receive is how we see Turkey in this industrial plan. Let's say that this year, as I said, Turkey experienced very difficult situation. And at the end, compared to last year, Turkey will have a minus EUR 18 million compared to last year. So last year was plus EUR 10 million. We'll finished at around minus EUR 8 million in terms of EBITDA. And even considering this detail, let me say, delta, we are, let me say, we can keep the same guidance because the remaining part of the perimeter are performing quite well.

Turkey, in our industrial plan, we think considering also that in the month of October for the first time after 11 months, we have a positive EBITDA. We think that next year it's around EUR 6 million, then EUR 8 million and EUR 10 million in the last year. So it is very limited from 1.2% to nearly 3.2% the contribution overall in our, let me say, industrial plan.

I think that, let's say, I have explained -- and also I think the main target for, let's say, the whole group is to reach the 30% reduction of emission compared to '19. With all these project, we'll be able to reach the 30% reduction by 2030.

I am finished. So I'm ready. We are ready to answer to your question. Thank you.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from Matteo Bonizzoni with Kepler.

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Matteo Bonizzoni, Kepler Cheuvreux, Research Division - Equity Research Analyst [2]

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I have 2 question. The first one is related to the 9 months results and the 2019 guidance. So what we see in these results is that EBITDA in the 9 months, excluding IFRS 16, is basically flat compared to last year. That means that Q3 alone was slightly down because the first half is slightly up. And you have already elaborated the theme. Previously, you indicated an improvement of Turkey in the second half of the year approaching the breakeven while we see that Turkey went from minus EUR 3 million of EBITDA in the first half to minus EUR 8 million in the 9 months. So it means that in the third quarter you seem to have worsened and not improved. Can you a little bit elaborate more? You have already touched the investment but if you can say something more on the situation.

The second question instead is on your plan. Because in the plan basically you will see that there is a revenue CAGR that is quite low, between 1% and 3%. So basically, can you a little bit comment on the different geographic and also a little bit more if correct that you are covered in terms of CO2 rights until Q3 of 2021 in Denmark and in Belgium and what kind of assumption are you making as regard the new regulation for the CO2 as of 2022 in terms of cut of the rights compared to now, basically what are your assumption? We know that the regulation has not yet been defined, but maybe you have done your internal assumption on that.

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Francesco C. Caltagirone, Cementir Holding N.V. - Chairman & CEO [3]

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On Turkey, yes, we say that, we, let me say, we should have landed around EUR 5 million up than minus EUR 5 million. We are also to consider that at a certain point a few weeks ago Turkey decided to invade Syria and their exchange rate went from around the TRY 6.61 to up to TRY 6.5, TRY 6.6. And so this also caused a little, let me say, taint. It seems that it's recovering a bit but this create additionally a bit of uncertainty. I think that, for us, I mean, at the end, the important thing is that with the cost reduction, recovery of market share and also price increase that is starting, let me say, to involve all the 4 market of our plants, let's say, we think that the worst is on our back and also we think and that we both agree that EUR 6 million plus because also there is another issue impacting, let me say, the balance sheet in Turkey, let's say that.

As you can imagine, last year or during this year, but even at the end of last year, we bought some coal to fulfill our, let me say, industrial plan in Turkey. At the end, the market slacked more than what we forecast. And so today, we are still consuming the coal that should have been finished during August, but at the end we'll finish in November that has a price gap compared to the actual situation in the market of nearly $30. So the market has performed slowly, but we think and we are sure because it's a matter of mathematics that with the new coal price that we are buying starting from December, so using in January, and also with what we are seeing in the market, probably the past is a little bit bitter, but we think that with the price deflation in, let me say, all the energy and solid energy because electricity is continuing, let me say, to be aligned at the euro or dollar price. But I'm confident that just switching from new coal from old coal, this should bring back the company up just plus EUR 4 million, plus EUR 5 million compared to this actual year. So there is a gap of nearly EUR 10 million, I mean, just in terms of the price of coal. Because in Turkey also there is the possibility to try internal coal that now, especially with the very strong devaluation, has become very competitive with the international pet coke because especially you save a lot of money for logistic.

Then I mean the other question was about -- we are, let me say, prudent on our guidance in industrial plan for the revenues, especially because as you are aware, this year, and we are active in 18 different countries, we have been hit by the devaluation of Turkish lira. So from the moment that nearly 75% to 80% of new industrial plan announcement, especially in EBITDA, is coming from cost saving, cost cutting, I think that it's better to leave some, let me say, space or possibility that the company probably can realize better result in terms of sales, but this can be also balanced, counterbalanced by any kind of devaluation in the business perimeter. This doesn't mean that we expect another devaluation. But if you remember, 2 years ago, we saw a nearly 40% devaluation in Egyptian lira, last year Turkish lira. So we are just being prudent. And we think that, let's say, this is something that with our, let me say, conservative approach, we can, let me say, put in this industrial plan. I hope, but this is just a hope, to review this figure, especially for the sales, during the next 3 years.

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Matteo Bonizzoni, Kepler Cheuvreux, Research Division - Equity Research Analyst [4]

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Okay. And on the cut of the allocation and which assumptions have you made as of 2022 and the cap adjustment that you've made.

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Francesco C. Caltagirone, Cementir Holding N.V. - Chairman & CEO [5]

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I think we have, let me say, today, there is not, let me say, exact mechanism. We think that there will be a reduction, a linear reduction of 43% with respect to 2005. This is supposedly the benchmark that we expect that should be used. Then on this 43% with respect to 2005 is the cap that then will reach 2030. So we have considered this. And also we have considered that using less pet coke in Gaurain and announcing the district heating will allow us to recover up to 300,000 tons of CO2 directly, indirectly with these projects. So this is why we think that the average of, let me say, the impact should be around EUR 5 million with the CO2 at EUR 30. Then we don't know if that will be at EUR 50 or at EUR 10. But roughly, we think that in this 3-year period should be this way. Then let me say going forward there is, let me say, a slight reduction achieving this minus 43%.

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Operator [6]

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The next question is from Emanuele Gallazzi with Equita.

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Emanuele Gallazzi, Equita SIM S.p.A., Research Division - Research Analyst [7]

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I have a couple of questions. The first one is on EBITDA. You mentioned that a large part of the EBITDA expansion in the business plan is mainly explained by cost cutting. I just would like to understand which kind of assumption do you have on volumes and prices for the main area in the coming years. And the second one is on M&A, considering your target of net cash in 2022, I just would like to have your view on M&A going forward. I mean, are you considering any potential opportunities in, let's say, new countries or to increase your footprint in countries where you already operate?

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Francesco C. Caltagirone, Cementir Holding N.V. - Chairman & CEO [8]

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Okay. I mean, broadly speaking, because this is a 3-year plan and going region by region is the path. So we think that, let's say, in terms of gray cement, we will recover it mainly the quantity in Turkey. We have already recovered, let me say, as you know, the difficulties that is facing also other, let me say, players in Turkey will, let me say, allowed us in the last 3 months to recover some market share. So compared to what, let me say, our sales of this year through the end of the plan, we might recover nearly from 20% of gray cement sales from 6.6 million to close to 8 million tons at the end, broadly in Turkey and then the remaining part in -- and that means Scandinavia and Belgium, France, because gray is, we are active only in this area.

In white cement, we think that we continue our slight increase that should bring our total sales from 2.7 to 3.1 at the end of the period. For ready-mix, I think that there is a slight increase but is mainly affecting Turkey. And for aggregates, we will be flat in terms, let's say, that our main aggregates activity are in Sweden and in Belgium, let's say, we are, let me say, closer to full capacity. So we will see probably here a price hike because as you know in aggregates it's very difficult to put in line a new capacity. And if the demand is continuing to grow, I think, in the region, I mean, not for us, the possibility is just to align the price to the new demand. I don't know if you have asked other things.

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Emanuele Gallazzi, Equita SIM S.p.A., Research Division - Research Analyst [9]

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No. And what about M&A?

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Francesco C. Caltagirone, Cementir Holding N.V. - Chairman & CEO [10]

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In M&A, we don't think major things today. And the reason why we put also, we decided now just at the starting of the new decade to reach this 30% '30 target to put this EUR 100 million that I think for the size of the group is a quite reasonable resource to put in place is that we don't see any possibility and because the multiple in the various market, the open market that interest us are too high and we think that we will invest in our ourselves even if -- because if you consider that we will have nearly, let me say, a recovery in 4 years of this investment, I think that today it's very difficult to find something where you can invest at 4x EBITDA, so this is the main reason. But this doesn't mean that something will arrive. But I don't feel, I don't think, and what we have discussed in the last months, it seems that the price and the multiple are not, let me say, in line with our, let me say, way to manage the business.

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Operator [11]

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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 [12]

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I have, let's say, 2 questions. Okay. The first one is coming back to your point on 70% of your, let's say, EBITDA expansion over the plan mainly explained by the cost cutting. If I understood well, you should have digitalization helping you with around EUR 50 million synergies. And I would like to understand, it should be visible at full speed in 2022. On the other side, you also mentioned that you expect to get, including, I guess, digitalization, EUR 25 million of cost saving from H2 2022. So maybe...

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Francesco C. Caltagirone, Cementir Holding N.V. - Chairman & CEO [13]

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Now we are expecting to have by 2022 from digitalization starting from this year and in 2020 that will be around EUR 2 million. We will reach EUR 15 million digitalization only in 2022. And this is, I mean, around EUR 18 million of the EUR 100 million that we put on the table. With the other EUR 80 million that are, let me say, on that 4 selective, let me say, project mainly in the plants to reduce footprint, we will, let me say, starting from the second half, so let's say that you will save half of the EUR 20 million, extra EUR 25 million. So it's EUR 25 million plus EUR 15 million if we start looking at 2023. Otherwise, it's EUR 15 million plus EUR 12 million, EUR 12.5 million for 2022 because we need the 2-year, especially for, let me say, the ramping of the kiln, of the setup, of the windmill which will take 2 full years. So we expect that then we need a ramp-up. So we expect that they will start to deliver in the second half. So at the end of this digitalization and EUR 15 million, plus EUR 25 million of green investment, let's say.

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Alessandro Tortora, Mediobanca - Banca di credito finanziario S.p.A., Research Division - Research Analyst [14]

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Okay. So it's EUR 25 million, let's say, over the period, let's say, at full speed at '22, '23. But if, let's say, we remain to the 2022, we are talking about this EUR 15 million at full speed from digitalization, let's say, half of the EUR 25 million in...

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Francesco C. Caltagirone, Cementir Holding N.V. - Chairman & CEO [15]

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Yes. Exactly.

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Alessandro Tortora, Mediobanca - Banca di credito finanziario S.p.A., Research Division - Research Analyst [16]

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So at the end, if we do, let's say, a bridge starting from the EUR 255 million EBITDA this year expected by, let's see what will happen on Turkey. The idea from you is a delta. Okay. I know it's too precise but just to have an idea, a positive delta from Turkey of around EUR 15 million starting from the minus EUR 5 million to the plus EUR 10 million you mentioned before, so this plus EUR 15 million. And then we should have, let's say, the other EUR 25 million. So these, more or less, now should explain, let's say, how we get to be around EUR 300 million then as you said, at least EUR 300 million, but is it right that this is the theoretical bridge?

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Francesco C. Caltagirone, Cementir Holding N.V. - Chairman & CEO [17]

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Yes. This is the theoretical bridge. So from the moment, let's say, that probably you are fully aware that next year, especially coal, pet coke will cost less than this year. But frankly speaking, it's difficult to say that in 2021 and '22 the trend will continue with regard to this. And so we are, let me say, designing an industrial plan that has to be sustained by financial resources. So even internally, we have put, let's say, an average, let's say, not best or worse case, an average case where, let me say, the enhancement in energy cost that we will see next year probably if that will continue, let me say, with a slight growth will be absorbed. And so there will be a recovery of the coal price and the energy price during '21 and '22. And so let's say it's more or less in the 3-year period are neutral. This is what, let me say, I think.

Then we count more on ourselves that, let's say, if we use RDF instead of coal, if we use windmill, if we use waste heat recovery, we cut, let me say, the mix of the plant of electricity and the electricity, more or less, except for Turkey that is linked to U.S. dollar is more or less, let me say, flat in euro, so we don't consider a huge, let me say, spike or a downward revision in the price. Then it's also linked to -- or let me say, the revenues that are quite conservative because, let's say, all of us are aware that most of our perimeter, the things are going in the right way. We think that these trends should continue last year, but also, as you know, the trade dispute between China and U.S.A. and other, let me say, local political instability in some spot of the world, like also in Turkey, might, let me say, affect us. So this is our, let me say, normal view because for sure, if I give you the best case, probably it's much more than EUR 300 million where we think that we might arrive, but today it's just a forecast. So I am an industrial producer, I cannot forecast the unforecastable, let's say.

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Alessandro Tortora, Mediobanca - Banca di credito finanziario S.p.A., Research Division - Research Analyst [18]

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Okay. Okay. And clearly, as you said before, all these assumption are based on, let's say, CO2 price of around EUR 30 per ton?

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Francesco C. Caltagirone, Cementir Holding N.V. - Chairman & CEO [19]

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Exactly.

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Alessandro Tortora, Mediobanca - Banca di credito finanziario S.p.A., Research Division - Research Analyst [20]

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Okay. Okay. And the second point was on the free cash flow. Clearly, you said the EUR 370 million of free cash flow including the EUR 100 million green CapEx. You mentioned before that you may get some financing, let's say, green financing on a part of this EUR 100 million?

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Francesco C. Caltagirone, Cementir Holding N.V. - Chairman & CEO [21]

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Yes. Exactly. Our industrial free cash flow will be EUR 370 million. Then with our normal CapEx of EUR 70 million. Then up on it we, let me say, take out EUR 100 million of this, let me say, green investment and digitalization, so we go back to plus EUR 270 million. And for this reason, compared to EUR 245 million, we reach several tens of million of plus in 2022. This is the mathematical. Then up on it there might be a jackpot, let's say, of EUR 20 million, EUR 30 million that we can receive back from our investment. But today, there is visibility in the next 12, 18 months and this might enhance the net cash position of this EUR 20 million, EUR 30 million but at the end, let's say, we are talking about that we might see it end up. This considering also a flat dividend in continuity of last year because also this might affect the net financial position and also considering what I told you about the tax rate that, let me say, we've given you in Belgium and in Turkey. Today, in Turkey, we have, let me say, 0. Negative result is meaningless. But in Belgium, let me say, if you go 3 years ago was around 31%, next year will be 22%. So it's a huge enhancement.

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Alessandro Tortora, Mediobanca - Banca di credito finanziario S.p.A., Research Division - Research Analyst [22]

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Okay. And the last question was on the dividend policy. Clearly, you are commenting, let's say, a business plan. So looking at, let's say, the dividend policy, can you give out also a comment on it?

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Francesco C. Caltagirone, Cementir Holding N.V. - Chairman & CEO [23]

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As I already told in some Investor Day that with this industrial plan, let me say, but even with the older one, let's say, in a couple of years will be net of cash. So the dividend policy, last year, we had some one-off exceptional items that increased the net profit that in this year will not be, let me say, present. So I, let me say, this year, let's say, my suggestion to the assembly would be to keep the same dividend of last year even if the net profit will be lower because of this, let me say, one-off that will not be present. For the next year, let's say, as I said, if we don't have new M&A, if we don't have other things, probably we shouldn't answer because, let's say, the net profit should grow. So you can make your own calculation with the EBITDA around EUR 300 million with, let me say, the financial cost that should go closer to 0 with the net cash position active. And so for sure keeping this 20%, 25% that this is, let me say, is our guidance in terms of distribution. We can say that if the industrial plan will be fulfilled, there is a space, let me say, and there's no other, let me say, measure that I see today. I'm not studying any M&A and discarding opportunities that are arriving, let's say, as I said to your colleague before. So I think that these are the things remain as we are trying to picture out in this, let me say, industrial plan, the dividend should be aligned with the growth of the net profit.

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Operator [24]

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Your next question is from Tobias Woerner with MainFirst.

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Tobias Alfred Woerner, MainFirst Bank AG, Research Division - Research Analyst [25]

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Three questions, if I may, from my side. Number one, just with regard to the net debt, there's obviously a big swing from the third quarter to the full year number. Last year, you achieved a swing of EUR 85 million. If we assume the same one, you do get roughly to that level, but it's still a big swing. Maybe you can give us a little bit of color on that swing down to the target of 2019? Secondly can I just confirm, the Turkey guidance for the full year is a loss of minus EUR 5 million to minus EUR 6 million and then into next year a positive swing into EUR 4 million to EUR 5 million EBITDA on the positive side. And then just lastly, the energy bill, can you just provide us with the total energy bill split by fuel and electricity, please?

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Francesco C. Caltagirone, Cementir Holding N.V. - Chairman & CEO [26]

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This, let me say, is mainly seasonality because especially in the Nordics and in part also Turkey, during winter, let me say, you pile up. And so you spend cash for maintenance and for inventory, even of clinker. And then during, let me say, the good season, you release most of this. And this is the reason why usually we are, let me say, affected by this, let me say, mismatch, but this happen every year. It's not something special. So we think that also this year we will see that kind of, let me say, recovery that should bring us around, I would say, minus EUR 250 million. And this is probably the end-of-the-year target.

The other question is Turkey. Let me say this year should be around minus EUR 6 million, minus EUR 8 million and next year is at plus EUR 5 million.

On the energy bill, give me just 2 seconds. We have nearly EUR 200 million of energy bill, of which 40% is electricity and EUR 120 million is coal and fuel.

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Tobias Alfred Woerner, MainFirst Bank AG, Research Division - Research Analyst [27]

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And should one assume that by the end of the year, you should have used most of your fall bought coal so that the new prices will kick in for the whole energy bill into next year or will you have higher-priced coal still going into next year to a meaningful extent?

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Francesco C. Caltagirone, Cementir Holding N.V. - Chairman & CEO [28]

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No. I think that from plant to plant, we have plants that are already using in November new coal and the last one will be in January. So let me say that I think that from the start of the year because then there are some plant that are quite small compared to the other one. Let's say from the starting of the year, we should start to use the new coal.

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Tobias Alfred Woerner, MainFirst Bank AG, Research Division - Research Analyst [29]

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One more question. You target a reduction in terms of -- or increase in alternative fuel rate from 40% to 80% in Denmark, if I remember correctly.

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Francesco C. Caltagirone, Cementir Holding N.V. - Chairman & CEO [30]

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In Belgium. It's all in Belgium.

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Tobias Alfred Woerner, MainFirst Bank AG, Research Division - Research Analyst [31]

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In Belgium, sorry, in Belgium. I know 80% is feasible. It exists in the industry, but it's still a big jump so...

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Francesco C. Caltagirone, Cementir Holding N.V. - Chairman & CEO [32]

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There are some plants even close to us, Heidelberg, that in the past also reached 95%. Depends on the mix of the RDF. You have to consider that probably 5, 10 years ago, the RDF was, let me say, not so perfect as we can, let me say, we see different kind of, let me say, even the plastic content today is much more, let me say, trackable than what -- we see also the moisture because what affect the RDF is mainly the moisture, the content of water, and also the plastic content because this is the kilocalorie that you can have.

Today, let's say, that with the mix that we are using today in Belgium, we are confident that, let's say, we can reach from 40% to up to 80% with the same mix. So this is, let me say, the baseline of our investment in revamping that is about EUR 40 million just only on the plant, in the Belgium plant. So nearly half of the whole amount it is, let me say, on this revamping. And also going from 2 to 1 kiln, so we just close one, revamp the other one. And also we might also, but this will affect, let me say, very little. We might also increase the capacity of 5% to 6%, but that's an increase in capacity.

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Tobias Alfred Woerner, MainFirst Bank AG, Research Division - Research Analyst [33]

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Okay. And just last, just remind me what the alternative fuel rate is in Denmark.

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Francesco C. Caltagirone, Cementir Holding N.V. - Chairman & CEO [34]

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In Denmark today is 60% for the gray cement. Let's say that in Denmark, we have test, but this has been just tested a few months ago. We went for 10 days at 100%.

I think that also -- I don't know if you have other question. I would also add probably -- I forgot before that part of our strategy is also to put in place new products. And FUTURECEM that is a trademark and patent cement that will allow us to reduce, let's say, with a patent formula the clinker of nearly 30%. This cement, just because it's 5 years that we are working and we have patent a few years ago so we think we are well ahead other competitors, has been already used to build 2 bridges and 1 single building in Denmark. So it's not just a laboratory test but is something that has been used in the last 3 years. And we are expanding because, let's say, the return from, let me say, the customer is good and also, let's say, allow us to reduce, let me say, the clinker content in a new way.

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Operator [35]

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(Operator Instructions) Gentlemen, there are no more questions registered at this time.

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Francesco C. Caltagirone, Cementir Holding N.V. - Chairman & CEO [36]

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Okay. So it seems that there are no any more questions. Me and myself and Marco are happy to answer all your, let me say, answer your doubts and will also explain. And we are also ready in the near future if you have other, let me say, question to answer and to let you understand better the industrial plan. So thank you for the time being. Thank you for your interest. Bye-bye.

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Marco Maria Bianconi, Cementir Holding N.V. - Corporate Development, M&A and Business Integration Director [37]

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Bye-bye. Thank you.

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Operator [38]

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