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Edited Transcript of VCT.PA earnings conference call or presentation 20-Feb-19 2:00pm GMT

Full Year 2018 Vicat SA Earnings Call

Feb 22, 2019 (Thomson StreetEvents) -- Edited Transcript of Vicat SA earnings conference call or presentation Wednesday, February 20, 2019 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Guy Sidos

Vicat SA - Chairman of the Board & CEO

* Hugues Chomel

Vicat SA - CFO

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Conference Call Participants

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* Brijesh Kumar Siya

HSBC, Research Division - Analyst

* Gwendolyn Foster

* Manish Beria

Societe Generale Cross Asset Research - Equity Analyst

* Michael Frederick Betts

Data Based Analysis Limited - Director

* Sofia Ferreira Sotto-Mayor

Exane BNP Paribas, 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 day, and welcome to the Vicat Group 2018 Full Year Results Call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Mr. Guy Sidos. Please go ahead, sir.

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Guy Sidos, Vicat SA - Chairman of the Board & CEO [2]

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Thank you, Kevin. Good afternoon. Welcome to the presentation of the Vicat's 2018 results. I'm Guy Sidos, the Chairman and CEO of the Vicat Group. With me is Hugues Chomel, Vicat's CFO.

On Slide 2. This slide contains a disclaimer. It draws your attention to the fact that in this presentation, statements relating to 2019 and assessment of trends, expectations in the group's various market and that it should not in any circumstances be regarded as forecast.

Let's move to Slide 3. The presentation has 5 sections. I will start by looking at the highlights of 2018, and I will present the group's financial results to you. Hugues Chomel will then take over for the analysis of our performance in each region and the main balance sheet and cash flow items. I will finish by looking at expected trends in the current year.

In terms of the preliminary comment, Vicat delivered a satisfying performance in 2018 in a very mixed operating environment that saw large seasonal variations. The dynamism of the group's sales team combined with a very firm grip on cost allowed us to limit the consequences of the monetary and geopolitical difficulties in some of the markets. Our solid free cash flow allowed us to reduce the pressure and we had undertaken to do and to resume our targeted acquisition strategy with the purchase of Ciplan in Brazil.

Let's move to Slide 4. In 2018, Vicat achieved strong sales growth with an increase of 5.9% like-for-like. EBITDA was EUR 435 million, up 2.7% like-for-like. Free cash flow amounted to EUR 167 million in 2018. Our priority remains reaping the benefit of our past investments. Gearing is now at 27.8% and the leverage ratio is 1.59. The Board of Directors is confident that the group's -- in the group's ability to generate profitable growth, and so has decided to a propose an uncharged dividend payment of EUR 1.50 per share to shareholders at the group's Annual General Meeting due to be held next April 11.

Move to Slide 5, and let us now look at the results on Slide 6. The Vicat group's consolidated sales in the 2018 financial year came to EUR 2.58 billion, representing an increase of 0.7% on a reported basis or 5.9% like-for-like. The negative currency effect on consolidated sales were almost EUR 138 million. The group's consolidated EBITDA fell 2.2% on a reported basis to EUR 435 million but rose 2.7% like-for-like. On that basis, EBITDA margin on consolidated sales was 16.8%. The rise in the euro against all the group's other currencies dragged down EBITDA by EUR 22 million. That impact was particularly large in Turkey and India. Consolidated EBIT came to EUR 249 million, up 0.8% year-on-year and up 5.9% like-for-like. EBIT margin was 9.7% in 2018.

Net financial expense improved sharply by EUR 8.9 million and amounted to EUR 19.3 million.

Tax expense rose by EUR 13.5 million, and so net income, group share was up 6.3% at exchange rate or 12% like-for-like. On the basis of net income, group share, earnings per share amounted to EUR 3.37 per share in 2018 versus EUR 3.17 per share in 2017.

On Slide 7 now. This slide shows the factors that drove the change in EBITDA between 2017 and 2018. You can see the extent to which the group was able to take advantage of higher prices in its main markets to improve its financial performance, but also that EBITDA was badly affected by the significant increase in variable costs, resulting, in particular from higher energy cost and a deterioration in operating conditions in Egypt and Senegal.

Let's move to Slide 8. I will now hand over to Hugues Chomel for the analysis by geographical region.

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Hugues Chomel, Vicat SA - CFO [3]

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Thank you, Mr. Sidos. Good afternoon, everyone. I will start this presentation by our main market trends. In 2018, the gradual upturn in the French market continued, supported by a more favorable macroeconomic and sector environment and at the start of the year, milder weather conditions than in 2017. The infrastructure, industrial and commercial markets, comfortably offset a slight contraction in the residential markets. The group performance improved with sales rising 6.6% and EBITDA growing 14.4% despite higher energy cost. This reflects an improvement in selling prices, particularly in concrete and improved operation condition.

In the Cement business, operational sales rose 4.8% in 2018. This growth came on the back of an increase in volumes. Price rose slightly in the domestic market and more substantially in export markets. As a result, and given higher energy costs, EBITDA rose 3.3% over the year as a whole. EBITDA margin on operational sales was therefore almost unchanged in 2018.

In the Concrete & Aggregates business, operational sales rose by 4.6%. The strategy adopted by the group with the aim of restoring the profitability of the concrete business through a selective sales approach resulted in a significant increase in selling prices that comfortably offset a decline in volumes. In aggregates, volumes rose again in a positive price environment. As a result of these factors, EBITDA generated by this business in France doubled compared with 2017 and EBITDA margin on operational sales was up 320 basis points.

In Other Products & Services business, operational sales rose 9.8%.

Let's move to Slide 10 for a presentation of our results of Europe, excluding France. In 2018, the region saw a slowdown in Switzerland following the absence of major projects that had strongly supported business levels in previous years, particularly in the region in which the group operates. In Italy, after business level had been badly affected by a difficult macroeconomic and sector context for a long time, 2018 brought an upturn in the construction sector.

In Switzerland, consolidated sales came to EUR 375 million, down 3.4%. EBITDA amounted to EUR 84 million in 2018, down 5.6%. EBITDA margin on consolidated sales fell 70 basis points in 2018.

In the Cement business, operating sales fell by 3.1%. The decline was due to the absence of major projects in 2018, which had given a boost in the group business levels in previous years. On the plus side, after a long period of pressure on selling prices starting in late 2015, the competitive environment gradually improved in 2018, resulting in higher selling prices. On that basis, and against a background of rising energy costs, EBITDA fell 3.8% over the full year. EBITDA margin on operational sales was almost stable.

In the Concrete & Aggregates business, operational sales moved 2.8% lower at constant scope and exchange rate. The decline was, again, caused by the lower number of major projects, which led to a contraction in volumes in both Concrete and Aggregates. With regard to selling prices, after several years of significant competitive pressure, 2018 saw them stabilize and then improve gradually, particularly in concrete business. As a result, selling prices were higher over the year as a whole. Against that backdrop, EBITDA was up 9%, and EBITDA margin on operational sales rose by 170 basis points.

The Precast business saw a 4.3% decline in operational sales and EBITDA fell substantially.

In Italy, after several difficult years, the market trend improved significantly starting in the second quarter of 2018, and the group posted a 20% increase in consolidated sales over the year as a whole, supported by an increase in volumes and higher selling prices related in particular to an improvement in the product mix. EBITDA grew 33% and EBITDA margin was 170 basis points in 2018.

Let's move to Slide 11 regarding the analysis for United States. In the United States, macroeconomic and sector improvement continued in 2018, particularly in the groups where the group operates, although there was some variation because of exceptional events, such as rainfalls and wildfires in California. The group activities improved in all businesses in 2018, with consolidated sales up 7.4% like-for-like. EBITDA grew 24.9%. EBITDA margins on consolidated sales rose by 240 basis points. 2018 EBITDA includes EUR 10.6 million received as a settlement of a legal dispute relating to loss of business arising in the U.S. Cement business before 2018. Excluding that item, the group's EBITDA in United States would have risen 6.8% at constant scope and exchange rate and EBITDA margin would have been almost unchanged.

In the Cement business, operational sales grew 9%. Volumes rose supported by a strong growth in Southeast region, whereas they fell slightly in California because of certain adverse factors relating mainly to weather conditions and wildfires in August and November. Selling prices rose significantly again, particularly in California. EBITDA in the Cement business rose by 30%, with EBITDA margin on operational sales rising by 520 basis points. Excluding the settlement payment, EBITDA was up 10.8% like-for-like, and EBITDA margin on operational sales rose by 20 basis points.

In the Concrete business, operational sales increased by 3.3%, however, volume fell. The slight increase in the Southeast region, despite highly adverse weather conditions in the fourth quarter, failed to offset the decline in California. Selling prices rose in both regions, but more significantly in California than in Southeast. EBITDA in the Concrete business was down 44% because of higher costs, particularly raw material and transport costs, and a sharp decline in efficiency caused by bad weather and wildfire in the second half of the year.

Please move to Slide 12 for the analysis regarding Asia. In Asia, the situation varied considerably between countries and between the first and second half of the year. In Turkey, after a particularly strong first half because of the favorable weather condition and the positive sector environment, the sharp devaluation of the Turkish lira in the third quarter caused macroeconomic and sector trends to go sharply into reverse. Therefore, in the region as a whole, sales totaled EUR 165 million, up 6.1%. Given the new environment and against a background of sharply rising operating cost, EBITDA generated in Turkey in 2018 amounted to EUR 22 million, down 17.9% like-for-like, with EBITDA margin on consolidated sales of 13.3% down from 17.2% in 2017.

In the Cement business, the group recorded an increase in its full year operational sales of 8.8%. However, the sharp devaluation of the lira meant that operational sales were down 21.3% on a reported basis. After volume rose in the first half of the year, they fell almost 22% in the second, some resulting in a decline over the year as a whole. Selling prices rose sharply, but not enough at this stage to offset rapid inflation in production costs. As a result, EBITDA in the business posted a decrease of 19%, with EBITDA margin on operational sales down almost 6 percentage points over the full year.

Operational sales in the Concrete & Aggregates business rose by 2.9%. As in the Cement business, the impact of devaluation was felt in the third quarter and was more severe in the fourth quarter. Volumes contracted in Concrete and Aggregates. Average selling prices rose substantially in both Concrete and Aggregates, offsetting the impact of lower volume and higher cost. As a result, EBITDA rose 23.8% with a slight increase in EBITDA margin.

In India, 2018 saw a very sharp upturn in cement consumption driven in particular by renewed work on major infrastructure projects. Against this background, the group posted consolidated sales of EUR 336 million, up 17.9%. That growth resulted in an increase in volumes, which rose more than 20% to almost 6.6 million tonnes. However, competitive environment remained tough, causing average selling prices to decline in 2018. As a result of these factors and rapid inflation in production cost, the group's EBITDA in India fell 13.1%. EBITDA margin declined to 15.4%.

In Kazakhstan, supported by its particularly efficient production facility, the group performed well in a dynamic market supported by exports. Consolidated sales came to EUR 63 million, up 37.5%. This good operating performance was driven by an increase in volume along with a further improvement in selling prices over 2018 as a whole. As a result, EBITDA generated grew sharply by 65 -- 69% and EBITDA margin improved substantially, rising to 37% in 2018.

Please move to Slide 13 of the analysis regarding Africa and Middle East. The region suffered from a very sharp fall in activity in Egypt, caused by security conditions. In Egypt, consolidated sales came to EUR 38 million in 2018, down 38%. That contraction resulted from a near 48% drop in volumes during the year because of a plant shutdown and the halt of sales during March and April, linked to the military operations in Sinai, along with the slowdown in the Egypt construction market as a result of the downturn in the country's economy. Average selling prices rose substantially over 2018 as a whole, but the increase was not sufficient to make up for the very rapid cost inflation caused by devaluation and deteriorating operating conditions, particularly in logistics. In those circumstances, the group recorded, in Egypt, a EUR 10.8 million loss at EBITDA level.

In West Africa, consolidated sales totaled EUR 235 million, up 4.1%. That performance resulted from growth in the Cement & Aggregates business in Senegal, which offset declines in Mali and Mauritania. Cement volumes in the region as a whole fell slightly, while Aggregates volumes increased. Selling prices in the Cement business in Senegal were limited by regulatory constraints in the run-up to elections. Price in Aggregates increased, however, cement prices decreased in Mali. As a result of these factors, along with rapid inflation in production costs and the deterioration in the cement operating conditions in Senegal, EBITDA fell 18%.

I will now look at the balance sheet and cash flow statement. Please move to Slide 15. The group generated cash flow from our operation of EUR 338 million during 2018 compared with EUR 346 million during 2017, representing a decrease of 2.3% on a reported basis but an increase of 3% like-for-like. Vicat's capital expenditures amounted to EUR 188 million in 2018 compared to EUR 187 million in '17. Financial investment during 2018 amounted to EUR 52 million versus EUR 29 million in 2017. The group generated free cash flow of EUR 167 million in 2018 as opposed to EUR 179 million in '17.

Please turn to Slide 16. At December 31, 2018, the group had a very solid financial position. Net debt ended the year at EUR 692 million, down EUR 95 million from previous year. Consolidated equity rose by EUR 83 million in 2018 and ended the year at around EUR 2.5 billion. The increase includes EUR 67 million of after-tax disposal proceeds resulting from the capital reduction carried out by SOPARFI, a shareholder of Vicat SA and a negative currency effect of EUR 51 million. On that basis, there was an improvement in the group's gearing to 27.8% and leverage ratio to 1.59x.

Please turn to Slide 17. I would now like to draw your attention to the application of IFRS 16 regarding lease contracts at January 1, 2019. Following that rule, leases will be treated as acquisition of an asset and financing arrangement. The estimated impact on the financial statements will therefore be laid out as on the slide. On the income statement, this would trigger an increase in EBITDA, an increase of depreciation and interest expense, but very likely little impact on net income. On the balance sheet, that should be an increase on net current assets and an increase on financial debt. If you look at the tables on the slide, on the left, you have the balance sheet with an impact of plus EUR 220 million on the noncurrent assets and an impact of EUR 240 million on financial debt. On the income statement is an increase of EUR 58 million on EBITDA, a slight increase of EUR 6 million on EBIT after the increase of depreciation, an increase of financial expense of EUR 9 million and a limited impact on the net result.

To note, Vicat pro forma 2018 financial statement integrating the full set of impact related to the application of IFRS 16 will be published at a later date after they have been audited by the group's statutory auditors.

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Guy Sidos, Vicat SA - Chairman of the Board & CEO [4]

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Thank you, Hugues. I will now finish by looking at the current year. Let's now move to Slide 19. This slide is about our recent acquisition of Ciplan in Brazil. We acquired a majority shareholding in Ciplan, January 21. This deal took place through a reserved capital increase of EUR 295 million, which were used to repay most of Ciplan's existing debt. Ciplan's net debt after the capital increase is around EUR 75 million. Estimated figures, not yet audited, show that Ciplan's 2018 sales amounted to around EUR 140 million, with more than 2 million tonnes of cement sold, around 2 million tonnes of Aggregates and 420,000 cubic meters of Concrete delivered. 2018 EBITDA was estimated to be around EUR 24 million.

Ciplan operates a modern cement plant close to Brasilia, with annual capacity to produce 3.2 million tonnes of Cement and has large amounts of high-quality mineral reserves. The company also has a network of 9 Ready-Mixed Concrete production units and 5 quarries, including 12 [reserve] quarries.

Through this acquisition, we are pursuing the group's strategy of selective acquisitions and geographical diversification, while establishing Vicat in a new emerging market with a strong growth outlook. We'll be able to capture the full potential of the Brazilian market's prospective growth, leveraging highly efficient initial asset base, high brand recognition, abundant quarry reserves and strong competitive positions in local markets.

On Slide 20, I will let you read this short paragraph, which summarizes our prospects for the current year. I will remind you that the detail of the outlook by geographical region are in our press release.

In 2019, the macroeconomic context is likely to include broadly firm economic growth, although certain emerging market regions will continue to face an uncertain political and sector environment. The group expects wide seasonal variations in 2019. Against these background, the group's main aim is to improve its operational profitability by implementing a proactive but balanced commercial policy, focusing on increasing volumes sold, rising selling prices where the competitive situation permits and continuing its policy of optimizing production costs.

Move to Slide 21. Thank you for attention. Mr. Chomel and I will now be happy to answer your questions. Kevin, can we now move on to questions?

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Questions and Answers

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Operator [1]

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(Operator Instructions) We will now take our first question from Sofia Sotto-Mayor of BNP Paribas.

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Sofia Ferreira Sotto-Mayor, Exane BNP Paribas, Research Division - Research Analyst [2]

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Three questions from my side. This first one is on your outlook for 2019. Consensus for EBITDA like-for-like growth is around 36%. Would you be able to comment on your expectation for 2019 or not yet?

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Guy Sidos, Vicat SA - Chairman of the Board & CEO [3]

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This is Guy Sidos talking. So on your first question, well, we don't do any comment on consensus and on the EBITDA growth. I remind you that we will probably have some high seasonal effect as usual in our businesses, and we expect a good trend. But we don't go with the detailed comments on EBITDA, but we -- the group is aiming to improve EBITDA.

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Sofia Ferreira Sotto-Mayor, Exane BNP Paribas, Research Division - Research Analyst [4]

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Okay. And second question is regarding the U.S. What level of price increases do you expect to pass on in California and Southeast for 2019 and whether price increases throughout 2018 stuck?

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Guy Sidos, Vicat SA - Chairman of the Board & CEO [5]

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Guy Sidos again. We -- in the U.S., we should see price rises in April, and we will try to pass an increase of between $5 and $10, as we did in 2018.

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Sofia Ferreira Sotto-Mayor, Exane BNP Paribas, Research Division - Research Analyst [6]

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Successfully? Okay. And third question is on the magnitude of the volume declines that you expect in Turkey and where you see EBITDA margins for 2019? And whether or not you have a contingency plan for the year ahead?

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Guy Sidos, Vicat SA - Chairman of the Board & CEO [7]

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This is Guy Sidos again. First, the market is stabilizing at around 70% of its level of a year ago, I mean, first half of 2018. Right now, pressures are rising but not fast enough at this stage to offset increases in cost. I will not comment anymore on EBITDA decline or level, but keep in mind that this is a market that have seen crisis in the past, but we have high-quality production facilities that allow us to remain competitive even at the bottom of the sector.

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Sofia Ferreira Sotto-Mayor, Exane BNP Paribas, Research Division - Research Analyst [8]

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Just one more question. You mentioned improvement in product mix in Italy. Could you give a bit more detail on that?

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Hugues Chomel, Vicat SA - CFO [9]

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Yes. An important factor is that Italian subsidiary is now selling more cement plant in the -- on behalf of Vicat France, which has a substantially higher selling price.

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Operator [10]

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We will now take our next question from Manish Beria of Societe Generale.

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Manish Beria, Societe Generale Cross Asset Research - Equity Analyst [11]

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So I have 2 questions. The first one is on your outlook that you have given for the EBITDA, like operational improvement. So I just wanted to check, what do you mean by operational improvement exactly? Is it EBITDA improving on the absolute basis or you're also thinking of improving your margins, EBITDA margins, in 2019? The second one was on like India. So how do you see the pricing progressing next year? So obviously volumes are very good. But do you see pricing coming back next year? And hence, a margin improvement there? And lastly also a comment on Egypt. So due to the new capacity from the Army, do you see more competition in Egypt, like less pricing versus the cost increase, so still no improvement in profits or EBITDA there?

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Guy Sidos, Vicat SA - Chairman of the Board & CEO [12]

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Guy Sidos again. Your first question is about the meaning of the outlook we gave on EBITDA. So that mean it's an improvement in the absolute number, but also an improvement in our EBITDA ratio, EBITDA to sale ratio. In India, price is an issue, and we saw a good move in the right direction this month in February. So it should -- I believe, for me, it will stick, and it will improve for sure our margins. Your third question was about Egypt and new capacity from Army that creates an overcapacity situation. It means that market will stay tough this year. But this market has a high potential locally. There is a big demand, and the large projects for construction, and the whole area will also be in demand for cement. So I believe a part of this overcapacity will be drained through exports.

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Manish Beria, Societe Generale Cross Asset Research - Equity Analyst [13]

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Okay. Just to come back on your first point, so you said about margin improving, I mean, you also see the margin improving. So can I check, I mean, which region you think margin will improve? Obviously, you talked Egypt will be tough but India improving, but also other region like what happens to West Africa and Senegal or maybe in France, how do you see it or Switzerland? So all of these markets, where do you see the margin improving probably? And where do you see margin declining? And also comment on the electricity prices that has been rising in the Europe. So do you see, I mean, margin can improve despite so much hike in electricity prices? Or are you have -- do you have hedge position there in the electricity in Europe?

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Guy Sidos, Vicat SA - Chairman of the Board & CEO [14]

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You have a lot of points. Keep in mind that our business is all about increasing volume, increasing prices and lowering cost. Saying that, we'll have probably a tough situation in Egypt and in Turkey versus what we knew from the past, but a good alignment of permits elsewhere. So I don't quantify the increase in ratio of EBITDA or in absolute number of EBITDA, but the trend will be positive globally. One specific question was about electricity, so we have the policy for forging that will help to minimize the increase in price. But keep in mind that in France, we have a cap on price of electricity, and we'll be protected with that. So we see positive trend globally.

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Operator [15]

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We will now take our next question from Brijesh Siya from HSBC.

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Brijesh Kumar Siya, HSBC, Research Division - Analyst [16]

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So I have 2 questions. One is on the fuel. So you have kind of guided the first half fuel will be still rising and second half, you'll see a decline and the reason cited there is hedging. So given that -- one of your competitor yesterday came out with a 2% decline essentially for 2019. If it is possible, if you can just flesh out little more how you think, where you think there is an increase in fuel cost and hence, a flattish to slight increase that you're guiding? And the second one is on the price rise in India. If I can just go in little more detail and ask you what was the magnitude of the price rise you effected in -- earlier this year, and how do you see that panning out? Where it's sticking in or how the reaction from the customer side? And probably on the third is on the outlook, I mean, as already got a lot many questions on that. Just got 1 last question on that is, this year's EBITDA outturn does include a EUR 10.8 million gain from insurance claim in the U.S. So excluding that, the number comes around EUR 424 million. So are you talking about an improvement from EUR 435 million or are you considering EUR 425 million as a base?

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Operator [17]

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We will take our next question from...

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Guy Sidos, Vicat SA - Chairman of the Board & CEO [18]

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No, no. Just -- I want to answer this one, if I may. I'm Guy Sidos again. You asked me 3 different questions. I will answer to the price rise in India question. To your last question about improvement versus which number, and I will let Hugues Chomel talking about the dynamic of the fuel price this year. So, but price rise in India, we are in the South India. And what I can say is that we had a double-digit increase this month, but it could be very volatile. So as far as utilize is good, I think it's going to be restricted, but it can be very volatile. Also your question about that EUR 10.8 million in U.S. an improvement, we're expect for next year that I confirm the improvement will be from EUR 435 million figure. And last question about fuel price.

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Hugues Chomel, Vicat SA - CFO [19]

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Yes. Just as a reminder, the energy bill globally fuel plus electricity is around a little bit above EUR 300 million in 2018 for the group. We, and as you rightly pointed out, we point out to an increase in the first part of the year regarding given inventory and hedging strategy, and we would beneficiate from a decrease in prices as we go into the second half and more likely into the last quarter. So all in all, we expect, excluding volume and Brazil, we expect an increase of about 5%, but I would like as well to remind you that it is our strategy to continue to develop substitute fuels as we have been doing for decades. And we will continue to do so very strongly, trying to eliminate the fuels...

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Guy Sidos, Vicat SA - Chairman of the Board & CEO [20]

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Noble.

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Hugues Chomel, Vicat SA - CFO [21]

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Noble fuels in France and Switzerland in the coming year.

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Brijesh Kumar Siya, HSBC, Research Division - Analyst [22]

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Just to come back on their Energy Bill and your guidance for -- around increase of 5%, so what is the kind of number of months you hedge? So is it for 3 months or 6-month of hedging policy you apply?

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Hugues Chomel, Vicat SA - CFO [23]

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It is beyond 6 months between inventories and forwards.

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Operator [24]

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We will now take our next question from Yassine Touahri of On Field.

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Yassine Touahri, On Field Investment Research LLP - Founding Partner [25]

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I would have 3 questions. First, what is your long-term strategy in Brazil? Do you see scope for more consolidation in the country? And what sort of hedge ratio would you be comfortable? And the second question is on West Africa. Since your outlook, you are mentioning that you would expect selling prices to increase sharply. What kind of overall relative price increase do you expect? And what has changed in the interest [long state] for you to be able to reach the confidence? And then my last question is on energy. I think you have -- can you just give us a bit of color for 2019? Could you tell us what happened in 2018, so last year? What kind of energy inflation did you face?

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Guy Sidos, Vicat SA - Chairman of the Board & CEO [26]

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Yes. Yassine, this is Guy Sidos. So our long-term strategy in Brazil, at first, we'll make profit with our acquisition. We -- this is our first move in a new place in the Latin America, so it is a big one. I mean, it's 2.2 million tonne cement, large aggregate facility and ready mix, 900 people. We'll consolidate first our (inaudible). We have 1 million tonne capacity to resell on top of what was sold last year, so we have a lot to do over there. So our future there can be seen in our global strategy, which is to do one step at a time and we look at the growth a bit later. Your second question was about West Africa and the selling price. We expect to wait for political reasons. We were not able last year to balance with selling price the rise in cost linked with the cost of fuels. So we expect, at least, in the second -- well, in the first half, but we will not have the same political pressure and any static pressure this year after the presidential elections. About energy cost dynamic in 2018, I will hand over to Hugues Chomel.

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Hugues Chomel, Vicat SA - CFO [27]

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Thank you. So as mentioned previously, the global bill is around EUR 310 million. All in all, the increase was somewhat above 5% from year-on-year between '17 and '18, including price mix, energy efficiency and FX.

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Operator [28]

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We will now take our next question from Mike Betts of Data Based Analysis.

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Michael Frederick Betts, Data Based Analysis Limited - Director [29]

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I just have 2 questions, please, if I may. First one, could I return to the India pricing, the much better news there, the double-digit price increases in February and ask you what do you think is the change that's allowing you to do this? Has there been validation in the region? Or is capacity utilization at such a level where it's now possible? Or are our competitors losing money? Just maybe a view as to why having had a very difficult period in India for pricing, the situation seems to be changing? And then the second question is on overhead costs. Most of the large global cement companies have just -- are now implementing further reductions in their overhead costs. I mean, for Vicat, are you doing the same? And I'm not sure I know what the SG&A is as a percentage of sales for Vicat. So if you're willing, maybe you could let me know that as well?

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Guy Sidos, Vicat SA - Chairman of the Board & CEO [30]

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And so 3 quick questions, just 2 in 1, India pricing in February. I believe that the main figure -- main figures are utilization rate, which raised and cost inflation. At some point, you have to balance the cost inflation. And when the utilization rate raises, you're able to raise prices so that's very simple, and I believe that's a good reason for that to stick. About overhead cost, we -- I would say we are quite lean on cost, and we keep this policy alive, and we don't have a big move to do on that as far as we don't increase overhead cost that much, and we try to stay as lean as we can.

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Michael Frederick Betts, Data Based Analysis Limited - Director [31]

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Okay. If I could just follow-up, please, on India. Capacity utilization in your markets, what -- are we now 80%, 85% there? And I'm just trying to wonder where you roughly are in the capacity utilization rates in India, where it is in your locations?

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Guy Sidos, Vicat SA - Chairman of the Board & CEO [32]

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Yes. Market reserve in our market, which is South India plus Maharashtra, we believe our utilization rate is around 75%, and our utilization rate closer to 85%.

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Operator [33]

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(Operator Instructions) We will now take our next question from Gwen Foster, Guardian Life Insurance.

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Gwendolyn Foster, [34]

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I had some questions on Page 10 of the presentation, specifically related to Switzerland. It looks like in the second bullet point on the left column, that sales were down and EBITDA down to EUR 84 million. And so is that EUR 84 million a representative of Switzerland's EBITDA and therefore, that the total of Europe, excluding France, at EUR 87 million of EBITDA? That's -- so total it represents almost 100% of that? Or am I misinterpreting that bullet point?

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Hugues Chomel, Vicat SA - CFO [35]

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Yes. You are reading it perfectly right. I mean, Switzerland is the most part of this area, and we have indeed a fairly small operation in Italy.

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Gwendolyn Foster, [36]

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Okay. So it's really just Switzerland really just composes this region?

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Hugues Chomel, Vicat SA - CFO [37]

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Yes, indeed.

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Gwendolyn Foster, [38]

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Okay. And then my -- yes, and then -- so my question is, do you have any kind of a view on what infrastructure project spend is going to be like in the future with Switzerland? Whether there is kind of an anomaly in 2018, a pause that will pick up again? Or just any view?

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Guy Sidos, Vicat SA - Chairman of the Board & CEO [39]

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Well, market in Switzerland on infrastructures, they are very, I would say, slow to move. So I don't see any -- in fact, any quick change right now. We still have the real market, but the project will come. And as far as they will have mountain to dig in, in Switzerland, good -- markets will come back. But it takes some time to start them.

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Gwendolyn Foster, [40]

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Fair enough. Do -- I mean, do you -- with LafargeHolcim having moved their headquarters in Switzerland, do you see them becoming more aggressive in that market?

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Guy Sidos, Vicat SA - Chairman of the Board & CEO [41]

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Well, that's the question to ask them. I cannot ask for them, but I don't see them being more aggressive than they are now. But they may...

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Gwendolyn Foster, [42]

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Yes. I wondered if you had observed that at all.

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Guy Sidos, Vicat SA - Chairman of the Board & CEO [43]

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No more, no less than before. But yes, that's a question for them.

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Operator [44]

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We will now take our final question from Manish Beria of Societe Generale.

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Manish Beria, Societe Generale Cross Asset Research - Equity Analyst [45]

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So this is just a follow-up. So on India, you said the price rose by double digits. So I just wanted to check, is this sequential price increase or Y-o-Y price increase? This is the first one. And also on the CapEx, I see you have spent little bit lesser on the CapEx side, less than EUR 200 million that you have been guiding before. So will there be some deferral of CapEx in 2019 and '20? So can you just please guide me basically what should be the CapEx number to put on 2019 and 2020?

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Guy Sidos, Vicat SA - Chairman of the Board & CEO [46]

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Yes. About price increase at second, it is what it was last month, earlier last month. And about CapEx, it's -- you can -- it's plus or minus the same number for this year than the last year, plus or minus. So you can read this number, and we try to -- with this level of EBITDA and cash, we try to cap it to this number. Part of it is maintenance CapEx and then additional project to -- for it quite as the future. But this number will be -- keep for the future, next future.

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Manish Beria, Societe Generale Cross Asset Research - Equity Analyst [47]

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Okay. And also in India, like just to come back, so you said price increase month-to-month, but how does the price looks like Y-o-Y? Does it still a positive number or just flat or -- so any comment there?

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Guy Sidos, Vicat SA - Chairman of the Board & CEO [48]

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Yes, it's -- on a year-on-year comparison, it's still a little bit less. They are less, but let things stabilize, and we'll have a better view on it.

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Operator [49]

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There are no further questions at this time. I would like to turn the call over to Mr. Guy Sidos for any additional or closing remarks.

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Guy Sidos, Vicat SA - Chairman of the Board & CEO [50]

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Yes. I want to thank you all for attending this conference. That's all for today. Thank you very much for your interest in the Vicat group. (foreign language).

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Hugues Chomel, Vicat SA - CFO [51]

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(foreign language)

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Operator [52]

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Ladies and gentlemen, this conclude today's conference call. Thank you for your participation. You may now disconnect.