Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Buzzi Unicem first half 2022 results conference call. As a reminder, all participants are in listen only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, please signal an operator by pressing star and zero on your telephone. 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. Hello. Thank you. Welcome to our semiannual conference call, where we are going to illustrate as quickly as possible our first half results, which have been disclosed and published two years ago. Two hours ago, sorry, approximately. Well, you have seen that the first half showed a fairly stable result across the consolidation area. We enjoyed in the first half overall a fairly stable demand in most of the regions, somewhere as usual better, somewhere worse. But overall demand was fairly stable. This, regardless the high inflation environment and a lot of uncertainties and challenges related to the geopolitical tension, particularly in Eastern Europe. We also enjoyed during the semester some very significant and sequential price increases, which were the only way actually to somehow offset the production cost spike, which unfortunately we faced across again all countries, some were much more, some were less. This was quite general. Price increases were particularly strong in Italy, Eastern Europe, and also USA. If you look at the margins, at the let's say price over cost, we were able to almost, I would say, offset the cost inflation in absolute terms. Clearly also due to the fact that prices have changed so significantly during the semester, the EBITDA margin went down quite significantly from approximately 22% last year to something above 19% this year. 250 basis points down. The net sales growth, which was meaningful, as I said, in all regions, did not really translate into higher profitability. We were able to more or less stabilize the cost inflation. It was really impossible to maintain the same level of, let's say, operating profitability. The net cash position by the end of the semester is positive, as it was last year. Net financial position is positive as it was last year, end of 2021. It improved some versus end of March, but it's still lower versus the end of 2021, mainly due to the, let's say, working capital trends, which have been quite unfavorable in a sense. The share buyback and the dividend payment which they all occurred during the first six months. Following the results that we were able to achieve during the first quarter, we also revised the guidance for the full year, and we now expect our recurring EBITDA to be at the level which we describe as similar to 2021. What does it mean exactly? Well, it's not so easy to tell, but let's say something closer, which could be something more or something less according to what is going to happen, many different variables during the next six months. Looking now at page three of the presentation that should be already available to you. Here we are showing the volume variance during the semester. We are down in cement by approximately 4%. Positive development in Central Europe and USA. Negative, quite negative in Italy, unfortunately, following a second quarter, which was very difficult. In Eastern Europe, also negative, but with of course, a mix quite different between the European Union countries and the Ukraine and Russia and Eastern European countries, particularly Ukraine, are mostly affected by the conflict and difficult environment to produce and sell. Ready-mix volumes are somewhat flatter, more similar to last year. Again, Central Europe up. Eastern Europe flat. USA as opposed to cement down also due to difficulties in our distribution, let's say, staff, truck drivers, difficulties to really find people to deliver concrete to the customer. Italy suffering, I think, cement or a little less than in cement due to our involvement in some of the infrastructure works that continue to move on and concrete production devoted to those was able to continue. On the following page, we give you an idea about the energy cost impact during the semester. It's important to mention here that we are excluding Russia, so all items all different periods that you see in the graph are consistent. We took out Russia across the entire let's say timeline. Why? Because basically we don't have this information anymore. We are receiving information from the Russian business, but the information that we receive is strictly, let's say, purely financial and only the one or the kind of information that we need to complete the consolidation process and prepare the financial statements. But we do not have, let's say, any more available details like the one that we would need to complete this graph and this calculation appropriately. That said, you see how things change in terms of cost of energy and, let's say, weight of the energy cost on our total revenues. This is, of course, the highest level ever. Even if we would go, of course, to the left of the graph, we could never find something similar. On the right side, you can see that most of the pressure or the majority of the pressure is coming from the power cost. The electrical energy cost is showing definitely greater inflation rate than fuel. Also fuel has been going up quite significantly. As you know, as far as fuel is concerned, we are in several countries. We do have some kind of natural edge associated with the use of alternative fuel, which we do not have in terms of power. In a sense that power is power. Of course, we do have some countries where the cost of power has been hedged, but not so frequently and it's not been so common. We are mostly buying at the spot price, which has been dramatically worsening in the last few months. If we move to the following page, the variance analysis of the EBITDA, the so-called EBITDA bridge, you can see that we start from EUR 352 million last year. Volume impact weighs for about -EUR 20 million. Prices, a very significant improvement, EUR 217 million. Unfortunately, almost fully offset or fully offset if you consider the volumes by the trend of variable cost and fixed cost. The issue is really more the variable cost, and in particular, let's say, the material, fuel and power. At the end, let's say, the price recovery has been very significant, but necessary in a sense to be able, again, to offset this strong rise, this very high cost pressure that we've been facing and we are still facing. Other items are not changing much. They don't have a very major impact on the EBITDA variance. We do have an important, I would say, foreign exchange effect of EUR 90 million coming mainly from the dollar, and Also the ruble and other, let's say, less important currencies showed a revaluation against the euro during this first semester. Another point that is worth mentioning is not a difference versus last year, as you can see. I'm talking about the CO2. It's important to remember that CO2 cost, according to the way we are accounting for the CO2 allowances and, in let's say, free allowances that we have to buy and surrender, let's say, at the end of the period, are not still visible in the first half. Because we are still, let's say, using the allowances that were granted for free at the beginning of the year. However, these allowances, as you all know, are not enough to cover our needs for the full year. When we will enter, let's say, into a so-called short position, we will start to have also a visible, let's say, CO2 cost in our books. Just to give you an idea, the forecast for the full year in terms of CO2 cost is EUR 47 million. But this will be visible only by year-end. Moving forward, country... Well, region by region, some more detail about Italy first, and then the rest will follow. We had a significant slowdown in demand in Q2. For sure this was due to a strong inflationary environment. Also to the fact that we were forced to increase prices more than what we were initially planning at the beginning of the year or in budget. It is true that cement demand is mostly inelastic, but when the prices are going up in such a way, some kind of impact on the demand does exist. We started to see some postponement particularly in the field of the private investments. Production cost, again, steep rise. Fuels and power more than double during the semester versus the same period last year. We implemented sequential price increases in Q1 and Q2, but again with some impact on the demand, unfortunately. If we look at the ratio between price and cost, this has been negative. Prices lately are catching up, but a lot on the final results for the full year will depend on the grant or not grant of the tax credit, which was, let's say, available until June for the so-called energy intensive industry. You see here in the page that this tax credits amount to approximately EUR 13 million on a total EBITDA of EUR 35 million for the first half. Really a very large portion of it is coming from this tax benefit. Also for the full year, the outcome or the outlook for the country is strongly related to this kind of benefit or non-benefit, because we are not very optimistic about the volume. The prices, yes, they may go up further, but the impact on the volume could be anyway unfavorable. Without the tax credit or confirmation of the tax credit in the second half, the results of the first half are really not meaningful of what could happen in the second or for the full year. In the graph on the right bottom side of the slide, and this is available also for the other region, you see, the bridge for net sales, volume impact, negative in this case, and price and pricing impact to the, let's say, 17% increase that we enjoyed in the first half. Moving to the USA, this is clearly in terms of, let's say, demand and soundness, the strongest market we are in so far. We had also in the second quarter, after a strong first one, confirmation of the, let's say, support in the construction activity, overall, but particularly in the residential sector. Cement volumes actually improved almost 3% in the first six months. We were somehow penalized in the ready-mix business due to the lack of drivers and also due to the, let's say, our tactics or decision not to let's say, push too much in ready-mix sales, because we are anyway running almost everywhere at full capacity also without the captive ready-mix business. In the U.S., they also suffer from an overall significant increase in cost items, not as much as in Europe. We are clearly still enjoying in U.S. a power cost, which is, yes, definitely much greater than it used to be, but nothing similar to what we are experiencing in Italy, Poland, Luxembourg, or even Germany. Also the fact of being in a very tight supply position, let's say a consequence of this was also the higher maintenance cost that we had to bear because of timing, because of, say, machine running at very high utilization rates. This translated into higher cost inflation for fixed costs, let's say, in the U.S., which instead in Europe, typically, the higher inflation we suffer was related with variable costs. Also, staff costs in U.S. is increasing in a more evident way. In general, they said not only drivers, but lack of blue-collar labor turnover and salary increases are a challenge that we are facing daily right now. The U.S. did improve the prices in a quite significant way. There was a first round already in January. April postponed to April as far as the Southwest Texas market is concerned. There should be a second price increase, available or realizable, let's say, starting from July. Clearly here, the pricing power of the producer is higher than Europe due to the fact that most of them, if not all of them, are very close to full capacity utilization, and imports are rising to cover the demand. For how long this will last is difficult to tell. There are many indicators that are, let's say, signaling some kind of slowdown going forward. This is well possible, associated with the rising interest rate, the inflation. We could be, let's say, at the peak of a cycle. Our visibility so far for the second half still positive. We hope that even if we're not able or the market is not able to stay at this level, going forward, the recession or the downward trend will not be so, let's say, meaningful or so important in the coming year. Important to mention also about the U.S. that more than 80% of our production has already switched to Type IL, which is the so-called Portland-Limestone Cement. An important move, both from an environmental or let's call it more the environmental CO2 emission standpoint, and also in terms of potential new capacity available in terms of clinker, thanks to the reduction in the clinker-to-cement ratio. EBITDA margin in the U.S., even if the situation was favorable, suffer from the cost pressure that I mentioned before. We are actually in dollar terms almost -10%. Thanks to the strength of the dollar, we are ending the first half at the same level of last year. The dollar impact has been quite significant and should be even more significant in the second half if we remain at this level. Going to the Central European market, Germany, Luxembourg, Netherlands, as far as ready-mix is concerned. Strong first half. Definitely positive development across the area. Yes, so we started to see some slowdown of demand during Q2, and things may turn worse in the second half, but so far, let's say, so good. The story is not very different when we are talking about the rising production cost was very significant here too. If you wish more under control for the reason that I mentioned before to the high usage of alternative fuel, and also in the case of Germany, a partial hedging of the power cost, which we are still enjoying so far. Pricing was quite solid. As you can see, we were able to, I would say, fully offset in absolute term the cost increases. The EBITDA for the six months moves from 67% to 69%. We are below last year in terms of margin because the top line is much, let's say, higher, greater. We can be definitely happy about the outcome of this region at least so far. You see that both volume and prices contributed to the increase in the net sales. EBITDA was at a good level, achieved a good level in the first six months. Eastern Europe, as I said before, two groups, positive development overall of the construction investment, the activity, in Poland and Czech Republic, even though when we compare, let's say, Q1 with Q2, clearly you're starting to notice a slowdown associated with the, let's say, geopolitical situation and the inflation pressure, but both countries closed H1 with favorable cement volumes differential. In Ukraine, we were able by the end of March to restart the commercial and production activity only in one of the two plants, so only in Volyn, which is located in the north area and west of Kyiv. Meanwhile, we're still idle, basically idle in Mykolayiv in the south. Due to this and due to the fact that anyway the economy is clearly in a stationary mode, our sales are basically half of what they had been last year in H1 with a negative EBITDA of approximately EUR 3.5 million for the first six months. Let's say that this is a little better than what we were expecting or assuming back in the beginning of March when the war started. Price increases have been significant across the entire area, and we had a positive contribution from FX, more significant from the ruble, but even the Ukrainian hryvnia is giving us a positive foreign exchange impact on our figures. You see that overall the EBITDA for the region is up about EUR 9 million, and EBITDA margin is the same as last year. Even considering the negative contribution from Ukraine, the region as a whole was not worse than last year. Going to the joint ventures, Mexico and Brazil. Mixed, let's say, mixed feelings, in a sense that we have seen, for example, in Mexico, a volume trend which was lower, definitely lower than last year. We closed the first half with -12%. In terms of profitability, as you see on the right, thanks to two reasons I would say, a significant price increase and second, the fact that power cost in Mexico remain at the same level of last year, basically did not change. The price increase was enough to offset the inflation coming at this point mainly from the fuels and the general fixed cost, the general inflation of the country. I don't think we can complain too much about the Mexican situation. Still remains the key market and a key, let's say contributor at least to the net results, for our company with a very strong performance, regardless of the decline in volumes. As we say here, price over cost has been stable in H1, start to be slightly negative in Q2, but we think that by year-end, probably cement volumes will recover some, and we can confirm the same trend for the full year, also helped by the exchange rate, as you can see. Brazil also overall favorable results. Of course, here, still, the scope changes are playing a big role in the analysis, let's say, of the results. As you can see, increasing net sales is almost 70%, but like for like, adjusting for the change in scope that occurred last year, we are 13% up. In terms of volumes, we are basically flat with last year if we consider again the like for like data. Demand not particularly vibrant, not particularly strong. We had also some issue with the weather, particularly in the southeast, a lot of rain in the first part of the year. It seems that even if we are not moving or going to very strong here, similar to Mexico, we can say that the profitability should remain at a similar level as last year. With the help, to some extent also the exchange rate, the evaluation of the real has been not so important. Yes, let's say helpful in keeping our euro denominated figures at a good level or at a level that comparable with last year. One more comments about the outlook. I was already making some before when we were illustrating the different countries. Well, we see that H2 in Italy, in Central Europe, and also, let's say, some European countries like Poland, Czechia could be penalized by a less favorable development in the residential sector. Unfortunately, this, let's say that the private sector is the one that has to face and bear in a way the higher financing cost, the rising interest rates, and also the materials costs that are still rising, unfortunately not yet stabilized. This will be coupled likely with some delay in the implementation of infrastructure plans because also the public projects, particularly the ones that still have to start, are feeling the impact of the cost inflation. Some of the project that were originally maybe budgeted for EUR 100 million, now are becoming EUR 150 million or EUR 200 million. This will make also the public financing less easy. There was just yesterday the study by the PCA. They were here, I was talking about it in Central Europe, but even in the U.S., the study of the PCA, which refers to the so-called infrastructure plan, is showing that, let's say, the recent inflation on project cost could in a way or another impact, let's say, the cement consumption associated with the infrastructure projects that are going to start, let's say, in the future. If this is the money available, inevitably in one way or another, either some project will not start or will be postponed or will likely cost more. Again, if they cost more, and the financing is not adjustable, this means that also cement consumption will be somehow impacted. The favorable development associated with this project will not be as favorable for sure. Still favorable, but then probably not as favorable as originally expected. We expect also the selling prices, and we were commenting about the different area before, to continue to increase revenue in H2. This is okay. I mean, clearly is important and it's better than nothing, but we're not so interested in inflating, let's say our net sales. Unfortunately, it is a necessity that we need to focus on and continue to try to achieve, but it's just a necessity to be able to offset the costs. Yeah, we are inflating the numbers, but not. Unfortunately, the profits are not following with the same pace. Production costs, yes, expected to remain at record levels. It is true that in H2 last year, we started to face the challenges of the cost inflation. We should have in H2 comparison an easier comparison in terms of energy cost. We mentioned, except for Italy, because for Italy so far, because the power cost has continued to rise quite significantly. We don't see there an easier comparison base yet, at least. To conclude, we have, after six months, as usual, a better visibility on the full year. We think that, versus the previous indication, which we are very pessimistic, in particular about Ukraine and Russia, we can adjust. We are able to adjust our guidance and assume that result could be in line with the 2021 levels. In this assumption, we do consider a strong, let's say, favorable impact from the foreign exchange, which has been already there in the first half. If the ruble and the dollar remain where they are now, it will be even more significant in the second half. Okay, we have an appendix with more detail, but maybe we can use them during the Q&A session. Well, let me just mention something. If you switch to page 19 on the cash flow statement. You can see that cash generated from operations and also net cash from operating activities is definitely much lower than last year. This is due mainly to the working capital trends. The increase in accounts receivable was very significant because the prices went up, because the sales revenues went up, let's say. We also have an increase in inventory, which includes the advance purchasing of CO2 rights, which we made back in March. That of course are absorbing, let's say, working capital. Accounts payable also went up because we are facing, let's say, higher costs from suppliers, but to a lower extent in absolute terms versus the accounts receivable and the inventory. This translated into quite significant differences you can see here on the cash generated from operations and net cash from operating activities. Nevertheless, I mean, we were able to, let's say, close the semester with a positive, let's say, cash generation, positive if we, let's say, do not consider the buyback completed during the first quarter. We have EUR 123 million buyback and EUR 121 million negative change in net debt. Without that specific, let's say, item or transaction, we would have been positive, but nothing wrong, let's say, with the buyback. I think we can close this first part of the conference, and I would like to let the operator open the Q&A session. Thank you for listening. Excuse me. This is the Chorus Call conference operator. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. One who has a question may press star and one at this time. The first question is from Elodie Rall with JP Morgan. Please go ahead. Hi. Good afternoon, everyone. Thanks for taking my questions. So I have a couple. To start with, could you please give us an update on what you intend to do with regard to your Russian operations? That's my first question. Second question is with regard to your corporate structure change that you intend to do with Italy no longer looking to be strategic for you. What does that mean? What do you consider doing with the rest of the group? Would you consider listing it somewhere else, for example, in the U.S., if that made more sense? My third question is with regard to the infra plans in the U.S. You've mentioned higher cost inflation could actually lead to some delays or considerations. Do you think that infra spending in the U.S. could turn negative next year? I mean, you said it was still favorable, but not as favorable as originally expected. What does that mean in terms of outlook for next year for U.S. infra? I'll stop here and come back to the queue for more questions. Thanks. Okay. Well, very easy to know. Very easy to answer. Update on Russian operation. Well, we made the required changes back in the beginning of May to make sure that we are, let's say, compliant with the norms about the sanction, about the E.U. sanction. We withdrew completely from the operations of the entity. When I was speaking before about the data about energy cost is to give an example, something we have not available anymore. We are, let's say today, more a passive investor rather than an active managing position as we used to be before. This is the best option that we found or we thought could fit to our group, to the way we are. We don't see any major changes from this situation going forward. Clearly, this is not ideal. I mean, it's not something that we like a lot. It's not the preferred way that we have to run a business. It's also quite important business overall. We think that in the current situation and also in perspective, as long as the sanction scheme remain the same, this is the best way to, let's say, keep Russia within the group and not lose or close or abandon it, or sell it maybe for a low price to someone else. On the corporate structure changes, well, I know I think you're giving too much importance or you're going into a direction which is not the one that we are thinking of. This is simply an internal change, which has the main purpose to adjust better, let's say, our organizational structure, internal organizational structure, to the corporate structure, to these companies, let's say, structure. We are simply adjusting also for some legal reason that I would not mention now because they are too technical. Adjusting our, let's say, organizational structure, the way we are set up internally in terms of executive management with the corporate structure, so with the actual, let's say, legal entities that are involved in the different businesses. For the moment, really, nothing really. No substantial changes. Just a better structure more fitted to the way we are running the business, and that's it. On the infrastructure plan, if consumption to turn negative next year, I don't know. Again, I don't know how much you rely on the PCA forecast because they change frequently and they often make mistakes. Yes, for example, if you look at the PCA forecast for 2023 is turning slightly negative. The impact is coming mainly from the residential, but also non-residential turning somewhat negative. They are guessing, I mean, they are assuming some 3% decline of volumes for 2023. Is that likely, not likely? I think the likelihood of a 2023 with improving volumes is low. Whether it will be a -2% or -3% or a 0%, I don't know. It's hard to tell. We are, let's say internally, more betting on a soft landing and minor decline for next year. On the infrastructure plans, yes, again, there is a study which is very recent from the PCA again, which is assessing the inflation impacts on the different projects. They think that some of the projects will be at risk due to this inflation erosion and the increase in construction costs that we have seen since the bill authorization. Thanks. Can I just follow up? You're talking about 3% decline in volumes in cement in the U.S. Mm-hmm. Do you have a better mix guidance? Could you give us a bit of your thinking between infra and residential and non-residential, and how you get to -3%? No, we don't have a different thinking so far versus the PCA. The PCA is -7%, right? They say -7% for residential, and they see non-residential at -2% and public positive by 1% approximately. Again, this is something that we will internally maybe discuss later in the year when we are ready to prepare the budget or in the budget process. Again, it's worth something of course because they analyze a lot of data and they have a lot of information available. It's not the gospel. Okay, great. Thanks a lot. You're welcome. The next question is from Yuri Serov with Redburn. Please go ahead. Hi, good afternoon. Can I ask a question- Hello. -about [audio distortion]? Sure. Yeah. Can we talk about prices first? I mean, the price increases have been quite stunning, especially for fragmented markets like Italy or Germany. Yeah. Me personally, I'm struggling to believe that this is sustainable. The latest release for PPI indices by the European Union already showed that the prices in Italy in June were slightly lower. What do you think? I mean, why can we believe that these prices can be sustained? There is competition. I mean, it nobody canceled that, right? Companies compete with each other. How is this going to develop? Well, it really depends on the margins and on the price across the structure of the competitor, which is. You're right, I mean, it's not the same. For sure there are competitors that are today in a better position and some others that are in a worse position. I think that each one also looking at what's happening or what has happened and what is happening now is trying to make sure that his income statement is at least balanced. I mean, not losing cash. The problem is really, in my opinion, more how much this. Not so much the fact that every producer will somehow have a similar, let's say, behavior, but how much these prices will affect the demand. On the other hand, I was mentioning before, today the pressure is mostly on variable cost. If you reduce your volumes, so if you lose, let's say, market share because someone is more competitive than you, this is somehow less important than it used to be in the past, because the variable cost component is much more important than it used to be. But if s ustainable, I don't know. We think that at least if you're talking about domestic producers like in Italy, Germany, et cetera, we don't see a real difference in the cost structure versus ourself. We think that each one of these producers will try to somehow offset its cost. The risk for Italy probably versus other countries is more the imports. Even if the imports of course even the imports are becoming much more costly because the logistics is more costly. They don't have the CO2, but they're also suffering in Turkey from definitely much higher fuel costs. They have a high inflation. I see more, let's say, the risk of a decline in demand rather than a risk of falling prices going forward. Yeah. You know, at some point, losing volumes becomes not attractive. You say that variable costs are more important, but if you are faced with stoppages, then fixed costs will very quickly become very important too. Yeah. I mean, it's not ideal. It's not. Our goal is certainly not to lose volume, but we have to stay on the market as usual, but we have to stay in a way that is reflecting our cost. You want to add something? Yeah. Okay, fine. Can I ask you a question? Just a second, Patrick. Maybe one thing you have to also consider when you talk about sustainable price increases. You have to consider that the CO2 pricing cost increases that are not fully digested by the cement sector yet will need. Will force further price increases or at least, confirm the price increases because they need to be somewhat well reflected in the cement price as well. This is not fully— Not yet. — integrated yet. You have to take this into consideration as well. Another point, which I did not mention before, is that when you compare anyway, the trend of cement cost versus other building materials, we are no worse off. For example, we were discussing in Mexico some months ago, with an important, let's say, builder there. And he said, "I'm changing, let's say, all my projects from the one that included steel or more structural steel to projects that are more concrete, let's say, intensive." Also, fortunately, in a sense, we are not the only ones that are forced to increase prices. And among the building materials, cement is not the one that increased the most. Prices for steel are on the way down. I understand that they are on the way down from a much higher level, but the less your customers are seeing prices going down, how does that influence the discussions? Anyway, we have to stay in the market. This is clear. I mean, if we are for some reason facing decline in the volumes, we will have to react somehow. Yeah. Yeah. Okay. I I understand. Can I ask you about Russia? Yes. Not about what you're planning to do with the market, but just looking at the results, they are quite stunning. What's going on there? I mean, Russia is again number three in your portfolio in terms of the size of EBITDA. I mean, it's not that I do not want to answer, but we don't have many details. We can just tell you that in terms of volumes, let's say, they lost about 5% in the first six months. Pricing was very favorable in local currency. In addition to that, we had a revaluation of the ruble, which was not very little because we had a 5%. If you look at the first six months, if you compare the average for the first six months with the current foreign exchange, potentially in the next six months could be much more than that. We have a- Yeah, I'm not saying. Yeah. Sorry. I'm not talking about the number. The margin was up. That's the surprising part. Well, you know, we are selling oil well cement to a relatively large portion of our sales. The trend of oil well cement is related to the trend of say oil and gas prices. This is usually a better margin business than gray cement. Okay. That's clear. All right. I have a couple of short questions. The margin that you're showing in Brazil in the first half, I mean, with the acquisition of CRH's assets, we were trying to understand what the normal margin is and. Yes. You know, obviously it has been moving around. What you see, what we're seeing now, is that the more normal margin for that business? Probably, yes. It is clear. Well, we mentioned it already in the past that the acquisition was variable in many respects. We do not absolutely regret what we have done. The plants, let's say, that came into the scope are less efficient than the ones of Brennand. Yeah. For the future, we can basically model this by- Probably it's not in terms of margin. This year is not great. Let's say it's good. It's not great. It could be, in my opinion, 2% more than that in a more, let's say, favorable environment. Yes, we are not. We will not be back to the levels of the, let's say, Brennand- only plants. Okay. I understand. Another question, completely different. Share buybacks. You- Yes. You still have a lot of cash on your balance sheet. The business is okay. I mean, we were worried that it was going to be a disaster. It isn't. Your EBITDA is not falling. What are your plans? What is your thinking? I mean, we've just completed a few months ago. Yes, the occasion for taking the resolution was the AGM, because it's the moment when you usually take the resolution. We are not in a hurry, in a sense that you also if you look back to the last year, we distributed, if you consider dividend, extraordinary dividends, share buyback, a very meaningful amount of money, EUR 190 million in the first half of 2021. Another EUR 190 million, basically including buyback and dividend, this first month. So these are, I mean, very meaningful amounts. I do not make a direct comparison with other similar companies, but I think there are very, very few that were able to return, let's say, to shareholder such amounts in the same period. So in- I mean, in the meantime, also the share. I mean, okay, you can say that it's undervalued, maybe, but did not perform so badly. I mean, lately the share performance was, let's say, okay, so we don't feel any rush about it. Okay. Look, you know, you say that you paid a lot of money, but you still have too much cash. You know, I mean. I forgot to mention that as you can see on the page of the net financial position, we have anyway debt repayment of about EUR 620 million-EUR 650 million coming up in the next few months. Yes, we have the cash to repay, and we can also partly refinance, but we need to plan a little carefully. I mean, these are big amount of money. Also, the way the cash is in the group is a bit, let's say, spread among different countries. We will have uses of cash, for example, to lower the gross debt position important ones in the coming months. Okay. That's pretty much it. I mean, one topic that is in my mind is about the U.S., and you were talking about kind of cautiously about next year, but you're still positive for the second half of this year, and I wonder why. I mean, if the soft landing begins in the U.S., why is it in January rather than in September? No, January. We do not start from January first. You're right. It is true that last year we had a very strong fourth quarter also due to weather, and this will be difficult to repeat. We have a strong help from the effects as I mentioned before. Unfortunately, I mean, if you look at the results, they are not that great in dollar terms because -10% with the positive volume and price variance is not that great. We are offsetting with the FX. We should have a better second half in terms of price cost, say development, because we do expect, as I mentioned before, price improvement, and possibly, at least in the U.S., not such a, let's say, additional cost increase. The impression is that so far the volumes are holding well. We have July, let's say, behind us. Was good month. We think that yes, a slowdown is likely to come, but not so quickly, and hopefully not so important. Okay. Thanks so much. You're welcome. The next question is from Yassine Touahri with On Field Investment Research. Please go ahead. Yes. Good afternoon, gentlemen. My first question would be on energy inflation. What kind of energy inflation did you see in the first semester of 2022? What kind of energy inflation do you expect for the second semester of 2022? The other point is, have you started to hedge your energy for 2023? If you have, could you give us a bit more color about what you're expecting for next year in terms of energy cost development? Well, it's difficult to give a real just one figure. There are very differentiated, let's say situation. We have countries that are more than double, as we said before, their energy costs, H1 2021 versus H1 2022. The minimum, I think, was 20% up where we are mostly hedged, which is Germany. The average, I would say 80%-90% up, more or less. Weighted average of, let's say all the different countries. It's this first half 2022 versus the first half 2021. I think this is probably likely to stay, let's say as an average. With the trend that we are seeing right now in Europe for power cost, it's difficult to imagine something completely different by year-end. I would assume that this is the trend for the full year. I mean, Patrick, you may have something looking at the- Yeah, same line with- Yeah. With the forecast. Yeah. Regarding the hedges. Yeah. I mean, of course, right now it's not very interesting to hedge at these. Mm-hmm At these levels. From 2024 onwards maybe, but not before. There are maybe some tranches still in some countries, small mature markets where I feel hedging is ongoing, but overall new hedges are very difficult right now. Therefore, we are rather more exposed with the spot price at present. If energy prices remain very high, could you see more energy concentration in 2023? We don't know. I mean, the curves are indicating some softening, so it's not very meaningful, but some softening. Depending on the country. Yeah, depending on the country, but in general, say, in Europe, fuel difficult to tell. Very difficult to tell. Could be a little lower. Petcoke has been increasing very significantly, but we don't have right now a clear view on the trend of petcoke, for example, which remains our main fuel anyway, within the group. The second question would be on the change in corporate structure. Yeah. You mentioned a technical legal reason. I'm just wondering why you didn't do it before this corporate restructuring. Is there a change in where you can benefit from a tax advantage? Is it a managerial advantage? Is it a cash flow management advantage? Mm-hmm. I'm just trying to understand why you do this change in Italy today, and why you didn't do it five years ago? Well, why we did not do it until now? It's something that has been in our mind, let's say already since some years. There was always something, let's say more important or how could I say, higher priority. The timing does not mean that we did not have that in mind already since some years. It's not the fact that it's occurring now, yes. I mean, it's what it is, but does not really change the reason or the, let's call it motivation behind it. For the rest, no, there are no particular advantages in terms of the cash management or tax planning. We will be basically as we are now. There are some other advantages or reason, as I mentioned before, in terms of how we manage and particularly how we assign responsibilities to our, let's say, executive people as far as in particular, let's say, the Italian businesses is concerned. Then, the third question on pricing, or more on the evolution of margin in 2023. Is it fair to say that if you've got a volume decline in the U.S., you will first cut your imports and that the imports are not very profitable, so the volume decline would not impact too much the EBITDA? It's very clear. Secondly. Yes. How much of your cement is imported in the U.S.? Significant. This year is going to be significant, more than 700,000 tons. It means that the first 5%-10% decline in volume could come from a reduction in imports. Yeah. Yeah. All right. Is it fair to assume that the import margin and import are very low today compared to the local margin? Not very low, but definitely lower than the self produced, let's say, cement. In Europe, is it fair to assume? Sorry. No, no. I mean, this is a flexibility. You're right. This is a flexibility that we do have. In Europe, is it fair to say that approximately 10%-15% of your production in Italy, Luxembourg and Poland is not covered by CO2 allowance? It's correct, yes. Does it mean that, let's say, if you've got a 5%-10% decline in volume in Europe, you will just stop selling this production, which is not profitable because it's not covered by CO2? This is more complicated than that because if you go below the 15% reference, then you also receive less allowances. To make it simple, but it's not that simple. Anyway, there is a range within which you will be able to maintain the same level of allowances. Okay. Then there is the linear factor, which goes down anyway. Every year you receive less, regardless of what you are producing. If you go off, let's say if you go outside this range, so you go below, again, to make it simple, the 15%, you will also receive less allowances. Do you see a risk in any country? Because is it fair to assume that in Czech Republic, Poland, Luxembourg, you should be okay because volume were up, but there might be a bit more risk than in Italy? Exactly, yes. It's correct. Yeah. The last question, small bit of a big picture question on your valuation is very low. You've got a very strong balance sheet. What is the benefit for Buzzi in a sense to remain listed in the stock market versus becoming private? The benefit is to have the possibility to speak with you, to speak with the investors, to have this nice, let's say, conference call. I'm joking, but I mean, there are some benefits. I would say that for a company like ours, which is also somehow strongly related to a family and with a number of shareholders that are not following, let's say, the business directly, but they are important shareholders. The listed status is giving them high degree of competence, let's say, on what we are doing and what the company is doing and what the board is doing. The help from independent, let's say, board members is also something that we consider very meaningful, very important. I mean, in general, let's say, I would say, governance of a listed company is giving to any shareholders, including the ones that are, let's call it, the majority, and obviously, the ones that are instead representing the minority a greater degree of competence on the way the business is carried out. I think this is probably one of the main advantages. Thank you so much for the input. You're welcome. The next question is from Brijesh Siya with HSBC. Please go ahead. Hi, good afternoon, gents. Hello. Hello. I have a couple as well. Starting with the Italy one, the corporate transaction or the hiving of the cement business. Is there any particular reason why cement is only hived off or it's the ready-mix integrated business are already in a separate entity, and you're doing only cement now? Say it again because there was, I missed something. Can you speak a little louder? Sure. No. I was talking about the Italy corporate structure change. You are mentioning that you are kind of moving Italy cement business only to a separate entity, and which will be- Yes. -your subsidiary. What about ready-mix and aggregate business? Are they already— Okay. — subsidiaries or you're going to— No, they are already in a separate entity. They will remain in a separate entity. They are both below, let's say, what is going to be the, let's call it, the holding or the parent. We have one entity in Italy already now, which is the ready-mix so-called business. Then the new entity after the contribution of the same kind will be the cement entity, yes. Understood. Yeah. Coming to the outlook, you talk about a similar EBITDA versus last year. What's the kind of FX impacts you are assuming in that, so when you are talking about similar level, considering H1 was EUR 19 million positive. Just a second. Let me pull it, I see. Just a second, I will tell you on the EBITDA page. Yeah. Okay. Yes. We have on the dollar we are assuming 9%-10% appreciation. On the ruble this seems a little low, but anyway. On the ruble 2%-3%. The rest is less meaningful. The big change or the big potential positive is coming from the dollar. Right. Somewhere around EUR 45 million-EUR 50- odd million of positive contribution from FX. Yeah. Approximately, yes. Okay. Yeah. Coming to the U.S. business. Yeah. The 10% decline in H1, you mentioned about ready-mix concrete fell in the volume 7%, and that relates to driver shortage and your strategy of preserving your capacity and because you are already in allocation in cement. Yes. You also mentioned about the maintenance cost being higher. Yes. Yes. Yes. Could you give us any particular, what's the kind of maintenance cost versus last year? Oh, the increase in maintenance cost was quite s ignificant in the first half. If I recall correctly, between EUR 15 million and EUR 20 million up. Okay. Yeah. That's purely because of the timing of the maintenance? Timing and the materials inflation, let's say services. Yeah, I mean, also the fact that, for example, what usually we used to consider maybe a 15 days shutdown period now due to the lack of inventory and the customer location, we need to shorten it to maybe a seven days project. We are a little bit in a rush. It's good to have a high capacity utilization of course, but when you are too much under pressure, this translates often into higher costs. Okay. Staying within U.S., like the Portland-Limestone Cement, you've mentioned that you've already moved to 80% of your total production. Yeah. I mean, how is the industry now? Because one of your competitor was saying that we can't move for 100% because it's demand for other type of cement as well. Yeah. Can you give us a little more how the industry is at this point in time, at what percentage of Portland-Limestone Cement conversion has already happened? No, no. The industry has been moving very quickly, actually quicker than what we expected, towards Type IL. I mean, we would not be 100% because there will always be some different types of cement, oil well cement, for example, or Type III Portland for some usages. But next year we are targeting, let's say 100%. Then it's not going to be 100%. It's going to be maybe 95% or 93%. But it will be very high. Almost only, let's say, Type IL sales. The industry is doing the same. It's basically doing the same with very few exceptions. There are some regions, but again, this is going to be solved by year-end, where the DOT approval is still lacking, is still on the way to be released. There are some technical reasons why you cannot fully, let's say, convert yet to Type IL. The DOT approval will come as it has already happened in most of the counties or states. No, it's a general trend embraced, let's say, by the industry, which is very, I mean, all around, definitely for everyone. Okay. Understood. One on U.S. prices, that possibly looks like lagged a bit, compared to what the cost inflation has evolved. What's the kind of pricing fees you have done to date and you're planning for Q3? You mean, the magnitude? The price. Yeah. I don't know if we can tell you. We usually don't. Okay. In terms of percentage, or that's too sensitive? Well, you can see more or less from the trend of the sales revenue. I mean, if you look at the sales revenues in dollar, you know the volumes, so more or less you have an idea. All right. Okay. What's kind of magnitude for Q3? Again, we can do something, we try to do something not so different from what we have done at the beginning of the year. Will not probably be all over the country. Probably will be some places more achievable, let's say, some other less. Okay. Understood. Lastly on Italy, the EUR 13 million of tax credit which you have accrued in Q1. Yes. Is there any possibility of that being kind of rejected by the government, or it's highly likely that that will come through? There are, we think, at least 50% or maybe more than 50% likelihood that it will be repeated for the third quarter. We are less optimistic about the fourth quarter. For H1 you will certainly get it? No, because also we have the election, you know. This is about the third quarter, it's a decision that the current government should be able to take before really going home, let's say. Instead for the fourth quarter is a decision which will be in the hands of the new government, assuming that we will have a new government by the fourth quarter, which is still to be seen. Okay. Understood. This is part of your guidance. This is the tax credit you assume that it— Yes. Yes. — will be carried through to end of the year. Correct. Yes. All right. That's all from my side. Thank you very much. Welcome. The next question is from Alessandro Tortora with Mediobanca. Please go ahead, sir. Hi. Good afternoon, everybody. Hi, Alessandro. Hi. Fine. Thank you for questions. I have a very, very brief questions. Okay. Okay. The first one is a follow-up on the last point you touched on the tax credit in Italy. Yes. Basically the EUR 13 million you got was related to, let's say, Q1, Q2. Yes. -and then- Correct. Yes. Is it fair to assume that you could get, let's say, a similar amount in the second part of the year, right? It depends on what they're going to decide. It's at 20% or 25% of the energy cost. This was about the scheme until now, at least. Yes, if it's one quarter instead of two, you can approximately divide by two. Mm-hmm. Approximately, that's the— Cost of it. Mm-hmm. Okay. As you said before. Maybe, yeah. Maybe even more if the energy costs continue to goes up. Mm. Mm-mm, mm-mm. Okay. As of today, basically you are assuming that this is a benefit that clearly will be confirmed in the second part now according to the guidance. One quarter. One quarter. We think that is possible, yes. Okay, one quarter. Because it's a decision of which should be somehow follow what has been done so far. It seems that the power cost situation has not improved, actually, it's worsened, so it could make sense. Dr. Pietro, the reason why you classified these tax benefits as recurring is because... Sorry? The reason why you classified these tax benefits as, let's say, fully recurring is due to? No, no. Yeah, yeah. Okay, no. Because we did decrease the power cost. I mean, it was not included into other revenues. Because it was also discussed with the auditors, et cetera. Since it's something that is clearly referring to the power cost, for us it was a net in a sense that we decrease the cost of power to that extent. Mm-hmm. Yes, becomes recurring. Yeah. Okay. Okay. Yeah. The second question is on Russia. Basically Russia first half got the record results, that we should come back to 2014 to see a similar EBITDA margin. Now, I understand, let's say, your point on the mix, on well- Yeah. Should we take this number with a, let's say, pinch of salt? Or, just to better understand, because again, we're talking about very, very strong results from Russia even compared to what we discussed, let's say, in the first quarter, talking about 30%, 40%, 50% EBITDA reduction in Russia. Thanks. No, we are more pessimistic about the second half. Mainly because we think that in the first half, the economy still did not feel so much the impact of the sanction. The overall economy was okay declining, but not as much as we think is going to decline in the next six months, and probably also next year. On the other hand, if the ruble, let's say, stays at RUB 60- Mm-hmm. This can make anyway a big difference. We don't see very well the volume trend going forward. There could be significant offset coming from the foreign exchange, which is back to the level of 2015, basically. The third question is on sustainability of price increases you already made. Is there any possibility that, for instance, in Italy, the second price increase you made, I don't remember, April, May, could be scratched considering, let's say, the reaction of the market, but also the weakness of the market? We hope not. Clearly, as I said before, we have to see the behavior of the competitors, how they are moving. It is true that not everyone is possibly in the same exactly cost structure situation or some of them, for example, have a presence in Italy, which is really irrelevant versus their overall, let's call it, scope of consolidation. So they may consider to behave in Italy in a more aggressive way. It could be an opportunity to gain some market share. I don't think that we will go back to where we were before. Some adjustments, not impossible. Maybe very surgical. Okay. Yeah. The last question is on the tax rate in the first half. I saw a very high tax rate, like 26%. Probably there are a lot of, let's say, one-off that No, it's the impairment of the goodwill, which is not deductible. Yeah. Yeah. Yeah. Yeah. We have EUR 123 million of goodwill impairment, which is not tax deductible. Okay. Let's say we can confirm independently from the mix, we are seeing— Yes. — a regional mix, 20%-21%. Yes. Yes. With this additional, let's say, cost item, which will stay because it will be also. I mean, it's already taken as an accounting, let's say, decision and will stay also. At year-end, it will stay. Mm-hmm. Mm-hmm. Okay. Okay. Thanks, Dr. Pietro. Okay. Good. The next question is from Gregor Kuglitsch with UBS. Please go ahead, sir. Hi. Thanks. I'll try to keep it brief, given it's getting late. The first question is just on the U.S. Can you maybe just lay out your thinking? Do you think you can hold dollar EBITDA this year? Obviously, you were down in H1. The second question is the very high interest charge. I suspect there's some non-cash stuff going on, but maybe you can elaborate what happened there. Finally, after the impairment, what's Russia now on your books? Is it essentially all the tangible asset value now? I guess related to that, are you able to get cash out of that country? Thank you. Yep. Well, dollar EBITDA flat versus 2021 is probably the best, the most optimistic, let's say, outcome that we may achieve. It's not impossible, in my opinion, but it's for sure the best. The likelihood of that not too high, but not impossible. The second one I'm missing the first one. That's the finance cost. The finance cost. Finance cost. Well, we have but no real change. I mean, we will have some likely refinancing, as I said before, associated with the repayment. But on the other hand, we will decrease significantly the gross debt, no, Patrick. I don't see there. I mean, it's not very likely that we will follow capital markets. No. Transactions at these high coupons. For sure, this would not be— Okay. — affecting our cost of funding in that way, so. In the first half, you had a EUR 50 million net charge, which is very high. Oh, no. That's the cash, non-cash stuff. Exactly. No, that's due to non-cash items. Mainly. Mainly non-cash items. We have some, for example, dollar-denominated debt. Yeah. Which is value at, let's say, year-end, sorry, end of period, let's say, exchange rate. It's going up because of the dollar revaluation. If you look purely at the cash net interest expense, we actually saved some EUR 2 million in the first half. It's always a mix between the cash and non-cash items. Yeah. Okay. Fine. Understand. The impairment in Russia is driven by two reasons. The main one is the change in the weighted average cost of capital, which moved from, if I recall correctly, 12% something to 20%, almost 25%. We did change also in the impairment test, let's say, analysis some of the assumption. As I mentioned before, we are more pessimistic about versus the original plan, let's say the plan which was used for the impairment test at year-end. We are more pessimistic in terms of volumes and economic, let's say, environment. Really, what most affected us in the calculation is the change in the risk, let's say in the country risk, which translate into a weighted average cost of capital today of 25%. This is the main driver. No, but how much is left is the question. Can you get cash out? Is there basically- Sorry. Any repatriation. Cash out is difficult. Almost impossible, I would say right now because the shareholders can decide to distribute a dividend, can take the decision, but then the money will come into what they call C account. Type C account, yes. Type C account. This type C account is monitored and, basically managed by the central bank. It's very unlikely, in my opinion, that they would allow you to actually move it back. This is a constraint, but it's not affecting too much the impairment test because at the end, yeah, it is true that it's a cash, the cash that you generate, you cannot touch it, but it's not really something that in the impairment test calculation. Yeah. Okay. Okay. You do consider. It's a problem. It's a problem. How much cash sits in Russia and how many assets? What's your net asset position in Russia then? At present, there are roughly EUR 65 million counter value in Russia. Okay. Yeah. Yeah. It's not a small amount. Okay. All right. Thank you. Okay. As a reminder, if you wish to register for a question, please press star and one on your telephone. For any further questions, please press star and one. The next question is a follow-up from Yassine Touahri with On Field Investment Research. Please go ahead. Yeah, just a very quick question on the working capital. You had a big cash outflow— Yeah. — in the first part of the year. Yeah. When you look at 2022 as a whole, do you still expect a negative impact from working capital? If so, is it something that you can quantify? In part it will revert because of the CO2 portion that we anticipated. It should be less than that. The account receivable, I think, it will remain similar. It will continue to absorb, let's say, let's call it capital. With such a big change in the trend of net sales and also purchasing which is offsetting, but only in part. Yes, I would expect some, not as much probably as in the first half, but I would expect some impact on the cash generated from operation. We need to start to stabilize, let's say, the sales at a certain level before going back to the, let's call it, previous trend. Could it be as bad like as EUR 150 million negative impact for 2022? No. Probably I would say more EUR 100 million than EUR 150 million. Thank you very much for this precision. Sorry? This precision. Oh, okay. I think it's always a little bit difficult to compare the accounting versus the real cash flow. I mean, in real cash flow, I think the EUR 100 million is like, the operational cash flow is a pretty good assumption on the overall. Yeah. This is not necessarily in line with the indirect method that you can. Yeah. Basically, read in the financial statement. Plus, you have the exchange rate impact too, which can be meaningful this year, which is only accounting at the end. It's not really cash flowing in a sense of the— Income. Income and cost. I mean, inflows and outflows. Yeah. Yeah. Thank you very much. Okay. Mr. Buzzi, there are no more questions registered at this time. Okay. I don't know how many of you are still on the line. Thanks for listening and enjoy the rest of the summer. Bye-bye. Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones. Thank you.