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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Hello, everyone, and welcome to our analyst conference regarding our 2022 results of Holcim. I'm very delighted to have many analysts and investors present today. Thank you for joining. And also welcome for those of you who join us via the webcast. We're very excited to share more background with you on the results. I will give you some highlights, and I wanted to point out a few of our successful elements of strategy execution, and Géraldine will give us some more details then on the financial results, and then we come to the outlook together and, of course, have time for your questions and comments.
2022 for us was, I would say, a very satisfying year. We -- on the one hand, we continue to deliver, deliver record results, first time above CHF 29 billion. At the same time, we could offset this enormous cost inflation pressure. We all experienced and come also with record numbers for the earnings for -- and the free cash flow again. And I'm personally very pleased that also our whole transformation led to even a stronger balance sheet with now a debt leverage of below 1x. So I think this is all well delivered.
At the same time, we have a big success from our strategy already contributing significantly to the results with Solutions & Products already at 19% of group sales, with the rapid expansion in North America already 35% of sales and will reach 40% in this year.
On the CO2 side, also very proud that we could significantly reduce our footprint by decarbonizing our existing products and solutions, but also by the fast growth of our new segment Solutions & Products, leading here to a reduction in CO2 per net sales of 21% year, and this will continue here in rather large steps also in the future.
If I continue, I will leave for the record results to Géraldine later to comment a bit more and would like to point out a few things. First of all, our strategy involves a lot of transactions. We did 23 transactions of acquiring or divesting businesses. And I think we are doing this in a very value-accretive manner, buying 6 businesses for Solutions & Products for reasonable multiples. Having then bolt-on acquisitions, 13, to further strengthen our aggregates and Ready-Mix, Concrete business.
And at the same time, our divestments have been very value accretive because we sold them for very attractive enterprise values. And put these elements together, we were -- despite the biggest sales ever, we were able to strengthen the balance sheet and reduce our net debt by CHF 4 billion in 2022 alone achieve net debt ratio of only 0.9x. So I think these are really excellent results, and I'm very happy we execute with such a value discipline in mind. The year has started very dynamically. So we are not stopping with the profitable growth. It looks like we are rather here gaining momentum.
We have already 7 acquisitions in the first 2 months of the year, another 3 for our Roofing business and another 4 bolt-ons for Aggregates and Ready-Mix. The latest one here. Duro-Last, we are very excited. We have bought already in roofing several companies. We were starting with Firestone, if you remember, this iconic company for flat commercial rules, then we continued with Malarkey another iconic company for the residential roofing. And now we're very happy that we could acquired Duro-Last, another leading company with sales of over $500 million and very well positioned with premium solutions system selling and with special contractor association they serve basically exclusively with their solutions. This is a fantastic fit with our established roofing business in terms of technologies, but also in terms of channels and customers, and we are very happy we could do this. If you look now at the roofing business, how strong it became already, it's a $4 billion business now for us.
However, in a large market, it's a $40 billion underlying market. So we have plenty of room to continue to grow. We have plenty of plans to grow. And this will be very satisfying for us also in the future. If you look at all the success factors we have with the business, more than 70% of the sales is in reroofing. So we're not depending on new build. We have high-margin reroofing, which is also growing because all the roofs need only replaced. The new roofs need to be insulated. They need to be green. They need to be solar. So there's a lot of value for us.
We do already 80% of our sales is complete system selling. So we're not only selling a waterproofing membrane, we're selling a full system with installation with the design for the installation, with all the parts for the installation. And just by doing so, you triple the sales square meter. And of course, you achieve a much higher loyalty with your customer, you have a higher importance and you obviously have a very good pricing power at the end.
Also very happy that our team executed so well. We bought the business. If you recall, we had between 11x to 12x multiple when we bought the roofing companies, and already last year, basically in the first full year of operation, that multiple came down to 7x, simply because we are growing the bottom line, and we achieved 19% EBIT margins in the roofing business last year.
So this is a fantastic accomplishment and shows the great fit these businesses have for Holcim from the supply side to the distribution side and very happy we could be here so successful with roofing and already such a contribution for the Holcim group.
We look at North America. With this, we come from 24% of North American sales just before the pandemic, and this is already 35% last year and will reach 40%. Very important to us. We are very bullish on the North American market.
You can see we have already strong results in North America from growth and for margins. And when you look at all the new infrastructure bills which have been passed, Anti-inflation Act and so on, we're going to have for the years to come, a very healthy order book here in North America.
And I think we make this strengthening of North America at the right time. We see also the profile of wholesale now, we do North America, Europe and Latin America is now over 80% of the company and Middle East, Africa, Asia is less than 20%.
This is a geographic profile we wanted to have for much better growth and better earnings. You also see that when you look at the EBIT, North America is already over proportional also in margin. So I'm very glad we could establish now this very strong earnings profile for Holcim.
With this, I would like to talk lastly now about the sustainability. It's on top of our strategy. We want to be part of the solution for decarbonizing not only Holcim, we want to decarbonize in buildings, the construction industry. And here, we make big inroads. You see by decarbonizing the established products and systems, but also by this rapid expansion into Solutions & Products where we are talking about some of the sustainable solutions for the built environment.
You see the amazing results. We were already, in '21, minus 8% CO2 per net sales. Last year, we achieved to 21% minus. And also for this year, we target more than 10% CO2 reduction for the Holcim Group. And I think this is a very great news that the road map and sustainability we have started years ago is now showing such good results.
I think with this, I make a quick summary, what you can expect from us now ongoing we believe our transformation is not only successful.
It will give us now great results into the future, basically on 3 pillars. Profitable growth. We want to grow Holcim by growing Solutions & Products products, our fourth segment. We had 19% of group sales. We promised 30% by '25.
So I think we're well on track, but this is something you can expect from us.
At the same time, we have our highly synergistic bolt-on acquisitions to strengthen Ready-Mix and Aggregates. And you can also expect here, we will continue this year with a high number of transactions also in this year and the years to come.
Expansion in North America. You see also in the document, we had a high organic growth rate in North America in addition to the acquisitions, and this is also something you can expect from us for the coming years.
Then we have a growing demand for the sustainable solutions. If you look at our low-carbon solutions, we have been introducing ECOPack for concrete ECOPlanet for cement. They are in high demand. We are literally sold out and we have to scale up production capacity to be ordered to follow up with the high customer demand, and this is something where we will see a lot of growth, a lot of value coming for Holcim.
You can expect superior performance ongoing. So we expect the record results to continue for this year and the years to come. Our free cash flow were around CHF 3 billion has been well established now for the past 4 years. This is something we want to deliver also into the future.
And you can also expect from us that we make smart choices for the balance sheet. We make smart choices when we buy or sell, and please expect that the balance sheet will remain strong and will give us a lot of freedom, a lot of firepower to make the right choices for Holcim's future for investments for acquisitions.
Sustainability, I talked already about. This is on top of our strategy, and this will give us a lot of opportunities for growth, and we will talk about this in detail later, but from new application segments, to carbon capture, we are really well positioned, and we execute here at high speed to lower the footprint of Holcim year-by-year.
I think with this highlights on strategy execution and what you expect from us ongoing, I think I'll pass over to Geraldine.
Thank you, Jan. Thank you, and good morning, ladies and gentlemen. I'm very pleased to share with you more details on our achievements in 2022. It has been another record in terms of financial performance. Our net sales grew by close to 13% like-for-like, benefiting from the strong pricing in our historical businesses and the huge success of our roofing business.
Our recurring EBIT grew by more than 7% despite the significant inflation. Both our earnings per share and free cash flow have been impacted by the settlement with the DOJ, resulting in a payment of $778 million in Q4.
But without this extraordinary expense, our earnings per share before impairment and divestment would have increased by an impressive 25% at CHF 4.96 per share. And similarly, our free cash flow would be above CHF 3.5 billion, a new record.
Let's now move on to our sales. On a full year basis, our net sales amounted to CHF 29.2 billion. This is up 8.8% versus 2021. And this reflects a strong organic growth of the business at 12.9%. The portfolio transformation brought us new sales or 4.7%, stemming from the acquisitions and Solutions & Products.
The divestments in Cement reduced our sales by 6.1%, and this number mainly stems from the divestment of India and the derecognition of our Russian sales since March 2022. So here Cement, Ready-Mix and Aggregates business segment grew by 12% on a like-for-like basis, benefiting from a strong pricing of about 14% on average, slightly offset by a small negative volume impact on the back of soft markets in Europe and in China.
Our Solutions & Products segment grew by 18.5% benefiting from the outstanding success of our Roofing business. The currency translation that you see here is slightly negative at minus 1.8%, and this is mainly due to the depreciation of the euro, partly offset by a strong dollar.
Let's now move on to our EBIT. Our recurring EBIT amounted to CHF 4,752 million, up 3% compared to 2021. This effect had a negative impact of 2.5% on our EBIT, but this was more than offset by the strong organic growth of 7.2%.
The volume impact that you can see is slightly negative at CHF 41 million, but the price of the cost was positive throughout the year. And this price of a cost is coming from a strong pricing of 14% on average, which, together with efficient energy sourcing and cost management more than offset inflation.
The contribution of our joint ventures slightly declined because of which suffered from the lockdown in China.
Solutions & Products had a like-for-like growth of 99%. This is clearly coming from our roofing business, which demonstrates here that it is a key growth engine for the group.
This slide shows an overall picture of the performance for the 5 regions. Four out of 5 regions grew their EBIT. APAC suffered from the high inflation in India and the lockdowns in China.
Let's go into more detail, and we will start with North America. The region delivered here a record performance in 2022 with impressive results demonstrating the effective implementation of our transformation strategy.
Market demand remains strong with an attractive outlook driven by all the federal funding, the infrastructure, investment and Job Act and all the plan spending on energy and climate change. This makes us well positioned going forward with our unmatched footprint and well-accepted low-carbon product portfolio.
As explained by Jan, North America is the most attractive market for Building Solutions. And therefore, it has been our priority to develop roofing a profitable and fast-growing business in such an attractive market. And you can see here how successful the execution of the strategy has been as we are moving from CHF 5.7 billion of revenue in 2020 to CHF 10 billion in 2022, we're almost double here, the revenues.
And you see as well that Solutions & Products now represent the biggest segment in the region as we continue our journey to further expand in this segment.
Let's now move on to Latin America. The region delivered strong profitable growth in 2022. We observed robust dynamics in Mexico and Colombia and El Salvador. Growth continued to be fueled by a healthy pipeline of infrastructure projects, especially in Mexico. Price of the cost was positive in both the full year and in Q4 2022, led by strong pricing.
The region further progressed on its sustainability journey achieving significant improvement in both materials recycling and alternative fuel usage.
Let's go next to Europe. The region delivered strong results, achieving good profitability. And this amidst softer volume since mid of the year. Price momentum was excellent. The region clearly demonstrated its strong ability to contain cost inflation and optimize energy achieving a positive price over cost for both the full year and for Q4.
The region is at the forefront of Holcim's net 0 journey by systematically accelerating the use of alternative fuels, expanding green sales from ECOPack to ECOPlanet and making fast progress in green energy sourcing.
Turning to Middle East Africa. The region has consistently delivered good set of results during the year on a like-for-like basis. We observed good demand across key markets. Price momentum remains strong, especially in Egypt and Nigeria. The region achieved a positive price over cost in both the full year and in Q4.
Moving to APAC. Australia delivered a good performance on the back of healthy market dynamics and positive price momentum. In China, we saw a softer demand due to the COVID lockdowns. But if we exclude China, the region recorded a positive price over cost in Q4. The region also made good progress in improving its clinker factor and accelerating the usage of alternative fuels.
Finally, the slides focus on Solutions & Products where we continued to improve our margins in Q4. Solutions & Products now represent 19% of the group net sales. In North America, we accelerated growth this year with the successful acquisitions of SES, Foam and Polymers, Sealants North America. This -- and Malarkey, obviously. This allows us to offer a complete product range to deliver sustainable and energy-efficient solutions.
Let's now look at the full P&L. We've already commented the recurring EBIT that is growing at 3%. Next line, if you go to Restructuring, Litigation and Others actually contains the resolution with the DOJ and its related legal cost for about [$779] million.
Then as you can see, we have managed this year again for the fifth consecutive year to reduce our financial expenses. Our effective tax rate appears at 30%, but this is entirely due to the payment that we made to the DOJ, the [$778] million, which is obviously not tax deductible.
And if you take that out, our effective tax rate amounts to 25%, like in previous year. Due to the divestment of India, the net income attributable to the minority shareholders has significantly declined. So all in all, our earnings per share before impairment and divestments amount to CHF 3.66 per share, including the resolutions with the DOJ.
But if we exclude it or earnings per share, is up 25% and amount to CHF 4.96 per share. This year, we have chosen also to comment the EPS reported on an IFRS basis due to the materiality of the impairment and the capital gain, the net capital gain on the divestments.
Indeed, the impairment amounted to CHF 673 million, and this is mainly due to Russia, where we have impaired completely the assets, depreciated all assets due to the current situation. The net capital gain on the divestments amount to CHF 1.8 billion and it comprises the capital gain on India, which is a bit more than CHF 2 billion.
So that leads us to a reported earnings per share of CHF 5.48 per share. Let's now move on to free cash flow, we are very proud and very happy to report a free cash flow above CHF 3.5 billion, if we exclude the resolution with the DOJ and the related legal costs [$779] million.
Despite the unfavorable change in working capital, the impact has been contained to CHF 300 million in the context of growth. The profit or the contribution to our cash of our JVs has increased, thanks to higher dividends received. We had incurred nonrecurring expenses in 2021. That did not happen in 2022 apart from the DOJ, which also we're benefiting in our cash this year. So all in all, our free cash flow, including the settlement with the DOJ amounts to CHF 2.8 billion.
And that leads me to the debt. Our net debt has reduced by CHF 4 billion and now amounts to a very low amount of CHF 6 billion. Obviously, we have benefited from the free cash flow that you can see for CHF 2.8 billion. And then the portfolio transformation had a net positive impact of CHF 3.7 billion, thanks to the high-value obtain and the high valuation obtained in the divestments. Indeed, the proceeds amounted to CHF 7.2 billion less the cash disposed of CHF 1 billion and the new acquisition of CHF 2.6 billion gives you the net of 3.7 positive net.
We have also paid dividends for CHF 1.6 billion to all our shareholders.
We have bought about 0.5 billion of treasury shares. And we have started a share buyback program that represents CHF 400 million of spending as at year-end. So with such a very low debt and excellent leverage of 0.9x, as Jan mentioned it, we are actually far beyond or well beyond the objective of being below 1.5x that we set to ourselves for 2025.
So with such a strong balance sheet, we felt it was important to go through our capital allocations principle. And the first priority is for the portfolio transformation and to invest in acquisitions and projects that will bring growth, profitable and sustainable growth.
With such -- and as long as our balance sheet remains strong, we are, of course, very happy to share our success with our shareholders. This is why we continue the execution of the share buyback program in 2023, which will lead to either 40 million shares more or a maximum of CHF 2 billion.
The shares will be proposed for cancellation at the next AGM. On top of this, we are also increasing our dividend by 14% to CHF 2.5 per share. And you remember that this is also exempt from Swiss withholding tax.
So before handing over to Jan, I want to thank the teams for their hard work and the good teams period along these past -- 5 past years. Over to you, Jan.
Thank you, Geraldine, and we come to the outlook. We are able to give you a very confident outlook for year, 2023. We have good order books across our key markets. We have in the European market, which has been softened since May last year by 3% to 5%.
Nevertheless, we are able to have good margins. We are able to improve a lot with our sustainable products now where we get good pricing and high demand. So also for Europe, we expect a very solid result for this year. And then we have our growth regions of North and Latin America where we have very good order books and a lot in the pipeline to be very successful this year.
So we are guiding for a positive growth, 3% to 5% is what we say in our strategy 2025. So at this point, we want to leave it there. At the same time, we believe our margins are at the right level for this year. So we believe we're going to have an over proportional increase in EBIT for this year.
And also for the cash flow, we want confirm that this will be also a satisfying year of around CHF 3 billion cash flow. And then, of course, we're going to see a further reduction of the CO2. As we discussed before, we have concrete target of more than 10% of CO2 reduction per net sales, what we want to achieve this year.
Year started well. You have seen 7 acquisitions already in January and February. So we are not only off to a good start, we have a lot in the pipeline. So every quarter, we talk about the outlook and every quarter, we have rather increased the outlook. And I think I was saying that there is no recession at Holcim, and this is what we still see today.
Holcim going to have a strong 2023 for volume sales and then especially also for bottom line and especially for strategy execution, more solutions and products, America, more sustainability.
I think these were the highlights and the views we would like to share with you, and now we are very happy to have your questions and comments.
It's Cedar Ekblom from Morgan Stanley. I've got three questions. Firstly, Jan, can you talk about your transition to the Chairman role? How is that going to change your day-to-day involvement in the business? And then two questions on the U.S. Solutions & Products and Roofing market. It's been a fantastic growth story for the business. There is, however, a little bit of concern out there in the market about that business and that industry over earning and whether Holcim is acquiring assets at the peak of the market? Can you tell us how you see that business today, the market backdrop? And then secondly, when we think about the right margin for roofing over the next 3 to 5 years, you talk about the upselling potential, solar roofs, green roofs, cool roofs, et cetera. And you're also buying more products into the business, Duro-Last is obviously a great example of this. How high can that margin be? How do we think about the margin transition for Roofing?
All right. Cedar, thank you so much for the questions. So I'll start with the second one. Look, for Solutions & Products, we have just started. So while we are very happy to report already such convincing results and while Solutions & Products has already such big impact on our growth and profitability, we just started 2.5 years ago. And I'm very happy that the team around Jamie put together such a winning formula to run the business to benefit from our synergies as the largest building materials company from supply chain to the customer, so I'm very happy, and we just started.
So we have achieved 19% EBIT margin in this now $4 billion roofing business already. I think that that's very remarkable. But I think our targets go beyond that. How far beyond? We will not make any precise number today.
You can also see some of the peers who have numbers out there for North America, you will realize it's a very attractive market from the returns.
And we are very happy we could enter there. And we just started. You can see now also ongoing. And regarding a peak of market, I don't think we have a peak of the market. We had super disruptions to deal with in roofing over the last 2 years.
We had from -- coming from corona, from the corona lockdowns. We had a lot of challenges, and our teams have managed this very wisely and very successfully, and we look forward to a very strong roofing market ongoing.
Regarding our organizational changes, first of all, maybe let me start by -- I'm very -- I'm committed to Holcim, 100% for the next 10 years or whenever someone will decide, it's not necessary anymore. But for myself, I'm motivated, and I always share that with everyone, Holcim is my mission to make the transformation into the most sustainable and innovative company, and that's what I want to do until I retire.
Now regarding the position, I was very happy now to succeed. As our Chairman has decided not to stand for reelection. So the Board decided that I'm the natural successor there for continuity and to ensure that we continue as strong as we are.
At the same time, we have the situation that we have the highest speed ever in our execution. We have 7 acquisitions in the last 2 months. So the Board at the same time has asked that this very successful team we have today continues for this year to make sure we're not losing any speed.
So for me, not much is changing. I will run the company for this year. And then we look forward after that to have a very strong succession for CEO. I look forward to that, hopefully, smarter person with a lot of energy. And then I will be around.
And I will make Holcim my mission beyond my CEO term because that's what excites me, and that's where my passion is.
Bernd Pomrehn from Vontobel. You mentioned that you are sold out for some products in some regions. Could you talk a little bit about your CapEx plans, CapEx priorities? Roughly, how much will be dedicated to the Americas? For example, how much will be dedicated to Solutions & Products? How much will be dedicated to green products? Just to give us roughly an idea.
First of all, I'm very happy to invest in the business. This is key. This is key to make products decarbonized, decarbonize the process. So very happy to continue to invest. We -- however, we found a very good level of CapEx for all those years, around CHF 1.4 billion. And we found that this is sufficient to, of course, maintain the company at the highest level, but at the same time to make all the green investments.
And we have just, I think, also in the presentation that we are now at -- I think at CHF 400 million plus CapEx already simply for decarbonization, which is a very good number, and this will continue to grow. At the same time, our company will be less capital-intense. So the business is like roofing. They have much, much lower investment needs in percentage of sales.
So we have very exciting projects going forward. Now specifically to your question, there are two answers to your question. The first one is that, of course, North America is a super attractive market and we want to make sure not to miss out on all these opportunities. And when I listen to my team in North America, that opportunities are just starting.
You see our high growth numbers also organically, but you see for the future with this Anti-inflation Act and so that is huge demand for us. So we want to make sure we are ready for that. So we invest, of course, in the business.
At the same time, we have in Europe, but also in Latin America, very exciting opportunities for decarbonization investments, and they have very high returns. So that's the second part of my answer.
It's not that we now shift all the CapEx to North America, we have very attractive CapEx also for the other regions. And we do that very simple. We don't even do much budgeting for -- by country or by reach because we budget project by project. We want to see the most attractive projects get the money, no matter if they are in this region or that region.
Can you hear me?
Elodie, we hear you well.
Okay. Great. Well, congratulations on your new moves to both of you, so better luck. I have 2 questions. Maybe the first one on your guidance. The 3.5 -- the 3% to 5% like-for-like sales growth. So if you could give up a bit on where you see pricing in there, the carryover from what has been announced already and the further price increases that I suppose you're trying to push through and volumes? So what should we expect for volumes generally for the group in '23? And if you could give us the big trends by division, that would be helpful. And then I just have a follow-up on the margin question on Roofing. So you are at 19% margin, but your Solutions & Products is that 12%. So I was just wondering what's diluting that margin overall? And where do you see that 12% going into '23?
Yes. Thanks, Elodie. We give, at this point, not the precise guidance on the targets, of course. But obviously, we are very confident and where does the confidence come from is that we have this huge hyperinflation challenge last year, and we had to raise the sales prices by 14% in the last year to make and come out with a record result.
And that was not an easy task, and I'm very proud about our regions and our key countries to make this happening. We only had a very few markets who couldn't offset the cost inflation but we could offset it in most of our markets. So I'm very proud of that. And now we go with some hangover into this new year. And of course, we have a very strong shouldn't say hangover, but we had a very strong situation now on the pricing.
And at the same time, we have now a decrease in costs since December from energy and others.
And no matter how the cost situation plays out this year, we are very confident that we are in a very sweet spot for the margin for 2023. Your more detailed questions on countries or where it is? I'm a bit hesitant to answer now. I think we can talk about this more after Q1 reporting.
For now, maybe just take back that we're very confident in the outlook, and that's why we guide not only for growth but also for over-proportional margins and EBIT. This is a bit the same for the Solutions & Products business. Of course, you see we have motors, we have we have other segments in Solutions & Products. And obviously, they need to catch up now with the roofing business. And there, we have a very big upside potential here in Solutions & Products to increase the margins already this year.
Remo Rosenau, Helvetische Bank. Going back to corporate governance, you just said that you're committed to Holcim for 10 or whatever years. So should we think about your new role rather being kind of an Executive Chairman role or just the Chairman role? First question.
Second question, is there any preference about your successor as a CEO in terms of internal or external solutions?
Remo, I think Holcim has been committed to highest levels of governance for the last years and is committed to do so in the future. So you noted that even in today's press release, we wanted to share how we have Hannes Sorensen, who is already our Vice Chair, becomes the lead Independent Director with large competencies to make sure we have the checks and balances.
I think at this point in time, we have to take care of Holcim and the shareholders, and you can always think about governance, what box to tick. But we're going to take all the right boxes and do what's the best leadership for Holcim. I think this is Board had in mind. And this is why they also took the courage to say, you know what, this year, we want the team to run. We don't want to disrupt now with a change.
So for me, that's all well organized, and I look forward to be doing that this year. For the succession, let's wait for the succession. We have fantastic people in the company. We have great talents, and I don't think we will have an issue to appoint the CEO succession.
I mean I don't have any issue with this double mandate for 12 months-or-so. My question was just when that is over, when there is a new CEO and you will be the Chairman, will you be a more active Chairman than kind of an Executive Chairman or just having a similar role as Mr. in the past?
I don't want to talk about future and past Chairman positions. I'm committed with Holcim and I will put my experience and my energy in for Holcim in a positive thing. This is not something about ego or something. This is about Holcim and my own success is only measured in the success of Holcim and that can be assured that we will have harmony, teamwork and a lot of success in the future.
Okay. Okay. Then let's leave it at that. Something totally different. You mentioned this 21% reduction of CO2 footprint relative to sales. Of course, most of that is due to the structural changes. I mean you sold India, that alone is changing this ratio a lot. . Do you have also kind of an organic number? How much did you reduce the CO2 footprint with not including all these changes?
Of course, we have that. And again, this number is a combination of various things. First of all, the strict decarbonization of, let's say, cementitious products, which was around 2% last year, plus the sales growth, so the number will be higher for this calculation. And then, of course, we have decarbonization through these lower car products we are introducing to the market. And then we have, of course, big transformation by expanding into sustainable solutions like roofing, like insulation and So it's a combination. And the larger part of this reduction comes from the second part of the equation. But nevertheless, I think that's the right strategy for the company, and I'm very happy we make such significant progress.
But there is no concrete number kind of -- there is in the annual report...
Of course. Of course. We continue to publish our kilos of CO2 emitted by per tonne of cement and on a like-for-like basis, it has reduced by 2%.
Last question. Without any additional pricing actions, what would be the spillover effect from all you have done already into '23?
The question is how is the cost inflation turning this year? On the pricing, we are confident we have a good pricing in place. We have especially the good new products in place. The question is, is energy costs rebounding backup high? Are they staying where they are? So that's the thing we don't know.
For us, honestly, after managing the hyperinflation last year on a weekly basis, however, the cost environment will carve out this year, we are prepared. So that's why we give the guidance and we're going to have an overproportional increase in margins for 2023.
The next question comes from the webcast and is from Mr. Tobias Woerner with Stifel.
Yes. Apologies directly from my living room. Two questions, if I may, Jan and Geraldine. Number one, you've been quite active in terms of divestments. Should we expect more here, especially on the emerging market side and in context of listed entities where you can't get the cash out via dividends? And if so, do you feel that this could be a more difficult process?
Secondly, then moving on to the other side of the M&A, i.e., the acquisitions. A number of your peers are sort of more cautious on the first half and possibly for the full year '23 in terms of doing more sizable deals. Is -- does that also apply to you or are you simply focused on the opportunity rather than the timing given your strong balance sheet?
No. Look, I don't want to comment on others. But look, we come from a record year coming from a strategy which works and shows results. So we have no reason now to change strategies, and you can expect more of that from us in the future.
We demonstrated already that the year started very active, 7 acquisitions. And we have a few more in the pipeline. We might read about in the weeks or months to come. So we are very positive, and of course, have no reason not to be.
The same on the markets. We gave a very positive outlook because it's positive for us, especially with the country profile, we now have established in Holcim. And talking about the country profile, we have the profile we wanted to achieve with a bit less emerging markets.
Now more than 80% of the sales is in North America, Europe and Latin America and that's the profile we wanted to have. So we have no immediate divestment needs from any other countries. There might be some decisions in the future where we divest a few businesses. But I think the profile we now establish in terms of geography, that's what we wanted to achieve.
Martin Huesler, Zürcher Kantonalbank. I have two questions. I'll ask them one by one. First of all, I was surprised by the quite low energy bill '22. Can you say how -- what's your view for this year? What's your hedging strategy? And do we see incremental increase in the overall energy bill for this year?
I think I give that question in a second to Géraldine because she is very -- rightfully very proud of the, I would say, smart contracting. At Holcim, we never make a shortcut in the supply chain. We always make sure we are properly supplied. We believe in long-term contracts with utility companies. We believe in smart prebuying, not hedging, prebuying of products we need or energy we need. And we have been doing that for all the recent years. And you remember, we never talk about hedging at wholesale because that's something we do quite well over all those years. We've done well in 2022, and we've done it now -- Géraldine told me, we've done it exceptionally well for this year, but...
Yes. No, absolutely. So you see it. I mean the markets have increased about 80% in 2022 when our energy bill has only increased by 40%. For 2023, we don't have any dogmatic approach on hedges, as Jan mentioned.
So we are trying to keep bottoms views and having a pragmatic approach to our energy cost for 2023. We see that it could increase flat to high single digits. That's a bit the range because we don't have crystal ball. For the reason also we are not fully hedged. We are about 2/3 of the hedgeable part is hedged, to answer your questions.
And the next question, turning back to the CO2 development. And obviously, in Europe, the legislation gets tougher, allocation has become smaller. So what's your -- do you have -- obviously, you have, but will you share this a reduction plan in Europe? And how does this compare to what the trading scheme is want you to do? Can you fulfill that? And do you still have excess emission rights in Europe?
So yes, thank you. First of all, I'm excited about the CO2 scheme in Europe. And I always said that when the CO2 price was at EUR 20, I think I said, I wish it's EUR 100 because that gives us the needed return on our investment. I think it's now around EUR 100 or something, and that's a good price that gives us a lot of return on the sustainability investments because nowadays, everyone is short in our industry on CO2 certificates.
So now -- and you can see that now in the strong pressure we have in the pricing. We have significant. We had the biggest sales price increases in our traditional business segments were in Europe last year. And one of the key drivers or the key driver is sustainability and the CO2 scheme.
And CO2 scheme has two fantastic mechanisms. First of all, it's an incentive scheme to reduce new emissions because we directly save the CO2, so very high return. And secondly also because it's difficult to produce extra tonnes, which are not covered by certificates, you have also a limitation in market volumes and both led to extremely strong pricing in the European market. And the one who's running faster than the competition is the one benefiting and we have the clear target to run fast in reduction of this decarbonization rate.
The next question comes from the telephone and it's from the line of Yassine Touahri with On Field Investment.
Yes. So two questions. First, what key piece -- what would be the key pieces of advice that you would consider giving to the next CEO of Holcim based on the successful growth and transformation strategy that you've implemented at Holcim and at before? And what do you think will be the key challenges for your successor? And then second question, which is maybe a little bit more technical. It seems that you've stopped disclosing volumes in your presentation on your annual report. Is there any explanation for these decisions?
Now -- so yes, and you're right, we don't disclose the volumes in details by country with regard to cement anymore. You're totally right, but we disclosed the impact of the volumes for this activity. And also I presented it during the financial part. But you're right, we -- with the portfolio transformation, we have decided not to give specific details on the volumes of 1 segment per country. That's right.
On the succession, it's very simple. If you have the best in mind for all SIM, we hope that the next CEO will be better than the current one. With high energy, smart, and while we all like the current strategy and we -- and it shows results, the strategy has to be constantly developed and -- maybe there will be other segments we could enter in the future. So I'm the first one to be open to any strategic development. And again, I hope the next CEO will be stronger and higher energy to bring Holcim then to the next level of performance.
No, I'm [Samuel Weber], I'm an independent wealth manager. And given your impressive results and low leverage, it seems you have a lot of firepower financially. Do you think you can use that all for acquisitions? Or if not, the window seems to be closing quite fast to be able to buy back undervalued shares. So how do you think about that in the future? And the second question would be, there is only one, I don't know the word in English, but [Foreign Language] in you're impressive -- otherwise very impressive operational results. And this is the CHF 6 billion Ready-Mix Concrete business, the EBIT margin, and how should we think about the development of those 2.4% going forward?
Thank you for the question. I'll start with the second question first. So the Ready-Mix Concrete business is a business which is very low capital intense, but at the same time, has very challenging margins. For us, why we always like the business is we are supplying our aggregates and our cement products inside that business. So we have some vertical synergies and vertical margins you cannot underestimate. Nevertheless, it's our big target to improve the profitability significantly also in this business segment. This is why we always show it separately, and we also have established separate profit and loss leadership for this business segment in the countries. I think that segment will be also extremely important in the future for decarbonizing buildings and the way to build because to have lower CO2 in the final concrete is the real target and that's why we believe this segment is also very important strategically for us in future.
Regarding our cash position and our debt position, first of all, I'm -- we're very happy to be in this situation. Very happy we could make all this strategic shift with such a value-creative momentum. So we are in a good spot.
I personally was very excited to make the share buyback and then we decided to make it as an express buyback because we don't want to harm our future opportunities. So we said, let's take now CHF 2 billion, but let's use them within 5 months, and let's not have a long-hanging share buyback because we want to sit together in May and see what are the projects in the pipeline? What are the investments? What are the acquisition opportunities?
And then we can take maybe the next decision. And then we have to decide at what level the stock is undervalued? It's CHF 60 or CHF 70. And then we have to put this all together. I think this is the way to do it.
And first of all, we are very happy to have all that shareholder value we create also with an increase in the dividend share buyback. And then in May, we sit together and we see how much money we spend for acquisitions, what's in the pipeline and -- and that's a very -- I would say, a very comfortable position of strength we are having.
The next question comes from the telephone and it's from the line of Ross Harvey with Davy.
My two questions. The first one relates to return on invested capital. And clearly, you've made a lot of progress there, not just this year, but in recent years. I'm hoping, Jan, you might be able to describe the impact of the shift to Solutions & Products as part of that? I know you mentioned that there's lower capital intensity in some of those businesses. But if you can address the point around maybe margins and asset turn and what the business would look like from a returns perspective as that transition continues?
And the second one is in relation to your outlook. I'm wondering if you can address North America in particular, given the size as part of the group? Just what are you seeing there across your different product lines and the degree to which the infrastructure funding can contribute to your 2023 financials?
Thank you. If you look at the capital intensity of Holcim today, we have shifted already a lot. We are now on a new base of around CHF 1.4 billion of CapEx, which is now below 5% of our net sales. So that's a new level, and that's thanks to the shift to Solutions & Products, but also thanks to very smart investment and CapEx decisions in our traditional cement business.
And you can expect this to continue with us. When you look at solution products, isolated to your question, I would say this business has -- we target about 3% CapEx for the business, which is plenty, plenty to grow. If I don't grow in that business, I can go below 2% of sales.
And this is what you can expect from us. We are already below 5% of CapEx by net sales, and this will be further decreasing over the years to come.
You had a question on our American outlook. We have our head of North America here I don't let him speak, he's too bullish. But you can catch them maybe over lunch later. Look, the North American market is in a very good stage. We are sold out still on certain products.
We have good order books. And at the same time, all these huge government bills, government initiatives have not started yet, so we expect them to come in later this year. And these programs, they are so significant for us, they will have a runway for us for the next 5 to 8 years. So this is why we are so positive on North America and positive on all the investments we have done to expand this region for Holcim.
So we have a very positive outlook. We're going to have a very good result this year in North America. And what's even more important is the outlook is even more attractive. Now I was also a bit bullish,
It's [indiscernible] Two questions. First, there was a statement this morning made by you that we should expect a couple of bigger acquisitions but no blockbusters. So could you maybe give some flavor what this it means in terms of size something similar like Duro-Last?
Yes. And we have been very good, I think, in our acquisition strategy. If you look in our materials, we give you an indication that -- for example, in roofing, we are already from -- we bought at 11x, 12x EBITDA multiple based on last year's results, we are down to 7 already. So obviously, we do this very well. And I think what is important to realize the size of acquisitions, the small to medium ones, they are the ones rather easy to integrate, easy to lead. And when it gets too big, you have all these issues on timing, on who is responsible for that. And this is what I was a bit elaborating around.
I mean, obviously, we were having a CHF 2 billion acquisition with Firestone, and we made this very successful, and we have Malarkey and Duro-Last, 2 also significant businesses with $500 million to $600 million of net sales from the start.
So we feel very comfortable with those type of acquisitions. And we feel also comfortable with the loans. They are in the range of maybe CHF 20 million to CHF 200 million each, and they are even the easiest on synergies because they are local -- usually family-owned businesses and they are rather fast in integration and in realizing synergies.
So this is a bit the strength of Holcim. This bolt-on to medium-sized acquisitions, they work very well. And the question this morning was about like mega acquisition and I'm just -- I don't say no to this, but we have to realize that can be quite complex and lengthy process.
Okay. And then maybe, Ned, in terms of leverage 0.9, you're now at the lowest level for a couple of years. So is this a range that we should expect to keep? o would you go back to the 1.5x or even 2x?
Look, I think what is important about the strength of the balance sheet that you have the entrepreneurial freedom to do the right things, right? When you are at 2x-plus and you want to buy Duro-Last, you have to negotiate with some banks to give you credit or something. And this is not a good position to be in, and I think it's a high value for a company like us who is growing, who is acquiring to have the firing power to do so.
And that's why I think 2x is too high for us. We had 0.9x, which I think we should be glad about that. If we go up a bit, depends on the opportunities we have in the market. But a strong balance sheet and a low debt leverage, I think, is key for success.
The next question comes from the telephone and is from Mr. Gregor Kuglitsch with UBS.
I've got three questions, please. The first one I think you mentioned in one of your remarks, sequentially, energy costs are already declining. It looks like, in general, there's not much left there. So I guess my question is, do you think that cement pricing or aggregate pricing could sort of trend down with that? Or do you think you'll -- or perhaps you look at it differently and you look at sort of trying to capture positive price/cost spread of some sort. So that would be my first question.
Second question is a relatively simple technical one. Can you just tell us the net M&A, EBIT or revenue, ideally both, impact of all the deals you've done, so divestment and acquisition sort of so we can have a sort of clean baseline, I guess, to think about your organic growth for 2023, please?
And then the third question and maybe it's a bit personal. But obviously, the business is doing very well, yet both of you are deciding to sort of step back or leave. So I kind of wonder why that is?
Okay. I mean, look, I take the first and the third question and then Géraldine takes the one in the middle. And look on the pricing, I said before, we have excellent pricing in place. I think we are in a different cycle at Holcim now. Our pricing is not correlated with energy costs or something, and I know there was a lot of debate in the past about this. But if you follow us, we have been increasing sales prices for the past 5 years, every single year. And this is also what we're going to see this year.
So we are planning on price increases for all key markets for this year, and we're going to make that happen. And that's why we are so confident on the margin. And again, on the energy costs, they came down December until [today], but we don't know what's going to happen tomorrow, but we will be in a good position no matter where the costs are curbing this year.
On the personal question, I'm not stepping down. I mean I'm not stepping I'm the CEO of Holcim for this year and then let's see who comes next. But this is very important to us. We have a winning formula, and we have a winning team, and we will continue to do that. And I'm not stepping down from anything. So -- instead, I'm saying I will be close with Holcim for many more years to come.
Yes. And Greg, you asked about the scope impact to take into consideration for 2023. You asked that for the EBIT level. So obviously, for the scope, it's easier, it's about CHF 300 million that you have to subtract. And if you take into consideration all the EBIT of our acquisitions for 2023, you get something around more than CHF 150 million of additional EBIT. So it gives you a bit of a net scope for your modeling.
And that's with Duro-Last in for -- or is it including that?
Yes, it does include Duro-Last.
[indiscernible] Jan, I want to follow up on one of the questions before, but from a broader perspective. I remember when you announced the Firestone deal, you said the key element is to buy a platform and to develop the business from there. And I think you were very, very successful in doing that in North America. You also mentioned that you had two factories in Europe and you saw plenty of opportunities. But if I look at the acquisitions you did, it was in other areas. So two questions. One is, do you still see the chance that you can consolidate the European roofing market? And second, do you still look for a second platform where you basically can repeat what you did with roofing?
Look, first of all, we should be all very happy that we were able to establish that roofing business we did with $4 billion of sales, mostly in the U.S., totally correct, but I prefer this even of being spread out too much. So we are one of the top 3 companies already in the U.S. market. And when you look at -- and I think we provided that information in the slide, that's a $40 billion market alone in the U.S. So we have plenty of room to space this. I told the team, there's no reason you shouldn't do 8 billion in the years to come in the roofing segment. And roofing as comes with insulations is super highly attractive. You saw the return.
So I think we did everything right there. Now of course, we also are excited to grow in Europe. You said we have two factories, one in Germany, one in Spain.
And we just announced the acquisition of Flat Technology, a German-based excellent company in roofing systems. So we also are expanding in the European market. And so we're doing both. We have also establishing a second platform, what we call Specialty Building Solutions, which are basically facade systems and motor systems.
We bought four companies in Europe. This is already a $600 million platform, which also has a big underlying market volume. So we have already two platforms, and they by itself, provide a lot of space to grow.
If I'm not mistaken, the roofing market in Europe is around CHF 20 billion. So let's put it that way. You got a foot in the door but not more. What is holding you back? Is it the lack of opportunities or what is it really?
Well, we have a high speed. Imagine the number of -- we just started in roofing in really in April '21, right? So we have a super high speed. But you know what, I will forward your message to the team and tell them. You did -- you did -- I would say you did okay, but we are not happy in Europe, and we're not happy with the market share in North America. And this is -- that's great news, right? Because the market even CHF 20 billion, so we have a CHF 60 billion market we can grow. And that's what we try to do, and I will. We'll talk to the team and ask them to do a bit faster.
The next question comes from the telephone and it's from Mr. Yuri Serov with Redburn.
I just want to go back to the discussion about volumes. You said that there is no recession in Holcim. Can you please try to explain what you mean by that? I mean what sort of volume growth? And I'm talking about the heavy side of business, what sort of volume growth you're expecting in 2023 across the business and maybe by region?
Look, we're not guiding on volumes. Even what Géraldine said before, we were guiding less and less on volumes because we are becoming a different company, which is not only just a supplier of tonnes, but it's a supplier of building systems. . Having said that, there's no recession also because we're going to have profitable growth this year, and that's our definition of a recession. We're not going backwards. And you're going to see a good year for Holcim. And the volumes -- now before you will insist on an answer, we will have -- and I said this after Q3 already, we have a softening in Europe.
So if you go traditionally to cement volumes maybe for this year, 3% to 5% volume decline is maybe a realistic target or a realistic scenario. But then for Latin America, we expect growth on volume plus strong pricing. And for North America, we have also the expectation that we will sell more volume in the classic cement segment. So when you put it all together, we are also on the volume side with a positive outlook, but no more details at this point.
Okay. And also pricing, maybe you already answered this question, but let me just ask it more specifically. Are you saying that you're expecting continued sequential price growth not necessarily year-on-year, but from here, your prices are going to continue growing? And again, my focus is on the heavy-side businesses.
No. Look, the heavy side has 1 big advantage. It has a lot of room for price increases because the materials are literally very inexpensive. And if it is required to decarbonize further, if you have other costs and so on, there's a lot of pricing power to this segment and you can see it from this 14% price increase we realized in 2022 that there's a lot of pricing power coming with the business. And we expect that the pricing will continue to be very positive for us based on smart products from our side, but also based on sustainability where decarbonized products, lower carb products having higher values for the customer, and we will make sure that we price them on the right level.
Okay. And can I just ask 1 last thing? You said a few times that the year has started well. But then you say, well, we've been very active, we have 7 acquisitions. If you look at how the year started from the market perspective, does that statement still apply? Are you happy with what you're seeing in terms of the demand and what you're selling?
Well, January is maybe the the lowest or second lowest month of the year for construction for building globally. So that's why I don't want to burden you with a too detailed outlook. I think I gave already a lot of color on what we see for the order book, what we see happening for North America, for Europe for Latin America. And I think for today, I would be very happy to leave it there. And then I think after Q1, we're going to give you a more detailed outlook.
[indiscernible] Still a question on growth. Coming back to the Product & Solutions business, I'm wondering -- still trying to understand what happened in Q4 on a like-for-like basis. You had a significant growth of 19% full year. You barely grew in Q4. What's the...
Look, we had in Q4, you saw the Solutions & Products business is largely in the U.S. market, and we had simply we had the huge snowstorm in December where we literally had a 10-day stop of our construction activity. You also saw for our other North American business was slow in sales in Q4. That's fully based on the snowstorm. And I think we lost around CHF 300 million of sales due to this. And that's not an excuse, that's why we didn't write it anywhere, but that's just going to happen any month of the year, but we had -- in quarter 4, we had -- the weather was not favorable for us, but you can expect that this will be fully recovering for this year.
The next question comes from the telephone and it's from Mr. Brijesh Siya, HSBC.
I have two questions. The first one is on low cost of products. So yes, previously, you talked about low carbon products, you're pricing it in line with the cement, the normal cement because you wanted to be the most sold after the normal product, but it seems you are talking about higher pricing and better margin. Could you please just clarify whether you've changed your strategy in terms of how you price this product? Or it's that the carbon footprint is lower hence, you probably benefit with a higher margin because of the lower intensity? So that's my first question.
And I think the second one is both cost inflation and the pricing. And you talked about cost inflation will be flattish to high single digit and looking at how the pricing evolved last year and what you are indicating that you would be raising prices, it looks like you don't need any price increases unless the energy prices kind of starting again?
Look, we talked about the pricing a bit before, and we are in a good position. And we manage this huge mountain of cost inflation in 2022. And now we I think we are in a much different scenario. And I think, again, we have a good position on the margins. I think all our key markets have further price increases for this year plan. So it's even that we go ahead here and the cost at the moment look like they came down. So that's why I'm so -- have such a confident outlook for you today that we probably should not worry too much on the margins in 2023.
And if you allow me, then I would not like to say much more. And we talk about this after Q1. On these lower carbon products, we're very happy to have launched these global brands of ECOPack where we have to promise that it's at least 30% CO2 reduced compared to ordinary products. The same for cement where the product name is ECOPlanet, so very successful brands, and they make already a significant part of our sales in those two segments.
Now what we try to do these product, they have higher sales prices, but let's say, in the single-digit percentage or something. And this is important for two reasons. The first reason is the customer, I would say, is well accepting sustainability when it comes with a moderate price increase.
And second, for us, at Holcim, we want those products to be our main products. As you know, we operate large-scale supply chains, and we want not to have niche products. So we want sustainability to be part of the main product range. This is why, for us, those products have to our blockbuster products, and that's why we don't price them at 20%, 30%, 40% higher, and they remain in the niche. We want them to be our main products.
So these are the two reasons how we're going to do that and working very well.
Yes. Just following up on the -- sorry, a clarification on the ECOPlanet. You talked about -- you've launched in 27 markets. Could you give us how the markets fair or what percentage of your products in Europe are ECOPlanet now?
We have -- so we have only -- we have it now fully launched in all key markets. We will first launch the ECOPack, the low carbon concrete, and then we launched ECOPlanet later. It is also on the same trajectory as ECOPact. ECOPact, I think we announced is that 13% of sales now already in concrete and ECOPlanet is on the same trajectory. It's just with a bit of a time lag over a year behind the ECOPact launch.
Last question from the webcast comes from Arnaud Lehmann, Bank of America.
Two questions. Firstly, on CO2, interesting that you're talking about CO2 per net sales. You mentioned the 20% reduction last year. I think you're targeting 10% reduction for this year. Firstly, could you give us the absolute number of CO2 per net sales for '21 and '22. And in your target of minus 10% for this year, what is underlying reduction and what is related to change in scopes, for example, the recent acquisitions? That's my first question.
And my second question is on currency. There's been a lot of devaluation in some African countries, in particular, Egypt, Nigeria or Zambia, Kenya, et cetera, are you confident that you can protect your margins through price increases to offset the devaluation this year?
So Arnaud, on the first question, we have all the calculation in the annual report, and I think we also have values to the numbers here. So we talked about this a bit earlier. I think that a large part, of course, comes from our strategy to faster grow in solutions and products and other sustainable building solutions. And another part comes from the decarbonization, where we last year reduced CO2 per tonne of cement issues by 2% that also plays into that. And we have all the numbers available in the annual report. And again, I think this is a very strong strategy of Holcim to track all those decarbonization efforts from a product line like cement to the overall company, and that is what we will be doing ongoing.
And Arnaud, yes, you're right to protect the margins in the countries with such currencies where there is strong devaluation or hyperinflation, and you need to increase your prices and our teams know it very well. And I can assure you that when you take the EBIT of these countries back in Swiss francs from 1 year to another, we find the same amount or higher, which is a proof that we do effectively take care and pass on prices as often as necessary and sometimes it's quite frequent for the reason you mentioned.
Very good. Thank you so much. I think we are at the end of the Q&A. It's my pleasure now for all the people who came here that we can have lunch together and some further discussions. We have all our executive committee members here. So they head from Asia, Middle East, Africa, Europe, Latin America, North America as well as our Head of Solutions & Products and our Chief Sustainability Officer. So please take the opportunity to engage in more discussions. And for those people joined by webcast, I wish you a good Friday and hope to see you very soon in person. Thank you very much for attending.