Cementir Holding NV

MIL:CEM

Earnings Call Analysis

Cementir Posts Record Earnings, Plans Growth

In 2023, Cementir Holding reported revenues of EUR 1.69 billion, slightly down by 1.7% year-over-year, while EBITDA soared to a record EUR 411 million, a 22.6% increase. Despite a dip in cement and aggregates volumes by 1.6%, 11%, and 10% respectively, the company achieved a net cash position of EUR 217.6 million, an improvement of EUR 122 million including dividends. Looking ahead, Cementir guides for 2024 revenues around EUR 1.8 billion and EBITDA approximately EUR 385 million. The company remains committed to sustainability with investments of over EUR 100 million planned for upcoming years, targeting a net cash position of EUR 600 million by 2026.

Overview of 2023 Performance

For the year 2023, the company reported revenues of EUR 1.69 billion, marking a slight decline of 1.7% compared to the previous year. Despite a decrease in cement volumes by 1.6% and significant drops in ready-mixed and aggregates volumes by 11% and 10%, respectively, the company achieved a record EBITDA of EUR 411 million, up 22.6%. Excluding nonrecurring income, the adjusted EBITDA increased by 25.4% to EUR 421.9 million, with the margin notably improving from 19.5% to 24.9%.

Forward Guidance for 2024

The company provided its guidance for 2024 with non-GAAP recurring expectations of revenues around EUR 1.8 billion and EBITDA around EUR 385 million. This reflects a cautious approach due to potential economic softness, notably in Turkey and the Nordics, which are significant markets. The net cash position is projected to be approximately EUR 300 million, with CapEx anticipated to be around EUR 135 million. Despite a strong cash flow, management is incorporating a degree of prudence in their outlook due to uncertainties, such as elections in Turkey and potential macroeconomic shifts.

Strategic Pillars and Sustainability Commitments

The company's strategy remains unchanged, grounded on five pillars, with a particular emphasis on sustainability. Over EUR 100 million will be allocated for sustainability investments, and efforts in carbon capture technology and circularity within the value chain will continue. The company also aims for 51% of the cement sold in Europe to be decarbonized by 2030, in line with the Science-Based Targets initiative for a 1.5°C scenario.

Financial Objectives to 2026

By 2026, revenues are expected to grow to around EUR 2 billion, with an anticipated 5% to 6% sales compound growth rate. The company eyes EBITDA to reach about EUR 425 million, acknowledging this forecast is tempered due to the already significant EBITDA achieved two years ahead of schedule in 2023. The company forecasts challenges such as an increase in certain input costs and plans to optimize capacity in key regions to support growth. An end goal for 2026 is reaching a net cash position of EUR 600 million.

Dividend Policy and Cash Flow Expectations

Investors can expect a dividend payout ranging between 20% to 25%, signifying a progressive dividend policy. Over the next three years, free cash flow guidance is set at EUR 500 million, slightly conservative compared to the potential EUR 600 million due to uncertainties in exchange rates and assumptions around working capital. The company maintains a long-term vision of stability and growth, with a commitment to shareholder returns.

Earnings Call Transcript 2023-Q4

[Operator]

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Cementir Holding preliminary 2023 results and 2024 to 2026 Industrial Plan Conference Call. [Operator Instructions]. At this time, I would like to turn the conference over to Mr. Marco Maria Bianconi, Head of M&A and Investor Relations. Please go ahead, sir.

[Marco Bianconi, executive]

Thank you and good afternoon, good evening, and good morning to those who participate from the U.S. Welcome to Cementir Holding preliminary '23 results and the Industrial Plan updates. I'm here with our Chairman and Chief Executive, Francesco Caltagirone. And my name is Marco Bianconi, and for the first time, we are in audio webcast. So I'm sure you will follow the presentation deck that's been distributed a few minutes ago. So I will introduce the results moving to Page #4, and at the end, we will leave a Q&A session for our Chairman and Chief Executive to answer your questions.

So from Page #4, a few financial highlights. For the year 2023, revenues reached EUR 1.69 billion, minus 1.7% year-on-year. The non-GAAP revenues were EUR 1.69 billion, minus 1.5%. Cement volumes were down around 1.6% in almost all countries with the exception of Turkey and China. Ready-mixed and Aggregates volumes were also down during the year by 11% and 10%, respectively. EBITDA was a record EUR 411 million, up 22.6%. The non-GAAP EBITDA was up by 25.4% to EUR 421.9 million. This figure includes nonrecurring income of EUR 11.6 million, mainly related to gains on asset sales. So the non-GAAP recurring EBITDA is EUR 410.3 million, up 22% on a like-for-like basis. The margin increased from 19.5% to 24.9% in the period.

EBIT also was record to a EUR 278.3 million, up 36% year-on-year. Non-GAAP EBIT was EUR 299 million, up 39%. Profit before tax was up 23% to EUR 290 million. Non-GAAP pretax was EUR 315.8 million, up 39%. Important to underline the net cash position reached the record of EUR 217.6 million, an improvement of EUR 122 million year-on-year, including EUR 34 million of dividend distribution. Remind you that of this EUR 217 million, the IFRS 16 impact is around EUR 82.3 million.

Moving on to the guidance for 2024. This is a like-for-like non-GAAP recurring guidance. We expect to reach for the year around EUR 1.8 billion of revenues and EBITDA around EUR 385 million, a net cash position of around EUR 300 million and a CapEx of about EUR 135 million.

Moving to a few slides about the industrial plan. We have a rolling industrial plan, so the updates starting from Page #7, there is no change to our strategy, which is based on 5 pillars. At the first, there is sustainability, where we'll be deploying over EUR 100 million of CapEx in the period in sustainability investments. FUTURECEM continues to be at the core of our strategy. We continue to push towards value chain circularity, water recycling. And also, we are starting with some initiatives in the carbon capture technology in Denmark, where we want to be fully operational by 2030. We filed a commitment to be aligned to SBTi scenario of 1.5 degrees Celsius. And we continue to work to preserve the diversity and habitats and supporting local communities.

With regards to the other pillars, innovations continue to be at the heart of our operations. We're focusing on low carbon products like FUTURECEM and others, and we are increasingly utilizing artificial intelligence in our operating processes.

With regards to competitiveness, we are digitalizing all our main processes from manufacturing to logistics, to procurement. And we also maintain a high level of profitability and seek to continue to operate and achieve efficiencies.

With regard to growth and positioning, we want to continue to capture growth opportunities via the utilization of new green products. We want to reinforce our vertical integration in the Nordics, Belgium and Turkiye, and we would like to keep our global white cement leadership. We will use also M&A opportunistically in core businesses.

With regards to People and Organization, we have a very strong drive towards the zero accident policy. We are working to develop human capital, and we have in place a leadership program and the talent management and succession plan. And we have also invested significant resources on the Cementir Academy to develop, enhance our managerial and behavioral fields.

On Page 8, just to show that decarbonization drive is live across the value chain, starting from raw materials with the use of circular materials in the energy side with the use of alternative fuels, district heating and new green energy investment like solar and wind, and switched to natural gas and biomass in Aalborg from 2025. We are upgrading our plants like the Kiln 4 in Belgium, for example. We are also working to reduce clinker ratio and to improve our heat consumption in our manufacturing process through waste heat recovery.

Logistics, which is an important cost element, we are working on predictive maintenance. We are investing in green transportation fleet, especially in the Nordics. We are also working on network and root optimization and eProcurement. This is clearly with the overriding investment in FUTURECEM and the adoption of new technology like CCS.

On FUTURECEM, just one slide on Page 9. This is a key pillar of our strategy. As you know, this is a low carbon technology that we have developed in-house and allows for a 30% reduction in CO2 emission compared to ordinary Portland without compromising the chemical or physical characteristics. We have in place a pretty aggressive rollout plan that will bring FUTURECEM to represent around 51% of total volumes of cement sold in Europe by 2030 and around 60% of Gray cement volumes by the same time.

Moving on to Page 10 to illustrate our decarbonization drive. As you can see, these are Scope 1 emissions. We have further upped the bar to reduce our carbon emission by reducing the emissions that we want to achieve by 2030. As you can see on the right side of the slide, we aim at achieving 915 kilograms of CO2 per ton by 2030 in White cement and 718 kilograms of CO2 per ton in Gray cement by the same time. You also see below the graph, the trajectory of the clinker ratio, which is declining from around 80% of 2023 to 78% and 64% in White and Gray cement, respectively.

Moving on to CCS, Page 11. We have a couple of pilot projects underway. We have started already a pilot plant in Aalborg for the capture of CO2 using amine solvents and new heat integration methods. We are also participating in another big project that picked up in November 2023, which is called ConsenCUS, which, again, in Aalborg uses an electrochemical CO2 emission reduction technology. We are also investing heavily in PPA contracts. So long-term contracts for renewable energy generation and direct purchase of electricity from alternative sources. So this is, again, another important pillar of our decarbonization strategy.

But to summarize, on Page 12, you see here the CapEx highlights, you can see, on the left-hand side, the major investments in sustainability, this EUR 100 million cumulative 3-year investment program, which will encompass a number of initiatives, including Kiln 4 upgrade, switch to natural gas in Aalborg, CCS preliminary studies and a number of other initiatives you can see here. And on the right-hand side, you see the split and the breakdown between sustainability CapEx and maintenance CapEx over the industrial plan period.

To finalize presentation, the last couple of slides, Page 13. You see here the financial objectives to 2026. You see that revenues are expected to reach around EUR 2 billion. This is a 5% to 6% sales compound growth rates in the period. That is we expect a moderate increase in volumes with stronger volume growth in 2024, except for China. We also expect prices to be broadly stable or moderately up. As far as EBITDA, we expect to reach around EUR 425 million in 2026. Clearly, we are starting from a quite high comparable figures because we reached 2 years in advance our objective, it was a 2025 objective and was already reached in 2023. So clearly, the EBITDA progression is a bit more muted. Still, we have a number of initiatives supporting this absolute growth from capacity optimization in Egypt and Belgium to the fact that we will face a bit of a headwind in some selected input costs increase.

We are, on average, short about 250,000 tons of CO2 per annum, including a step-up in 2026 due to regulatory changes. You see the EBITDA margin after a big spike up in 2023 is just normalizing to the average historical margin level. The average yearly CapEx is EUR 112 million, which is a ratio of about 4% to 5% to sales. And then as already mentioned, a cumulative sustainability CapEx of EUR 100 million. And the most important, I would say, line is the last one. We expect to end 2026 with a net cash position of EUR 600 million. That means generating a cumulative EUR 0.5 billion of free cash flow before dividend. We also expect dividend payout to be in the 20% to 25% range, therefore, a progressive dividend policy.

Lastly, just the last slide on the comparison with the previous industrial plan. As you can see here that the sales remains broadly the same, we've upped the EBITDA in absolute terms, the yearly CapEx is broadly unchanged. The net cash position is increased by over EUR 100 million. So this is the presentation, and I will now hand over to you for any questions you may have to Francesco Caltagirone. Thank you.

[Operator]

[Operator Instructions] The first question is from Emanuele Gallazzi with Equita.

[Emanuele Gallazzi, analyst]

I have 3 questions. The first one is on Turkiye. Last year, you defined Turkiye as a wild card. And I think on 2023, the performance was very good. So I would like to understand which is your view on the country now and what are you including in the business plan?

The second one is on the 2024 guidance. If you can just elaborate a little bit more on your assumption for volumes and pricing and maybe giving us a sense of the negotiation you had with your clients in the Nordics.

And still on the guidance and on the EBITDA, the guidance is pointing to a 6% decline. Can you just comment on which country are you expecting this decline? So this 6% decline from which country is basically driven?

[Francesco Caltagirone, executive]

In Turkiye, we saw a very nice increase during 2023. We went from nearly 20 -- we increased nearly around EUR 40 million, EUR 45 million the EBITDA. So on the sense of next year, we expect from the moment that there will be the election on -- in the main cities around March. And also, you have seen that the head of the Central Bank has been appointed the new one just in this weekend. And so also the upturn in the rates would continue. And so we see a bit of softness for the economy during 2024. So part, I mean, more than half of what -- let me see, we expect as a sort of setback from this year compared to 2024 against '23. So that the EBITDA, it's around, let me say, EUR 25 million less, already [ EUR 21 million ], we expect that half of this is mainly done by '30. Also, you have to consider that the exchange rate is a big question mark because we don't know with still an inflation around 60%, the expectation is to go towards 2025, but we have to see the deployment.

Then we think that in the Nordics where we saw [indiscernible] decline during the end of the year, we see -- start to see an upturn during the second half of the year. And then let's say that in the last 5 years to the company and say, increased with the same perimeter, the revenue is around 50% and the EBITDA around 80%, 85%. So just to be prudent, we see a sort of consolidation. We still have to work at our, let me say, border, say that the Ukraine and [ both ] can afflict the Baltics and also the war in Gaza can afflict, let me say, Egypt. So we are cautious.

So we don't know if our caution is right, but let's say, sometimes even if you run a lot, you need to rest. We see a stable situation in the energy prices, both on, let me say, electricity and [indiscernible] and gas, so mainly the quantity should start to rebound in the second half. And let me say -- this is our, let me say, view for 2024 and mainly Turkiye is 50% of the gap that you see, but let's say, we have to see if this materializes or not. But especially after, let me say, the election that will be during March, we will have a clear idea. Yes. I think I don't know if I missed something that you asked.

[Emanuele Gallazzi, analyst]

No. Maybe any comment on pricing?

[Francesco Caltagirone, executive]

No, the pricing, let's say, it's, let me say, we expect for '30, but '30 is mainly also the translation in euro of the tax usually rather than, let me say, lift a little bit. But then we see in the Northern countries, the prices are stable. Also the big project on the Fehmarn is starting to kick in. Then also, as we mentioned, as you can see here, we are, let me say, planning to restart our second line in Egypt in the second half of the year. It is logical that today, let me say, we are aware that from the technical point of view, we can start in the second half. Then if the area is involved in other things, mainly due to the war in Gaza. We don't know if we can postpone of some [indiscernible] months due to security reasons. So these are, let me say -- but let's say that the number of what we expect in 2024.

2024 is just EUR 385 million, and let's say, EUR 50 million is coming from Turkiye. So the other are minus, but are spread in all the perimeters of [indiscernible]. We are -- we continue to see a solid cash flow, including higher CapEx. And so as I say, that this -- 2024 is the year of consolidation for what we see at this point. Then we might, let me say, upgrade or downgrade during the year looking at, let me say, you know that in the last quarter of the year, that we did also the election in the United States, and I think in April, May, there will be the election in Europe. So this year, let me say, it's not easy to the [indiscernible], let me say, in terms of [ microsignal ]. Also the central banks, as you know, are, let's say, now have stopped to increase the rates, but also there is uncertainty on when they will start, let me say, to lower the rates, and this also can afflict, let me say, some macros projection.

[Operator]

The next question is from Matteo Bonizzoni with Kepler.

[Matteo Bonizzoni, analyst]

I have 2 questions. One is a follow-up on this, let's say, guidance for 2024, which is for a 6% EBITDA decline. So you have said, correct me if I'm wrong, that EUR 50 million of this decline are coming from Turkiye. But you also see that pricing, I don't know, the pricing is not going down. Costs, I don't know if you can elaborate, but I don't think they're going up, if any, if we look at least at the spot commodities, but it might be different for you because of the hedging spot commodities, which are relevant for you are not going up or going even down. So if prices are not going down and commodity prices are improving, maybe just to understand what kind of sales buffer you have included in this guidance clearly is now very early in the year. So it makes sense that you stay with a little bit of caution because we don't know what is going to happen. We are only in the beginning of February. But just to understand the rationale of projecting an EBITDA, which goes down by EUR 25 million or 6% in a scenario in which prices are not going down and cost at least the spot commodities are improving.

And then I have a question on the cumulative free cash flow for the plan in 3 years, you are guiding EUR 500 million of free cash flow. But the yearly CapEx at the end of the day is not about depreciation because the yearly CapEx is EUR 112 million, which is, if any, slightly below depreciation. I was calculating a little bit of approximate bridge and to get to EUR 500 million, I assume that there is some working capital absorption or some assumption also working capital, which I don't see here if you can clarify because in my bridge, you should be closer to EUR 600 million than to EUR 500 million. So I just want to add a little bit of color on the various parts of the cash flow bridge in the 3-year period.

[Francesco Caltagirone, executive]

Starting from your last question, let's say that -- as I said, when you forecast for a year, you have some uncertainty. When you forecast for 3 years, you have bigger uncertainty. So it is true that, let's say, frankly speaking, the average free cash flow after tax before dividend, it's, let me say, around EUR 200 million. But here, we have put around EUR 170 million, that is EUR 500 million, just because we don't know the exchange rate. We don't know -- we need also to say a little buffer because if we also improve the revenues from EUR 1.7 billion to EUR 2 billion, and we keep the working capital in terms of [indiscernible] at the same level, we might have an increase in absorption of capital.

Then going to, let me say, back to the cost structure, let's say, I confirm that we see and we are aged partly more than, let me say, 50%. The energy also we don't see, let me say, a scenario where the energy are more or less the same. But we see some inflation in the personnel costs for sure in the various countries. And this, let me say, considering that we have revenues of, let me say, between EUR 1.7 billion and EUR 2 billion in the plan, let's say, even, let me say, 1%, 2% or 3% in change can, let me say, bring EUR 10 million of dividend -- difference in the EBITDA. Then in Turkiye, let's say, it's just a cautious approach because it's a volatile country. And if, let me say, we went from, let's say, 2 years ago that we were close to 0. And now we are, let me say, around EUR 70 million, let's say, there is the possibility like so even in the stock market of some retreatment. So it's just, let's say, a cautious approach because we don't want, let me say, to sell dream, but I want to sell the reality.

So the company is performing well, is producing, I think, a very good cash flow and also we increased nearly 5 points of EBITDA for industrial companies. It's a big improvement. You are aware that this year, our target, let me say, in industrial plan where I don't know, nearly EUR 50 million or EUR 70 million or EUR 50 million or EUR 60 million below what we realized. So if we are, let me say, we are well above our target of the industrial plan. So we already reached the former industrial plan of '22, '24 -- '23 '25, already the target 2020 -- 2025, I think it is normal that you can expect a little bit of retreatment. So I don't want to be too much pushy because there is no reason to be pushed.

[Operator]

The next question is from Tobias Woerner with Stifel Europe.

[Tobias Woerner, analyst]

Number one, when we look at your cash position, which seems to be growing as we speak, and you're taking a conservative approach. Other than decarbonization, what other opportunities do you see now? Are you becoming more positive on M&A opportunities? That's the first question.

The second question relates to the CCUS project you mentioned here in Denmark. I mean maybe you can give us a little bit more flavor what -- firstly, do you expect any EU subsidies here? Or are you applying for EU subsidies for this project? And what sort of OpEx -- would you assume OpEx costs, would you assume at the end of it? Do you have some competitive advantage in terms of location?

And then just lastly, you seem to be one of the more highly exposed companies to housing. And I was wondering what sort of developments you're seeing at the moment coming from these markets?

[Francesco Caltagirone, executive]

In M&A, let's say, we still have, let me say, limited view on the future because, as you know, we don't see so far a full, let me say, major deployment of the CCUS technologies. But let's say, compared to a couple of years ago, we have seen some more visibility on some technology, so we are in talk with 2 main, let me say, industrial players to -- that they might supply to us the technology to decarbonize one thing, as you imagine, is the OpEx -- the CapEx that, let's say, there are more sense of certainly about CapEx than 2 years ago. There are some, let me say, still some question marks about OpEx because the big question mark is still the energy intensity. And then when you talk about the energy intensity, you have also to apply the cost of energy. And we see -- we look in the past 2 years, it's difficult, let me say, to forecast from the past 2 years to a price that spiked to EUR 300 per megahertz and now we are around EUR 70, EUR 80 to say, okay, this is the basis for the next 8 to 10 years.

For sure, the green energy will cost more but as you saw, I said before that we are not, let me say, first to invest in the cement directly. We can also invest in the side business that can help our business to growth to, let me say, reduce the cost like green energy, I mean, in wind and solar power. And let's say that also our location in Europe, I think that we have only 2 big plants compared to other players that have a lot of plants and our location, I think is one of the best and because we are -- the Baltic Sea close to, let me say, North Sea, where there are, let me say, sources of [indiscernible] that can be injected with CO2. And also seems that in Denmark, there are some, let me say, [indiscernible] where you can inject in-shore CO2, but this has to be, let me say, more scrutinized in the next, let me say, month.

So I think that during this year, we will have a clearer picture for us, which saved the carbonization path, the cost and the opportunities because, let's say, having this strong net financial position can give us also the opportunity to decarbonize factor or to, let me say, increase our perimeter where other players that are leveraged or are limited, let me say, financial capacity can have difficulties in reaching the target. Remember that starting from 2026, the allocation will be, let me say, a certain cap in the allocation. So as already said, in this couple of years, let me say, sort of [indiscernible].

But then starting from 2026, there will be a cut year-by-year. And so if you don't have, let me say, a clear path, you are forced to close down, and you see that some players, even bigger, are starting to close down some capacity in Germany because they don't have, let me say, the possibility to decarbonize after, let me say, good cost. And then also, there is the possibility that some small players can exit the market because they are -- especially now that the rates are higher, they cannot, let me say, survive the cost of upgrading the plant.

Then on our CO2 situation, I think that, let's say, our average, let me say, need for the next 3 years is around at an average 200,000 tonnes -- 250,000 tonnes that is better than our previous quarter.

On housing, the only weak market as this year happened, I mean in 2023, we see softness in the U.S., but even if the market, let me say, are, let me say, from our point of view, is bottoming in the Nordics so we should start to see some pickup in demand in the second half. But let's say, the price dynamics are, let me say, more interesting in the Nordics than in the U.S.A., where also we have limited capacity and we import maybe from ourself in Denmark or in Egypt, but let me say there is also the freight cost. So for this reason, let me say, the U.S.A. has suffered this year, but we don't see a major pickup in the demand, but even a major down in the demand.

[Tobias Woerner, analyst]

I mean just as a follow-up quickly, are you buying, at the moment, CO2 at these processes?

[Francesco Caltagirone, executive]

Let's say that from -- opportunistically, yes, we buy sometimes. But just to cover our short position, we are not, let me say, speculating just to buy to resell after, but, let me say, we are short of this one. So it's a small gain.

[Operator]

The next question is from Giuseppe Grimaldi with BNP Paribas.

[Giuseppe Grimaldi, analyst]

The first question relates to the volume development. If you can share with us an update on current trading? I know that basically, you have different products and different geographies. So even a sort of ballpark number on volumes in the first 2 months, it could be helpful.

The second question is around Egypt. You're going to, if I got it correctly, to increase the capacity in the region. So basically turning up the plant -- the existing plant. So I was curious to understand which is the end market that you're targeting with this new capacity? Is it Western Europe, U.S. and Asia, just to understand where do you want to sell the product?

And the final one is on pricing. The CO2 prices are going down. So I'm curious to understand if you saw smaller players that are trying to chasing volumes eventually lowering the pricing of the cement at the moment? And if you see this as a sort of potential scenario going forward?

[Francesco Caltagirone, executive]

Starting from your last question, I don't see that the CO2 that -- for me, temporary, maybe driven from, let me say, the mild weather in Europe, let me say, now because January has been quite, let me say, difficult of the weather, especially in the Nordics and also because there is sort of rethinking of the ESG and investment with some hedge funds that are exiting or they are, let me say, paying [indiscernible] let me say, big losses, and so I think that part of the downturn in the CO2 prices because some financial players are, let me say, the sort of unwinding their position, they are forced to unwind position.

So I don't think that this, let me say, trend will last for, let me say, more than a few months. And so I don't think that this is a trend. And so for this reason, I don't think that any player can, let me say, [indiscernible] the approach on the market just because the CO2 is EUR 20 lower than what is the average of last year. As I said, starting from 2026, so in nearly 20, 22 months, there will be a sharp cut in the allowance. And I think that anyway, it would be temporary for the price of the CO2 to start to pick up again.

Then the other question is -- our volume development, let's say, that we see in the Gray market, a rebound in the second half in the Nordics for us. And in Turkiye, let's say, that we still see a strong market because of the earthquake, because of the neighborhood, let me say, that Syria and the other countries, let's say they have reviewed a lot of things. And if one day also Ukraine, we reach peace, the only country where you can, let me say, supply cement in the Southeast Ukraine, where today, there is no war is Turkiye. Because from Russia, I think it won't arrive, and Ukraine from the border of Europe, let me say, from 500 to 1,000 kilometers. So the only reasonable way to reach Ukraine will be through the black sea. So this is an opportunity when -- and if there would be the piece.

So for -- we don't see any, let me say, sharp downturn in Turkiye in terms of demand and also the government, let me say, [indiscernible] trying to carve the exports from Turkiye because in some parts of Turkiye, there is no availability for domestic cement. So this is, today, the situation. I mean the first months have been, let me say, for the Nordics, we saw during January, in some countries, even minus 30%. So the volumes are weak -- have been weak, but we see starting now that the temperature are coming back to the normal average. We are starting to see a pickup in the demand. So from what we have seen so far in 5 weeks, let me say, it's more linked to the, let me say [indiscernible] situation than from real, let me say, demand. And our capacity that, let me say, saw this restart of our Kiln, it's mainly for exports and export for Europe and United States.

[Operator]

The next question is from Alessandro Tortora with Mediobanca.

[Alessandro Tortora, analyst]

I have 2 questions, okay. If I may. The first one is related to -- as you mentioned before, the average needs you have in terms of, let's say, CO2 deficit. So the question is if you already covered the needs over the plan, over the next year considering that you already mentioned some opportunistic purchases you can do on Q2. So just to understand how do you -- what's your strategy on this?

The second question is on Turkiye. You mentioned before in the call that around EUR 70 million EBITDA on Turkiye, can you help me to understand if this is a figure basically no gap, but also excluding the recurring items you had in 2023 in Turkiye?

And then the third question is on, again, on the capital allocation side. Considering clearly that the company is still in the leverage mode. First, why don't you think to regulate to beat at least the upper end of your payout ratio? And second, is there any possibility to see the company, for instance, is starting to think about maybe increasing some capacity in China? Or maybe looking also in other markets where maybe the ETFs or, let's say, a restrictive regulation on emission is not present. So maybe, let's say, new areas for you where you may think to invest.

[Francesco Caltagirone, executive]

There are lots of questions. The CO2 for the year, we are, let me say, buying slowly 200,000 tonnes up EUR 65, let's say, that is the average of last 7 -- let's say, 10 days. We are talking about EUR 13 million, so it's small amount considering our, let me say, cost base. So every week, we are buying something. So I don't think that even if we are buying even up EUR 5 allover or even EUR 10 higher, this can affect the, let me say, EBITDA, frankly speaking, because, I mean, the gap is around 200,000 tonnes, let's say, the gap will increase, I mean, towards 2026 because it's starting the cap. But now this year, let's say, it's below 200,000 tonnes.

Then -- the Turkiye, let me say, it's a IAS 29, but there are not, let me say, exceptional items because the exceptional items that we have, let me say, non-GAAP figures this year is coming from the sale of some, let me say, business mainly in U.K., in China, and in the Baltics, I mean, that were, let me say, all the ready-mixed plants or in China, it was the old cement plant that we bought in 2010, then we relocated to, let me say, a zone that we're close to this plant, but this plant now has a different, let me say, zone from an industrial perspective, and so we decided to sold it. So there is nothing except the IAS 29 related that is affecting, let me say, our figures of around EUR 70 million for 2023.

Looking at the PL ratio, let's say, that I think the last 20 years, we invested EUR 1.7 billion for acquisitions. So let's say, it seems that like EUR 200 million, you can buy a single plant with EUR 200 million today, with EUR 600 million probably a small company conglomerate. But let's say that we don't think that we change the policy for dividend payout even because if you are also to consider another thing that if you keep, let's say, more or less the EBITDA at the same level with a small increase for the next 2 or 3 years, this doesn't mean that the net profit because of, let me say, the financial income that is the income that, let's say, we will -- we see investing this cash will affect, let's say, the net profit. So net profit should continue to grow even if the EBITDA, let's say, will remain at the same level because you can imagine it's just EUR 600 million, up 3% or 4%. And you can have some income, let's say, nice income in -- and so this means that even the dividend should continue to increase because the dividend is linked to the net profit and not to the EBITDA.

And then also, you asked about increasing the capacity, let's say that today, some countries I'm not, let me say, in the [indiscernible] or system like this. But for example, Turkey, has already announced last year that they want to convert starting to 2026. So we don't want to invest or to start the new investments in any country were probably then in the next 3 to 5 years, they decide to convert to a certain [indiscernible] system or system like this. But for example, Turkiye, as already announced last year that they want to convert starting to 2026. So we don't want to invest or to start the new investment in any country where probably then in the next 3 to 5 years, they decide to convert to a certain [indiscernible] so they, let's say, indirectly carve your capacity or our ability to sell for the medium and long term.

So for this reason, today, it's difficult even in [indiscernible] like China, India to invest because if, in 5 years, they put a sort of threshold in the emission, then let's say, you can lose part of the future return of the asset. And so this is the main reason. So it is better to invest in the country where you have the [indiscernible] system because the rules are clear. So today, for example, in Europe, it's difficult to understand which would be the CO2 price in 5 years and 10 years. But then you have the rule, you have the cap in the Tier 2. You know where there is a path where you can go. The issue today is the technology that you can use to revamp the plant. But I think in the next 2 years, we are, I mean, as a sector, aware about the CapEx and the OpEx. And so this should foster, let's say, starting from 2026 another round of consolidation. This is my expectation.

[Alessandro Tortora, analyst]

And just -- let's say, a question on this last point that you mentioned on clearly awaiting the technology and, let's say, economically viable technology. It is probably too early today to say that if the EBITDA margin basically, let's say, you put the target in 2026, the 21% and something, let's say, in the region of 21% EBITDA margin. Considering anything we're discussing on CCS and so on, if this a level that basically could be deemed as sustainable going forward? You can even answer with no or not yet, just to understand.

[Francesco Caltagirone, executive]

Let's say, you saw that in 1 year, we went from 19% to 24%, 25%. So let's say that I don't want to, let me say, show the [indiscernible] too earlier, but I continue to stress that having 2 plants in 2 very nice locations, it might be a competitive or a huge competitive advantage going forward. I continue to say and you follow probably some of you follow me since I mean the last 20, 30 years, that I don't want to announce something that I don't -- I'm not, let me say, sure more than 100%. But let's say that today, it's difficult to say that the average, I mean, from 2030 is 20%. It can be even 30%, frankly speaking, because if some player will not, let me say, anymore in the market. If the market is closed because of the [indiscernible]. If you have a competitive advantage, so your costs are lower, especially not for the carbon capture, but for the demonstration.

So in some areas, for instance, there are no places where you can store. So everybody in the Iberian Peninsula should, let me say, ship this CO2 one day to other places. And this will cost, for sure, 2 or 3x higher that can go out to the players that are around, let me say, Baltic and North Sea. So this can afflict a lot to the profitability, frankly speaking, because if the cost is EUR 20 for somebody, EUR 80 for others, this can say, okay, for us, let me say, the EBITDA can be EUR 22, but for another player here with a cost structure for cement, very lean can be 12% because they lost the 8 points for shipping the CO2. So today, we are in this, let me say, big question marking scenarios. And for this reason also, let me say, even if there are the opportunities to invest our cash, we don't want to too early because, let's say, if then, let's say, we need EUR 50 to store the CO2, it can be a competitive disadvantage.

[Operator]

[Operator Instructions] The next question is from Bruno Permutti with Intesa Sanpaolo.

[Bruno Permutti, analyst]

Two questions for me, if I may. The first one is related to the freight costs. I would like to understand if you have -- could have an impact or you're considering having an impact in your guidance from increasing freight costs. And the second one was related to the expected recovery of the volumes in the Nordics for the second half of the year. Is there any specific project that you have in mind? So there is something specific that you have in mind when you believe that will be a recovery?

[Francesco Caltagirone, executive]

Yes. Freight costs, let's say that we own part of the vessel. So we have long term contract, so let's say, to ship cement, I mean, 80% of our, let's say, that we have a sort of fixed cost. For sure, for spot contracts or especially for the energy where you pay, let me say, [indiscernible] the freights can, let me say, have some extra calls, especially in this, let me say, situation when you have, let me say, the Red Sea that is not viable for shipping. But I think that, let's say, this is I don't want to say a not meaningful part but, let's say, it's not a big chunk of our business that, let's say, can be afflicted by a decade of [indiscernible] and shipping. Beside the main market, we have 1 big project that is starting in this week, the Fehmarn that is the tunnel that will link Germany with Denmark. It's a tunnel where we are going to, let me say, supply 1.2 million tonnes of cement in 5 years. This is the project. You know that sometimes big projects can have delays. So it's another ratio for [ 200 ].

[Operator]

[Operator Instructions] Mr. Bianconi, there are no more questions registered at this time.

[Marco Bianconi, executive]

Okay. So thank you very much for your interest and your questions, and we wish you a pleasant rest of your day and evening. Thank you very much.

[Francesco Caltagirone, executive]

Thank you, have a nice evening. Bye-Bye.

[Operator]

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