Holcim AG

SIX:HOLN

Earnings Call Analysis

Strong H1 Results, Positive Full-Year Outlook

The company has successfully delivered robust results for the first half of the year with several highlights. There was a 7.4% organic growth in net sales, largely influenced by divestments in India and Brazil, and strategic acquisitions, especially in Solutions & Products. These actions resulted in an over-proportional EBIT growth of 13.4%. Each segment exhibited significant growth: North America with close to 16% organic growth in sales, Latin America with 24% organic sales growth, Europe with 10% organic sales growth, and Asia, Middle East, and Africa with nearly 10% organic growth in sales. For roofing, after completing destocking, there's a robust outlook for H2. The positive trend is expected to continue and the guidance for the full year anticipates net sales to grow above 6% and EBIT to grow over 10%.

Robust Growth in Sales and EBIT

The company has reported significant organic growth with sales increasing by almost 16% and recurring EBIT by an impressive 26%. These strong figures are backed by robust demand in the U.S. and Canada, and they suggest a favorable environment, especially with investments flowing into the energy sector and manufacturing returning to the region.

Expanding Margins Across Multiple Regions

Latin America continues to display excellent performance, marking its 12th consecutive quarter of profitable growth, with 24% increase in organic sales and 16% growth in recurring EBIT. Europe, on the other hand, has shown a recurring EBIT growth of almost 33% against a 10% organic sales increase, highlighting efficiency gains and value-added products. Similarly, Asia, Middle East, and Africa region showed considerable margin expansion with 10% organic sales growth and 15% growth in recurring EBIT.

Optimistic Guidance forthe Second Half

The company's management is confident in maintaining the momentum of profitable growth into the second half of the year. Despite upfront pressures, they anticipate sales growth for the year to surpass 6%, with EBIT growth expected to be proportionally higher, reaching above 10%.

Sustainable Product Innovation

Driving towards sustainability, the company is innovating with products like ECOPlanet, which offers at least a 30% CO2 reduction in cement, aligning with global trends and regulatory pressure to lower carbon footprints.

Strengthened Cash Flow Position

Despite an increase in net debt from CHF 6 billion at year-end to about CHF 11 billion for the half year, the company expects to generate around CHF 3 billion in cash flow for the year. This influx is anticipated to alleviate debt levels and maintain a strong credit rating by year-end.

Product and Service Diversification

The company also revealed that it is set to end the year with over 20% of group sales stemming from Solutions & Products, keeping it well on track to achieve the target of 30%. This diversification into high-quality product offerings like specialized shingles for roofing indicates an ability to innovate and capture premium segments of the market.

Confident Commitment to Pricing and Profit Margin

Management has communicated a firm stance on pricing, successfully implementing mid-double digit price increases, approximately 15%, to neutralize rising costs in energy, raw materials, and distribution. They also reiterated a strong commitment to maintaining an industry-leading EBIT margin that will comfortably exceed the 16% mark.

Earnings Call Transcript 2023-Q2

[Bénédicte Mayer, Investor Relations]

Good morning, everyone. A warm welcome to our Half Year 2023 Results Presentation. I am Bénédicte Mayer from the Investor Relations team, and I'm delighted to connect again with all of you today. Here with me at my side, I have our Chairman and CEO, Jan Jenisch; and our CFO, Steffen Kindler. They will walk us through the company's highlights and performance of the last 6 months. After that, we will have the chance to take your questions. If you would like to ask your question, please click on the link, which is visible on your screen and follow the instructions. [Operator Instructions]

With that said, I will now hand it over to you, Jan. Please go ahead.

[Jan Jenisch, Chairman, CEO]

Good morning, everyone, and very welcome to have you all here for our half year report. Let me start with talking about some of the highlights of our strong performance in the first half before Steffen gives us more detail on the financials.

The first half year was an excellent performance of Holcim. I'm very pleased that our organic growth has continued in the second quarter of the year with 7%, making a more than 7% organic sales growth in the first half of the year. Then as we promised in our outlook, we have an over proportional EBIT improvement by more than 13%, leading us to a new record EBIT margin of more than 21% in the second quarter of 2023. Very proud of this, and we will discuss many of the areas how we can achieve now such a record-setting margin with our move into Solutions & Products, but also by decarbonizing our product range and receiving premiums for the products and getting into value selling, system selling. And this all shows now that the new strong Holcim will deliver much more increased margins now, but also in the future.

We have continued with our speed in transformation. So we had 18 acquisitions in the first half of the year. Another eight acquisitions to strengthen our new platforms for Solutions & Products and also 10 very value-accretive bolt-on acquisitions to strengthen and grow our business segments in aggregates and ready-mix concrete.

Our expansion in the most attractive North American market is continuing, and we are on our way to make this region 40% of the group sales. On climate action, we have further accelerated. Very happy to report that our C2 per net sales has decreased by another 18% in the first half of this year. And also we have received further grants of the European Union Innovation Fund for our leading carbon capture utilization and storage plants where we have now already five grants out of a total nine grants giving to our sector.

Overall, a very successful first half of the year and confirms our guidance for the full year where we are looking forward to have organic sales growth of more than 6% and an EBIT growth of more than 10% and also delivering the cash flow and the other KPIs as promised and guided beginning of the year.

Let's look into some of the details of our results. First, this is the overview now on the EBIT margin, where we achieved now a new level of performance, more than 21%, and we will continue here to set the benchmark here in building materials when it comes to EBIT margin.

We have on the acquisitions. I go to the second slide here, we have spent CHF 1.8 billion in the first half of the year to continue our growth investments, eight acquisitions for Solutions & Products, most prominently Duro-Last, one of the leaders in flat roofing systems is already a member of the Holcim family as of April 1, has started very well. We have also increased profitability in the first 3 months of being with Holcim and is completing our footprint in the U.S. where we now have 30 production facilities to serve all the roofing needs from flat roof to residential housing from insulation to spray foam insulation. We have a complete range here of solutions for this very attractive roofing market in North America.

We're also expanding the roofing segment in Europe. We could take over one of the leading manufacturers of thermoplastic roofing systems in Germany earlier this year. And in Latin America, we also entered the roofing, the waterproofing, but also the mortar market to build up also here strong growth platforms in Solutions & Products.

Very happy that on the very value-accretive bolt-on side, we had 10 acquisitions already in the first 6 months of the year. And you see the characteristics we look for. We treat those acquisitions as growth platforms, expect the minimum growth of more than 5% per annum. These local acquisitions are very highly synergistic and the ROIC is already achieved within the first 3 years, above 10% on group level, and all those acquisitions are value accretive from year one.

The North American, a very interesting slide, which shows our successful expansion. If you recall, 4 years ago, this was about 24% of Holcim. And now this is the biggest region, not only the biggest one, but also the region with a very positive outlook, will reach 40% of our group net sales. And you see here the fantastic balance we have among the four business segments, with Solutions & Products already being the biggest one and then followed by cement ready-mix and aggregates. And overall, we are one of the leading players now in North America with expected net sales of around $12 billion already for 2023.

We have a bit more details on North America. On the next slide, you'll see our strong market positions. We are the number one in cement, already the number two in commercial flat roofing market. And also we are strong number five in the ready-mix and the aggregates segment.

What's very interesting here is we are best positioned now for all the upcoming growth in North America. While we have been already happy now, we have significant growth and margin expansion in North America, we have now all these new infrastructure bills coming in. We have the Infrastructure Investment and Jobs Act. The Inflation Reduction Act and then not to forget, we have all these onshoring investments from all those companies from automotive to the white goods industry, from electronics to all the new industries, battery makers, wind parks. We have a huge order book already of all these onshoring investments, and we are very happy to support our customers to make this happen over the coming years.

All this extra momentum will just start now. Basically, we'll start next year or end of this year, and we have already secured more than 70 infrastructure projects, and we expect an additional boost of our organic growth by 5% per annum based on our target in here those new growth opportunities.

I talked about this. We have established now the leading roofing growth platform in the U.S., 30 production facilities here well spent to serve all the mega cities, all the large metropolitan area in the U.S. covering from the residential market to the commercial market from new build to especially refurbishment and to system selling.

We're going to have an exciting day ahead of us on September 21. We're going to meet in Connecticut, and I want to show you more details on how this growth platform of roofing will be a big part of Holcim's future, and I hope many of you are able to join us in Connecticut, where we show you much more details on technologies, system selling on geographies in the markets and so on.

You see this also on the second slide, where you see that we have now the leading range of advanced roofing systems and all this, you are very much invited to meet here the business and to meet our people in the field to do this every day, the innovation, the customers who are doing already 7% - 70% of the sales in reroof, 80% in system selling. It's really exciting, and I hope many of you will be able to join us in Connecticut on September 21.

We have the reduction in CO2. This is at the heart of our strategy of Holcim strategy 2025 accelerating green growth. You see here the very rapid reduction of CO2 per net sales, another reduction of 18%. We're doing this by decarbonizing our existing Products & Solutions, but also by introducing newer low-carbon footprint solutions like our new brands, ECOPlanet, ECOPact, and of course, the new footprint we are having with more Solutions & Product sales helps us here to get a new profile of Holcim as the leader in decarbonizing buildings.

You'll see some of the key initiatives here on the next page. I just want to mention maybe two or three aspects. I think the climate report is the leading road map in our industry, which describes how Holcim goes to net-zero. I'm very happy. We have this reporting and the road map in place and our shareholders are supporting this strongly awarded with more than 95% at our last Annual General Assembly.

We are in carbon capture. I think we become the leader in carbon capturing. We have another three projects selected by the EU Innovation Fund and makes a total of 5 while only 9 grants were given. So this is very promising. I think this shows our projects are very realistic. They have great road maps and have all the right characteristics here to be part of decarbonizing Europe and going for carbon capture utilization and storage.

Lastly, I'm super proud of our branding. We have introduced the ECOPact brand. So the first global range of low-carbon concrete. We introduced that brand 3 years ago globally, and this is already a $1 billion brand in 2023. Very proud that we have been able to establish this lighthouse brand here for Holcim globally.

We have on ECOPlanet. It's the same at least the 30% CO2 reduction in cement. We have introduced the brand 2.5 years ago, and this will already be a $2 billion brand in 2023. And this is a big part of the road map here of Holcim for sustainability, decarbonization, but also to achieve further margin improvements in our business.

On the carbon capture, I talked already about, we have more details in the slide deck. We're also going to do some Capital Market Day here sort of in November, we want to show you this. So please also reserve some time here. We want to show you those projects, going to most likely show you some recycling. We're going to be one of the biggest recycling companies in the world, building new from old, so literally taking all the construction demolition materials back and turning them back into products. And this is already happening today. We're very happy to share this with you later this year.

With this, I'm very happy to hand over to Steffen for some more details.

[Steffen Kindler, CFO]

Good morning, everybody. Very happy to be here and to present our very good half year results to you. I'll start with the bridge on the net sales. What you see here is the bridge explaining the 7.4% organic growth. The acquisitions and divestments impact are mainly India. You remember, we divested that last year, but also Brazil, which was divested last year and acquisitions in Solutions & Products worth probably 450 million, the divestment of India is about 2 billion.

Organic growth, you see here, the FX effect, this is translation effects from the ever-appreciating Swiss franc. About 60% of that effect here is – comes from mature markets, about 40% from emerging markets. It's about 6% effect on FX, which seems to be what the companies - global companies reporting in Swiss francs show.

On the next page, I want to show you the EBIT growth. So over-proportional EBIT growth of 13.4%. The explanations on the bridge from the reported to the organic are pretty similar to what I explained on the sales chart, it is India, it is Brazil, but it's also the acquisitions and Solutions & Products. And the FX effect here, similar stories on the chart before about 7%.

This is the segmentation that we show you and we show the company in five segments. This is because our five segments have different drivers of the business, different growth drivers and different dynamics in the markets. And we think the broad-based growth that this company shows that Holcim shows is a real strength of this company. We are transforming this company, and we think this is part of the story we want to explain to you how we drive growth and how we drive the transformation in the future.

Now what I would also want to say here is we're going to explain more of that in the two events that Jan already mentioned, we're going to have the Solutions & Products events in September, and we're going to have the decarbonization event in November. And I think it would be great if you can visit those events because then you will also understand why we segment the company this way.

Now let me go into a bit more detail on each of those segments. I'm starting with North America with an outstanding performance. We have almost 16% organic growth on sales, and we have almost 26% organic growth on recurring EBIT. The strong demand in both the U.S. and the Canada and Jan said it before, the growth is supported by onshoring activities and investments in the energy sector. There are several regions in the United States that are currently practically booming and where cement product is almost short. They have a significant overproportional organic EBIT growth here, and we also expect a good performance to continue into the second half. At least we build enough stock for that.

Latin America, another quarter of profitable growth, almost 24% organic sales growth, 16% recurring EBIT growth. It is the 12th consecutive quarter of profitable organic growth with a broad-based performance. We have particularly strong performances in Mexico. I think we explained before that we have infrastructure projects. There is a big Dam, there's a Maya Train, their refineries, their industrial projects as well, and we participate in all of those. We have a significant improvement in alternative fuels and in carbon and low carbon solutions, and we also expect to continue the performance very strong into the second half of the year.

Europe. Europe sees a strong increase in profitability. You see in net sales organic growth of 10% with a recurring EBIT growth of almost 33%. This is broad-based across the countries in Europe, and we increased profitability across all key markets. We have a strong margin expansion, as you can see here, driven by high-value solution and very disciplined cost management. We already completed 7 bolt-on acquisitions in aggregates, ready-mix and in recycling operations, and we expect a strong H2 with an acceleration in the progress in decarbonization, hence, also our event in November of this year.

Asia, Middle East and Africa, again, outstanding margin expansion, almost 10% organic growth with 15 on sales - with 15% organic growth on recurring EBIT, profitable organic growth expansion with a margin expansion of 4.5 basis points - 4.5 percentage points. The performance here was driven mainly by Australia and Nigeria. We announced the divestment of South Africa, which is signed, and we also continue the strong momentum into the second half.

That brings me to roofing, where our destocking is completed and where we now have a solid outlook into the second half. We have a strong growth momentum in the residential roofing in Q2 already, and we completed the destocking in the commercial roofing, as I just said.

We continued the expansion with eight acquisitions, messages [ph] that we have a strong growth in roofing expected in H2. I want to go in the next page. I want to go in a slightly a bit more detail, why do I make the statement that we have a positive outlook. I would like first to focus on the left side of the chart, which shows you our Elevate business, so formally Firestone.

And what you see here is the effects we saw in the second and third quarter of last year. You remember probably we already explained to you, at that time, raw materials for this business very short. Pen's finished product was short on the market. Hence, roofing companies and construction companies basically bought any product they could get. They stored it on construction site, they stored it in warehouses. And therefore, we saw elevated levels of sales in the second and third quarter of last year.

When that ended, we saw in the fourth quarter and the first quarter of this year, the opposite effect, but what you can also see in the right bar that this is coming back. And when we look at the second quarter of this year, month-by-month, we would also see a strongly increasing trend. So we're convinced that this is complete.

On the other side, on the right-hand side of the chart, you see Malarkey with strong growth momentum in Q2 already. You see a very strong second quarter. And lastly, Dura Last, our latest acquisition that we consolidate as of April, strong order books, recurring EBIT of up to 20%, very positive momentum in H1. Proforma sales this year of about US$ 540 million, big synergies and an EBITDA multiple of 7.4% post the synergies. So we think roofing looks into a very good second half.

This is a look at our P&L. Reported EPS grows by 15% from CHF 1.90 to CHF 2.19. When you look at the P&L, you see about 11% negative sales, 6% negative operating profit. Remind you, this is reported. So if you extract India divestment and Brazil devestment, you come back to the like-for-like numbers that we talked about before.

Cash flow. Our cash flow stands at around CHF 80 million. This is okay. As you know, our business is very seasonal in terms of cash flow, and this has weighed very heavily towards the second half of the year. This has always been like that in the last year and the years before. So we make almost all our cash flow in the second half. So being slightly positive in the first half is good.

The chart in order to really understand the chart, I should really exclude India in the first half of last year because if I did that, you would see that the drivers for us being slightly below last year is higher stock levels in the United States in order to be able to supply the second half and a bit of anticipated CapEx.

That's it for me. With that, I would like to give back to Jan for the outlook and guidance.

[Jan Jenisch, Chairman, CEO]

Yes. Thank you, Steffen, and we are obviously happy that our H1 results are confirming our positive outlook for the full year. So we can fully confirm our guidance. We will see a continuation of the profitable growth, what you have seen H1, we see that also for H2. We have good order books. We have plenty of good projects we are participating. So we believe that the net sales for the full year will grow above 6%. The EBIT will be over proportionately to above 10%, and we are obviously on the way to have the industry-leading EBIT margin well above 16%.

On the cash flow, as Steffen just mentioned, we are confident that this will be another CHF 3 billion cash flow year and the reduction of CO2 per net sales is well underway and will reach more than 10% for the full year 2023.

I think with this, I hand over to Bénédicte for the Q&A.

[Bénédicte Mayer, Investor Relations]

Thank you, Steffen. Thank you, Jan. And with this, we open the Q&A session. [Operator Instructions] So the first question today comes from Paul Roger from Exane. Good morning, Paul. Please go ahead.

[Paul Roger, Exane]

Good morning, Jan Jenisch, Steffen, congratulations on the results. I just have two questions here. I mean the first one is on U.S. Luthen [ph] It was interesting, one of your competitors last year was talking about the commercial segment being done low teens this year. It sounds like you're a bit more off beat. Can you just talk a bit more about the outlook and what gives you confidence?

And then the second one is on the European margins. I was looking at the detail in your report. It looks like margins in cement increased by about 400 basis points in the first half. And obviously, that's before energy costs really declined. So what can we expect for the second half? And how sustainable is that margin momentum? Thanks.

[Jan Jenisch, Chairman, CEO]

Hey, Paul, good morning. And thank you for having the first question. So the roofing is an interesting situation. We never had such a stocking or a relevant stocking topic for as long as I'm in the industry, so more than 25 years, and that was something new. So we provide you some more transparency in the slide, which Steffen maybe we can go there, Steffen - Steffen has shared earlier that we really had a maybe extraordinary Q2, Q3 last year, and you see the stocking effect where literally, the roofing companies, the distributor, we're trying to have extra stock.

And that happened, you see now we are back already normalized in Q2 2023. And the order books are excellent. You have to see that our customers, the roofers they are fully booked for the next 12 months. So we have an over risk [ph] here about this business. And of course, we are happy with that the destocking is now over. That was something a new experience and not a positive one in one way.

When you look at residential, the situation is a bit different. Our residential business is growing. You see the Malarkey sales. We have a new record in the Q2 this year in sales and also good profitability. And the reason is that we are here 90% in reroofing. And all these weather effects, we had this bad weather in California, a lot of rain. We had a very intense hail season in the first half of the year. So many people had to refurbish the roof and Malarkey is the number one choice to do that.

We have the special polymer modified shingles, which have the highest quality and the higher weather resistancy. So if you need to replace your roof after Hailstorm, you probably go for a higher quality of shingles, which come from Malarkey. So in roofing, in residential, the destocking is not already back on normalized levels. This is a new good level. So overall, in roofing, we're going to see a very good year for Holcim in the second half of the year.

You asked about the EU situation and you, of course, you sneaked in a bit the margin question, Paul. But I'm happy to answer. In Europe, we have a new reality for building materials where it's about decarbonization. It's about decarbonization, making construction and buildings are sustainable. And we are here at the forefront.

So when I look at my European business, you have to understand the markets are softer in the first half of the year. So Holcim's volumes might be down something like 6% in the first half year, but our sales are up more than 10%, as you have seen on the slide. And the difference is selling more value-added Products and Systems, and the profitability is then up more than 30%, as you have seen in the chart.

So we have a - and this is not a short-term trend. This is a very sustainable new reality in Europe where decarbonization is the key to avoid CO2 emissions in the plants and to provide more sustainable Solutions and Products for our customers, and that is highly rewarded. So you will see Europe at Holcim in the future operating on significantly improved margins.

[Paul Roger, Exane]

That's great. Thank you. And I'll see your cost upon [ph] in September .

[Bénédicte Mayer, Investor Relations]

Thank you. So we will take the next question from Yassine Touahri from On Field. Please, Yassine go ahead.

[Yassine Touahri, On Field]

Yes, good morning. A couple of questions. First, on your Solution & Product business. The organic growth was minus 14% in H1 2023. Could you give us a bit of a breakdown between the volume decline and the price effect? And also, could you give us a bit of an outlook for the pricing development in the second part of the year? I understand that there are additional price increase for asphalt shingle in August. What about the single ply membrane, do you expect to keep prices stable? Would you be able to increase prices sequentially?

And then a second question about the - where do you see this Solution & Product business in the next 5 to 10 years? Do you see the opportunity to do the acquisition in Europe? Could you consider a large private company in the roofing sector? And if you see a great fit, would you consider raising capital?

[Jan Jenisch, Chairman, CEO]

Thank you for the questions. Look, first of all, you have more specific questions on pricing and roofing. First of all, we are satisfied with the current pricing and roofing. We have very good margins. Then you, I think, observed this well that the shingle market is now in already way out of the destocking into growth. So it's a good momentum for the pricing, which also will do in a very responsible way for the customer. On the flat roofing, we're very happy to continue with the good pricing. And now let's go into the new growth before we get too much dreams about further increased pricing.

But overall, very strong for the segment. You will see growth - strong growth in Solutions & Products for the second half. We will finish this year well above 20% of group sales in Solutions & Products, well on track of our promise to achieve 30% of our sales in Solutions and Products by 2025.

And on the way, you have seen we did eight acquisitions already in the first half of the year in Solutions and Products. So you can expect from us that we are here very active like we have been in the last years and very successful.

To raise capital, I think, is not really a topic for us as we have done the transformation of Holcim in a very value-accretive way. You remember 5 years ago, our EBITDA to net debt was around 2.4, 2.5 times. Last year, we closed with a record of 0.9 times. We have significantly decreased our net debt at Holcim, which is a very good idea because that gives us the freedom to acquire companies whenever we find the right targets for the right valuation.

And this year, we will also deliver a strong balance sheet for the year-end, and this is how we like it at Holcim. No need to raise capital. We just finished our share buyback. And depending on the success of the second half of the year, I'm rather positive to discuss what we do for the shareholders to satisfy them.

[Yassine Touahri, On Field]

The split between price and volume for the first half where you had 14% decline organically? Is it something that you can provide or give a little bit more color on?

[Jan Jenisch, Chairman, CEO]

I'm not comfortable because it's such a mix. As you have seen, we established now the roofing platform. Even our roofing platform is a full range, so from the shingles for the classic residential homes to the commercial flat roofing business. Here, in the meantime, we have all membranes needed from PVC to TPO to EPDM. We have the insulation material. We do system selling 80%.

So the - and we are following up on every segment and every segment in these times is quite different. So we are not so comfortable now to make average numbers out there. But you can see that the destocking you see in the chart is a volume effect because we have been able to keep the prices of good prices into 2023.

[Yassine Touahri, On Field]

Thank you very much.

[Bénédicte Mayer, Investor Relations]

The next question comes from the line of Elodie Rall from JPMorgan. Good morning, Elodie.

[Elodie Rall, JPMorgan]

Hi, good morning. Thank you for taking my question. First of all sorry to come back on the Building & Solutions business. You seem to be very confident about CO2 - H2 after the stocking in impact in H1. So can I ask simply, do we expect - I mean, should we expect to see the segment up this year in operating profit, i.e., can you get back or the on the performance in H2 that you've seen in H1 recover from that?

And second, we move to Europe. Just a simple question on prices at the moment. Are you seeing any signs of weakness or no sign of weakness in prices despite the challenging volume environment?

[Jan Jenisch, Chairman, CEO]

Good morning, Elodie. Thank you for the question. Look, I don't - can give you another guidance now for Solutions & Products for the year, but I can promise you that I expect profitable growth in the second half of the year. So you will see sales growth and EBIT growth in the second half of the year to bring Solutions & Products back on the growth path we want to see organically. So this, I can share with you. I cannot give you now a guidance for the full year, but is happy to share we were going to have a very good situation in H1, H2.

On the pricing, we are very confident. We have good pricing in Europe, as we talked about before. And we will stick to our pricing and our pricing is based on many effects from our ECOPact range to the ECOPlanet range and a good discipline. So we don't expect prices to go in the wrong direction for the second half of the year.

[Elodie Rall, JPMorgan]

Great. Thank you. And if I can just sneak in a third one. I think you said you would give us the price cost and volume split in terms of the organic growth split in H1. Can we have that?

[Jan Jenisch, Chairman, CEO]

All right. Steffen, do you want to speak about reporting?

[Steffen Kindler, CFO]

Yes. Look, in the segment of cement, aggregates and concrete, we had a price increase of mid-double-digit number. So let's say, around 15% to offset the massive increases that we have in the energy materials, raw materials and distribution costs. This is what we saw in the first half of this year, and Jan already commented on the pricing from Solutions & Products.

[Elodie Rall, JPMorgan]

Okay. Thanks very much.

[Bénédicte Mayer, Investor Relations]

The next question comes from Arnaud Lehmann from Bank of America. Please, Arnaud, go ahead.

[Arnaud Lehmann, Bank of America]

Thank you very much. Good morning, everybody. I have three questions, if I may. First, regarding Middle East, Africa, there's a decent recovery in the second quarter in the region. Could you give us a bit of color what are the drivers? And do you think there are sustainable improvement in the region?

Related to that, I think you announced the disposal of South Africa. Could you give us a bit more detail on this transaction? Is it meaningful in terms of sales contribution? And what are the proceeds? And more generally, should we expect more asset disposals going forward in Middle East and Africa?

And my last question is on net debt. It's almost double, if I'm correct, at the end of June relative to the end of December, I think, from CHF 6 billion to about CHF 11 billion. I appreciate there's been some acquisitions and some share buybacks. But where do you expect the net debt to land throughout the end of the year, please? Thank you very much.

[Jan Jenisch, Chairman, CEO]

Good morning, Arnaud. Let me take the first two questions. So we are, of course, very satisfied with the results in Middle East, Africa, but also in Asia, the exception of China, where the market remains softer than most people anticipated. We have very good results in Australia in the Philippines. And then as you mentioned, we have good results, Middle East, Africa.

I think we have sharpened our footprint in this region, and we have divested a lot of businesses. If you recall from Zambia, Zimbabwe and Malawi to other positions. And we have strengthened also our earnings and return profile in this region. So this is not a short-term trend. This is also very sustainable results, and I think you can expect also a strong second quarter in this region.

From us, you mentioned the divestment, we will keep very active. We have 18 acquisitions in the first half of the year. Till to date, we have one divestment, which is South Africa, a rather small position we have there, and you can expect that we're also going to shape the portfolio and the divestment side a bit over the coming months and years.

[Steffen Kindler, CFO]

So I would take your question on net debt. You're right. The net debt at year end was about CHF 6 billion. And then the drivers that we had in the first half was we acquired Dura Last. We did several bolt-on acquisitions, as Jan explained in his part. We paid the dividend. We did a share buyback, and that lands at about CHF 11 billion for the half year.

Now as I explained when I talked about cash flow before those CHF 3 million cash flow roughly are coming in, in the second half. And so when you deduct that from our debt level that we currently have, plus some minor bolt-ons and some debt redemption, you will find that at the year-end, we will comfortably land in the range of where we need to be for our current credit rating and comfortably.

[Bénédicte Mayer, Investor Relations]

Thank you, Steffen.

[Arnaud Lehmann, Bank of America]

Very helpful. Thank you very much.

[Bénédicte Mayer, Investor Relations]

The next question comes from the line of Gregor Kuglitsch from UBS. Good morning, Gregor.

[Gregor Kuglitsch, UBS]

Hi. Good morning. I have a few questions. Maybe firstly, a technical one, if you could just update us what your latest thinking is on the ForEx and M&A impact on EBIT for this year, your guidance, obviously, is like-for-like. Related to that is you're guiding for 16%. I think that's in margin terms, but most, I think the consensus is quite north of 17%. So I guess I want to explore why you were not comfortable kind of going a little bit higher?

And then maybe a second question on carbon capture. So we saw the announcement the other day, and I think the project - my calculation is that all the carbon capture projects have announced in Europe kind of cover 40% of the EU emissions, I want to check if that's correct. And I want to kind of understand - I don't know if I'm sure you've done the math, but roughly, what do you think your all-in cost of carbon abatement is compared to the carbon price of 90%. What do you think you're paying on a sort of per tonne basis?

[Jan Jenisch, Chairman, CEO]

Hey, Greg. Yes, thank you. Look, on the EBIT margin, we can be very simple. We guided above 16%, and we will make above 16%. I think you point out right fully that we are ahead of this. So let's see where we finally - and I'm not a big fan of making small adjustments to the guidance. So above 16% is obviously still correct, but hopefully, it will be quite significantly above 16%

On the carbon capture utilization storage, I think the European Union has just started to deploy those grants. And they just started basically 13 months ago, with the first batch of grants, and we were among those grants and now came the next round, and there will be many more rounds coming. So we are not at 40% at this point in time. But we are on a very impressive track now where the European Union wants to make the decarbonization happening, but where they provide the support for the companies like Holcim to not only give the grants, but also to announce what they did beginning of the year, the broader adjustment for cement.

So we have a very good framework, which gives us enough certainty to invest in these projects. The projects are high-return projects. You can imagine how much CO2 costs we will be avoiding with those projects. You can also imagine what a better product we produce, demanding probably higher premiums in the market for this net zero types of cement and other products.

So we're very confident, and I'm personally very happy to see that we are at the forefront because 5 of the 9 projects for the sector are with Holcim. So that, I think, demonstrates that our people have rock-solid road maps and projects yet to participate in this framework of the European Union.

[Steffen Kindler, CFO]

Okay. Well, for your question - for your question on foreign exchange and scope. So as I said before, we had 6.1% foreign exchange impact in sales and 7.1% in EBIT. Due to the strengthening of the Swiss franc, main impact is 60% is from mature markets, 40% of emerging markets. We do not guide on FX because we - I don't have the silver bullet to read the market.

Where I can give you a bit more color is on scope. We had - in sales, we had scope out of CHF 2.3 billion. This is mainly India, as I said, plus Brazil. And we had scope in of about CHF 600 million. This is mainly the acquisitions in roofing. For the full year, we would expect a net sales scope of about CHF 1.8 billion due to the positive impact from the acquisitions in Solutions & Products and net scope in EBIT of, I would say, below CHF 500 million. I hope this helps you.

[Gregor Kuglitsch, UBS]

Excuse me. You said - what you said for EBIT?

[Steffen Kindler, CFO]

Below CHF 500 million.

[Gregor Kuglitsch, UBS]

Okay. Thank you.

[Bénédicte Mayer, Investor Relations]

We will now take the next question from the line of Cedar Ekblom from Morgan Stanley. Good morning, Cedar.

[Cedar Ekblom, Morgan Stanley]

Thanks very much. Good morning I've got a question just on the decarbonization backdrop in Europe. If you look at a high level, it sounds a little bit too good to be true. You've got really strong pricing, which is proving to be sticky because players are acting rationally. You're cutting your costs as you are investing in alternative fuels and a lower clinker ratio. And at the same time, a lot, not all, but a lot of the financing for some of the big CapEx projects are coming from the European Commission, the taxpayer.

So the question is, what is the current tone when we think about the commission? Are they looking at your very healthy margin recovery and cash flows and wondering how long they need to be committed to the big CapEx checks? Or is there a point at some point, not in the too far future where the industry, yourselves included, will probably have to start thinking about accelerating some of those big CapEx projects in order to justify government support or just taking a bigger slice of that CapEx yourself? I'm just trying to square how everything can be great. You make fantastic cash flows and yes, government funds a lot of the projects? Thank you.

[Jan Jenisch, Chairman, CEO]

Hi, Cedar. No, that's a great question. And I think it all comes back that in Europe, we have a new economic framework for building materials, which are now heavily influenced by the framework of the CO2 certificates and all the regulation of the green deal. And this is the race and the companies who are the fastest are rewarded. So Holcim is very fast in decarbonizing Process & Production, but also decarbonizing the customer solutions. So this is a race.

If I'm able to decarbonate faster than others, if I'm able to have more promising projects to get even subsidies, I have the margin expansion I deserve. And then we have others who are maybe in a different and more difficult situation.

So it's a new game. We see now in the last 2 years, we saw a heavy impact of the CO2 cost into building material prices, most prominently into cement, which basically made inexpensive cement or cheap cement go away. So we have the classical markets where we have even cement prices below €100 per tonne, let's say, in the southern parts of Europe. That's all history. There is no cement price below €100 per tonne.

And this is because we have the CO2 costs coming into the cement. Everyone is short in certificates. And now this incentive scheme is working. So it's rewarding the company who decarbonizes the best.

The second aspect, besides the pure cost of CO2 is the influence it has on production capacity because you receive the maximum amount of certificates for around 80% of your production capacity, so that means to produce above of 80% of capacity is very painful because then you have to cover the full cost of the CO2, which is almost unbearable in today's market conditions. So you have all that, and this just now is the new economic race for decarbonizing Europe.

Lastly, I want to point out that the pricing for building materials, especially when it comes to cement, is on a level that we can have cement prices doubling or tripling which will still have same levels of demand as of today because it's simply their highest-performing material for many, many building material products, and that's why we have the price elasticity, which we need to make decarbonizing a reality.

[Bénédicte Mayer, Investor Relations]

We'll now take the next question from the line of Yves Bromehead from Societe Generale. Good morning, Yves. Please go ahead.

[Yves Bromehead, Societe Generale]

Hi. Thank you very much for taking my questions. Just a few for me. Circling back to the volumes in Europe, I think your prior expectation was for some sequential improvement in the second half of '23. Just wondering with the current backdrop, if that's still the case? That's my question number one.

Question two on the cost side. Can you actually update us on your expectations regarding energy and input costs and how you think they will develop in the second half of the year? And lastly, also on the cost, but on labor inflation, we've seen actually recent articles suggesting Syndicate and different parties in Europe are chasing much higher wage inflation in percentage terms as corporate profit margins continue to expand. I'm just wondering if you're seeing these pressures and if it's changing your view of wage inflation as we migrate towards 2024?

[Jan Jenisch, Chairman, CEO]

Yes. Look, thank you, Yves. I think we are in a very good position for the second half of the year and also really in the newspaper with all the recession aspects and all of that, there's no recession at Holcim for the second half of the year. We have good order books. So you can expect the profitable growth, which we have shown in the first half will also continue in the second half of the year across our business segments and across our geographies. So we're very confident to share this information with you.

On the cost side, we still had very high costs in the second quarter of this year because the comparison base was still significantly lower. And now that would change for the second half of the year, it looks like our costs like energy, but also logistics will be below last year's level. And then as you mentioned out, the labor costs will be remaining on a high side. But if you combine the cost information and our discussion on pricing before, you will see that we are very confident on the margins for H2.

[Bénédicte Mayer, Investor Relations]

The next question is coming from - sorry. Sorry, Yves. Yes, please go ahead.

[Yves Bromehead, Societe Generale]

No, I'm sorry. I just wanted to push you on the labor inflation. Are you seeing any incremental increases that exceed sort of the mid-single-digit inflation that we've seen in Europe starting to be fast and demanded by your employees for '24? Or is the ballpark figure of low single to mid-single-digit labor inflation still prevailing?

[Jan Jenisch, Chairman, CEO]

That's a very precise question. Look, it will not be in the low single digit. I think it will be in the mid-single digit. And for Holcim, we take care of our employees, and we understand the inflationary cost environment and the difficult situation, many of the Holcim employees and the family face. So we are not trying to be limiting proper salaries, and that's why we have budgeted for, I would say, significant salary situation or satisfying set of situations in the conduit [ph] which will more mid-single digit, something like that.

And that's not a bad thing. I think properly priced. The salaries is a good thing. It forces you to be faster in digitalization to be better in value selling to make sure you create, the ECOPact the EcoPlan products of Holcim to bring more value to your customers. So this, for me, is not a negative aspect. We have it well budgeted, and we look forward to deliver strong margins in H2.

[Yves Bromehead, Societe Generale]

Thank you.

[Bénédicte Mayer, Investor Relations]

We will now take the next question from Luis Prieto from Kepler Cheuvreux. Good morning, Luis.

[Luis Prieto, Kepler Cheuvreux]

Good morning, everyone. Thanks a lot for taking my questions. I had a couple of them, and if I may. The first one is that it would be possible to get an idea of what your recurring EBIT margin for U.S. roofing alone was in the first half of the year and what it could look like for the full year 2023? I guess what I'm trying to get to is some kind of measure of synergy delivery so far.

And the second question would be what does the M&A pipeline look like now in the Solutions &Products front, where should we see most of the firepower to go into? Is it mainly roofing? Are there other segments of increasing interest? Thank you.

[Jan Jenisch, Chairman, CEO]

Hi, Luis. Look, we were very happy to report. I think we report the EBIT margin roofing for last year, if I recall. We reported 19% EBIT margin. That was, I think, already quite a satisfying margin. You can imagine that when you look at the volume aspects we discussed earlier, where the margin was not fully defendable in the first half of the year, but I'm very confident that for the full year, we're going to see a similar margin and our margin target is maybe around 20% for that business because it's a great business with growth, innovation, system selling, refurbishment sales. So that business should be around a 20% EBIT margin. And I think we are well on track to get there.

M&A pipeline, this is - obviously, we have been very active in the first half of the year, and we were able to acquire 18 companies, 8 for Solutions &Products, another 10 for the bolt-ons. Second of the half of the year will be interesting. The market has turned a little bit. We're trying to pay a bit lower valuations, which then sometimes an acquisition doesn't materialize.

So I have no outlook for you. I could just confirm that this strategy will still be the same for us. So we look for bolt-on acquisitions, so local family-owned companies in North America, in Europe and selectively in Latin America. And then we also look for opportunities to accelerate Solutions & Products.

[Luis Prieto, Kepler Cheuvreux]

And Jan, if I may ask regarding your first reply, that 20% EBIT margin, that's next year, following year? What's the time frame for that?

[Jan Jenisch, Chairman, CEO]

Let's see. I don't like to speculate. I'm just saying we provided the EBIT margin for last year, which was, I think, a satisfying 19%, so delivering already well, well ahead of the synergies and well ahead of the promises we made at the time of acquisitions. And you can regarded second half of the year, we are fully on track, and I expect EBIT margin for that business to be ahead of 19%.

[Luis Prieto, Kepler Cheuvreux]

Thanks, Jan. Thanks, again.

[Bénédicte Mayer, Investor Relations]

We'll now take the next question from the line of Martin Huesler from ZKB. Good morning, Martin.

[Martin Huesler, ZKB]

Yes, good morning. And thank you for taking my question, Jan, Steffen and Bénédicte. The first question would be maybe a top-down-ish view. But if you -- if we should expect price over cost to improve in the course of the second half of the year. I was just wondering what held you back to increase the full year guidance on EBIT growth?

[Jan Jenisch, Chairman, CEO]

Martin. Good morning, Martin. We discussed a bit before. It's always a question a bit. We hear a lot of negative news at the moment about macroeconomics, geopolitics. And when you look at the Swiss media, every - you feel like every second company makes a profit warning for this year. So it's an environment where I'm extremely conservative with the outlook.

And I think you make the right math. We have been now above consensus above expectations for the first half of the year, and we give you no reason in this call to think different from H2. But nevertheless, let's stay a bit conservative, and let's talk after Q3 where our landing zone will be. And if things go well, maybe we have a different outlook. But for now, I think in this challenging macroeconomic environment. I think it's wise to keep it rather conservative.

[Martin Huesler, ZKB]

Okay. Thank you. And then my second question would be, if I look at Solution & Products and obviously, you also have non-roofing, non-insulation on more business in there, which is diluting the margin of the whole Solution & Products division. Could there be any divestments in the carts? Or how - I mean, it's a bit of a burden that those high-volume, low-margin businesses affect actually the whole divisional margin. What would you think about that?

[Jan Jenisch, Chairman, CEO]

Hey, Martin, that's a great question. And look, we have obviously positioned this Solutions &Products segment for growth for innovation, for more repair and refurbishment sales compared to new build. So I think that is all well positioned, and your observation is correct that the margin is not where the margin should be. That's the way how to look at it because the other segments in there, we have some selected high-technology precast business. We have water business in there.

So all businesses, which kick the right boxes for growth and for margins, and this is what we want to see. So we will not shape this - down shape this business. We will rather improve the margins for all platforms we have in Solutions & Products.

[Martin Huesler, ZKB]

Thanks a lot.

[Bénédicte Mayer, Investor Relations]

The next question comes from the line of Brijesh Kumar from HSBC. Please go ahead, Brijesh.

[Brijesh Kumar, HSBC]

Hi, good morning. I have two questions. The first one is on U.S. So you hopefully end out the 17 projects and that has in excess of 5% organic growth in next 4 years. The 17 [ph] projects, are they all or you expect many more to kind of come in the second half of the year and early next year? So that would be - and what's the kind of run rate would you expect going into the next 4 years in the U.S. in organic growth?

And within that, I understand this possibly are mostly related to the traditional business. So will – will really you think that 5% would be higher for cement aggregate and ready-mix and we obviously, we have a Solutions & Products which have a little different trajectory.

Now the next question to Steffen. That's on the EBIT scope impact, you talked about CHF 500 million. Can you split out the numbers because that's something different from what we heard in Q1, I guess, you were talking about CHF 300 million divestment impact for full year and some CHF 100-odd million coming in and including Dura Last. So if you can just give a little more clarity about whether what's the real number we are looking for full year, that would be helpful.

And possibly the last one on the CCUS projects, which you have on already three [ph] last year in the pipeline. Can you give us a little more flavor about what's the kind of funding requirement from your side? And when you talk about CHF 2 billion up to 2030, so what in million terms, how many - how much million ton of your capacity can be converted for the CCUS projects?

[Jan Jenisch, Chairman, CEO]

Brijesh, thank you for the questions. Let me take the first and the last question before Steffen gives us mere clarity on the second question. Look, you asked me for more outlook on the growth on the U.S. market. And I'm not able to give you a precise number. But we talked about three things, I think. The first one is we are very bullish on the U.S. when it comes for the next 8 to 10 years. We have one slide in the deck, I think it's Slide 8, and we talk about this impacts now from the Infrastructure Investment and Jobs Act, the Inflation Reduction Act and then also all the onshoring investments from the companies from automotive, electronics to white goods to all the new industries from battery makers to wind parks. And this will be very significant for us. And we shared in the presentation that this will boost our organic growth by another 5%

And this is not a quarterly thing. This is not something for next year. This is for the next 8 to 10 years, where we expect such a support by these programs. And we have been planning for these acts for the last 2 years very much in detail. And this is why we have already secured more than 70 infrastructure projects who came out of those bills and a lot more will come. So that's the first driver in the U.S.

The second driver we talked about that the roofing platform we established is a high-growth segment of the building materials market and why we had the destocking topic in H1 of this year, we should be back on track for H2 and back on track for the years to come.

In addition to this, we have a big catch-up in residential housing. They don't have enough inventory in residential housing in the U.S., and this will also be a positive trend. Now please allow me to stay right here and don't give you a precise number now or add up all these effects, but you can understand we are very positive on the U.S., especially as we have established such a strong footprint being the number one in cement, the number two in flat roofing and also number five positions for the other two business segments. So very confident here going forward, but I cannot give you the percentage number you look for aggregated.

On the CCUS, we made now a huge progress. So we shared with you the five new grants. If you go to our climate report, you will see all the projects we have in CCUS, including Canada, including U.S., very promising and excellent road maps. At this point in time, I cannot give you the precise number - I think we wrote in the climate report. We will capture more than 5 million tons of CO2 starting before 2030 annually. But I think the number, the real number will be significantly higher, and we will update our presentations as we have more clarity on the start of production of these many CCUS projects we're having at Holcim.

[Steffen Kindler, CFO]

Okay. So for your question on scope, I was giving you round numbers before, but to be very, very precise. The net scope on sales is minus CHF 1.8 billion, with a scope out of minus 2.9 and scope in of plus 1.1. And the EBIT net scope is around minus 0.2 with scope out of minus 0.3 and scope in of plus 0.1. This is the numbers I think you got from our Investor Relations department, and that these are still the numbers, okay

[Brijesh Kumar, HSBC]

Okay. Thank you.

[Bénédicte Mayer, Investor Relations]

All right. Let's now take the next question from the line of Yuri Serov from Redburn. Good morning, Yuri.

[Yuri Serov, Redburn]

Hello?

[Bénédicte Mayer, Investor Relations]

Hello, Yuri.

[Yuri Serov, Redburn]

Yes, good morning. I have two questions from our Solutions & Products in the U.S. First of all, looking at the largest chart and it shows very good performance in Q2. But then you were talking about some factors that were driving that performance that sounded a bit one-off plus was destocking so probably there is a refilling of the supply chain. I just wonder whether we can be confident that this is the new base for growth. This is not driven by some one-off impacts, as outsiders for us, it's very difficult to know when the supply chain is being overfilled like a bit now last year in commercial. So I'm just curious what’s happening there. And so - sorry, long question, but all the indicators were U.S. residential show decreases in new housing, obviously, renovation as well and your performance is very good. So I am just trying to figure out how to square those things?

[Jan Jenisch, Chairman, CEO]

Hi, Yuri. Look, I think we can say roofing is one of the most attractive segments in Building Materials. And there is ongoing continuous growth going forward. So we have - roofing is, first of all, one of the most important design element for the architects. At the same time, it's key to achieve the energy and sustainability levels you want to achieve for all billings in the future. So roofs have to be properly insulated, roofs have to be green roofs or solar roofs or cool roof. So roofing will have increased functions today, but even more so in the future.

So we see an ongoing increasing demand through all these trends in roofing. All the new roofing will be insulated. To insulate the roof is already doubling our sales per square meter to make a solar or a green roof is even more fruitful on the sales side. So you will see all that.

At the same time, we have already 80% of our roofing sales is system selling. So we're not just providing a waterproofing membrane. We provide the full buildup with insulation, with installation. We make the full calculation for the roof. So what type of wind load the roof needs to have, what's the durability of the roof, what's the maintenance concept of the roof, what's the efficiency benefit of the roof. So very fulfilling specification work from our sales force, and we're very happy to have 80% already of our sales in this category of system selling.

At the same time, our roofing sales is already 70% in reroofing. So only 30% new build. We like reroofing very much because this gives you even the opportunity for a bespoke specification. You assess the roof and you make a proposal how to properly refurbish it with all the key characteristics from insulation to what type of roof durability, maintenance concept. And then in addition, how you turn an old roof into a new one.

So these are all the trends we love about roofing. So we should not be worried about the long-term growth trend in roofing and also the long-term trend for profitable growth. And we have now this first time in I don't know how many years, this stocking effect, and now this is over, and you will see an H2 a different picture for our roofing business, again.

[Yuri Serov, Redburn]

Okay. Well, listen, that's very helpful in terms of understanding the strategic outlook, and this is very positive. But I wonder whether it's possible to answer specifically about Q2 and Malarkey. I mean the number that you're showing, are they contain any one-off effects that will come out in the numbers in the future?

[Jan Jenisch, Chairman, CEO]

No, I can just tell you that we have one-offs. We reported last year already, the growth and especially the 19% EBIT margin. These were firm real numbers. There was nothing adjusted, and this is what you can expect from us going forward that we have a strong 20% EBIT margin for this business.

It's quite similar among the segments after the restocking and we can provide you more data maybe at our roofing day, which we're going to have in September, but it's a very healthy business. And we like to be part of all segments. If you look at our charts, we are the most complete and most advanced roofing platform from residential to flat roofing, in flat roofing. We have all the systems you need. We have all the membrane types you need. We have the insulation and we have the full specification selling. So we are very happy to be at this position.

[Yuri Serov, Redburn]

Okay. Let me – my second specific question then, please. In Solutions & Products, you said that in H2, we will see growth. Just wanted to clarify, are you talking about the sequential growth or year-on-year growth?

[Bénédicte Mayer, Investor Relations]

Sorry, Yuri. Could you repeat your question, please? We didn't get that. The line is not great.

[Yuri Serov, Redburn]

Yes. In previous conversations answering previous questions, you said that H1 was difficult in Solutions & Products, but the second half of the year is going to see growth. I would like to clarify, when you say growth, is that year-on-year growth compared to last year? Or is this sequential?

[Jan Jenisch, Chairman, CEO]

No, we will see a healthy second half of the year against last year, and this is what we expect from us profitable growth compared to H2 last year. And then we see how strong we are for the full year. But you can expect a healthy second half for roofing, but especially also for the entire segment of Solutions & Products.

[Bénédicte Mayer, Investor Relations]

All right. Let's move now to the next question and take it from Tobias Woerner from Stifel. Good morning, Tobias.

[Tobias Woerner, Stifel]

Yes. Good morning. Good morning, Jan and Steffen. Thanks for taking my questions. Two questions here quickly. When we look at the recurring EBIT, which you no longer show price of cost, no volume and also the net debt bridge has gone missing in this presentation. Should we assume that these things are not going to come back in terms of reporting? Or is there a specific reason why they have been admitted on this occasion?

Secondly, you show a very positive reduction in CO2 footprint, 18% to 3,000 tonnes, which if you get closer to the 2,000 tonnes should be ideally helpful for your rating. Can you just remind us how much of that 18% is due to the deconsolidation of cement businesses? And how much is underlying? And also what your best sense is in terms of where you could get to on that measure also factoring in the possibility of the 20% divestments on the cement side? Thank you.

[Jan Jenisch, Chairman, CEO]

Good morning, Tobias. Let me take the second question, and then Steffen can talk about the reporting and why we have chosen now to do a reporting, which actually reflects the way how we run the company.

On the CO2, first of all, we're very happy that we have the right recipe of decarbonizing our existing processes, our existing products by then introducing new low car products, like, ECOPact, ECOPlanet, and then, of course, by adding the new Solutions & Products segment, which is on very low CO2 footprint.

And we do all of this and all of them have a significant effect. We - at this point in time, we don't share the exact split. You have - of course, you are right that India was some part of the reduction as that was a cement - heavy cement relying business with according CO2 emissions, but that's part of our portfolio strategy, and we focus North America, Europe, Latin America with decarbonizing construction and billings.

We will provide you more data at a later stage. For now, you see this very fast success we have here and the journey is, of course, not over. And we have not set a target yet. We will probably do that in the near future to set ambitious targets here where we want to end up in the near and in the long term.

[Steffen Kindler, CFO]

Yes. So you had two questions. Let me first come back to net debt. We - it's very simple. So we explained it before the net debt bridge. So we come from CHF 6 billion to CHF 11 billion, and that is really CHF 80 million free cash flow. The Dura Last acquisition, a few bolt-ons, the share buyback, the dividend and some ForEx. So there's - this is a very simple net debt bridge. And into the second half, as I explained, we're going to have mainly the vast majority of our free cash flow with a few bolt-ons still to come. So this is on the net debt.

On volume and price over cost, look, we don't see our business like that. We don't see our business in terms of volume, neither in North America nor in Europe, Jan explained at length also how our business works in Europe with more value-added products with more branded products, the drivers of decarbonization that come into the pricing of our products, this is what drives our business, and this is also how we want to communicate our business, and this is why we dropped the volume.

I answered to, I think, Elodie's question earlier on this call that we had in the business of aggregates, cement and concrete, we had a price increase of mid-double digits, around 15%, and that significantly offset our cost, but we don't want to split out volume anymore. Because also in other regions like North America, yes, we have positive volume there, but that's not the main driver of our business anymore. The main driver of our business is really the massive value we can generate in other fields of this business, so.

[Tobias Woerner, Stifel]

Okay. Thank you very much.

[Bénédicte Mayer, Investor Relations]

Thank you. We will now take the next question from the line of Bernd Pomrehn from Vontobel. Good morning, Bernd.

[Bernd Pomrehn, Vontobel]

Good morning, Bénédicte. Good morning, gentlemen. I appreciate the new segment reporting, but I just wonder why you put the asphalt and precast business into the Solutions & Products segment? Because according to my understanding, from a customer orientation standpoint, this segment is rather kind of a building solutions business, and it's also rather R&D-driven? Or was the split rather made on the - on your system selling approach and the different asset intensity of the business? Thank you.

[Jan Jenisch, Chairman, CEO]

Hi. Good morning, Bernd. Thank you for the question. We are very happy to have different platforms in Solutions & Products. And they all take a bit the right boxes. They are all growing businesses. So you talked about precast. Precast will be a bigger part for construction solutions in the future. So we want to do more modular buildings, easier to assembly with more secured quality and so on. So we see that as a growth driver also for those products. Those products are produced in factories, similar to the other solutions and products. So we see a lot of similarities. That's why we like those modular building elements to be part of our solutions and products.

And we can look into more detail in all the different platforms. We have talked a lot about roofing, but we have now built up a mortar platform in Europe, which is already €600 million, mostly focused on renovation on improving energy efficiency for houses to make a proper insulated facade systems.

We made big inroads now in Latin America to enter into sealants, to enter into mortars, also very, very successfully. So we're very happy to have not only the roofing platform, but roofing platform is our big dominant platform, but we have other smaller platforms. And they all have the right criteria spend. That's why we keep them in our special business segment to make sure they have the right attention from management to grow and share the right characteristics of growth, but also of low capital intensity. So this is another important financial set of criteria for Solutions & Products. So that's why we keep it this way and grow them all for a big future of Solutions & Products.

[Bernd Pomrehn, Vontobel]

Okay. Thank you, Jan.

[Bénédicte Mayer, Investor Relations]

We will now take our next and last question from Remo Rosenau from Helvetische Bank. Good morning, Remo. The floor is yours.

[Remo Rosenau, Helvetische Bank]

Good morning, Bénédicte. Good morning, Jan. Thank you for getting me the last question. And speaking about this huge valuation discount, all companies suffer from in the sector. Don't you think that this will only disappear really when your sales within cement and aggregates will drop below 50% of group sales, which means that you still saw far away from that? The target is 25% in Solution Products within a few years. I mean don't you need to get below 50% cement to aggregate to really get the valuation of? What do you think about that topic?

[Jan Jenisch, Chairman, CEO]

Hi, Remo, good morning. Look, I think cementitious products are the best solution for buildings, not only for the best performing business for the highest energy efficiency but also for sustainability footprint for being able to recycle. We have now a big focus of us is to recycle all the construction demolition waste and put them back as new products.

And we will see in the future how successful this will be for Holcim. And we believe in our current setup of the four business segments, and we have already high returns, high cash flows, high improving earnings per share. So we - I think while we fulfill already the financial side of the metal, we will also show that it's the right strategy. We are part of the solution to decarbonize construction and to decarbonize buildings, and that's our mission.

And to your 50%, if that means 50% or does it mean 50%, we will see that on the way. You see already in the U.S., our footprint where Solutions & Products is already our biggest business segment. But we see also in the U.S. how well this fits together with our three traditional business segments. And this all makes sense, and you can see that in the U.S. where we will have even more success going forward. So we believe we have the right strategy to decarbonize construction and building, including cement.

[Remo Rosenau, Helvetische Bank]

Okay. But if the other business is robust, if you acquire more in those things, it is - at some point, you will get in that direction, right?

[Jan Jenisch, Chairman, CEO]

Yes, we are very happy with the progress, and we are very happy we could make such inroads into Solutions & Products, and we think it's such a fantastic addition for Holcim. And - but to reduce cement is not a target we have. We want to decarbonize cement and enjoy very excellent returns in cement.

[Remo Rosenau, Helvetische Bank]

Okay. Thank you.

[Bénédicte Mayer, Investor Relations]

All right. We are now coming to the end of this session, and I will hand it over to you, Jan, for a few conclusions and the last word.

[Jan Jenisch, Chairman, CEO]

Thank you, Bénédicte. That was a great session like always, thank you so much for the Q&A. Don't forget, we all like to see you in Connecticut in September 22. Please come, you get a lot of insights, maybe even some secrets into our Solutions & Products business, particularly into the roofing you will see our state of the art factories for roofing, for insulation and we will have many insight discussions, so please make some time in your calendar to join us in Connecticut in September. Besides that, I hope in case to meet you all very soon and have some very engaging personal contact, like we always had and until then I wish you a good end of the week and look forward to seeing you very soon.+