HeidelbergCement AG

XETRA:HEI

Earnings Call Analysis

Stable Q1 with Key Acquisitions and Cost Management

Heidelberg Materials had a stable Q1 2024 despite a slight decline in revenue by 8%. EBITDA remained nearly flat with a 2% decrease, while EBITDA margins improved by 71 basis points due to effective pricing strategies and strict cost management. Key developments include starting a $1.2 billion share buyback and acquiring a company in Malaysia. The company received $500 million for a decarbonization project in Indiana. Outlooks were confirmed with revenue growth expected between €3 billion and €3.3 billion, an ROIC of around 10%, and maintaining a CapEx budget of approximately €1.1 billion.

Introduction

Heidelberg Materials hosted its Q1 2024 earnings call, where key executives, including CEO Dominik von Achten and CFO René Aldach, presented the quarterly performance and future outlook. Despite facing tough comparisons from Q1 2023, the company delivered an overall stable performance with a few areas of concern and highlights.

Revenue and Profitability

Revenue for Q1 2024 saw a slight decrease of 8%, while EBITDA remained nearly flat with a minor decline of 2%. This stability was attributed to effective pricing strategies and stringent cost management. The EBITDA margin improved by 71 basis points, showcasing the company’s efficiency in managing costs. Operating income (RCO) also experienced a slight drop of 9%, but the company remains confident in its ability to maintain full-year guidance.

Regional Performance

Performance varied significantly across regions: - **Europe**: Revenues and RCO both declined. Western and Northern Europe faced market depressions, while Southern and especially Eastern Europe showed promising improvements. - **North America**: Showed strong performance despite adverse weather conditions. The region recorded profitability, which was noteworthy given historical trends. - **Asia Pacific**: Underperformed expectations. Australia’s diligent cost management delivered positive results, but other areas had sluggish volume growth. - **Africa**: Volumes declined in Sub-Saharan regions, but overall the performance in Africa held up with near EUR 70 million in results.

Strategic Actions and Future Plans

The company continues to focus on growth and efficiency: - Announced the commencement of a EUR 1.2 billion share buyback program. - Acquired a business in Malaysia to strengthen its presence and sustainability initiatives in Asia. - Received up to $500 million from the DOE for a decarbonization project in Indiana, targeting the capture of 2 million tonnes CO2 per year by 2030.

Cost Management and Pricing Strategy

Heidelberg Materials anticipates maintaining variable cost deflation, especially in energy costs, while managing fixed costs rigorously. The company is prepared to implement further price increases, particularly in mid-year for some U.S. markets, to counteract inflationary pressures.

Guidance and Outlook

The company reaffirmed its annual guidance with an RCO target between EUR 3 billion to EUR 3.3 billion and a ROIC around 10%. They expect to maintain the CapEx budget at approximately EUR 1.1 billion and keep leverage in the range of 1.5 to 2x. Confidence remains high in achieving these figures, supported by continued efficiency improvements and strategic market actions.

Decarbonization and Sustainability

A significant part of the company’s strategy involves decarbonization projects. The recent funding by the DOE boosts the company's efforts in carbon capture, and similar initiatives are being pursued in Europe with substantial government support. These projects are seen as not only environmentally crucial but also financially beneficial in the long-term.

Earnings Call Transcript 2024-Q1

[Operator]

Ladies and gentlemen, welcome to the Heidelberg Materials First Quarter Results 2024 Conference Call. I'm Maurice, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast.

At this time, it's my pleasure to hand over to Christoph Beumelburg. Please go ahead, sir.

[Christoph Beumelburg, executive]

Thank you, operator. Good morning, good afternoon, everyone. Thanks for listening to our Q1 conference call. In the room is [ Ozan Kacar ] from the IR team; René, our CFO; and Dominik our CEO.

Welcome, everybody, and we have some prepared remarks that we go through and then immediately, jump to the Q&A. If you haven't done so, please check out our presentation on our website.

With that, over to you, Dominik.

[Dominik von Achten, executive]

Very good, Chris. Hello, everybody. A warm welcome from the Heidelberg Materials team. Great to have you on our Q1 2024 call. And I would suggest that we just dive into the summary of Page 2, to give you an overview of what I -- what we believe is a good quarter, although we were running against a very good comp Q1 2023.

Revenue is slightly down, minus 8%; EBITDA, almost flat, minus 2%; RCO, minus 9%, this is all like-for-like; EBITDA margin improves, which is an important message from our side, 71 basis points up in a combination of good pricing, we'll come to that, I'm sure, in your questions and also strict cost management. I'll come to that in a minute.

We are continuing our growth path with an interesting acquisition in Malaysia. I'll come to that later on in a little bit more detail.

We will, as promised, start our next share buyback of EUR 1.2 billion with the first wave after our AGM in Q2. We have received a very important contribution to our project, full decarbonization project in Mitchell, Indiana with up to $500 million by the DOE. That's, from our perspective, the largest capture projects of 2 million tonnes CO2 per year already as of 2030.

And we are confirming our outlook with the RCO, a bandwidth of EUR 3 billion to EUR 3.3 billion; and a ROIC, around 10%.

I suggest we dive into the overview of Q1 and it's basically -- if you take a ballpark, it's basically flat to prior year in most dimensions. Revenue's a little bit more down, 8%, but EBITDA basically stable. Operating margin improved and EBIT, slightly down, but in absolute terms, from our perspective, still a very convincing result of EUR 232 million.

You see that on Page 4. The hit on the volume side, it's clear that volumes are contracting in some of the key markets. But the good news is that price over cost is still working very well and continues to work well in a combination of good pricing and also cost management.

If you go into the different areas, we start with Europe on Page 5. Yes, Europe came down in terms of revenues and also RCO in the first quarter. The same is true for the RCO margin. But from our perspective, still was holding up quite well. From our perspective, Europe is big. And there are different parts of Europe. I think while Western and Southern Europe as well as Northern Europe -- sorry, while Western and Northern Europe are still quite depressed on the market development, Southern Europe and especially Eastern Europe, are clearly improving. Eastern Europe with a very convincing performance in Q1, and we expect that this eventually will also spill over to the other parts of Europe, but Eastern Europe was clearly, from our perspective, in the bright spot.

North America is the other bright spot. I think from our perspective, very convincing performance in North America. Profitable quarter. This has not happened often in the U.S. back through our -- maybe because it's a small quarter and then it's winter. Weather was not good in the U.S. in general. Even in Texas, Northeast, bad weather. Nevertheless, I think clear improvement on the RCO in absolute terms and also on the margin side. So you see also the Mitchell effect, we call it, it's clearly coming through. Operational performance is improving. Cost management is getting better. So I think convincing performance in North America, and there is no reason to believe this will change in any near future.

Asia Pacific, to be honest, I think we are a little bit disappointed on Asia Pacific. I think there is a good performance in Australia. René can maybe share a bit more. The market is still down, but very diligent cost management in Australia has led to a convincing result out of Australia.

The rest of Asia, still a little bit subdued on the volume side. Improvement now after Ramadan in April. But in general, Asia with a sluggish volume start in the first quarter.

Africa, next page. I think very much impacted by volume declines in sub-Sahara. So Morocco, Egypt is not bad, Turkey also. The problem is a little bit sub-Sahara with a sluggish start, especially also the currencies are a little bit devaluating. So when you then turn the results into Europe -- into euros, then I think you get a little bit of the hit. But still, it's close to EUR 70 million result in Africa. So we'll fight to get also the African results into the corridor during the remainder of the year.

What's very important for us is that we continue to grow the company with the portfolio optimization. We have done significant deals in the past and another 1 now at beginning of April with the acquisition in Malaysia. That is an important deal, not only for the footprint in Malaysia, but especially also for the sustainability topic. It's a cementitious material that we acquired, market leader in the Malaysian market, which is a growing market and we have a very strong position in all the other business units, aggregates, asphalt and ready-mix. So a great complement for the Malaysian market position.

But as always, we are continuing to work on the cost side of this. We are not making a big splash, but we go very diligently step by step with significant step changes in our asset base that will also deliver significant savings on the fixed cost side.

Leimen, just out of Heidelberg, we closed the clinker production. The same we have now announced for Germany in Hanover, which is going to happen during this year and then 2 more closures to come in 2025 due to the social process in France. And we'll continue to work on our Mitchell plant optimization that will deliver a significant increase in margins in the U.S. as we said.

Just take you back to our capital markets presentation in '21, where we said the margin improvement in the U.S. is going to be above the average of the group. At the time, we said 300 basis points for the group and 400 to 500 basis points for the U.S. and we are absolutely well on track to deliver that margin expansion.

Then turning to the sustainability topic. I think I mentioned already the ACE Group acquisition in Malaysia. I mentioned also the funding of the DOE on the CCUS project for Mitchell. Very important step for Germany, and I would also say for Europe is the fact that finally, the German government has moved on the carbon capture and storage piece. So the barriers have been lifted both to capture CO2, also to export CO2. We are well on track to get that executed in the political framework in Germany. There, we've taken a very active part and personally, I also took a very active part. This is a lifeline for us in Germany, and I think we move in the right direction.

Good traction also on the evoZero. Commercialization, we've announced the first project with the Nobel Center in Stockholm, and there are many more to come.

And then we finally renewed our long-standing partnership with BirdLife to also continue to work on biodiversity.

If you wrap it all up, we are confident in our guidance to grow the revenue; like-for-like to stay within the corridor of EUR 3 billion to EUR 3.3 billion when it comes to the RCO; to stay around the 10% of ROIC; to keep the CapEx budget around EUR 1.1 billion; and to stick to the leverage of 1.5 to 2x.

With that, I'm very much looking forward, and we are very much looking forward to your questions. The floor is yours, Chris?

[Christoph Beumelburg, executive]

Thanks, operator. Will you kick off the Q&A session, please?

[Operator]

[Operator Instructions]

[Christoph Beumelburg, executive]

So first in line is Elodie Rall from JPMorgan.

[Elodie Rall, analyst]

My first question is on Europe. You say price/cost is positive, but margin is down because of negative volumes. So I was wondering if there are extra actions that you need to take to maintain margin even if volumes remain weak? Basically, what else can you do to absorb fixed cost at this stage?

My second question is on price increases, whether you have done more, announced more? And when should we expect to see the impact?

And lastly, on guidance, what would be needed at this stage to get to the top end of the guidance?

[Dominik von Achten, executive]

Very well, Elodie. Thank you for your 2.5 questions. I think that's good. I'll go first and then maybe René has something to add. I think on Europe, it's going to be a combination of the triangle that you know from our perspective, volume, price and cost. I think I've indicated already that on the volume side, we should not expect miracles in Western and Northern Europe, including the U.K. However, I think we do see also in some of those markets, stabilization on the decline. So I think that's encouraging.

Eastern Europe, as I shared with you, is going very strong in almost all markets in Eastern Europe. So I think in that respect, there is a good development on the volume side.

Pricing, I think we have gone for price increases in almost all markets. Some of them sticking a little bit more than others, but there is -- I think that's also behind your question, there's no significant price decline or anything dramatic from our perspective, not in Europe.

On the fixed cost side, we are continuing to work. I think I already shared with you, if we take out the clinker kiln in any one of the plants, you typically save a high single digit up to a low double-digit million fixed cost per year, so it's very significant, and you can then make your calculations on your own. We've done now Leimen, Hanover and the 2 French ones. Rest assured, this is not going to be the end of it. We are going to trim our capacity. We want to be fit for the next 10 to 20 years in Europe. And I think this is now the time to move and the chance to move and that's what we will continue to work on.

On the top of the guidance, I think the question is in that triangle, if the price increases go through and there are markets, notably in the U.S., where we are going for midyear price increases, so there are more price increases in some markets to come, obviously, the volume development and recovery plays an important role. And I would also say the emerging markets are always hard to predict. If they come back quicker than currently assumed in our plan, then I think that would also be a trigger for driving that to the upside.

That's a little bit my view, but, René?

[René Aldach, executive]

Just to confirm, Elodie, as well, price over costs for all the regions is very positive. So just to take the fear away that we are not working on cost. Pricing is for all regions positive and costs as well. So that's a little bit the message. As Dominik said, the key will be how well volumes develop and the rest, I guess, we have pretty much under control.

[Elodie Rall, analyst]

Can I ask where pricing is [ taking ] or not?

[Dominik von Achten, executive]

Sorry?

[René Aldach, executive]

Okay. One more. Elodie, let's see. We are at the beginning of the year, winter quarter, different seasonalities in the group. So let's wait and see. But as we said, we went out with price increases and now we need to see in Q1 how these price increases will...

[Dominik von Achten, executive]

Q2.

[René Aldach, executive]

come into the market. Q2 -- sorry, Q2. Yes.

[Dominik von Achten, executive]

Thanks, Elodie.

[Christoph Beumelburg, executive]

Thanks. The next question comes from Luis Prieto from Kepler Cheuvreux.

[Luis Prieto, analyst]

A couple of questions from me. The first one is, do you have any update on your plans to pave the way for a rerating of U.S. operations after the CRH and Holcim moves? U.S. listing, segregation of assets, whatever you might be considering at the moment if you have initiated a discussion or not?

And then the second one is, could we drill into how much of your very positive price-over-cost dynamics is explained by price and how much by subdued cost inflation and cost optimization? Any indications of magnitude would be extremely useful on both fronts. How much is pricing and how much is the rest?

[Dominik von Achten, executive]

Okay, Luis. I would suggest I'll take the first one, then René will give you the details on the second. As we said in earlier calls, we have noticed that some of our competitors have moved west and have worked a little bit on the sum of the part discussion. We've indicated that we continue to review the situation and that's what we will do. We have internally discussed that we will bring some more transparency around the performance in the U.S. I think that you should expect during 2024. That will be the first specific step and then more structural changes like you indicated that we've seen by any of our other competitors, we continue to evaluate. But for some of these steps, the jury is still out whether they deliver what they expected. So I think we'll watch the situation carefully.

[René Aldach, executive]

Luis, your second question is the share is roughly 60-40, so 60% coming from price, 40% from cost.

[Christoph Beumelburg, executive]

Okay, we move on to the next question from Arnaud Lehmann from Bank of America.

[Arnaud Lehmann, analyst]

Two questions on my side. Firstly, obviously, very negative volume effect in the first quarter, and we know it's a small quarter, but have you seen a normalization of volumes in April in the various regions, especially Europe and North America?

And my second question is on carbon capture. Obviously, this big announcement from the DOE for Mitchell is quite encouraging. But you've had also some financing from the EU for your European carbon capture plants. Just thinking of returns, considering that you have to cover the ETS cost in Europe and you don't have that in the U.S., do you see better returns on investment for European CCUS plants relative to the U.S.?

[Dominik von Achten, executive]

Okay. I'll do the first 1.5 and then I'll give René because he's also doing the calculations on the business plans of carbon capture. The answer to your first question is very simple, yes. We see normalization of the volumes in April. So I think that's easy.

Second one on the DOE. Yes, absolutely. That's encouraging. And in Europe, you know that we've received the funding for GeZero, around EUR 200 million. We've received earlier even the funding on Bulgaria. So -- and we have obviously significant applications in for the round that closed beginning of April. So those results, I think, will come in October, November or something. So let's wait and see.

As we've indicated earlier, the first real business case that I think we can judge, and we have already 80% data points realized is the business case in Brevik, and that one looks good. Even our CFO doesn't lose any hair or gets any gray hair from that; it's rather the opposite. So that looks -- that business case looks absolutely solid. Okay, we received 85% funding. So I think there is a little bit of a special setup. And now we are going into the calculation of the business cases in the U.S. and Canada. So Edmonton and Mitchell are the next ones. And then we have the European ones. We go one by one.

It's very difficult to give you a general answer to this because it is really a case-by-case scenario because it depends on the stuff that [ hits ] Europe, everybody, what's the CO2 price and then it becomes very specific. What's the technology you are using, that drives CapEx and OpEx. What is the -- secondly, the transportation issue and certainly the storage and/or utilization issue. And that one is so widely spreading from left to right, that every business case is very different. And then you know that in the U.S., it was more with 12-year tax credits, plus direct funding. That's why it's so important. Don't underestimate, we get the $500 million, but we get the tax credit on top of it. So I think that's a combination of direct funding, and that makes also the U.S. cases, from our perspective, quite interesting. So let's wait and see.

Plus we have in Mitchell the specific situation that potentially we have the storage right below the plant. So you save the transportation, which is also a significant benefit.

So I think in general, I would say it's a case-by-case decision. But rest assured, no, we have given you the financial targets for the whole company. And even if we like decarbonization very much, even if we love this assumption that we go down to fully decarbonized by carbon capture, we are not financially stupid. We continue to make this a very successful case. In fact, for Brevik, we try to make it a business case that's even more convincing than the average of the group. So let's wait and see.

[René Aldach, executive]

Everything said, I guess, Arnaud, don't forget, as Dominik said, you get the $85 per ton tax credit and then the direct funding. And then if you have no transportation cost for Mitchell, you can be sure that hopefully, the tax credit will be higher than the OpEx for the CCUS. So that will be anyhow a positive business case so.

[Dominik von Achten, executive]

And then you don't forget you have the commercial -- in none of these businesses, we have the commercial upside that we are targeting for evoZero. So all what I've said is in brackets and then you have multiplier, is the commercialization of evoZero. So let's wait and see. And I'm sure there will be some excitement coming down the road.

[Arnaud Lehmann, analyst]

That's very helpful.

[Christoph Beumelburg, executive]

We move on to Cedar Ekblom from Morgan Stanley.

[Cedar Ekblom, analyst]

So just two questions for me. Could you just talk a little bit about Asia? You mentioned it as being disappointing. We have seen you allocate a fair amount of capital to that region recently. So I'd like to understand what the plans are for Indonesia and how you see the path forward to profitability. Is it really just around the market? Or is there something that you can do within your control to get profitability in the right direction?

And then the second question is just around fixed costs. I know you mentioned a triple-digit number for Mitchell. But your price/cost is positive, but I assume that that's variable costs. At the end of the day, you've got quite a lot of negative operating leverage working against you. And I know you can't fix the volume backdrop, but can you do more on the fixed cost side of things? Could you quantify some potential savings that we could look to as we move through '24?

[Dominik von Achten, executive]

Okay. I'll do the first one, and René that's the second one. Cedar, on Asia, I think there is a combination of 2 things. One, I do believe that short term, the market is a little bit subdued. And that's, I would say, a post-corona effect that we do see there. Also, the currency is getting a little bit under pressure as some of these markets had elections. Indonesia was just coming out of elections. India is going through an election cycle. Thailand went through an election that took them 6 months to get the budget done. April looked already very strong again in Thailand. These emerging markets, that's why we need a portfolio of markets because it goes up and down, but this can change quickly. So we believe that growth will come out of Asia.

It's clear that these economies will grow. If you look at the population growth in India, it's mind boggling. Don't forget, some of these markets are now bigger than China. Indonesia is growing fast in terms of population. So in that respect, the markets and the structural demand is absolutely there, quarter 1, quarter 2, let's wait and see when it kicks in again.

Then there are, the second part of your question, obviously, portfolio measures that we are taking in Asia, and we -- within our general mark to portfolio management, we go 1 country after 1 country, and I just had a call again with Roberto Callieri, our new Board member for Asia, we go 1 by 1 and check whether we have a convincing market position or not.

Indonesia, I think, for the time being, is fixed, Bosawa and Grobogan are the 2 additions, and they will eventually pay out. I have no doubt. There's always a little bit of a ramp-up in the first couple of months, but I think that's absolutely normal. From our perspective, mid and long term, this will be a very convincing setup in Indonesia.

I think the recent acquisition in Malaysia shows you that we target the vertical integration in Malaysia and with the cementitious addition now, that really is also something that will solidify our situation in Malaysia.

In China, I think it's -- for us, it's a small position. It's a two 50-50 joint venture, so nothing exciting. Hong Kong is good and stable, delivering good results, great market position. So I think that's good.

Brunei and Bangladesh are more the small pieces in the puzzle. It's little bit up or out in that respect. In Thailand, there, in essence, is something we still need to get our arms around. The market position from my perspective, is not perfect. So let's wait and see what we can do over there. But in general, we strongly believe in Asia, and we do believe that we have a very defendable market position in each of those markets.

[René Aldach, executive]

Cedar, to your second question, your working assumption that from the cost savings, everything is coming from variable costs in Q1, is not fully correct. So I said to Luis, 40% of the price over cost comes from cost and out of the 40%, half of it is coming from fixed cost, yes. So -- and the biggest part out of Europe. And there you see that we are trimming our business to adjust to the lower volumes.

Obviously, you can always do more, and we are doing just an analysis right now on our ready-mixed footprint as well to see what do we need to adjust in terms of volumes. So you can be sure that's in our DNA, that we very much know how to manage fixed cost and that we have a very hard focus on this, and you see it already in Q1, where I said there's already a nice fixed cost reduction in Q1.

Can I give you a target? No, because if volumes pick up, we need to be ready, but you can be sure we will adjust to lower volumes.

[Dominik von Achten, executive]

Yes. And on the flip side, just to add to what René said, we can also not exclude that during 2024, we'll give you a target. So we are constantly working on it.

[Christoph Beumelburg, executive]

Thanks for your question, Cedar. The next one comes from Brijesh Siya from HSBC.

[Brijesh Siya, analyst]

So two questions from my side as well. The first one is on Africa and Middle East. That market has possibly -- and we have seen in the last 2 years or 3 years has been kind of moving around by quarter. So it's very difficult to get a hand on to it. And I'm sure you must be kind of coupling around the take as well. So can you just give us a little more into how the market is looking like? And what's your strategy in terms of to kind of get around this and get a consistent performance quarter-by-quarter?

And the second question is more about U.S. pricing. You talked about price increase plant from starting Q1. Could you give us what it was, a ballpark number, especially in aggregate and cement, given all the talks around East Coast pricing pressure? If you could give us a little more sense about how it was in Q1 and anything you have seen as a pricing pressure in East Coast would be great.

[Dominik von Achten, executive]

Yes. Brijesh, just a couple of thoughts and maybe René has something to add. On Africa, Middle East, from my seat, I have to say, given the typical volatility of emerging markets, if I look over the past couple of years, our performance quarter-over-quarter in Africa, there was not a high volatility. It was the only 1 trend line and it was up. So our result in Africa has actually moved absolutely in the right direction.

Is this now a little bit of a stabilization on a high level? Yes. But we continue to work on 2 things. One, you always need a portfolio in emerging markets. There's never 1 country can do it all, and that's what we also do in Africa. That's why we have more than 1 country and rather, a basket of countries. But within the countries, you don't want to have flea circus of crazy market positions. You want to have each country being on a top market position. And that's what we've been working on.

Especially with our restructuring efforts in Egypt, I think we've come a long way. The Egyptian results a couple of years back was negative; now it's strongly positive. Tanzania, we've made this acquisition, which was very important that we have a clear #1 position now in Tanzania that's very comfortable. Ghana, we have a clear #1 position. We've just built out the sustainability investment with CBI together on the calcined clay. So I think we -- again, similar to my answer to Cedar, we go market by market, not only in Asia, but also in Africa to have a #1 or #2 position in each of those markets. Otherwise, we should leave. That's a little bit our mindset. And that is true also how we manage Africa.

On the U.S. price increases, I ask for you understanding that I can't say more, that we go for midyear price increases in some business units and some markets in the U.S. And secondly, if I see what has been published, we are very well in the water when it comes to price realization. So nothing from our side to be concerned about.

[Christoph Beumelburg, executive]

Next is Harry Goad from Berenberg.

[Harry Goad, analyst]

I've got a couple of questions, please. Firstly, just continuing that vein on the U.S., can you give us a bit of a feel for what you see in terms of underlying sort of almost like clean volume trends? I guess, Q1 was obviously distorted by weather and the comp and a few other things. But maybe break it down by the different end markets. You talk about the sort of clean volume trends you're seeing there.

And then secondly, you've obviously referred to there are some capacity closures in Germany and France. Can you just let us know what -- when those cases are affected, what the decline will be almost like from the beginning to the end of the process in terms of production capacity in both countries?

[Dominik von Achten, executive]

Okay, Harry. Let me take the first one, and then René and myself are helping you on the second one. On the U.S. volume development, you're right. I think there was a little bit of a subdued volume development in the first quarter in the U.S. driven, from our perspective, by the working day topic, but also by weather, especially in the Northeast, partially in Texas where there was even snow again and tornados and whatever. So I think we do see some stabilization on the volume side in April as we've indicated before.

So I think the picture overall has not changed fundamentally. Infrastructure is strong. Commercial -- sorry, industrial plant developments, I think, looks good. Housing is, from our perspective, stabilizing on a very low level. So a little bit up in some small markets. If you take, for example, Houston, I think the volumes are coming ever so slightly back even in residential, but in other markets, there is still a decline. In other markets, there is a stabilization. So I think, from my perspective, if the general economy in U.S. continues to work the way we have seen, the worst in the housing side, so let's wait and see. I'm not so pessimistic if you talk in a 1- to 2-year time frame for housing in the U.S. if the economy stays where it is. So I think that's a little bit the picture on the U.S. volume side. And maybe René, do you want to...

[René Aldach, executive]

Regarding closure of Hanover in Germany or the kiln, we're talking about the kiln there, the grinding center will remain, it will be in H2 this year. So you can -- maybe there's a small financial effect this year and the full financial effect next year. And the 2 plants in France, that will be Q4 '25. That's a little bit the time line.

And then on further outlook, then that's what we in the past said already. There will be market consolidation, let's say. There will be plant closures. And we are a market leader in Europe and I guess with the announcement we have done so far, we are in a very good position to stream our asset base. And as Dominik said, we are working on how do we -- how can we improve further to adjust our capacity especially in Europe. And maybe we'll come later in the year with something about our plan.

[Dominik von Achten, executive]

Harry, and maybe if I may add and also to Cedar's question earlier on, I think and, Elodie, you also had a little bit the question, I think 1 is the reduction in fixed costs. But I think the other piece that is important to understand, it will also be a margin expansion topic because again, it's a portfolio of assets. And we are closing, obviously, the most inefficient kilns which helps you on margins, on fixed cost and on sustainability performance. So I think you'll get a portfolio asset effect if -- that's how I call it, out of these plant closures that I think everybody is underestimating a little bit. So I think in that respect, I think every kiln we close has 3 dimensions of positive effect, not only one, that's a little bit what we are also targeting.

[Christoph Beumelburg, executive]

Thanks, Harry. The next question comes from Yassine Touahri form On Field Investment Research.

[Yassine Touahri, analyst]

So a couple of questions. The first one is on what's happening in April. You're guiding on like-for-like sales growth for the full year. You delivered minus 8% in Q1. Is it fair to assume that you've got a good like-for-like growth in April, with volume stabilizing and at least -- volume at least stable and a bit of price increase?

And then my second question would be on imports. So we see the cost of imported cement is declining -- in Vietnam, in Turkey, around the [ Mediterranean ]. Do you see any impact from independent importer in Italy, Belgium, Texas or around the Mississippi River, taking market share or capping prices for some of your clients?

[Dominik von Achten, executive]

Yassine, first one easy is, yes, your assumption is right.

Second one on imports, I think you're right. Cost of imports have decreased both in terms of clinkers and cement costs. I mean, shipping is going a little bit the other way. So it's not like shipping is also declining. So it's always a combination of many things. But the markets that you are indicating, Italy, it's not generally in Italy. It's in the Northeast, maybe that's not such a super stronghold for us. So I think there are a spot in the U.K., maybe here and there a little bit, in the U.S., in Houston, yes, you know normal spots. But it's not like it's a massive impact. This is very pinpointed in some of the local markets, but that's it from our perspective. There is not a massive flood of imports.

And just to remind you on the opposite point, we also profit from this. We are still net importer in the U.S. So obviously, if the import costs come down, we also source much cheaper. The same is true for Africa. It's a big net importer from our perspective. That obviously helps us. Bangladesh, net importer. So we have -- yes, there is a little bit of rain coming through the roof, but we have a lot of buckets on the floor that will capture that rain and make gold out of it almost. I think that's a little bit -- that's the balance of the group.

[Yassine Touahri, analyst]

And just on that feel, what you're suggesting is that volume might be up a little bit at the group level?

[Dominik von Achten, executive]

Sorry, I didn't -- you asked what was it?

[Yassine Touahri, analyst]

What you're suggesting is that April, in April, the volume are up a little bit at the group level.

[René Aldach, executive]

Yes. He said yes.

[Dominik von Achten, executive]

Yes, you're right.

[Christoph Beumelburg, executive]

Next in line is Gregor Kuglitsch from UBS.

[Gregor Kuglitsch, analyst]

So can I ask two questions? So the first one is in Q1, you actually had cost deflation from your answer. And I guess my question to you is, do you think you can sustain that? Or do you think that now goes into inflation? And if so, I guess, why?

And then I think when we had the dinner a few months ago, you were sort of hoping, I think, that European earnings could grow this year. Do you think that is still the case? Or do you think that's become more challenging?

[René Aldach, executive]

Gregor, I will take the first one. Cost in deflation? Correct for Q1. I would say on the variable cost side, we can probably see this continuing, especially for energy. And then on the fixed cost side, there will be, let's say, deflationary impacts due to our measures and obviously, an inflationary impact due to, for example, staff cost increases because there's still salaries go up. I would not -- for the full year, both cost elements, deflationary, let's wait and see, but variable cost, energy should be and fixed cost, we will try to manage as hard as we can.

[Dominik von Achten, executive]

And then on the second piece, Gregor, the year has 12 months, and yes, Europe has got a little bit of a hit in the first quarter, but keep it a little bit in the total perspective. We made almost EUR 1 billion profit in Europe last year. And I think now we talk about EUR 100 million up or down in the first quarter. So rest assured, we don't give up until the finish line, and I certainly haven't given up the hope that Europe is going to come in with a very strong result also in 2024.

And remember, just sorry, again, Europe is now a big -- because we've made the organizational change. I think Europe is now a big picture of us, let's say, 4 or even 5 different submarkets. You have the Northern European market, that is a completely different game. You have the Eastern European markets, different game. You have the Southern European market, different game. We have the Western market, and then you have the U.K. So 4 to 5 markets, and they will be -- as they did in Q1, behave very differently. And I think that I'm still hopeful that we'll come in with a very strong result in 2024 for Europe.

[Gregor Kuglitsch, analyst]

Can I follow up on the energy cost comment? What you've actually seen in terms of deflation and maybe what your most recent thinking is on the price decline or, let's say, cost decline that you expect for '24, please?

[René Aldach, executive]

In Q1, we had double-digit percentage relief. Yes. And the comparison base in H2 will be much more difficult because H2 last year, we had already relatively lower energy cost. But again, it will be valid what I said, there should be deflationary energy cost for the full year.

[Christoph Beumelburg, executive]

Thanks, Gregor. The next question comes from Ross Harvey from Davy.

[Ross Harvey, analyst]

Just looking to go back on I think a comment you made about North America earlier in the call. I think it was a comment about 500 to 600 basis points of margin improvement. Can you just reiterate what that relates to? Is it RCO or RCOBD? And is that for 2024?

[Dominik von Achten, executive]

I think just to be -- we are always confident on the U.S., but just to be -- we said 400 to 500, it was not 500 to 600. So we said 400 to 500 for the time being. So let's get to the -- let's get to that milestone first, and then I'm not against fighting for 600, but let's do 1 step after the other. I don't have the absolute RCOBD impact in my mind. We talk about at least double-digit millions, if not more.

[René Aldach, executive]

And for this year, for this year, Ross, we have as well we should see and will see the full Michell impact, so that will drive our result up in '24. I don't want to state the exact amount. Let's wait and see. But we should see improved result plus improved margins in the U.S. this year.

[Ross Harvey, analyst]

Okay. Great. And then just one quick one.

[Christoph Beumelburg, executive]

No, go ahead.

[Ross Harvey, analyst]

Yes, I just want to ask a quick follow-up. So I think you've been helpful in terms of pricing commentary on North America. And you said, if I took it down correctly, more increases to come. I'm just wondering are you expecting a set of midyear price increases? Or what is that based on? Or have you seen most of the price increases actually come through in North America already for the year?

[Dominik von Achten, executive]

As I indicated earlier, Ross, I think, yes, many of the price increases have already been done, but there will be, from our perspective, a market in the U.S. with second round price increases to come during the year that have not yet [ done it ].

[Christoph Beumelburg, executive]

The next question comes from Tobias Woerner from Stifel.

[Tobias Woerner, analyst]

Yes. First one, when you look at the like-for-like across Europe, minus 10.3% in the first quarter in revenue terms, if you assume a low single-digit price impact. So that's about 8%. If you assume that working days impact whatever, 1.5%, 2%. Is that a fair assumption? And does that point to over and above what you said about April trends getting less bad, working day adjustment? That's the first question.

The second question, when I look at the price/cost spread, I think you sort of indirectly answered it. Most of that what you expect for the full year will, however, happen in the first half? Is that fair to say or a larger proportion of that?

And then if I may squeeze one cheeky one in lastly. How do you see this quarter? Is this sort of a typical quarter for you? Or because of what happened on the volume side, you'd say, actually, generally, we should be doing a better off Q1?

[René Aldach, executive]

So let me take the first one, Tobias. The workday impact, you said what, 1.5% to -- 1.5% from our calculations is much more, so we're talking probably 5%, and that is the impact on the workdays in Q1, which consists of Easter, Ramadan and all this. So that is a little bit the impact in Q1.

Then price over costs, spread. As I said, H2, the base will be tougher, but we see still energy costs coming a little bit down. And where does it come from? Maybe on electricity, there will be not super much relief anymore but on fuel because lastly, fuel was a little bit more expensive with stuff on stock. So that will then come from fuel, but I would agree to the statement that the H2 relief will be lower than the H1 release, that's probably correct to say it like this.

And then the last one...

[Dominik von Achten, executive]

I didn't quite...

[René Aldach, executive]

Typical first quarter, whether it was a typical first quarter, I think.

[Dominik von Achten, executive]

It's difficult to say, we tend to forget that we had huge winter in Q1. And I think it's been a mixed bag of things. But what I think has it been an extraordinary quarter to the one side or to the other side, I wouldn't say no. So I think it's nothing that gets us out of our seats on this if that's behind your question.

[René Aldach, executive]

And don't get excited that it's EUR 20 million gap from RCO. In a good month in summer, it's 1 working day where we make this profit as well. I would not get super excited about the data in Q1.

[Christoph Beumelburg, executive]

Okay. That puts it into perspect...

[Tobias Woerner, analyst]

Excellent. And then -- yes, go on. Sorry.

[Christoph Beumelburg, executive]

No, I was going to say that puts it into perspective. Thanks for that comment, René.

[Tobias Woerner, analyst]

Sorry, I didn't hear that. Was it 5%, René said on the working day.

[René Aldach, executive]

Yes, I said 5%.

[Christoph Beumelburg, executive]

All right. Now we have Mike Betts, who is complementing the Q&A session.

[Michael Betts, analyst]

Can you hear me?

[Christoph Beumelburg, executive]

Yes.

[Dominik von Achten, executive]

Yes.

[Michael Betts, analyst]

My questions are both on scope, if I could, Slide 14. The contribution in Q1 was EUR 16 million EBITDA. Question one, what are you expecting based on what you've done so far for the year? I mean are we around the 50 area?

And then the second question, if I could just ask for a bit more explanation on North America, where there was a EUR 7 million contribution to EBITDA, only EUR 2 million to EBIT suggests there was a lot of depreciation. Does that also suggest that the North American contribution from scope will be a lot higher in the rest of the year?

[René Aldach, executive]

Okay. So Mike, let me take that one also.

[Dominik von Achten, executive]

I'll leave that to the CFO. Mike, that's a great question for the CFO.

[René Aldach, executive]

Mike, the scope, the EUR 16 million, that consists, obviously, of items we have bought, yes, consolidation effect. And then obviously, the other way we sold a few, let's say, operations the last year. The EUR 16 million, if that would be only 50 in a year, that would be very disappointing. Yes, that should be more. In Q1, as you know, is the lowest quarter, so the EUR 16 million, I don't give you an absolute number, but the EUR 16 million should be way more than 50 in the year.

And then the U.S., that is scope is -- you can imagine what that is, that is SEFA, and that business is running super nicely. Yes? You see already EUR 7 million in the last quarter. And when you allude to the depreciation, now EUR 5 million, that is how it is. But that should significantly grow in the next 3 months because that business is really running well and nothing more to say.

Don't -- we got the question in Q3 already, I guess, from Cedar. How our positions will pay nicely off, you see it already here in Q1. Just 1 more comment. You see the EBITDA margin. If you divide EUR 16 million by EUR 72 million, it's over 20% in our weakest quarter. So you can imagine that we did a few good deals. And you see the Asia impact with very nice margin.

[Michael Betts, analyst]

And just on that Asia what's already in there in the fourth quarter last year was it? Asia was already in the fourth quarter?

[René Aldach, executive]

No. No. That is our Grobogan acquisition, which we closed in December. There was 1 month, I think it was EUR 2 million or something, half of the month last year. So the number here is just that 1 acquisition.

[Christoph Beumelburg, executive]

Thank you, Mike.

[Dominik von Achten, executive]

Thanks, Mike.

[Christoph Beumelburg, executive]

Thanks, Dominik. Thanks, René. There's no further questions in the line. So let me just to tell you that we are quite active now going on the road with the IR team, go to Milan, Paris, New York, Boston, Netherlands [indiscernible] with a couple of conferences, so hope to see you all there. Stay tuned, and thanks for turning in.

[Dominik von Achten, executive]

Thanks, everybody. Thank you.

[René Aldach, executive]

Bye-bye.

[Operator]

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.