Heidelberg Materials AG

XMUN:HEI

Earnings Call Transcript 2018-Q1

[Operator]

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to today's conference call on the first quarter results from January to March 2018. [Operator Instructions] I must advise you that this conference is being recorded today, Wednesday the 9th of May, 2018.And I would now like to hand the conference over to your first speaker today, Dr. Bernd Scheifele. [indiscernible]

[Bernd Scheifele, Chairman of Managing Board & CEO]

Okay. Hello. Good afternoon, good morning, good evening to everybody. Thanks a lot for joining us in the first quarter conference call from Heidelberg. As usual, I'm sitting here together with Dr. Näger and Andreas Schaller and Ozan Kacar from our Investor Relations team. I will lead you through the operational results, Dr. Näger will comment on financial results and then I will come back at the end on the outlook.Okay. As you know, I think we have been -- we are the last in our industry who is publishing. Our key cement competitors have already published and also Martin was out, I think yesterday or today. You have seen that weather had a significant impact on our numbers, mainly in North America due to our footprint in the region north and also in Europe where we had especially harsh and long freezing period in the month of March which covered Germany, U.K., but also France. And in France, we had the flooding in February in Paris. A second point which needs to be taken into account is the Easter effect. As you know Easter last year was in April. This year it was in March. So we lost depending on the country between 1 and 2 working days in the first quarter versus last year.Our group share profit is up due to mainly 2 -- 3 effects. First of all we had disposal gains from the US White business and the German sand-lime brick. Secondly, financial result, as we expected continued to improve because we are issuing bonds at a much lower interest rate than the old ones which are expiring and also the tax rate, as predicted, coming down.Operationally EBITDA on a like-for-like without ForEx and consolidation effect is down by EUR 88 million, I'll come back to that, that is mainly due to 4 countries or 4 areas. It's the region north in the U.S., it's south and that's Texas which had a very bad February, it's the U.K. and Indonesia, they all together make about [ EUR 81 million of EUR 82 million ] part of the EUR 88 million. April obviously looks much better. Heidelberg is in cement up more than 8% in April and aggregates about 12%, ready-mix 13%. Backlog in core markets is pretty solid. That's especially true for North America, but also for Germany, Poland, Northern Europe, so we have no concern about the volumes.We have price increase announced in most of the markets and pricing at the moment, globally I think is also okay, even in Indonesia, in the month of April pricing was up by about 1% compared to last year. That's also a positive -- first positive signal after a couple of very difficult quarters.Energy cost had a significant impact on our result in Q1 mainly due to the comparison base from last year where we still had a lot of cheap coal and pet coke on stock. And secondly, we were negatively impacted mainly in Asia due to the fact that the Chinese, before Chinese -- as you all know Chinese were importing a lot and pricing went up, especially for the Newcastle coal, significantly above $100, which had a negative impact, mainly on the margins in Indonesia, but also in Thailand.Free cash flow is up, outlook is controlled. Key operational figures, you have seen that's what just what I told you. On the cement volumes, we are up 2.3%. That is mainly coming from good growth in Africa, yes, where our volumes are more or less double digit up by about 12%, driven by strong volumes in Egypt of about 22%, Ghana, Tanzania 15% -- 14% and 15% up and also Indonesia was growing more than 8%, yes, that's what you see, financial numbers I mentioned.Operating EBITDA bridge, I think that's the most interesting chart, if you look to it, Chart 5, you might miss the synergy impact from Italcementi. [ Actually the ] additional synergies in Q1 were small because if production is low production and production was low, then obviously the synergies are relatively low. It's a number of around EUR 6 million. The number is small, that's why we didn't mention it, especially in the chart.You see cost and others is up to by EUR 111 million and I look at it from 2 angles. If I look to the countries or areas, then the message is very simple. U.S. is down by about -- or North America, 2 regions are down by about EUR 50 million versus last year, that's region north with about EUR 37 million and region South Texas by EUR 12 million, U.K. is down by EUR 18 million and Indonesia about EUR 14 million. If you add that all up, that comes up to EUR 81 million, EUR 82 million and that explains the negative deviation.If we look by cost from a functional point of view, cement/energy is up by about EUR 40 million and maintenance/repair we had a negative impact due to timing issue. We had 2 big plants which were in winter repair this year in March, and last year they were in April. It's our plant Permanente in the Silicon Valley, which had a negative impact of about EUR 16 million and it's our largest plant in Europe. It's Slite in Sweden, on Gotland Island which is about EUR 12 million and that together has a negative impact of EUR 26 million.Chart 6 shows you a little bit what you already know that Q1in our industry is not so meaningful. Chart 7 tells you what I told you. We are on the market volume side backlogs are okay, negative impact working days I explained, energy cost we expect to flatten, okay, after the Trump decision on Iran. That's obviously a question mark since oil price peaked today again. And Indonesia as I will tell you later, we expect a change in pricing or we will go for a price change after the Ramadan season.If you look on the volumes, Chart 8, U.S. down minus 5%, region north minus 18%, South Texas minus 6% whereas the West was up by more than 30% and in the Western Southern Europe, U.K. was down by about 10%, and also Bene was down 9%, Germany 4%, Italy, Spain, were up. Asia Pacific, Indonesia, plus 9% and India plus 5%, Australia plus 6%, whereas Thailand the market remained weak with about 8.5%. Northern Europe volumes down 10%, mainly Norway, Sweden down 10%, Russia down 10%, Poland up 20%, Kazakhstan up by about 6%.If you look to the results per area, we start with North America, that's the biggest impact on our negative deviation compared to last year. You see [ it's ] about EUR 62 million. I explained about EUR 50 million, another EUR 6 million come from Canada. We see -- what we see is that the -- we had a negative inventory impact also mainly due to region north because in the region north, especially the whole area around New York, New Jersey, Connecticut, Maryland and then up to Ohio, and up to Chicago had a lot of snow. We still had [ drizzles now ] even in April. So it was a really harsh winter and that is about 40% of our cement volume. So we are really at a footprint disadvantage. That's why our cement volume is minus 4.6%. If you compare then, for example, with our Mexican comparables where we are up 5% then that is absolutely consistent because they have no footprint in the North, they are much more in the South, and that's what you see.And also Texas was weak, yes, because Texas was very wet in February and you saw that also in the numbers which were published by Martin I think yesterday where they were down in cement by more than 8%, mainly due to bad weather in Texas. And we see we are a little bit in the middle of the road because -- which is a clear footprint impact.The outlook for the U.S. in our opinion remains solid, we see especially compared to last much better state infrastructure programs, especially in core markets for us like in Texas and in California. But we also see clear improvements in the North Carolina and Indiana. Pricing is going overall okay. We see clear slowdown in pricing power, especially in the Boston and New York area due to the impact of McInnis. We will consider our second price increase in July or August in some areas, especially California but also maybe Mid-West.In Canada the Prairies were down due to weather whereas the Pacific Northwest, Vancouver, Seattle, Portland, were clearly up and we expect a relatively good run in Canada and we have price increases except for the Prairies of about $5 to $6 per tonne.If you go to Western and Southern Europe that was the other market there where we see where we lost about EUR 53 million compared to last year. Nature impact comes from U.K. This is close to [ EUR 18.5 million, then Bene was also down by about EUR 9 million, Germany by about EUR 7 million or EUR 8 million, Italy and Spain [ were out ]. And especially U.K. we had a clear weather impact and also an inventory impact. And last year in the U.K. we had property profit of about EUR 7 million, which we are missing this year and we have a property gain in the U.K. in the month of April that was a timing difference. So that's about Europe. And if you look to Northern and Eastern Europe, you see the result is down by about minus [ EUR 4 million ]. That's totally explained by the effect of Slite. I told you earlier that Slite had a repair shift -- which Slite last year was repaired in April. This year it was repaired in March. That's already EUR 10 million, so without Slite like-for-like we are already up and then we have between 1 and 2 working days less. So if you look to Northern Europe like-for-like we are compared to last year EUR 15 million up, yes, if you take the Slite impact and the working days impact out. So the markets overall are strong, especially Poland is strong. Volumes in Poland very strong, also again in the month of April. Czech Republic, okay. Nordics we are relatively confident. So this region should be okay. Asia-Pacific, we're down EUR 26 million. That's mainly explained by Indonesia, I told you EUR 40 million. The EUR 40 million [ investment coming ] from volume and pricing where volumes are strong. In the first quarter we were up by about 8.5%, also April is again up 6%. So we are growing. The market is stable, so in West Java, especially in the Jakarta area, private projects are coming back to the market. This is okay. Pricing has stabilized. In April it's even up a little bit by 1%. The main impact comes from the high coal price from the Newcastle coal, which is in the first quarter compared to last year, up by about 23% or 25%. I guess we have a chart, maybe [ laid on that ]. That's the main impact.India was also down for us by about EUR 8 million, mainly due to market weakness, especially in the region south. China clearly up and also Australia clearly up.If you look to Africa, [ we're above last year ], overall picture is good. Egypt was clearly better due to strong pricing. In Egypt prices went up to EGP 720, EGP 720 per tonne, up 40% versus last year. Okay, we were lucky because the Sinai was closed due to the CC elections and the army is now coming with a capacity, but also month of April overall volumes and result were okay.Morocco is stable, Tanzania market is okay, pricing has improved. Ghana market was very strong with 15%, pricing has stabilized. So overall region Africa looks good.Turkey, good volume growth, [ 8%, 9% ] pricing up double-digit, so the result is okay, main impact comes from negative currency. On trading, what you see, trading result is up. We have high volumes in the first quarter, by about [ 20.1% ] up and what you see is that the clinker price in Asia FOB is up by about $5. We see the same in the Mediterranean. The Turkish exporters managed to get about $4 to $5 per clinker more than last year the pricing which is now about USD 35. The threat -- what you always perceive it as a market threat, the exports from China has significantly slowed down. Chinese pricing is extremely strong. In China in the [indiscernible] and the south pricing is up by about 40% and China has started to import clinker from Vietnam because the pricing in China is so attractive. At the same time, imports -- exports from China last year dropped from [ EUR 16 million to EUR 10 million ]. So we see this as a relatively good signal.I think that's it, a little bit from my side and I just hand over to Dr. Näger on the finance side.

[Lorenz Näger]

Thank you very much, Dr. Scheifele. Good afternoon and good morning also from my side. I would like to lead you through the financial results which start on Slide 17 with a summary. So you have seen that we have posted the profit for the period in the first quarter compared to a loss in the previous years and on the bottom line also the share of the controlling shareholders has improved significantly. As outlined by Dr. Scheifele, this was first of all due to the success in our portfolio optimization where we had the capital gain in the range of EUR 100 million from the sale of the sand-lime bricks in Germany and our US White Cement business. And we have re-shifted these monies then into the acquisition of Cementir, of Fraser in Australia and the grinding unit in Canada. So we have really reused our monies here.We have a continued and further improvement of our financial result, which will be a continuous effect. We have the same effect in the tax line where we have a significant improvement of the income tax and we have strengthened our financial position by issuing a new bond for 10 years tenure in April at quite favorable conditions.Cash flow, up double digit and we continue to expect further improvement in the cash flow through the year. So the music plays below RCOBD and this really helps us improve our earnings per share.If you look to the P&L then you can see this effect in the P&L on Page 18 where additional ordinary result is EUR 118 million-plus shows the capital gains from the sale of the 2 businesses. Result from participations pretty stable around the [ 0 ] line for the first quarter. Here also the results come later.Financial results improved to EUR 75 million. Income tax improved to EUR 17 million and profit of the period EUR 6 million compared to a loss of EUR 35 million last year. Then in the cash flow statement, you will see that first of all, the gross cash flow has reduced by EUR 113 million due to the lower RCOBD but also the outflow for financing of our working capital is significantly higher than previous years due to the prolonged winter. We have this year a stronger seasonality and this will, of course, flow back during the remainder of the year.Payout from provisions decreased as the major part of our restructuring is done and the payout has been done last year. So we expect also this year a continuous improvement in this position. Investment net minus EUR 448 million, so we have bought the 3 assets, Cementir, consolidated to Italian market and Fraser to improve our aggregates position in Australia and the grinding unit for cement in Southwest Canada. And at the same time, you see the proceeds from our disposals. We see currently a trend that all these M&A and CapEx is done to enlarge the footprint or to consolidate. It's done a bit front-loaded, so the activity in the first quarter definitely stronger here than it is in the remaining quarters of the year.Cash flow total from investing activities minus EUR 448 million and this then reflected on Slide 20 where you can see our net debt reconciliation and the use of the free cash flow. First of all, free cash flow has improved to [ EUR 1.18 million ] over the last 12 months, coming from [ EUR 1.039 million or EUR 1.038 million ] in the 2 previous years. And then you can see the use of the free cash flow below where we have higher gross CapEx this time, and we believe that this will normalize over the rest of the year.Then we have the dividend of HeidelbergCement and the dividends to our minorities, which both are going up. So net debt we have a balanced payback in the last 12 months but we suffer negative accounting and FX difference from the strong euro in the magnitude of EUR 304 million so that the net debt comes down at EUR 9.9 billion. We expect this currency effect to phase out from the second quarter as currently we see a strengthening of the U.S. dollar against the euro.On Slide 21 you can see the balance sheet. The balance sheet total goes down from previous year, EUR 37 billion to EUR 34 billion and this is predominantly currency effect as the euro has appreciated compared to the first quarter of last year. And I just mean that the headings of the columns are wrong, December 2017 and March 2017 is wrong, we have to just exchange the labeling of the columns. Compared to end of last year, 31st of December 2017, the balance sheet total is almost unchanged. Also fixed assets is unchanged as there is no significant difference.Working capital, as I said, is slightly higher due to the weather conditions in the first quarter and we expect this to normalize over the remainder of the year. Net debt stands at EUR 9.9 billion and we stick to our target to bring that down over the remainder of the year to a value of EUR 8.2 billion to EUR 8.3 billion.That's it from the financial side, and I would like to give it back to Dr. Scheifele for the outlook.

[Bernd Scheifele, Chairman of Managing Board & CEO]

Yes, I'll come back to the outlook. We keep our guidance for the year, mid to high single-digit organic EBITDA growth. That's obviously more ambitious now after a relatively difficult start. We see strong order backlog in the U.S., especially in core markets for us like Texas, California, Canada and the West Coast, Seattle, Vancouver. And in Europe we expect a price recovery and price increase in Indonesia after the Ramadan period and also in Africa. And we will push very strongly for pricing in all other markets. We have seen from our [ earnings ] that the pricing environment at the moment is favorable mainly due to 2 reasons. Import costs for clinker are up and also due to the rising oil and fuel cost obviously imports are less competitive than last year. Question mark is the energy cost inflation. We see in the South African coal and in the Newcastle coal a clear easing. Pet coke remains price wise challenging and we have to wait a bit and see a little bit what the oil price is now doing after the Iran decision of the U.S. government of yesterday evening.That's it from our side and as always we are now open -- we are happy to answer any questions that you might have. [indiscernible].

[Operator]

[Operator Instructions] And our first question comes from the line of Paul Roger from Exane BNP Paribas.

[Paul Barry Roger]

So just 2 questions, then. The first one on your previous guidance for the few countries. I think you are guiding previously to a flat profitability in Indonesia and the U.K. and then 10% like-for-like increase in profit in the U.S. I wonder if your guidance for those 3 countries actually still stands. And then secondly, just ask you to clarify your comment you just made in the call about lower price momentum in the U.S. Are you suggesting that you are now less optimistic than you were in March and I think are going for a 4% to 5% price increase in cement, and if that's the case, why?

[Bernd Scheifele, Chairman of Managing Board & CEO]

Okay. On the guidance for countries, so I think we are one of the last companies in the sector who are giving you some number on a country level. We might review that practice Mr. Roger, just to tell you. We stick to our commitment in the U.K., yes, that's very clear, that remains high on the agenda. We have started what we call our [ Action 25 Plus 25 ] program that means a profit improvement versus last year [ 25 ] on gross margin, and [ 25 ] on cost and we are on our way. Indonesia I told you, we are -- we expect or I expect to see a trend change in the market after Ramadan as far as pricing is concerned. We will see how that might go. And then U.S., 10% like-for-like, obviously that remains also on the agenda. In our industry to change targets after first quarter -- after the first quarter in my opinion is not the right thing to do because Q1, as you know, is always in our industry, especially in the Western -- in the Northern world is a little bit of weather report. So you have to be a little bit careful. On the U.S. on pricing, as I told you, it's a mixed picture. We see a clear -- partially slower -- a slower pricing trend in the region around New York, Boston, Connecticut due to the McInnis impact. On the other side, we expect pricing to be stronger in Texas because we expect the market to be very strong, we also expect stronger pricing in California. In California we're going to renew in June, July again, whether we go for a second price increase, not only in cement, but also in aggregates because the market is very strong. We had also again the region West in the month of April was again up, 33%, that shows you the market in California is really hot and we have to see what we can do. So -- and then we will see what is going to be the average figure from the -- for the U.S.

[Paul Barry Roger]

So overall, you are not actually changing your guidance for the U.S. There's nothing you've seen after the April quite simply to...

[Bernd Scheifele, Chairman of Managing Board & CEO]

No, no, no U.S. -- I am still, I think that should work in U.S., we are running a bit against the clock now because, if you are in the U.S., you know that April in the region North was still weather-wise a problem. There was still snow and a lot of freezing temperature in May, in April. So in April, the North figures in cement, they were again down against last year's [ 6.5 ] whereas now, Texas for example was up by about [ 25 ]. That shows you that the market is still very regional and that has to do with weather, it's not that there is no business in New York or Boston, it's the market is weather impacted and that gives you a very diverse picture. And for the U.S. in full in April, we were about, up I think close to 6%. So that gives you -- that shows you a little bit where we are at the moment.

[Operator]

Our next question comes from the line of John Messenger.

[John Messenger]

Two, if I could. One was just the picture on Egypt, Dr. Scheifele, I wonder if you could give us a bit of a view as to how you think things are going to evolve from here. Obviously there has been quite a lot of talk about prices moving lower again recently because of the new plants coming on stream and maybe some easing in terms of the logistics challenges in the market. So are you still upbeat on Egypt or is there more risk in terms of that capacity impact coming in the second half of the year and from hereon? And the second one was just coming back on your comments on Indonesia. In terms of a shift in pricing behavior after Ramadan, I wonder could you -- is that -- do you take the view that there will be some consolidation between here and that point in time to help instigate that kind of change or rather consolidation [ moves effort ] or is that just a view being taken around uptick in volume that you hope will see prices follow?

[Bernd Scheifele, Chairman of Managing Board & CEO]

Okay, Mr. Messenger. On Egypt -- I think in Egypt the predictability of the business is even worse than in Indonesia, you know what I mean? So this is a pretty challenging environment. As I told you very bluntly we have been lucky in a way in the first quarter that the Sinai was closed and we used that opportunity to push pricing very high and our pricing went up to EGP 720, or you go back to Ozan, EGP 720 or even EGP 740 per tonnes, which is up versus last year 40% because last year we were around EGP 500 or EGP 540. The army now with their famous 10 million tonnes or whatever it is they are coming to production step by step. Volumes in April were still okay, pricing also in April was still okay, but we expect pricing in Egypt to go down from that level. We're not going to keep that level at EGP 720. That's clear. But according to our calculation, if the army wants to pay the interest for the financing they have from Sinoma, including payback, they need also a cement price around EGP 670, EGP 680 per tonne. That's our calculation. And on the other side, there is a certain upside in Egypt because the Egyptian government has issued a regulation that they're going to subsidize exports from Egypt with 50% of the logistic costs to the export destination. That would be for us mainly our African hubs in Tanzania and Mozambique and that would bring us an improvement in exports on pricing by about $10 per tonne and we would export from our U.S. cement plant. So there is Egypt, you are right, we expect more price pressure in the coming months due to Sinai going away and the army coming in. But on the other side, we expect -- we think there are some upside, especially on the export side. On Indonesia, what we see is that the local players are now in coal markets on delivered costs to the market including interest rates -- interest to be paid for the investment they made because they are debt financed, they are under the water. They are producing cash losses. Some of them have stopped production or are only running a couple of days and they stop again because they are obviously short of financing. And that what you see then in the market that the price [ downward still ] is starting to slow down. And in the first quarter, pricing pressure did not come from [ cement raising ] or from Chinese player or local player [indiscernible] from other international players. So at the same time, we see volumes clearly moving in the right direction in our core markets, Jakarta, West Java [ Spain ] that's for us the core and also the corporate sector, the private sector [ in Spain ] that's why we believe there is opportunity to change pricing after Ramadan. Why after Ramadan because during Ramadan typically demand is weak then there is more volume in the market. After Ramadan typically catch-up exercise, we would expect a strong increase in demand. Cement will be sold and we think that it would be the right climate to increase pricing. We will have a final discussion with the management of that in June. Okay?

[Operator]

Next question comes from the line of Phil Roseberg from Bernstein.

[Philip Anthony Roseberg, Senior Analyst]

Just my 2 questions please. On the potential to catch up, I know you mentioned that guidance is now more ambitious and we do a quick calculation and sort of comes to the need to get to about 8% like-for-like growth in the next 3 quarters in order to make the low end of guidance. How realistic is a catch-up in, let's say in Q2 and will we be able to see it already in Q2? The second question is just a little bit, if you could give us an update about Italy, you mentioned EUR 10 price increase the last time when we spoke, I think on March 1. Can you give us an update on where that price increase is and on the, if you like, portfolio changes and wedding in of the Cementir assets, please?

[Bernd Scheifele, Chairman of Managing Board & CEO]

Yes, Mr. Roseberg, first of all catch-up is always not easy. Normally you try to be ahead of the game, not too ahead of your budgeted figures. And [ maybe as possible you know ] I am always positive and confident. That's what we operate for. So again we will fight very hard to hit the numbers and I think we will have a clearer picture after Q2. You know that Q2 and especially Q3 are for us very important. Last year, for example, in Q3 we had the double hurricanes in Texas which have impacted the business. We hope that we will have the normal hurricane season this year and then let's wait and see. So -- then the other one is on Italy. On Italy it is so that we have started the price increase of about EUR 10 starting from 1st of March. And we also followed with about EUR 5 per cubic meter 1st of April then in the ready-mix. For our whole portfolio, meaning Cementir and Italcementi, our pricing in April is up by about [ EUR 7.60 ] per tonne. That does not include obviously the public works because there we have bidded the prices before but the pricing is clearly up. We are also considering a move of another EUR 3 in July or August in order to come to a commercially sustainable pricing level in Italy. We will watch now the market developments with a lot of attention in May and June. And in Italy on the portfolio, as you know, we had to make 2 disposals according to the antitrust office decision. We have signed a deal [ Madalony with CalaChem ] and we are also close to sign a deal for one terminal, how it's call [ Sacley ] or whatever, which we have to sell in Southern Italy, so we are pretty confident that we will get that in. And so we are on track in that respect.

[Operator]

Our next question comes from the line of Arnaud Lehmann from Bank of America Merrill Lynch.

[Arnaud Lehmann]

A couple of questions. Firstly on McInnis that you mentioned as being a bit disruptive to pricing in the Northeast of the U.S. Do you have any action plans to try to ease this pressure? To be more specific, I heard that you were thinking of selling some import terminals to McInnis in southern part of the U.S. to spread a little bit production all over the U.S. and reduce the pressure from the import in the northeast. Can you please confirm that? That's my first question. And the second question is related to your reporting. You said a word already, but you have noted that LafargeHolcim is now giving very little details on a quarterly basis, basically just a trading update for Q1 and Q3? Will -- could that make you revise the level of detail that you disclose to the market?

[Bernd Scheifele, Chairman of Managing Board & CEO]

Mr. Lehmann, answer to the second question very clear. I have been growing up in industries which were always [ oligopolic ] and normally you always follow the #1 in the world, you set the standards, you know what I mean. But we have not made any decision yet, but I'm looking smiling faces from Mr. Kacar and Dr. Näger. So we will let you know at our Capital Markets Day. But it's clear -- clearly it's not going to be in the future so that Heidelberg is the only [indiscernible] details and our other friends are just watching what we tell them about the markets and then they try to get advantage of us. Maybe we look stupid, but we are not stupid. So let's wait and see. Second on McInnis, the answer is very clear. We're not going to sell any terminals in U.S. We are not crazy. McInnis is something where we take a look at. You know that they have started a sales process and you mentioned rumors. If I read the market or I listen to rumors, there are some cement players in the game to watch at the target and it's all about pricing, whether the price expectation are realistic or not. And it is so that McInnis obviously they are trying hard to increase their volumes in the U.S. and that has obviously an impact on the markets like New York and Boston. So we are not the only one who are hit by that and I think the next couple of weeks, we'll see how this goes.

[Operator]

And our next question comes from the line of John Fraser-Andrews from HSBC.

[John Fraser-Andrews]

My first question is on cost savings. So other than the EUR 26 million on plant maintenance that fell into Q1, can you confirm that was in Q2 last year, so that's to come into help with your guidance. And you mentioned Italcementi that was very little. So I'm assuming that the EUR 40 million or EUR 50 million to come through from there. And then on top of that, are there any other cost savings? You mentioned the U.K., where you've got an initiative. Are there any other initiatives which will help you achieve your guidance?

[Bernd Scheifele, Chairman of Managing Board & CEO]

It is so that -- Mr. Fraser you're right. What I tried to explain, the EUR 26 million is a pure phasing effect of our winter repair planning in 2 big plants. One is Cupertino, that's San Jose in Silicon Valley, it's a 2 million tonne plant; Permanente, the ex-Kaiser plant which serves the Bay Area, that's a big plant for us where we had an impact of about, whatever it was EUR 16 million -- close to EUR 16 million and that's a pure phasing effect. And the second one is the Slite plant. That's our largest plant in Europe, that's a 2 million tonne plant on the Island of Gotland, which had an impact of about EUR 10 million. And that you will not see and that will obviously -- you will not see that in the Q1, that's a pure timing effect. On Cementir it is so that we are going to close the Rome headquarter in, I guess in June and then about 70 to 80 full-time employees will go out. You know that we paid for Cementir about EUR 315 million. We have -- we get -- we as a purchase price of the [ Madalony ] plant for Maples, we have a price of about EUR 40 million. And -- so we end up with a final price of maybe EUR 270 million for the other disposal of the terminal, and we have fewer cost synergies out of Cementir targeted for about EUR 28 million, EUR 25 million, EUR 28 million that means finally the deal is paid by the cost synergies, no market synergies pricing included. And out of the cost synergies, management target is to get EUR 8 million this year, my number is rather EUR 10 million and that's it. Then in North America, we have -- we are running a program to reduce overhead. We target for about 130, 140 FTE out which has I think a result impact of about EUR 20 million, EUR 25 million and we have already reduced in the first quarter by about [ 70, 80 ]. That's -- these are some of the initiatives which we are running. Okay?

[John Fraser-Andrews]

Over and above those, are you still running on the continuous improvement programs and...

[Bernd Scheifele, Chairman of Managing Board & CEO]

Yes, yes, of course, of course. Yes, of course.

[Operator]

And our next question comes from the line of Rajesh Patki from JPMorgan.

[Rajesh Patki, Analyst]

Just 2 questions from me as well. First one is on energy costs. You mentioned that Q1 was the most difficult quarter in terms of comparison base. Can you give us -- what the year-on-year impact was in percentage terms, and maybe also expectation for the remainder of the year, which could be difficult in the light of recent events? So at least help us understand how the comparative base tax from the last year's tax up. And the second one is on pricing. I know you commented a bit on Egypt, but if you can provide more color on pricing trends in other African markets and are you able to or are you comfortable of compensating for higher inflation in these markets?

[Bernd Scheifele, Chairman of Managing Board & CEO]

Yes, so in energy, that's always -- that's a little bit difficult choice. You look to the -- if you look to the pricing, then you see that API coal, that's the South African coal which is typically a benchmark for Europe, is in the first quarter up versus last year by about 18% whereas the Newcastle coal index, that's Asia, was up by about 25%, 26%. Newcastle even peaked about [ 100, 102, 03 ] and it's now down again to [ 92 ] or whatever. But it's still up versus last year and what we see now that spot prices coming down, mainly in Asia because for us Asia is the main concern because in Europe our alternative fuel rate is typically around 50% to 60%. So we are not that dependent on coal. Just to give you an idea, coal in Germany, just so that you get an idea of the dimension, in Germany, we burn coal -- classical coal about 20,000 tonnes. In Indonesia we burn 2.5 million, you know what I mean. So if Newcastle is up $20 per tonne, that means [ EUR 50 million tax ] on the margin in Indonesia, whereas the impact of Germany is much lower and that's the one part. And then we see pet coke is also still pretty much up. If you take high sulfur pet coke pricing is now [ 64, 65 ] whereas low sulfur pet coke is about [ 92, 93 ]. The problem is that everybody in the market is now switching as far it's technically feasible to high sulfur pet coke because there is a price difference of about $30 per tonne and this product gets now sold in the market with the consequence that the pricing is increasing and typically pet coke follows also oil prices. So that's a risk now with the oil price movement. And overall before the decision of Trump yesterday, we will after ForEx impact, our forecast on energy was about all-in [indiscernible] against the last year's number of [ EUR 1.970 million ], so just about EUR 50 million up, and that includes Cementir which has made an impact of EUR 30 million. We will have to review that now in the coming weeks so this is developing and obviously we're going to push especially in the U.S. and also in the U.K. on fuel surcharges in order to compensate for the higher gasoline cost. Pricing overall, Africa is okay, Ghana is pretty stable with about -- what is it [ 92, 93 ] we have increased prices in Tanzania, quite a bit. We have now increased also prices in Congo. So overall pricing environment is good. That's what you see also from annex chart that the diagrams for pricing are up. So overall pricing climate in the world at the moment is clearly up. We see Indonesia stabilizing, going upwards. We see Australia up. We see China up. We see Russia up 10%. Kazakhstan is up. Poland is up [ 5.30% ]. Germany is up [ EUR 2.50 ], which is a significant improvement in Germany where the last year's pricing was flat. In Bene, Belgium and Netherlands pricing is up, it's been EUR 2, EUR 2, EUR 2.50. Italy I mentioned, also Spain is up by about in the South EUR 2, in the North, even higher EUR 6. So overall pricing is relatively -- is okay.

[Operator]

And the next question comes from the line of Josep Pujal from Kepler Cheuvreux.

[Josep Pujal, Head of Building Materials & Construction Sector]

My 2 questions please. The first one is on acquisitions. This EUR 716 million in the free cash flow -- in the cash flow statement. There is at EUR 315 million, Fraser at EUR 133 million. What, please, the remaining EUR 268 million, what kind of multiples did you paid? And were they already included in the guidance you give about the scope effect? If I recall well, 2 months ago the CFO said that overall there would be 0, close to 0 scope effect at the EBITDA level because the disposals would offset the acquisitions. Has that changed? And my second question is about these winter repairs. If you can explain a little bit, what is exceptional in what you are mentioning here? I think that you do winter repairs frequently, let's say, yearly in your plant. Why are you talking about those 2 examples? And is there examples the other way around, things that were repaired in Q1 last year and which will be repaired in April or May this year?

[Bernd Scheifele, Chairman of Managing Board & CEO]

I'll take the second one, why do we explain with the winter repair. That the point is, if you look to our numbers on a group level, the main negative impact from our numbers comes from high cost impact. Cost is up by about [ EUR 111 million ] and we try to explain that. And one important piece is it is not about that we have done more or whatever it's just the timing of phasing effects. Last year the winter repairs [indiscernible] in April in this year they were done in March. And due to this quarterly reporting it shows now up in Q1 and last year it was in Q2. And that's also one reason why I said to Mr. Lehmann, maybe we can follow our competitors on reporting because then this -- all these detailed explanations about Q1 and Q2 will slow down because it's just a timing effect and that depends very much on technical planning, what is the availability of the subcontractors, how are we stopped and whatever and what's the length of the winter repair we need. Do we need a [indiscernible] repair, is it only a normal repair and whatever, that's something which is decided on plant level, on country level and the headquarter [ has been saying it] and then we just see the numbers. And on the M&A side I expect you talk to the CFO obviously then the CFO should answer on that.

[Josep Pujal, Head of Building Materials & Construction Sector]

CFO should know.

[Lorenz Näger]

So EUR 720 million, as you say EUR 315 million Cementir, EUR 140 million Fraser and then there is EUR 120 million, which is the normal maintenance CapEx and the remainder is a number of smaller assets such as the asphalt plant in Australia and this grinding mill in Canada, so that works out. Now if we look at the Italian acquisitions, which has the EUR 315 million Cementir and I said that we are financing this with a sales -- with a disposal of White Cement and Kalksandstein as limestone bricks in Germany which together is in the range of EUR 220 million to EUR 230 million. Then we have a gap of EUR 70 million that is covered by EUR 40 million disposal of the Madalony plant and [ EUR 5 million or EUR 6 million ] of a terminal in the South and a few other smaller things. So that will work out in that respect. As I said all those M&A activities are a little bit front-loaded now in the meanwhile so that all happens in the first quarter and the board will meet today and review a little bit how the M&A situation continues for the rest of the year. But in general we would like to keep the guidance.

[Josep Pujal, Head of Building Materials & Construction Sector]

Thanks for that. But -- sorry -- the question was on EBITDA, the impact of scope at the EBITDA level for the full year 2018 that you forecast today.

[Lorenz Näger]

This I have to check, scope. This I have to check. I'll call Mr. Kacar and we will check that. I don't know by heart.

[Bernd Scheifele, Chairman of Managing Board & CEO]

On the scope level, if I look to it, obviously Fraser will have a positive impact on us. That's quite a good acquisition we believe at a very decent multiple. And the major scope changes we have by heart now in the region of Western and Southern Europe because on the one side we are selling Madalony, we sold sand-lime brick business, which is obviously a negative impact on the other side. And on the other side, we have Cementir and we have also a pending aggregates acquisition in Belgium and that was the main remark that we think on Western and Southern Europe the negative impacts on deconsolidation on new ones should level off whereas in U.S. the impact is not that much. It's the North -- 6 months more on the Cemex assets in the region of west for the moment. Okay?

[Lorenz Näger]

That's it from our side. Thank you very much for your interest and talk to after second quarter.

[Bernd Scheifele, Chairman of Managing Board & CEO]

Okay, thank you. Have a good day and bye-bye.

[Operator]

Thank you. This conclude our conference for today. Thank you for participating. You may all disconnect. Have a lovely afternoon.