Edited Transcript of HEI.DE earnings conference call or presentation 19-Mar-20 1:00pm GMT

In that respect, I’ll turn to the first key message page. And I think it’s fair to say that the performance was very solid in 2019, good improvements around most of the key financial metrics. We’ll go through the details in a minute. We also had a very good business start into 2020, despite a strong comparison of the Q1 2019. So the first 2 months of the year actually were very strong. Obviously, in these times, everybody asked about liquidity. Lorenz Näger will share with you the details on that. But from our perspective, we have significant liquidity headroom from today’s perspective. It is absolutely clear that, as a company, we are absolutely determined to take all necessary measures to mitigate the impact of the corona — COVID-19 or coronavirus situation. And I just want to make one general remark, both Lorenz and myself have already been at the table in 2008, 2009. I myself was managing the rather volatile business in North America, those days. So rest assured that we know what we need to do, both in terms of content and in terms of speed. So I have no doubt that we will weather this in a very strong fashion.

On the back of a local decision here in Baden-Württemberg where Heidelberg is based, we had to postpone our general assembly because the country of Baden-Württemberg has decided to not allow any assemblies regardless how big they are until June 15, and that’s why we had to postpone our general assembly beyond June 15, and we’ll come back to you with the new date. Lorenz will share with you some of the details and backgrounds around that.

And last but not least, although the services

May have been pushed back a little bit given the current crisis situation, we want to also share with you our progress on CO2 because we are absolutely convinced this is a short-term clear dip, but the mid-term and long-term sustainability targets will come back eventually. That’s why we want to stay focused on what we have achieved there, and we’ll continue to push.

With that, I would ask you to turn to Page 4, and I’ll just go through some of the key items. So revenue is up 2.1%. Like-for-like EBITDA, operating-wise, also up 2.5%. EPS before adjustments, up 23% to EUR 6.40. The cost saving continues even before COVID-19, EUR 135 million was the achievement on the SG&A savings that we have already communicated, I think, in the trading statement. And we — as you all know, from that call, we have another minimum EUR 15 million to go, but that’s before COVID. So I’m absolutely convinced that we need to further tighten the belt once this is over. But for the time being, we continue to work on the already agreed savings.

We have also optimized the portfolio. As you well know, the disposal amounts to EUR 622 million without any major EBITDA impact. The debt in these days, quite important. It came down on a net debt basis by EUR 1.2 billion to a net debt-to-EBITDA ratio of 2.3x.

Last but not least, shareholder return. Both the Board and the Supervisory group this week decided to raise the dividend to EUR 2.2 per share. That would be a 5% increase and a payout ratio of 40%. Obviously, the payout only happens once the general assembly has been taken.

With that, I would hand over to Lorenz Näger to share with you the details of the financial results.

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Lorenz Näger, HeidelbergCement AG – CFO, Head of Finance, Accounting, Controlling, IT & Logistics and Deputy Chairman of Managing Board [4]

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Okay. Thank you, Dominik, for this introduction. So I would very briefly lead you through the financials. And let’s start with Page 5, our return on invested capital, our main measure to measure the efficiency of the use of capital in the company. On a like-for-like basis, pre-IFRS, we have reached 7.1%, and against weighted average cost of capital of EUR 6.6 million. So again, we have earned our cost of capital. After IFRS 16, this reduces by 0.2 percentage points, down to 6.9. You can see that we have been very disciplined on the capital. We come from EUR 25.5 billion capital. It went up, pre-IFRS 16, to EUR 26.2 million, and IFRS 16 adds another EUR 1.3 billion in financial debt to the capital.

The return on invested capital continues to benefit from a low level of tax cash payments. You know that we use cash tax payments to reflect the tax factoring in that, and that’s a little bit away from the standard, which has established — been established. In the meanwhile, we use the same definition since 2005, and now we consider to redo the calculation mechanism and the definition for 2020. That’s just for your information, and we will inform you about the impact and in the — when we publish our new strategy in autumn.

On Slide 6, you see the development of the dividend. The situation is so that we had to declare a dividend for — to finish the year and closing under German law. Now we have — we cannot hold the AGM, the shareholders’ meeting due to the legal restrictions in Germany around the coronavirus as the authorities have closed down any event until 15th of June. As a consequence of that, the payout of dividend is not possible now. So we will need to find a new meeting day for the shareholders’ meeting, and we will publish this as soon as we know how things are going on. Under German law, we have 8 months of time, and so we need to have it done by end of August. And we will see how we can do that, and we will inform you as soon as possible if we know when the shareholders’ meeting will take place.

On Slide 7, you can find a number of financial key information. The turnover is up 4%, like-for-like, 2%. That has been broadly communicated in the trading statement earlier this year. RCOBD, up 16% reported and 2% like-for-like. RCO, up 9%, like-for-like, 5%.

If you’d come to what we call below the line, meaning below the operating income, we had a net expense of EUR 143 million noncash effect from the deconsolidation of the Ukraine business, which is included in the additional ordinary results. This is a pure noncash accounting effect and is required by IFRS to clean up the exchange rate differences in the equity, a pure accounting effect.

Our adjusted earnings per share increased by 23%. Dividend per share, I just explained, to EUR 2.20. We had a year with excellent cash flow, I will come to that later on. Operating cash flow, as reported, up by EUR 700 million. This EUR 700 million do include EUR 285 million from IFRS 16. So on a like-for-like basis, up EUR 411 million. This is — we see this as a major achievement. The company has a very strong ability to create cash, and this is also due to the fact that we have a very disciplined investment, EUR 1.3 billion compared to EUR 1.7 billion previous year.

Finally, on a like-for-like basis, pre-IFRS, this led to a reduction of net debt of EUR 1.2 billion, brought it down to EUR 7.1 billion, pretty close to our midterm target of EUR 7 billion pre-IFRS.

On the Slide 8, you can — you then can see the income statement. Just, again, your attention to the additional ordinary result, minus EUR 178 million, and this includes the EUR 143 million from the deconsolidation of the Ukraine business.

Financial results, I may explain a bit because it’s counterintuitive. It goes up to EUR 375 million against previous year’s EUR 353 million. We had EUR 49 million decrease in interest expense, but this was offset by a negative accounting effect from IFRS 16, which came as an expense of EUR 45 million, and the change in the discount rate for the measurement of provisions, which came to EUR 28 million, both due to accounting effects. So that explains why the financial result went up a little bit.

Income taxes EUR 358 million against EUR 464 million. We have higher current tax expense, which is an underlying trend. Our tax expense and also tax payments increased, but that was in the current year fully compensated by lower deferred tax expense, which was EUR 264 million less expense than previous year. Previous year, you may remember that we had to make an allowance to our carryforward losses in U.S. due to the reduction of the tax rate in U.S. after the Trump tax reform, but also from allowance, which we had on the deferred tax asset because it was unclear what part of our interest carryforward we can use in future. So that has now a reverse effect a little bit, and we came down with the tax rate, as you can see it here.

Slide 9, again, the cash conversion rate. We are now — pre-IFRS cash conversion rate is 45%. These are pre-IFRS 16 figures on the left-hand side. EBITDA, EUR 3,250 million; and then tax interest payment, working capital, sustaining CapEx, brings us to a free cash flow after sustaining CapEx of EUR 1,468 million. Cash conversion rate, 45%. If you calculate the same after IFRS, the cash conversion rate is 49%.

On the right-hand side, you then can see the net debt development. EUR 8.3 billion at the end of 2018, and then strong free cash flow generation, very disciplined net growth CapEx there, the disposals exceed the net growth — the growth CapEx by EUR 125 million. Dividend payout and currency comes to EUR 7.1 billion, and IFRS 16 brings it up by another EUR 1.3 billion.

So that’s a very good start now for 2020. By the end of the year 2019, we couldn’t foresee the coronavirus, but the very stable cash generation and the low net debt helps us now going forward.

So that — with that, I give back to Dominik to lead you through the current business.

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Dominik von Achten, HeidelbergCement AG – Chairman of Managing Board [5]

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Okay. Thanks, Lorenz. We’ll move then to Page 11. And you’ll see on Page 11 that we started very strongly into 2020. First 2 months, volumes were clearly up in cement, also in aggregate, and basically flat in ready-mix. But overall, a very strong start, especially if you keep in mind that we’re going against a good comparative last year.

We thought it would be interesting for you to understand the latest, the very latest development, so we basically pulled everything together last night to try and give you a briefings, where we are in the different areas. So U.S., first 2 months, volumes up, clearly up in all regions, including Canada. You know that Canada was a little bit of a problem in terms of volume development last year. But Canada, for the first 2 months, potentially also helped a little bit by weather, was good in the first 2 months.

Now those of you who are listening in from the U.S. know that also the U.S. right now is slowing down a little bit. Some of the bigger cities have already stopped or put on hold the public works. So Boston, I think San Francisco, also Pennsylvania PennDOT is going down with their public works. And we assume that some of — some more of that will come in other states and cities of the U.S. during this week and next week.

In Europe, the picture looks a little bit different and also varying over — for the different countries. In fact, U.K. and Benin were a little bit slow for the first 2 months in terms of volume development, while Germany continues to be very strong even into this week. And Italy was good until 2 weeks ago, and then since the COVID-19 development accelerated in Italy, volumes were also coming down this week, a further reduction in Italy.

Eastern Europe, actually very strong. I just talked to my colleague in the Board about Eastern Europe last night. Poland, still very strong in development, but let’s wait and see how that moves down the line for the remainder of March. You know that most of the countries have now closed their borders, and we’ll have to see how that — what that impacts the local construction development.

In Asia, again, a mixed picture. In Thailand and India, volumes were actually pretty good for the first 2 months. China, as you all well know, also Australia and Indonesia, somewhat lower than prior year, and a lot of expectations in the operating plan.

Africa, mixed picture again. Slowdown in Israel and also partially in Egypt, not so much because of corona, but more because the hurricanes we hear first time for a long time.

So Egypt and Israel were a little bit slow. Morocco and sub-Sahara are still going okay. So in that respect, the global picture is very mixed at this point. But clearly, as you see in the U.S. and also partially Europe, the COVID developments still unfold. So that’s the current situation for you to understand.

If you go to the next page, we just wanted to explain to you how we have — how we are seeing the world from a plant production perspective and also what we have done in terms of reaction to this situation. First of all, from a plant perspective, up until yesterday, our plants in Lombardy were down, not so much because of volume decline, but because the local governments of Lombardia has basically ordered us to take down the plants for safety reasons. And that’s why we took out — took down our 3 cement plants in a coordinated fashion to avoid any damages for the mid-term. So in that respect, that has taken place. The rest of the country is actually running for now as planned.

In France, we see now the first developments that the government is trying to put the country on whole to some extent. Let’s wait and see how that plays out. I had a call with Kevin Gluskie, our colleague in APAC. Malaysia has obviously also now ordered that all plants must stop. So there is a mixed picture here and there. But for now, most of our markets are still running and we do not have a material impact yet based on the COVID-19 developments.

Now it is clear, and I mentioned that at the very beginning, we need to be quick on our toes here, and we are, rest assured. We have taken as one of the first public-listed company in Germany, drastic actions already in February when we put on hold completely international travel. Hindsight, that was a quite smart decision. We have put in place crisis teams not only on group level, but in all key countries. On the back of that, we have then gone down to national travel bans and also changed the working patterns. For most of the administrative functions, we’ve moved into smart working, basically working from home. In most of the critical areas, we have clearly introduced safety measures in terms of, let’s say, a 50-50 shift pattern or we have taken teams from larger rooms part into other rooms to mitigate any risk on the business critical functions.

And we have also looked in our IT department to ensure that we are able to continue to deliver IT services, which become more and more important in these days. And we have also, obviously, for our plants, clear contingency plans in place, how can we ensure that the business continues because one thing is very clear, while the measures look swift and strict, our overall targets. First of all, safety for our employees. That’s clear. And secondly, keep the business going as good as we can and serve our customers as good as we can. That’s our — those are the 2 top priorities. And then on the back of that, if we see demand declining, we react immediately appropriately.

So if you could go to the next page, Page 13, you see, basically the key points that we have addressed, also having in mind our key cost items. So if you look at — to the people and personnel costs side, we have moved, as I mentioned earlier, to smart working wherever possible. We have put in place a clear hiring fees that includes open positions. We will greatly limit third-party providers to the business-critical issues only, as I mentioned before, mainly with the focus to keep the plants running. And we have already started to reduce overtime, make sure that the vacation days are taken. And we also start to consider and partially introduce short pay and also unpaid leaves on a voluntary basis at this point.

From a business perspective, we are working, obviously, now in different scenario situations. That is especially true for our plants, so production planning, but also for the relating energy demand. You could argue why don’t you take advantage massively of lower oil prices or lower coal price or lower pet coke prices? We — yes, we clearly get a tailwind there, but we also want to be a little bit cautious not to overdo it in order to be — to not get into a take-or-pay situation on some of these forward-buying topics. So in that respect, we watch the situation on a, basically, hourly basis. But I think that’s also a good, prudent practice that we have done in the past, and we have discussed this intensely also in the Board. So well prepared in that respect.

And then last, but not least, also very importantly, the cash conservation. We stopped all nonessential CapEx also with a focus on non — on rolling stock because the trucks you can run for 1 or 2 more years, if necessary. But as I said before and Lorenz explained it to you, cash is king right now to make sure that we also manage that in a professional manner.

So overall message on the COVID-19 issue, from a company perspective, we are absolutely well prepared to handle the topic. We have to — we have low visibility. I think that’s true for most companies at this point. But we are — the good news is we are a management team that is used to low visibility from the past. So in that respect, I’m very confident, indeed, that we will weather the situation in a strong fashion.

Maybe, Lorenz, you explain once more a little bit the situation around liquidity and our headroom.

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Lorenz Näger, HeidelbergCement AG – CFO, Head of Finance, Accounting, Controlling, IT & Logistics and Deputy Chairman of Managing Board [6]

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Yes. I will do, Dominik. I’ll come back to the 2019 — 2009 drop, so we talk about liquidity, headroom, et cetera. The big difference is that the company is in a really strong situation and far away from any situation as we saw it in 2009. Our available liquidity is EUR 6.5 billion. This consists of EUR 3.6 billion cash in hand at the end of 2019 as well as a EUR 3 billion undrawn, committed, confirmed credit line. So total liquidity available is EUR 6.5 billion. We — as you may know, we have done a lot of financing in the Q3 and Q4 of last year and have covered all maturities at that time when the conditions were quite favorable. So in 2020, we expect 3 maturities, 2 of them pretty close to now. One we repaid just today with cash in hand of EUR 750 million, and there is another one with EUR 750 million coming due in 2 weeks’ time on the 3rd of April. For this, we also do have the cash in hand already now. And then there are 2 smaller maturities during the course of the year.

So we have the headroom of more than EUR 4 billion currently. Our committed, confirmed credit line is a syndicated loan, and the syndicated loan matures, I think, in 3 years or so, and — 2025, 5 years’ time. And there are covenants in — there are no covenants in the bonds, and there are covenants in the syndicated loan. In case EBITDA, over the full year, would drop by more than 25% and debt would go up by 25% — more than 25%, which is a very unlikely scenario. In that case, we still would have ample headroom under our covenant.

So the company is very safe on the liquidity side. We check our cash position every single week. We exactly know where we stand, and we always have a lot of time to react in case things would really come bad. On liquidity side, we have no headache at all and we have comfortable space, and that’s a part of our strength to manage us through the crisis.

Dominik, please go ahead.

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Dominik von Achten, HeidelbergCement AG – Chairman of Managing Board [7]

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Okay. Thanks a lot, Lorenz. Then we would continue with sustainability, okay? We’ve talked about the short-term issues. Now this is clearly a mid- and long-term issue, which is absolutely relevant for us as a company but also for us as an industry.

In this respect, Page 16, you see that we have made — we have put significantly more focus as of 2019 on this topic and move quickly to also see the first results. You see that we are now down 22% versus the original baseline of EUR 749 million. This is specific net CO2 emissions in kilograms per — of CO2 per tonne. So in 2019, we came down to 590, 5-9-0, kilogram of CO2 per tonne of cementitious material. You know that our target sits at minus 30%. So while we were down 20% in ’18, we did another 2 percentage points between ’18 and ’19. So I think we should be well on our way to clearly meet our targets in 2030. The key levers are, as you see here, mainly alternative fuels, energy efficiency and also the clinker and cement factor, which by the end of 2019 was at 74.5%. Clear target is here to get towards 70% or even below.

Those of you who have followed us in the past on this topic know that we were the first company in the cement industry with science-based emission reduction targets. You know that there is initiative and they gave us the certificate — excellence certificate around that. Not that we need this to get going, but I think it’s also important for you to understand that this is done in a very professional manner.

If you turn to Page 17, you see the key projects that some of you already know. The 2 carbon capture projects on the left — top left and top right side, basically, the 1 in Canada that we are doing together with CCS Knowledge, and also the 1 in Norway that we do together with the Norwegian government and Equinor. Both are in industrial scale targeting to capture CO2 in a big fashion. For example, the Norwegian one wants to capture 400,000 tonnes of CO2 per year. In our (inaudible), that’s more than 50% of our annual production. Then we have the catch 4 climate initiative that we do together with 3 of our industry partners in Germany. It’s also known as the oxyfuel project where we have already signed the NDAs and are currently negotiating with the technology suppliers. Then we have the Omega Green project in — with our colleagues in Morocco where we basically capture CO2 through an algae project. And then we have the Leilac project.

Then if you skip to Page 18, it shows you a little bit the scope of this project. This is a project we do together with some of our industry partners and other industrial companies. This is funded also through EU money. We have successfully completed pilot phase I that has proven the technology, and now we need to scale it up. And we are in negotiations with you to go to pay — to pilot phase III and beyond. We are very hopeful that this will happen. It should come in the coming weeks, the okay to go ahead in that respect. And again, as I said, this is based in our Lixhe plant on the border between Belgium and Poland.

So to sum it up, I think the focus areas for 2020 are clear. COVID-19, back or forth, clearly, operational excellence will remain our clear focus. We continue to focus on driving the top line, as we have started already last year in a very successful fashion. Let’s wait and see how that works out during the year 2020. We will continue and potentially even increase our cost focus and cost management in a tight fashion, and we will remain focused also on margin development.

As I shared with you, the coronavirus mitigations, we are well on our way, well prepared. And we have (inaudible) also in close contact with our Italian colleagues who are hit the worst right now in this difficult situation.

Cash is king, and we are watching our cash generation and allocation as well as our sustainable growth. I shared the details with you, and as you know, we have worked on carbon neutrality — carbon-neutral concrete for 2050, but we used the strategy update to review whether we can tighten those targets and whether we can basically break them down into annual or semiannual or 5-year targets in order to make it more tangible and also for us to increase even further the focus on this topic.

With this, I’ll just sum it up with the key takeaways again. Strong cash flow generation that continues into the beginning of 2020. Lorenz already explained, up until now, the cash flow generation remained strong. We are absolutely well prepared to fight the potential impacts of this COVID-19 or coronavirus situation. We will continue to work on our carbon footprint. We’ve progressed well ’18 over ’19. And as we communicated before, we stick with the idea to give you a strategy update in the late summer 2020, targeted date is around September.

With that, I hand it back to Chris, and we’re looking forward to your questions.

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Christoph Beumelburg, HeidelbergCement AG – Head of Group Communication & IR [8]

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Thank you, Lorenz. Thank you, Dominik. We’ll now embark on the Q&A session. We have, as always, scheduled roughly 1 hour, so we do have ample time. I’m not sure whether the Q&A session has worked ideally last time, so may I please remind you to limit your questions to 2 at a time, and really 2 at a time, and not embed any other questions in those 2 questions to get everybody a chance to pose the question. So if you all stick to this procedure, yes, everybody will get a chance to ask.

And let’s get started now. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) It comes from the line of Paul Roger. Sir?

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Paul Barry Roger, Exane BNP Paribas, Research Division – Sector Head of the Building Materials Team & Analyst of Building Materials [2]

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Sorry, can you hear me okay on this line?

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Dominik von Achten, HeidelbergCement AG – Chairman of Managing Board [3]

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Perfect, Paul.

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Paul Barry Roger, Exane BNP Paribas, Research Division – Sector Head of the Building Materials Team & Analyst of Building Materials [4]

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Yes. So okay, so I’ll just have two questions then to start off with. So you’ve mentioned, obviously, our previous experience and being ready to act in response to the virus, if needed. Could I ask you specifically how much scope there is to cut working capital? And how much of the EUR 300 million growth CapEx that was planned is actually discretionary versus committed?

And then just secondly, what impact do you think the virus and presumably weaker demand could have on pricing, especially in markets where utilization rates are quite low, like Europe?

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Dominik von Achten, HeidelbergCement AG – Chairman of Managing Board [5]

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Yes. Okay, Paul, thanks for your question. Let me answer, and then if Lorenz has something to chip in — maybe we’ll do — pass the working capital piece to Lorenz, and he can comment on the working capital situation. I would take the growth CapEx and the pricing piece of your question.

We have clearly stopped the nonessential CapEx, and we are on our way to also review the growth CapEx bucket. We have — I have not got the final number for you now what exactly is committed in a way that we could not stop it at all. We have reviewed the big-ticket items. And obviously, in each of these projects, you then get into a discussion, is it wise now to fully stop it because that would come at additional costs and the midterm damage? Or do we need to do — is it wiser to continue? And we basically have done this for the key large projects. And those who are business critical, also from a midterm perspective, we will continue also on the basis of what Lorenz has shared with you on the overall liquidity situation. But those who are not business critical, we will put on hold for now.

On the pricing side, we have started well into the first 2.5 months. So for now, we do not see across-the-board big negative pricing impact. Paul, you are long enough around the block to know that the year has 12 months, and with a situation like this, it is very difficult to assume what is the impact on pricing. I think what is — from our perspective, was a little bit helpful is that, last year, as we have shared with you, we have switched in some key countries to price increases as of January and not like in the past as of April. So in that respect, some of the price increases that we had planned have already taken place. Whether they hold fully for the next 12 years — 12 months under this scenario, Paul, difficult to say. But we clearly stay focused on pricing as long as we can.

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Lorenz Näger, HeidelbergCement AG – CFO, Head of Finance, Accounting, Controlling, IT & Logistics and Deputy Chairman of Managing Board [6]

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Yes. When it comes to working capital, you know that in 2009 when the financial crisis came, the working capital dropped sharply off, yes, and we had a quite strong cash flow just from reduction of working capital. Now we have worked on that item, and our working capital since 2009 has reduced by more than EUR 1.2 billion in absolute terms. So today, already, the working capital is much tighter than it ever was in 2009 and earlier. So that will lead to a situation where we will not see such high working capital backflow as we saw in 2009. So I would see that rather on the stock side. Currently, we have full stocks, yes? We have — we had a good production run end of the year 2019. We went into the year with good production. We’re still holding up production. We see some countries where demand is a little bit lower. So I would more see this effect if we really see a shutdown in the operations to come from the stock side, and I would guess EUR 300 million, EUR 400 million, what we could get in on that side, so that’s my guess. On the accounts receivable, accounts payable side, it’s a bit difficult to forecast at our DPO. DSO balance is close to 0. So that’s my estimate. We — as I said earlier, we check the cash position of the company every single week, very close, very precise. And any deterioration of the financial situation, we could immediately identify.

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Christoph Beumelburg, HeidelbergCement AG – Head of Group Communication & IR [7]

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Next question comes from Arnaud Pinatel from On Field Research.

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Arnaud Jacques Michel Pinatel, On Field Investment Research LLP – Founding Partner [8]

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I only have two questions. First one just to try to understand the situation. You mentioned that there is an inflection currently, obviously, in terms of volumes, I guess, in terms of demand in your markets. If we take Italy as a leading indicator of what could happen to Europe, could you please quantify the drop of volume you have seen in the recent weeks, in the recent days? We have seen in China that in January, February, production was down 30%. Are we talking about this type of order of magnitude? Or should we read the newspapers when they are mentioning that most of the construction sites are closing in Italy as a leading indicator that the drop of volume would be much more than what we have seen in China? That will be my first question. And if you can help us to quantify it, obviously, will be very helpful.

The second question will be on your dividend. I was surprised that you increased it. I understand that the assembly will have to — the general assembly will have to finalize and approve it. But is it really a signal that you are so confident on your cash flow and also you’re so comfortable on your governance? I know that you help us during the call and give us a little more flavor on your covenants. But based on our calculation, it would imply a 3.5x net debt-on-EBITDA covenant. Could you also confirm that, please?

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Dominik von Achten, HeidelbergCement AG – Chairman of Managing Board [9]

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Okay, Arnaud. Thanks very much, Mr. Pinatel, for your question. Let me take the first 1.5 questions, and the 0.5 question I give to Lorenz on the covenant. So I’ll get to your volume and your dividend question, and then Lorenz will go to the covenant point.

On Italy, Mr. Pinatel, the volume development up until 2 weeks ago was actually good. We had — we were basically on our plan. And then for the first week, we saw a drop of about 10%, roughly, both in ready-mix and in cement, while ready-mix held up actually a little bit longer than cement, which also tells you a little bit about the supply chain. Now in the last week when the shutdown came across all of Italy, the volume drops were more pronounced, I think more in the magnitude of 25%, 30% that you mentioned. And now it remains to be seen how this unfolds, how many construction sites are still going to continue. I think — I’m not the government, but you can different — make different arguments around this. There is, obviously, the argument you have to be careful and safeguard also the people on the construction site. There could also be the argument, don’t take down all the business in a country because I would — I’m not a medical guy, but the question is whether the infection risk on large construction sites is actually very increased. So there are different arguments, I think, that are currently also discussed in the associations and in the government. I think, for now, the governments, at least some of them, have started to reduce public work. But whether that’s going to continue or not, it’s very difficult for us to say. That opinion also may turn. So that’s the magnitude. But we are working with worst-case and best-case and middle-case scenarios. And there may also be small parts of the world or regions of a country where the construction sites come to a bigger stop. So very difficult to argue what is the right number, but there will be good parts and not-so-good parts. Because let’s — also, the world is big. We — I know that many of you in the past have argued are you in 55 countries. In this crisis, this also may be an advantage to be in 55 countries because we already see some countries are hit worse than others. So let’s wait and see how this plays out. You know that I’m, by nature, a positive guy. I’m trying to be realistic and careful, but in essence, I’m positive, and I think there are also some positive signs around the world, but there may also be some negative ones and negative surprises. That’s clear.

On the dividend. Obviously, we had a discussion around the dividend, how to handle that. And yes, you are right, from today’s perspective, also with the current cash position, also with the current development of the volumes, there was no real reason for us to say we scrap the dividend or we even reduce it because, for now — and then I think it was absolutely fair to say also to the capital markets guide, based on the current knowledge, there is no reason to scrap the dividend. Now formally, yes. We — there is a chance that we need to adjust — can adjust it and potentially need adjusted. But from our perspective, as Lorenz and I sit here today, there is no reason to believe that. That’s why we said we don’t panic. We don’t now take crazy decisions on just speculation. So based on the current knowledge that we stick to our dividend of EUR 2.20.

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Lorenz Näger, HeidelbergCement AG – CFO, Head of Finance, Accounting, Controlling, IT & Logistics and Deputy Chairman of Managing Board [10]

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Dominik, let me add. We have — under German law, the board has to take a decision about the dividend. If we want to close the annual accounts and we wanted to close the accounts, and as we didn’t have better knowledge, we decided for that dividend, which we think is appropriate in the light of the business year 2019 and our current knowledge about the year 2020, including what we see from corona today — as of today. Now finally, the board has to decide about the dividend once we call for the shareholders meeting. And there we still have a couple of months to go, and we believe that over that 3 months, we will gain much better knowledge about the potential impact of the coronavirus on our financial key parameters. So if things really went sour, we have — still have the possibility to correct that decision and do whatever is needed to keep the company safe. So that’s at this point. So it’s in a wise decision. But as I say, if things go badly wrong, really badly wrong, we even have the possibility to still change that proposal.

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Dominik von Achten, HeidelbergCement AG – Chairman of Managing Board [11]

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Covenant.

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Lorenz Näger, HeidelbergCement AG – CFO, Head of Finance, Accounting, Controlling, IT & Logistics and Deputy Chairman of Managing Board [12]

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Covenant, Mr. Pinatel, we are far away from where we were in 2009. The headroom is ample, and we do not want to disclose the covenants because then you only get even more questions, which do not help. And therefore, we can tell you there is so much headroom in the moment, we cannot even see to come in the worst case scenario even close. Take the cases in China, the crisis went 2 to 3 months with a drop of 30%, 40%, 50%, and that’s what we can wrestle easily. And if in Europe, things went even worse by stop for more than 4, 5 months of the whole production, we feel it’s a less safe side. So safe for this moment, and we just take it from here. Things evolve day by day, and we take the decision as they are needed.

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Christoph Beumelburg, HeidelbergCement AG – Head of Group Communication & IR [13]

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Next one comes from Elodie Rall from JPMorgan.

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Elodie Rall, JP Morgan Chase & Co, Research Division – Research Analyst [14]

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Can you hear me?

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Dominik von Achten, HeidelbergCement AG – Chairman of Managing Board [15]

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Yes.

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Elodie Rall, JP Morgan Chase & Co, Research Division – Research Analyst [16]

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So can I first ask on plant closures? You mentioned that you’ve closed 3 in Lombardy. Do you have any more plans to mothball some plants now that other countries in Europe are going in full lockdown? And can you explain to us the costs associated with closing and then reopening those plants?

And my second question is on cost flexibility in general. I mean I understand it’s difficult to answer this question depending on whether you think it’s going to be a short-term impact or a longer-term impact. But if we assume it’s a longer-term impact, what do you think is the right — I mean, the cost flexibility that you see in your business, in general?

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Dominik von Achten, HeidelbergCement AG – Chairman of Managing Board [17]

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Yes. I will gladly answer your questions. Thanks so much. First, on the plant closures. As I shared with you, the current plant delivers — and the better word is mothballing, so because we don’t close the plant for good, it’s what we call mothballing. So we basically temporarily close parts of the plant. So even when we talk about a plant closure, then it can also be a — that we stop the — running the kiln but we continue to ship because let’s not forget the one — when we talk about a plant being affected, that’s the production of clinker. In parts, we even continue to produce cement. So we use the running mills to produce cement. And as Lorenz was saying, we still have ample stocks, and we continue to ship for quite a while. So typically, we have 2 to 3 weeks of stock that we can still use in order to ship.

The cost of up and downing of plants is minimal because let’s not forget, we do winter repairs where the plants are taken down also. So it’s a well — I think it’s a well-established process running up and down kilns. You cannot compare this with closing full automotive factory for 4 weeks. We do these, if you wish to say so, plant mothballing on a routine way, basically, every year for each of the plants during winter shutdowns, as we call them. So in that respect, there — it’s not at no cost, but it’s not a huge number to mothball a plant and bring it back up and running.

Obviously, the question of cost flexibility, you’re absolutely right, that’s exactly what we have studied over the last 2 to 3 weeks in a very intense fashion. And if you look at our big cost items, I’ll just share with you some of the — a couple of the big tickets. The biggest cost item for us is EUR 3.3 billion — or EUR 3.2 billion of personnel costs. And then we have another EUR 2 billion, EUR 1.85 billion, EUR 1.9 billion of energy-related costs. Those are the big cost items. In general, costs are around 50% variable, and the remainder is more or less fixed, but we’ll come to — also to the fixed part.

Now on the variable cost part, main part being energy and also repair and maintenance material. On the energy, obviously, we have some tailwinds. You know the development of the energy costs. Oil, on the back of that bitumen, pet coke, coal, all coming down significantly. So in that respect, we see a clear tailwind that will go into our cost base over time because we do have some hedges in place. So — but we will clearly get some tailwind on that. We cannot take them down fully to 0, but that — those should drop drastically. If we take down plants, obviously, the variable costs go away on that end.

When it comes to the personnel cost side, I think, there will — first of all, we do have some flexibility in there when it comes to the measures that I shared with you before on reducing overtime, on getting the vacation days out. That’s not cash conservation, but it clearly helps you on the cost base. And then as you may have followed over the past couple of days, most of the governments that are infected heavily by COVID-19 have put in place or are putting in place now significant measures to support companies on things like short pay. And obviously, we follow that situation country-by-country also very closely. And it’s very clear, if we have to temporarily close certain locations or parts of the business in certain countries, we will, obviously, also go for these elements that will conserve our cash out and also reduce our cost base.

So the personnel cost, obviously, is not fully flexible, but there is a part of it that we can still flex. And let’s also be clear, these are unprecedented events, and we may have also to take unprecedented measures, even also on the cost side. There are now people coming to say, can we go on voluntary leave. We know this is a difficult situation, I’m only going to work for 2 days because I have my family at home, I’m fine with a 2-day pay per week. And that — so we look at every possibility in every corner. And as always, you’re typically taken by surprise to the positive if you really ask rigidly what is possible and what people are also flexible to do. And I have to share with you, I see big solidarity in our workforce across the globe on this topic. That doesn’t mean we can completely go crazy on these things, but we will find a way to navigate through this.

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Christoph Beumelburg, HeidelbergCement AG – Head of Group Communication & IR [18]

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Next one comes from Robert Gardiner from Davy.

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Robert Gardiner, Davy, Research Division – Industrials Analyst [19]

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Yes. Robert Gardiner from Davy here in Dublin. Well, most of mine are already answered, I guess. In terms of your customers, can you give us some sense of what your customers are saying to you in terms of projects going ahead or being delayed, deferred? And you talked about a couple of countries as well where the government or local authorities are restricting construction activity. I wonder, could you add some color on that in terms of who exactly is stopping construction work. Obviously, it’s happening in Italy, in Boston and San Francisco. It would be helpful if you could give us some indication of who else is stopping work?

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Dominik von Achten, HeidelbergCement AG – Chairman of Managing Board [20]

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Yes. Robert, thanks for your question. On the customer side, the picture really looks very, very different country by country and even city by city, as I was sharing you the events of Northern Italy and also the events in the U.S. partially. But to give you the opposite call, I’m not sure, but I’ll just share that with you, yesterday was the strongest shipping day ever in Germany. I think things are crazy. So in that respect, we see everything from the very left to the very right. So it’s not all doom and dust, there are also positive parts. In a large company, that’s the beauty.

So we do know that some of the governments are thinking about closing some of their public construction sites, but the public construction sites are also not 100% of the business in a country. I mean some of the private companies still keep going. In Austria, I think one of the big customers has now announced that they will close nationwide their sites, but we are not big in Austria. Austria is, for us, a minimal country. Let’s wait and see what other countries do. We are looking, obviously, to the U.S. We’re looking to France. We will eventually also look to Germany. But for now, there is early indications that this could be a measure, but I would be surprised if this goes across the world and it’s happening in all countries. You will see a very varying picture across many countries.

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Christoph Beumelburg, HeidelbergCement AG – Head of Group Communication & IR [21]

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The next question comes from Nabil Ahmed from Barclays.

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Nabil Ahmed, Barclays Bank PLC, Research Division – Head of European Construction, Building Materials and Infrastructure Equity Research [22]

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Can you hear me well?

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Christoph Beumelburg, HeidelbergCement AG – Head of Group Communication & IR [23]

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Yes. We can.

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Nabil Ahmed, Barclays Bank PLC, Research Division – Head of European Construction, Building Materials and Infrastructure Equity Research [24]

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So my two questions, actually — thanks for sharing with us the last few days’ events and talking through what you’re seeing on the demand side and also on your manufacturing capabilities. I was wondering also if you could update on potential disruption you’re seeing across the supply chain. In terms of workflow, do you see workers no longer willing to come in sites? Have you seen disruption related to that? Logistics? Third-party contractors? Is that having an impact at this stage or not really?

And my second question was on the strategic review that you mentioned during the last call, I think, on 18th Feb. Does the COVID situation changing in a way or another the way you approach this review? Is it accelerating as well the process?

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Dominik von Achten, HeidelbergCement AG – Chairman of Managing Board [25]

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Nabil, thanks for your questions. Let me answer the first one, disruption in the supply chain or workers showing up or not. We are monitoring, and Lorenz is actually overseeing the purchasing piece very closely, the global supply chain. We do not yet see any major disruptions when it comes to our necessary — of our materials. Keep in mind, that’s the beauty of our business. We are producing locally and we are selling locally. So this is — we are not very significantly depending on international supply chains. There is minimal trade going on between the countries. The one piece that, obviously, we are watching is the repair and maintenance piece. So you know that for the winter repair of our plants, we do some — we do need some refractories, we do need some spare parts. Some of those spare parts are coming out of China and other parts of Asia. We are very — in very close contact with our colleagues in China. As some of you know, the business has actually come back a little bit in China already. So for now, we have identified alternative sources in cases where China was not able to deliver. So we have not yet seen any significant impact on any supply chain issues across the globe.

When it comes to workers showing up, in our own workforce, we have not seen any significant problems. As you know, in France, there’s always a discussion that’s very much union driven, but that’s more a French-specific issue. In Germany and other parts of the world, we do not see a significant impact in that respect. We have pulled down the plants in Italy, as I shared with you already, in order to make sure that we don’t get into a situation where we risk an infection outbreak in our plants in the — of larger scale in Northern Italy.

On the strategic review, we have deliberately decided to stick to the date. So yes, obviously, as you — as we go along, we get more clever. So whatever we learn out of this situation now in COVID will also go to some extent into the strategy review. This has not been decided last year, and then we just keep going without looking left and right. So clear question to the answer, we stick to the date and give you, in any case, an update in September. And obviously, clearly, we also need to take into account what we learned through this COVID-19 developments. But we are not going to pull anything upfront just because of COVID. If you not take the measures that we have disclosed to you now, as such, so clearly, if you want to talk about cash conservation being part of the strategy or a specific demand management then, yes, this has been pulled forward, and there may be other things that we need to do in order to mitigate the coronavirus impact, but in general, we stick to the time line of the strategy update.

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Lorenz Näger, HeidelbergCement AG – CFO, Head of Finance, Accounting, Controlling, IT & Logistics and Deputy Chairman of Managing Board [26]

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Let me add from a supply chain side. First of all, we have high manufacturing capacity. However, we have no suppliers who bring preproducts to our main products that comes out of limestone, which comes out of the ground, so there’s very little.

The second point are spare parts, which come from abroad. You know that the — our main need of spare parts is over now in springtime. The kiln stops with the main repairs are in late autumn, either December, January, February. And here, we have done most of our jobs, so here, we also do not see a major issue. And we see China already starting production again, and we get first products again from China. So for the next season, starting in December, we already start sourcing. And we — currently, we do not see any lockdown in this respect.

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Christoph Beumelburg, HeidelbergCement AG – Head of Group Communication & IR [27]

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The next one come from Tobias Woerner from MainFirst.

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Tobias Alfred Woerner, MainFirst Bank AG, Research Division – Research Analyst [28]

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Number one, I just want to understand the pattern in China a little bit better. Could you — from your partners, do you hear that the recovery — that there’s a recovery ongoing as we speak. I have seen some numbers where actually there were some good numbers. And whether that recovery is sort of matching what is happening in Italy? Again, I saw some numbers in Italy down this week, somewhere around 40% to 45% in terms of volumes.

And then just the second question. This fiscal spending, i.e., infrastructure programs, what sort of feedback do you get from your markets on those? Germany is obviously the most discussed one around the world, whether this will come fiscal spending, what’s your sense?

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Dominik von Achten, HeidelbergCement AG – Chairman of Managing Board [29]

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Okay. Woerner, thanks a lot for the questions on China. I had a call with our Asian colleague who is currently based in Australia because traveling to Singapore is also restricted. Yes indeed, the — we have 2 joint ventures in China, 1 more in the south and 1 more in the center, in the Northwest. So in that respect, yes, what we hear from there, the business is coming back to some extent. But it’s not yet, at least to the best of our knowledge, on the old level. So there is still room for improvement.

Let’s also keep in mind that the lockdown that the Chinese government has put in place end of January is basically coming to us in a delayed fashion because we are taking a lot of sewage sludge in our cement kilns in China. And in fact, the government actually asked us to continue to run our plants in order to be able to take that sewage sludge. So in that respect, you have country by country, kiln by kiln, again, a different answer to your question. But in — overall, in China is a huge country, we see a rebound, but we are not back to old levels.

In Italy, there are pockets. I do not disagree, there may be pockets where the business is down 40% to 45%. That potentially is the case. But again, Italy is a large country. In Lombardy, we do see these drop offs, but in other parts of the country, they are less pronounced. But have we seen the worst in Italy yet? The infection numbers are not materially coming down at this point, so very difficult to predict.

On the infrastructure programs, again, when — if this ends up to be a recession in countries or around the globe, the historical answer of governments was to push infrastructure programs. So yes, there is clearly a chance to hope for infrastructure programs. But I’m, at this point, seeing governments more trying to tackle the problem of potential unemployment and not ending up with a huge amount of that. So that, I think, has the first priority, and then I think we’ll come to the question of infrastructure program. But yes, the historical answer to these recessionary issues was typically infrastructure.

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Christoph Beumelburg, HeidelbergCement AG – Head of Group Communication & IR [30]

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Five more people on the line. Next one comes from John Messenger from Redburn.

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Dominik von Achten, HeidelbergCement AG – Chairman of Managing Board [31]

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John?

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Christoph Beumelburg, HeidelbergCement AG – Head of Group Communication & IR [32]

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John, you’re still here?

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John Messenger, Redburn (Europe) Limited, Research Division – Partner of Construction & Building Materials Research [33]

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Yes. Can you hear me okay?

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Christoph Beumelburg, HeidelbergCement AG – Head of Group Communication & IR [34]

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Now we can, yes.

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John Messenger, Redburn (Europe) Limited, Research Division – Partner of Construction & Building Materials Research [35]

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Brilliant. Two, if I could. One is just if — it’s above the line, but could we just understand around other income because, obviously, the group historically, a lot of volatility, just so we understand where our base EBITDA pre-COVID sits as we go into 2020. I’m just looking, and obviously, your other income fell to about EUR 431 million from EUR 524 million in 2018. Is that level something that we should take as the new normal? Or is that elevated or depressed? And I’m just thinking of things like the Stockholm property transaction. Is that something that will happen in 2020? Or does COVID make that unlikely? So is the base EBITDA one that you’re comfortable for us to take as the like-for-like base?

And then the second question was just coming back on covenants. And just reading Page 41 of the full annual report, just so we’re all totally clear, I understand if you’re not going to give us the covenant on the main credit line, but could we understand, is it an old IFRS — pre IFRS 16 or post? Does it include the JV income? Or does it exclude that? And for the bonds, which, I think, Dr. Näger said, have no covenants, is that correct if you were to lose your investment-grade rating in — the wording in the report suggests that some covenants would kick back in if you were not investment grade. Just to understand the mechanics that we can all think around the balance sheet, and clearly, it’s the big issue for everybody right now.

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Dominik von Achten, HeidelbergCement AG – Chairman of Managing Board [36]

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John, thanks for your question. If you don’t mind, also in the interest of time, let’s have the next question already in the line, and then we’ll answer them in a package, okay?

We’ll come back to your point, John. Thanks.

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Christoph Beumelburg, HeidelbergCement AG – Head of Group Communication & IR [37]

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The next one comes from Arnaud Lehmann, Bank of America.

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Arnaud Lehmann, BofA Merrill Lynch, Research Division – Head of the European Construction & Building Materials and Director [38]

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Can you hear me well?

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Christoph Beumelburg, HeidelbergCement AG – Head of Group Communication & IR [39]

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Yes. We can.

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Arnaud Lehmann, BofA Merrill Lynch, Research Division – Head of the European Construction & Building Materials and Director [40]

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Okay. I’ll just stick with one question, please. Could you give us an indication of what might happen to your pension liabilities? Interest rates are going lower, financial markets are also going lower, so you could have an increase in your liabilities and your asset base could decline. So have you an estimate of potential increase in the pension deficit?

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Christoph Beumelburg, HeidelbergCement AG – Head of Group Communication & IR [41]

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I think we should park that as well.

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Dominik von Achten, HeidelbergCement AG – Chairman of Managing Board [42]

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So we will take the questions now that are in the line, then we’ll come — we’ll take them as a package.

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Christoph Beumelburg, HeidelbergCement AG – Head of Group Communication & IR [43]

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Just in the interest of time. And then — so we move on to Cedar Ekblom from Morgan Stanley.

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Cedar Ekblom, Morgan Stanley, Research Division – Executive Director & Equity Analyst [44]

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I’ve just got one question. Can you tell us how much it would cost you to draw down your credit line today if you decided to do that?

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Christoph Beumelburg, HeidelbergCement AG – Head of Group Communication & IR [45]

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Okay. Another financial question we can park. And we move on to — so we’ll answer those questions, don’t worry.

Then we’ll go down to Sven Edelfelt from ODDO. Sven?

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Sven Edelfelt, ODDO BHF Corporate & Markets, Research Division – Research Analyst [46]

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Yes. So I understood union are putting pressure to stop production in France. Can you tell us if it’s the case as well for you? That’s the first question. On the second one, you commented about the volume development until March. Can you as well comment about pricing, please?

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Dominik von Achten, HeidelbergCement AG – Chairman of Managing Board [47]

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Yes. I’ll come back to that. And then is there another one?

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Christoph Beumelburg, HeidelbergCement AG – Head of Group Communication & IR [48]

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The last one, I think we have from Gregor Kuglitsch from UBS.

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Gregor Kuglitsch, UBS Investment Bank, Research Division – Executive Director, Head of European Building & Construction Research and Equity Research Analyst [49]

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Can you hear me?

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Christoph Beumelburg, HeidelbergCement AG – Head of Group Communication & IR [50]

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Yes. We can.

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Gregor Kuglitsch, UBS Investment Bank, Research Division – Executive Director, Head of European Building & Construction Research and Equity Research Analyst [51]

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Okay. Great. So I got two questions and there are slight follow-up questions. The first one is on the CapEx. Kind of if you take it all in, how low could you go? I think last year, you had — just looking at the pure CapEx and the cash flow, like $1.2 billion. If you really had to pull all levers, how low can that number reduce to?

And then the second question is, and it’s kind of tying up on the cost and flexibility and all that sort of stuff, but if you maybe simplify it for us, in your own scenario analysis, if you lose, say, EUR 1 billion of sales, how do you think that would convert into EBITDA? So EUR 1 billion of sales loss because of coronavirus, volume loss, how many million in EBITDA do you think you will lose? Obviously, including your mitigation and everything that you’ve talked about, so just sort of for us to get a sense.

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Dominik von Achten, HeidelbergCement AG – Chairman of Managing Board [52]

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Okay. Let me answer the — maybe the ones of Sven Edelfelt and the first one, Mr. Kuglitsch, as they go on the CapEx piece, and then I would hand back the questions to Lorenz Näger on the financial side about other income and the covenants on Page 41, the pension liability, whether it’s impacted by the pension — by the change in interest rates, and the cost of drawing down the credit line. And then last but not least, the question of cost impact, EUR 1 billion sales, what’s roughly the impact — EUR 1 billion sales loss, what’s roughly the impact on EBITDA loss.

Let me answer the ones, Mr. Edelfelt, on the union pressure. You know the situation in France very well. The French are, in essence, very much intertwined with their unions when it comes to industrial production. I had a long call with our French management last night also around this. You know that Mr. le Président has chosen to use very drastic words when it comes to this crisis. (foreign language), this is quite dramatic. And he has, on the flip side, given a very, very generous way of handling this because he has basically told everybody, don’t worry, you can go home and the government will pay you — are now paying — giving you a little bit the black or white picture. And now the unions are saying, “But when we go home, we don’t only want 84%, but 100% of our pay.” And we argue, “Sorry, guys. What’s this? If you don’t work, then we’re not going to pay you the remaining 16%.” So there is a nice discussion with the unions in France, and we’ll still need to find a settlement with them. We are very experienced in having this — the union situation, but let’s wait and see how that plays out. It very much also depends on the further movements of the government because what I hear last night, the government has woken up also a little bit and started to make a calculation. If really everybody in France goes home and the government is paying that, then you have a different problem in France. So I think they are — they probably will come back during this week to put some more precision on how to handle the situation from a government perspective.

On the volume development, I think I’ve commented already quite well. I think there is, from my perspective, not much to add in that respect. On the CapEx side, EUR 1.2 billion on average. We take it there from day to day. There was the earlier question, how much do we have already committed? I now make a wild guess, but it’s not EUR 500 million that we have committed. We have gone through our winter repairs. That is typically the most costly exercise. But beyond that, there is a lot of flexibility in everything. So if the moon comes down, rest assured, we’ll address that. And we can clearly, in a crisis scenario, pull our CapEx below EUR 1 billion easily, if that is necessary. But from today’s perspective, we do not have a worry around not being able to conserve our cash through drastic CapEx measures.

With that, I would hand over to Lorenz to answer the other open questions on the finance side.

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Lorenz Näger, HeidelbergCement AG – CFO, Head of Finance, Accounting, Controlling, IT & Logistics and Deputy Chairman of Managing Board [53]

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Yes. Okay. Let me go through some financial synergy and financial exercise. First, if we lose EUR 1 billion turnover, what would happen to the EBITDA? So typically, we lose 50% on gross margin, meaning variable cost, so that — we would lose EUR 500 million on variable costs. And with our measure, typically, we cover 30% to 50% of — we compensate 30% to 50% of that loss. So the loss in EBITDA would be in the range of EUR 300 million, EUR 200 million, EUR 300 million, EUR 250 million. That would be my best guess.

Then the second is on the bonds. You are right, John. I’m sorry for that. I forgot about it. In case we were not investment grade, there is a very high level interest expense covenant, which is more than 5x away from our current level. So that means that interest cost would — may tip a little before we come close to that covenant, and we needed to be noninvestment grade. So this is a very remote scenario.

When it comes to the term loan, the term matures in 2025, so 5 years ahead. The covenant was adjusted by the IFRS 16 effect. So it is like it was agreed in 2017, and then coming up with the IFRS 16 in application, it was just to do that. So there is no impact from this accounting change to the covenant. And as I said — and the calculation of EBITDA is pretty much as it is as you can find it in the — as you can find it in the report. We have a slight adjustment in the net debt position, where we exclude the obligations from multiple minorities. So that’s a little bit — so it’s per balance a little bit better than what we report as leverage covenant. The JV result is included in the EBITDA, so that’s a pretty standard situation.

Then the cost of the term loan are very limited, currently significantly below market rates. The interest is clearly below 50 basis points at the moment. It’s variable, and depending on our leverage, not underwriting, if I’m not mistaken, it’s on the leverage. And this is a very efficient way of financing in case we needed it. Currently, we plan our financing so that we do not really need to draw the syndicated loan.

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Dominik von Achten, HeidelbergCement AG – Chairman of Managing Board [54]

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Pension.

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Lorenz Näger, HeidelbergCement AG – CFO, Head of Finance, Accounting, Controlling, IT & Logistics and Deputy Chairman of Managing Board [55]

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Pension. Yes, pension liability, you have seen, we have reduced the pension liability on a like-for-like basis significantly and our pension funds, so the financing side to about 70% by, what we formally call, 0 bonds. So if the interest rates change, the discount rate change and the — our funds do actually breathe in parallel to the pension obligation. So the gap should be — either the change in the gap should be very, very limited amount compared to the size of the pension fund. Currently, it’s EUR 450 million. And this should not — if we consider 1 or 2 percentage points in change of discount rate, so the change should not be more than EUR 100 million or EUR 200 million in the net open position.

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Christoph Beumelburg, HeidelbergCement AG – Head of Group Communication & IR [56]

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Okay. Have we answered all your questions? Anything open?

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Dominik von Achten, HeidelbergCement AG – Chairman of Managing Board [57]

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Okay. Then thanks a lot to everybody. Thanks for being on the call, and we’ll talk next with the Q1 results, I think, on May 7, that’s what we have published. And despite the fact that we have pushed the AGM, we obviously get back to you on May 7 on the — with the Q1 results. So stay tuned. Okay? Thanks so much.

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Christoph Beumelburg, HeidelbergCement AG – Head of Group Communication & IR [58]

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Thanks for dialing in. Bye-bye.

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Operator [59]

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So that does conclude our conference for today. Thank you all for participating. You may all disconnect.