HeidelbergCement's (HDELY) CEO Bernd Scheifele on Q4 2015 Results - Earnings Call Transcript

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HeidelbergCement AG (OTCPK:HDELY) Q4 2015 Earnings Conference Call February 16, 2016 9:00 AM ET

Executives

Andreas Schaller - Investor Relations

Bernd Scheifele - Chief Executive Officer

Lorenz Naeger - Chief Financial Officer

Analysts

Rajesh Patki - JPMorgan

Yassine Touahri - Exane

Harry Goad - Credit Suisse

Robert Gardiner - Davy

Robert Muir - Berenberg

Josep Pujal - Kepler

Alejandra Pereda - Morgan Stanley

Mike Betts - Jefferies

Marc Gabriel - Bankhaus

Gregor Kuglitsch - UBS

John Fraser-Andrews - HSBC

John Messenger - Redburn

Operator

Good afternoon. Thank you for standing by and welcome to the preliminary overview of Q4 and Full Year 2015 Conference Call. [Operator Instructions] I must advise you that the conference is being recorded today on Tuesday, February 16, 2016. I would now like to turn the conference over to your speaker today, Dr. Bernd Scheifele, CEO. Please go ahead, sir.

Bernd Scheifele

Okay. Hello to everybody. Good afternoon here from Heidelberg. Thank you very much for your interest in our trading statement call with our preliminary figures up to operating income level for the year 2015. I am sitting here with the CFO of the company, Dr. Naeger and Andreas Schaller, Ozan Kacar, Mr. Schebesta from our Investor Relations team.

Now, I start and lead you through the figures from the operational side. If you look to the overview, I think overall 2015 was a very good year for Heidelberg. It has been the best year for us since the financial crisis. I think operationally we did quite well. You see that our operating EBITDA is up about 14%, operating income 16%. In absolute terms, our OI went up more than €250 million. That’s a very significant number. Operating EBITDA margin went up from 18.1% to 19.4%, a significant improvement. And we had also a good run in Q4. If you look to Q4, our EBITDA and operating income is still ahead of consensus at about 7% to 8% and the same is for the margin. We had a strong finish in North America, especially in the region north, but we had also a good finish mainly in Germany. However, we had a negative ForEx impact in the last months, especially in December.

The second big topic is obviously the Italcementi transaction. Overall, we are on track. We are increasing our synergy target now to €400 million, which is about €325 million on EBITDA level the rest is on tax and finance. And the increase compared to the last figure which we communicated, which I think was about €360 million, €300 million is mainly due to more upside on operational excellence. We think we see here more upside and also higher savings on SG&A. And we see also more synergies in the trading part. The refinancing goes below €2 billion and the timeline is as we discussed last year, there is no change. And our net debt for year’s end, we expect to be at 2.0, at least net debt below €5.3 billion, which I think is a very solid figure.

If you go to the group overview on Chart 5, you see the operating income in the last quarter is up compared to last year by about 13%, mainly driven by a strong finish in U.S. but also in the UK and also in Germany and also in Africa. However, we had a weaker development, mainly in Asia that is due to China and also Indonesia partially due to internal problems. We didn’t have such strong months in November and December especially.

If you look to the margins, you see for the full year the cement margin is up by about 0.9%, driven mainly by U.S. and UK, but also by Africa. Aggregates margin is again up to 24.2%. We see in aggregates very clearly that our initiatives on client, the margin improvement programs on the cost side, but also on the sales side clearly pay off and also ready mix and asphalt has improved. I think our full year result is a very solid set of figures compared to a relatively difficult market environment. If you look to the cement volumes, they are globally down 0.9%, which clearly reflects the weak market development in the emerging markets, starting in Asia. Indonesia was disappointing. India had a flat growth. China growth was also more or less flattish. Russia was negative. Obviously, Ukraine was negative. Also Norway was negative due to the oil. And against this set of figures, we had a very significant increase in operating income is close to 16%. That shows that cost efficiency has been again very, very good.

Chart 6 gives you the overview on the group sales volume. You see clearly North America up, plus 2%. Okay, Canada was last year slightly negative. And in cement, volumes were down by about 6%. So, our pure U.S. business is doing clearly better with about 3%. Then Western and Northern Europe, slightly down. We had negative growth mainly in Norway. Also Netherlands was again negative. Germany was slightly negative, whereas volumes were up mainly in UK and Bene. Asia-Pacific, minus 5% comes mainly from Indonesia, where volumes were down for us by about 6%. And also India, our volumes were slightly up, but the market in total was obviously very weak.

Eastern Europe, Central Asia, volumes were mainly down in Russia by about 10%. Ukraine was also down by about 10%, whereas volumes were mainly up in Kazakhstan. Africa-Mediterranean, we had a strong increase in our volumes, mainly in Togo, but also in Tanzania. Turkey had a very strong Q4. The market came finally to a positive growth after a very slow start in Q1 with a very harsh winter. Turkey was doing very good in Q4. We had a volume increase of about 20%, especially in the Marmara region, where we are the key market leader. That led overall to a good development.

EBITDA bridge, Chart 7, shows you the operational improvement. You see pricing very strong with 8% and then you see volume had only a minor impact here. Italcementi synergies we show you on Chart 8. And you see we are now ending up at €400 million. And you see the increase comes mainly from SG&A and comes also from OpEx. And we believe that the €400 million is an aggressive target. It’s about 9.6% on the sales, but we think it’s feasible. And please be aware that market synergies are not included.

On the refinancing, I hand over to Dr. Naeger to explain where we are there.

Lorenz Naeger

Yes. Good afternoon, ladies and gentlemen. On Slide 9 you see the refinancing need, which has now reduced below €2 billion. Initial financing need was €4.8 billion to buy the free float, to buy the 45% stake of Italmobiliare and the gross debt, which had a change of control clause initially. So, we reduced that by change of control waiver which we, in the meanwhile, have obtained from all Italcementi banks. And then we have issued a debt certificate, €645 million at 1.8% in January to the German bank market.

We expect €0.8 billion from the share issuance according to the contract with Italmobiliare and €1 billion from asset disposals. Out of the €1.250 billion are for businesses which are inside Italcementi and will be retained by Italmobiliare and the other €750 million will be disposals from overlaps in the businesses’ antitrust restriction, which is mainly Belgium and U.S. And we are very confident to find very solid buyouts for those businesses. So currently €1.9 billion to be financed, currently the bridge amount is €2.7 billion. So we still have €800 million cushion for any unexpected setback which could happen in that way. So I think the refinancing is very well underway.

Bernd Scheifele

Yes. Okay. And I continue with the report on the market. If you look to North America, I think a very important market for us, obviously if you look to the Q4 we see the result is up against last year about 37% in Q4, for the full year it’s about 40% up. And what is interesting to see, that all regions in our North American business managed to increase the result on operating income level at above last year. So even in Canada, where we faced significant headwind with the oil well cement and the oil sands problem with the fracking industry, we managed to increase the result by about €5 million and on OI level. And that shows that we have reacted very fast on the cost side and we could compensate partially the lost volumes in the oil sand industry where we lost about 300,000 to 400,000 tons. We could compensate in British Columbia, Washington and in our markets in Saskatchewan, in Manitoba. Overall volumes in cement in Canada were for us, down by about 6%.

Pricing in Canada was still up by about 3%. So we had a very good performance of our new management team in Canada. In U.S. itself, region North, that is for us Washington and New York, Maryland, then it goes Chicago, Illinois, Iowa up to Indianapolis. In Indianapolis we had a very strong run. Pricing – volumes in cement were very strong with about 7% increase. Pricing was up by about 9%, close to 10% in the region North. And the other region which performed very well was the region South. South, it was a difficult year in a way that Texas, the cement market was negative by about 4%, then we had a lot of bad weather. But even with that we increased the result in the region South significantly, by about more than €70 million on OI and OIBD level. That has mainly to do that we could leverage very much on strong pricing in aggregates and we saw also the markets, especially in the Carolinas and also in Georgia, in Atlanta coming back very strongly. And for us Dallas, obviously Northern Texas is very important. Houston was a little bit under pressure, whereas Northern Texas had a very strong run in residential and in infrastructure and also in commercial. Also region West increased the result significantly. However, we had some production problems in our Permanente plant, so we could not in all respects maximize our results in North America.

If you look to the margins and you go back 1 year, you see in cement EBITDA margin for the full year I think that’s now the relevant figure, we increased more than 3%. That’s what I told you last year, I said we should see margin expansion in the U.S. by better pricing and good development on the variable costs. And also in aggregates the margin is clearly up. That’s Canada and U.S. the margin is up by about 1.1%. If I take U.S. only, the aggregates margin is up by about 2%, driven by good, strong pricing and also very good costs, especially variable costs development. So overall, I think U.S. was for us again a very good year. And I think we can be proud that especially in Canada, even with the slowdown in oil sand, and the slowdown in Texas, we managed such a significant result increase.

Now if you look now to Western Europe and Northern Europe, you see also the result, Q4 is up by about €35 million on OI, 36.4%. As I told you, we had a very strong finish in UK, also in Germany, also Bene had a strong December and November. Norway was for the full year disappointing. Volumes were down in Norway by about 6%, whereas in Sweden, as we told you in November, volumes were up by about 8%. So those countries were more or less a washout. And overall, the result in Western Europe and Northern Europe for the full year went up by about €105 million, the main part coming out of UK, where we had a very strong result development. Operating income is up by – compared to last year, by about €90 million. We more than doubled the result due to strong pricing, especially in aggregates, but also in the cement and cementitious division and again, a strong performance of our business in the Greater London area. In Germany, we managed finally to keep the result flat on a high level compared to last year. Volumes, we were slightly down between 3% and 4%, pricing was up more than 1%, the margin stayed healthy, about 26% and we managed to keep the operational result flat at a very good level. In Bene, as I have said we had a mixed development and the clear disappointment was the Netherlands. The market was still down minus 6%, minus 7%, pricing was still more or less flat, slightly negative, especially in Belgium. Okay. So overall we think the Western European and Northern European figures are okay. We had a clear increase of the result, driven by a good development in the UK and a very stable development and even some slight improvement in Northern Europe and a good, stable result in Germany on a relatively high level.

You see also Eastern Europe and Central Europe Q4 ended better than last year by about €10 million. In Eastern Europe we had overall a mix picture. We had a couple of countries which did clearly better than last year, so like Bosnia also Czech Republic was clearly better. Hungary was clearly improving. Also Romania was improving. Even Ukraine did better by about €3.5 million. And we had major problems versus last year, especially in Kazakhstan, due to the very negative ForEx development in Kazakhstan. The tenge took a huge dive and we could increase volumes by about 30%, 34%, but there was significant price pressure due to the ForEx issue with the ruble. We had imports from [indiscernible], so pricing was down by about 15%. And then we had also a strong negative development versus last year, especially in Russia, where volumes were down, but also we had a negative ForEx impact of about close to €9 million. And overall for the full year, operating income then came in at about €114 million, which is clearly down compared to 2014, mainly due to the problems with Russia and Kazakhstan.

If you look to Asia-Pacific, Q4 is down versus last year by about €34 million. I think main driver in Q4 was China, which was down by about €10 million. Volumes were weak. And also pricing, especially in the region Northwest was relatively weak. The remaining negative development was mainly in Indonesia. In Indonesia we had a little bit of a house-made problem. We could not fully capitalize on the pure market recovery in November and especially in December because our business was out of stock. We did not have enough cement stock to sell, so we could not fully participate in the clear increase in volumes. So this was a problem. And then there was also an issue over, just before Christmas, Jokowi decided again that he stopped truck traffic on the toll roads in order to facilitate traffic during the holiday season. And that slowed down our sales, especially in the Jakarta/Central Java area significantly. India was overall – the market was a clear disappointment. The market was about flat. Pricing was down by about 5%. Margins were under pressure.

Australia was for us a good year. We could enjoy increase of profitability quite a bit. We had a better run, especially in Cement Australia, our joint venture with Holcim. But also what we see in the metropolitan areas of Brisbane, Sydney, Melbourne and Perth and especially the multi-residential sector is booming. So, for example, the permits in Perth for multi-residential is up by about 30%, 35%, that has to do that a lot of Chinese money is flowing into the property market of Australia. And that compensates for the missing project business, especially in the region west, north of Perth, and also for the coal mine business in Northern Queensland. So Australia overall had a good run. On the margin side, you see cement margin for the full year is down in Asia. In Indonesia we stabilized the margin. The margin was more or less stable. And the main trough of the margin comes from India, where pricing was lower. Energy costs were slightly higher, which led to a significant pressure on margin.

If you go to the last one, then, to Africa-Mediterranean Basin, then what you see is that in the last quarter result is up 22.9%. Also, for the full year, result is up by 18%. Overall, we had a good run in Africa in the last quarter. Our result in Africa on OI level is up by about €30 million, driven by strong financial performance in Ghana, but especially also in Togo. Our new clinker plant in Tabligbo has performed very well in the first year of production. We produced more than 1 million tons of clinker. That’s a clear strong performance because in the bush of Africa to produce is not always as easy, especially in the rainy season. So we managed that. That helped us a lot. Turkey had a very strong Q4. After the election of the AKP party there in the second run, the market came back again. And we had in the Q4, as I told you, a volume increase of about 20%. So, overall in Turkey, the volumes were flat there, because we were running negatively over the full year. Pricing is up by about 5%, which is strong. We are on a historically high price level in Turkey. In Spain, the market outlook – the recovery is clearly on the way. Market outlook is positive.

Then on Group Services, that’s our trading arm, where we trade mainly clinker, cement and fuels, we managed overall that volumes are above last year, that it’s already performance because overall obviously trading was suffering from low-cost freight rates and also raw materials. And overall I think the result, operating income is €25 million, is a very good one. So that’s a little bit.

And then if you look to the outlook, we have tried to be a little bit innovative. On the volume side, we gave you a volume chart over the whole world, where do we see. So volume wise, we still think that the market is okay. So we think on the volume side we are doing fine. That’s also supported what we saw early in January. So we are, on the volume side, I think we are okay, especially for main markets like North America, UK, but also Western Europe and Africa, okay. The weaker spots, obviously Russia, China, Turkey, let’s wait and see. I am not sure whether the market really will go down. At the moment infrastructure with the government still continues. Marmara region, or Istanbul, which is for us the main market remains very strong. For India, we hope to see growth in volume. And for Indonesia we are clearly positive. I think what we see here for Indonesia, 3%. I think if you look to infrastructure spending, especially if you look also to the spending infrastructure in January, which is up by about 50%, I would assume that the markets can easily go to 5%, 6% or even 8% this year. So, I would be more bullish on volumes in Indonesia for the year.

Then the point is always, on Chart 19, is what about with the import/export. There were a lot of volumes coming especially from China to markets. The message here is, what we try to show you is sort of what are the typically export countries in the world. So, it’s typically Turkey, which is a strong exporter. It’s typically also Spain, obviously, which is a big exporter. We think China will do about 16 million tons; Vietnam, 14 million tons. And what we have not in is Iran. I think that’s still a little bit unclear. But the message is also that the export volume is typically in Asia and Mediterranean and we would expect most of the volumes to stay within the region. Main import markets are obviously Africa, very clear and also North America. You have to remind that in the peak season Heidelberg, without Hanson, imported about 4 million tons into U.S. Our total import facility throughput from a yearly basis is maybe 7 million tons. And we expect imports to U.S. to start to increase.

Then the question is also always whether cement will follow steel. We know that the Chinese guys are exporting steel more and more, which puts a lot of European and other non-Chinese manufacturers under pressure. And I think there are some key differentials between cement and steel. And one key point is that the economic added value of the Chinese to gain from exporting clinker typically or cement is very low. As we speak, FOB price for clinker in Shanghai is maybe $27, $28 per ton, variable cost to the Chinese cement plants, maybe $23, $24. So, if you add handling fees and whatever, that shows you the margin is very slow – is very low. And on the other side, you have to see that the CO2 emission per ton of cement is even higher than of steel. You only need about 8.5 kilos. That means from a balance between environmental impact and economic value added, it is far more attractive to export steel, because you can gain a much higher margin because they typically take manufactured steel, which is a value-added steel and the margin is much higher. The selling prices are €400 per ton. And at the same time the CO2 impact on steel is only 4.5 kilo per ton. And that’s why the Chinese government also in the new 5-year plan clearly does not want to go for exports obviously in clinker and cement. That’s why we do not see the risk that the Chinese exports go up very significantly.

Overview on key markets, we remain bullish on the U.S. So that’s in line with the other U.S. companies which have reported their Q4 figures already. So we are, in that view, we take respectfully a different view than the capital markets, which have a lot of concerns and are very nervous. We think the construction sector in the U.S. overall is very solid. We see residential, maybe with the exception of Florida, as solid and clearly growing. We see also commercial going very well. We saw that especially in Q4. And we expect a strong run in infrastructure, mainly supported by DOT state money. We see significant pricing power in the U.S. Our cement prices in U.S. last year, up close to 10%, 9%. I think we should have normally a similar run into ‘16 with higher capacity utilization. And also pricing in aggregates, we are pretty confident that we will see again good price increases in aggregates. So in U.S. overall we remain bullish. We expect that Texas would recover. Texas had last year a negative growth, major impact from oil, major impact by weather, those will not repeat, so we would expect Texas cement market to come back to growth in 2016.

Then on – we remain on Western Europe and Northern Europe, we expect UK to be strong. We see pricing upside in the UK. I think that will excel. We see volume recovery in Germany, especially due to the refugee crisis, etcetera. We would expect Northern Europe to be stable on a higher level. And we would see the end of the negative cycle in the Netherlands. There is a pickup in demand of the Netherlands, which has seen negative growth over 2 years in a row. In Eastern Europe, we would also expect better market trends in Czech Republic, Hungary, Poland, Romania, we remain skeptical on Kazakhstan and Russia and Africa, I think what we see market growth is there in Ghana, in Tanzania. And the key questions will be, what is the competitive behavior, what’s the pricing power, what are variable costs doing, our first month of January was good in Africa, it was clearly above expectation.

Then the key question is obviously Indonesia. On Indonesia I would expect good development in volumes. That’s what we already see in the month of January, where the market was up around 5%. Our volumes were up about 4%. Jakarta was still slow. We see infrastructure spending clearly accelerating in Indonesia and this is good. We see also that the macroeconomic figures of Indonesia are improving. The account deficit is around 2%, which is okay. The rupiah has clearly stabilized and strengthened against the U.S. dollar. On the price side, we expect certain price pressure, especially in the back sector. We see better pricing in the back sector. And if you look to January, our pricing was even above December. So at the moment it works well. Good news is what we see in Indonesia, expect for Indonesia variable cost will come down. We see electricity, fuel, coal clearly going down. If I look through the January result, variable costs are around 4% to 5% below last year, which obviously helps us on the margin and on the result. Our new capacity in Citeureup will be ready, starting production probably from April. This gives us an advantage of about $10 to $12 lower variable production costs compared to the old kilns that should also help us to stabilize the margin.

Okay. And the rest is a little bit – 21 shows you the upside, shows the downside. I think that’s up for interpretation. It’s early in the year. The volatility in the world, I would say has never been or has rarely been as high as it is at the moment. If you look to oil impact, if you look to currency and if you look to the politicians, whether it’s in the Middle East or to Europe and if you look to the North American elections, I would say volatility all over the world is very high. And there are a lot of things which are beyond our control. And that’s it from us for the moment.

Andreas Schaller

Okay. We are ready to take questions now.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Your first question comes from the line of Rajesh Patki from JPMorgan. Please go ahead.

Rajesh Patki

Yes. Good afternoon gentlemen. Two questions for me. Firstly, on the Italcementi acquisition, there have been some concerns in the market about possible renegotiations of the deal, just wanted to understand again if that is something possible and if that is dependent on the operational performance of the company, any divergence there that result in a renegotiation. And secondly, at the Q3 results you preferred to keep the 2016 EBITDA target unchanged, €3.7 billion pro forma, but now with the new volume outlook, do you have a target that you can share for the full year? Thanks.

Bernd Scheifele

First of all, the contract does not state any price adjustment for any EBITDA movements. I think we are well on our way on the synergy. And we will not comment on the question on renegotiating the price or whatever. And the second question was on the – what was it, €3.7 billion target I send it over to Dr. Naeger.

Lorenz Naeger

Yes. I can explain to you. So if you look to the €3.7 billion, how it was composed, it was based on the 2014 last operational development of €800 million of Italcementi and HeidelbergCement over a 2-year period, so €400 million each, if you want. And HeidelbergCement has delivered €325 million EBITDA increase in 2015. So we are fully on track to achieve this goal. Now – until now, we do not have access to Italcementi figures beyond what is published and this €800 million increase includes also €100 million operational result increase in Italcementi which we expected in June of this year. And I am not entirely aware of where Italcementi stands. I know that the consensus has been reduced, but we still wait for the result and we also wait for the outlook of Italcementi, so we cannot comment on that. So as far as 2015 is concerned in HeidelbergCement, we are on track. And now we have to see how it continues when it goes to the target for 2016. And as you see from the environment, it’s definitely more challenging in 2016 to get the operational result increase which we have seen in 2015. On the other hand, if you look to the synergies, we thought that €100 million pro forma synergies would be realized by end of 2016. We now have increased the synergy target substantially, so we should expect there a certain compensation for the operational market headwinds which we see, what Dr. Scheifele has discussed on India and China, and Russia and Ukraine, etcetera. So this will at least partly be compensated by an increased synergies target. And okay, then the third part there, the last point, the anticipated divestments, they will go out. So all-in-all, I would say 2015 was okay. The synergy part is okay. It’s okay, but there are more headwinds on the Italcementi expected result development and also in HeidelbergCement, that we will be able to increase the result to the extent we expected it to be in July last year. So that’s the view. It’s operationally difficult synergies more, let’s wait and see, will be more challenging to achieve.

Rajesh Patki

Okay. Thank you very much.

Operator

Your next question comes from the line of Yassine Touahri from Exane. Please go ahead.

Yassine Touahri

Yes. Good afternoon, a couple of questions. So firstly, on the U.S., you mentioned that you could expect price increase of 9% to 10% again in 2016, is it some figure that you have already seen in January of the price increase that were announced at the beginning of the year as such. And then my second question is on Africa, I was surprised by the strength of margin in the first quarter despite the competitive situation in Ghana and Tanzania, is that something which is sustainable?

Bernd Scheifele

Yes. Also in Africa nothing is sustainable, if you want to be reasonable, beyond the horizon of 3 months [ph], because this is the roller coaster continent. This is not Germany or Switzerland, where everything goes rather slow but stable. So obviously in Africa we had a strong finish. I told you that the margin is driven by the clinker production, which obviously helps that. Then we had a good finish also in Ghana, supported also by the ForEx. The Ghanaian shilling gained strength again, which helped us. And the negative market impacts in Tanzania have been limited. Then we had very strong runs in Liberia, Sierra Leone, Benin, so the smaller markets run at very solid figures. And that’s why on Africa we have been also, as you said, a little bit more skeptical for 2016. But as we look now and if I look to my January side in Africa, it’s again up. So, we are more confident on Africa than maybe in November.

On the U.S. pricing, it is still early. There are a lot of price increases out in the markets. I talked to our management yesterday. We think the pricing assumptions which we have made are okay. So, we expect pricing – we have announced price increases of $10 to $12 in the region north and also in Southeast Florida. And in Texas, we have announced about $16, not for oil well cement, but for the normal cement, California for April, about $11. So, I think it’s still early, but on U.S. side we are confident because if we look -- we went through the order books of our key accounts in the regions yesterday. The order books are in good shape. Order books are still increasing. So, we see strong demand. And as soon as the weather becomes better we see immediately how volumes pick up. We saw that in January already. And obviously we had a hit from the weather. So, we remain optimistic.

Yassine Touahri

Thank you.

Operator

Your next question comes from the line of Harry Goad from Credit Suisse. Please go ahead.

Harry Goad

Yes, good afternoon. I have got two questions, please. Firstly, just going back to the synergy target for Italcementi and I guess when you were first putting together your thoughts on this, were you very conservative in your assumption, because I mean, it does feel that the increase is really quite substantial now. I mean, were you very conservative or is it a question of genuinely finding more opportunities as you spend time going through the business? The second question is on the U.S. business, are you yet beginning to feel any change in infrastructure demand or projects or seeing the consequence of the new Highway Bill or at least feeling on the ground? Thank you.

Bernd Scheifele

Yes. On Italcementi, I would tell you, it’s both. You know what I mean? I think, even if the market thinks I am always bullish, I think we would rather try to be realistic and then to deliver. When we made – when we announced the acquisition, we set a synergy target of €175 million. On that, I was 200% sure that I am going to deliver this. That was the first number. And then we were touring a little bit the plants and set the first integration discussion with Italcementi. We had time to work with our guys in the group first time, especially this trading with tax, with finance, what can we do, what are the optimization potential and then we came up with the €300 million figure, which my internal figure at that time was already €350 million, but we want to be cautious with the financial market. And then finally we ended our integration phase 1 and have now visited more or less four plants. And nowadays I would say the €400 million is a stretch, but I think we can deliver this. And so it’s a conservative start, but we see obviously potential to improve in trading. But I think also I think good corporate spirit can achieve a lot and we have a lot of spirit in Heidelberg and a lot of drive. So we think there is good motivation also in Italcementi, especially on the country level. They are looking forward to the business combination with Heidelberg. And I think synergy potential is significant. And it needs the right push and the right incentive schemes in order to get the job done and we are very eager to do that. That was this and what was the other one was on...

Harry Goad

U.S. infrastructure?

Bernd Scheifele

U.S. infrastructure. Yes, what we see on U.S. infrastructure is, obviously there is this famous Highway Bill, the federal. We would not expect to see a major impact into ‘16, maybe in Q3 or Q4, a smaller one, but what we see is that the state level infrastructure investment is clearly going up, yes. So we see it in the region north. We see it in the Carolinas, Georgia, Florida, Texas, especially Texas is very strong again on infrastructure. They have put out about 10 billion DOT work for 2016 against 6 billion in 2015. That goes mainly through the core markets of Heidelberg to Dallas, Houston, San Antonio, Corpus Christi. So, we think Texas should be okay. That’s why we believe infrastructure will be good this year.

Harry Goad

Thank you.

Bernd Scheifele

Thank you.

Operator

Thank you. Our next question comes from the line of Robert Gardiner from Davy. Please go ahead.

Robert Gardiner

Good afternoon, gentlemen. Two questions from my side. Can I just ask again on Italcementi back on the regulatory timeline and the disposals, any update there in terms of what should potentially happen to disposals and where the investigations lie, i.e., the Phase 2 investigation in the U.S? And also would you mind just reminding us in Indonesia, so you are adding 4.4 million tons of capacity, do you expect to close capacity, what’s the net addition and how that will kind of ramp up through the year?

Bernd Scheifele

Okay. I ask for you to understand that we do not want to comment now in public on where we are with the regulators. The regulators watch and whatever – and anything what we could say could be taken wrongly. So as we told you we stick to our timeline what we discussed last time that we think in the Q2 2016 we should see final decisions. And we do not want to comment on any disposals and whatever, because they are still under discussion with the regulator. On Indonesia, okay, we will bring about 4.4 million tons. And for the total – for the full year it will be maybe 2 million tons, because there will be a time delay and you are not going to start a car like a Porsche, where you can immediately go to 250 kilometer speed. So that will take a ramp up time. So, we will bring about 2 million tons capacity.

And you are right first of all we can cover additional volumes growth. We would expect the market, what we said originally, about 4.5%. I told you, but it’s not now my guarantee or whatever, I would not be surprised if the market does this year 6%, 7%, because the infrastructure pipeline is very strong. And compared to 2015, Jokowi has cleared all the democratic problems in Indonesia to get the money on the street. If you look, for example, for the road projects, which are an important piece, about 70% of the road projects are already tendered. So the tender is gone and they just have to sign the contracts in order to go. And the money they have provided is about IDR319 billion infrastructure budget for 2016 to be spent. That’s a significant amount. That’s an increase of about 8% to 10% compared to last year.

If you look to the run-rate in Q4, they had a run-rate of increased infrastructure spending compared to the year ahead of about 50% and the run-rate in January is about 70%. So if that continues, that will have a major impact on volume growth. And we keep our fingers crossed that this comes and then we can produce additional volumes at a really lower variable cost. If the market is slower, we would slow down or mothball our less efficient kilns. We have old Japanese smaller kilns which have a significantly higher production costs than our new modern kiln. And I mentioned a figure of about $10 to $12 per ton, and that is the average figure depending on the kiln you shutdown that can be also easily more.

Robert Gardiner

That was great. Thank you.

Bernd Scheifele

Okay, thanks.

Operator

Thank you. Our next question comes from the line of Robert Muir from Berenberg. Please go ahead.

Robert Muir

Hi, good afternoon everyone. I have got two questions, please. First one, just on Indonesia again, if you are looking at then the part that you are putting up in Q2, could you maybe give us an idea of what the CapEx tailwind is going to be on that in terms of – you are obviously finishing up that asset. And then the second question I have as well on Indonesia is, in terms of capacity additions in that market, I mean how in your mind do you see those comparing with that volume growth this year, do you think there will be more additions into the market or are you thinking things are going to be quite balanced. And then I had a second question on Africa, I was interested in your comments about pricing pressure in general or rather actually a rise of competition in Africa in recent times, obviously prices are nominally quite high in that region, what do you foresee in your minds for the longer term sort of developments around pricing in those markets? Thanks.

Bernd Scheifele

Okay. I saw on Indonesia the total, I think the total CapEx for the new kiln is close to about €490 million and we have about €74 million to go. You check that again with Mr. Schaller or Kacar, that’s the figure I just – I just come out of the supervisory board meeting, if anybody had a chart. I think we have about €74 million still to spend in order to finish the project, that’s the one. And if you look to per ton of capacity, we are spending about €110 per ton of additional capacity, that’s for Indonesia still a very competitive figure, that’s not a crazy amount. That’s why we always said this is a very safe investment. And the figure of our mind is our original CapEx target we probably will end up €50 million to €60 million lower. You can ask us again in the Q2, in July when we have the call, then we will have the final figure. We will be below budget and that would bring then the upfront capacity to about €100 per ton, which is for Indonesia, emerging market, a very, very low figure. And this capacity is directly the City of Jakarta and we are very confident that we can sell that, even in a downturn we can switch off a less efficient kiln.

Now there is obviously new capacity coming in Indonesia with about 7 million to 8 million tons beyond Heidelberg. It’s especially Siam which comes, Panasia and [indiscernible]. And what we see at the moment is that there is a certain price erosion in the back sector because for infrastructure peak volumes, tenders competition is there, whereas on the back sector pricing has stabilized or is even moving slightly upwards. In January we were quite okay. Our volume growth was about 4% for whole Indonesia even if Jakarta was negative. Our market share in Jakarta was up beyond 45%, – 44% up from December from about 42%. So we are well within the market. Pricing in January averaged above December, which is a good signal and variable costs down around 4% to 5% because what we see, a clear decline in fuel, coal, electricity and the whole thing is supported by a strengthening and stabilizing of the Indonesian rupiah, so far so good. But as you know, in Indonesia every three months and you saw it, the currency can change and competitive behavior can change. But for the moment, things are I would say, under control or I would say even better than anticipated. We have to say so. Positive news on volume, positive news on variable costs and on pricing, no further erosion as far as we see. Okay.

Robert Muir

And just to be clear on that CapEx tailwind, that’s going to be the order of magnitude of approaching €200 million on an annual run rate, it sounds like in terms of the tailwind on the actual cash that you are spending on the facility that you are not going to have to spend in the future?

Bernd Scheifele

On P14?

Robert Muir

Yes, on P14. Yes.

Bernd Scheifele

P14, we are going to spend the total amount of €420 million against the budget of €480 million more or less. And currently we have spent €360 million to €370 million, so another €70 million to €80 million to go. €74 million is about the figure which still needs to be cashed out into ’16, so the worst is behind us, if you want that.

Robert Muir

Yes, that’s what I was looking at. Yes, okay. And then just the longer term pricing in Africa, what’s – I am interested in your comments?

Bernd Scheifele

You want to have a 3-year forecast for Ghana or for Sierra Leone or whatever my, don’t expect too much from us. No, I think the – I think we should be realistic that – and that if you look to the world of cement, I think what we see is that the emerging markets become more and more also mature markets because the world is in a way a limited space. And that process also starts in Africa, it does not start immediately in Congo or in Chad, but it starts for example, in Ghana or Tanzania, which are more developed markets. And that I think we will see and everything be – depends obviously then on your sales strategy and also on the competitive behavior. But we have to see. We haven’t seen in Africa, also from Dangote, any crazy pricing. You have all these on Dangote, he wants to go public listed on London hopefully we will see this one day. With the Nigerian problems at the moment I am not sure whether that’s a realistic perspective. But anyway, but he is also, on pricing, the guy wants to make a buck, you know what I mean so and what we have seen, his operations outside of Nigeria, what we can follow are not earning any money. So on price side the guy has been rather disciplined and typically follows the market leader as far as pricing strategy is concerned which is a little bit the typical behavior in the industry that the market looks on pricing to the market leader. So that is the management challenge which – for which we are paid and for which – what we can handle and things are not getting easier, but hey that’s why we need a good management. You know what I mean, so it’s an issue, I agree, but I think we can handle that.

Robert Muir

Sure. Thanks very much.

Bernd Scheifele

Thank you.

Operator

Thank you. Our next question comes from the line of Josep Pujal from Kepler. Please go ahead.

Josep Pujal

Yes. Hello gentlemen. Two questions for me. The first one is on the UK, was there something exceptional in those great results, I think that you said that they doubled, can these level of results be maintained or do we have to be aware of a sort of one-off. And my second question is on Indonesia, could you give us the full year EBITDA margin for this year and remind us last year, please?

Bernd Scheifele

What’s the EBITDA margin for what?

Josep Pujal

EBITDA margin of Indonesia.

Bernd Scheifele

EBITDA margin of Indonesia, that’s only 33.7%. It’s down by about 0.8%, okay.

Josep Pujal

Thank you.

Bernd Scheifele

And on UK no, there is no exceptional item. There was about maybe €8 million to €10 million property profit, but we have lots of property in UK also from the form of brickworks, etcetera, that’s the normal run rate. We had a strong result in our asphalt business due to low petroleum price, but petroleum price continued to be low, so we think that’s fine. We have good pricing in aggregates. We had price increase in cement of about 4%, volumes up 5%. And so our figures are significantly up. And we expect UK to be up again into ‘16 double digits.

Josep Pujal

Thank you very much.

Bernd Scheifele

Close to 20%, just to give you an idea, so and the EBITDA margin and I think that’s – so UK for us continues to be a good market and we remain confident.

Josep Pujal

Thank you.

Bernd Scheifele

Okay.

Operator

Thank you. Our next question comes from the line of Alejandra Pereda from Morgan Stanley. Please go ahead.

Alejandra Pereda

Hi good morning. I have two questions, too. The first one would be on Africa – well, the two on Africa indeed. First one is if there is any new capacity being built, either clinker or grinding and when would you open and where. And the second question is on Ghana, up to Q3 you were still drawing a positive sign in the pricing for Ghana and it has turned now in the Q4 on double negative, so if you could give us some color on how much pricing has turned around and if you think that’s going to bounce back?

Bernd Scheifele

Okay. Now on Ghana, in Ghana it’s a little bit tricky because of the pricing you always have to watch whether we talk dollars or whether we talk local currency, because the Ghanaian shilling saw a devaluation of I don’t know, 30% to 40%, because the government managed proudly to run the country against the wall a little bit on that side even with all the oil and gas they found before the coastline. So I have first to check. On the pricing side, in local currency pricing was up, but in dollars pricing was down. The problem of Ghana is they import clinker, which is paid in U.S. dollar, so they are dollar cost base and then they get the crazy – the very nice Ghanaian cedi currency as incoming cash flow and if they devaluate like hell, then we have a problem. So, that’s a little bit the – that is about the point.

And if you look to Heidelberg, we have focused on Ghana into ‘15 on a clear margin and profit maximization policies. So, we intentionally gave up volume, but we kept the price on a very high level and that led to a very good result, which is just to give you an idea why it’s a significant number. It’s close to double-digits in U.S. dollars. Nice result. And now for 2016 we will have a more focus on volumes in order to come back into the market. And then we have to see how we manage the price/volume relationship in 2016. And after our call, if you allow me to leave, I fly directly to Africa and tomorrow I am in Togo and Ghana in order to discuss the markets situation with our management and then we will see how it works out. We have been – you are right we have been strong on pricing into ‘15. We softened the stance a little bit in Q4. That might be the reason why we changed a little bit the signal for the pricing. Okay?

Alejandra Pereda

Okay. And on capacities?

Bernd Scheifele

On capacities, no, no, no, I think we just finished our Tabligbo clinker plant and now we have projects in Africa, but now the highest priority is to have the Italian transaction first, and then integrate and then let’s wait and see.

Alejandra Pereda

Okay, thank you very much.

Bernd Scheifele

Thank you.

Operator

Thank you. Our next question comes from the line of Mike Betts from Jefferies. Please go ahead.

Mike Betts

Yes, thank you very much. My two questions, please. The first one is on cost and I guess you showed €88 million, only an €88 million increase in 2015 in cost. Do you think that can be matched in 2016? I guess particularly I would like you to comment please if you would, on energy cost, which Cemex said might be minus 10% in 2016? And then my second question, which is briefer, under the map showing the volume trends in 2016, you talk about a slower growth rate. Your volumes actually declined overall in 2015 does that mean that you would expect a bigger decline in your cement shipments in 2015 – sorry, in 2016? Thank you.

Bernd Scheifele

No, sorry, no, no, no, that’s wrong. We are thinking, to be clear cut, Mr. Betts, the volumes in 2015 as I said at the beginning was disappointing, minus 0.8% was clearly lower what we expected. Our budget was probably plus 4%. And that’s maybe what we expect also for 2016. So, the message for 2016 is, from Heidelberg, we believe the worst is behind us in emerging markets, but also in the countries impacted by oil. So, we do not expect another negative drop of 300,000 tons oil well cement in Canada or in Texas. And we would expect Indonesia to come back on growth. We would expect that India comes back on growth, etcetera. So, that obviously – sorry, that was misleading. That’s not the message.

And on the energy cost, energy is, in a way, it’s simple or not. The total energy bill for Heidelberg, all in, all business lines and all types is about €1.36 billion or whatever, if I take the latest estimate for 2015. And now, if I look to my actual spot rates, compare what I see now, then obviously I could say we are maybe down 5% or 6% on spot rates. That would mean our energy bill would go down compared to last year about €60 million to €70 million and that’s a little bit of rough figure. I thought – I have read, obviously, the 10% from our colleagues. Okay, we are in Germany and we are not in Mexico. So, we think 5%, 6% is okay. Maybe they are 10%, I don’t know, but 10% is ambitious. It’s not impossible, because it depends a little bit what’s your exposure on pet coke. We are not as exposed to pet coke as Cemex, for example and that maybe that’s – there comes the difference. But we think 5%, 6% is a figure which looks very reasonable and I agree it can be better, maybe a little bit better. 10% looks a little bit stretched.

Mike Betts

Okay, thank you.

Operator

Your next question comes from the line of Marc Gabriel from Bankhaus. Please go ahead.

Marc Gabriel

Good afternoon, everybody. I was just wondering the operating leverage in aggregates in the U.S. was not as strong as one could have expected looking to your competitors in the U.S. And what is your goal here in 2016? Will we see further margin increase as to what level would you guess the margin could increase in aggregates?

Bernd Scheifele

Okay. Just to comment, obviously, I am a strong believer in benchmarking, not only internal, but also external and obviously operating leverage, that’s a figure even I understand. So, I have the figures. So I see the operating leverage for Heidelberg in U.S. of about 56%, which is pretty much in line with some other famous names and even better than one of the big gorillas in aggregate. So, maybe you check again with Mr. Kacar on whether the figures are consistent. Because operating leverage obviously we follow very well. And if I look to the EBITDA margin on our U.S. aggregates, not including Canada, we are about up 3%, more than 3% compared to last year, which I think is a figure which is very much in line with the market.

Marc Gabriel

Will it continue into 2016 with your....

Bernd Scheifele

I would say on – I am not sure whether we can see the same run on a margin expansion again on 3%. I think on fuel we have seen a significant improvement into ‘15. We are not going to repeat that into ‘16 again, because the gas price, the gasoline price in the U.S. is not going to fall from – we had it fall to almost $2.00, $2.20, it’s not going to go from $2.20 now to $1. I think we are not going to see that, even if Mr. Trump is elected. And so this we will not see. On pricing, okay, that depends a little bit where are you on pricing and that’s a little bit – some are very bullish and say we go again on pricing 6% to 8%. We did about 5% to 5.5% in ‘15. We had a very strong run in Texas. So, let’s wait and see. I would expect further margin improvement in aggregates, but at a lower pace than in ‘15. We cannot get every year 3%. That would be nice, but sorry, we could say that, but it’s not realistic. We cannot add every year 3%, then the margin goes beyond, I don’t know what, 40% and probably that’s not sustainable. Okay?

Marc Gabriel

Yes.

Operator

Thank you. Our next question comes from the line of Gregor Kuglitsch from UBS. Please go ahead.

Gregor Kuglitsch

Hi, good afternoon. I have got two questions. The first one is on net debt can you be specific perhaps in updating us? I think at the time of the Italcementi acquisition you were targeting €8 billion of net debt by 2016. Could you just tell us where we are, what you are targeting at this point and what sort of the key assumptions are? I guess I am sort of thinking about any additional disposals over and above the €1 billion, or CapEx, if you could just help us out how you get there broadly? My second question is on the outlook, i am a little bit confused, because you said on the one hand you expect, I think you just – in answer to Mike’s question that you are looking for 4% volume growth. Obviously that will be a significant pickup from last year, but equally it sounds from the overall message, that you are at least from an organic EBITDA perspective growth, if I look at the 8% that you delivered last year, it sounded as if you think that growth rate is going to come down. So maybe you can just reconcile broadly where we are, i.e., what you actually mean? Do you mean an acceleration in that number or a deceleration? Thank you.

Bernd Scheifele

No, on the growth – okay, on the growth in our industry, if you look to a global picture, and Heidelberg is pretty much a global player except for Latin America and Latin America is Brazil in a way, which is having a very bad market at the moment. And if we look to our growth perspective, if you look to the planning cycle of Heidelberg, we start the planning cycle always mid of October, where we do a top-down budget from the top management, mainly Dr. Naeger and myself on the group and on the big countries. And the starting point for the discussion is the IMF growth forecast on GDP globally because our industry runs very much in line with GDP. The problem is with the IMF, they are always bullish and then they come down, you know what I mean. That’s what you see. And in October, they were still at 3.6% global growth. Now they are – I think they are 3.4%, 3.3%. And I bet with you in April, if they come out again, they are at 3%. So – and that’s absolutely what you see, that’s what I said, our original vision or idea was maybe 3.5% to 4%, which is very much in line with global GDP growth forecast.

And the question is now, are we more skeptical than I think compared to the 2015 figures, I agree. This looks challenging, but we would expect that the emerging market comes back. And if Indonesia does for example, 6% or 7%, the growth rate for Heidelberg is much more realistic. If Texas is not down 4% this year, but goes up to 3%, then you have already a swing factor of 7%. You know what I mean, so there are some issues. I would not expect Russia to go down again 10%, as last year. You know what I mean, so there are some factors which make this not realistic, but obviously, looking at the world of today, volume 4% looks rather ambitious, fair point.

Gregor Kuglitsch

Thank you. And on the…

Lorenz Naeger

Okay. Next Italcementi, I refer to our Slide 33 from the presentation on 28 of July and just want to remind you how we arrived at the €8 billion. So therefore the net debt position at the end of 2014 was €5.7 billion, plus an equity of Italcementi plus the net debt of Italcementi, which brings us to €11.5 billion. And then we reduced it by €800 million equity which we issued to the seller, €1 billion de-leveraging from free cash flow, €1 billion from disposals and €800 million reduction in CapEx and working capital. Now if you look to the reductions, I mean equity issued to development of contractual obligation to the seller, so there is a very limited risk there. Why a very limited risk, because it refers to the share price of HeidelbergCement before closing. There is a certain – there can be certain change for that, but that’s limited. Second is de-leveraging from free cash flow, we have for 2 years €1 billion. We have delivered this year €400 million in HeidelbergCement. So we are on line with that. And we still wait for the Italcementi figures, we do not know this and we also expect for next year to be able to deliver this – our share Italcementi, as I say, we have to wait what they can deliver. Disposals, this is €1 billion, €250 million are contractually concluded from businesses which go out from Italcementi. So we have to sell out the two conflicting markets, which is Belgium and U.S. for €750 million. In the current market environment this appears to us to be a quite realistic figure. Then we have reduced CapEx and working capital on our – we have to wait for HeidelbergCement. We have not yet closed our accounts. So we see this reduction in CapEx and in working capital. We are confident that we can exceed our targets in Italcementi and we are pretty confident that we can deliver our results for 2016. So I think – the €8 billion is a very challenging management figure, but as the figures look currently, we are confident that we will be able to come close to this figure.

Gregor Kuglitsch

Okay. That does not assume any incremental asset disposals over and above the €1 billion?

Bernd Scheifele

The normal – in Italcementi we see additional liabilities. They have a lot of assets, as far as we know, which are idle. The question is how fast can we make money out of it, but that would be part of the last component reduced CapEx and working capital, I would summarize it under this, because it’s already a challenging target. It does not mean the disposal of major operations, I talk about depleted quarries or idle pieces of land, etcetera, etcetera, which we have brought to the market systematically in HeidelbergCement over the last couple of years.

Gregor Kuglitsch

Okay, thank you.

Bernd Scheifele

And this potential we still could not evaluate and – but our gut feeling is that there is good potential.

Gregor Kuglitsch

Appreciate it. Thank you.

Bernd Scheifele

Thanks.

Operator

Your next question comes from the line of John Fraser-Andrews from HSBC. Please go ahead.

John Fraser-Andrews

Thank you. Good afternoon. The first question is in the U.S. and the further volume leverage you have got on your capacity, could you just remind us how full you are in terms of using up your capacity and what the plan is there? Does it mean you will be investing in the coming years or does the Italcementi acquisition provide you with the surplus you need? And then the second question is back on to Chinese imports, it’s clear, your stance and many would agree with that, but I am just wondering if Chinese imports into Africa and Indonesia are part of the story in the price weakness you have been seeing in those territories? Thank you.

Bernd Scheifele

I would say we see partially Chinese imports coming to Africa, but we see it also a little bit slowing down, because typically that’s all this back haulage, because they bring – they come with ships in order to transport the raw materials resources to China. And since that business is slowing down that also is slowing down a little bit the cement imports. And in Indonesia, it is so at current pricing importing cement is not really making money. What you can do is importing clinker and you have an existing grinding mill, already working grinding mill in Indonesia, then it works. So, I wouldn’t say that.

On U.S., on the capacity, it depends obviously on region to region. On the region north, you still have some spare capacity in Evansville and also in our plant up the Hudson, on the Hudson River, whereas we are fully sold out in Mason City and in our small plant, what is it called, in central project. The other one, in the middle, west, we are more or less sold out. And in Texas, it is so Texas Lehigh is more or less sold out. We are importing via Houston and buying from the market. And in California, we still have spare capacity a little bit in Permanente, which is San Francisco. We are more or less sold out in LA. And we have in our plant in Northern California at the border to Oregon we still have some spare capacity.

Italcementi will bring us additional reserve capacity for our region north. So, our import needs will be pushed back time wise at least by 1 year or 2 years. Situation in Texas is different. As you know, in Texas, we are studying together with our partner, Eagle, how to expand capacity. There is no final decision yet. At the moment, we are looking more to, how do we say, how is its called volume in the new world, low CapEx solution or cement light solution. So, we are looking more to import terminal and grinding mill at the coastline instead of putting a fully integrated clinker cement plant in Texas with a very high CapEx item, because we understood that the capital market prefers very much the capital light model. And that’s what is at the moment looks as, probably from a return point of view, the preferred option.

John Fraser-Andrews

Thank you.

Bernd Scheifele

Okay. Last question?

Operator

Thank you. Your last question comes from the line of John Messenger from Redburn. Please go ahead.

John Messenger

Hi, good afternoon. Sorry, it’s two again, hopefully quick. First one was just – Dr. Scheifele, in terms of the actual Italcementi transaction, can we just be clear how much access have you had at this stage? Is this clean room kind of sharing of data that’s allowing you to get to these numbers or is this very much site visits just seeing physically what the various plants are doing to be clear as to what this potentially unlocks for you, because I guess, if I was an Italcementi shareholder, until the deal is done I’d probably be concerned about how much data is potentially being shared? And the second question was just on Indonesia and maybe we just have to wait until their results, but would you be arguing that there should be a shift in strategy for Indocement in that with the extra capacity going forward and the lower variable cost, should you be leading the industry to a degree in terms of adjusting prices, perhaps as a deterrent for others potentially thinking of launching more capacity or does the strategy stay very much about margin and letting some market share slip?

Bernd Scheifele

Okay. Very interesting question. Just to make it clear, Dr. Naeger and myself are sitting on the board of Indocement. We give soft advice get us more remuneration in a soft currency, but it’s not on us to decide on the pricing and the volume. That’s up to the management. So, you can call our friend, Christian Kartawijaya and he can talk to you alone. Sorry about that. But we are serious now on that, that’s a very – the issue is what’s the volume, what’s the price. We have now more capacity available and obviously we want to – last year Heidelberg or Indocement did not share into the market growth. We had a negative volume growth. The market was still positive. This year we want to grow with the market and keep our market share. That was the message between the line that our market share in Jakarta, Central Java in January is up, because I want to make sure we hit also our volume targets what is the case. At the same time we are going to be very reasonable on pricing and we watch very much the variable input costs. That’s what I told you earlier, that things at the moment for January, it is okay.

Next weekend of next week I go for about 8, 9 days trip to Asia and Australia, and I have about close to 2 days in Indonesia where we’re going to discuss the questions you asked about the volume in strategy in the light of the most recent market developments and competitive behavior. So we talk again in March when we present our final year’s result and then I can give you a little bit better. We have also to be clear now. And now you have to see, Indonesia, we are now in the midst of the rainy season. It’s starting. The peak is going to be this month, second half of February. It’s very difficult to understand a little bit where the volume, where the pricing is because we have a lot of interruption in the market and slowdown of business in the first quarter due to the rainy season. We expect, starting from April 1, the rainy season is over, infrastructure to come in very strongly, order book is okay and then we will see. So, this time of the year – it’s always difficult at the beginning of the year for Indonesia. It’s rainy season. That makes things even more difficult. And on data on Italcementi, it’s both. We have this clean team approach. Obviously we know the industry a little bit. We can benchmark a lot of figures which are available from Italcementi in public. Then sometimes, if you just walk around and use common sense, you see a lot of interesting things and it’s a mix of both.

John Messenger

Okay, Bernd. And sorry, just coming back on Indonesia, the last time you reported, Dr. Scheifele, Jokowi had done that rather strange change in trade terms. When you look at the year end prospect, are you comfortable that Jokowi isn’t going to do anything else stupid? I know it’s difficult to predict, given what he did on the toll roads, but are you comfortable that certainly there is no change in trade terms?

Bernd Scheifele

I think it’s a good point and I think you should be – let’s be just fair and rational. And you should always look a little bit – remember what did we discuss one year ago, in February 2015, and we had a lot of hope for 2015 for Jokowi to improve. Jokowi came to power in October 2014. The first year he had a lot of trouble to get his administration working, to get the majority in parliament, to get the bureaucracy working. There was a lot of bureaucratic hiccups. And finally, in the second half 2015, he managed to clean it up. For example, he merged the two ministries, the Ministry of Housing and of Public Infrastructure. He changed three ministers by experienced guy. So the whole political process is running better. And that’s what you have seen then in the increased – massive increase in spending to which we have heard earlier in the year. So, I think that’s why I do not want to be again bullish. That’s why obviously I also have to be optimistic running a business, but I think this year, in 2016, the government is much better organized, it’s in better shape that really the money hits the road than in 2015. And I think we should give Jokowi that credit. Now, he has also moved on the tax side that he has a relief program for the people who have evaded taxes in the past. So, he has tried a lot of – he has also done things in order to get the spirit of the business community up. And that’s why I am relatively confident that this should work. And I am not the only one. There are lot of analyst papers about infrastructure in Indonesia and whatever. So, it’s not Heidelberg alone. I think it’s a good argument that 2016 should work better, significantly better in volume than 2015.

John Messenger

Thank you very much.

Bernd Scheifele

That’s not over bullish, okay?

John Messenger

Great, thanks.

Bernd Scheifele

Thanks a lot. Thank you very much in your interest. Thank you. Bye-bye.

Operator

That does conclude the conference for today. Thank you all for participating. You may now disconnect.

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