Buzzi Unicem — Investor Presentation 2020

Oct 15, 2020

Investor Roadshow Milan - 16 October 2020

Executive Summary

VOLUMES & PRICES	• Volumes: In Q2 cement volumes declined in all geographies, particularly in Italy and Eastern Europe, due to the pandemic impact, apart from the USA. For Q2 as a whole, cement down -6.1%. YTD cement volumes down (-3.4%) at 13.4 mton; ready-mix concrete volumes more impacted (-6.3%) • Prices: Favorable variance across the board in local currencies, particularly in Poland and Italy
FOREIGN EXCHANGE	In H1, almost €m 11 advantage on Net sales and €m 3 on EBITDA from stronger dollar and hryvnia
FINANCIALS	• Net Sales at €m 1,520 (€m 1,519 in H1 19), -1.4% like-for-like • EBITDA at €m 314 (€m 289 in H1 19), +8.3% like-for-like • Net debt at €m 385 versus €m 568 at year end 2019
	Guidance for 2020: recurring EBITDA expected to decrease between 5% and 10% versus last year
GUIDANCE
	Announcement of the mandatory conversion of savings shares. • Stock conversion rate at 0.67x;
SAVINGS SHARES	• Extraordinary dividend equal to EUR 0.75 p.s. for all shareholders post conversion
CONVERSION	• Timing: Extraordinary/Ordinary Shareholders Meeting and Special Meeting of Savings Shareholders on 19 November 2020. Closing in Q1 2021

Volumes H1 2020

Price Index by country

In local currency; FY16 = 100

FX changes

	H1 20	H1 19	D	2019	Current
EUR 1 =	avg	avg	%	Avg
USD	1.10	1.13	+2.5	1.12	1.18
RUB	76.67	73.74	-4.0	72.46	90.93
UAH	28.63	30.42	+5.9	28.92	33.30
CZK	26.33	25.68	-2.5	25.67	27.31
PLN	4.41	4.29	-2.8	4.30	4.51
MXN	23.84	21.65	-10.1	21.56	25.11
BRA	5.41	4.34	-24.6	4.41	6.54

H1 20 Financial Highlights

Net Cash from operations (€m, % of sales) Net Debt (€m)

Results by Geographic Area | Italy & United States of America

• Cement volumes down due to lockdown of industrial operations in Mar and Apr. Recovery trend in May and June. Stronger impact on readymix production
• Favourable trend for selling prices.
• 13% of consolidated H1 net sales (17% in H1 19) and 3% of consolidated H1 EBITDA (11% in H1 19)

• Cement volumes improved thanks to marginal impact from Covid-19 and no restrictions on the construction sector in the vast majority of the country. Ready-mix slightly down
• No relevant changes in average selling prices in local currency
• 40% of consolidated H1 net sales (38% in H1 19) and 57% of consolidated H1 EBITDA (50% in H1 19)

Results by Geographic Area | Central & Eastern Europe

• Central Europe Eastern Europe
• Cement volumes only slightly down in Germany, thanks to limited negative impact from Covid-19. Luxembourg unfavorable after very weak April and stronger trend in May-June. Readymix concrete up thanks to different scope in Germany
• Average selling prices improved
• 27% of consolidated H1 net sales (27% in H1 2019) and 19% of consolidated H1 EBITDA (18% in H1 19)

• Cement volumes slightly better in Czech Republic, meanwhile Ukraine, Poland and Russia perfomed worse, more affected by the pandemic; readymix negatively impacted too
• Average selling prices in local currency improved (Poland in particular)
• 18% of consolidated H1 net sales (19% in H1 19) and 21% of consolidated H1 EBITDA (21% in H1 19)

Results by Geographic Area | Mexico & Brazil (valued at equity)

• Average selling prices in local currency declined
• Negative impact from the depreciation of the Mexican peso (-10%)

65.5 61.2

H1 19 H1 20

• Cement volumes improved despite some cointainment measures introduced by the local authorities following the worsening of the pandemic in the country
• Positive variance in selling prices, in local currency
• Negative impact from the meaningful depreciation of the Brazilian real (-25%)

Net Financial Position

	Jun 20	Dec 19	∆	Jun 19
EURm			abs
Cash and other financial assets	1,045.0	840.9	204.1	639.2
Short-term debt	(40.7)	(72.2)	31.5	(389.7)
Short-term leasing	(22.5)	(22.5)	-	(21.4)
Net short-term cash	981.8	746.1	235.7	228.1
Long-term financial assets	2.4	2.9	(0.5)	3.3
Long-term debt	(1,294.2)	(1,242.1)	(52.1)	(978.4)
Long-term leasing	(75.1)	(74.7)	(0.4)	(72.1)
Net debt	(385.1)	(567.8)	182.7	(819.0)

Gross debt breakdown (1,432.4 €m )

Guidance 2020: Recurring EBITDA expected to decrease between 5% and 10% versus 2019 results

Italy

• In the second half, a foreseeable moderate recover in demand will only partially offset the loss in volumes suffered during the lockdown period
• Operating results expected to be higher than previous year, net of the sale of CO² emission rights

USA

• Demand expected to contract in the second half due to the concerns and growing uncertainties following the critical epidemiological picture
• Operating results in local currency expected to close somewhat down in comparison with previous year

Central Europe

• Expected some marginal slowdown in demand in the second half
• Operating results should remain in line with previous year

Eastern Europe

• In the second half, demand is not expected to rebound due to the continuing criticality of the epidemiological picture and the related greater uncertainties regarding the timing of the economic recovery
• Operating results expected to worsen in comparison with previous year

Untangle the Governance

A single class of shares, with the same rights and the same price, allow to align the rights of all the shareholders

More liquidity and higher market cap for ordinary shares

Improve P/E ratio

The improvement in EPS should lead to an increase in the share price

Streamline and simplify the Capital structure

Capital structure rationalization and simplification mean less corporate obbligations and costs associated with the existence of different class of shares

Market Friendly Operation

The conversion reflects a trend towards simplification of the share structure of listed companies which is clearly visible in the Italian market

Savings Shares Conversion – Buzzi Unicem Capital Structure

• Two class of shares: Ordinary and Saving shares
• Saving shares represent 19.8% of share capital
• Buzzi Family Holdings own 58.9% of ordinary shares and 47.6% of the share capital

	Share Capital
	N. of shares	%
Ordinary	165,349,149	80.2
Savings	40,711,949	19.8
Total	206,061,098	100

	Avg. daily volumes
	Avg. daily vols (Apr.20-Sept.20)	% on shares
Ordinary	626,802	0.379%
Savings	69,918	0.172%

Ordinary	3,452
Savings	480
Total	3,932

Savings Shares Conversion – Stock and Conversion rate analysis

	Historical conversion rate (x)
	Spot (@08.10.2020)	Avg L1M	Avg L3M	Avg L6M	Avg L12M	Avg L2Y	Avg L3Y	Avg L5Y
Conversion ratio	0.57x	0.57x	0.56x	0.56x	0.58x	0.61x	0.60x	0.59x

Savings Shares Conversion – Deal Structure

• Stock conversion rate: 0.67 ordinary shares for each saving share
• Equal cash payment recognised to all shareholders through an extraordinary dividend post conversion of EUR 0.75 p.s. (Total cash-out of EUR 144.1 mn(1) )
  • Implied premium: +22.7%

Deal structure

• Majority shareholders' impact: Buzzi Family holdings will land to 50.94%(1) of voting rights (from 59.0%)
• Withdrawal price and treshold:
  • 10.778 €
  • EUR 25 mn

	Implied Premium	Implied Premium (2) Adjusted
Spot (@ 08.10.2020)	22.70%	18.46%
Last 1 month	22.70%	18.30%
Last 3 months	24.11%	19.72%
Last 6 months	24.79%	20.12%

Market reaction
	Ordinary shares	Savings shares
Price @ announcement	20.89	11.80
Prices @ 12 Oct 2020	21.23	14.05
% change	+1.6%	+19.1%

(1) Assuming no withdrawal

(2) Ordinary shares adjusted for dividend

Savings Shares Conversion – The Timing

(1) Simple majority for the approval of the deal, representing a minimum of 20% of saving shareholders capital

Appendix

Buzzi Unicem at a Glance

• International multi-regional, "heavy-side" group, focused on cement, ready-mix and aggregates
• Dedicated management with a long-term vision of the business
• Highly efficient, low cost producer with strong and stable cash flows
• Successful geographic diversification with leading positions in attractive markets
  • Italy (# 2 cement producer), United States (# 4 cement producer), Germany (# 2 cement producer), material joint venture assets in Mexico and Brazil
  • Significant positions in Luxembourg, The Netherlands, Poland, Czech Republic, Slovakia, Russia and Ukraine, as well as entry point in Slovenia and Algeria
• High quality and environmentally friendly assets
• Leading product and service offering
• Conservative financial profile and balanced growth strategy

"Value creation through lasting, experienced know-how and operating efficiency"

Cement plants location and capacity

2019 Consumption vs. Peak

Historical series of cement consumption by country

575

Net Cash Flow from Operations and Capex | €m

% Net cash flow from operations / Net sales

% Ordinary capex / Net sales

Historical EBITDA development by country

			2011	2012	2013	2014	2015	2016	2017	2018	2019
	Italy	EBITDA	10,3	-5,9	-18,1	-18,7	-37,2	-22,2	-79,7	-1,7	43,4
	Germany	margin	1,8%	-1,2%	-4,2%	-4,8%	-9,8%	-5,9%	-18,6%	-0,4%	8,6%
		EBITDA	90,3	72,2	108,1	88,6	72,1	76,8	78,1	82,5	102,3
		margin	14,2%	12,0%	18,0%	14,7%	12,6%	13,4%	13,3%	13,0%	15,1%
	Lux/	EBITDA	35,0	8,3	11,5	15,9	19,7	25,8	17,6	23,1	22,7
	Netherlands Czech Rep/	margin	15,7%	4,3%	6,3%	9,7%	11,7%	14,7%	9,4%	11,7%	11,8%
		EBITDA	35,2	25,4	19,2	27,0	32,6	34,4	36,5	43,6	46,3
	Slovakia Poland	margin	20,5%	17,0%	14,6%	20,2%	24,0%	25,2%	24,7%	26,5%	27,5%
		EBITDA	36,9	21,8	27,1	18,2	22,7	23,4	24,1	31,9	32,1
	Ukraine	margin	26,6%	20,0%	26,8%	20,4%	20,4%	24,6%	24,9%	28,6%	25,9%
		EBITDA	6,9	15,8	12,3	11,0	4,0	12,8	16,0	7,0	21,0
		margin 6,2%		11,8%	10,0%	12,5%	5,7%	16,1%	16,9%	8,0%	15,9%
	Russia	EBITDA	65,7	96,1	92,6	73,4	48,4	43,2	46,0	50,1	57,7
		margin	37,4%	41,0%	37,2%	35,0%	29,0%	28,0%	24,9%	27,0%	26,9%
	USA	EBITDA	71,4	123,9	151,0	207,3	311,7	356,5	369,6	341,2	402,7
		margin	12,8%	18,2%	20,7%	24,2%	28,1%	31,9%	33,0%	31,9%	32,4%
	Mexico	EBITDA	82,6	97,5	77,5	Adoption of
		margin	34,7%	36,2%	33,2%	IFRS 11
		EBITDA	434,3	455,1	481,2	422,7	473,2	550,6	508,2	577,2	728,1
	Group	margin	15,6%	16,2%	17,5%	16,9%	17,8%	20,6%	18,1%	20,1%	22,6%

Estimated trend of CO² emissions and allowances in the first half EU ETS phase IV period (2021-2025)

BU area ETS CO² emissions

(Reduction scenario includes CO² reduction projects and >/< 15% rule)

Allowances net balance

Breakdown of CO² emissions per country in 2019

Solutions for de-carbonization

	CLINKER CEMENT		factors influencing feasibility: low very high ****
	CONCRETE CONSTRUCTION CARBONATION	2050 CARBON NEUTRALITY ROADMAP (Kg CO2/t cement)	performance and market acceptance	standards	availability of supplementing materials/fuels	permits	nimby	R&D	increase of cost production	capex
cements with a lower clinker content		-72	***	***	*				*	**
alternative fuels with biomass content		-71			**	***	*		*	**
technical update (BAT)		-61								*
new cements with lower carbon footprint		-17	***	***	***	*		*	*	**
carbon capture		-280				***	*	*	*	*
concrete recipe optimization		-52	**	*	***				**	*
H2 + electrification		-19			*			**	*	*
decarbonated raw materials		-27			*					**
carbon neutral trasnsport		-17			*					***
CO2 uptake		-51
already achieved up to 2017 since 1990		-116
total		-783

CCS situation: where are we now?

Good news…

• Various CC options available although not all with the same level of technical readiness (TRL)
• Storage and utilization solutions potentially available
• EU financing

Bottlenecks

• High costs
• Lack of infrastructure
• Not enough renewable energy / H2
• NIMBY syndrome

What do we need to go forward?

• High costs entail risk of carbon leakage. We need rules for maintaining our competitiveness
• Infrastructure projects and support for storage still missing
• Renewable energy supply
• New liaisons and new alliances between energy intensive industry and big emitters
• Stakeholder dialogue to prevent/limit NIMBY

Investor Roadshow Milan - 16 October 2020