Heidelberg Materials AG (HEI) Earnings Call Transcript

Ladies and gentlemen, thank you for standing by, and welcome to today's second quarter 2020 results conference call. [Operator Instructions] I advise you that your conference is being recorded today on Thursday, 30th of July 2020. I would now like to hand the conference over to your speaker today, Chris Beumelburg. Please go ahead, sir.

Thanks, Christina. Good morning, and good afternoon to everyone listening in, and welcome to our Q2 or H1 earnings call today. As usual, we have published our results this morning, 7:00, you should have received them. If not, please refer to our website on the Investor Relations events and publications. There you see the annual or the semi-annual report plus the presentation that we are going to be discussing now on the call. And with me, as usual, is Dominik von Achten, our CEO; and Lorenz Nager, our CFO; plus Ozan from the IR team, and we look forward to an interesting discussion after the presentation. Dominik, over to you.

Chris, thanks a lot. Hello, everybody, from Heidelberg. I hope you are all safe and well. I would assume most of you in home office. So hopefully, you all well. As Chris said, we welcome you to our Q2 call, and I would like to take you through the key operational topics, and then Lorenz Nager will take over for the financial side. If we go to the first page of the key messages, clear message from our perspective. Personally, I think this is a very solid result in an unprecedented challenging quarter. You know this was a roller coaster, April volumes significantly down in most parts of our countries. In June, we were clearly above prior year and operating plan in our volume performance in most markets. So really a roller coaster, and I think the team in Heidelberg here, has done an excellent job in that respect, in a very balanced portfolio. I will come back to you -- I will come back to that point in a minute. As an effect, the margin has significantly improved despite all the demand pressure, which I think is one of the clear indicators that this was an excellent performance in Q2. Also the COPE action plan that we announced earlier this year has worked very well, and I will share the details with you in a minute. Then Lorenz Nager will explain to you the background of a EUR 1.4 billion net debt reduction. You know this is a very big focus topic for us. And on the back of strong free cash flow, we were able to pull down the net debt in a very meaningful way. And then looking into the future, the start into Q3 was good. I will come to the details about July. But it's also fair to say that the visibility overall remains low. That's true both on the infection case side and also on the business side, and I think the key point from our side is we have clearly shown in Q2 that we can be very flexible and quick on our feet if things change. That's true for the upside, but it's also true for flat or down development. So I'm absolutely not concerned about the future. The company will react super strong whenever necessary, and as I said, the start in -- during the Q3 was good in July. With that, we go into Page 4 with a margin -- with the margin improvement, but let's start on the revenue side. Whether you look at Q2 or the half-year, revenue came down 10%, respectively, 13%. But you have to take into account that this has a 4 to 5 percentage point decline of a deliberately drawn down HC Trading business in there. So the operational decline in revenues was more in the high single-digit figures. On the operating EBITDA side, you see that we were basically flat to the first-half of last year. And I have to say, this is something we are proud of. That's well managed and to create EUR 1.4 billion after a roller coaster of Q2, I think, an excellent job of the team. Operating EBITDA margin. Look at this development, half-year, 1.4% up. Second quarter, even more than 2% up. That's obviously on the back of very strict cost measures, helping energy prices in most markets and also good pricing. So that then turns into a very strong operating EBITDA margin of 23.1%. If you go to the operating EBIT or how we call it RCO, you see also there, single-digit, low single-digit declines for both the half-year and Q2. I'm being very honest with you, if you would have asked me whether we can pull this off in March, I probably would have been very cautious. So in that respect, I think that's a very good development. If you go to the next page, we typically share with you the bridges between the different EBITDA developments both for the quarter 2 and then also for the first-half. You see here the 4% that I noted earlier for the quarter, and you see also that there is no -- hardly any currency impact. I think the quarter was basically flat compared to last year in terms of currency development. But then you see the big swings in net volume on the one side and then price over cost on the other side. So volume effect on the results, on the EBITDA side, was almost EUR 200 million coming from basically many different markets across the world. Notably, West and Southern Europe, then also Asia Pacific with heavy lockdowns in India, Malaysia, Bangladesh. West and Southern Europe, I don't have to tell you, you know the story. Italy, France, Spain, Belgium, U.K., all partially under lockdown. Also the U.S., I think I'll come to that in a minute in more detail. Clearly, we are skewed with our assets to the Northeast. New York, Pennsylvania, there was a bad hit up there early on. We have then a strong footprint also in California that they are also a significant lockdown in those big cities. And then the Canadian situation with Seattle. That's part of our region in Canada with heavy lockdowns and then also the Prairie provinces that have been hit by the oil price shock. Price over costs are -- is very favorable from our perspective, almost EUR 160 million cost savings that are in there, including the price -- the positive price development and some smaller other items. It adds then up to a EUR 1 billion EBITDA like-for-like in Q2. No scope changes. If you basically go to the next page and look at it from the first-half perspective, almost flat to prior year. I think that is kudos again to the team. EUR 1.4 billion, again, no currency impact and the net volume is even more pronounced with minus almost EUR 240 million down, but more than EUR 200 million compensated with price over cost with more than EUR 180 million cost savings, EUR 183 million cost savings in there. So I think that is actually okay. If you go to the next page, you'll see the COPE action plan, and this is the figure on the EUR 1 billion target. We announced the target in March to say we want to save EUR 1 billion on the back of fixed costs, CapEx and other cash savings. And here is the results today, EUR 354 million. And more than 50% of these are, at this point, fixed cost savings, EUR 183 million. You saw the number already earlier. And then also more than EUR 100 million CapEx containment and more than EUR 50 million or even EUR 60 million cash savings on strict receivable management and also cautious tax prepayments. If you go to the next page, you see the volume development in each of our business lines, and you see that the development in Q2 and half-year is very comparable in aggregates and cement. So half-year, we are basically 6% to 7% down. Q2, around 10% down. And then in ready-mix and asphalt, the situation is a little bit more down, especially ready-mix, Q2 and half-year more than 10% down. Why? Because in some of the markets, obviously, things switched also to bag. Bigger projects were on hold or there were no construction workers available, so that's why ready-mix is declining a little bit more than the cement side of things. I won't go into the details on the right side because -- let's take you to the next page when we talk about the EBITDA growth in NEECA, Africa and other 3 countries -- other 3 areas. For us, we are standing on 5 legs and there was a lot of discussions in the past about the portfolio. Yes, you can always do better. But one thing is also clear, to have a balanced portfolio in a global pandemic situation -- I'm not saying it's a hedge, but it's clearly a good balance, as you can see here. North and Eastern Europe, even EUR 30 million better than prior year quarter, plus 14% in our NEECA markets. Also AEM, very strong, plus EUR 9 million, 10% up despite a significant lockdown and volume decrease in Morocco, which is as you all know, one of our key markets. Very strong performance in all sub-Saharan markets. Then also Asia Pacific, okay. We are minus EUR 38 million down, 20%. That is quite substantial. But if you go into the different markets, as I said earlier, India, Malaysia, Bangladesh, almost completely locked down; parts of Australia under lockdown; Indonesia with obviously some COVID uncertainty. And then also the headwind a little bit in the Australian market that we talked about for a couple of quarters now. But overall, the team in APAC, from our perspective, has done a very good job. And also Thailand, for example, was going very well. So there was in the past a discussion around Thailand. But if you look at the development in Thailand, just as one example, I think there are quite some few bright spots in the portfolio as well. The other thing is it is -- must be noted the performance in Western and Southern Europe. Personally, I think that is probably one of the most outstanding jobs we have pulled off there. With all the volume declines that we talked about, minus 80%, minus 90%, Continental Europe; minus 56% in the U.K. in April and in June, practically double-digit above prior year and operating plan. So that is a very strong performance in WSE it basically then adds up to a decline of only 10% on an EBITDA basis. North America, if you look at the portfolio here, you could say, well, the minus EUR 26 million and 8% down is actually okay. From our perspective, we are open enough to say we are not happy with the American performance. We can still do better. There's, from our perspective, an upside in there. Clearly, we have a little bit of a disadvantage on the footprint side. We have, as I said earlier, a Northeastern skewed footprint. We have the Northwest in there. We have the Western Canadian footprint there. We have California in there. But I don't want to put this as an excuse. This clearly contributes to that, but as we said in the past and as we also see here, there is clear upside from my perspective in North America. I've already discussed it overnight with Chris Ward, our new colleague in the U.S. And rest assured, I know the place quite well, I have been over there 8 years after the last recession so I know the plays quite well. And we have clear ideas how to improve, and we will address the upside potential that we clearly see in our North American result. If we just look at 1 quarter, okay, 1 quarter is only 1 quarter. The year is long, and let's wait and see how that plays out. But overall, I think it's fair to say that we see some upside potential in North America. Last but not least, I would then go into the sustainability side of things. You know that this is for me personally a very important topic, indeed. And I just want to remind everybody that we have published our sustainability report that we do for many years already in June -- end of June, and this obviously includes a good transparency on the whole climate issue, on the CO2 issue, on water management, on all the ESG topics necessary. I think it lays a good foundation for us to substantially accelerate our efforts in that respect. But I just wanted to note at this point that this is something that we are working on as a team, and I see very strong momentum in the company in all our 55,000 employees carrying that topic on their shoulders and clearly see the upside for the future for asphalt cement in that respect. With that, I would hand over to Lorenz Nager, and maybe you'll share the financial side of things.

Okay, Dominik, thank you very much. Welcome from my side for this call. Good morning or good afternoon, ladies and gentlemen. I will lead you through the key financial messages for June 2020. The result overall is a twofold one. On the one hand side, we have been negative impact of the revaluation of our asset portfolio. And secondly, I think we have a quite good financial performance if we look to the details behind it. So the revaluation of the asset portfolio after the corona crisis as a triggering event led to an impairment of EUR 3.4 billion, which we have booked mainly in the additional ordinary result. If you adjust for this, the group share of profit has increased by 5% to EUR 356 million as of June 2020. We have a remarkably strong free cash flow generation. We have a cash conversion rate of 53%, which means that 53% of our half-year will be ends up a net free cash flow, and this brought our free cash flow over the last 12 months, meaning between June 2019 and June 2020 to EUR 1.9 billion, which is probably the highest value we ever saw here. And that's a clear outcome of the COPE action plan, which did not only focus on cost savings, but also on a very tight CapEx spending and a very disciplined working capital while maintaining our stock levels, yes? So we think that we did a quite good performance here in the first-half-year. The balance, this led to a reduction of our net debt by EUR 1.4 billion. And currently, we are significantly ahead of our plan, whether it's the annual plan for 2020, but also our midterm plan, which we communicated in the Capital Market Day 2017 for the years 2018 to 2020. If we go to Slide 12, you can see the P&L down to the group share of profit. As you can see, we booked the impairment in the additional ordinary result, which brought it down to close to minus EUR 3.5 billion. If we -- if we look to each single [ output ] position, then we see quite nice positive development. Financial result improved by EUR 19 million on the back of improved at lower spending for interest. But we have to keep in mind that there we have a second effect, which is a negative accounting effect from the change in discount rates for long-term provisions. Under IFRS, we discount long-term provisions. For us, these are mainly asset retirement obligation or for our employees and that had a negative EUR 50 million book impact out of which EUR 40 million sits in the financial result. So without this change in discounting rates, our financial results has improved by another of EUR 40 million. The after EUR 10 million will sit down in the net result for discontinued operations. Income taxes are lower, of course, on lower result expectations. Then we have business results from discontinued operations, which increased to minus EUR 20 million. And as I say, out of -- except this accounting effect for long-term provisions, that would have been on the same level of previous year. Noncontrolling interests improved by EUR 40 million. So per balance, we achieved through our semester slightly lower result from current operations by an improved performance in the lower half of the P&L, and that led then into a group share of profit adjusted for AOR of EUR 356 million, which is an improvement of EUR 60 million compared to previous year. Let me talk a little bit on Page 13 about the goodwill impairment and asset impairment which we face, treated normally, as you know, we reevaluate our assets on an annual basis. But the corona pandemic is a triggering event on the IFRS regulation and the German Association of Auditors has declared this to be a triggering event where you have to review that. So we did. And the outcome of that was that the original business expectations have decreased, and that's important in this specific planning period. Our expectation is that the business development in 2021 and 2022 will be below our initial expectations as the recovery from the corona crisis will be relatively slow. And this pushed our initial profitability expectation long-term beyond the planning period of 5 years, which is regulated under IFRS and here it's [ 35. ] So this led that in the specific planning period which is 5 years, our profitability expectation dropped. And that led them to a reduction of the net present value of our businesses. We had the second impact, which was the Brexit on the business expectations in U.K., which in our expectation also pushed down profitability expectation. Then the German Association of Auditors increased the market risk premium and also the risk-free rate -- the risk-free tax spreads went up. So that's the situation where the discount factor increased, and of course, that reduces the present value of our business. Importantly is to reiterate that our long-term business products continue to be good. And as you see from our short-term results that the impairment does not affect the cash generation in the short-term operational development of our business. 50% of the asset reevaluation comes from U.K. and U.K ., through this disappointment, we have acquired most of the U.K. business from Hanson in 2007. So it's pretty old, a pretty old goodwill. And the case is that the volumes in U.K. is still today pre-Corona, they are 30% below the volumes we saw in 2004, 2005 and 2006. And the whole market in U.K. did not live up to our expectations this year. And we do not believe that this will come back in the foreseeable future, meaning our 5-year planning horizon. And that caused a major part of our impairment to be -- to come from U.K. The other 2 major countries are France and Belgium, and France and Belgium are badly hit by the corona crisis and that led to this decrease. Yes. I mean that's it for the impairment and I think we have to focus now on the short-term. And for me, that's predominantly the cash flow generation. And you see on Slide 14 that our free cash flow generation was very strong in the chart. On the left-hand side of Page 14, it depicts the development of the last 12 months, so including July 2019 through June 2020, and we had the last 12 months EBITDA of EUR 3.5 billion. Then you can see our interest payment -- tax payment et cetera. And that leaves then with free cash flow of EUR 1.9 billion, close to EUR 1.9 billion which, as I said earlier, is probably the highest amount which we saw until now. And the cash conversion rate of 53% is a quite high value. Going into July. Now in the third quarter of 2020, this trend continued and even accelerated. So we are very confident in this very moment that this will at least bring the trend over the finishing line by end of the year. And as a consequence, our net debt development was outstanding. Last year, we had net debt, including IFRS 16 of EUR 10.4 billion at the end of June. And this dropped to EUR 9 billion, mainly driven by the free cash flow, but also by lower dividend compared to last year. As you know, we paid EUR 300 million less dividend. This we have to keep in mind. If we look to this outstanding development, it's not only the company as such with its financing power, but also the shareholders contributed here, the EUR 300 million, to this development. And the 8.9%, is close to EUR 9 billion debt also includes debt from leasing obligations according to IFRS 16 in the magnitude of EUR 1.25 billion. And if we look at last year, we saw that between end of June and end of the year, 31st of December, we saw the decrease in net debt of close to EUR 2 billion difference. It went down between June and the end of December by EUR 2 billion. And currently, we are confident that we could achieve a figure which is not too much -- too far away from this last year's figure. So for our financial side, we are relatively confident in that respect, especially at our COPE programs, we continue to push [ ourselves ] to get the cash in. Okay, I mean that's it from the finance side. I give back to Dominik von Achten for the continued message.

Thanks, Lorenz. Just to add on his point on the U.K. I think that's a balancing act. The impairment the U.K. is a mid- and long-term perspective also in the light of the history, where the U.K. is coming from. History is history. But I remember well, there are a couple of quarters where we underperformed in the U.K. If I go, and you can rest assured that we watch the situation. I personally watch the situation very closely. And if I take the latest indication, at least the transparency that I can see, I would say it can always be better. But the last quarter in the U.K. compared to what we can see elsewhere, I think we don't have to shy away. That was much improved in relative terms to the past. And obviously, we can always do better. That's clear, also true for the U.K. But I think it's important to see one is the impairment discussion. The one is the operational development and the improvement that we do towards past performance -- or compared to past performance. With that, I would just close on the key messages, again. And then we are more than happy to take all of your questions. So as I said, it was a roller coaster quarter with minus 80%, minus 90% down in April, then clear recovery -- strong recovery all the way to June. And as I said earlier, June, in many markets, clearly above prior year and also in -- against operating plan on the volume side. And then margins on the back of that significantly improved. We explained that COPE, we explained in detail, EUR 1.4 billion net cash reduction. And I think it's important to note that, for the way, going forward, our portfolio is well balanced for global pandemic. I think that's important to note. It's important to note that we have reacted super quickly, and the EBITDA performance in Q2 from our perspective is to be fair and more this superior. And the start into Q3 was also good, with July volumes holding up well, also pricing holding up well. So in that respect, we are very well equipped with our flexibility to react whatever is necessary to tackle the future. So in that respect, we are happy now to take your questions. Chris, over to you.

Yes. Thanks, Dominik, Lorenz. Cristina, do you want to explain the procedure for the Q&A, please?

[Operator Instructions]

Great. So we have many people on the line. The first one would come from Yassine Touahri from On Field Investment.

Yes. I would a couple of questions on fixed costs. You managed to cut fixed costs by EUR 183 million in the first-half. What would be the target for the second-half? And then a second question would be on the trend that you're seeing at the beginning of July on your order book. Could you give a little bit more color about what you're seeing on your different markets in July? You say that volumes are holding up well, does it mean that they are up? And do you have any indication in terms of order book in terms of your business about where your activity could go in the next few months or quarters?

Yes, Yassine, thanks a lot for your 2 questions. Fixed cost, I think what we have, EUR 183 million is not bad. To assume that we can exactly do the same in the second half. I think, again, it's not clear. It very much depends on the development because let's be also realistic, we -- and we haven't shared that with you. But the fixed cost savings came in on plan that we did here together in March, April with our team. But the contribution margin was EUR 1 billion higher than the original plan. So let's also be realistic. That was a pretty good exercise. It was also helped by the furlough schemes that we get from some of the governments. But for us, it's important to reach the EUR 1 billion, whether we can have the same split between fixed cost CapEx and other cash savings, it's very hard for us to say because, as I said, some of those cost reductions are not permanent. And in that respect, we stay very focused to get close to the EUR 1 billion. But whether the split will be exactly the same, let's wait and see. Now beginning of July, if I would know the order book until December, precisely, I could give you a guidance. But that's in these days, things move fast. And we have -- we are optimistic on what -- on the basis of what we see in July, but we also are fair enough, guys, to say visibility until December is just not there. If somebody tells you that, then that's fine. And to us, but we don't have the visibility until December to give you a precise guidance. I think that's also fair to say. There's nothing to do, be negative or positive. I'm just trying to be realistic. And July was good in terms of volume. It was good in terms of pricing. It was good in terms of cost development. And the order books that we see in our market is obviously very, very much. Because order books in some countries say something, in others they don't say anything. And order books can change. I have been through the recession in 2007 and 2009. You can brag about great order books but it also can change overnight. A, there comes to infrastructure product along, there is a significant jump in the order book. B, people start cancellations, which we don't see at this point. So that can vary pretty quickly, and I'm trying to give you a realistic picture. And all I can say, we are fairly positive for Q3 on the basis a good development in July. And then as I said, we have everything on board to react as quickly as possible to whatever happens. So I'm absolutely confident on the back of a strong performance in Q2 that we will tackle the future in a very strong fashion.

Thanks, Yassine. Next one comes from Paul Roger from Exane BNP Paribas. [Operator Instructions]

So I'll stick to 2. So the first one is on North America. Dominik, you referenced perceived underperformance in that particular division. Can you talk a bit more about what's behind that? I mean are you tight in terms of capacity? Are the plans held or something like that? And basically, how are you thinking about fixing it? And the second one, which is probably more for Dr. Nager. Cash conversion is obviously very strong. Is there further to go? And how sustainable is CapEx at these levels?

Okay. Paul, thanks a lot for your 2 questions. Very disciplined, 2 only. That's good, Paul. Thanks a lot. So on North America. The picture is, if you go through the details, I think, first and foremost, and very importantly, pricing is not the problem. Pricing is actually, it's actually good from our perspective across all business lines. That is good. On the volume side, we look a little bit to our cement volumes that are down, and that could be a footprint issue to a large extent. We had to close and have closed temporarily some of our capacities in the Northeast, also in California, also prolonged in Canada. You can always balance then our timing of that and what's the inventory impact. So that's why I think we have to be careful not to overdo it on 1 quarter because this is a longer-term game throughout the year. We know the seasonality issue and everything. So let's wait and see. We are not tight on the capacity, Paul, to be very clear. We have the inventories available to serve the market. But the volume development in the U.S., especially in the cement division, was not where we hoped it to be, partly footprint-driven and partly timing on the asset ramp up and ramp down. In aggregates and ready-mix, I don't see any issue on the volume development side, that was actually fine. And then obviously, we have reacted very early and quick on furloughing on the cost side. And -- but there are some operational topics that we've talked about in the past that we need to get our arms around in terms of transferring material from A to B or was it really necessary. So there are a couple of points operationally that we are -- we will discuss with the team. When it comes to fixing it, maybe we'll take also -- I can give you a side remark on the upcoming Capital Market Day around that. I'm in constant discussion with Chris Ward also, to be fair to him, he's also fairly new in his job. He knows the business, obviously, very well. You can -- you know that I've discussed with him over the last 24 hours and before, quite in-depth already, what we can do. I ask for your understanding that we don't go into details, but it's always not 1 measure that will fix it. It will be a few flowers that will need to contribute, and it will be partly short-term, it will be partly midterm. So there will be a combination of a couple of levers that we will pull in order to get it done. And as I said, Paul, you know that I've been in the U.S. 8 years myself, I -- immediately through and after the last recession. So as I said in the earlier calls, we are very experienced. Chris Ward has been with us for a long time. He knows the business very well, indeed. So do I. So in that respect, I have no doubt that we are -- will be addressing the key points. As I said, some short-term, some mid-term. And then I would hand over to Lorenz for the cash conversion question.

Yes, yes. Paul Rogers, yes. We really had a good -- a very nice cash conversion and [Audio Gap] firm, as I just said earlier, that the trend of good cash in continues and even accelerated towards the end of this month. So our cash conversion now in the beginning of Q3 was even stronger than before. But that will hold throughout the year over the finishing line, I wouldn't -- it's hard to predict because it obviously depends on the operating business. But the underlying trend in spending, let's say, beyond EBITDA, as of working cash capital, CapEx, impact on that that, tax interest, where we spent the money, payout on provisions, things like that. We are extremely disciplined, and we really see this cash out reducing. So I am pretty sure in this very moment, provided for any unexpected change which could happen in year, that we can bring this over the finishing line, and that we will see a really, really good cash flow development and deleveraging over the rest of the year. When it comes to sustaining CapEx. First of all, the spending mainly takes place in Q1 and Q4 because these are the quarters when we do the annual shutdowns of the cement plants, and that's where the predominantly and major part of the maintenance CapEx is spent, especially in Q3 -- sorry, in Q4. Until now, we did not have any business disruption due to underspending in maintenance CapEx, which clearly shows us that this level of CapEx we spend for maintenance and environmental and things like that are on the right level. We do -- we spend enough money on that. We now view those as we would a bit lower production due to less volumes. There are a bit less spending needs and we will see how things come along in Q4. I would say that they are moderately below previous year's figures. So we should not exceed previous year figures. And -- but we should also not be, let's say, substantially below. So I think that the current trend to have the spending just below previous year's level that is an assumption, which probably will go on through the year. If you looked at our cash flows -- legal cash flow statement, we spent first half-year EUR 560 million, previous year EUR 500 million in this tangible asset side. And I think that this trend slightly below previous year should prevail for the second-half of the year.

Paul, I think it's always a balancing act in these days. It's clear that with the visibility in March, we had to put our foot on both brakes. But it's also clear that we improved contribution margin development and also good cash flow and everything. We have to -- we will take it again, step by step. We are very conscious of the fact that we don't want to ruin our 2021 or 2022 results. So we go very diligently through our project list. And if there is a need to support the business in '21 and '22, rest assured, we will have the money available, and we will spend it. I'd rather come in at EUR 995 million -- EUR 100 million -- EUR 995 million and not EUR 1 billion, but to make sure that we support our business in '21 and '22. So we go very diligently area by area, business line by business line, through the topics. And if there are good payback projects that are happening in bottleneck markets, in bottleneck assets, rest assured we will do them even under a tight CapEx scenario to clearly also support the business going forward.

Next one is from Elodie Rall from JPMorgan.

So I'll keep it to 2 then. First of all, on net debt. So you've explained to us the EUR 1.4 billion reduction. Do you have a view about where you want to land at the end of this year? Consensus is at EUR 7.6 billion. Are you basically comfortable with this figure? Second on capital allocation, now that the operational side is improving a bit, do you feel a bit more comfortable about a return on dividend as soon as next year? And would you consider doing a bit more bolt-on acquisition at this stage?

Yes, I think I would start with the net debt. That's what I -- that's concerning the Slide 14, right-hand side. Currently we stand at [ 8.99, ] as the EUR 9 billion including EUR 1.25 billion leasing obligations. And as I previously said, last year, from June to December, we deleveraged by EUR 2 billion. As I said earlier, I expect the cash flow to continue to be strong, at least on the level of previous year, provided business continues to be, let's say, corona stays if you want, either in the range of whatever you can expect from these times. So if you assume that we, as I said, bring that over the finishing line, I think the EUR 7.6 million would be a very conservative figure. And so the consensus currently stands at EUR 7.2 million, yes, and EUR 7.2 million does not make me sleeping bad in the night. So clear ambition to go below that.

We have a bullish CFO. One point which I forgot to mention. I mean -- we have kept our stock here a bit more or less on the same level, 2.1 billion more or less from the level of previous year or so we had full continued production. So we have not gone and shut down the curve to reduce our stocks. And I think that makes me confident that if we continue production levels in line with the consumption level and base level, then we will not have a major impact on the working capital from that side. So yes, call it bullish. Call it realistic. Call it ambitious. I would say it's ambitious, and that's what we have to achieve. And if we look to all my COPE savings, I am not so much -- EBITDA is important, but there is a life beyond EBITDA, and cash is king. And we look for tax. We look for CapEx. We look for working capital management. We have collected quite a bit of our overdue receivables. We have been very strong in this point. So yes, that's the ambition, below this consensus stock.

Okay, Lorenz and then I'll take the next one, the second 1 of your questions, capital allocation. As I indicated to Paul earlier, for us, also capital allocation is a moving element. Yes, we had an idea in March and now we reconvene a little bit because have to see how we allocate our capital wisely, and we do this with a clear spirit to support also the business beyond 2020 because there is a life after 2020, even if we get through this COVID. And you know that we are in an industry that means -- that needs capital to support cash flow and also operational development. We do this with very stringent financial discipline. But even in these days, we will support the business where necessary. And as I said to Paul, if the business needs the CapEx, we will spend it respectfully, but diligently controlling the cash flow in this scenario. And that also includes, if there are small bolt-on acquisitions that we can do in single markets, very small bolt-ons here and there. Obviously, if they fit in there, if they have a high synergy level under very strict financial discipline, we are also happy to do that if necessary. It's all with an eye to support the business beyond 2020.

The next question comes from Pierre Rosso from Barclays.

It's actually Nabil Ahmed from Barclays. So my 2 questions. First one, I was wondering if you could help us to quantify the energy cost tailwind in H1. What has been the energy cost per tonne? And if you've got a guidance for the full-year of 2020, what will you see kind of are the costs? And the second question, I'm sorry if you already answered, but I was a bit confused. I mean did you provide the numbers behind how much government operating measures furlough accounted for in H1 earnings?

Okay, Nabil. Thanks for your questions. Maybe I'll take the government furlough one, and then I would hand over to Lorenz for the energy cost side because he is also leading the energy cost department and we had yesterday a discussion around the energy cost development. On the government measures, this is always a balancing act, and it's a market-by-market discussion. We have taken some advantages of these government measures, notably in Continental Europe then also in the U.K. And in that respect, you would say it is a double-digit million figure in the fixed cost side, maybe in this -- don't -- maybe on EUR 1 million or EUR 2 million. But in the magnitude of around EUR 25 million, I would say, in Continental Europe. I think that's a fair assumption, more -- EUR 5 million up, EUR 5 million down. But just to give you an indication. And Lorenz, you want to take the energy cost question?

On energy cost, we -- do we publish the energy cost per tonne?

No.

So on the energy cost, we had a very favorable development in the first-half. In Europe, the energy cost price effect was close to 20%. So the fuel price effect and then on top of that, we had a volume impact due to lower production and lower sales, of course. And because the cost -- the price inflation effect of this EUR 80 million comes almost entirely from the fuel side. The power cost remained stable as fuel -- fuel went up and fuel inside [ of -- the coal in the group of ] power went down so that levels out on a stable level. For the second half-year, the future is always difficult to predict. We expect a further savings in that respect, but it's very difficult to say how much. We are covered about 80% in the second half of the year this forward contract. They should go into the P&L. And then we are -- we have 20%, which is open and are currently in spot prices are below our plan. Therefore, we expect support for our operations from the energy and power side also in the second half. The magnitude of this effect is difficult to forecast. But I would guess, can I see this [ posted chart? ] I would bet in the magnitude of, let's say, about 50% of what the saving was in the first-half. That would be a little bit my expectations. But that is a very volatile and very volatile story in this very moment. Okay? Is that okay? Sorry, that's not very precise, but...

I think the communication might be there. I think it's -- it's clear that this remains an up and down. But for the time being, I think there is some payments on the energy, especially the fuel side.

So it's roughly 50% of H1.

Yes. That on the price side and the volume goes in parallel with the volume now.

Yes.