Guy Sidos (Vicat) : "Même après 50% de hausse, nous sommes encore sous-cotés !"

Hello.

We are now the 8th generation because two daughters joined the company two years ago.

And by my wife, exactly.

Overall size is not necessarily important in our businesses. You need a critical size, a local critical size. We are a proximity industry where we produce locally with local resources and local personnel for local needs. So it's enough to be strong in your geography to get by.

Yes, we are in 12 countries, with our latest example being Brazil, central Brazil, Brasilia. We chose a geographical risk distribution to avoid being on a single economic cycle. Today we are present in Asia with India, Central Asia, Kazakhstan, Turkey, Egypt, West Africa (Senegal, Mali, Mauritania), Europe with France, Switzerland, and a little in Italy. We have been in the United States for a long time because we were the first non-American cement maker to set up there, in Alabama in the Southeast. Now we have a plant in Alabama and one in California.

18 cement plants in total, in 12 countries, 10,000 direct employees, and the ratio in our industry is 1 direct to 10 indirect. Cement, like heavy industry, is rarely in city centers; it is an element of rurality. When a cement plant closes, local services close, public services disappear, schools close, and that has major consequences on rural life. So we are very important for rurality.

It's a very broad spectrum. It goes from the DIYer, whom we call the beaver because he builds himself, to the large construction companies. You can name them — the French are the best: Vinci, Bouygues, Eiffage, Fayat, and many others are our clients. We have a very broad spectrum. Sometimes our clients are our competitors because our core business is cement. We sell cement in bags, but as the market matures, there are fewer bags. We sell a lot of bags in India as a percentage of sales, very few in the US, and a bit more in France, but it's 15% of sales in France. More often, cement is sold in bulk to concrete plants that make the mix. Concrete is a mix of gravel and cement that binds the gravel. People often say cement dries, but no, cement hardens; it hardens under water as well, which is its quality. Moreover, cement will be very useful for reinforcing coastlines attacked by the consequences of climate change.

The sector is very fragmented. There is a large group of Chinese cement makers, almost state-owned, which is a bit apart because it is very concentrated on the Chinese market, which represents two-thirds of global cement consumption. Elsewhere in the world, we have large competitors that you mentioned, but they are eight times the size of Vicat. So it's not that big. There is room for a company like Vicat, which is independent, watches its financial teams, and has a long-term vision. For example, there are things not counted in the balance sheets: raw material reserves. Vicat has a very simple principle: a century of limestone, our raw material for cement, for each plant. So we hold that — we might be at 80 years for one, 100 to 150 for another. That is our benchmark, showing the long-term vision of the cement industry and particularly Vicat. What applies to reserves also applies to commitments in decarbonization, especially since we are talking about a 2050 deadline. I won't be very fresh then, but my daughters, who are in the company, will have to keep my commitments. This long-term vision is the common thread of a family business, an industrial family business in a trade that disturbs natural environments but also restores them.

It's the geographical diversification we talked about earlier that allows stability in the revenue. When one country is doing well, another may be doing less well, and overall it balances out. So there is great organic stability. Then there is a currency effect that will have a strong impact this year, linked to geopolitical uncertainty. Ironically, we criticize Europe a lot, but the euro is strong. So that has an impact. When two-thirds of our activity is outside the eurozone, it goes in the wrong direction for consolidation, but in terms of ratios, it remains very good. So it's a phenomenon, not very serious. Overall, to take the example of France, housing is really distressed, while the need is enormous. So we wait, and it will pick up. In our geography, there is a syndrome of large infrastructure projects that we are on, which compensates and smooths out the strong variations in housing construction. We will be ready when housing construction picks up again because the need is there. Similarly, there are geographies with a great need for cement when peace returns, and we will be ready to supply them.

Yes, directly. To be very frank, a little tariff does not hurt the cement industry because it avoids imports, it protects in a certain way, until the economy in general is affected. If the economy is affected, the first thing that gets delayed is investment in construction. So there is a balance to be found. To take the example of the United States, the first half is quite soft compared to what we expected because needs are very high. The level of construction demand and building permits has fallen back to 2015 levels as we speak. So it's quite soft without being worrying. It has also been affected by surprisingly bad weather conditions for our business because when it rains or conditions are very difficult, we wait for it to calm down to build. We are very tied to the natural cycle.

Yes, concrete can be recycled. To go back to the figures: 7 to 8% is the percentage attributed to cement in recorded CO2 emissions, and it's a global average. In France, we are at 1.8%, less than 2% of the carbon footprint of cement in France, including imports. We are greener in Brazil, at 3.5% for example. So we are greener in France, and that shows the maturity of policies to reduce the carbon footprint of cement. The metric is per ton of cement, and then we add it all up based on needs. In France, we have made a lot of progress, and Vicat is at the forefront of this strategy and exports its know-how abroad. That's what we are doing today. We are starting a new production line in Senegal near Dakar with principles that allow us to produce clean cement. First of all, cement is not dirty, even if it is dusty; we are talking about greenhouse gas emissions. Today, without going into great detail, we have four levers to reduce the carbon footprint per ton of cement to zero. The first three levers are: modernization of equipment — 30% less energy; defossilization — replacing coal. For example, in France, the least expensive industrial energy is coal from Australia or South Africa, which is crazy. We replace that with the energy fraction of metropolitan waste that we feed into cement. You see the circularity. Plus, it pays: instead of buying coal from Australia, we are paid to eliminate waste that previously went into a hole. So it's virtuous. The third lever is what we call clinker factor reduction. We reduce the volume of active ingredient and add other products, notably activated clays. We just started a plant, helped by France Relance, which advanced the start of the project by 5 years. We have an activated clay plant near Nancy. It will reduce the carbon footprint of each ton of cement made with this activated clay by 40%. That's at Vicat; for other cement makers, you'd have to ask them. Some are behind, some are very advanced, and Vicat is in the leading pack. Once these three levers are activated, we have cut emissions in half, from 800 kg per ton of cement to 400 kg on average. To cut the rest, we need to capture and store in underground or underwater cavities, or transform. Transformation involves combining a hydrogen molecule with a carbon atom to remake the hydrogen-carbon bond, producing synthetic kerosene or methanol, which can then decarbonize air and maritime transport. So it's a cross-cutting logic that is the hallmark of transitions. It's not marketing; it's a reality. We are working on it with technological bricks. It's a medium- to long-term project because some technological bricks are not yet mature. To name just two projects: we have a project in California, BECCS Z0, which has suffered from the vagaries of subsidy allocations, but studies continue. The subsidies were planned at $500 million — a huge figure. And then that was taken away. The US policy was to support the decarbonization of the cement industry. Two plants were awarded this subsidy as pioneer plants that would inevitably spend more money to achieve a goal that everyone will have to reach in 20 years, but in 20 years it will be cheaper. So the policy brought a subsidy, the policy changed, the subsidy disappears. That's better for Vicat's cash flow because I had to match that subsidy. So it doesn't change the project even if $500 million falls through. It might be done later. We keep all doors open. We also have a project in France called VA, a capture and storage project for our plant in Montalieu near Lyon. It's the largest cement plant in France, an ultra-modern plant that we will equip with this project, and the carbon will go to the fosse because there is a pipeline in the Oiseau valley. So with this plant, we will decarbonize the industry of northern Isère and the Plaine de l'Ain, which is very dynamic and will be even more so with the arrival of Lyon-Turin.

I would say we are still undervalued. Yes, it's true. Compared to the sector, I think we are very readable because in a very unstable world, Vicat is stability. The strategy doesn't change every morning. The management teams stay. We have extremely committed personnel, and I want to pay tribute to them. When we start something, we do it; we do what we say.

Because I think they are attaching even more importance to the long term. Vicat distributes regular dividends and has worked hard to give more visibility to its debt management policy. Debt management is very simple: when money was free, we borrowed to invest and modernize the group; now that money is more expensive, we repay. It's very simple. We are a common-sense company, I would say. Management is common sense and above all readable. We don't follow fads. We are in the big movements of decarbonization and artificial intelligence. But we have been working on AI for a long time. What does it change in our plants? We called it fuzzy logic 20 years ago. We have a whole history of studies, particularly in California, on fuzzy logic loops that improve production. It stabilizes production, improves quality consistency, and can increase production by up to 10% with the same tools. That's a prize. The installed cost per ton of cement is on average $200 per ton. If you gain 10% of production for Vicat, which has 40 million tons of capacity, you do the math. The value of AI is theoretically $800 million for tools that cost much less. So we work a lot on these subjects but with a lot of pragmatism on equipment that is already at maximum utilization and that we need to push further to meet commercial needs.

In 200 years, we have seen others. We are obviously very worried for our employees, our stakeholders, our clients who may be in these geographies, and it's dramatic. Instability is never good for business, obviously. But overall, the needs for cement remain enormous because they are linked to the increase in the world population. When we expect billions of inhabitants by 2050 — we could be off by a billion and 10 years, it's the same — there is a need for infrastructure, for building cities on the coast because this population will be 75% on the coast, according to the UN. There was the Ocean Summit we participated in last week in Nice, and the question of building with resilience on the coast is essential. You can't do it without cement. Well, thank you very much for this interview. Guy Sidos, the CEO of the Vicat group, was our guest in the big live interview on Boursama. Thank you.

Thank you.