Financial year 2014 preliminary results
Cement volumes at 25.1 million tons (+1.8%); ready-mix concrete at 12.0 million cubic meters (+1.4%)
Consolidated net sales equal to €2,506 million (€2,510 million in 2013), up 3.4% like for like
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The Board of Directors of Buzzi Unicem SpA met on February 10, 2015 to examine the preliminary figures for the year 2014.
During 2014, group’s sales in the geographical areas of presence showed an interesting rate of growth in the United States of America and in the Czech Republic, a moderate progress in Central Europe and a stable trend in Russia. Conversely activity level in Italy continued to decline and Poland reported a contraction in sales, caused by endogenous reasons.
The marked strengthening of world trade occurred in the summer months faded out at a later stage. Overall, in 2014 global economy showed a moderate recovery, weaker than initially expected. In the United States economic activity accelerated more than projected in the third quarter and continued to expand, at a slower pace, during the last months of the year, while GDP trend remained weak in the emerging countries and suffered a fast decline in Russia. The strong fall of oil prices, which began in June, intensified at the end of the year also as a consequence of the increase of supply deriving from the extraction activities in the United States and the weak world consumption. Economic recovery in the Eurozone, supported by higher consumer spending but held back by delays in capital spending, remained unsatisfactory. In Italy the contraction in capital expenditures, mainly in the construction sector, was only partly offset by the turnabout in consumption, thus leading to a decline, although marginal, of GDP. In the United States of America, where GDP posted a further, dynamic progress thanks to domestic demand, the construction sector showed a very positive trend, especially in the commercial and residential building segments. In Germany the economy was characterized by a brilliant start of the year, driven by a growth in construction investment, and by a subsequent slowdown during the second half of the year. In Eastern Europe countries trends were rather diversified: in Russia the quite lively building activity, although in decline in the last months of the year, brought to a cement consumption still higher than the peak realized in 2013; in the Czech Republic, after a long period of stagnation, signs of economic growth and positive recovery of production levels in the construction sector appeared. In Ukraine the difficulties associated with a still worrisome, complex and uncertain economic and social context, caused strong differences between the business level of the western regions, where our group operates, and that of the eastern ones. Finally in Poland, notwithstanding the economy resilience and the rise in construction investments, our volumes were penalized by some marketing choices which had unintended effects.
Cement sales of the group totaled 25.1 million tons, up 1.8% over 2013. Ready-mix concrete output at 12.0 million cubic meters posted as well a slight increase (+1.4%) from the previous year. Consolidated net sales were down 0.1% from €2,510 million to €2,506 million. Foreign exchange rates negatively impacted for €91 million. Changes in scope were favorable for €2 million. Like for like, net sales would have increased by 3.4%.
Net debt as at 31 December 2014 amounted to €1,063 million, down €34 million over €1,097 million at year-end 2013. The improvement of net financial position was achieved thanks to cash flow from operations, disposal of non-strategic assets and a careful dividend policy, although the acquisition of the full cycle cement plant of Korkino (Russia), occurred at the beginning of December, required an outlay of €104 million, and in December as well tax provisions accrued in previous financial years were paid for about €20 million.
In the third quarter GDP declined by 0.1% and this trend continued also in the last quarter of 2014. Industrial production decreased by almost one percentage point. In December consumer prices declined again, and inflation still remained very restrained also net of energy commodities. The contraction of bank loans continued, but at a slower pace, and the climate of business confidence stabilized after the decline in the summer months. Construction investments showed a further contraction in all segments, except for the renovation of residential properties; the decline concerned particularly the new residential as well as the non-residential public sector. Cement domestic consumption, which has been falling for eight years in a row, is estimated at around 20 million tons (-57% from the 2006 all-time peak). Our hydraulic binders and clinker volumes decreased by 7.6%, in line with the domestic market tendency. Exports, which in 2013 had partially mitigated the decline in the domestic market, suffered from the difficulties due to oversupply in the Mediterranean area, which made this choice less sustainable. Selling prices posted a 6.6% decrease partly due to the change in sales mix, with a higher portion of clinker. In the ready-mix concrete sector, volumes trend was more favorable (+0.7%), with prices however equally decreasing (-5.3%). Overall net sales in Italy amounted to €392 million, down 9.3% from 2013.
In Germany GDP growth level, driven by export recovery, investments and domestic consumption, slowed down in the second part of the year. The construction sector, after a strong upswing at the beginning of the year, favored by good weather conditions, returned to more consistent growth rates and closed the year with a slight positive sign. Our cement deliveries showed a positive trend (+3.7%) with stable prices (+0.2%). As for sales mix, exports and white cement increased, while oil well special binders posted a slightly unfavorable variance. In the ready-mix concrete sector, volumes and prices confirmed the same values as in the previous year. Thus overall net sales increased from €593 million in 2013 to €603 million in 2014, up 1.7%.
In Luxembourg, cement and clinker volumes sold, inclusive of internal sales, were affected by lower export and contracted by 1.6% with marginally weaker average prices. In the ready-mix concrete sector, output was down 6.6% in a declining price environment. Overall net sales came in at €106 million vs. €109 million in the previous year (-3.2%).
In the Netherlands, economic activity began to show timid signs of recovery, after a two-year recession which had penalized especially the building industry. Our ready-mix concrete sales decreased by 12.1% and the average price level declined by 2.8%. Net sales revenue, including also aggregates business, came in at €58 million, down from €73 million in 2013 (-20.9%).
In the Czech Republic, after a long period of sluggish business activity, the signs of recovery became more evident and GDP growth, revised upwards during the year, is estimated at +2.4%. Construction investments, which had been declining for three years in a row, started to grow again. Our cement sales were up 14.6%, while the trend of average prices in local currency was unfavorable (-2.9%). The ready-mix concrete sector, which also includes Slovakia, showed signs of improvement, with volumes up 2.0% and virtually stable prices. Consequently net sales increased from €132 million to €134 million (+1.4%). The weakening of the local currency negatively impacted net sales by €6.9 million.
In Poland GDP, sustained by domestic demand, realized a growth estimated at 2.8%. Construction investments showed a slight increase, as did cement consumption in the country. The introduction of a new price list in April penalized our cement shipments whose trend until then had been buoyant. Thanks to the subsequent revision and although the demand slowdown in summer made the adjustment path towards customers more complex, the last part of the year highlighted a promising recovery. Cement sales volumes decreased by 17.6% with average prices level in local currency slightly down (-1.3%). Ready-mix concrete output maintained instead a positive trend (+6.1%), with prices down 1.1%. Net sales decreased from €101 million to €89 million, on which zloty appreciation positively accounted for €0.3 million.
Ukraine, with the help of international diplomacy, is trying to move towards normalization, but geopolitical tensions and uncertainties about possible developments continue to remain at an highly critical level. Notwithstanding the context of typical recession, with capital outflow abroad, depreciation of the currency, high inflation and decline in construction investment, the economy of the western regions, far away from the guerrilla areas, performed well. In fact, in 2014 our cement sales volumes were higher than in the previous year (2.3%), with prices in improvement (+3.1% in local currency). Net sales thus stood at €88 million vs. €124 million in 2013 (-28.9%). The translation of turnover into euro was extremely penalized by the depreciation of the local currency (-€41.5 million).
In Russia, during the last months of the year, the economic and financial scenario rapidly deteriorated, due to the sharp drop in crude oil prices, the collapse of the ruble and the sanctions imposed by western countries. Inflation continued to be rampant (+11.4%) due to the currency depreciation and the increase in prices of foodstuffs, following the decision to block imports from the main mature countries. In December the central bank implemented the strongest rise in interest rates ever decided, bringing the reference rate to the maximum level since the 1998 crisis (17%). Consequently GDP growth for 2014 contracted significantly (+0.6%). The construction sector showed a decreasing trend, with cement domestic consumption breaking however the record realized in 2013. The slowdown of deliveries occurred in the last months of the year caused total cement sales to come in at the same level as in 2013 (-1.4% at constant scope), with average prices in local currency higher by 2.7%. The category of oil well cements, used in the extraction industry, posted an unfavorable variance equal to -10.2%. Shipments benefited from the positive contribution of the new terminal in Omsk and moreover, starting from December, the full cycle plant in Korkino, acquired from Lafarge, entered the consolidation scope. Net sales stood at €210 million vs. €249 million in 2013 (-15.6%). The depreciation of the local currency had a negative impact of €42.7 million; like for like, net sales would have increased by 0.6%.
United States of America
In the third quarter GDP growth dynamics were higher than expected (+5.0% on an annual basis) and continued to expand in the fourth quarter, thanks to the support of domestic demand. Job growth was well set and unemployment rate stood steadily below 6%. Consumer price inflation, which was also affected by the fall in prices of raw materials, in November decreased to 1.3%. Special stimulus to growth in construction investment came from the commercial segment and the good performance of residential building, while public spending in infrastructure was still slightly declining. Our hydraulic binders sales rose by 9.5% compared with 2013, with a growth development supported by both the Midwestern and the Southwestern regions of the country. Also ready-mix concrete output, mainly located in the South-West, kept up with demand increase (+9.3%). Selling prices trend in local currency continued to be favorable for cement (+6.7%) and even more remarkably for ready-mix concrete (+12.3%). Overall net sales stood at €856 million, up 17.3% from €730 million in the previous year. Foreign exchange had no material impact, since the dollar average rate of exchange was the same as in 2013.
Mexico (valued by the equity method)
The country entered a phase of stronger economic expansion, with a forecast of satisfactory GDP growth (+2.2%) from the previous year. Public spending in infrastructure, included in the development plan 2013-1018, starts showing its positive effects on building materials demand. Cement volumes of the associate Corporación Moctezuma showed a favorable and consistent trend throughout 2014 with average prices in local currency some points higher than in the previous year. Ready-mix concrete output posted a slight decline, but prices were on the rise, following a new strategic positioning and reduction of the active batching plants. With reference to 100% of the associate, net sales stood at €520 million (+11.3%); at constant exchange rate net sales would have increased by 15.8%.
Based on the preliminary information available, we expect that the consolidated financial statements for the year 2014 will close with a recurring Ebitda in improvement with respect to last year, and in absolute value slightly over €400 million, in line with the forecast already disclosed to the market on the occasion of the interim report for the first nine months.
The Board of Directors for the approval of the statutory and consolidated financial statements is scheduled to meet on March 27, 2015.
The manager responsible for preparing the company’s financial reports, Silvio Picca, declares, pursuant to paragraph 2 of Article 154 bis of the Consolidated Law on Finance, that the accounting information contained in this press release corresponds to the document results, books and accounting records.
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