Financial year 2015 preliminary results
Cement volumes at 25.6 million tons (+1.7%); ready-mix concrete at 11.9 million cubic meters (-0.9%)
Consolidated net sales equal to €2,662 million (€2,506 million in 2014), up 6.2% (+1.0% like for like)
Cement and clinker
|Dec 15||Dec 14||Change|
The Board of Directors of Buzzi Unicem SpA met on 10 February 2016 to examine the preliminary figures for the financial year 2015.
During 2015, group’s sales in the geographical areas of presence showed a favorable variance in the United States of America, due to the strengthening recovery, and in Eastern Europe, achieved thanks to the additional contribution from the Korkino cement plant in Russia and the recovery of the market positioning in Poland. Conversely moderate decreases were posted in Italy and Central Europe.
After a sharp drop during the first six months, the recovery in international trade recorded in the second half of the year was weaker and less than expected, especially in mature countries and, for 2015 as a whole, it posted a modest growth trend, about half of that previously estimated.
During the third quarter, economic activity was stronger in mature countries, above all outside the euro area; the growth pace was higher than expected in the United States despite signs of a slowdown in the last months of the year, starting from manufacturing. In the Eurozone growth was frailer, with the rapid weakening of the drive from exports, which was gradually offset by the contribution from internal demand.
The main emerging economies showed a rather weak economic situation, although with disparate trends between countries: in China the signs of slowdown were sharper, with a further shifting towards consumption and services and a resulting deceleration in investment and imports; in Brazil the recession phase deepened while in Russia the contraction in output was less evident and India underwent a more marked expansion phase.
In December oil prices turned weaker again; by the end of the first ten days of January 2016 they fell below the lowest level since 2008, with futures contracts indicating expectations of a very limited rise in prices over the next months. Consumer price inflation remained low in all the main advanced economies. The price increase was moderate also in China, while the strong devaluation of the local currencies was the main cause of a higher than 10% inflation in Russia and Brazil.
In Italy the boost from exports weakened and the recovery is proceeding gradually; the favorable cyclical conditions in manufacturing were flanked by signs of an expansion in services and, following a protracted recession, of stabilization in the construction sector. In the United States, where expansion continued, the Federal Reserve initiated the rise of the official interest rates, motivated by the significant improvement in the labor market, without negative repercussions, and the construction sector confirmed a positive growth, especially in the commercial and residential category. In Germany construction investments were back to normal, after the increase of last year. The trends of Eastern European countries confirmed diversified trading conditions: in Russia the recession situation caused a decrease in the construction activity level with a resulting contraction in cement consumption; in Poland, where the economic growth and the investment level in the construction sector continued to be favorable, our sales showed a regular and positive trend; in the Czech Republic the phase of economic recovery continued with an improvement of production levels for the building industry; in Ukraine finally, in a context of strong recession and decrease in investments, the activity level in the western regions (where our group operates) maintained a better trend compared with the eastern area.
Cement sales of the group totaled 25.6 million tons, +1.7% compared to 2014. Ready-mix concrete output, equal to 11.9 million cubic meters, were slightly lower than the previous year (-0.9%). Consolidated net sales increased by 6.2%, from €2,506 to €2,662 million. Thanks to the strengthening of the dollar, which was partly offset by the devaluation of the Russian ruble and the Ukrainian hryvnia, foreign exchange fluctuations had a favorable impact of €101 million. Changes in scope were favorable for €29 million. Therefore like for like net sales would have increased by 1.0%.
Net debt as at 31 December 2015 amounted to € 1,030 million, down €33 million on €1,063 million at year-end 2014. The improvement of the net financial position was achieved thanks to cash flow from operations, although the project for the expansion of the Maryneal, TX cement plant required a capital outlay of €163 million during the year.
During summer months the economic activity was supported by the positive trend of domestic consumption that replaced the boost from exports, which are suffering from the weakness of demand in non-European countries. The consequent stimulus enhanced a GDP growth of just 0.2% in the third quarter and the same trend continued in the last quarter of 2015. The slightly positive contribution of manufacturing was coupled with a stronger recovery in services, together with more favorable signs in the real estate market. Investments presented signs of slowdown following a cumulative gain between the summers of 2014 and 2015, showing an uneven recovery. In particular construction investments for 2015 showed a further contraction in all segments except for the renovation of residential properties. In the year as a whole domestic cement consumption is estimated at approximately 19.3 million tons, -3.5% from last year and -59% from the 2006 all-time peak (negative variance for nine years in a row).
Our hydraulic binders and clinker volumes decreased by 2.3%, with an improvement in exports which has partly mitigated the domestic market decline. Selling prices posted a decrease of 3.7%, a slight recovery on the minimum which was achieved in summer. In the ready-mix concrete sector the sales trend was similar to the previous period (+1.2%) with stable prices (+0.2%). Overall consolidated net sales in Italy came in at €381 million, down 2.7% vs. 2014.
In Germany in the third quarter of 2015 GDP increased by 0.3%, driven by growth in domestic demand, which more than offset the weakening of investment and the slowdown in exports. The improvements in disposable income, the decline in unemployment rate and low inflation continued to support domestic demand in the last quarter of the year. The construction sector maintained an overall slightly positive trend. Our deliveries of hydraulic binders, although recovering at the end of the year, were penalized above all by the weaker oil-well cement demand; they closed with a decrease of 2.8%, with prices slightly down (-1.1%). Output volumes in the ready-mix concrete sector recorded a more marked reduction (-5.1%) with prices down (-1.3%). Overall net sales decreased from €603 million in 2014 to €574 million in 2015 (-4.9%).
In Luxembourg cement and clinker volumes sold, inclusive of internal sales, were affected by lower export and, thanks to some recovery during the last quarter, they contracted by 1.8% with stable average prices. In the ready-mix concrete sector output was considerably up (+16.3%), in a weak price environment. Overall net sales came in at €105 million vs. €106 million in the previous year (-1.1%).
In the Netherlands the signs of recovery in economic activity appeared in 2014 strengthened during 2015. Our ready-mix concrete sales increased clearly, while prices confirmed the levels of the previous year. Net sales revenue, also including the aggregates business, came in at €65 million, up from €58 million in 2014 (+11.4%).
In Poland the development of recovery is driven by the robust growth of domestic demand, due to the improvement of disposable income, a good trend of employment rate and low inflation. GDP growth is estimated at +3.5% in 2015. Construction investment continued to have a favorable trend and cement consumption in the country posted a slight increase. Our commercial activity for the whole of the year kept a steady development, in accordance with the geographical position and the potential rather than with the figures of last year. Cement volumes sold reported a 21.1% increase, however against a lower price level in local currency (-11.7%). Ready-mix concrete output also achieved a growing trend (+9.8%) in a scenario of always competitive prices (-3.1%). Net sales increased from €89 to €97 million (+8.7%), without exchange rate effect, thanks to the stability of the zloty.
In the Czech Republic the favorable trend in exports and domestic demand, together with the growth in investments, helped maintain a material GDP development, which is estimated to increase by 3%. Construction investments confirmed a good momentum. Our cement sales were in line with the good levels achieved in 2014 (+0.9%) with stable average prices in local currency (+0.1%). The ready-mix concrete sector, which also includes Slovakia, showed signs of improvement, with volumes up 3.0% and prices recovering (+2.1%). Consolidated net sales revenue increased from €134 to €136 million (+1.5%). The strengthening of the local currency positively impacted net sales by €1 million.
Ukraine, where latent regional tensions persist due to the geopolitical conflict, was affected by a strong recessionary environment, thus causing a significant GDP contraction (-11%) and inflation higher than 40%. The assistance plans of International Monetary Fund, European Union and United States of America are supporting the efforts made by the country to promote structural reforms and the return to balanced and sustainable economic conditions. Despite the difficult situation, our business operations had a quite regular trend; cement volumes sold were in line with the previous year (+0.6%) in a scenario of prices in local currency pushed upwards by the galloping inflation (+19.5%). Net sales thus stood at €70 million vs. €88 million in 2014 (-20.8%). The translation of turnover into euro was penalized by the depreciation of the local currency (-€37 million).
In Russia, the economic dip which was triggered by the effects of the sanctions, the drop in crude oil prices and the ruble depreciation resulted in a contraction of domestic demand, due to the reduction of real wages and the high inflation (approximately 15%), as well as the decline in investment because of business confidence weakening in the country. The most recent estimates for 2015 foresee a GDP decline of 4%. The construction sector suffered for the second year in a row from a serious contraction (-7%) which resulted in negative repercussions on domestic cement consumption. Our sales volumes, which benefited from the Korkino cement plant entering the scope of consolidation, were up 8.4% on 2014; like for like the volumes sold would have decreased by 14.3%. The category of oil well cements, used in the extraction industry, continued to show good resilience. Average prices in local currency did not change significantly (-1.0%); it should be remembered, though, that the average price of the products delivered by the Korkino cement plant is lower compared to the mix of the Suchoi Log plant. Net sales revenue stood at €167 million from €210 million of the previous year (-20.6%). The weakness of the ruble had a negative impact on net sales of €46 million; like for like net sales would have decreased by 12.5%.
United States of America
Economic activity in the third quarter strengthened more than expected and the upturn continued in the fourth quarter, but with a growth rate that was affected by some slowdown in manufacturing activity and investment. Domestic consumption, thanks to the sustained increased in employment rate, boosted recovery and, in the most recent calculations, GDP growth for the full year 2015 is estimated at 2.4%, in line with the levels of 2014. Consumer price inflation remained very low, at 0.5% in November (1.3% excluding energy and groceries). Significant improvements in employment pushed at the end of the year the Federal Reserve to abandon the zero interest rate policy adopted in December 2008. Investments in the construction sector showed a good growth overall (+6.1%), higher than in 2014, with particularly positive changes in the commercial and residential sector, and with infrastructure recovering. Our hydraulic binder sales rose by 2.4% thanks to the good performance in the Midwestern regions and despite a sharp contraction in oil well products deliveries. Ready-mix concrete output, mainly located in the South-West, decreased from last year (-5.2%). Selling prices trend dynamics in local currency was favorable, thus causing a +7.7% increase in the cement sector and a +9.7% rise in the ready-mix concrete one. Overall net sales stood at €1,109 million, up 29.5% from €856 million in the previous year. They were strongly favored by the strengthening of the dollar, with a contribution of €183 million.
Mexico (valued by the equity method)
The economic activity of the country, despite some external factors such as the drop in crude oil prices and the international trade slowdown limited its development potential, continued its expansion phase and GDP growth for 2015 is estimated at 2.4%, in line with the figures achieved in the previous year. Cement consumption in the country benefited from the first concrete effects of the 2014-2018 development plan for infrastructures, thus going beyond the previous record of 2012. Cement volumes of the associate Corporación Moctezuma was brilliant for the whole of 2015, with average prices in local currency improving from last year. Ready-mix concrete output showed a similar trend. With reference to 100% of the associate, net sales stood at €626 million (+19.9%). The Mexican peso maintained its value during the year: at constant exchange rate net sales would have increased by 19.7%.
The last quarter of the year was characterized by a dry and mild climate, both in Italy and in Central and Eastern Europe, thus allowing the construction activity to remain at levels above the seasonal average. Based on the preliminary information available, we expect that the consolidated financial statements for the year 2015 will close with a recurring Ebitda figure of approximately €470 million, therefore more favorable than 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 24 March 2016.
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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