Financial year 2020 preliminary results
Cement volumes at 29.3 million tons (+0.4%), ready-mix concrete at 11.7 million cubic meters (-3.1%)
Consolidated net sales equal to €3,222.4 million, in line with 2019 (€3,221.4 million) but +1.8% like for like
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The Board of Directors of Buzzi Unicem SpA met today to examine the preliminary figures for the financial year just ended.
During 2020, sales volumes of the group achieved the levels recorded in the previous year, thanks to the progress observed in the United States of America, which was supported by the strength of the demand, the marginal increase in Russia and the stability of shipments in Germany. These trends balanced the negative development in Eastern Europe and Italy, where, however, some recovery in cement consumption during the second half was registered.
The Covid-19 pandemic severely hit the world economy during 2020, causing an unprecedented recession during the first half of the year. The extraordinary economic policy response helped to cushion the impact of the contraction in international trade and, together with the loosening of the restrictive measures aimed at limiting infections, stimulated a rebound in demand during the summer, when the global economic activity recorded a higher-than-expected recovery. The recrudescence of the pandemic during the fourth quarter, particularly in the European Union and the United States, and the consequent reintroduction of the contagion containment measures resulted in a new slowdown, mainly concentrated in the advanced countries. These trends reflected on the prospects for economic growth in 2020, which foresee a decline in world GDP equal to 3.5% and a contraction in international trade of 9.6%.
In the United States of America, after the sharp slowdown in the second quarter, which caused a dramatic decline in the employment rate, the easing of containment measures as well as the immediate monetary and fiscal stimuli, intended to support households and businesses, allowed a significant recovery in demand and consumption during the summer months. However, in the third quarter GDP still remained below pre-pandemic levels.
In the Euro area countries, during the third quarter of 2020 GDP increased by 12.5%, after a cumulative loss of 15% in the first half of the year. GDP grew in all major economies, although it remained below the levels achieved prior to the spread of the pandemic. In the fourth quarter, on the other hand, GDP apparently showed a decline, despite the positive signs of the manufacturing sector, neutralized by the further weakening of the services.
In Italy, GDP in the third quarter showed a marked recovery, supported by both exports and domestic demand. However, in the last quarter, following the worsening of the epidemiological picture in the country, economic activity slowed down, hitting the tertiary sector with greater intensity and manufacturing activity only marginally.
As for the main emerging economies, in China in the third quarter the growth of economic activity further strengthened, exceeding the figures recorded prior to the health emergency. In Brazil and Russia, the effect of expansive fiscal and monetary policies, in addition to the relaxation of the restrictions aimed at containing the infections, partially mitigated the contraction of economy that occurred during the first half of the year.
During the fourth quarter, oil prices began to rise again, reaching figures close to $50 per barrel, thanks to the overcoming of the uncertainty regarding the outcome of the American elections, the resilience of Asian demand and the encouraging signs deriving from the beginning of the vaccination campaigns on a global scale.
In the mature economies, financial conditions remained accommodating: the Federal Reserve, in December, announced that expansionary policies will continue until the targets of maximum employment rate and price stability are achieved, while the ECB reshaped the monetary policy instruments in an expansive sense, in order to maintain the favorable financing conditions.
Cement sales of the group amounted to 29.3 million tons, substantially stable (+0.4%) compared to 2019. Ready-mix concrete output, which stood at 11.7 million cubic meters, was down compared to the volumes of last year (-3.1%). Consolidated net sales for the financial year increased from €3,221.4 to €3,222.4 million (+0.4%). Exchange rates variances, mainly due to the depreciation of the ruble, the Ukrainian hryvnia and the dollar, particularly evident in the second half of the year, had an overall unfavorable impact of €69.2 million. Therefore, like for like net sales would have been up 1.8%.
Net debt at the end of 2020 came in at €241.6 million, down €326.2 million compared to €567.8 million at year-end 2019. The improvement of the net financial position compared to the level of the previous year was achieved thanks to the favorable trend in cash generated from operations and from the receipt of a €143 million dividend, referring to the disposal of all the assets belonging to the associate Kosmos Cement, already in the first quarter. The aforementioned net financial position includes the extraordinary dividend payable linked to the conversion of the savings shares, equal to approximately €144 million, which was already paid off at the beginning of February 2021.
Economic activity during the summer was better than expected: GDP in the third quarter increased by approximately 15.9%, supported by the recovery of exports and the soundness of domestic demand, following the easing of measures to contain infections. According to the most recent indicators, business slowed down during the fourth quarter due to the worsening of the epidemiological situation and the simultaneous introduction of new restrictive measures, which have a significant impact on the trade and services sector but only a marginal one on manufacturing. GDP for the whole of 2020 is expected to contract markedly (-8.8%), while inflation should be negative (-0.1%).
Activity in the construction sector showed a clear decline, due to the sharp decrease recorded during the first half following the forced lockdown of construction sites, and despite the positive dynamics observed in the second half of the year. The growth recorded in the third quarter, which is the result of the positive evolution in the public works sector and of the stability of the residential segment, was unable to offset the losses incurred in the previous quarters. Consequently, domestic cement consumption is estimated to decrease compared to the levels reached at the end of 2019.
Our hydraulic binders and clinker volumes, after a sharp decline in the first half, maintained a positive trend in the second part of the year, thanks to the strengthening of domestic demand, partially recovering the losses during the production and commercial lockdown. Average selling prices, for the whole of the year, showed a positive development. The ready-mix concrete sector posted a more evident contraction, despite a meaningful rebound occurred during the second half, with prices also improving.
Overall net sales in Italy stood at €501.1 million, down 0.7% compared to 2019. Like for like they would have been down 2.1%.
In Germany, after the sharp contraction in economic activity in the first half of the year following the outbreak of the Covid-19 pandemic, during the third quarter a marked recovery in GDP was recorded (+8.5%), supported by the upswing initially in the services sector and, afterwards, of manufacturing, favored both by the relaxation of the restrictive measures aimed at containing infections and by the fiscal stimulus packages launched by the government, which were allocated to support businesses, employment and consumption. Net exports, which were particularly weak in the first half due to the economic difficulties also faced by the main trading partners, despite the significant recovery shown during the summer months, at the end of the third quarter were still significantly lower than the levels prior to the pandemic. In this context of slowdown in investments, the construction sector however maintained some stability, supported by the residential segment.
The second wave of the pandemic, starting from October, has slowed down the recovery of the economy one more time. Based on these dynamics, the most recent estimates for 2020 forecast a decline in GDP equal to 5.5%, due to the weakness of domestic consumption, investments and exports, while inflation is expected at very low levels (+0.4%).
Our shipments of hydraulic binders, after a slight decline in the first part of 2020, during the second half of the year showed good development, associated with a favorable variance of average selling prices, which allowed to recover the disadvantage accumulated in the first six months. The ready-mix concrete sector showed an increase in production compared to 2019, thanks also to the additional contribution of the plants acquired last year in Düsseldorf, with prices also strengthening.
At year-end 2020, overall net sales thus came in at €717.0 million, up 5.5%, compared to €679.6 million in 2019. Like for like they would have been up 4.7%.
In Luxembourg and the Netherlands, during the second half 2020, cement and clinker deliveries were unable to overcome the cumulative negative variance, due to the interruption of the production and commercial activities of our plant during the first six months of the year, closing with an unfavorable change compared to the levels of year-end 2019, associated with only slightly higher average selling prices. The ready-mix concrete sector, despite a partial recovery signal shown during the last quarter, closed the year also down, albeit with prices improving.
Overall net sales of 2020 amounted to €191.7 million, down 0.4% compared to €192.5 million of the previous year.
In Poland, after the marked contraction of economy in the first six months of 2020 also following the introduction of restrictive measures to contain the Coronavirus disease, during the third quarter industrial production strongly recovered, supported by the increase in public spending and the upswing of domestic demand and exports. Nevertheless, the introduction of new restrictive measures following the resurgence of the pandemic, starting from October, weakened domestic demand as well as business and consumer confidence again. The most recent estimates indicate a GDP contraction equal to 3.6%, with inflation expected at around 3.3%. The construction sector showed a moderate decline, with the residential and commercial demand being particularly weak, while investments in infrastructure maintained a positive trend.
Cement volumes sold by the group closed 2020 down from the levels reached in the previous year, despite an overall positive second half, which allowed to partially recover. On the other hand, the average level of selling prices, in local currency, improved markedly. Ready-mix concrete output recorded a more evident decline, with selling prices in local currency slightly increasing.
Following these market dynamics, net sales amounted to €117.8 million, down 4.8% compared to €123.8 million in 2019. It should be remembered that the weakening of the zloty (-3.4%) led to a negative exchange rate effect: at constant exchange rate, net sales would have been down 1.6%.
In the Czech Republic, after the slowdown in the first half, manufacturing activity and consumption recovered rapidly during the summer, thanks to the rebound of exports and domestic demand, in addition to government initiatives to support employment. However, due to the worsening of the epidemiological picture starting from September, which led to the introduction of new restraining measures, the high uncertainty and further weakening of household and business confidence abruptly interrupted the economic recovery in place. Based on these dynamics, for the entire year 2020 a GDP decline of 6.5% is estimated, with inflation expected to be around 3.3%. The level of construction investments showed a modest slowdown, due to the weakness of the residential and commercial sectors, while infrastructure investments maintained a positive trend.
Cement sales, after the slight progress recorded in the first six months of the year, contracted sharply during the second half, closing below the levels reached at the end of 2019. However, the trend of average prices in local currency remained bullish. The ready-mix concrete sector, which also include Slovakia, recorded even weaker production levels. Nevertheless, the price effect was favorable.
Consolidated net sales, on which the depreciation of the Czech koruna had a negative impact (-3.1%), amounted to €159.5 million, down 5.2% compared to 2019. At constant exchange rate the turnover would have been down 2.7%.
In Ukraine, the sharp slowdown of the economy in the first half of the year, resulting from the outbreak of the pandemic and the severe containment measures adopted, was followed, in the summer months, by a partial recovery of domestic and foreign demand, which favored the progress of the manufacturing and mining businesses, particularly weak during the first part of 2020. During the last quarter, due to the worsening of the epidemiological picture and the difficulties of the health system in managing Covid-19, economy slowed down again. Based on these dynamics, for the entire year 2020, GDP is estimated to decline by 7.2% while the inflation rate is expected at +3.2%.
Cement sales, despite the good performance recorded in November and December, only partially recovered the disadvantage accumulated in the first half, closing 2020 with a sharp decline compared to the levels reached the previous year, penalized by the pandemic emergency and by the increase in imports from Turkey, particularly intense in the South of the country. The defense of the market share entailed a slight decrease of the average price level. Ready-mix concrete output showed more pronounced weakness, accompanied by selling prices also decreasing.
Net sales stood at €116.1 million, down from €131.9 million recorded in 2019 (-12.0%). The depreciation of the local currency (-6.7%) had a negative impact on the translation of the turnover into euro. At constant exchange rate net sales would have been down 6.1%.
In Russia, the sharp economic contraction in the first half of the year, caused by the rapid spread of the pandemic in the country and by the consequent introduction of containment measures regarding mobility restrictions and lockdown of production and commercial activities, led to the collapse of domestic consumption, with a particularly negative impact on the services sector. Afterwards, in the second half of the year, a partial recovery of business was registered, driven by the fiscal stimulus measures introduced by government authorities to sustain employment, households and businesses, as well as by the significant recovery in global demand for hydrocarbons, while investments remained depressed. However, GDP change for the whole of 2020 is estimated at -3.6%, due to the limited growth in domestic consumption and the negative trend in public investments which, after benefiting from the new infrastructure modernization and improvement plans at the start to the year, slowed down sharply following the outbreak of the pandemic and the redefinition of the priorities on the use of resources, in favor of support plans for families and businesses.
Cement sales, after a visible decline in the first half due to the difficulties linked to the outbreak of the pandemic, in the second half of 2020 showed a positive trend, which was particularly evident in the fourth quarter, thanks also to favorable weather conditions. Unit selling prices, in local currency, confirmed the positive performance already recorded in the first half of the year. Despite the recovery in oil prices starting from June, the demand for special oil-well cements remained weak.
In 2020 net sales stood at €195.8 million, down compared to €214.5 million of last year (-8.7%). The significant weakening of the ruble (-14.2%) negatively impacted the translation of turnover into euro. At constant exchange rates, net sales would have been up 4.2%.
United States of America
In the second quarter of 2020 economic activity recorded the strongest contraction since the postwar period, characterized by the loss of over 20 million jobs. During the summer months, with the relaxation of the restrictive measures introduced in spring, aimed at slowing down the spread of infections, the economy showed a clear rebound. The improvement of the employment rate fueled the rapid recovery of consumption and the fiscal and monetary stimuli guaranteed some support to families and businesses. Starting from September, a new worsening of the epidemiological framework led to the reintroduction of restrictive measures, mainly concerning the closure of schools and businesses open to the public, which, however, thanks to their more local nature, had a lesser impact on the economy. Based on these dynamics, the change in GDP for the entire year 2020 is estimated at -3.4%, while inflation is expected to be around +1.5%. Construction investments are expected to be stable compared to the previous year, supported by the development of the residential sector and the stabilization of infrastructures, while the contraction in the non-residential segment was marked.
Our sales of hydraulic binders, thanks to generally favorable weather conditions, particularly in the winter months, and to the soundness of demand, during the second half of the year confirmed a positive development, closing the year with a good favorable variance compared to 2019. Selling prices, in local currency, only slightly improved in the year as a whole. Ready-mix concrete output, mainly located in Texas, during the second half showed some weakness, which was already noted during the first six months, closing the year down compared to 2019, with selling prices, in local currency, slightly increasing.
Overall net sales amounted to €1,260.6 million, up 1.5% compared to €1,242.5 million in 2019. The depreciation of the dollar (-2.0%), particularly evident in the second part of the year, had a negative impact on the translation of the results into euro. At constant exchange rates net sales would have been up 3.5%.
Mexico (valued by the equity method)
After the profound contraction in the second quarter, attributable to the dramatic worsening of the epidemiological situation which required the introduction of severe social distancing measures and the closure of sectors deemed non-essential, the economic activity showed signs of gradual recovery starting from the summer quarter. Through the easing of the restriction measures, a recovery was recorded both of domestic demand, however penalized by the weakness of the services sector, and of exports in the manufacturing industry, which is typically addressed to the United States. In this context, the GDP contraction for 2020 is estimated at -8.5%, while inflation is expected at +3.4%.
Sales of the associate Corporación Moctezuma, during the second half of the year, recorded a clear strengthening, thanks to the significant recovery of the activity in the sector of public works, closing 2020 clearly progressing compared to the previous year, with prices, in local currency, which did not show major changes. Ready-mix concrete sales, on the other hand, confirmed the weakness already recorded in the first half, closing the year clearly declining compared to 2019, with prices in local currency down.
With reference to 100% of the associate, in 2020 net sales came in at €573.8 million, down 3.3% on the previous year, with the depreciation of the Mexican peso (-13.7%) that unfavorably impacted the translation of the results into euro: at constant exchange rate net sales would have been up 10.0%.
Brazil (valued by the equity method)
The wide spread of the Covid-19 pandemic and the resulting containment measures aimed at limiting the growth of infections, including interpersonal distancing, limitations to mobility, closure of schools and of the businesses deemed non-essential, marked very negatively the country’s economy during the first six months of the year. However, starting from the third quarter, thanks to the easing of restrictive measures and very accommodative fiscal and monetary policies intended to support the most difficult groups of the population, there was a marked recovery in economic activity, both in manufacturing and in services, which could limit, at least partially, the impact of the pandemic on unemployment and, therefore, on the country's economic system. In this context, GDP for the year 2020 is estimated to contract by -4.5%, while inflation is expected to stand at 2.7%.
In the second half of 2020, cement shipments of our joint venture confirmed the positive momentum already recorded in the first six months, closing the year with a marked increase compared to the levels reached in 2019, with selling prices, in local currency, clearly improving.
With reference to 100% of the associate, net sales amounted to €139.1 million, slightly progressing (+3.2%) compared to €134.7 million of the previous year. The steep depreciation of the Brazilian real impacted on the translation of the results into euro (-33.6%): at constant exchange rates, net sales would have been up 37.9%.
The weather conditions of the last quarter were overall favorable. Thanks to the experience gained in the first half of the year, the second wave of the pandemic was managed by governments in a less penalizing way, with reference to both healthcare systems and economic activity. In the October-December period our sales volume exceeded the level of the previous year, particularly in the United States of America, Russia and Italy. The price level remained sound and the rise in energy factors had, for the moment, a limited adverse impact on production costs.
Based on the preliminary information available, we expect the consolidated financial statements for the year 2020 to close with a recurring Ebitda of about €780 million.
Alternative performance measures
Buzzi Unicem uses in its financial disclosure some alternative performance measures that, although widespread, are not defined or specified by the accounting.
Pursuant to Consob Communication no. 92543/2015 and the guidelines ESMA/2015/1415 set out below is the definition of the measure which has been used in this disclosure.
Net debt: it is a measure of the capital structure determined by the difference between financial liabilities and assets, both short and long term; under such items are included all interest-bearing liabilities or assets and those connected to them, such as derivatives and accruals.
The manager responsible for preparing the company’s financial reports, Elisa Bressan, 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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