Interim results at June 30, 2012
Good recovery of sales volumes in the United States and sound trend in Russia and Mexico; enduring difficulties of construction industry in Italy and weakness in Central Europe
Favorable price effect in almost all markets and slowdown of inflation from energy costs
Net sales at €1,351 million (€1,339 million in 2011); Ebitda at €197 million (€183 million in 2011)
Outlook of operating results similar to the previous year confirmed for full year 2012, with contribution from geographical areas partially different from initial assumptions
| || |
|Cement sales||m ton||13.1||13.4||-2.6|
|Ready-mix sales||m m3||6.6||7.4||-11.0|
|Consolidated Net profit||€m||3.3||-0.3||n.s.|
|Jun 12||Dec 11||change|
The Board of Directors of Buzzi Unicem met on August 3, 2012 to examine the interim financial report as at June 30, 2012.
The world economy, after a first quarter of expansion at a moderate pace, from spring onwards slipped again. Prospects of recovery were actually hampered by the ongoing sovereign debt crisis in Europe and by the uncertainty on the US budgetary policy. In the Eurozone, GDP stagnated, although with differing intensity in the various countries: slight growth in Germany, stability in France, decrease in Spain and Italy. In the United States of America the positive contribution of net exports and a more sustained consumption dynamics balanced the weaker public spending and the investments slowdown while in Japan production activity boomed. The slackness of demand in advanced countries caused a slowdown also in the major emerging economies: rates of growth sharply shrank in China, India and Brazil. Russia fared better, favored by a good trend in the energy sector. Inflationary pressure mitigated, reflecting the weakness of the current cyclical phase and the decrease in the commodity prices. Futures contracts implicit indications show that oil price in the second half of the year should stay around the levels recorded in July. Mature countries’ GDP growth estimates for the current year remain at around 1.4%, slightly lower than in 2011 and in the emerging countries growth is expected to fall under 6%. The tensions on the financial markets in the Eurozone, which had relaxed in the first months of the year, intensified again as from April and the increased risk aversion continued to squeeze the yields of the “safest” countries’ government bonds. Given the high levels of overcapacity, the risks of new slowdowns in economic activities and the restrained inflation, the advanced countries’ central banks increased their recourse to expansionary monetary policies. In a scenario of slow reduction of public and private debt, still underway in mature countries, the main risks for the global economy growth derive from the uncertainties on the governments’ cohesion policy in orienting the European governance reform and adjust the crisis management mechanisms in order to cope with the negative spiral among sovereign risk, fragility of banking systems and growth.
Net sales posted in the first six months were up 0.9% to €1,350.9 million from €1,339.4 million in H1-11 while Ebitda amounted to €197.2 million vs. €183.1 million (+7.7%). Selling prices in the first half of 2012 were higher than in the same period a year earlier in all geographical areas of operations, except for a slight decrease in Luxembourg and Poland. The favorable price effect, the recovery of volumes in some key markets and the stabilization of energy cost allowed for an improvement in operating profitability. The weakening of the euro against the main functional currencies of the consolidated companies brought to a positive foreign exchange effect on net sales and Ebitda.
Operating and financial results
In the first six months of the year, group’s cement volumes at 13.1 million tons were down 2.6% from the same period a year earlier. Ready-mix concrete output decreased to 6.6 million cubic meters (-11.0% vs. 2011).
Consolidated Ebitda increased by 7.7% to €197.2 million from €183.1 million in 2011. The 2012 figure includes non-recurring income of €7.7 million (€7.1 million in 2011). Net of this amount, Ebitda increased by 13.4 million (+7.6%). Foreign exchange fluctuations positively impacted by €2.0 million mainly thanks to the strengthening of the dollar which together with the revaluation of Russian ruble and Ukrainian hryvnia more than offset the weakness of the other currencies. Changes in the scope of consolidation accounted for a slight increase (€0.3 million). Like-for-like, Ebitda would have increased by 6.4%. Ebitda to sales margin improved in the United States, Eastern Europe and Mexico while in Central Europe it remained at a lower level than in 2011 although the second quarter was aligned with the previous year’s same period. In Italy, where trading difficulties became greater and greater, operating results were negative. After amortization and depreciation for €113.2 million (€120.7 million in H1-11), Ebit came in at €84.0 million (€62.5 million at June 2011). Profit before tax stood at €22.0 million vs. €16.1 million in H1-11 (+36.3%), after net finance costs of €62.2 million (€46.0 million in 2011) and a negative contribution of €0.1 million from the associates accounted for under the equity method. Net profit for the period, which was influenced by a more favorable average tax rate, increased from €11.9 million to €18.1 million (+52.2%), €3.3 million thereof being the profit attributable to owners of the company (vs. a loss of €0.3 million in 2011).
Cash flow reached €131.3 million vs. €132.6 million at June 2011. Net debt as at 30 June 2012 amounted to €1,159.6 million vs. €1,143.1 million at 31 December 2011. In the first six months, the group paid out dividends for €28.8 million, €10.3 million of which by the parent company and undertook capital expenditures for a total of €72.4 million, €18.9 million thereof for the completion of capacity expansion projects.
Cement and clinker volumes, exports included, shrank by 23.0% from H1-11, in line with the decline of domestic consumption. Selling prices strengthened thanks to the price list increase applied at the beginning of the year and reported a 20.9% improvement over H1-2011. Ready-mix concrete reported a 24.8% decrease in sales volumes, with prices up 5.6%. Overall net sales came in at €245.7 million, down 15.3% from €290.2 million in H1-11. Fuel cost showed a favorable progressive trend from the beginning of the year while the cost of electric power surged. The first half 2011 included other operating revenues equal to €13.5 million deriving from the sale of CO2 emission rights which, based on the output expected, were estimated to be surplus to requirements. Gross of this income, Ebitda decreased from €6.9 million to -€1.3 million, with an Ebitda to sales margin turned negative.
In Germany, cement volumes sold decreased by 9.4% from H1-11, with prices slightly up (+1.6%). After a start of the year penalized by very cold temperatures, the second quarter showed an upward trend in cement demand, in line with that of the same period a year earlier. Ready-mix concrete sector recorded an output decrease of 3.6%, with prices showing a downward trend. Consequently overall net sales decreased to €286.0 million from €308.3 million in 2011 (-7.2%). During the first half of the year, the company realized other operating revenues equal to €1.8 million deriving from the sale of CO2 emission rights which, based on the output expected, were estimated to be surplus to requirements (€3.0 million in 2011). Fuel cost increased by 2% while electric power one was down 0.6%. Ebitda decreased to €30.1 million from €44.5 million in 2011.
In Luxembourg, after an adverse seasonality in the early months of the year, the second quarter showed a decrease of shipments of around 4% from the same period of 2011. In the six months, cement and clinker volumes sold, including internal sales, decreased by 10.3%, with slightly lower average unit revenues. Net sales came in at €54.0 million, down 10.5% from €60.4 million in H1-11. Ebitda dropped from €21.3 million in 2011 to €6.2 million. The 2011 figure, however, included other operating revenues equal to €4.9 million deriving from the sale of CO2 emission rights which, based on the output expected, were estimated to be surplus to requirements, and other non-recurring income for €7.1 million relating to gains on disposal of an investment property.
In the Netherlands, volumes sold totaled 0.42 million cubic meters of ready-mix concrete, in sharp decline from the previous year, with net sales amounting to €47.0 million (€58.1 million in H1-11). Ebitda decreased from €1.8 million to -€1.7 million, with Ebitda to sales margin turned negative (+3.1% in 2011).
In the Czech Republic and Slovakia, cement volumes, including exports to Poland, decreased by 17.4% from the same period a year earlier, while average selling prices in local currency slightly improved (+0.6%). Also the ready-mix concrete sector confirmed a significant decline in volumes (-12.1%) with prices lower by 3.8%. Overall net sales, also penalized by a weaker koruna, decreased by 20.2%, from €80.3 million to €64.1 million, while Ebitda stood at €7.9 million vs. €15.0 million in H1-11 (-47.3%). Electric power cost showed a sizeable hike (+12.3%) while fuel increase was less marked (+2.3%). Ebitda to sales margin dropped from 18.7% to 12.3%.
In Poland cement sales volumes were lower than in 2011 (-6.8%). An even more marked decline was reported in the ready-mix concrete output (-24.6%). Cement selling prices showed signs of softness (-1.6%) while ready-mix concrete ones strengthened by 1.1%. Net sales in euro came in at €53.1 million, down 19.0% from €65.6 million in 2011. The trend of energy factors’ cost was favorable with fuel and electric power price down by around 2%. Ebitda decreased by 34.4% to €9.9 million vs. €15.0 million in H1-11 with Ebitda margin declining from 22.8% to 18.6%.
In Ukraine, in the first six months, cement volumes sold increased by 9.0% in a very favorable price environment (+22.0% in local currency). Net sales and Ebitda increased from €42.4 million to €60.8 million (+43.3%) and from €1.0 million to €4.4 million respectively. The full utilization of the new equipment to switch from natural gas to coal made it possible to mitigate the high inflation rate which characterized fuel (+19%) and electric power (+24%).
In Russia volumes sold increased by 17.3% from H1-11, with prices in local currency on the rise (+15.3% HoH). Net sales were up 40.2% from €75.1 million to €105.4 million while Ebitda stood at €41.2 million from €20.5 million in 2011 (+100.5%). The modest ruble revaluation (+1.1%) had no sizeable effect on results translation into euro. Russian operations confirmed an Ebitda to sales margin at the top level within the group (39.1%) and in improvement from the previous year (27.3%), also thanks to a smoother running of the new dry-process production line at Suchoi Log.
United States of America
Cement volumes, after the buoyant Q1-12 start, favored by mild weather conditions, kept a good pace of growth and at the end of the six months posted a remarkable increase (+16.3%). Ready-mix concrete output was virtually unchanged from the previous year (+1.1%). Cement selling prices in local currency rose by 3.4%. The announcements by the producers were accepted by the customers thanks to a higher than expected demand at the beginning of the year and quite conspicuous backlog. Overall net sales came in at $418.8 million, up 15.3% from $363.3 million in H1-11 and Ebitda increased to $65.7 million (+197.0% from $22.1 million in 2011). Foreign exchange effect was favorable; consequently, translated into euro, overall net sales increased by 24.8% from €258.9 million to €323.1 million and Ebitda was up by €34.9 million, from €15.8 million to €50.7 million (+221.5%). Net of non recurring items, consisting of €7.7 million gains on disposal of properties, Ebitda improved by €27.2 million from 2011. Volumes growth, prices improvement and virtually stable energy factors had a major impact on recurring Ebitda to sales margin, which jumped from 6.1%.% to 13.3%.
Mexico (50% consolidation)
Cement volumes sold by the associate Corporación Moctezuma increased by 9.9% and ready-mix concrete output improved by 9.4%. Cement prices confirmed the favorable trend, rising by 6.3% in local currency and equally positive was the development for ready-mix concrete ones which were up 3.9% from H1-11. Net sales and Ebitda in local currency showed a progress of 14.5% and 23.8% respectively. The devaluation of the Mexican peso negatively impacted the results translation into euro. Net sales increased by 11.2%, from €118.3 million to €131.6 million and Ebitda was up 20.2%, from €41.4 million to €49.8 million. Ebitda to sales margin was equal to 37.8% vs. 35.0% in 2011, thanks also to the price/volume effect and the decrease of the cost referred to fuel consumption.
The first half of 2012 featured an unexpected recovery in the United States, a confirmation of profitability improvement in the emerging economies, especially Russia and Mexico but also a situation weaker than foreseen in Central Europe which has as comparison base a very positive year 2011. Very difficult were the conditions in Italy, where construction investments are quickly getting back to mid ‘70s levels. All in all, energy factors inflation cooled down, although each single market shows different and sometimes diverging development between fuels and electric power.
The trend of volumes and prices in H2-12, as compared to the indications set forth at the beginning of the year, will likely be weaker in Italy, Central Europe and Poland, more positive in the United States of America and Russia and virtually unchanged in the Czech Republic, Ukraine and Mexico.
External conditions show some opportunity for the improvement of production costs (raw materials, fuels) which however will not be spread over all geographical areas of group’s operations. Our commitment is constantly addressed to contain costs and attain the most effective management structure, especially where operating profitability is at the trough.
Based on the above considerations, we can confirm, for the full financial year 2012, the forecast of operating results similar to the previous year’s ones, with a contribution from our geographical areas partially different from initial assumptions.
Senior Notes and Bonds on maturity
In the period from January 1 to June 30, 2012 no new bonds were issued.
In the 18 months subsequent to June 30, 2012, the following repayments of bond principals shall be effected:
- on May 29, 2013, $80.0 million referred to the Senior Notes Series B issued by the subsidiary RC Lonestar Inc. in 2002;
- on September 12, 2013 €30.0 million referred to the Senior Notes Series C issued by the subsidiary RC Lonestar Inc. in 2003.
The mezzanine loan issued by the subsidiary Dyckerhoff AG for a principal amount of €200.00 million will be due in December 2012.
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.
Investor Relations Assistant
Phone. +39 0142 416 404
Buzzi Unicem 1H-12 results will be illustrated during a conference call to be held today, Friday August 3, at 5:00 pm CEST. To join the conference, dial +39 02 8020911.