Interim results at June 30, 2014
Cement sales quite stable in the second quarter and higher than in 2013 in the first half (+5.6%); Italian market still declining while Ukraine and Russia remain positive despite political tensions; building activity resilience confirmed in the USA
Price effect favorable in local currency, but penalized by foreign exchange; operating costs control thanks to positive fuel trend, streamlining and productivity improvement projects
Net sales at €1,181 million (€1,150 million in 2013); Ebitda at €139 million (€109 million in 2013)
Net loss due to complete write-down of goodwill in Ukraine, following the worsening of the country risk
Second half expected with operating profitability similar to 2013; for full year 2014, outlook of recurring Ebitda growth above the previous year and slightly over €400 million
|Cement sales||m ton||11.7||11.0||+5.6|
|Ready-mix sales||m m3||5.9||5.4||+8.5|
|Net profit (loss)||€m||(20.8)||(34.9)||n.s.|
|Consolidated net profit (loss)||€m||(22.6)||(37.3)||n.s.|
|Giu 14||Dec 13||change|
The Board of Directors of Buzzi Unicem met on August 1, 2014 to examine the interim financial report as at June 30, 2014.
The word economy, after a deceleration at the beginning of the year, regained strength, especially in the United States, where expansion resumed, and in China, where the slowdown came to a halt. In the Eurozone growth was moderate and uneven among the countries, with inflation at rock bottom and below expectation, as a consequence of the weakness of the cyclical recovery and the large margins of unused production capacity. In Germany economic activity in the first quarter increased, thanks to a rise of consumption and investment, influenced also by the favorable weather conditions, but went back to low levels in the subsequent months. In Italy growth was still struggling to take off, also due to the prolonged slackness of the construction sector. In the United States, after the sharp contraction occurred in the first months of the year, caused by temporary factors, economic activity began to expand again during the second quarter, thanks to export recovery and fast growing employment. In Russia, capital outflows and confidence decline, following the worsening of the Ukraine crisis, led to a slowdown in investment and a marked deceleration of GDP growth. After an initial contraction of world trade, as a consequence of the decline in exports from the United States, signs appeared of a recovery of business although at a moderate pace. In the advanced countries inflation remained low and crude oil price, influenced by geopolitical tensions, reflected increases in the implicit trends of future contracts over the one-year horizon. Monetary policies in mature economies remained accommodative and for the first time the interest rate applied on the bank deposits with the ECB turned negative to enhance liquidity circulation and counter euro appreciation.
Net sales posted in the first six months were up 2.7% to €1,180.7 million from €1,149.7 million in H1-13 while Ebitda increased to €138.5 million vs. €108.5 million (+27.7%). The trend of prices in local currency was overall favorable, apart from a slight decline in Germany and a more marked one in Italy. Volumes effect was positive in all geographical areas except for Italy where they were stable and Poland which closed the six months in decline due to a poor performance in the second quarter. Foreign exchange effect was material and negatively impacted net sales for €53.0 million and Ebitda for €11.4 million.
Operating and financial results
In the first six months of the year, group’s cement volumes at 11.7 million tons were up 5.6% from the same period a year earlier. A progress was reported in all geographical areas, except for Poland and Italy. Ready-mix concrete output increased to 5.9 million cubic meters (+8.5% vs. 2013).
Consolidated Ebitda increased by 27.7% to €138.5 million from €108.5 million in 2013. The 2014 figure was penalized by non-recurring costs for €7.0 million vs. €5.2 million in H1-13. Net of these amounts, Ebitda would have increased by €31.8 million (+28.0%). Foreign exchange fluctuations had a negative impact, due to the weakness of the US dollar, the Russian ruble and the Ukrainian hryvnia. Like-for-like, half-yearly Ebitda would have increased by 37.6%. In the first six months Ebitda to sales margin improved by over two percentage points, thanks to the contribution of the United States and Eastern Europe. In Central Europe margins remained similar while in Italy operating loss shrank. After depreciation and impairment charges for €124.4 million (€105.4 million in H1-13) of which €30.9 million referring to goodwill of the CGU Ukraine, Ebit came in at €14.1 million (€3.1 million at June 2013). Profit before tax was negative for €11.1 million vs. a negative of €26.0 million in H1-13, after net finance costs of €47.0 million (€47.6 million in 2013) and a contribution of €21.8 million from the associates accounted for under the equity method (€18.5 million in 2013). Income statement for the period closed with a net loss of €20.8 million vs. a net loss of €34.9 million in H1-13. The profit attributable to owners of the company remained in negative territory and amounted to a loss of €22.6 million vs. a loss of €37.3 million in 2013.
Cash flow was equal to €103.6 million vs. €70.5 million at June 2013. Net debt as at 30 June 2014 amounted to €1,127.5 million, up €30.3 million vs. €1,097.2 million at 31 December 2013. In the first six months, the group paid out dividends for €12.1 million, €10.3 million of which by the parent company, and undertook capital expenditures for a total of €82.3 million.
In the first six months, cement and clinker volumes, exports included, were virtually unchanged from H1-13 (-0.1%). The decline in domestic consumption was offset by higher sales volumes of clinker. Selling prices, although not dissimilar from the values of 2013 year-end, posted an overall average decrease of 6.9%, largely due to a different sales mix. In the ready-mix concrete sector output increased by 9.3% with prices rather weak and in decline by 7.8%. In line with such volume and price trend, Italian operations’ net sales came in at €193.6 million, down 3.7% from €201.1 million in H1-13. Since the beginning of the year energy factors have shown a favorable trend, both fuel and especially electric power, thanks to the discount on system charges for energy-intensive firms applied as from the second half of 2013. Ebitda, slightly positive in the second quarter, at the end of June posted a loss lower than in 1H-2013, coming in at -€9.7 million vs. -€17.8 million. To be reminded however that staff costs include non-recurring restructuring expenses for €2.4 million (€1.1 million at June 2013) and that in the period the company realized other operating revenues for €4.2 million from the swap of CO2 emission rights (nil in 2013). Net of non-recurring items Ebitda was up €9.4 million.
In Germany, cement volumes sold increased by 11.6% from H1-13, with almost stable prices (-0.6%). After the buoyant start of the year, favored by good weather conditions, our sales deliveries subsequently showed a quite steady pace. The ready-mix concrete sector recorded a consistent output (+11.1%), with prices up 2.0%. Overall net sales increased to €296.4 million from €266.2 million in 2013 (+11.4%) and Ebitda improved to €23.5 million from €20.1 million in the previous year (+16.7%). It should be noted however that non-recurring costs were booked relating for €1.2 million to restructuring expenses (vs. €1.8 million in 2013) and for €3.4 million to impairment of financial receivables. Net of non-recurring items Ebitda increased by €6.2 million (+28.2%). Among operating costs, fuel slightly decreased (-1.1%) and electric power trend was favorable (-6.0%).
In Luxembourg, mild weather enhanced deliveries at the beginning of the year. Subsequently shipments confirmed a pace more consistent with the previous year. In the six months, cement and clinker sales, including internal sales and exports, increased by 6.8%, with average unit revenues in line with H1-13 (+0.8%). Ready-mix concrete output was down 3.1% in a weak price environment. Net sales came in at €55.4 million, up 7.4% from €51.6 million in H1-13. Ebitda increased to €7.8 million vs. €6.6 million in 2013. The trend of energy factors was favorable for both electric power (-3.0%) and fuels (-1.3%).
In the Netherlands, volumes sold totaled 0.29 million cubic meters of ready-mix concrete vs. 0.34 million cubic meters in the previous year, with prices declining by 2.6%. Net sales amounted to €28.8 million (€36.1 million in H1-13). Ebitda, slightly positive in the second quarter, benefited from the remarkable efforts made by the management to bring the company back to balance and closed the six months at -€0.6 million vs. -€4.0 in 2013. To be reminded however that the 2013 figure included among staff costs non-recurring restructuring expenses of €0.7 million.
In the Czech Republic and Slovakia, cement volumes, after the very buoyant start of the year, maintained a good pace of growth also in the second quarter, thus posting in the first half an increase of 24.9% from the same period a year earlier, with average selling prices in local currency slightly down (-2.0%). The ready-mix concrete sector, which includes also Slovakia operations, showed a very consistent and equally positive trend, with volumes up 22.4% and slightly lower prices (-2.2%). Overall net sales, which were penalized by the weaker koruna, amounted to €61.4 million, up 14.2% from €53.8 million in the previous year and Ebitda increased by €5.4 million, from €3.7 million to €9.1 million. The Czech koruna devaluation negatively impacted the translation of the results into euro; net of foreign exchange effect, net sales variance would have been of +20.9% while Ebitda would have increased by €6.0 million. Among operating costs, in local currency, the price trend was favorable for both fuels (-13.8%) and electric power (-16.4%).
In Poland, after a brilliant and positive start of the year, in April a new price list was submitted which faced difficulty in being applied and was therefore reformulated in June. Our production unit’s cement deliveries were penalized by the second quarter results and at the end of the six months posted a 12.3% decline from H1-13. The re-establishing of terms more favorably accepted by customers, allows us to expect in the second part of the year results more in line with those reported in 2013. Conversely, ready-mix concrete output was much on the rise (+20.3%). The average level of selling prices in local currency improved for cement (+3.6%) and was rather weak for ready-mix concrete (-4.3%). Such market dynamics brought to net sales in euro of €43.6 million, down 4.1% from €45.5 million in 2013. Ebitda decreased by 7.3% to €8.4 million vs. €9.1 million in H1-13. Thanks to zloty stability, foreign exchange effect was virtually nil. Among operating costs, fuels price decreased by 14.0% and the trend of electric power cost was favorable (-12.9%).
In Ukraine, up to the end of June, the worrisome dramatic context fortunately did not significantly impact our industrial operations. Cement volumes sold rose by 6.6% and average prices were higher than in 2013 (+1.5% in local currency). The ready-mix concrete sector confirmed an even more positive trend with volumes up 28.9% and average prices in local currency slightly lower (-1.9%). Net sales at €43.3 million, were down 17.7% from €52.6 million in H1-13 while Ebitda increased from €1.3 million to €5.4 million. To be reminded, however, that the previous year’s figure included non-recurring costs for €1.7 million relating to a litigation with the public administration about VAT on gas supplies. Net of non-recurring items, Ebitda however posted a progress of €2.4 million from the same period a year earlier. The local currency sharp depreciation heavily penalized the translation of the results into euro: at constant exchange rate, net sales variance would have been positive (+11.2%) and recurring Ebitda would have increased by €4.3 million. As for the main operating costs in local currency, the trend was favorable for fuels (-8.2%) while electric power price increased (+6.3%).
In Russia volumes sold increased by 5.7% from H1-13, thanks not only to the good market trend but also to the new contribution of the mixing and shipping terminal in Omsk. Selling prices in local currency strengthened (+2.0%). Net sales were down 9.3% from €113.2 million to €102.6 million while Ebitda stood at €35.4 million from €36.0 million in the previous period (-1.7%). The sizeable ruble devaluation (-17.8%) negatively impacted the results translation into euro. Net of foreign exchange effect, net sales and Ebitda would have increased by 6.8% and 14.7% respectively. Among the main operating costs in local currency, energy price trend was unfavorable for both fuels (+15.5%) and electric power (+10.9%).
United States of America
Our hydraulic binders sales, after a start of the year penalized by harsh weather, showed a good pace; demand trend continued to be robust in the South-West of the country but also the Midwestern regions reported a favorable change. Sales volumes closed the first half of the year on the rise by 6.0% while ready-mix concrete output, mainly located in Texas, consolidated the previous year’s positive results (+0.7%). Cement selling prices in local currency rose by 6.2% and ready-mix concrete ones showed an even more lively trend (+11.5%). Overall net sales came in at $505.6 million, up 11.5% from $453.2 million in H1-13 and Ebitda increased to $81.3 million (+15.6% from $70.3 million in 2013). Foreign exchange effect was unfavorable; consequently, translated into euro, overall net sales increased by 6.9% from €345.1 million to €368.9 million and Ebitda at €59.3 million was up 10.8% from €53.5 million in 2013. As for energy factors cost, the trend of fuels, and indirectly logistics too, was unfavorable while electric power was flat.
Mexico (valued by the equity method)
Cement sales trend of the associate Corporación Moctezuma remained promising also in the second quarter, after the favorable start of the year. Average prices for the period in local currency were still declining vs. H1-13 but they kept improving from the year 2013 exit level. Ready-mix concrete sales continued to be weak, largely due to a new strategic positioning and the reduction in the number of active ready-mix concrete plants. Net sales and Ebitda in local currency increased by 10.8% and 19.0% respectively. The Mexican peso depreciation negatively impacted the translations of the results into euro. With reference to 100% of the associate, net sales stood at €243.5 million (+1.7%) and Ebitda improved by 9.2% to €91.9 million from €84.2 million in 2013. As for the main operating costs, in local currency the trend was unfavorable for both fuels (+5.5%) and electric power (+5.6%).
The first half of 2014 featured results above expectations, influenced both positively (Central and Eastern Europe) and negatively (United States) by unusual seasonal conditions. The major operating variables (demand, prices, costs) have been and will continue to be rather different in the various geographical areas of presence, and precisely:
- an ongoing recession phase in Italy,
- a good recovery in the United States,
- overall stability in Central Europe,
- quite favorable prospects in Eastern Europe’s EU countries (the Czech Republic, Poland) and more uncertainty in Ukraine and Russia, where the macroeconomic imbalances add to the local and international political tensions
Based on the above considerations, we believe that, for the group as a whole, the next six months will post an operating profitability similar to the previous year’s one, penalized by the unfavorable foreign exchange effect linked to the devaluation of the Russian and Ukrainian currencies. Consequently, for the full financial year 2014, we expect to report a recurring Ebitda growth above the previous year and slightly over €400 million.
Senior Notes and Bonds on maturity
In the period from January 1 to June 30, 2014 no new bonds were issued.
In the 18 months subsequent to June 30, 2014, the following repayments of bond principals shall be effected:
- on September 12, 2014 $80.0 million referred to the Senior Notes Series C issued by the subsidiary RC Lonestar Inc. in 2003.
- on April 1, 2015 $56.7 million referred to the Senior Notes Series A issued by the subsidiary RC Lonestar Inc. in 2009.
- -on September 12, 2015 $80.0 million referred to the Senior Notes Series C issued by the subsidiary RC Lonestar Inc. in 2003.
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 H1-14 results will be illustrated during a conference call to be held today, Friday August 1, at 5:00 pm CEST. To join the conference, dial +39 02 8058811.