Interim results at March 31, 2009
Cement and ready-mix volumes down 20.0% and 20.4% respectively
Weak demand and winter climate deeply affect results, mainly in Eastern Europe countries
Net sales -22.2%; EBITDA at €39.3 million (-74.1%)
Outlook of much lower results confirmed for full year 2009
| || |
|Cement sales||m ton||5.5||6.8||-20.0|
|Ready-mix sales||m m3||3.0||3.7||-20.4|
|Consolidated net profit||€m||(43.0)||56.5||-176.0|
|Mar 09||Dec 08||Change|
The Board of Directors of Buzzi Unicem met on May 13, 2009 to examine the interim management report as of March 31, 2009.
The first quarter of the year 2009 was strongly influenced by the repercussions of the financial crisis on the real economy, reporting a demand general decline. Moreover the first months of the year, which feature a high seasonability especially in the market areas having a continental climate, were penalized by a harsh winter. In a scenario of depressed sales volumes, no help came from the trend of costs which were still burdened by the raw materials and fuels hikes occurred in 2008. Finally, the slowdown of the emerging economies where the group operates put the respective currencies under high pressure (Czech koruna, Polish zloty, Ukranian hryvnia, Russian rouble and Mexican peso), negatively affecting the translation of the results into euro. As a consequence, results conspicuously contracted in the different geographical areas of operations, starting from Eastern Europe countries (Poland, the Czech Republic, Ukraine and Russia) which last year had allowed to counterbalance the downward trend of the more mature markets (Italy and the United States) and to maintain good profitability levels also in the first quarter.
Demand slowdown, although at a different pace, involved all construction industry segments. Residential building is recording large unsold volumes, burdened by the contraction in consumer demand consequent to the current economic difficulties and uncertain scenario. Non-residential sector is impacted by the cost rationalizations and investment reductions carried out in many business segments to meet cash requirements. Finally public civil engineering is not benefiting yet from the stimulus packages launched by central governments due to the decision-making and implementation procedures underlying the choice of works and the funds allocation, especially in some Eastern Europe countries, then the first positive effects will start to be seen towards the end of 2009 and then in 2010. Also the Unites States, where shorter-time moves are expected, was only marginally influenced by the stimulus packages launched by Obama’s new administration.
In the first three months of the year, group’s cement volumes at 5.5 million tons were down 20.0% from the same period a year earlier. Volumes scenario showed a contraction in almost all countries of group’s operation and especially in Ukraine, Poland and the Czech Republic while the Mexican market recorded a positive sign. Ready-mix concrete volumes totalled 3.0 million cubic meters, down 20.4% from 1Q-08 due to volumes decline in Central and Eastern Europe countries and in Italy; volumes increased by 6% in Mexico and by 4.4% in the United States thanks to the inclusion in the scope of consolidation of Dorsett and Varmicon operations acquired in 2008.
Cement selling prices continued to show a favorable dynamics in Germany, Luxembourg and, in local currency, also in Mexico, Poland, the Czech Republic and Ukraine. A negative trend was recorded in Italy and Russia, in the latter country due to an adjustment toward international prices from the levels reached in early 2008. The United States showed a moderate decrease. Ready-mix concrete average unit prices in local currency slightly improved in all countries. Conversely, production costs have not benefited yet from the decreases in fuel and electric power costs, whose positive effects will start to be seen as from the second half of 2009.
Consolidated net sales decreased by 22.2% from €755.3 million to €587.3 million and Ebitda stood at €39.3 million, down €112.3 million (-74.1%). In the quarter, Ebitda to sales margin contracted from 20.1% to 6.7%. Changes in the scope of consolidation accounted for an increase of €16.7 million in net sales and €1.0 million in Ebitda. Foreign exchange fluctuations negatively impacted the two figures by €4.2 million and €1.2 million respectively. Like-for-like net sales and Ebitda would have decreased by 23.6% and 73.8% respectively.
After amortization and depreciation for €51.4 million (€49.3 million in 1Q-08) Ebit was negative for €12.1 million (positive for €102.3 million in 2008). Finance costs increased to €32.5 million versus €8.5 million, mainly due to the volatile components, namely foreign exchange losses. As a result, the first quarter 2009 closed with a loss before tax of €45.3 million versus a profit before tax of €101.8 million at March 2008. After income tax expense, net loss came in at €40.4 million (€43.0 million being the amount attributable to the equity holders of the company).
Cash flow was equal to €11.0 million (€122.7 million at March 2008). Net debt as of 31 March 2009 amounted to €1,186.3 million, up €126.6 million over year-end 2008. In the first three months, the group invested a total of €98.7 million, €55.5 million thereof for the capacity expansion projects under way in the United States, Russia, Mexico and Luxembourg.
As of March 31, 2009, total equity, inclusive of minority interest, stood at €2,697.5 million versus €2,705.5 million as of December 31, 2008. Consequently debt/equity ratio was equal to 0.44 (0.39 at 2008 year-end).
In the first three months, cement shipments shrinked by more than 20% from 1Q-08. Buzzi Unicem’s performance was better than the market figure (-2.5% versus 1Q-08) thanks also to a wider scope of consolidation for the inclusion of the grinding centers acquired at the end of 2008. The month of March featured a fairly good progress in average selling pricing level thanks to the implementation of a lower discount policy with the aim of at least partly recovering the increases occurred in costs. The quarter figure however was still much lower than the 1Q-08 average one (-12.1%). Ready-mix concrete sales posted a 19.5% decrease with slightly higher prices.
Overall, net sales in Italy came in at €175.8 million, down 14.2% versus €204.9 million in 1Q-08. Ebitda stood at €5.7 million (€29.3 million in 2008, -80.4%), with a significant decline of Ebitda to sales margin (from 14.3% to 3.3%).
In Germany, cement volumes sold contracted by 20.9%. Exports, mainly to the Netherlands, were slightly up. Ready-mix concrete sector recorded a volumes decrease of 21.5%.Overall net sales stood at €100.7 million versus €117.6 million in 1Q-08 and Ebitda decreased by €11.3 million, from €9.9 million to -€1.4 million.
In Luxembourg cement volumes sold showed a negative trend (-21.6%), with prices higher by 4.0%. Overall net sales decreased from €19.5 million to €14.9 million (-23.6%) and Ebitda declined from -€0.5 million to -€2.2 million. The results deterioration was mainly caused by the market dynamics (increases in production costs and decline in sales volumes).
In the Netherlands, in the first three months, volumes sold exceeded 0.21 million cubic meters of ready-mix concrete (0.25 million in 2008), with net sales at €24.1 million (-24.5%) and Ebitda negative for €0.5 million.
In Eastern Europe, the downturn in volumes sold was especially marked in Ukraine (-63.5%), Poland (-47.5%) and the Czech Republic (-46.2%); the decline was more contained in Russia (-28.0%). Average selling prices in local currency improved in Poland (+7.6%) and in the Czech Republic (+7.0%) while in Ukraine they remained stable from the same period a year earlier. An opposite trend was recorded in Russia where prices plunged by 30.0% after having skyrocketed to medium-term unsustainable levels during 2008. Demand decline affected also ready-mix concrete output, which contracted in all countries of group’s operation, especially in Ukraine, the Czech Republic/Slovakia and to a lesser extent in Poland while prices were in general improvement.
Overall net sales came in at €79.8 million from €186.1 million in 2008 (-57.1%), factoring in the effect of the heavy devaluation of all local currencies against the euro (-€16.7 million). The Ebitda realized in the area shrinked by 89.4%, from €68.8 million in 2008 to €7.3 million in 2009. The profitability deterioration was due to the low utilization of the production capacity, with a consequent higher product costs per unit, in addition to the variable cost component which was still influenced by electric power and fuels hikes (especially in Ukraine).
United States of America
The group’s cement volumes sold were down 20.5% while average unit prices in local currency declined by 3.0%. Ready-mix concrete sales increased by 4.4% thanks to the wider scope of consolidation. Overall net sales totalled €149.9 million versus €149.5 million and Ebitda was down 38.1% from €22.9 million to €14.2 million. The dollar appreciation positively impacted the two figures for €19.7 million and €1.9 million respectively.
Mexico (50% consolidation)
Moctezuma’s cement volumes sold increased by 6.9%, with average selling prices in local currency in slight improvement. Ready-mix concrete sales were up 6.0%, with prices on the rise. Net sales and Ebitda translated into euro showed a negative trend: net sales decreased by 4.6% (from €48.7 million to €46.4 million) and Ebitda was down 20.0% (from €20.3 million to €16.2 million). The two figures were negatively affected by foreign exchange and costs inflation. At constant exchange rate net sales and Ebitda would have come in at +10.3% and -7.5% respectively.
The first quarter showed a substantial drop in group’s results, due to the worsening of the economic crisis, starting from the fourth quarter of 2008. Moreover the first part of the year was influenced by worse weather conditions as compared with 2008. Demand weakness in the construction sector is likely to continue also in the forthcoming months of 2009, with a potential slight resilience in the second part of the year in some geographical areas, thanks also to the stimulus policies launched by the central governments.
The most penalized countries will continue to be Ukraine and Russia, whose emerging economies are more sensitive to global economic trends and are rather volatile. In the other countries of presence, market trend, despite the stimulus packages launched, does not allow to predict a demand recovery earlier than 2010.
Given the current poor visibility on the trend of the different market variables (volumes, prices, production costs and foreign exchange), for the full year 2009 we deem it advisable to confirm the expectations of recurring operating results down 20/30% from the ones posted in the previous year, likely in the lower end of such a range.
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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