Interim results at March 31, 2011
Cement and ready-mix volumes up 27.0% and 27.2% respectively
Sale volumes rebound favored by mild weather conditions vs. the Q1-10 adverse ones
Net sales at €569.4 million (€459.6 million in 2010); EBITDA at €42.7 million (€13.9 million in 2010)
Outlook of results not lower than in the previous year confirmed for full year 2011
|Jan-Mar 11||Jan-Mar 10||% 11/10|
|Cement sales||m ton||5.6||4.4||+27,0|
|Ready-mix sales||m m3||3.3||2.6||+27,2|
|Net profit (loss)||€m||(32.8)||(50.2)||+34,8|
|Consolidated Net profit (loss)||€m||(36.6)||(52.9)||+30,8|
|Mar 11||Dic 10||Var.|
The Board of Directors of Buzzi Unicem met on May 13, 2011 to examine the interim management report as of March 31, 2011.
In the first quarter of the year 2011, in the different countries where the group operates, cement and ready-mix concrete demand showed some significant acceleration from the same period a year earlier, with robust growth in Central and Eastern Europe markets. The sale volumes rebound was favored by the comparison with Q1-10, which had been penalized by an exceptionally harsh winter not only in continental Europe, but also in geographical areas which are usually less affected by seasonability. The inflation tensions on fuel costs, which have been going on since the second half of 2010, continued especially in Italy, the United States, Mexico, Ukraine, Russia and Germany. Conversely, electricity cost decreased in Germany, Poland, the Czech Republic and the United States whereas it rose considerably in Ukraine and Russia. The group’s functional currencies strengthened, with a consequent favorable foreign exchange effect in the translation of the results into euro.
Central, Eastern Europe and Mexico confirmed a robust and continuous economic growth, but uncertainty remains on the development of the business trend in the United States and Italy. This incertitude which reflects on the investment choices of the operators and dampens private and industrial building, combines with the troubles of several central Governments on the sovereign debt front, which restrain demand stimulus possibilities and make stabilization and prospects of the financial industry and consequently of the real economy, more difficult. In such a context the underutilization of production capacity, the prolonged softness of selling prices and tensions on fuel costs complicate any significant recovery of profitability.
In the first three months of the year, group’s cement volumes at 5.6 million tons were up 27.0% from the same period a year earlier. Volumes increase was reported in all countries of group’s operations and especially in Central and Eastern Europe, Mexico and the United States of America. Ready-mix concrete volumes totaled 3.3 million cubic meters, up 27.2% from Q1-10.
Selling prices were lower than in Q1-10, except for Mexico. However it must be remarked that such variable featured a downward trend throughout 2010 and that the Q1-11 prices are in line or in progress compared with those of 2010 year-end. Also in the ready-mix concrete, selling prices in general showed an unfavorable change compared with the same period a year earlier.
Consolidated net sales increased by 23.9% from €459.6 million to €569.4 million (+€109.8 million); volumes boost was decisive and positively accounted for €123.9 million whereas pricing effect had an unfavorable impact of €21.8 million. Ebitda stood at €42.7 million, up €28.8 million from Q1-10. Changes in the scope of consolidation and foreign exchange fluctuation accounted for an increase in net sales of €11.1 million and €8.1 million respectively. Ebitda was positively impacted by €1.3 million and €1.7 million. On a like-for-like basis, net sales and Ebitda would have increased by 19.7% and 135.1% respectively. The Q1-11 figure, however, includes non-recurring gains for €7.1 million referring to the sale of an investment property in Luxembourg. Net of non-recurring items, the quarter’s Ebitda to sales margin increased to 6.3% from 3.0% in the previous year. After amortization and depreciation for €60.9 million (€54.2 million in Q1-10) Ebit was negative for €18.2 million (-€40.3 million in 2010). Net finance costs decreased from €33.5 million to €28.0 million: the favorable change is attributable to a reduction of net interest expense on financial position and to lower costs associated with the more volatile components (foreign exchange differences, derivatives valuation). Due to the effects of the factors outlined above, the first quarter 2011 closed with a loss before tax of €46.7 million vs. €74.4 million at March 2010. After income tax expense, net loss came in at €32.8 million (€36.6 million being the loss attributable to the owners of the company)
Cash flow was equal to €28.2 million (€4.0 million at March 2010). Net debt as of 31 March 2011 amounted to €1,294.3 million, up €27.4 million over year-end 2010. Capital expenditures accounted for a total of €37.7 million of the figure (€90.3 million in Q1-10), €15.3 million thereof for the completion of the capacity expansion projects in Russia, Ukraine and Mexico. As of March 31, 2011, total equity, inclusive of non-controlling interest, stood at €2,670.2 million versus €2,803.7 million as of December 31, 2010. Consequently debt/equity ratio was equal to 0.48 (0.45 at 2010 year-end).
Group sales were up 6.3%, mainly thanks to increased export and clinker deliveries. Selling prices decreased by 12.3%. Despite the discount reductions implemented as from January 2011, fierce competition and unused overcapacity kept prices at levels which did not allow to absorb the sizeable hikes in fuel and electricity costs. Ready-mix concrete showed a less penalizing trend, with sales volumes up 1.7% and slightly lower prices. Overall, net sales in Italy came in at €131.7 million, down 3.3% versus €136.2 million in Q1-10. Ebitda stood at €0.2 million vs. €6.5 million in 2010. During the quarter, the company realized other operating revenues equal to €6.4 million deriving from the sale of CO2 emission rights which, based on the output expected, were estimated to be surplus to requirements (€7.6 million in 2010).
In Germany the year 2011 began quite well, with cement and ready-mix concrete volumes increasing by more than 55.7% and 89.4% respectively from the same period of 2010. At constant scope of consolidation (SIBO acquisition occurred in mid 2010), ready-mix concrete sector would have grown by around 53%. In 2011 deliveries benefited from favorable weather conditions which instead had been very adverse in the first three months of the previous year. Cement selling prices decreased (-3.3%). Overall net sales stood at €130.9 million vs. €81.9 million in Q1-10 and Ebitda increased from -€1.8 million to €13.9 million. During the quarter, the company realized other operating revenues equal to €3.1 million deriving from the sale of CO2 emission rights which, based on the output expected, were estimated to be surplus to requirements (€2.5 million in 2010).
In Luxembourg, thanks also to favorable climate, cement and clinker volumes reported a sizeable increase (+75.3%), in a quite stable selling price environment (-1.8%). Net sales at €27.9 million, were up 83.4% from €15.2 million in 2010. Ebitda jumped from -€3.4 million to €13.3 million. However, during the quarter, the company realized 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 for gains on disposal of an investment property.
In the Netherlands, in the first three months, volumes sold increased by 42.5%, with slightly lower prices. Net sales improved by 45.8% and Ebitda was negative for €0.4 million (-€1.4 million in 2010).
The beginning of the year, which featured milder weather conditions, was positive for the cement industry and our sale volumes that posted a sizeable increase in the Czech Republic (+103.4%) Ukraine (+88.6%), Russia (+42.1%) and Poland (+38.9%). Price effect, expressed in local currency, continued to be widely unfavorable, i.e.: the Czech Republic (-18.5%), Russia (-15.2%), Ukraine (-7.7%) and Poland (-1.5%). Demand strengthening reflected also on ready-mix concrete volumes which showed a significant improvement everywhere.
Overall net sales came in at €86.4 million from €59.8 million in 2010 (+44.5%). The Ebitda realized in the area was virtually unchanged, from €2.5 million in 2010 to €2.4 million in 2011. At constant exchange rate, it would have decreased by 16.0%. The inadequate profitability was due to still soft prices, higher costs borne in the period for the commissioning works of the new dry-process production line at Suchoi Log in Russia and largely to the growing pressure on fuel costs.
United States of America
Group’s cement volumes sold were up 12.2% while average unit prices in local currency declined by 7.9%. Ready-mix concrete sales increased by 8.4% with prices in slight contraction. Volumes positive trend was mainly due to favorable weather conditions compared with Q1-10. Overall net sales totaled €113.7 million versus €105.4 million (+7.9%). Foreign exchange effect was favorable for €1.3 million. The above described volume/price mix and the hikes in fuel costs negatively impacted profitability. Ebitda consequently was negative for €9.1 million (also negative for €5.6 million in 2010).
Mexico (50% consolidation)
Cement volumes sold increased by 17.5%, with favorable price effect in local currency (+4.1%). A contributor to this result was the activity of the new cement plant at Apazapan, inaugurated at the end of 2010. Ready-mix concrete sales were stable (-0.7%), with slightly better prices. Net sales in euro showed a sizeable increase (+29.1%) from €45.4 million to €58.7 million. Ebitda was up 31.9% to €22.4 million vs. €17.0 million in 2010. The Mexican peso appreciation (+6.7%) positively impacted the translations of the results into euro. At constant exchange rate, net sales and Ebitda would have increased by 20.4% and 23.0% respectively.
The first quarter of 2011 was encouraging from the outset and posted better economic results. Such an improvement, generated by the strong resilience of sale volumes, was decisively favored by the mild weather conditions as opposed to the adverse ones in the previous year. Signs of recovery are consolidating in many countries, but to gauge their intensity better we have to wait for the outcome of the attempts currently underway to improve prices, aimed at balancing the very high inflation of energy costs. In Mexico, the new Apazapan cement plant had a smooth start-up and the troubleshooting phases of the new dry-process production line at Suchoi Log in Russia and of the equipment to switch from natural gas to coal in Ukrainian plants are virtually completed.
We take note of the favorable start of the year but we think that only the development of trading conditions in the forthcoming months will allow a better visibility into the scenario trend. Based on the first quarter results, for the current year we deem it advisable to confirm the expectations of operating results not lower than the ones posted in the previous year.
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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