Interim results at September 30, 2009
Cement and ready-mix sales down 20.6% and 18.9% respectively
Group’s key markets still weak in third quarter
Net sales -23.8%; Ebitda at €426.3 million equal to 20.5% of sales
Outlook unchanged for full year 2009
| || |
|Cement sales||m ton||19.7||24.9||-20.6|
|Ready-mix sales||m m3||10.5||12.9||-18.9|
|Consolidated net profit||€m||117.3||295.1||-60.3|
|Set 09||Dic 08||Var.|
The Board of Directors of Buzzi Unicem SpA met on November 11, 2009 to examine the interim management report as of September 30, 2009.
The market trend in the summer months of 2009 continued to show dynamics similar to those of the first half of the year. At group’s level cement and ready-mix concrete demand stabilized around the volumes reached in the second quarter, despite some improvements in Central and Eastern Europe countries. Consequently Buzzi Unicem volumes remained weak and at much lower levels than in 2008, with a clear impact on the economic results.
The different segments of the construction industry are still penalized by the international economic trends: especially non-residential building continues to suffer from the conspicuous investment reductions carried out by most firms while the residential sector, after months of depressed activity, shows no clear signs of improvement. Similarly public infrastructure investments included in the stimulus packages launched by central governments have yet to have any significant impact due to the delays in decision-making and funds allocation procedures, but mainly to the actual national budget difficulties (especially in Italy and the United States) with growing constraints on spending power.
In the first nine months of the year, cement and clinker volumes at 19.7 million tons were down 20.6% from the same period a year earlier. Volumes scenario continued to show a contraction in all countries of operations, apart from Mexico, and more impressively so in Ukraine, Poland, the Czech Republic and the United States. Ready-mix concrete volumes totaled 10.5 million cubic meters, down 18.9% from 9M-08 due to a general volumes decline in all areas, and especially in Central and Eastern Europe countries and in Italy.
Cement selling prices continued to show a favorable dynamics in Germany, Luxembourg and, in local currency, in the Czech Republic and Mexico. A negative trend was recorded again in Italy, the United States, Ukraine and Russia, as a consequence of demand weakness, while Poland situation remained virtually stable. Ready-mix concrete pricing trend was positive in Central Europe and Mexico, negative in Eastern Europe and stable in Italy and the United States. Production costs related to energy factors, which were very high in the first part of the year, in the third quarter showed a reduction in Italy, Mexico and the United States, with a positive impact on profitability; in the same period the cost deflation trend was less marked in Germany as well as in Eastern Europe countries, which remained strongly penalized versus the previous year.
Consolidated net sales decreased by 23.8% from €2,724.7 million to €2,075.8 million and Ebitda stood at €426.3 million, down €305.1 million (-41.7%). Net of non-recurring items Ebitda would have been down by €329.9 million (-45.5%). Thus recurring Ebitda to sales margin contracted from 26.6% to 19.0%. Foreign exchange fluctuations accounted for a decrease of €52.0 million in net sales and €13.5 million in Ebitda, due to the weakness of the Eastern European and Mexican currencies. As for the US dollar, currency effect was still favorable, despite a higher depreciation in the third quarter. Changes in the scope of consolidation had a slight positive impact on the two figures, i.e. €55.7 million and €4.5 million respectively. Like-for-like net sales and Ebitda would have decreased by 23.8% and 40.4% respectively.
After depreciation, amortization and impairment charges of €165.5 million (€160.7 million in 9M-08), Ebit amounted to €260.8 million (€570.8 million in 2008). Net finance expense increased from €52.6 to €77.7 million, mainly due to the reduction in interest income and to hedging derivatives valuation; stable was the contribution from equity-accounted associates (+0.5%). Profit before tax thus stood at €193.3 million versus €530.9 million at September 2008 (-63.6%). The income statement for the period, although benefiting from a more favorable average tax rate, closed with net profit down by 60.7% to €142.6 million (€362.9 million in 2008), of which €117.3 million attributable to owners of the company (vs. €295.1 million in 9M-08).
Cash flow was equal to €308.1 million (€523.6 million at September 2008). Net debt as of September 30, 2009 amounted to €1,198.3 million, up €138.6 million over year-end 2008. In the first nine months, the group invested a total of €268.3 million in property, plant and equipment, €163.7 million thereof for the capacity expansion projects of Selma (USA), Suchoi Log (Russia), Esch-sur-Alzette (Luxembourg) and Apazapan (Mexico). Equity investments totaled €5.3 million.
As of September 30, 2009, total equity, inclusive of minority interest, stood at €2,646.9 million versus €2,705.5 million as of December 31, 2008. Consequently debt/equity ratio was equal to 0.45 (0.39 at 2008 year-end).
Our sales volume of cement and clinker, including export, decreased by 16.9%; selling prices remained at a lower level than in 2008 due to a weak demand and a strong competition. Ready-mix concrete sales posted a 15.8% decrease with stable prices (+0.4%). The costs of energy factors showed a downward trend in the period, bringing benefit finally in the third quarter compared with the same period a year earlier.
Overall, net sales in Italy came in at €540.4 million, down 17.9% versus €658.6 million in 9M-08. Ebitda stood at €59.9 million versus €121.3 million in 2008, (-50.6%). Since in the previous year Ebitda benefited from €7.0 million extraordinary income, recurring Ebitda to sales margin has decreased to 11.1% versus 17.3% in 2008.
In Germany, after a very unfavorable beginning of the year, also due to harsh weather conditions, in the first nine months cement sales contracted by 14.7% while ready-mix concrete sector recorded a volumes decrease of 23.0%. Average unit revenues improved by around 8% for cement and 9% for ready-mix concrete. Overall net sales stood at €401.3 million versus €459.5 million in 9M-08 and Ebitda increased by 26.9%, from €76.5 million to €97.2 million. However, net of non recurring items (gains for €37.4 million) Ebitda to sales margin would have declined by 21.9%.
In Luxembourg cement volumes sold showed a negative trend (-13.2%), but prices confirmed their buoyancy (+6.2%). Overall net sales decreased from €69.4 million to €62.1 million (-10.5%) and Ebitda was lower than in the previous year, declining from €12.9 million to €10.3 million (-20.4%).
In the Netherlands, volumes sold reached 0.68 million cubic meters of ready-mix concrete (-20.7% versus 9M-08), with net sales at €84.0 million (-18.8%) and Ebitda at a much lower level than in 2008 (from €4.7 million to €1.3 million).
Eastern Europe countries continued to move at a quite different speed. While Russia and Ukraine showed no signs of resilience, the Czech Republic and Poland in the third quarter, progressively improved their performance. In the latter country, especially, thanks to EU funds for infrastructures, volumes sold declined by 9.0%. In the Czech Republic , which features a less diversified economy and narrow government intervention margins, sales contracted by about 20%. Our operations in Ukraine, hit by the economic and political stalemate ongoing since the end of 2008, closed the third quarter with sale volumes plunging by nearly 49%, although in slight improvement over June 2009. Russia showed a very negative trend, recording a sales decline of 39%, which does not allow to foresee sizeable improvements before 2010.
Cement average selling prices in local currency improved slightly in the Czech Republic (+1.2%), were virtually stable in Poland (-0.2%) and declined in Ukraine and Russia by 4.8% and 30.1% respectively. Ready-mix concrete output in the area contracted by 31.4% due to trading difficulties in the Czech Republic and especially in Ukraine, without prices making up for. The above volumes and prices trend led to a decline of 50.1% in overall net sales, from €736.2 million to €367.4 million; similarly the Ebitda realized in the area shrunk by 69.3%, from €311.5 million in 2008 to €95.7 million in 2009. The local currencies devaluation (zloty 27.8%, Czech koruna 7.3%, hryvnia 45.9%, ruble 21.2%) strongly penalized the translation of the results into euro (-€79.9 million for net sales, -€15.2 million for Ebitda).
United States of America
In the first nine months, the domestic market posted a demand contraction of 27.3%. Group’s cement volumes sold were down 23.2% while ready-mix concrete sales decreased only by 4.0% thanks to the wider scope of consolidation. Cement selling prices in local currency declined by 4.2% Overall net sales totaled €494.0 million versus €554.5 million (-10.9%) and Ebitda was down 25.0% from €141.2 million to €105.8 million, favored by fuel prices reduction. Excluding negative non-recurring items for €5.6 million, Ebitda would have stood at €111.4 million (-21.0%) Foreign exchange positively impacted the two figures for €50.9 million and €10.9 million respectively.
Mexico (50% consolidation)
Corporación Moctezuma’s cement volumes increased by 3.0%, with average selling prices in local currency up 4.3%. Conversely ready-mix concrete sales were down 5.7%, with prices on the rise (+5.3%). Net sales and operating results, which in local currency posted an improvement from the previous year, translated into euro showed a negative trend, due to Mexican peso depreciation (-16.3%). Consequently, net sales decreased by 9.1% (from €154.7 million to €140.7 million) and Ebitda was down 11.2% (from €63.3 million to €56.2 million). Production costs related to energy factors started benefiting from the deflationary trend occurred in the third quarter, buoying up profitability.
In Italy sales volumes are expected to fall by around 15-16%, while prices will continue to remain under pressure or even further decline. Benefits on the cost front will only partially offset the expected decrease in profitability.
Germany will close the year with a volume slowdown similar to that recorded in the first nine months; prices should stabilize at the attained levels also in the last part of the year.
Poland and the Czech Republic in the last quarter might disclose some margin for improvement. Conversely Russia and Ukraine do not show any clear possibility of recovery: cement demand will continue to be very depressed, with a decrease in volumes sold of over 30% and 40% respectively.
In the United States no significant turnabout is likely in any of the construction segments and our sales volumes are expected to fall by over 20%. The utilization rate of the production capacity in the sector is going downward, which increases prices volatility.
In Mexico full year expectations are for stable or slightly growing volumes, in a similar pricing environment; results however will be penalized by peso devaluation.
Overall, we deem that in the last part of the year trading conditions in our markets of operation will continue to be difficult without real prospects for recovery. Consequently, at consolidated level, for the full year 2009 we confirm the indications set forth in the first half interim report, i.e. that the group will close the year with a recurring Ebitda lower by around 40% over 2008. However, also thanks to the cost saving actions implemented by the company, Ebitda to sales margin will remain equal to about 20%.
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