Interim results at September 30, 2010
Good trend of shipments in Q3; at September-end cement and ready-mix concrete volumes up 1.3% and 1.9% respectively
First tangible benefits from the investments projects to boost capacity and competitiveness in emerging countries
Profitability still penalized mainly by unfavorable price effect
Net sales at €1,999 million (€2,076 million in 2009); Ebitda at €326 million (€426 million in 2009)
| || |
|Cement sales||m ton||20.0||19.7||1.3|
|Ready-mix sales||m m3||10.7||10.5||1.9|
|Consolidated net profit||€m||59.6||117.3||-49.2|
|Sep 10||Dec 09||Change|
The Board of Directors of Buzzi Unicem SpA met on November 11, 2010 to examine the interim management report as of September 30, 2010.
The signs of improvement in the international economic context that began to show during the second quarter were moderately confirmed by the dynamics of the summer 2010. Although uncertainties persisted and visibility was still poor, stronger indications appeared of a greater confidence in brighter scenarios and approaching cycles of economic growth.
The construction industry is still penalized by the long-term repercussions of the international economic crisis: public infrastructure investments included in the stimulus packages launched by central governments, mainly in the United States, is starting to produce some visible effects, demand in non-residential building suffers from the investment reductions carried out by the private sector, the residential segment fails so far to show clear signs of improvement.
In the first nine months of the year 2010, cement and clinker volumes stood at 20.0 million tons, up 1.3% from the same period a year earlier. Sales showed some improvement or remained stable in many countries of operations, apart from the Czech Republic, the United States of America and Mexico. Deliveries were more sustained in Russia, Ukraine, Poland and Luxembourg. Ready-mix concrete volumes totaled 10.7 million cubic meters, up 1.9% from 9M-09. The positive trend recorded in Germany, Ukraine and Mexico allowed to more than offset the decline reported mainly in the Czech Republic and Italy.
Cement selling prices in local currency remained unfavorable in all country of operations, apart from Mexico and Luxembourg. The most sizeable decline was recorded in Italy and Russia but also Ukraine, the Czech Republic and the United States showed a price deterioration of nearly 10%. In Italy the further strong contraction posted during summer months, due to a market featuring large excess capacity and a fierce competition, had a punitive impact and jeopardized the quarter profitability. Ready-mix concrete prices remained under pressure everywhere, but with lower volatility than in the cement sector. Decline was more marked in the United States, Poland, Ukraine and Italy.
Production costs, overall, remained under control, also thanks to the cost saving and efficiency enhancement actions implemented by the management. However the price of energy factors, especially fuels, started rising again in the last quarter which gives some cause for concern.
Consolidated net sales decreased by 3.7% from €2,075.8 million to €1,999.5 million and Ebitda stood at €326.4 million, down €99.9 million (-23.4%). Net of non-recurring items Ebitda would have declined by €68.2 million (-17.3%). Thus recurring Ebitda to sales margin contracted from 19.0% to 16.3%. Foreign exchange fluctuations accounted for an increase of €57.0 million in net sales and €15.3 million in Ebitda, thanks to the strengthening of the dollar and of the emerging countries currencies. Changes in the scope of consolidation had a slight positive impact on the two figures, i.e. €19.9 million and €1.1 million respectively. Like-for-like net sales and Ebitda would have decreased by 7.4% and 27.3% respectively. After depreciation, amortization and impairment charges of €171.6 million (€165.5 million in 9M-09), Ebit amounted to €154.8 million (€260.9 million in 2009). Net finance costs decreased from €77.7 million to €72.1 million, mainly due to favorable foreign exchange differences and to hedging derivatives valuation; stable was the contribution from equity-accounted associates (-0.7%). Profit before tax thus stood at €87.7 million versus €193.3 million at September 2009 (-54.6%). Income tax benefited from a release equal to €22.4 million of provisions set aside for potential tax claims abroad. The income statement closed with net profit for the period down by 43.7% to €80.2 million (€142.6 million in 2009), of which €59.6 million attributable to owners of the company (vs. €117.3 million in 9M-09).
Cash flow was equal to €251.8 million (€308.1 million at September 2009). Net debt as of September 30, 2010 amounted to €1,280.3 million, up €71.0 million over year-end 2009. In the first nine months, the group invested a total of €207.8 million in property, plant and equipment, €119.2 million thereof for capacity expansion or special projects. In this respect to be noticed that the new production line at Suchoi Log (Russia) came on stream during the third quarter; the greenfield cement plant of Apazapan (Mexico) will start production as early as 2010; in Ukraine the equipment to switch fuel from natural gas to coal were started up some months ago.
As of September 30, 2010, total equity, inclusive of minority interest, stood at €2,876.3 million versus €2,712.4 million as of December 31, 2009. Consequently debt/equity ratio was equal to 0.45 (0.45 as well at 2009 year-end).
Our sales volumes of cement and clinker, including export, increased by 4.8%, mainly driven by exports and clinker. Selling prices, due to weak demand and fierce competition, plummeted in summer months, leading to a progressive decline of over 20% from the previous year. Ready-mix concrete sales showed some rebound in the third quarter, closing with a 3.3% decrease versus September 2009, in a weak price environment (-4.0%). On the costs front, fuels continued their upward trend which sped up in summer months. Overall, net sales in Italy came in at €469.2 million, down 13.2% versus €540.4 million in 9M-09. Ebitda stood at €40.3 million versus €59.9 million in 2009 (-32.7%). During the first nine months, the company achieved other operating revenues of €29.5 million from the sale of CO2 emission rights which, based on the output expected, are deemed to be surplus. Recurring Ebitda to sales margin decreased to 8.6% versus 11.1% in 2009.
In Germany, during the first nine months, cement volumes sold remained stable (+0.9%) while ready-mix concrete sector recorded a sales increase of 20.1%, (11.5% of which due to the addition in the scope of consolidation of “Sibo” group). Average unit revenues declined by around 3% for cement and 5.0% for ready-mix concrete. Overall net sales stood at €412.9 million versus €401.3 million in 9M-09 and Ebitda decreased by 34.7%, from €97.2 million to €63.4 million. However, net of non recurring items (revenues for €37.4 million realized in 2009) Ebitda to sales margin improved from the previous year. During the first nine months, the company achieved other operating revenues of €4.7 million from the sale of CO2 emission rights which, based on the output expected, are deemed to be surplus.
In Luxembourg, also thanks to the new grinding capacity, cement volumes sold showed a positive development (+10%) and prices confirmed the favorable trend (+1.3%). Overall net sales increased from €62.1 million to €69.8 million (+12.5%) and Ebitda was up 16.6%, from €10.3 million to €12.0 million.
In the Netherlands, volumes sold reached 0.67 million cubic meters of ready-mix concrete (-0.9% versus 9M-09), with net sales at €83.0 million (-1.2%) and Ebitda at a lower level than in 2009 (from €1.3 million to €0.0 million).
Suchoi Log cement factory in Russia, after a buoyant second quarter, continued to grow in the third quarter, closing with a volume progress of 28.2% from the beginning of the year. In Ukraine, although dynamics were more volatile, cement sales confirmed the second quarter’s indications and increased by 8.5% in the nine months. In Poland, the public investments financed thanks to the EU funds for infrastructures and some major works referred to the forthcoming Football European Championship progressed. Consequently in the third quarter activities were boosting and at the end of September volumes sold stood at +7.4%. Conversely, the Czech Republic, whose industrial production is still far from the levels reached before the 2009 recession, continued to show some difficulty. Cement sale volumes contracted by 13.5% from the beginning of the year, although in improvement over the first half. Cement average selling prices in local currency were everywhere in marked decline: in Russia –17.6%, Ukraine -9.4%, Poland –8.3%, the Czech Republic – 9%. Ready-mix concrete output in the area decreased by 5.8% due to the protracted contraction in the Czech Republic and Slovakia (-11.1%) and prices showed the same negative trend as in the cement sector. The positive volumes trend, unfortunately mitigated by the unfavorable pricing environment, led to an increase of 1.9% in overall net sales, from €368.3 million to €375.2 million; Ebitda realized in the area shrunk by 14.6%, from €95.7 million to €81.7 million. The local currencies revaluation (zloty 8.6%, Czech koruna 4.4%, hryvnia 3.5%, ruble 10.2%) favored the translation of the results into euro (+€25.0 million for net sales, +€6.8 million for Ebitda).
United States of America
In the third quarter, group’s cement volumes sold had a quite positive trend and at the end of September were down 6.4% from 9M-09. Ready-mix concrete output remained virtually unchanged (-0.4%). Average selling prices in local currency continued to be penalized both for cement (-8.7%) and for ready-mix concrete (-7.3%). Overall net sales totaled €452.1 million versus €494.0 million (-8.5%) and Ebitda was down 34.5% from €105.8 million to €69.3 million. Excluding the negative non-recurring items from the 2009 figure, Ebitda would have decreased by 37.8%. Foreign exchange positively impacted the two figures for €16.2 million and €2.5 million respectively. The profitability deterioration was attributable to different causes, such as volumes and prices trend, rise in cost of power and logistics, higher incidence of unit fixed costs due to underutilization of production capacity.
Mexico (50% consolidation)
In the first nine months, Corporación Moctezuma’s cement volumes decreased by 3.6%, (-6.1% at June end) with average selling prices in local currency up 1.2%. Ready-mix concrete sales were up 9.4%, with prices slightly lower than in 2009 (-0.9%). Net sales increased by 10.6% (from €140.7 million to €155.6 million and Ebitda was up 6.1% (from €56.2 million to €59.7 million). The revaluation of the Mexican peso positively impacted the translation of the results into euro; at constant foreign exchange rate, net sales and Ebitda would have decreased by 0.6% and 4.6% respectively.
In Italy, the price environment remaining still very penalizing, no profitability improvement is expected in the last quarter of the year.
Central Europe will close 2010 with net sales on the rise, favored also by a change in the ready-mix concrete area of consolidation, and a recurring profitability in improvement from the previous year.
In Eastern Europe, volumes sold should confirm the latest months’ positive trend (except for the Czech Republic) and consequently assumptions are for a greater price stability. The full year Ebitda to sales margin is expected to remain some percentage points lower than in 2009.
In the United States of America, cement demand is stabilizing at around 70 million tons/year, which means a still very low utilization of production capacity and consequently few possibilities of prices improvement. In the ready-mix concrete sector, given the current price-cost ratio, operating result continues to be negative. We estimate that recurring Ebitda will decline.
In Mexico, for the full year, prospects are for stable volumes and prices; consequently results are expected to be in line with those posted in 2009.
Overall, based on the third quarter trend, the gradual weakening of the dollar and the enduring pressure on selling prices in some markets, we may reasonably assume that the results reported in full year 2010 will be lower that the indications set forth in the 1H10 interim financial report.
Pursuant to Consob Regulation no. 17221/2010, the Board of Directors approved the new procedures on related party transactions with the favorable recommendation of the Independent Directors Committee.
Moreover the Board of Directors provided to amend the bylaws to make them consistent with some regulatory provisions introduced by the Legislative Decree no 27/2010 in the matter of Shareholders’ rights. Specifically the amendments concern the following issues: procedure for the publication of notices of call of Shareholders’ Meetings, deadlines for filing slates of candidates for election to corporate governance bodies and arrangements for electronic notification of proxies to attend Shareholders’ Meetings.
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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