Interim results at September 30, 2011
Sound operating trend in Central Europe and emerging Countries, weak in the US and especially in Italy due to construction sector difficulties
Net sales equal to €2,109 million (€1,999 million in 2010); stable Ebitda at €330 million (€326 million in 2010)
For full year 2011, outlook of better results than in the previous year and target of deleveraging confirmed
| || |
|Cement sales||m ton||21.5||20.0||7.3|
|Ready-mix sales||m m3||11.3||10.7||6.0|
|Consolidated net profit||€m||38.6||59.6||-35.3|
|Sep 11||Dec 10||Change|
The Board of Directors of Buzzi Unicem SpA met on November 11, 2011 to examine the interim report as at September 30, 2011.
The global economy’s pace of growth has abruptly cooled since the middle of the current year. During the third quarter, mature countries’ activities slowed down, held back by temporary factors relating to energy costs but also by persistent weakness of employment, more stringent budget policies and widespread uncertainty on financial imbalances solving. Conversely, key emerging markets, although decelerating, have overall maintained a robust growth rate. International agencies have revised downward their growth outlook for 2011 and 2012. In the euro area, sovereign debt crisis has deepened, embracing also Italy and Spain. Against such emergencies, measures were adopted to reinforce the financial support capacity entrusted to the so called European Financial Stability Facility. The weakening of the economic situation might turn out of short duration, however stagnation could be lengthened by restrictive budget policies and possibly new financial tensions.
The construction industry maintained a buoyant growth trend in the emerging countries, confirmed the positive course in Central Europe but was still penalized by the persistent weakness of the real estate sector in the United States and to an even higher extent in Italy.
In the first nine months of the year 2011, group’s cement and clinker volumes stood at 21.5 million tons, up 7.3% from the same period a year earlier. An improvement was reported in all countries of operations, apart from the United States of America where volumes remained virtually stable and Italy, which posted an impressive contraction during the third quarter. In many markets of presence, deliveries grew by a double-digit percentage, namely in Russia, the Czech Republic, Ukraine, Luxembourg, Mexico and Germany. Ready-mix concrete volumes at 11.3 million cubic meters, were up 6.0% from 9M-10. A quite general positive trend could more than offset the slight decrease posted in Mexico and the much more marked decline in Italy.
Cement selling prices development in local currency remained favorable in Ukraine and Mexico. In Italy and Russia the trend changed from the negative sign reported till the end of June to the positive sign of September year-to-date. Marginally the same happened in Poland. A slight decrease was reported in Luxembourg and Germany whereas a stronger contraction occurred in the United States and especially in the Czech Republic, the latter being penalized by higher exports to Poland.
Ready-mix concrete prices increased in Poland, Ukraine and Mexico, were stable in Italy, Germany, the United States and decreased in the Czech Republic and the Netherlands.
Production costs continued to be impacted by the increases of energy factors. To be remarked that the cost trend of our main fossil fuel (petcoke) during the third quarter began to shift. In the markets where capacity utilization is improving, per-unit manufacturing costs were able to benefit from greater economies of scale.
Consolidated net sales increased by 5.5% from €1,999.5 million to €2,109.4 million and Ebitda stood at €330.0 million, up €3.6 million (+1.1%). Net of non-recurring items Ebitda would have declined by €3.4 million (-1.1%). Thus recurring Ebitda to sales margin contracted from 16.3% to 15.6%. Foreign exchange fluctuations accounted for a decrease of €34.4 million in net sales and €3.8 million in Ebitda, due to the weakening of the dollar and of the emerging countries currencies (Czech koruna excepted). Like-for-like, net sales and Ebitda would have increased by 6.0% and 1.1% respectively. After depreciation, amortization and impairment charges of €176.6 million (€171.6 million in 9M-10), Ebit amounted to €153.5 million (€154.8 million in 2010). Net finance costs decreased from €72.1 million to €68.2 million; lower was the contribution from equity-accounted associates (€1.5 million versus €4.8 million). Profit before tax stood at €87.4 million versus €87.7 million at September 2010 (-0.3%). The income statement closed with a net profit for the period down by 24.5% to €60.6 million (€80.2 million in 2010, inclusive of €22.4 million non-recurring income for release of a provision for tax claims), of which €38.6 million attributable to owners of the company (vs. €59.6 million in 9M-10).
Cash flow was equal to €237.1 million (€251.8 million at September 2010). Net debt as at September 30, 2011 amounted to €1,195.7 million, down €71.2 million over year-end 2010. In the first nine months, the group invested a total of €115.8 million in property, plant and equipment, €37.7 million thereof for expansion projects. As at September 30, 2011, total equity, inclusive of minority interest, stood at €2,766.0 million versus €2,803.7 million as at December 31, 2010. Consequently debt/equity ratio was equal to 0.43 (0.45 at 2010 year-end).
Our sales volumes of cement and clinker, including export, reported a 9.4% decline from the same period a year earlier, accrued mainly during the last quarter. Selling prices started to strengthen, posting a 4.0% increase over 9M-10. Ready-mix concrete sales were down 11.8% with virtually stable prices compared with September 2010. On the costs front, the fuels and energy unfavorable trend continued to have a strong impact. Overall net sales in Italy came in at €429.5 million, down 8.4% versus €469.2 million in the previous year. Ebitda stood at €8.3 million versus €40.3 million in 2010 (-79.5%). During the first nine months, the company achieved other operating revenues equal to €13.5 million (€29.5 million in 2010) from the sale of CO2 emission rights which, based on the output expected, were estimated to be surplus to requirements. Recurring Ebitda to sales margin decreased to 1.9% from 8.6% in 2010.
In Germany, during the first nine months, cement volumes sold grew by 13.4% from the same period a year earlier, with slightly lower prices (-1.5%). Ready-mix concrete sector recorded a sale increase of 30.1%, favored by the addition in the scope of consolidation following the acquisition of “SIBO” group, while prices showed slight contraction (-0.8%). Overall net sales stood at €486.6 million versus €412.9 million in 9M-10 and Ebitda increased by 23.6%, from €63.4 million to €78.4 million. During the first nine months, the company achieved other operating revenues equal to €3.9 million from the sale of CO2 emission rights which, based on the output expected, were estimated to be surplus to requirements (€4.7 million in 2010).
Luxembourg consolidated the progress achieved after a very favorable first half of the year. In the first nine months, volumes sold, inclusive of internal sales, increased by 23.7% with slightly lower average unit revenues (-2.6%). Overall net sales improved from €69.8 million to €86.3 million (+23.6%) and Ebitda rose from €12.0 million to €26.4 million. The strong increase was due for €4.9 million to other operating revenues arising from the sale of CO2 emission rights which, based on the output expected, were estimated to be surplus to requirements and for €7.1 million to other non-recurring gains on disposal of an investment property.
In the Netherlands, volumes sold reached 0.72 million cubic meters of ready-mix concrete (+6.5% versus 9M-10), with net sales amounting to €83.4 million and Ebitda at €1.9 million, higher than the one posted in the previous year
In Russia, Suchoi Log cement factory continued to run at very high capacity, closing the nine months with a volume progress of 40.4% from the beginning of the year. In Ukraine, despite the more volatile economic context, cement sales confirmed the first-half indications which led to a 25.1% increase in the nine months. Also in the Czech Republic cement sale volumes progressed, although at a slower pace than in the previous quarters, posting a 31.0% increase from the beginning of the year. During summer months, the Polish cement plant ran at full capacity and at the end of September deliveries increase stood at +3.8%. Cement average selling price in local currency remained stable or improved: Russia +3.4%, Ukraine +13.9%, Poland +0.7%; the only exception was the Czech Republic (-12.7%), penalized by higher exports to Poland.
Ready-mix concrete sales in the area were brilliant (+15.3%); prices showed a positive trend, apart from the Czech Republic where a slight decrease was recorded.
Overall net sales, driven mainly by volumes but also by the favorable price effect, increased by 21.6%, from €375.2 million to €456.1 million; Ebitda progressed by 37.7%, from €81.7 million to €112.5 million. The Czech koruna appreciation (+4.3%) and the other local currencies devaluation (zloty -0.4%, hryvnia -7.2%, ruble -1.8%) negatively impacted net sales for €3.7 million and Ebitda for €0.2 million.
United States of America
Group’s cement volumes sold at the end of September were down 0.7% from 9M-10, whereas ready-mix concrete output increased by 2.9%. The trend in cement average selling prices in local currency continued to be penalizing (-6.2%) but not as much in the ready-mix concrete sector (+0.1%). Overall net sales totaled €416.0 million versus €452.1 million and Ebitda decreased from €69.3 million to €40.7 million (-41.3%). The dollar weakness negatively impacted the two figures for €28.6 million and €2.8 million respectively. The profitability deterioration was attributable not only to the above volumes and prices trend, but also to the cost increases of energy factors and logistics, and the 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 increased by 14.7%, also thanks to the positive contribution of the new plant in Apazapan. Selling prices in local currency showed a favorable trend (+2.9%). Ready-mix concrete sales slightly contracted (-3.6%) but prices progressed by 5.7%. Net sales increased by 13.7%, from €155.6 million to €176.9 million, and Ebitda was up 3.7%, from €59.7 million to € 61.9 million. The devaluation of the Mexican peso negatively impacted the translation of the results into euro; at constant foreign exchange rate, net sales and Ebitda would have increased by 15.1% and 4.9% respectively.
In Italy, although selling price environment is now positive, serious structural problems make recovery of sales and consequently profitability unlikely in the last quarter of the year.
Central Europe should close 2011 with net sales on the rise, driven by volume effect, and operating results in improvement from the previous year.
In Eastern Europe, thanks to a recovery of the construction cycle which seems to be well set and to the higher production efficiency stemming from the investment plans recently concluded, we expect to close the current year with much better results.
In the United States of America, where cement demand is still sluggish, the low utilization of production capacity narrows the possibilities to pursue some price improvement. Consequently we estimate that recurring Ebitda will be in sharp decline.
In Mexico, prospects for the full year organic growth are positive, but the recent devaluation of the currency is partially jeopardizing such trend. Results are however expected in improvement.
Overall, based on the results reported in the third quarter, which confirm the 2-speed trend of our regional operations, we can reiterate for the full financial year 2011 the forecast of better recurring operating results compared with 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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