Results approved for the year ended December 31, 2008
Net profit at €471 million (-12%)
Favorable trend in Central and Eastern Europe
Strong slowdown in the fourth quarter
Dividend proposal: €0.360 per ordinary share, €0.384 per savings share
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|Consolidated net profit||€m||395.3||458.5||-13.8|
The Board of Directors of Buzzi Unicem met today to examine the statutory and consolidated financial statements for the year ended December 31, 2008.
The worsening of the financial crisis and the consequent global contraction of economic development affected the company’s results, halting its growth. In 2008, cement sales totalled 32.1 million tons, -5.8% over 2007. Sales were positive in Poland, the Czech Republic and Germany while a downward trade was recorded in all the other countries, with a strong slowdown in Italy and the United States and a slight decrease in Russia and Mexico.
Ready-mix concrete output at 17.0 million cubic meters was only slightly lower than in 2007 (-0.6%) thanks to US and German contribution, mainly as a consequence of changes in the scope of consolidation, and to favorable trading conditions in the Netherlands, the Czech Republic/Slovakia, Poland and Mexico. Italy was again the weakest market, completely offsetting the positive performance of the other countries; a negative trend was recorded also in Ukraine.
Consolidated net sales came in at €3,520.2 million versus €3,496.1 million (+0.7%); changes in scope of consolidation positively impacted for €48.5 million, while foreign exchange accounted for a decrease of €67.7 million. Like for like, net sales would have increased by 1.2%. The improvement was mostly attributable to Dyckerhoff’s countries as well as to the inclusion in the scope of consolidation of some new important operations in the ready-mix concrete sector.
Ebitda decreased to €922.7 million, -11.8% over €1,046.3 million in 2007, which included €61.2 million of non-recurring income. Consequently, net of non-recurring items Ebitda went down 7.1% (from €985.1 million in 2007 to €915.4 million), with Ebitda to sales margin at 26.0% (28.2% in 2007). Changes in scope were positive for €5.3 million, while foreign exchange effect was negative for €22.2 million. Eastern Europe countries reported an overall growth of 33,0%, with peaks of excellence in Russia and Poland. Also Central Europe markets (Germany, Luxembourg, the Netherlands) posted an improved recurring Ebitda. In Mexico the organic growth trend slowed down and the year closed with an Ebitda lower than in 2007. Italy’s contribution was negative by €63.0 million compared with the previous year. In the United States, Ebitda declined by €98.2 million (-32.3%) penalized by the falling dollar; at constant exchange rate a 27.4% decrease would have been posted.
Amortization and depreciation amounted to €225.0 million vs. €210.9 million in 2007. Ebit declined by 16.5% from €835.3 million to €697.7 million. Net financial expenses totalled €66.4 million vs. €22.2 million in 2007. The worsening was due to a higher utilization of the available credit facilities and to a less favorable net effect of the more volatile components of the finance charges. Gains on disposal of investments amounted to €12.0 million while equity in earnings of associates brought about an income of €7.0 million vs. €12.4 million in 2007. Profit before taxes reached €650.3 million, down 21.2% from €824.8 million in 2007. Income taxes came in at €179.6 million (€288.3 million in 2007) thanks to a more favorable average tax rate. Income statement reported a decline in net profit of €65.7 million, from €536.5 million to €470.8 million (-12.3%), of which €395.3 million attributable to the equity holders of the company (-13.8%).
Cash flow, gross of non-recurring positive and/or negative items, stood at €695.8 million vs. €747.5 million in 2007. As of December 31, 2008, net debt amounted to €1,059.7 million, up €438.5 million from €621.2 million at 2007 year-end. In 2008 the group paid out dividends for €127.6 million, €87.2 million thereof distributed by Buzzi Unicem SpA, and invested €853.3 million overall, €283.1 million thereof for capacity expansion projects and €333.5 million in equity instruments.
As of December 31, 2008, total equity, inclusive of minorities, stood at €2,705.4 million vs. €2,513.4 at 2007 year-end. Consequently debt/equity ratio went from 0.25 to 0.39.
In 2008 the parent company Buzzi Unicem SpA reported a net profit of €156.2 million (€149.2 million in 2007) with cash flow at €194.0 million.
Cement and clinker volumes were down 13.2%, including exports which fared worse than the average. Prices which had shown a positive trend in the first half of the year, gradually and increasingly declined. Overall net sales in Italy amounted to €850.2 million, down 11.6% over 2007 and Ebitda decreased 30.5% to €143.4 million with Ebitda to sales margin at 16.9% (21.5% in 2007). Net of €7.0 million non-recurring income, Ebitda declined to €136.4 million (-33.9% over 2007) and Ebitda to sales margin to 16.0%.
In Germany cement sales were up 2.1%, also thanks to exports to neighbouring countries; average price level improved by 6.7% confirming the previous year’s favorable trend. The ready-mix concrete sector recorded a remarkable progress, with sales volumes up 11.9%, mainly thanks to a wider scope of consolidation, and prices rising 10.6% vs. the previous year. Net sales in Germany stood at €594.8 million (€514.9 million in 2007, +15.5%). Changes in scope were positive for €20.0 million. Recurring Ebitda improved 27.1% to €102.4 million from €80.5 million in 2007.
In Luxembourg, cement and clinker volumes were virtually stable (-1.0%) with an average increase in pricing of 5,1%. Net sales came in at €89.3 million, down 2.7% vs. €91.7 million in 2007. The decrease was only due to the change in the scope of consolidation (sale of Marbrerie Jacquemart in 2007), net of which net sales would have increased by 4.8%. Ebitda decreased by 19.2% to €17.4 million from €21.5 million in 2007 equal to 19.5% of sales. At constant scope the decline would have been of 25.5%. The worsening in profitability is a consequence of higher production costs as well as some extraordinary maintenance works.
In the Netherlands, ready-mix concrete volumes reached 1.2 million cubic meters (+17.7%). Net sales amounted to €132.9 million, slightly lower than in the previous year (€140.6 million), due to a downsizing of the trading activities in the aggregates business. Ebitda stood at €7.2 million (€8.1 million in 2007) with an Ebitda to sales margin similar to the previous year’s one (5.4%).
In Poland group’s cement sales were up 9.8%, supplemented by inter-group trading from the Czech Republic. On the rise was also the output of ready-mix concrete (+4.6%). Average selling prices improved by 13.2% in local currency. Thus overall net sales were up 28.7% to €183.7 million vs. €142.8 million in 2007. Ebitda at €70.0 million (€52.1 million in 2007), posted a remarkable increase of 34.3%, gross of the favorable foreign exchange effect. Also Ebitda to sales margin improved, confirming an operating efficiency among the best in the group.
In the Czech Republic and Slovakia, cement sales were up 2.1%. Ready-mix concrete volumes exceeded 2.4 million cubic meters (+5.6%). Overall net sales reported an increase of 20.8% from €215.8 million to €260.8 million, favored by better average pricing both for cement (+5.0%) and ready-mix concrete (+2.3%). Ebitda reached €73.2 million vs. €70.3 million in 2007. The 2007 figure benefited from €3.4 million non- recurring income for the disposal of some lines of business in the ready-mix sector.
In Ukraine, cement and ready-mix sales decreased by some percentage points, i.e. 2.2% and 6.9% respectively. Unit average prices in local currency reported a conspicuous rise both for cement (+33.9%) and ready-mix concrete (+22.7%). Net sales came in at €209.4 million, up 16.8% over 2007 (€179.2 million), but despite such an improvement, Ebitda declined both in absolute value (-€8.2 million) and in percentage of sales (from 32.4% to 23.8%).
In Russia the 2008 cement production declined by more than 10%. However thanks to a more favorable geographical exposure (Ural regions) the group could maintain a sales level only slightly lower (-3.0%) than the one recorded in 2007. Average selling prices in local currency reported an average increase on an annual basis of 45.7%. Net sales at €267.3 million were up 35.1%, vs. €197.9 million in the previous year. Ebitda increased from €94.7 million to €173.2 million (+82.9%); €5.5 million logistics and assembly costs for the new production line were booked to income statement (€30.0 million in 2007). Ebitda to sales margin jumped to 64.8% (47.9% in 2007), at the top in the group.
United States of America
Cement sales were down 10.5%. In the ready-mix concrete, thanks to the acquisitions in the sector, output grew by 18.9%. Overall net sales, penalized by a limited pricing decline (-3.2% in local currency) came in at $1,103.1 million (-5.4%) corresponding to €750.0 million (-11.9%). Foreign exchange negatively impacted for €54.8 million while the wider scope of consolidation favorably accounted for €35.8 million.
Ebitda declined by 32.3% from €304.1 million to €205.8 million with Ebitda to sales margin down to 27.4% from 35.7% in 2007.
Mexico (50% consolidation)
The associate Corporación Moctezuma closed the year with a 1.7% decrease in cement sales, while prices continued to show a fairly good improvement (+5.7%), in line with inflation. Net sales and Ebitda in local currency posted an increase of 5.3% and a decrease of 5.5% respectively. The weakening of the peso once again penalized the translation of the results into euro: net sales decreased by 3.2% over 2007, from €212.0 million to €205.1 million and Ebitda was down 13.1% to €79.9 million (€91.9 million in 2007). Ebitda to sales margin declined from 43.4% to 38.9% due to a higher pressure on costs.
In Italy, cement demand is expected to slow down by around 10%, due to the lack of new starts of public works and the decline of residential building. However we do not rule out some improvement in selling prices, only partly sufficient to make up for the negative impact that lower volumes have on profitability. The energy costs deflation under way will more positively affect income statement starting from the second part of the year.
In Central Europe markets (Germany, Luxembourg, the Netherlands) the trend in construction investment is expected to fall in the range of 5%. Consequently demand is likely to weaken, although not too abruptly. The market might accept some price increases and therefore the performance of our operations should be lower only by few percentage points vs. 2008.
Eastern Europe countries (the Czech Republic, Poland, Ukraine, Russia) will cease having the driving effect on profits that distinguished the last two years, although, in some markets, profitability will remain at a satisfactory level. We expect weak volumes in Russia and a very difficult situation for the building industry in Ukraine. In these two countries pricing trend is expected to be unfavorable, especially in Russia where the level will clearly drop compared with the first quarter 2008. In the two EU countries (the Czech Republic and Poland) trading and pricing slowdown should be less marked. Following the recent news of the sizeable devaluation which has affected most of the Eastern Europe currencies (hryvnia 40%, zloty 23%, rouble 22% in the first two months of 2009), the translation of the results into euro is likely to be further penalized by the negative foreign exchange effect.
In the United States, the economic situation shows no tangible signs of recovery. The crisis of the residential real estate market should last throughout the year 2009 and cement consumption is again expected to decline by a double-digit percentage. Lower selling volumes will continue to impact imports, but mainly production levels, with a consequent worsening of operating income. The stimulus package launched by president Obama is thought to have the first positive effects starting from the last part of the year.
In Mexico economic growth expectations for the year are negative (–3% approx); however the infrastructure and welfare development plan pursued by the government should be maintained. Our associate Corporación Moctezuma prospects are for sales volumes in slight decline over the ones posted in 2008, combined with a recovery of average unit revenues. Operating results in local currency will likely be lower than those of the previous year, but still satisfactory. We expect a quite penalizing effect from the foreign exchange fluctuation (in the first two months of 2009 the peso lost 16% against the euro).
For the year 2009, the economic scenario is difficult and tricky, since the scope and globality of the crisis will undo the advantages of the group’s good geographical diversification. Consequently, notwithstanding the present uncertainty of all estimates, we believe that, at consolidated level, the year 2009 will close with recurring operating results 20/30% lower than the ones posted in 2008; currency volatility will play a key role in determining the actual decline. Hope remains that trading conditions will start to improve in the last part of the year, especially in the countries most stricken by the crisis during 2008 (United States of America, Italy).
The Board of Directors will propose to the Annual General Meeting, convened in first call for April 28, 2009 the distribution of a dividend of €0.360 to ordinary shares and of €0.384 to savings shares. The dividend payment, if approved by the Shareholders’ Meeting, will be effected as from May 21, 2009 (with coupon detachment on May 18, 2009).
The Board of Directors resolved to ask the Shareholders’ Meeting to authorize (and thus revoke the authorization adopted on May 13, 2008 to the extent of the non-used portion) the buy-back of a maximum of additional #4,000,000 ordinary and/or savings shares as well as the total and/or partial exercise of the pre-emption right pertaining to treasury shares in portfolio to the extent of the purchase of additional #2,000,000 ordinary and/or savings shares, besides those for the buy-back of which the authorisation is asked; the authorization is asked also for the sale of the treasury shares held by the company.
The above authorization to the purchase, as well as to the exercise of the pre-emption right and the disposal of treasury shares is required to allow the company to intervene in case of fluctuation of the shares price beyond the normal market volatility, within the extent allowed by the law and the market rules, as well as to give the company an instrument for liquidity investment. The authorisation to the disposal of treasury shares is also required to allow the company to use savings treasury shares under the MBO allocation scheme for granting to employees also without consideration.
The authorisation is asked for a length of 18 months as from the Shareholders’ Meeting approval.
The proposed purchase price, inclusive of additional charges, ranges from a minimum of €0.60, equal to par value, to a maximum of €23 for savings shares and from a minimum of €0.60, equal to par value, to a maximum of €32 for ordinary shares.
Consequently the maximum possible purchase expense is equal to €192 million.
The treasury shares shall be purchased on the market, according to Borsa Italiana rules.
The treasury shares selling transactions can be effected at any time, wholly or partly, in one or several transactions, through sale of the same or as a payment for stock acquisition within the company’s investment policy.
As per previous authorization of the ordinary Shareholders’ Meeting of May 13, 2008 #123,000 ordinary treasury shares and #150,000 savings treasury shares have been overall purchased and #45,025 savings treasury shares have been assigned to the managers of the company and its subsidiaries under the MBO scheme adopted for the years 2004-2008.
As of today the company owns #500,000 ordinary treasury shares and #305,475 savings treasury shares equal to 0.39% of capital stock.
The Board of Directors approved the annual report on the company’s Corporate Governance system, which will be made available at the same time as the draft of the statutory financial statements and the consolidated financial statements of the year 2008.
Stock grant plan
The Board of Directors resolved to ask the Shareholders’ Meeting to approve a new allocation scheme for assignment of Buzzi Unicem’s savings shares to the managers of the company and its subsidiaries who attains the individual and corporate objectives annually fixed.
The three-year scheme, linked to the attainment of the objectives in the years 2009-2011, aims at implementing an incentive and loyalty system of the above employees based on the achievement of individual and corporate goals previously set, which would involve them in shareholder value growth and consolidate their professional contribution to group’s decision-making processes.
The scheme relates to #1,000,000 savings shares to be allocated during the three-year period of the plan through assignment of savings treasury shares or newly issued savings shares. In this respect the Board of Directors resolved to ask the Shareholders’ Meeting, also in an extraordinary session, the authorization, till April 30, 2012, to increase without consideration the share capital up to maximum €600,000 through the issue of up to maximum #1,000,000 savings shares to be allocated to the scheme recipients.
Senior Notes and Bonds on maturity
During the year 2008 no new senior notes and bonds were issued by the companies of the group. In the 18 months subsequent to December 31, 2008, the following repayments of bond principals shall be effected:
- on May 29, 2009, US$58.3 million referred to the Senior Notes Series A issued by the subsidiary Buzzi USA Inc. in 2002;
- on October 20, 2009, US$18.3 million and €15.0 million referred to the Senior Notes Series C issued by the subsidiary Alamo Cement Company in 2004.
- on May 29, 2010, US$58.3 million referred to the Senior Notes Series A issued by the subsidiary Buzzi USA Inc. in 2002.
- on June 1, 2010, US$ 315.5 million referred to the Bond issued by the subsidiary Lonestar Industries Inc. in 2000.
The mezzanine loan issued by the subsidiary Dyckerhoff AG for a principal amount of €200.0 million will be due at the end of 2012. However, upon attainment of some balance sheet ratios based on the financial statements 2007, the lenders have the option to require the advance repayment as from December 15, 2008.
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