Results approved for the year ended December 31, 2009
Net profit of €171 million (-64%)
Operating margins remained at a satisfactory level
Capex of €244 million to expand capacity and boost competitiveness
Solid financial structure (gearing 31%)
Dividend proposal: €0.180 per ordinary share, €0.204 per savings share
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|Consolidated net profit||€m||139.5||395.3||-64.7|
The Board of Directors of Buzzi Unicem met today to examine the statutory and consolidated financial statements for the year ended December 31, 2009.
The credit crisis and the negative trend of real economy strongly penalized the construction sector and the cement and ready-mix concrete demand in the geographical areas of group’s operations, thus leading to a substantial contraction of the company’s results. In 2009, the group sold 25.5 million tons of cement (-20.4% vs. 2008) and 13.9 million cubic meters of ready-mix concrete (-18.3%). Due to the global dimension of the crisis our geographical diversification was not sufficient to oppose the negative business cycles the construction sector is facing. All geographical areas reported a demand contraction, with repercussions on selling prices in many countries. Italy suffered from the supply surplus in the residential sector and the lack of infrastructure projects which could underpin demand; Central Europe economies, in spite of the stimulus plans carried out by the governments, did not succeed in countering the investment cuts in industrial building. In the United States, the group, although maintaining a good profitability thanks to efficient plant management and production reorganization, suffered from the strongest contraction ever recorded in three years running by cement consumption. Eastern Europe emerging markets, which up to 2008 had contributed to the continuous improvement of results, in some cases significantly downsized their activities, with no possibility of lowering production costs. Mexico’s results, slightly positive in local currency, were penalized by the devaluation of the peso against the euro.
Consolidated net sales were down 24.1% from €3,520 million to €2,671.8 million in 2008. Changes in scope positively impacted for €37.6 million while foreign exchange accounted for a decrease of €87.2 million. Like for like, net sales would have decreased by 22.7%. Ebitda dropped to €541.7 million,-41.3% over €922.7 million in 2008. Changes in scope were positive for €5.6 million, while foreign exchange effect was negative for €20.9 million. The 2009 figure includes however €22.6 million of non-recurring income, referred mainly to the partial release of the provision set aside in Germany some years ago for the antitrust suit which came to an end in 2009. Excluding the non-recurring items Ebitda went down 43.3% (from €915.4 million in 2008 to €519.1 million), with Ebitda to sales margin at 19.4% (26.0% in 2008). The pressure on margins was intensified by the growth of production costs, mainly energy factors, which reached the apex in the first half of the year. In Ukraine, the continuous rise of natural gas price led to an operating cash flow negative by €4.5 million. The other Eastern Europe countries, despite the downturn in absolute value, confirmed good Ebitda to sales margins (25.2% in the Czech Republic, 25.7% in Poland) with a peak of excellence in Russia (42.6%). Recurring Ebitda contracted also in Central Europe countries and in Italy, mainly in the ready-mix concrete sector. The United States, notwithstanding a strong decline in volumes, posted an Ebitda to sales margin of over 21%. Mexico closed the year with operating results more positive in local currency, with Ebitda to sales margin at 38.7%, virtually unchanged from the previous year.
Amortization and depreciation amounted to €218.7 million vs. €225.0 million in 2008. Contributors to this income statement item were write-downs relating to the goodwill and plants of the cement sector in Italy for €7.1 million and to those of the ready-mix concrete in Italy for €1.2 million. Conversely in Mexico, in view of the adoption of IFRS for the local financial statements, property plant and equipment were written-up for €7.3 million. Ebit declined by 53.7% from €697.7 million to €323.0 million. Net financial expenses totalled €99.9 million vs. €66.4 million in 2008. The worsening was mainly due to a less favorable net effect of the more volatile components of the finance charges (foreign exchange differences, derivatives measurement). Gains on disposal of investments amounted to €6.2 million while equity in earnings of associates brought about an income of €5.9 million vs. €7.0 million in 2008. Profit before taxes reached €235.2 million, down 63.8% from €650.3 million in 2008. Income taxes came in at €63.8 million (€179.6 million in 2008) corresponding to an average tax rate virtually unchanged. Income statement reported a decline in net profit of €299.4 million, from €470.8 million to €171.4 million (-63.6%), of which €139.5 million attributable to the owners of the company (-64.7%).
Cash flow, gross of non-recurring positive and/or negative items, stood at €390.1 million vs. €695.8 million in 2008. As of December 31, 2009, net debt amounted to €1,209.3 million, up €149.5 million from €1,059.7 million at 2008 year-end. In 2009 the group paid out dividends for €96.2 million, €74.9 million thereof distributed by Buzzi Unicem SpA, and invested €406.0 million overall, €244.1 million thereof for capacity expansion projects and €8.0 million in equity.
As of December 31, 2009, total equity, inclusive of minorities, stood at €2,712.4 million vs. €2,705.5 at 2008 year-end. Consequently debt/equity ratio went from 0.39 to 0.45.
In 2009 the parent company Buzzi Unicem SpA reported a net profit of €112.6 million (€156.2 million in 2008) with cash flow at €158.0 million.
The decline of the building market brought to a 15.1% decrease of domestic deliveries of cement. Our cement and clinker volumes were down 16.4%, including exports which plunged by about 60%. Prices were down 6.0% from the previous year due to the very strong competition resulting from the continuous weakness of the market. In the ready-mix concrete sector, the output decreased by 13.7% vs. 2008 while selling prices were virtually unchanged (-0.4%).
Overall net sales in Italy decreased from €850.2 million to €706.6 million (-16,9%). During the year the company decided to sell part of its CO2 emission rights which were in excess due to the production downsizing, thus realizing operating revenues for €19.4 million. Ebitda came in at €92.7 million , down 35.4% from €143.4 million in 2008, which included a €7.0 million non-recurring income.
In Germany Dyckerhoff’s cement sales decreased by 13.3%. Ready-mix concrete recorded a more remarkable decline with volumes down 19.8%. Conversely, on the price front, the sales policies implemented to improve margins allowed the company to achieve an increase of 7.0% for cement and 8.5% for ready-mix concrete. The price/volume dynamics brought net sales to €528.0 million, down 11.2% from €594.8 million in 2008. Ebitda improved 13.2% to €116.3 million (€102.7 million in 2008). The conclusion of the antitrust suit allowed the partial release of the provision set aside in excess, for an amount of €37.4 million. Net of non-recurring items, recurring Ebitda decreased by 20.5%, dropping to €81.4 million (€102.4 million in 2008), also as a consequence of sizeable rises in electric power prices (+22%).
In Luxembourg, cement and clinker deliveries were down 8.3% while prices increased by 4.8%. Net sales came in at €83.0 million, down 7,1% vs. €89.3 million in 2008. Ebitda decreased by 18.9% to €14.1 million from €17.4 million in 2008 with Ebitda to sales margin declining to 17.0%, penalized by the hikes in fuel costs occurred in 2009.
In the Netherlands, ready-mix concrete volumes reached 0.9 million cubic meters (-22.8%). Net sales amounted to €112.7 million, lower by 15.2% than in the previous year (€132.9 million). The decrease is attributable for €5.4 million to the change in scope following the deconsolidation of Basal Belgie BVBA, a company operating in the aggregates sector in Belgium. Ebitda stood at €4.5 million (€7.2 million in 2008, -36.9%) with an Ebitda to sales margin slightly lower than the previous year’s one (4.0%).
In Poland group’s cement and ready-mix concrete sales were down 10.1% and 15.8% respectively. Average selling prices in local currency decreased slightly for cement (-1.2%) and more remarkably for ready-mix concrete (-9.2%). Market dynamics led to a 34.1% decrease of net sales which came in at €121.1 million from €183.7 million in 2008. Zloty devaluation strongly impacted net sales, net of which they would have been down by 18.8%. Ebitda stood at €31.2 million vs. €70.0 million in 2008 (-55.5%). At the end of 2009 the local antitrust authority inflicted a fine to seven cement producers, for alleged anti-competitive practices. The penalty referred to Dyckerhoff amounts to €15 million. The company has filed an appeal and the fine is to be paid only after the final ruling. With the additional provision of €6.8 million set aside in the year, the fine has been fully provided for in the financial statements. Net of this non-recurring item, Ebitda would have reached €37.9 million with Ebitda to sales margin lower than in the previous year, as a consequence of the hikes in the costs of electric power (+37%) and fuel (+21%).
In the Czech Republic and Slovakia, group’s cement sales were down 23.9%, with prices slightly up (+0.6%). Ready-mix concrete sector was strongly penalized, with volumes and prices declining by 31.6% and 1.3% respectively. Overall net sales amounted to €175.7 million, down 32.6% from €260.8 million in the previous year. Ebitda stood at €44.2 million vs. €73.2 million in 2008. Ebitda to sales margin consequently declined from 28.1% to 25.2%. The Czech koruna devaluation negatively impacted the translation of the results into euro; net of foreign exchange effect, net sales and Ebitda would have decreased by 29.4% and 35.8% respectively.
In Ukraine, cement and ready-mix sales closed the year with a contraction of 44.6% and 67.5% respectively. Unit average prices in local currency declined by 4.3% for cement and 6.6% for ready-mix concrete. Net sales came in at €75.3 million, down 64.0% over 2008 (€209.4 million), also as a consequence of the local currency depreciation (-44.8%). Ebitda which amounted to €49.9 million in 2008, was negative for €4.5 million. Profitability was jeopardized both by the strong drop of sales volumes and hence of production efficiency and by the trend of energy factors, especially natural gas, whose unit cost jumped by an additional 81% from 2008.
In Russia the 2009 cement production declined by 40.4% and prices in local currency were 28.1% lower than the 2008 average. In absolute value prices went back to international levels after the exponential growth of the years 2007-2008. Net sales at €98.8 million were down 63.0% vs. €267.3 million in the previous year. Ebitda strongly contracted from €173.2 million in 2008 to €42.1 million (-75.7%). Ebitda to sales margin, equal to 42.6%, was still very positive and at the top in the group.
United States of America
Sales realized by the group declined by 24.2% slightly less than the overall market, thanks to the presence in areas less hit by the real estate excess (initially positive, then negative). Ready-mix concrete volumes reported a lower contraction (-9.5%), due also to the consolidation for the full year of the Dorsett subsidiary based in Houston, TX. Cement prices showed a negative trend (-4.5%) while ready-mix concrete ones were stable (-0.2%). Overall net sales came in at $854.8 million (-22.5%) corresponding to €612.8 million (-18.3%). In spite of the dollar depreciation during the year, foreign exchange effect remained favorable, positively impacting net sales for €31.7 million while the wider scope of consolidation favorably accounted for €35.8 million. Profitability declined to 21.4% causing Ebitda to decline by 36.2% from €205.8 million to €131.3 million. Net of non-recurring charges (€5.5 million provision for environmental risks in 2009) the contraction would have been of 33.5% and Ebitda to sales margin would have reached 22.3%.
Mexico (50% consolidation)
The associate Corporación Moctezuma closed the year with sales volumes virtually stable (-0.7%) and prices rising by 3.2%, in line with inflation. Net sales and Ebitda in local currency posted an increase of 1.5% and 0.9% respectively. The weakening of the peso once again penalized the translation of the results into euro: net sales decreased by 12.1% over 2008, from €205.1 million to €180.4 million and Ebitda was down 12.5% to €69.9 million (€79.9 million in 2008). Ebitda to sales margin remained stable (38.7% in 2009 vs. 38.9% in 2008), confirming the excellent profitability of the Mexican operations.
In most countries of group’s operations, the future trend of the construction sector continues to feature a high degree of uncertainty, at least in the short-term. In the first months of 2010 trading conditions did not show signs of improvement from the previous year. The economies in our markets are still weak and as of now a clear turnabout has not appeared yet. Consequently the expected and desirable cycle’s recovery will possibly materialize only from the second part of the year and just in some geographical areas.
In Italy, cement demand is expected to further slow down due to the decline of residential and non-residential building and the lack of major infrastructure works. Trading difficulty will tend to negatively impact selling prices, thus additionally penalizing profitability. In the first six months of the year the deflation of energy costs should continue to show a favorable effect, which however will mitigate in the second half.
Central Europe markets will show a somewhat different trend. We expect demand to remain weak in Germany and the Netherlands, in a stable pricing environment after the increases achieved during 2009. Conversely, in Luxembourg, construction investments are rather unlikely to further contract and also by means of a wise policy of exports to neighbouring countries, our sales volumes should improve.
Among Eastern Europe countries we expect Poland to continue benefiting from the EU funds for infrastructure development, which presumably should increase cement consumption in the country. In the Czech Republic , the unfavorable cycle of investments, mainly in the industrial sector, is likely to continue, with negative effects on the sale of building materials. In Russia and Ukraine, after the dramatic downsizing occurred in 2009, the local construction sector can hardly get further worse. The scope of the recovery, if any, is however strictly dependent on the capability of the two countries to implement measures of economic stabilization and growth sustainability.
In the United States, the early indicators show a substantial stability of the economic trends rather than an actual recovery. Investments in residential and non-residential building are expected to decline also in 2010; however the infrastructure plans stemming from the economic stimulus, if indeed implemented in the current year, should ensure more dynamism to the construction sector and cement demand (+4/5%).
In Mexico, the construction sector showed no substantial changes in 2009, in spite of the difficult national economic environment. Investment in public works, pursued by the central government for the country development, should allow for a slight increase of cement consumption in 2010, but much will depend also on the strength of a possible recovery in the United States, which would favor the local economic relaunching.
Consequently, for the year 2010, the economic scenario looks complex and of difficult interpretation. Moreover, for the time being predictions are hard to make on the selling prices front, which even more than demand can determine the actual trend of results. Overall expectations on the price level are not positive and unit revenues are very likely to remain under pressure in markets of importance for the group, such as the United States and Italy.
Finally, we believe that, at group’s level, the current year will close with operating results and net profit lower than the ones posted in 2009. The plans already implemented will allow us to go through a difficult 2010 minimizing the negative impacts of the crisis and to approach the cycle recovery with a degree of operating efficiency greater than the one, already quite high, which has always distinguished our group.
The Board of Directors will propose to the Annual General Meeting, convened in first call for April 28, 2010 the distribution of a dividend of €0.180 to ordinary shares and of € 0.204 to savings shares. The dividend payment, if approved by the Shareholders’ Meeting, will be effected as from May 27, 2010 (with coupon detachment on May 24, 2010).
The Board of Directors resolved to ask the Shareholders’ Meeting to authorize (and thus revoke the authorization adopted on April 28, 2009 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 authorization is also required to allow the company to purchase treasury shares in order to use them as a payment in extraordinary transactions, also of equity interest swap or for distribution, for a consideration or without consideration, to directors and employees of the company or its subsidiaries as well as for allocation to shareholders without consideration. The authorization 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 €16 for savings shares and from a minimum of €0.60, equal to par value, to a maximum of €24 for ordinary shares, or at the highest price allowed by the market general rules approved by Consob by resolution no. 16839 of 19 March 2009, in case these rules are adopted by the company. The maximum possible purchase expense is equal to €144 million.
The treasury shares shall be purchased on the market, according to Borsa Italiana rules. Moreover the company can avail itself also of the procedure provided by the market rules approved by Consob by resolution no. 16839 of 19 March 2009.
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 in extraordinary transactions, also of equity interest swap or for distribution, for a consideration or without consideration, to directors and employees of the company or its subsidiaries ex art. 2359 of the civil code as well as for allocation to shareholders without consideration.
Based on the previous authorization of the ordinary Shareholders’ Meeting of April 28, 2009, as of today no transactions have been effected on treasury shares.
As of today the company owns #500,000 ordinary treasury shares and #257,180 savings treasury shares equal to 0.37% of capital stock.
Moreover 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 2009.
Finally the Board of Directors resolved to ask the extraordinary shareholders’ meeting to amend article 9 of the by-laws in order to re-introduce, following the new law provisions adopted by the Legislative Decree no 27/2010, the possibility to convene the shareholders’ meeting for the approval of the financial statements within 180 days from the closing of the corporate year, should the law requirements exist.
Senior Notes and Bonds on maturity
In early December 2009 the issue of the bond “Buzzi Unicem S.p.A. € 350,000,000 – 5.125% Notes due 2016” for a nominal amount of €350 million with a 7-year maturity was completed. The notes, placed with institutional investors only and with a minimum denomination of €50,000 pay a fixed annual coupon of 5.125%.
In the 18 months subsequent to December 31, 2009, the following repayments of bond principals shall be effected:
- on May 29, 2010, US$58.3 million referred to the Senior Notes Series A issued by the subsidiary RC Lonestar Inc. in 2002.
- on June 1, 2010, US$315.5 million referred to the Bond issued by the subsidiary Lonestar Industries Inc. in 2000.
- on October 20, 2010, US$18.3 million referred to the Senior Notes Series C issued by the subsidiary Alamo Cement Company in 2004.
- on May 29, 2011, US$80.0 million referred to the Senior Notes Series B issued by the subsidiary RC Lonestar Inc. in 2002.
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 2009, the lenders have the option to require the advance repayment as from December 15, 2010. In 2009 €1.0 million was repaid. As of now, no repayment of significant amount is expected before the final maturity of the loan.
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
The Buzzi Unicem 2009 financial statements will be illustrated during a conference call to be held tomorrow, March 24 at 10.00 am Italian time.