01 April 2011

Results approved for the year ended December 31, 2010

Write-downs impact (€113 million) causes a net loss of €41 million

Operating margins penalized by price dynamics, with volumes on the rise from the second half

Completion of the projects to expand capacity and boost competitiveness

Dividend proposal: €0.03 to savings shareholders only, to further strengthen the financial structure

Consolidated data

                2010         2009         % 10/09
Net sales       €m       2,648.4       2,671.8       -0.9
Ebitda       €m       387.0       541.7       -28.6
Net profit       €m       (41.4)       171.4       n.a.
Consolidated net profit       €m       (63.5)       139.5       n.a.
                12/ 10       12/09       Change
Net debt       €m       1,266.9       1,209.3       (57.7)

The Board of Directors of Buzzi Unicem met today to examine the statutory and consolidated financial statements for the year ended December 31, 2010.

In 2010 emerging countries, with China in the foreground, greatly contributed to the recovery of the global economy, while both the United States and the other countries with more mature economies showed a very slow upturn. Unfortunately in the Oecd “rich” countries, employment prospects are much less encouraging than those of growth and without a virtuous mechanism of job creation the real exit from global recession will not be quick. Sovereign debt crisis, triggered by some euro-zone countries, and the increased constraints to public spending in infrastructures penalized the construction sector and hence cement and ready-mix concrete demand in the areas of our operations; however, starting from the second half, stronger indications appeared of a growing confidence in brighter scenarios and not distant cycles of growth.

In 2010, the group sold 26.6 million tons of cement (+4.0% vs. 2009) and 14.4 million cubic meters of ready-mix concrete (+3.5%).

The negative cycle which in 2009 had affected the construction sector both in many emerging countries and in more advanced economies, thus thwarting the advantages of geographical diversification, was still pervading and latent. However, especially in the second part of the year, different dynamics of economic growth appeared in the various markets, with evident improvements in sale volumes. In Italy demand in all segments continued to be penalized and the potential anti-cyclical effect of public works was hampered by reduced spending power. Conversely, Central Europe economies, whose national budgets are structurally more solid, were capable of getting advantage from the revival of foreign trade, especially towards newly industrialized countries and started to show promising signs of growth. The United States benefited from the public infrastructure projects included in the stimulus packages but non-residential building remained very depressed, due to the widespread cuts in investments carried out by the private sector, and the residential segment was still suffering from the consequences of the housing bubble which burst some years ago. Eastern Europe emerging countries, after a drastic downsizing of activities, which lasted till the first half of 2010, brilliantly reversed the sale volumes trend, while price dynamics remained quite negative. Mexico posted satisfactory results, in progressive improvement starting from the second half, as a result of positive sale volumes trend and stable prices and thanks to the local currency strengthening against the euro.

Consolidated net sales were down 0.9% from €2,671.8 million in 2009 to €2,648.4. Changes in scope positively impacted for €36.3 million and foreign exchange accounted for an increase of €84.4 million. Like for like, net sales would have decreased by 5.4%. Ebitda dropped to €387.0 million, -28.6% over €541.7 million in 2009. Changes in scope were positive for €1.0 million and foreign exchange effect was favorable for €20.7 million. The 2010 figure, however, includes €11.2 million of non-recurring charges referred mainly to the write down of the Oglesby, Illinois cement plant. Excluding the non-recurring items, Ebitda went down 23.3% (from €519.1 million to €398.3 million), with Ebitda to sales margin at 15.0% (19.4% in 2009). The pressure on margins was mainly attributable to the increased price weakness, reported in almost of markets of presence, sharpened by a marked inflation of fuel costs, in the second half of the year, and a protracted underutilization of production capacity. Ukraine was the only country which still reported a negative Ebitda (-€10.5 million in 2010 vs. -€4.5 million in 2009): the weakness of selling prices combined with the protracted commissioning works to switch the plants from natural gas to coal did not allow to fully benefit from the expected cost savings. In the Czech Republic, Ebitda shrank considerably but Ebitda to sales margin remained higher than average (20.6%), as well as in Poland (25.8%) and Russia (32.0%) whose markets were favored by a good sales dynamics. Recurring Ebitda slightly contracted also in Central Europe countries, both in absolute value and in percentage, taking into account that the Netherlands was impacted by some corporate restructuring charges. In Italy, the average price level in the second half was aligned with that of production cash costs and the poor profitability of 5.3% was almost entirely attributable to the sale of CO2 emission rights which, based on the output, were surplus. In the United States, the unfavorable pricing effect and a sales mix formed by lower value-added products brought Ebitda to sales margin down to 16.6% from 22.3% in 2009. Mexico closed the year with slightly lower operating results in local currency, and with Ebitda to sales margin at 36.2%, some points worse than the 2009 figure, mainly due to energy factors and fuel inflation.

Amortization and depreciation amounted to €386.7million vs. €218.7 million in 2009. Contributors to this income statement item were impairment of property, plant and equipment located at the Oglesby, Illinois cement plant for €150.9 million and other tangible and intangible assets for a total of €13.0 million. Such write-downs virtually nullified Ebit for the year, which came in at €0.3 million vs. €323.0 million in 2009. Net finance costs totalled €103.6 million vs. €99.9 million in 2009. The worsening was mainly due to a longer average length of the loans and to the increase of net debt in absolute value. Gains on disposal of investments were not material (€6.2 million in 2009) while equity in earnings of associates brought about a much reduced income of €0.6 million from €5.9 million in the previous year. As a consequence of the above, loss before taxes reached €102.1 million vs. a profit before taxes of €235.3 million in 2009. After positive income taxes for €60.6 million deriving from both deferred taxes effect and tax income from previous years, income statement reported a loss of €41.4 million compared with a net profit €171.4 million in the previous year. Loss attributable to owners of the company amounted to €63.5 million vs. a profit of €139.5 million in 2009.

Cash flow, gross of non-recurring positive and/or negative items, stood at €345.3 million vs. €390.1 million in 2009. As of December 31, 2010, net debt amounted to €1,266.9 million, up €57.7 million from €1,209.3 million at 2009 year-end. In 2010 the group paid out dividends for €46.3 million, €37.9 million thereof distributed by Buzzi Unicem SpA, and invested €268.2 million overall, €162.8 million thereof for capacity expansion or special projects.

As of December 31, 2010, total equity, inclusive of non-controlling interest, stood at €2,803.7 million vs. €2,712.4 at 2009 year-end. Consequently debt/equity ratio remained at 0.45.

In 2010 the parent company Buzzi Unicem SpA reported a net profit of €44.3 million (€112.6 million in 2009) with cash flow at €82.6 million.

The long-lasting crisis of the building market brought to a decrease of domestic consumption of cement for the fourth year running. Our cement and clinker volumes were up 5.5%, mainly driven by exports and clinker sales. Selling prices, due to a weak demand and a fierce competition, plummeted till the end of summer, leading to a progressive decline by over 22% from the previous year. In the ready-mix concrete sector, the output decreased by 4.6% vs. 2009. Thanks to a clear and effective sales policy, based on product quality and service, selling prices declined only by 3.9%.

Overall net sales in Italy decreased from €706.6 million to €614.2 million (-13.1%). During the year the company decided to sell CO2 emission rights which were in excess due to the modest output, thus realizing operating revenues for €31.0 million. Ebitda came in at €32.5 million, down 64.9% from €92.7 million in 2009.

Central Europe
In Germany, our cement deliveries were virtually stable (+0.4%) and combined with a 3.1% fall in price average level. Ready mix-concrete sector posted a 20.5% growth, 15% of which due to addition in the scope of consolidation (acquisition of SIBO group), while prices were down by 4.9%. Thus overall net sales increased from €528.0 million in 2009 to €548.5 million in 2010, up 3.9% (-2.5% at constant scope). Net of non recurring items booked in 2009, recurring Ebitda decreased by 6.2%, dropping to €76.3 million (€81.4 million in 2009), penalized by rises in fuel prices (+6%).

In Luxembourg, cement and clinker volumes sold, exports included, showed a positive development (+7.8%) and prices confirmed the favorable trend (+1.3%). Overall net sales came in at €92.3 million vs. €83.0 million in the previous year (+11.3%) . Ebitda increased by 16.0% to €16.4 million from €14.1 million in 2009 with Ebitda to sales margin improving to 17.8% from 17.0% in 2009, favored by the deflationary trend in fuel and energy costs. Profitability was positively impacted by the new clinker grinding capacity at Esch-Sur-Alzette, which allowed to replace clinker sales with cement sales, thus favorably changing the average unit revenue mix.

In the Netherlands, ready-mix concrete volumes at 0.9 million cubic meters were virtually stable (+1.4% vs. 2009). Net sales amounted to €113.2 million, higher by 0.5% than in the previous year (€112.7 million). The increase was attributable for €2.5 million to the change in scope. Ebitda decreased to €0.6 million from €4.5 million in 2009, taking into account the €1.5 million restructuring charges which impacted income statement.

Eastern Europe
In Poland group’s cement sales were up 7.3% with a high utilization of our production capacity and ready-mix concrete volumes increased by 5.3%. However, cement prices in local currency decreased by 7.5% from the previous year, driven down by the first-half poor demand and by newly opened capacity. Price decline was more marked in the ready-mix concrete sector (-10.1%). Such market dynamics led to a 6.8% increase of net sales which came in at €129.3 million from €121.1million in 2009. Zloty revaluation strongly impacted net sales, net of which they would have been down by 1.4%. Ebitda stood at €33.4 million vs. €31.2 million in 2009 (+7.0%). The favorable trend in energy costs (fuel -3%, electric power -9%) contributed to underpin results for the year. Net of the 2009 non-recurring items, Ebitda would have decreased by 11.9% from the previous year.

In the Czech Republic, our sales contracted by 6.1% for cement and 8.1% for ready-mix concrete, Slovakia included, while prices in local currency declined by 9.9% and 3.5% respectively. Overall net sales amounted to €159.4 million, down 9.3% from €175.7 million in the previous year. Ebitda stood at €32.8 million vs. €44.2 million in 2009. Ebitda to sales margin consequently declined from 25.2% to 20.6%. Among operating expenses, to be remarked the deflationary trend of fuel cost and the increase of energy (+7%). The Czech koruna revaluation positively impacted the translation of the results into euro; net of foreign exchange effect, net sales and Ebitda would have decreased by 12.7% and 29.5% respectively.

In Ukraine, after a weak first quarter, cement and ready-mix sales progressively improved and closed the year with an increase of 11.0% and 19.0% respectively. The high production capacity available in the country negatively impacted average selling prices that declined by 9.9% for cement and 4.6% for ready-mix concrete. Net sales came in at €81.5 million, up 8.3% over 2009 (€75.3 million), also as a consequence of the local currency appreciation (+5.3%). Ebitda which amounted to -€4.5 million in 2009, was still negative for €10.5 million. The works for the start-up of the new equipment to use coal as a main fuel rather than gas in both cement plants were more difficult and onerous than expected: Although the differential advantage over gas is unchanged, the original cost of coal progressively increased. Moreover the previous year’s operating profitability had benefited from the release of a provision for legal claims of €4.5 million at the end of 2009.

In Russia the 2010 cement sales were up by 35.1%, with a steep increase mainly during the second half of the year, while prices in local currency were 17.6% lower than the 2009 average. Net sales at €124.1 million were up 25.6% vs. €98.8 million in the previous year. Net of foreign exchange effect, the increase would have been of 14.6%. The pricing unfavorable dynamics and the hikes in fuel (+21%) led to a contraction of Ebitda from €42.1 million in 2009 to €39.7 million (-5.7%). Expressed in local currency Ebitda posted a 14.7% decrease. Consequently Ebitda to sales margin declined by some percentage points and came in at 32%, however still very positive and at the top in the group.

United States of America
Sales realized by the group declined by 1.3%, in line with the overall domestic market. Ready-mix concrete volumes instead increased by 6.5%. Both cement and ready-mix concrete selling prices showed a negative trend, decreasing by 8.8% and 7.6% respectively. Overall net sales came in at €600.9 million (-1.9%). Thanks to the dollar appreciation during the year, foreign exchange effect remained favorable, positively impacting net sales for €29.8 million. Fuel prices trend was favorable, while electric power costs significantly increased. Moreover the protracted underutilization of the production capacity did not allow to improve unit production costs. Ebitda thus declined by 32.4% from €131.3 million to €88.7 million, with Ebitda to sales margin at 14.8% vs. 21.4% in 2009. Net of non-recurring charges (€11.2 million in 2010 referred to the write-down of the Oglesby plant), the contraction would have been of 27.0% and Ebitda to sales margin would have reached 16.6%.

(50% consolidation)
The associate Corporación Moctezuma closed the year with sales volumes up 2.1% and prices virtually stable (+0.3%). Net sales and Ebitda in local currency posted an increase of 5.3% and a decrease of 1.7% respectively, due to growing strain on energy costs. The revaluation of the peso favored the translation of the results into euro: net sales increased by 18.3% over 2009, from €180.4 million to €213.4 million and Ebitda was up 10.4% to €77.2 million (€69.9 million in 2009). Ebitda to sales margin remained quite stable (36.2% in 2010 vs. 38.7% in 2009), confirming the excellent profitability of the Mexican operations.

The sales volume recovery recorded in the second half of the year is probably an indication of a turnabout in our sector’s economic activity, but risks associated with pricing trend and energy costs inflation are still very real in most countries of group’s operations.

In general, the first months of the current year confirmed a favorable trend in sales, which can be only partially attributable to the milder and drier weather conditions compared with the same period a year earlier. The expected cycle’s recovery and its intensity can be better assessed only starting from the second part of the year and greatly depend on whether the price increases which are being tentatively implemented will stick.

In Italy cement demand should remain at the same level as in the previous year, due to the protracted weakness of residential building and the difficulties of an actual relaunching of infrastructure works. Operating results are likely to remain disappointing. In fact, although we do not rule out the possibility of an initial rise in prices from the 2010 year-end level, the strong inflation of energy costs and its impact on production costs are cause of concern.

In Central Europe markets, which are benefiting from a good economic situation, we expect stable or slightly higher volumes and prices, thus a rather favorable operating environment which should result in a profitability improvement.

Among Eastern Europe countries we expect Poland to continue increasing its cement consumption, favored by a sound economy and by the opportunities offered by the conspicuous EU funds. In the Czech Republic, the trend in the construction sector is likely to remain negative or stagnant for at least one more year. In Russia and Ukraine, which showed a good rebound capability starting from the second half of 2010, expectations on activity level are promising. The complete troubleshooting of the new production line in Russia and of the equipment to switch to coal from natural gas in Ukraine will be crucial to increase production efficiency, balance the higher energy costs and further favor the expected results improvement.

In the United States, the recovery of the construction cycle is seen as postponed. Investments in residential building and infrastructures are expected to be not lower than in 2010, while the non-residential sector will continue to be penalized. Some opportunities for price improvement exist but it remains to be seen whether the market will accept the producers’ announced increases. Given the underutilization of the production capacity, the inflation pressure on fuels and, consequently, on logistics, we expect from the US a lower contribution than in the previous year.

In Mexico, the economy is brilliantly recovering and the construction sector should benefit from the stimulus given to public works by the government, in view of the presidential election which will be held in July 2012. The coming on stream of the new cement plant at Apazápan has made the production structure more widespread and logistically effective. In such an environment we are confident that we will succeed in increasing sales, keeping prices remunerative and opposing the increase in production costs due to the unfavorable trend in energy prices.

Despite widespread signs of recovery from recession, the sovereign debt crisis might jeopardize prospects for 2011, obliging many countries to cut their spending and investments, with inevitable repercussions and consequences. As for our group, in the emerging countries and Central Europe, ground exists for improving results while in Italy and the United States a quite conspicuous increase in prices would be needed to offset the higher costs of some production factors and the still weak demand.
Finally, we believe that, at group’s level, the current year will close with operating results not lower than the ones posted in 2010. Our degree of operating efficiency, thanks to the recently completed projects, has further improved and net debt is set to decrease thanks to a very careful selection of capex approved or to be approved.

In order to favor the group’s financial structure, in a context which does not allow to think that the main markets have overcome the present uncertainties yet, the Board of Directors will propose to the Annual General Meeting, convened in first call for May 13, 2011 the distribution of a dividend of €0.03 to savings shareholders only. The dividend payment, if approved by the Shareholders’ Meeting, will be effected as from May 26, 2011 (with coupon detachment on May 23, 2011).
The Shareholders’ Meeting will also renew the Board of Directors and the Statutory Auditors’ Committee whose appointment expire with the approval of the financial statements as of December 31, 2010.

The Board of Directors convened for May 13, 16 and 17, 2011 the Special Meeting of the holders of savings shares to resolve upon the appointment of the common representative.

Treasury shares
The Board of Directors resolved to ask the Shareholders’ Meeting to authorize (and thus revoke the authorization adopted on April 28, 2010 to the extent of the non-used portion) the buy-back of a maximum of additional #4,000,000 ordinary and/or savings shares. 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 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 €10 for savings shares and from a minimum of €0.60, equal to par value, to a maximum of €16 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 €64 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, 2010, as of today no transactions have been effected on treasury shares while #117,025 savings treasury shares have been assigned to the managers of the company and its subsidiaries under the MBO scheme adopted for the years 2009-2011, #63,245 thereof to be assigned effective from June 27, 2011 according to the resolution of today’s Board of Directors.
As of today the company owns #500,000 ordinary treasury shares and #203,400 savings treasury shares equal to 0.34% of capital stock.

By-laws Amendments
The extraordinary shareholders’ meeting shall be asked to amend articles 8, 17 and 20 of the by-laws in order to introduce specific provisions which are required for the implementation of some rights granted by Consob Regulation no 17221/2010, use of which was made by the Procedures for related party transactions adopted by the Company on November 11, 2010, as well as the amendment of article 10 of the by-laws in relation to the rules ex Legislative Decree no 27/2010.

Corporate Governance
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 2010.

Senior Notes and Bonds on maturity
On April 1, 2010 the subsidiary RC Lonestar Inc. completed a new issue of $200 million of Senior Unsecured Notes. The Notes are structured in two tranches:
- a first tranche of $170 million, with 5-year average life and final maturity on April 1, 2016 at the fixed annual rate of 4.90% payable semi-annually;
- a second tranche of $30 million with bullet repayment on April 1, 2016, at a floating annual rate equal to 3-month Libor plus 245 basis points.
In the 18 months subsequent to December 31, 2010, the following repayments of bond principals shall be effected:

- on May 29, 2011, $80.0 million referred to the Senior Notes Series B issued by the subsidiary RC Lonestar Inc. in 2002;
- on October 20, 2011, $18.3 million referred to the Senior Notes Series C issued by the subsidiary Alamo Cement Company in 2004 (last tranche).
- on May 29, 2012, $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 2010, the lenders have the right to receive, effective as from December 15, 2011, the advance repayment. In 2010 approx. €5.2 million were 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.

Company contacts:
Investor Relations Assistant
Mariangiola Fiore
Phone. +39 0142 416 404

The Buzzi Unicem 2010 financial statements will be illustrated during a conference call to be held on Monday, April 4 at 15.00 am Italian time. To join the conference, dial +39 02 8020911.