Interim results at 30 June 2021
Cement and clinker sales higher than the first half 2020 (+10.9%). Significant increase in Italy, thanks to the strengthening of demand and the easy comparison basis. Good volume trend also in Eastern Europe and the United States of America. Marginal slowdown in Germany and Poland
Interim results improving versus 2020. The favorable changes in sales volumes, associated with an overall positive price momentum, more than offset the rekindling of industry inflation
Net sales at €1,609 million (2020: €1,520 million) and Ebitda at €352 million (respectively +11.1% and +19.4% like for like). Negative exchange differences of 81 million on net sales and €22 million on Ebitda
Outlook for the full year 2021: highly satisfactory recurring Ebitda, probably not above the 2020 level
|Consolidated data||Jan-Jun 21||Jan-Jun 20||% 21/20|
|Cement and clinker sales||t/000||14,833||13,374||10.9%|
|Jun 21||Dec 20||Change|
|Net financial position||€/m||109||242||(133)|
The Board of Directors of Buzzi Unicem SpA has met today to examine the interim financial report as at 30 June 2021.
During the first half of 2021, the continuation of the vaccination campaigns led to a sharp decline in the severity and frequency of Covid-19 infections, allowing a gradual relaxation of the social distancing measures in the areas where a high vaccination coverage was achieved, such as the United States of America and the European Union. The identification of a more contagious virus variant has caused a new wave of infections starting from June, which, however, where a good part of the population has already been vaccinated, did not mean a proportional increase in the admission to hospitals.
The rapid progress of vaccination campaigns was matched by a clear recovery in economic activity. The development prospects, although heterogeneous according to the different geographies, significantly improved compared to what was expected at the start to the year, thanks to more sound demand and to the contribution of expansive policies launched by government authorities.
In this context, the growth prospects of world GDP for the current year foreshadow an expansion of 6.0%. International trade is also expected to grow in 2021 (+11%), supported by the recovery of economic activity on a global scale, exceeding at year-end the pre-pandemic levels. In the United States of America, the rapid progress of vaccination campaigns significantly reduced the spread of the Covid-19 disease in the country, allowing for a gradual relaxation of restrictions. Thanks also to the fiscal stimulus programs launched by the federal government, GDP is expected to return to pre-pandemic levels by June, while for the entire year the most recent estimates indicate growth of 7.0%. In Europe, after the contraction observed in the first quarter (-0.3%), which penalized the major countries, Germany in particular, a recovery in the spring quarter was recorded, laying the foundations for more significant growth in the second part of the year, thanks to the recovery of international trade and to the stimulus of the Next Generation EU plan. However, some uncertainties related to the evolution of the pandemic continue to weigh on the development prospects. For the current year, the updated estimates assume GDP growth of 4.6%. In Italy, after the slight expansion recorded in the first quarter, in spring, thanks to the acceleration of vaccinations and to the gradual easing of restrictions, GDP growth became more evident: the improvement in activity in the industrial sector was accompanied by a recovery in the services sector.
Among the emerging countries, in China the economic activity returned to pre-pandemic levels and indicators foresee further strengthening during the year, favored by the upswing in global demand and by the recovery in the services sector. In Mexico, the positive dynamics of the US economy positively impacted the manufacturing sector, improving GDP growth expectations for the current year. In Brazil, on the other hand, the persistent instability of the epidemiological framework fueled some uncertainties about the prospects for a recovery in economic activity during the first half of the year.
The bullish trend of oil prices was driven by the increase in demand and, on the supply side, by the lack of agreement among the OPEC countries on the output increase. The prospects, however, indicate a possible decline in prices in the medium run.
The financial conditions in the advanced economies remained accommodative: both the Federal Reserve and the ECB confirmed their expansive stance, which is essential to support the economic recovery.
Net sales achieved in the first six months increased +5.8% on 2020, standing at €1,608.7 million versus €1,520.1 million in 2020, while Ebitda improved by 12.3%, increasing from €313.9 to €352.5 million. The price effect in local currency showed a favorable variance in the most countries where we operate. The foreign currency trend had a net unfavorable impact of €80.8 million on net sales and of €22.2 million on Ebitda. Net of exchange rate differences, turnover and Ebitda would have been up 11.1% and 19.4% respectively. After amortization and depreciation of €122.8 million (€128.4 million in the previous year), Ebit came in at €229.7 million (€185.5 million in 2020). The income statement for the half year closed with a net profit of €209.7 million, compared to €216.7 million in the same period of 2020.
Operating and financial performance
Cement sales of the group in the first six months of 2021 stood at 14.8 million tons, up compared to the same period of 2020 (+10.9%). The positive development in sales volumes, already recorded in the first three months of the year, continued also in the second quarter. Changes were favorable in all the markets where we operate, except for a limited decline in Poland and a more marginal one in Germany. However, it should be remembered that the same period last year was penalized, in April and May, by heavy economic restrictions aimed at containing the pandemic, above all in Italy and Benelux. Ready-mix concrete output also increased, reaching 5.8 million cubic meters, up 7.0% compared to the previous year. In this business, the positive development recorded in Italy, Poland and Ukraine more than offset the unfavorable changes in the United States of America, Germany and the Czech Republic.
Consolidated Ebitda came in at €352.5 million, increasing (+12.3%) compared to €313.9 million in 2020. Changes in exchange rates had an unfavorable net impact essentially due to the depreciation of the dollar, the ruble and the hryvnia. At constant exchange rates the recurring Ebitda in the first half of 2021 would have increased by 19.4%.
The recurring Ebitda margin of the group improved during the first six months of 2021: with reference to the different markets where we operate, progress was achieved in Italy, the Czech Republic, Poland and Germany; the level of the United States of America and Russia remained stable, while Ukraine and Benelux recorded a lower profitability compared to the previous period.
After amortization and depreciation of €122.8 million (€128.4 in the first half of 2020), Ebit amounted to €229.7 million (€185.5 million in June 2020). Profit before tax stood at €262.1 million (€279.4 million in 2020), considering a contribution of €48.4 million from equity earnings (€145.3 million in 2020, of which €108.1 million related to the asset sale carried out by Kosmos Cement), no gains on the disposal of investments (almost €3.6 million in 2020) and net financial charges of €16.0 million (€55.0 million in 2020, influenced by the fair value estimation of derivative financial instruments). After income taxes of €52.4 million (€62.7 million in 2020), the income statement closed with a net profit of €209.7 million, compared to €216.7 million in the first half of 2020.
Net financial position as at 30 June 2021 amounted to €108.8 million, a €132.8 million improvement compared to €241.6 million at 31 December 2020. It should be noted that the figure as at 30 June 2021 includes the loan, equal to $242 million, that the group granted to the joint venture BCPAR, in support of the acquisition of all the companies of the CRH group operating in Brazil. In the six months under review the group distributed dividends to the owners of the company for €47.3 million (on top of €143.3 million being already considered as a liability of the net financial position at year-end 2020) and incurred capital expenditures for a total of €101.9 million. Investments in property, plant and equipment referring to expansion or special projects totaled €3.6 million, attributable to the continuation of the works for the new grinding department at Korkino (Russia) and the new clinker storage at San Antonio (Texas).
Our sales of hydraulic binders and clinker closed the first six months with a strong improvement (+31.8%), thanks to a resilient demand and to the comparison with a second quarter of the previous year being heavily penalized by the restrictions aimed at containing the pandemic. Selling prices also showed a favorable variance. The ready-mix concrete sector recorded an even higher recovery (+42.3%) with prices improving, too. Net sales in Italy stood at €305.6 million, up 38.4% from €220.8 million in 2020). Ebitda of the first six months reached €32.7 million, clearly increasing compared to €8.8 million in 2020. Unit production costs showed an unfavorable trend, influenced by the marked increase in the prices of energy factors, despite the lower incidence of fixed cost items due to the improvement in operating leverage.
In Germany, after the slight decrease in sales volumes achieved during the first quarter, shipments of hydraulic binders showed a substantial stability during the second quarter. In the first six months as a whole, our cement operations posted slightly declining sales (-2.2%) compared to 2020, with average prices strengthening. The ready-mix concrete sector showed a decreasing production (-3.8%) compared to the same period of 2020, with prices improving. Overall net sales came in at €341.7 million (€339.4 million in 2020), up 0.7%, while Ebitda stood at €60.6 million (€51.8 million in 2020, +16.9%). It should be remembered that no operating costs for CO2 emission rights were accrued in the half year under review (approximately €7.6 million in the first six months of 2020). Due to the unfavorable trend in fuels and electric power, as well as a slight worsening of fixed costs, the unit production costs showed a visible increase compared to the same period of 2020.
In Luxembourg and the Netherlands, our cement deliveries, inclusive of exports, after a first quarter clearly recovering, maintained a strong trend also in the second one, closing the first half of the year up 13.5%, despite demand somewhat worsening in May and June. Prices confirmed a favorable performance. Production volumes in the ready-mix concrete sector remained stable (-0.3%), however with prices improving. Net sales amounted to €100.6 million, higher than the previous year (€91.2 million). Ebitda increased by €0.5 million, from €6.4 million in 2020 to €6.9 million in the period under review. It should be remembered that no operating costs for CO2 emission rights were accrued in the half year under review (approximately €1.2 million in the first half of 2020). The unit production costs recorded a considerable increase, due to the unfavorable trend of both fixed and variable items.
In the Czech Republic, cement sales, after a first quarter which was particularly penalized by unfavorable weather conditions, starting from April have maintained a robust trend, closing the first half up 4.6%, with average prices, in local currency, improving. Ready-mix concrete output, which also includes Slovakia, performed slightly decreasing levels (-1.1%), associated with a favorable change in prices.
Net sales came in at €80.4 million, up (+6.9%) compared to €75.2 million in 2020, while Ebitda increased by €3.7 million, from €19.7 million in 2020 to €23.4 million in the period under review. It should be remembered that, in the semester no operating costs for CO2 emission rights were accrued (approximately €0.1 million in the first half of 2020). At constant exchange rates, net sales and Ebitda would have increased by 5.2% and 16.6% respectively. The unit production costs in local currency improved marginally, thanks to the savings recorded in energy factors and to the control of fixed costs.
In Poland, cement volumes sold by our plant, after a particularly negative first quarter, penalized by the weak demand and the unfavorable weather, closed the first semester declining (-4.2%), despite a brilliant trend observed in May and June. The average price level, in local currency, progressed. Ready-mix concrete output proved, on the contrary, quite brilliant (+21.0%), however accompanied by a decline of prices in local currency. These market dynamics led to net sales of €53.7 million, down (-2.6%) compared to €55.2 million in 2020, but Ebitda increased from €15.4 to €16.2 million (+5.4%). It should be remembered that in the half year under review no operating costs for CO2 emission rights were accrued (approximately €3.6 million in the first six months of 2020). The slight weakening of the zloty (-2.8%) led to a negative exchange rate effect: on a like-for-like basis, net sales would have increased by 0.1% and Ebitda would have been up 8.4%. The unit production costs in local currency recorded an unfavorable change, following an increase in the electric power cost and a worsening of the fixed costs.
In Ukraine, starting from April, the recovery in demand and a gradual decrease in the import flow from Turkey allowed volumes sold to clearly recover and to close the first half of 2021 markedly progressing compared to the same period last year (+23.3%). Average prices in local currency confirmed some negative variance. Overall net sales amounted to €51.0 million, down 1.4% from €51.7 million in 2020, while Ebitda stood at €5.6 million compared to €6.7 million in the first half of 2020 (-15.9%). The depreciation of the local currency (-16.9%) had an unfavorable impact on the translation of the results into euros: net of the exchange rate effect, net sales would have been up 15.3% and Ebitda down 1.7% (-€0.1 million). The lower incidence of fixed costs, thanks to the higher capacity utilization, together with some savings in fuels led to a slight decrease in unit production costs in local currency, even considering the increase in the power cost.
In Russia, during the second quarter, thanks to the soundness of demand and to favorable weather conditions, cement sales confirmed the good progress already recorded in the first quarter, closing the first half clearly improving (+16.6%) compared to the volumes reached in the previous year. Average unit prices, in local currency, remained almost stable, largely determined by the mix effect. The increase in oil prices led to growth in the demand for special oil well cements, which was particularly evident in the second quarter. Net sales stood at €93.9 million, up 1.2% from €92.9 million in the same period of 2020, while Ebitda was almost flat at €25.2 million (€24.8 million in 2020). The weakening of the ruble (-16.8%) negatively impacted the translation of the results into euros. Net of the exchange rate effect, net sales and Ebitda would have been up 18.2% and 18.6% respectively. The unit production costs in local currency improved slightly, thanks to the stabilization of variable costs and to fixed costs being well under control.
United States of America
Our sales of hydraulic binders, after the progress recorded in the first quarter, suffered some slowdown in May and June, due to the very rainy weather in some of the regions where we operate. Therefore, the whole first half 2021 showed volumes up 6.8% compared to the levels of the previous year, with selling prices in local currency improving. Ready-mix concrete output, mainly present in Texas, closed the first half down (-4.3%) compared to the same period of 2020, with selling prices in local currency almost unchanged. In this context, net revenues came in at €599.0 million, down 2.1% compared to €611.6 million in the first six months of 2020, penalized by the depreciation of the dollar (-9.4%). Ebitda increased by 0.8%, from €180.1 to €181.6 million. Ignoring the variance due to foreign exchange differences, net sales and Ebitda would have been up 7.1% and 10.3% respectively. The unit costs of cement produced had an unfavorable trend, mainly attributable to the visible increase of variable costs, above all electrical power and even more fuels.
Mexico (valued by the equity method)
The liveliness of demand, already recorded in the first three months of the year and confirmed in the second quarter, supported the cement sales of our associate, which closed the first half clearly progressing (+23.9%) and with an increasing prices level. Ready-mix concrete output also recorded significant progress, with a positive price change in local currency. With reference to 100% of the associate, net sales stood at €337.1 million, up 26.4% and Ebitda increased from €126.4 to €150.9 million (+19.5%). The depreciation of the Mexican peso (-2.0%) penalized the translation of the results into euros. At constant exchange rates net sales and Ebitda would have increased by 28.9% and 21.9% respectively. The equity earnings referring to Mexico, which are included in the line item that encompasses the investments valued by the equity method, amount to €33.6 million (€29.5 million in 2020).
Brazil (valued by the equity method)
The cement sales of our joint venture, thanks also to the additional contribution from the recent acquisition of the CRH companies operating in Brazil, in the first half continued to show brilliant progress: cement and clinker volumes were up (+45.0%) compared to the levels of the previous year, with selling prices, in local currency, clearly improving. Net sales, with reference to 100% of the associate, stood at €106.4 million, up 73.9% compared to €61.2 million in 2020, while Ebitda came in at €37.0 million versus €16.5 million in 2020. The sizeable depreciation of the Brazilian real (-20.0%) impacted the translation of the results into euros: like for like, net sales would have increased by 90.8%, while Ebitda would have been up more than 100% compared to 2020. The equity earnings referring to Brazil, which are included in the line item that encompasses the investments valued by the equity method, amount to € 9.2 million (0.3 million in 2020).
The first six months of 2021 were characterized by broadly favorable operating conditions, net of a modest slowdown in Central Europe and Poland, mainly attributable to a harsher winter than expected. Thanks to the generalized recovery in economic activity and to the greater propensity to spend, investments in construction, both public and private, also showed a positive evolution. These dynamics allowed the group to achieve better sales volumes than initially expected in the first half of 2021. Ebitda margin improved overall but in some markets the favorable price change did not manage to offset the sharp rise in the main cost items.
Looking at the second half of the year, the most recent estimates indicate that economic growth should continue, supported by the stability of the industrial sector and by the recovery in the services sector. However, some uncertainties remain on the macroeconomic framework about the future evolution of the pandemic, in particular regarding the spread of the new Covid-19 variants.
In Italy, we believe that the positive development of demand already noted in the first half of the year is likely to continue in the second six months, thanks to the progress of construction investments, particularly in the residential renovation and infrastructure segments. The confirmation of the favorable price effect and the higher capacity utilization should balance the increase in energy costs. We expect the full year to be able to confirm operating results much higher than the previous period.
In Central Europe, we believe that the marginal weakness in demand may continue in the second half of the year, while the price effect is expected to continue to strengthen. The increase in the cost of energy and CO2 emission rights will penalize operating results, expected to reach a lower level than 2020.
In the Czech Republic and Poland, thanks to the recovery in demand observed in May and June, we expect a modest evolution in volumes, associated with a favorable price effect. However, the visible increase in costs, mainly those relating to CO2 emission rights, will result in a probable, slight decline in operating results.
In Ukraine, unlike what was outlined at the start to the year and despite the persistent uncertainty affecting the macroeconomic situation, sales volumes will be better than 2020. However, we expect an unfavorable price effect, associated with the increase in production costs. This scenario, combined with the weakness of the local currency, suggests a decline in operating results.
In Russia, in line with the figures achieved throughout June, we expect a positive second half. Assuming that the ruble exchange rate remains around current values, we expect operating results similar to or some points higher than the previous year.
In the second half of the year, we believe that the level of activity in the United States of America remains high, allowing us to achieve a favorable price and volume effect, able to offset the sharp rise in the main cost items. These trends, therefore, should translate into operating results in dollars similar to those of the previous year. Throughout July, the average euro/dollar exchange rate is showing a devaluation of approximately 5%.
In Mexico, in the wake of the results achieved so far, we expect an equally sound second half, thanks to the favorable volume and price effect. The increase in energy costs will slightly penalize the operating results that, however, we expect to improve compared to last year. In Brazil, the good trend in volumes shown at June end should continue in the following quarters, accompanied by a favorable price effect. Despite the negative movement of the exchange rate, we expect a clear improvement in operating results, driven by the additional contribution of the change in scope. The encouraging prospects of Mexico and Brazil give us a glimpse of a greater contribution to consolidated net profit generated from the results of investments.
In conclusion, based on all the above considerations, we expect the consolidated recurring Ebitda for the financial year 2021 to be confirmed at a highly satisfactory level and probably not above the result achieved in the previous year.
The Board of Directors also approved the compliance of Buzzi Unicem with the new Corporate Governance Code. As part of the compliance with the Code, the Board of Directors approved, among other things, the regulation of the Board of Directors and the Policy for managing dialogue with institutional investors and shareholders in general and updated the regulation of the Control and Risks Committee.
Finally, the Board of Directors approved the cross-border merger project of the wholly owned subsidiary Buzzi Unicem International Sarl, based in Luxembourg. The merger is aimed at simplifying the corporate structure of the group, at the realization of further efficiencies as well as at the reduction of costs, in particular administrative and structural ones.
The transaction is implemented with the adoption of the simplifications provided for by the legislation for the mergers of wholly owned companies and, therefore, will not involve any issue of new shares or in any case the assignment of Buzzi Unicem shares or any amendments to the bylaws. The merger will be decided by the Board of Directors of Buzzi Unicem with a resolution resulting from a public deed, by means of what is permitted by Article 16 of the bylaws, without prejudice to the provisions of Article 2505, paragraph 3, of the Italian Civil Code.
The merger plan and further documentation will be made available on the company's website within the terms and in the ways required by law.
Senior Notes and Bonds
In the period from 1 January 1 to 30 June 2021 no new bonds were issued.
In the 18 months subsequent to 30 June 2021 no principal repayments of bonds shall be effected.
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The manager responsible for preparing the company’s financial reports, Elisa Bressan, 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
Buzzi Unicem H1 2021 results will be illustrated during a conference call to be held today, Tuesday 3 August, at 04:30 pm CEST. To join the conference, please dial +39 02 80