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Italcementi Group Q3 results

World Cement,

The Italcementi S.p.A. Board of Directors have examined and approved the consolidated third quarter report for the year to 30 September 2011, which reflects profit for the nine months of €212.8 million (€133.4 million at 30 September 2010) including the capital gains from the asset sales in Turkey during the year, reflected in the accounts for the previous quarters.

In the first nine months of the year to 30 September 2011, Group sales volumes at constant size remained steady in the cement business (38.9 million t, -1.6%) and in ready mixed concrete (11.0 million m3, +0.2%), and fell in aggregates (29.1 million t, -7.2%).

Cement sales in the industrialised countries increased in France, Belgium and North America, whereas in the emerging countries the healthy growth in Morocco, India and Thailand was countered by the slowdown in Egypt, although this eased thanks to the upturn in recent domestic sales. The volume trend notwithstanding, revenue (€3600.2 million, +0.8%) made a small degree of progress, driven by a positive overall price effect reflecting disparate local dynamics.

“Our positive performance on the emerging markets where, net of the contingent situation in Egypt, sales volumes grew by about 3%, confirms the strategic importance of these countries for the Group,” commented Italcementi Chief Executive Officer Carlo Pesenti.

“More than 60% of our production capacity is located in these regions, and this will increase in the near future with the new development projects recently set up in India.”

Operating results at 30 September (EBITDA €583.4 million and EBIT €236.2 million, down by 11.7% and 25.3% respectively) were once again affected by rising costs, especially for energy products, and by a negative exchange-rate effect.

The consolidation of Calcestruzzi and the abnormal trend of the Egyptian market, without which operating results would have been in line with the same period in 2010, also had a significant impact.

At constant size, Group third-quarter sales volumes were down in the three lines of business, with the trend in the cement sector steady with the levels of the second quarter of the year. Despite the fall in sales volumes, revenue was on a par with the third quarter of 2010 at €1148.2 million (-1.9% from €1169.8 million in the third quarter of 2010 reclassified in compliance with IFRS 5 to take account of operations sold in Turkey at the end of March 2011), thanks to a positive overall sales price trend, especially in India and Italy.

In the nine months from the beginning of the year to the end of September 2011, Group sales volumes at constant size were substantially steady in cement (thanks to progress in France-Belgium and North America among Western countries and Morocco, India and Thailand among emerging markets) and in ready mixed concrete.

Revenue was €3600.2 million, a small increase (+0.8%) driven by the positive sales price trend, especially in the main emerging countries, excluding Egypt.

In Italy, which was the strongest market in Western Europe, prices at the end of the period were higher than those of a year earlier; despite this positive trend the slowdown in demand in the third quarter, after the relatively stable situation of the first half, led to a downturn in revenue.

As in the third quarter of 2011, the decrease in recurring EBITDA (a 15.2% reduction to €564.0 million) and EBIT (-25.3% to €236.2 million) was determined not only by the volume effect, but also by the increase in operating and by a negative exchange-rate effect.

Looking at the individual countries, the most significant progress in operating results was made in India, Morocco and Thailand, while decreases were reported in Egypt, France (due to the increase in variable costs) Greece, North America and Italy.

The €107.4 million capital gain on the sale of operations in Turkey was a factor in profit for the period of €212.8 million (€133.4 million), with profit attributable to owners of the parent of €123.2 million.

Confronted with renewed economic tensions in industrialised countries and ongoing difficulties on the Egyptian market, sales volumes for Group-owned Ciments Français in the third quarter were down in all three operating segments: -2.5% in cement and clinker at 10.4 million t, -12.1% in aggregates at 8.3 million t and -1.2% in ready mix concrete at 2.4 million m3.  

In the third quarter of 2011, the Group reached an agreement with Zuari Industries for the acquisition of 74% of Gulbarga Cement, a company that has launched a project for a new cement plant with a capacity of 3 million tpa. The agreement confirms India, the world’s second-largest cement market, as a key growth region for the Group. After the recent investments to boost production capacity in Andra Pradesh, attention has now shifted to other regions of the country.


In the fourth quarter, the Group should record a decline in operating results that will be less than those of the previous quarters. In fact, while the Egyptian market will still be affected by political instability and increased local competition, the rest of the Group should generate improved operating results, also thanks to positive price trends in Italy.

The Group has identified and is implementing a package of measures to reduce overhead costs and increase productivity to the tune of some €160 million annually, the effects of which will contribute towards improved results starting the next financial year.

The significant improvement in the 2011 consolidated net profit will benefit from the capital gains generated by the disposals carried out during the year. The year-end net debt should be in line with that at the end of September, thanks to the close monitoring of cash flows during the period.

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