Buzzi Unicem reports rising cement sales

In the first nine months of the current year, although the operating performance was penalised at the end of August and in September by the impact of hurricane Harvey along the Texas coast, sales volumes of the group continued to grow compared to the previous year, thanks also to the change in scope referring to the first line-by-line consolidation of the Zillo Group (starting from the beginning of July). With the exception of Ukraine, which was slightly declining, favourable variations of shipments to customers were achieved in all the other countries where the group operates, more marked in Italy, Germany, the Czech Republic and Luxembourg and more linear in the United States of America, Russia, and Poland. Economic growth in the major advanced and emerging countries showed some signals of consolidation and confirmed more favourable expansion prospects. International trade, albeit moderated after the strong acceleration of the beginning of the year, confirms for the current year the forecast of development at a higher rate than GDP.

In the United States, the economic situation continued to be driven by consumption and investment, while inflation, which stood at 2.2% in September, was surprisingly low, falling below expectations. In Europe the growth, mainly supported by domestic demand, strengthened in the second quarter (+0.6%) and continued at similar rates in the third one. Inflation however stopped at 1.5%, with underlying pressures curbed by wage developments, which are still moderate in many economies of the area and with still wide underutilisation margins. Growth in Italy, both for the service and the industrial sector, appears to be more widespread, and GDP dynamics were still strong in the third quarter as well.

On the basis of the most recent futures contracts, oil prices are expected to be rather stable and close to current prices, after going up from the end of September as a result of the OECD inventory reduction and production discontinuation in some regions.

The Federal Reserve began the process of reducing the budget and markets expect a further interest rate increase in December. The ECB Governing Council, on the other hand, confirmed the need for a high degree of monetary adjustment, considering the conditions for a stable return of inflation to close to 2%.

Although global growth prospects and international trade forecasts further improved, there are still relevant risk factors surrounding the uncertainty about the expansion and revision measures of financial regulation proposed by the US administration and those related to the outcome of the UK exit negotiations from the European Union, which could have negative repercussions on family and business confidence and reflect on spending and investment decisions.

During 3Q17, in the various countries where Buzzi Unicem operates, the construction sector overall maintained a satisfactory growth rate, with still positive figures in Germany and the Czech Republic and some strengthening compared to the first half of the year in the United States, Luxembourg, and Russia, while in Ukraine some signs of discontinuity were recorded compared to the first part of the year.

Cement and clinker sales of the group in the period January-September 2017 amounted to 20.3 million t, up 4.1% over the previous year (+2.6% like for like). Ready-mix concrete sales accounted for a somewhat more pronounced change (+4.8%) compared to the same period of 2016, reaching 9.2 million m3 (9.1 million m3 like for like). Price effect in local currency, compared with the same period of 2016, remained positive in the United States, in Ukraine (driven by inflation) and slightly improved in Poland, while in the other countries no significant variances were registered.

Consolidated net sales improved from €1998.5 to €2133.4 million (+6,7%), gross of a foreign exchange effect which favourably accounted for €23.4 million. On a like-for-like basis, net sales would have increased by 4.5%. The volume and price effect, both favourable, came in at respectively €69.0 million and €35.5 million.

Outlook

The operating conditions of the first nine months, though affected in the United States of America and Mexico by exceptional weather and seismic events, maintained a positive trend anyway, consistent with the expected developments. Starting from the second half of the year, there has been a sharp and significant reduction in the value of the dollar against the euro, which entails a negative translation effect of net assets denominated in that currency. In addition, over the last few weeks prices increased more than expected in the electricity and fossil fuel market.

All in all the company’s best current guidance, which is consistent with the one already disclosed to the market in the half-yearly report, foresees for the full financial year 2017 an improvement of recurring Ebitda between 5% and 10%, with good probability of achieving the higher end of the range.

With reference to the antitrust sanction imposed in August on Buzzi Unicem and other companies operating in the cement market in Italy, the TAR Lazio has informed Buzzi Unicem today that, also due to the fact that the company has already been granted by the Authority the payment by instalments, the interests of the parties can be safeguarded by the prompt scheduling of the oral hearing on this subject (established on 6 June 2018), thus not deeming it necessary to grant withholding of the payment of the sanction itself. Regarding this lawsuit Buzzi Unicem reaffirms its desire to pursue all the legal channels available for the most determined opposition, knowing that it has acted in full compliance with antitrust legislation and that the allegations made by the Authority are unfounded. The company also specifies that the rejection of the precautionary suspensive payment order, although not prejudicial to the outcome of the appeal, leads to the booking of the entire sanction, pending the result of the judgment.

Read the article online at: https://www.worldcement.com/europe-cis/10112017/buzzi-unicem-reports-rising-cement-sales/