Buzzi Unicem releases 2014 figures

Buzzi Unicem has released its preliminary figures for the year 2014. In 2014, the company reported good sales growth in the US and Czech Republic, moderate progress in Central Europe and a stable trend in Russia. Meanwhile, activity levels in Italy continued to decline and Poland reported a contraction in sales.

Buzzi Unicem’s cement sales totalled 25.1 million t, up 1.8% over 2013. Ready-mix concrete output, at 12.0 million m³, rose by 1.4% from the previous year. Consolidated net sales were down 0.1% from €2510 million to €2506 million. Foreign exchange rates negatively impacted for €91 million. Changes in scope were favourable for €2 million. Like for like, net sales would have increased by 3.4%.

Net debt on 31 December 2014 amounted to €1063 million, down €34 million over €1097 million at year-end 2013. An improvement in the company’s net financial position was achieved thanks to cash flow from operations, disposal of non-strategic assets and a careful dividend policy, although the acquisition of the full cycle cement plant at Korkino (Russia), which occurred at the beginning of December, required an outlay of €104 million.

Regional breakdown

Italy

In the third quarter, GDP declined by 0.1% and this trend continued in the last quarter of 2014. Industrial production decreased by almost one percentage point. In December, consumer prices declined again, and inflation still remained very restrained. The contraction of bank loans continued, but at a slower pace, and the climate of business confidence stabilised after the decline in the summer months. Construction investments showed a further contraction in all segments, except for the renovation of residential properties; the decline particularly concerned the new residential as well as the non-residential public sectors. Cement domestic consumption, which has fallen for eight years in a row, is estimated at around 20 million t (-57% from the 2006 all-time peak). The company’s hydraulic binders and clinker volumes decreased by 7.6%, in line with the domestic market tendency. Exports, which had partially mitigated the decline in the domestic market in 2013, suffered from difficulties due to oversupply in the Mediterranean area, which made this choice less sustainable. Selling prices saw a 6.6% decrease, partly due to the change in sales mix, with a higher portion of clinker. In the ready-mix concrete sector, the volumes trend was more favourable (+0.7%), however prices decreased by 5.3%. Overall net sales in Italy amounted to €392 million, down 9.3% from 2013.

Central Europe

In Germany, the GDP growth level, driven by export recovery, investments and domestic consumption, slowed down in the second half of the year. The construction sector, after a strong upswing at the beginning of the year, favoured by good weather conditions, returned to more consistent growth rates and closed the year on a more positive note. Buzzi Unicem’s cement deliveries showed a positive trend (+3.7%) with stable prices (+0.2%). As for sales mix, exports and white cement increased, while oil well special binders posted a slightly unfavourable variance. In the ready-mix concrete sector, volumes and prices confirmed the same values as in the previous year. Thus, overall net sales increased from €593 million in 2013 to €603 million in 2014, up 1.7%.

In Luxembourg, cement and clinker volumes sold, inclusive of internal sales, were affected by lower exports and contracted by 1.6% with marginally weaker average prices. In the ready-mix concrete sector, output was down 6.6% in a declining price environment. Overall, net sales came in at €106 million vs €109 million in the previous year (-3.2%).

In the Netherlands, economic activity began to show timid signs of recovery, after a two-year recession, which had especially affected the building industry. Ready-mix concrete sales decreased by 12.1% and the average price level declined by 2.8%. Net sales revenue, including the aggregates business, came in at €58 million, down from €73 million in 2013 (-20.9%).

Eastern Europe

In the Czech Republic, after a long period of sluggish business activity, the signs of recovery became more evident and GDP growth, revised upwards during the year, is estimated at +2.4%. Construction investments, which had been declining for three years in a row, started to grow again. Cement sales were up 14.6%, while the trend of average prices in local currency was unfavourable (-2.9%). The ready-mix concrete sector, which also includes Slovakia, showed signs of improvement, with volumes up 2.0% and virtually stable prices. Consequently, net sales increased from €132 million to €134 million (+1.4%). The weakening of the local currency negatively impacted net sales by €6.9 million.

In Poland, GDP, sustained by domestic demand, realised a growth estimated at 2.8%. Construction investments showed a slight increase, as did cement consumption in the country. The introduction of a new price list in April penalised cement shipments, whose trend until then had been buoyant. Thanks to the subsequent revision, and although the demand slowdown in summer made the adjustment path towards customers more complex, the last part of the year highlighted a promising recovery. Cement sales volumes decreased by 17.6% with average prices level in local currency slightly down (-1.3%). Ready-mix concrete output maintained a positive trend (+6.1%), with prices down 1.1%. Net sales decreased from €101 million to €89 million, on which zloty appreciation positively accounted for €0.3 million.

Ukraine, with the help of international diplomacy, is trying to move towards normalisation, but geopolitical tensions and uncertainties about possible developments continue to remain at a highly critical level. Notwithstanding the context of typical recession, with capital outflow abroad, depreciation of the currency, high inflation and decline in construction investment, the economy of the western regions, far away from the guerrilla areas, performed well. In fact, in 2014 cement sales volumes were higher than in the previous year (2.3%), with prices in improvement (+3.1% in local currency). Net sales stood at €88 million vs €124 million in 2013 (-28.9%). The translation of turnover into euro was extremely penalised by the depreciation of the local currency (-€41.5 million).

In Russia, during the last months of the year, the economic and financial scenario rapidly deteriorated, due to the sharp drop in crude oil prices, the collapse of the ruble and the sanctions imposed by western countries. Inflation continued to be rampant (+11.4%) due to the currency depreciation and the increase in prices of foodstuffs, following the decision to block imports. In December, the central bank implemented the strongest rise in interest rates ever recorded, bringing the reference rate to the maximum level since the 1998 crisis (17%). Consequently, GDP growth for 2014 contracted significantly (+0.6%). The construction sector showed a decreasing trend; however, domestic cement domestic consumption broke the record realised in 2013. The slowdown of deliveries, which occurred in the last months of the year, caused total cement sales to come in at the same level as in 2013 (-1.4% at constant scope), with average prices in local currency 2.7% higher. The oil well cements division posted an unfavourable variance equal to -10.2%. Shipments benefited from the positive contribution of the new terminal in Omsk and, moreover, starting from December, the full cycle plant in Korkino, acquired from Lafarge, entered the consolidation scope. Net sales stood at €210 million vs €249 million in 2013 (-15.6%). The depreciation of the local currency had a negative impact of €42.7 million; like for like, net sales would have increased by 0.6%.

United States

In the third quarter, GDP growth dynamics were higher than expected (+5.0% on an annual basis) and continued to expand in the fourth quarter, thanks to the support of domestic demand. Job growth was well set and unemployment rate stood steadily below 6%. Consumer price inflation, which was also affected by the fall in prices of raw materials, in November decreased to 1.3%. Special stimulus to growth in construction investment came from the commercial segment and a good performance in the residential building sector, while public spending on infrastructure was still slightly declining. The company’s hydraulic binders sales rose by 9.5% compared with 2013, with a growth development supported by both the Midwestern and the Southwestern regions of the country. Furthermore, ready-mix concrete output, mainly located in the Southwest, kept up with the demand increase (+9.3%). The selling prices trend in local currency continued to be favourable for cement (+6.7%) and even more for ready-mix concrete (+12.3%). Overall net sales stood at €856 million, up 17.3% from €730 million in the previous year. Foreign exchange had no material impact, since the dollar average rate of exchange was the same as in 2013.

Mexico (valued by the equity method)

The country entered a phase of stronger economic expansion, with a forecast of satisfactory GDP growth (+2.2%) from the previous year. Public spending on infrastructure, included in the development plan 2013 – 2018, has started to show its positive effects on building materials demand. Cement volumes of the associate Corporación Moctezuma showed a favourable and consistent trend throughout 2014 with average prices in local currency some points higher than in the previous year. Ready-mix concrete output posted a slight decline, but prices were on the rise, following a new strategic positioning and reduction of the active batching plants. With reference to 100% of the associate, net sales stood at €520 million (+11.3%); at a constant exchange rate, net sales would have increased by 15.8%.

Adapted from press release by Rosalie Starling

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