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Buzzi Unicem releases results

Published by
World Cement,

The Board of Directors of Buzzi Unicem SpA met on 10 November 2016 to examine the interim financial report as at 30 September 2016.

Global economy continues to grow, but the pace of development has remained low and altogether modest. The outlook has improved somewhat in the emerging economies, but some uncertainties persist in the major advanced countries, and international trade, whose growth dynamics has been further revised downwards, has shown some recovery in the developing countries, compared to a moderate trade in the mature ones.

In the United States GDP increased in the second quarter and continued its acceleration during the summer months thanks to robust growth in domestic consumption, which was however partly offset by the negative contribution provided by the changes in inventory and the deceleration in construction investments. The cyclical expansion in Europe, held back by weak international demand, continued and stabilized at a low pace, after the slight slowdown during the spring months. The major European economies have been similarly affected by the attenuation of the expansion phase during the spring and summer months, with weaker domestic consumption and sluggish investments. GDP slowed to 0.4% in Germany, marginally contracted in France and stagnated in Italy, while economic activity in the United Kingdom accelerated thanks to the good performance of domestic demand. The outcome of the Brexit referendum in June so far did not have major repercussions on economic activity and on the international financial markets.

The economic situation in the emerging countries slightly improved: in the second quarter, growth in China remained stable (+6.7%) and continued to benefit from credit expansion and the increase in infrastructure spending; in the summer months investments slowed down, but industrial activity and retail sales continued to increase at a fast pace. In India GDP growth remained strong (+7.1%), and recession in both Brazil and Russia attenuated.

Since 2012 international trade has slowed down significantly; compared to the past the weakness of investments and the greater importance in the global economic activity of the emerging countries, which are characterized by a minor trade openness, also resulted in a lower reactivity of trade compared to economic growth and consequently the prospects of trade development for the current year remain modest. During the summer months oil prices, due to an excess of supply, fluctuated between 40 and 50 dollars per barrel. The announcement of the achievement of an OPEC agreement to cut production supported the prices, which returned to around 50 dollar per barrel in early October; futures contracts foresee a slight increase in prices for the rest of 2016 and in 2017. The trend of consumer prices in the advanced economies remained weak, particularly in the euro area, it increased slightly in August in the United States (+1.1%) and remained stable in the United Kingdom. In the major emerging economies inflation was moderate in China (+1.3%), lively in India (+5.0%), Brazil (+9.0%) and Russia (+6.9%). Monetary policy remained expansionary in the advanced countries, more accommodating in China and India, while in Brazil and Russia, in view of high inflation rates, the monetary authorities maintained a tightening stance. During the summer months the conditions in financial markets gradually improved and tensions originated by the outcome of the British referendum were reabsorbed.


During the third quarter of 2016, the construction industry maintained a quite satisfactory pace of growth in the various countries of presence of the group, except for Italy and Russia, where the weakness of the sector, however, was attenuated, and the United States of America, penalized by extremely unstable weather conditions. In the period from January to September 2016 cement and clinker sales of the group totaled 19.5 million tons, up 1.2% from the previous year. Favourable changes were recorded in Germany, Poland, Ukraine, Luxembourg and the Czech Republic, while in the United States a somewhat weak and subdued summer quarter cancelled the positive change achieved in the first half year. In Russia the strengthening signals of demand were confirmed, while in Italy the market weakness accentuated again. Ready-mix concrete sales amounted to 8.8 million cubic meters, down 0.8% compared to the first nine months of 2015, with the confirmation of a higher production in Italy, Germany, Poland and Ukraine, and a slight negative sign in the Czech Republic; on the other hand the downturn in the United States strengthened.

The trend in cement prices during the first nine months in local currency strengthened clearly above all in Ukraine and also in the United States; modest changes occurred in Russia (favorable) and in Italy and the Czech Republic (unfavorable). In Poland, in particular, and in Central Europe, the decrease in prices was more pronounced. The ready-mix concrete prices strengthened in the United States, the Czech Republic, Benelux and Poland; the change was modest, but unfavorable, in Germany. Ebitda to sales margin still benefited from the tailwind in energy costs and the improved efficiency and productivity resulting from the optimization actions developed by management, thus increasing everywhere. The capacity utilization in Poland, Ukraine, Central Europe and the Czech Republic was higher than the previous year, thus translating into a lower incidence of fixed costs per unit, while in Italy the penalisation due to a low utilization has not started to decrease.

Consolidated net sales were in line with the previous year, increasing from €1,998.1 million in September 2015 to €1.998,5 million in the period under review, while Ebitda came in at €416.2 million (+64.1 million, equal to +18.2%). The 9M-16 figure benefited from non-recurring net income of €2.4 million (€3.2 million non-recurring expenses in the same period of 2015); net of non-recurring items, Ebitda would have increased by 16.5%, i.e. €58.6 million. Thus recurring Ebitda to sales margin increased from 17.8% to 20.7%. Foreign exchange fluctuations had a negative net effect characterized by the depreciation of Russian ruble, Ukrainian hryvnia and Polish zloty and the stability of the dollar. Like for like, net sales would have been up 2.0%, while Ebitda would have increased by 19.0%. After depreciation, amortization and impairment charges of €143.8 million (€145.2 million in the first nine months of 2015), Ebit amounted to €272.4 million (€206.9 million in 2015).

Net finance costs decreased from €83.7 million to €77.9 million, the outcome of the equity-accounted associates totaled €60.6 million (€50.0 million in the same period of 2015) and gains on disposal of investments amounted to €0.2 million (€5.7 million in 2015). As a consequence of the above, profit before taxes in the first nine months stood at €255.3 million compared to €178.9 million in September 2015. The income statement reported a profit for the period of €180.4 million, of which €177.9 million attributable to owners of the company (€117.6 million in 2015).

Cash flow of the period was equal to €324.2 million (€265.5 million at September 2015). Net debt as at 30 September 2016 amounted to €984.5 million, down €45.2 million over year-end 2015. In the first nine months, the group invested a total of €176.9 million in property, plant and equipment, €65.7 million thereof for expansion projects, almost all relating to the new production line in Maryneal, Texas. As at 30 September 2016, total equity, inclusive of non-controlling interests, stood at €2,670.2 million vs. €2,579.4 million as at 31 December 2015. Consequently debt/equity ratio was equal to 0.37 (0.40 at 2015 year-end).

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