Cementir Holding releases consolidated results

Results for the first nine months of 2016 are down on 2015 mainly because of the depreciation of the major foreign currencies, which had a negative effect of EUR 6.3 million on EBITDA. The strong performance of operations in the Scandinavian countries and Malaysia failed to offset the weakness of the Italian market and other negative effects in Turkey. Revenue from sales increased by 1.8% compared to the first nine months of 2015 thanks to strong business performance in Scandinavian countries and in Malaysia, which offset performance in Turkey, Egypt, China and Italy. Revenue of CementirSacci, included in the scope of consolidation in the third quarter of 2016, amounted to EUR 8.2 million. The depreciation of the major foreign currencies against the Euro had a negative effect of EUR 32.3 million: at constant exchange rates, revenue would have amounted to EUR 764.9 million, up 6.3% on the previous year. In the Nordic & Baltic and United States1 area, revenue was EUR 403.4 million, an increase of 4.6% from EUR 385.8 million in the same period of 2015, driven by the better results achieved in Denmark and Norway, and to a lesser extent in Sweden. In particular, in Denmark revenue increased by EUR 16.0 million (+6.6%) as a result of the increase in sales volumes of cement (+10.4% compared to the first nine months of 2015) driven by the strong performance of civil construction and major projects, with sales prices substantially stable both for cement and ready-mixed concrete. Exports were also up, both for white cement (+13%) – driven in particular by exports to the United States – and for grey cement, especially to subsidiaries in Norway and Iceland. In Norway, revenue increased by EUR 2.9 million (+3.3%), thanks to the significant recovery in the building sector especially in the east of the country, with sales volumes of ready-mixed concrete up 12% compared to the corresponding period of 2015. The depreciation of the Norwegian Krone of around 6.3% reduced the contribution of revenue to the financial statements stated in Euro. In Sweden, meanwhile, revenue from sales recorded a slight increase compared to the same period of 2015, due to the growth in sales volumes of ready-mixed concrete (+18%) as a result of strong performance in the residential and infrastructural sector, especially in the areas of Malmö, Lund, Thage and Nimab.

Revenue in the United Kingdom in local currency recorded a slight increase thanks to higher volumes of waste processed, but was pulled down by the depreciation of the British Pound after the Brexit vote (- 10.4% compared to the average exchange rate in the first nine months of 2015). In the Eastern Mediterranean area, revenue from sales was EUR 205.3 million, a decrease of 3.7% on the EUR 213.1 million figure recorded for the same period of 2015. In particular, in Turkey revenue in local currency increased by 8.7% compared to the first nine months of 2015 thanks mainly to the increase in sales volumes of cement and ready-mixed concrete (+5% and +35.8% compared to the same period of 2015) due to growth in demand in the Izmir and Kars regions, even though the domestic context was influenced by unfavourable weather conditions at the start of the year and the uncertain national political situation. Cement prices on the domestic market were slightly down (-1.3%) compared to 2015. Exports fell 7% compared to the first nine months of 2015 in order to meet the increase in demand on the domestic market. The depreciation of the Turkish Lira against the Euro (-10.4% compared to the average exchange rate for the first nine months of 2015) in any case reduced revenue’s contribution to the consolidated financial statements stated in Euro. In Egypt, revenue in local currency fell by 1.7% compared to the first nine months of 2015 due to lower quantities of cement sold in the domestic market, partially mitigated by an increase in sales prices. Exported cement volumes were substantially stable (-1%), with prices in US Dollars decreasing. The depreciation of the Egyptian Pound (-12.9% compared to the average exchange rate for the first nine months of 2015) had a negative impact on the financial statements expressed in Euro. In the Asia Pacific area, revenue from sales was EUR 56.9 million, a slight increase on the EUR 56.6 million figure recorded for the same period of 2015. In Malaysia, revenue in local currency increased by 7.9% compared to the first nine months of 2015, driven by an increase in average prices on export markets due to the mix of products sold and the appreciation of destination currencies against the Malaysian Ringgit, with sales volumes falling 4.8%, essentially due to the deferral to October of a major shipment of white clinker to Australia. When translated into Euros, revenue was essentially stable due to the depreciation of the Malaysian Ringgit against the Euro (-8.1% compared to the average exchange rate for the same period of 2015). In China, revenue in local currency fell by 1.5% compared to the same period of 2015 due to an increase in the quantity of cement sold on the domestic market (+12%) with prices falling, and a decrease in export volumes (-4%). In addition, the depreciation of the Chinese Yuan against the Euro (- 5.6% compared to the average exchange rate for the first nine months of 2015) weighed on the translation of the consolidated revenue into Euros. Lastly, in the Central Mediterranean area (Italy), revenue from sales totalled EUR 69.9 million, a slight increase compared to EUR 69.8 million in the same period of 2015, incorporating the revenue from the Sacci business division (EUR 8.2 million), which entered the scope of consolidation in the third quarter of 2016. On a like-for-like basis, sales revenue would have been down by 11.7% due to the decrease insales volumes of cement and ready-mixed concrete (-11.7% and -10.2%), with average sales prices for cement substantially stable and higher for ready-mixed concrete. Operating costs totalled EUR 620.4 million, an increase of 2.8% compared to EUR 603.7 million for the first nine months of 2015. The addition of CementirSacci to the scope of consolidation brought a EUR 11.4 million increase in operating costs. However, at constant exchange rates, operating costs would have amounted to EUR 656.7 million. Specifically, the cost of raw materials was EUR 311.0 million (EUR 305.7 million in 2015), bearing in mind for the purposes of comparison with 2015 that CementirSacci incurred raw materials costs of EUR 5.2 million. However, at constant exchange rates the cost of raw materials would have come to EUR 326.7 million (+19.6 million on the EUR 307.1 million figure for the previous period), primarily driven by higher production output of cement and ready-mixed concrete. Personnel costs amounted to EUR 117.8 million, of which EUR 3.0 million relative to CementirSacci. Total personnel costs at constant exchange rates would have been EUR 131.2 million, up 17.4% over 2015, due to the higher costs incurred following the increase of business in Scandinavia and the impact of inflation on employee remuneration in high-inflation countries. Other operating costs totalled EUR 191.7 million, an increase of 3.7% on the same period of 2015. CementirSacci incurred costs of EUR 3.2 million in the third quarter of 2016. At constant exchange rates, other operating costs totalled EUR 198.8 million, an increase of 7.6% on 2015 mainly as a result of the increase in production costs and plant maintenance costs. EBITDA, at EUR 118.5 million, was down 5.4% compared to the same period of 2015 (EUR 125.3 million) mainly as a result of the depreciation of the major foreign currencies against the Euro and lower earnings in Italy and Turkey, partly offset by the improvements in Scandinavian countries and the Asia Pacific area. At constant exchange rates, EBITDA would have been EUR 124.9 million, substantially in line with the corresponding period of 2015. CementirSacci recorded a negative EBITDA of EUR 2.3 million in the period. The EBITDA margin came to 16.2%, showing a slight drop in profitability compared to the same period of 2015 (17.4%). Net of amortisation, depreciation, impairment losses and provisions totalling EUR 60.1 million, EBIT amounted to EUR 58.4 million (EUR 63.0 million in the first nine months of 2015). Net financial expense totalled EUR 10.7 million, a deterioration compared to the previous year (income of EUR 0.6 million in the first nine months of 2015). The figure was driven by the fall in the mark-tomarket valuation of derivatives held to hedge commodity and interest rate risk, heavily exacerbated by the result of the “Brexit” vote. Profit before taxes amounted to EUR 47.7 million, down compared to the corresponding period of the previous year (EUR 63.6 million).

Net financial debt at 30 September 2016 amounted to EUR 350.6 million, an increase of EUR 128.5 million compared to 31 December 2015. The change was due mainly to the effects of the outlay for the acquisition of the cement and ready-mixed concrete business division of Sacci SpA concluded on 29 July 2016, and also includes capital expenditure of around EUR 32 million (EUR 42 million in 2015). Excluding the effects of the acquisition, the net financial position of the Group would have been 225.3 million, down EUR 65.8 million on 30 September 2015, in line with management expectations. The payment for the acquisition totalled EUR 122.5 million, while the remaining EUR 2.5 million will be paid as a deferred component 24 months after closing. To finance the acquisition, a financing agreement was signed with the related party ICAL 2, approved by the Board of Directors of Cementir Holding SpA on 12 July 2016. Total equity at 30 September 2016 amounted to EUR 1,121.7 million (EUR 1,131.1 million at 31 December 2015), not including taxes on earnings for the period.

Read the article online at: https://www.worldcement.com/europe-cis/14112016/cementir-holding-releases-consolidated-results/