Titan Cement releases 1H results – net profit up 14.9%

Group turnover during the first half of 2010 amounted to €681 million, posting a marginal 0.4% decline compared to the same period in 2009. EBITDA was flat (+0.2%) at €161 million. Group net profit after taxes and minority interest increased by 14.9% compared to the same period last year, reaching €68 million.

The Group’s long-term strategy of geographic diversification played a vital role in the improvement of the results. The recent start-up of the new production line in Egypt and the new plant in Albania contributed to increasing sales and operating profitability in the Eastern Mediterranean and South Eastern Europe, offsetting the negative impact from the decline of cement consumption for the fifth consecutive year in the USA and the fourth consecutive year in Greece.

The depreciation of the euro also had a positive impact on the Group’s results, as it led to positive foreign exchange differences that reduced financing costs.

Titan Group regions

In Greece, construction activity continued to contract in the first half of 2010. The decline is primarily due to the low demand for new housing, which in turn is a consequence of the economic crisis and the oversupply of property. EBITDA in the region declined by 8% to €53 million compared to the same period in the previous year. The decline in profitability was moderated by the systematic efforts to contain costs, in conjunction with extraordinary gains of €3.6 million from the disposal of assets.

In the USA, after a tough winter season, construction activity during the second quarter of 2010 showed signs of stabilisation. The Portland Cement Association (PCA) estimates that for the first half of 2010, cement consumption declined by 4.3% compared to the same period in 2009. However the decline was more pronounced in the South Eastern States, where most of the Group’s operations are located. For the first half of 2010, EBITDA in the region declined by 93% to €2 million.

On 1.4.2010, the Group disposed of a quarry in Cumberland, KY, for the amount of €32.7 million, almost exactly equal to the net asset value of the operation.

In Southeastern Europe, the economic crisis continues to depress demand for building materials, although at a lower pace than in 2009. Nevertheless, EBITDA increased by 31.7% to €43 million, as a result of the new 1.5 million t capacity plant in Albania, operating since the beginning of Q2 2010, and the expansion of operations in Kosovo.

In contrast to the situation in Europe and the US, demand for building materials in the Eastern Mediterranean increased. In Turkey, the economic recovery led to an increase of cement demand that is estimated around 15%. In Egypt, demand increased by 7% mainly due to extensive housing development programs. The positive economic developments in the region, in conjunction with the increased production capacity of the Group, contributed to the significant improvement of the financial results during the first half of 2010. Overall, EBITDA increased by 33.8% to €64 million.

In March 2010, the Group announced the signing of an agreement with the International Finance Corporation (IFC), under which the IFC is to invest €80 million to acquire approximately a 16% stake in Titan’s Egyptian operations. The implementation of the agreement is expected to be concluded by the end of September.

Significant post-balance sheet events

On 1/7/2010, the Group’s subsidiary in the US, Titan America LLC, prepaid and retired the remaining $66.9 million (€54.5 million) of private placement notes, which had been issued in the past to US institutional investors, with terms that were no longer favourable. The resulting one-off cost of $9.7 million (€7.9 million) will impact the third quarter of 2010.

Outlook for the 2H 2010

Under the prevailing conditions of uncertainty in the economic environment, the Group will continue in the near future to focus on reducing debt by prioritising investments, reducing working capital and lowering costs. The Group remains committed to its four strategic priorities, which are geographic diversification in cement, continuous improvements in cost and competitiveness, vertical integration in related building materials and a focus on both human resources and corporate social responsibility.

The full results can be found here.

Read the article online at: https://www.worldcement.com/europe-cis/31082010/titan_cement_releases_1h_results%E2%80%93net_profit_up/