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TITAN Cement Group share nine month 2019 results

Published by , Deputy Editor
World Cement,

Compared to the same period the previous year, consolidated turnover increased by 8.7%, EBITDA was up by 15.4%, and net profit grew by 25.7%, owing to a better performance delivered in all of the TITAN Cement Group’s regions, with the exception of the Eastern Mediterranean.

This solid performance of the third quarter contributed favourably to the nine month results. Consolidated turnover increased by 9.7%, reaching €1208.5 million, while EBITDA grew by 5.8% to €208.4 million. Net profit after minority interests and the provision for taxes declined by 9.9% to €45.3 million, largely owing to higher depreciation charges, partly due to IFRS 16 adoption and to the first time consolidation of Turkey in full in 2019.

The momentum displayed by construction activity in the Southeastern US in the current year, coupled with the continued recovery of markets in Southeastern Europe and the relative improvement of the situation in Greece, have all resulted in an improvement in consolidated results, counterbalancing the soft performance in Egypt and Turkey.

Following a successful tender offer, Titan Cement International S.A. (TCI) acquired 100% of the ordinary and preference shares of Titan Cement Company S.A. (Titan S.A).

In the US, third quarter results recorded growth, reflecting the strong momentum of the construction sector. Within the broader framework of economic growth, favourable macroeconomic indicators such as consumer confidence, low unemployment, and as low interest rates, all support the residential market which constitutes the backbone of demand in Florida, US. Virginia and the Carolinas also benefitted from better weather patterns this year, compared to what had been a very wet third quarter in 2018. Following the course of the market, TITAN America recorded an increase in sales in 2019 across all product lines, with the exception of fly ash, which continued to be in short supply in the market.

In Greece, demand posted a modest increase, stemming from private construction and tourism development, although this was partly counterbalanced by the delay in the realisation of new major projects. Within a more upbeat economic sentiment, the construction confidence index recorded a mild increase compared to December 2018. Total group turnover for the nine months of 2019 in region Greece and Western Europe increased by 6.8% to €185.2 million, while EBITDA grew by 45.1% to €15.5 million.

The continued economic recovery of the countries in Southeastern Europe, fed into the pick-up of construction. An increase in selling prices witnessed during the year, coupled with higher plant utilisation rates to meet the increased demand, have resulted in a substantial improvement in the region’s results. Turnover in the nine months of 2019 in Southeastern Europe increased by 11.2% to €194.7 million, and EBITDA recorded a 32.6% increase, standing at €59 million.

In the Eastern Mediterranean, markets continue to face challenges. In Egypt, despite the economic growth, which is forecast to move above 5% this year and the attendant needs generated by demographic growth, cement demand in the nine months of 2019 recorded a decline of approximately 6%. The existing capacity surplus has only been accentuated by the operation of the army’s large plant.

In Turkey, the sharp decline in the demand for building materials, which characterised the last twelve months, has gradually slowed down, with the market recording signs of stabilisation in the third quarter. While prices have increased in local currency, this was not sufficient to cover for inflation and the depreciation of the Turkish Lira. Total turnover for the Eastern Mediterranean region in the nine months of 2019, including Turkey, reached €107 million, recording a 6.1% decline, while on the EBITDA line, the group recorded a €3 million loss, compared to €13.9 million in profits in the corresponding period in 2018.

In Brazil, sales at Apodi were higher, reflecting the improved market conditions this year.

Capital expenditure for the group in the nine months of 2019 reached €76 million, remaining at roughly the same levels as in the corresponding period in 2018.

The outlook for the rest of the year is favourable for most of the markets in which the group is active. The market in the US demonstrated demand growth; markets in Southeastern Europe have the potential to grow further, while expectations for Greece and Brazil are also positive. Countering these trends, challenges in Egypt are expected to continue, while there is reserved optimism regarding the gradual stabilisation of Turkey.

In the US, construction trends remain favourable in the regions where the group is active. The Portland Cement Association (PCA) forecast that cement consumption will increase by 2.4% in 2019, and by approximately 2% per annum over the period 2019 - 2024.

In Greece, the gradual positive trend is expected to continue. Restart of major projects, now expected to take place in the coming year, sustain expectations of a medium-term pickup in construction activity. The rise in private consumption should also maintain its positive evolution.

In the countries of Southeastern Europe, continuing economic growth is having a positive effect on construction activity. Consumption of cement has increased, and profitability margins have improved. The group’s plants can increase their output by utilising excess capacity to cover additional demand.

In Egypt, demand is expected to post a moderate decline for 2019. A meaningful improvement in prices is not imminent, and therefore operations should remain loss-making, at least in the short-term.

In Turkey, the economic recession is appearing to soften, and the second half of the year is likely to offer more favourable comparatives in terms of cement demand. The market should stabilise in the short term, while the longer-term prospects of the construction sector remain attractive.

Lastly, in Brazil, the gradual macroeconomic improvement increases expectations for growth in construction and an uplift in the cement market. Cement demand in Northeastern Brazil where the group is present, is showing positive prospects which are driven by demographic growth and private building activity.

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