Titan Cement International SA reports record earnings backed by robust sales in main markets

Sales during the third quarter grew by 5.9% to €663.2 million compared to €626.3 million last year while EBITDA registered a significant increase of 63.6% year-over-year to €155.5 million. Higher volumes, supporting prices, operational efficiencies, better fuel mix and contained energy cost, have all factored into margin recovery. Despite some softening in energy costs such as fuels and electricity, compared to the all-time high levels experienced in 2022, cost headwinds persisted, with cost factors such as labour, raw materials, and other production costs on the rise. However, the Group’s dynamic positioning in markets exhibiting growth characteristics has upheld demand levels unabated in both Q3 and year-to-date. As a result, Group Sales, for the first nine months of 2023, reached €1 892.2million up by 13.9% while the year-to-date EBITDA rose to €396.7 million, growing by a notable 71.5% above 2022. Similarly, the Group’s nine-month 2023 net profit after taxes and minority interests (NPAT) more than doubled reaching €197.6 million, compared to the €89.1 million recorded in the same period in 2022.

Investments and financing

Following strong EBITDA levels of €397 million and despite high, growth-oriented capital expenditure of €158 million, focusing on effective capacity expansion, production cost savings, decarbonisation, digitalisation and logistics projects, operating free cashflow reached €160 million in the first nine months of this year compared to an outflow of €73 million last year.

The Group’s Net Debt at the end of 3Q 2023 was reduced by €147 million y/y, reaching €765 million and coupled with high profitability levels, led to a Net Debt/EBITDA ratio of 1.5x, a ratio compatible with investment grade ratings. TCI was rated “BB+” by Fitch earlier this summer, while S&P also revised TCI’s credit rating to “BB” with a positive outlook” in September 2023.

Resolution of Board of Directors

The Board of Directors at its meeting of November 8th, 2023, decided the initiation of a new share buyback program for a total value of €20 million with an expected duration of 9 months. The new programme will commence after the termination of the current one, which started in March 2023 for a total value of €10 million and is expected to be completed by 30 November 2023.

USA

Performance in the quarter continued to display the dynamic levels recorded so far in 2023, namely resilient delivery amidst diverging market dynamics. Year to date, in the US region, price appreciations have absorbed the effects of variable production, distribution and labour costs. Moreover, the portfolio of significant value-adding projects has further contributed toward the US’s improved bottom-line result. While the Fed continues to address inflation, cement consumption attributed to the residential segment and single-family in particular, has inevitably been affected although the Group’s specific exposure to residential is more favourably conditioned by our presence in high-growth metropolitan areas in the Southeast. Conversely, exposure to various segments of commercial construction such as warehousing and incoming reshoring and reindustrialisation investments, coupled with the continued flow of funding on the ground for public infrastructure works has translated in Group volumes holding up well in the quarter. Pricing levels continued trending upwards, reflecting the price increases carried out through the year on top of the carryover effect from increases in the previous year. On the cost side, cost headwinds from raw materials, labour and logistics continue to require vigilance. Nevertheless, the Group successfully pushed profitability to higher levels, capitalising on sustained demand, a robust pricing cycle and significant operational leverage achieved by its extensive investments in supply chain and logistics, such as the -now operational- dome in Florida (Tampa’s import terminal), investments in rail and truck loadout as well as the operational efficiencies accrued by its pioneering digitalisation investments in manufacturing. Overall, sales in the US increased by 18.1% to US$1196 million (15.5% to €1,104.7 million) during the first nine months of 2023, while EBITDA reached US$237.1million (€219million) versus US$133.1million, a 78.1% increase compared to 2022.

Greece & W. Europe

Performance in Greece enjoyed another very strong quarter, while sales in Western Europe displayed slowdown. Construction activity in Greece continued unabated resulting in a double-digit volume growth in domestic consumption. Attica, the capital region surrounding Athens, where the Group enjoys a strong presence, recorded growth rates double to those of the rest of the country which however also followed by heightened activity across the Greek islands in the tourism-related sector, as well as major public infrastructure works across the mainland and smaller infrastructure projects in the periphery. Set against a solid top-line generation, improved fuel mix with increasing use of alternative fuels as well as higher export prices to the US and Europe, profitability increased further testifying not least to the Group’s operational flexibility. Total sales in Greece and Western Europe in the first nine months of 2023 grew by 23.7% to €299 million while EBITDA doubled, reaching €52 million versus €26.4 million in the same period last year.

Southeastern Europe

Performance in Southeastern Europe was aided by two significant forces: the dynamism of the markets, which continued to grow in the quarter and the benefit from milder electricity prices. Cement demand in the region as a whole recorded a healthy growth rate spurred by different segments across the individual countries ranging from single-family homes and multi-family residential developments to port infrastructure works and extensive road infrastructure projects interconnecting the region. Resilient pricing set against softer energy costs in most countries and the Group’s optimised operation of its plants as well as continued increased utilisation of alternative fuels, all contributed to a favourable price-over-cost performance. Sales for the region as a whole in the first nine months of 2023 increased by 13% to €314.5 million compared to the same period in 2022, while EBITDA improved by 64.1% to €107.6 million.

Eastern Mediterranean

The Eastern Mediterranean region continues going through a turbulence as both Egypt and Turkey are facing hard adjustments in their fiscal and macroeconomic situation.

In Turkey, macroeconomic policy appears determined to target high inflation while reconstruction and renovation works accelerated. Group cement volumes grew double-digit while prices continuously adjusting to absorb inflation have risen in tandem. As a result, our operations in Turkey recorded improved profitability. In Egypt with a stalemate in macroeconomic conditions, volumes declined by high-single digits with cement consumption only supported by few public projects and large FDI projects in the field of energy. The quota system is now in place until August 2024. The Group continued to improve pricing and work on increasing the rates of use of alternative fuels which reached levels of more than 40% at the Alexandria plant, while similar project is already underway at the Group’s second plant in the country, in Beni Suef.

Total sales in the Eastern Mediterranean reached €174 million in the first nine months of 2023, dropping by 5.9% year on year (+55% in local currencies) while EBITDA reached €18.1 million versus €11.8 million in the same period in 2022, an increase of 53.4% (+153% in local currencies).

Brazil (Joint venture)

Domestic cement consumption in Brazil declined by 2% in the first nine months of the year versus the same period in 2022. Cement consumption has been dampened by high interest rates, the restriction of credit and lower disposable incomes. Recently key economic indicators have turned slightly more positive, pointing to both an improvement in employment conditions and a relative cooling of inflation. In the nine months of the year, Apodi posted increased sales of €96.9 million, versus €83.4 million in the first nine months of 2022, while EBITDA increased to €15.4 million versus €12.2 million in the same period in 2022.

Outlook

Despite signs of resilience in 2023, the impact of policy tightening to reduce inflation is expected to temporarily cool economic activity within different regions in the world presenting diverging growth prospects. Recent geopolitical developments have further disrupted economic market trends and visibility again remains limited. While the US economy has displayed significant resilience thus far, the Fed’s relentless pursuit of inflation will probably lead to a slowdown in economic growth at the end of 2023 and most likely through the first part of 2024.

The effects of higher rates and credit tightening are already evident in residential construction; however, the demographic fundamentals in the US high-growth metropolitan areas, especially in the Southeast, coupled with a severe lack of housing inventory are expected to make this slowdown rather temporary against the longer-term trends. Infrastructure and non-residential investments are set to continue owing to the sustained flow of funds and the rebalancing and refocusing of the US economy towards industrial onshoring, while the nature of these investments stretches their benefits beyond any near-term slowdown. The Group is well positioned in both the geographies and the segments set to benefit from these trends and this is reflected in the Group’s performance evolution.

Greece is poised for continued strong performance, with €8 billion-worth of public investments in ongoing infrastructure projects across the country budgeted against the backdrop of a healthy macroeconomic environment. The benefits of the recent investments in alternative fuels should become more evident by the beginning of 2024. The Group will continue developing more value-adding products for its strong customer base and invest in green products for growth, as well as increase its operational excellence through digitalisation. The market in Southeastern Europe should maintain the improved performance recorded this year as the investment sentiment remains fairly optimistic. The region however is closely interrelated to the broader European conditions, meaning that investments are affected by the macroeconomic backdrop, remittances, foreign direct investments and tourism.

The market in both Egypt and Turkey will in the short-term be conditioned by the tight macroeconomic environment and weak currencies. Set against these, the fundamental drivers of population growth and attendant infrastructure development are being muted by the macroeconomic weaknesses. Until the situation stabilises, the Group will meet domestic demand in Turkey, which is in a better condition, whilst also utilising its export outlet on the Black Sea to flexibly manage capacity. In Egypt, the Group is accelerating efficiency and decarbonisation investments to increase the use of alternative fuels aiming to improve its cost base.

The Group will continue to pursue its Strategy 2026 priorities for capturing growth in the following years based on its performance-driven local operating model and supported by fast-paced execution. The Group’s priorities remain on further building on its strong local positions through the expansion of its logistics and distribution network and the strengthening of its presence across the value chain, accelerating growth with new materials and service models offering new green products as well as innovative high-performance products and applying technology as a critical enabler for growth through end-to-end digital manufacturing and by offering a dynamic logistics and customer experience.

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