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Votorantim Cimentos posts net revenue of R$4.9 billion in Q1 2022

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World Cement,

Votorantim Cimentos ended the first quarter of 2022 with consolidated net revenue of R$4.9 billion, an increase of 22% compared to the same period last year. This was primarily due to favourable price dynamics in Brazil, North America, Europe, Asia and Africa, in addition to the positive effect of new sales volumes resulting from acquisitions made by the company during 2021.

In the first quarter, the company’s global cement sales totalled 8 million t, a growth of 5% compared to 1Q21, despite the market retraction experienced during the period in some of the countries where it operates.

“The war in Europe, sanctions imposed on Russia, new lockdowns in China and bottlenecks in logistics chains continue to impact the global economy. In addition, rising interest rates and cost inflation have affected companies and markets as a whole. Faced with this challenging environment, we remained aligned with our strategy and attentive to costs, our operational excellence and our business plan in all regions,” said Marcelo Castelli, Global CEO of Votorantim Cimentos.

Votorantim Cimentos ended the first quarter with consolidated adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of R$418 million, 57% lower than in the same period in 2021. This was due to the strong basis of comparison with 1Q21, combined with climatic factors (rainy summer in Brazil and harsh winter in North America), the exchange rate and the effect of non-recurring items recorded in the same quarter of last year that totaled almost R$132 million (sale of land owned by a subsidiary in Turkey and credit related to the renegotiation of the hydrological risk of electricity generation).

Pressure on raw material, energy and fuel prices affected the quarterly EBITDA margin, which was 9%. As a result of global macroeconomic challenges, the company ended the first quarter with a loss of R$317 million, in contrast with the R$227 million profit posted in 1Q21.

At the end of the first quarter of 2022, leverage (measured by the net debt/adjusted EBITDA ratio) was 1.84x; while this represents a small increase, as expected, compared to December 2021 (1.55x), it maintains the long-term downward trend, in line with the company’s financial policy.

“Despite a scenario of macroeconomic instability and pressure on costs, the company remains financially strong, reflected in an investment grade rating by the three main credit risk rating agencies. We ended the first quarter with strong liquidity, which enables us to meet all debt maturities in the next five years. It is worth mentioning that 40% of our cash is concentrated abroad,” said Bianca Nasser, Global CFO of Votorantim Cimentos.

Performance by region – In Brazil, Votorantim Cimentos’ net revenue in the first quarter of 2022 was R$2.7 billion, a 21% increase compared to 1Q21. Despite the instability of the local market, macroeconomic pressures and the strong basis for comparison with the same period last year, the increase in revenue was primarily due to the combination of higher sales volume and price. Adjusted EBITDA in the quarter was R$359 million, down 40% compared to March 2021 due to cost pressure caused by commodity prices, local inflation and the effect of a non-recurring item in the first quarter of last year (credit related to the renegotiation of the hydrological risk of electricity generation), which increased EBITDA by R$58 million.

In North America, net revenue was R$1 billion in the first three months of 2022, an increase of 24% compared to 1Q21, as a consequence of additional volumes resulting from acquisitions carried out last year and solid market dynamics in Canada and the US. Adjusted EBITDA in the region was negative R$122 million in the first quarter compared to positive R$10 million in the same period in 2021. This reversal is due to worse weather conditions in the Northern Hemisphere, which had a significant impact on operating results.

In the region covering Europe, Asia and Africa, Votorantim Cimentos’ net revenue increased 10% in the first quarter, reaching R$697 million, driven by an increase in volumes in almost all countries in the region and the addition of Cementos Balboa, in Spain. Adjusted EBITDA in the region was R$133 million in the quarter, down 46% from 1Q21, when a non-recurring item (sale of land in Turkey) led to an almost R$74 million increase in EBITDA. Market dynamics were not able to mitigate pressure on petroleum coke and energy costs, nor the impact of a truck drivers’ strike in Spain in mid-March.

In Latin America, net revenue in 1Q22 was R$189 million, down 17% compared to the first quarter of 2021. Worse market dynamics in Uruguay pressured the result down, an effect that was partially offset by the Bolivian market, which, despite macroeconomic challenges, has experienced a positive trend, with better volumes and prices, since last year. Adjusted EBITDA in the region was R$34 million in the first quarter, down 50% compared to the same period last year. In addition to the situation in Uruguay, the devaluation of the real also had a negative effect on the results in the region.

Quarter highlights – In March, Votorantim Cimentos acquired, from Auren (formerly Votorantim Energia), 49% of the total shares of Ventos de Santo Ângelo Energias Renováveis S.A. The company has equity interest in three special purpose companies that hold authorisations to explore wind farms to generate electricity.

In the same month, the company introduced Motz, a new digital carrier solution that hit the market to create a simpler and more agile model to transform the logistics journey of truck drivers and shippers. Motz combines the strength, reach and cargo network of Votorantim Cimentos with the startup spirit of a leaner, more agile, innovative and highly technological logtech.

Through a digital platform, Motz connects shippers with independent drivers. The new carrier focuses on dry cargo, related to the civil construction product chain, and can serve several segments, including agribusiness, mining and steel, among others. Motz has already been operating in the transport of cargo from Votorantim Cimentos and other companies.

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