Votorantim Cimentos recorded global net revenue of R$3.9 billion in the second quarter of 2020, an increase of 18% as compared to the same period in 2019. The growth is mainly due to the positive effect of the depreciation of the real against the dollar, solid results in North America, and better sales volumes in Brazil. Consolidated adjusted EBITDA was R$735 million in the second quarter of 2020, 50% higher than 2Q19, with an EBITDA margin of 19%. Leverage, as measured by the net debt/adjusted EBITDA ratio, was 4.20x, a positive evolution when compared to a ratio of 4.76x in 1Q20, due to strong operating results and free cash flow generation, still heavily impacted by the exchange devaluation during the first half of the year.
Net income (loss) in the second quarter of 2020 was negative at R$153 million, a 214% decrease compared to 2Q19. This reversal is mainly explained by the recording of the impairment of assets in Turkey and Bolivia, mainly given the challenging environment resulting from the pandemic, which impacted the recoverable value of these assets. The total impairment recorded – which does not impact the company’s cash flow ¬– was R$273 million. Had the effect of impairment been excluded, net income for the second quarter would have been positive at R$119 million with an 11% decrease in comparison to 2Q19.
The company’s geographic diversity also helped the results, since impacts of the coronavirus pandemic were felt at different times and at different intensities in each country. As of mid-March, measures induced by Covid-19, such as social distancing and restrictions to economic activity, impacted cement sales in all regions where the company operates, albeit to different extents.
Social distancing has positively impacted demand in Brazil, where increases in sales volumes have been observed since May. This growth in demand for construction products is due to an increase in small improvement projects, since people are spending more time in their homes. The market was also influenced by early maintenance to coincide with the closing of stores and shopping centres, according to the latest report by the National Union of the Cement Industry (SNIC).
In Brazil, the company maintained positive dynamics and recorded net revenue of R$1.8 billion, with 9% growth compared to the second quarter of 2019. Adjusted EBITDA in the period was R$254 million, a growth of 233% in comparison to 2Q19, mainly due to cost reductions resulting from the Covid-19 pandemic contingency plan, in addition to the improved performance of adjacent products and better sales volume.
“Market conditions in Brazil were less challenging than initially expected in the first half of 2020, considering the coronavirus pandemic. We continue to exercise financial discipline and to manage the company’s debt profile conservatively. Our average debt maturity is over eight years and we have high cash liquidity, which puts us in a strong position to face the volatility and uncertainty arising from these turbulent times,” said Osvaldo Ayres Filho, Votorantim Cimentos’ Global CFO.
The dynamics of the cement market in the United States and Canada were also positive during the first half of 2020, driven by favourable weather conditions and a lower impact of restrictions resulting from the pandemic in the regions where Votorantim Cimentos operates.
In North America, net revenue was R$1.5 billion in the second quarter of 2020, an increase of 40% over 2Q19, mainly due to the devaluation of the real against the dollar, lower-than-expected impact of the pandemic in the civil construction sector, and steady market demand. Adjusted EBITDA in the quarter was R$387 million, an increase of 33% over 2Q19.
In Europe, Africa and Asia, restrictions to contain the spread of Covid-19 were stricter in the areas where Votorantim Cimentos operates. In Spain and Tunisia, the sector was completely shut down between March and April, and production has been gradually resumed. In Morocco, although the interruption was more moderate, measures implemented in the second quarter to contain the coronavirus had a significant impact on volume. Turkey experienced the least impact in the region, but the country’s macroeconomic situation remains challenging.
In the region, net revenue growth was 2% compared to the previous quarter and reached R$440 million. It was positively impacted by the depreciation of the real, which offset the drop in sales volume in all countries, mainly due to Covid-19. Adjusted EBITDA in the region decreased by 33% in the second quarter, to R$67 million.
In Latin America, the evolution of the pandemic in Uruguay was milder than in its neighbouring countries, and the country did not have to interrupt its economic activities. As a result, Votorantim Cimentos maintained the regularity of its operations in the country and benefited from local market factors in the second quarter. On the other hand, in Bolivia, the company was forced to freeze operations for two months due to the pandemic, which had a direct impact on sales volume.
Net revenue in Latin America and other regions was R$145 million in 2Q20, down 6% in comparison to the second quarter of 2019. The market in Bolivia faced a challenging environment with the total interruption of economic activities starting at the end of March. This impact was partially mitigated by the strong operating performance in Uruguay. Adjusted EBITDA grew by 16%, to R$27 million.
Read the article online at: https://www.worldcement.com/the-americas/18082020/votorantim-cimentos-reports-global-net-revenue-increase-of-18/
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