Votorantim Cimentos shares Q1 financial results
Published by Emily Thomas,
Votorantim Cimentos ended the first quarter of 2021 with net profit of R$227 million, reversing the R$380 million loss posted in 1Q2020. The company’s global net revenue in the first quarter of the year was R$4 billion, an increase of 46% in comparison to the same period in 2020, as a result of an increase in sales volume in all regions where it operates, combined with the positive impact of the devaluation of the real against foreign currencies in its international operations. The company’s global cement sales totalled 7.6 million t in 1Q2021, a 20% growth compared to the 6.3 million t sold in the same period in 2020.
“Our results in the first three months of the year reflect our resilience and teamwork to overcome adversity in the face of COVID-19. The pandemic still brings a lot of volatility and uncertainty, and people’s lives continue to be a priority as we conduct our business. The first quarter reflected the company’s unique positioning and potential for operational leverage, as we remained focused on keeping our guard up,” said Marcelo Castelli, Global CEO of Votorantim Cimentos.
Votorantim Cimentos ended the first quarter with adjusted EBITDA (earnings before interest, taxes, depreciation and amortisation) of R$971 million, an increase of 318% compared to 1Q2020, and an EBITDA margin of 24%, an increase of 16 percentage points over the same period in 2020. These results reflect positive sales volume and the favourable effect of the appreciation of the dollar against the real. Leverage, measured by the net debt/adjusted EBITDA ratio, remained stable at 1.98x, in line with the company’s financial policy.
“We exercised our customary financial discipline and actively worked on debt management. As a result, we ensured liquidity and a strong cash position and kept the company’s leverage under control during the quarter. With stronger operating results and better credit metrics, we resumed the payment of dividends to shareholders and not only maintained our investment grade by two risk rating agencies, but also had our outlook recently upgraded to stable by Fitch Rating,” said Osvaldo Ayres Filho, Global CFO of Votorantim Cimentos.
Performance by region
In Brazil, Votorantim Cimentos’ net revenue in the quarter was R$2.2 billion, an increase of 47% compared to 1Q2020. Adjusted EBITDA was R$594 million, an increase of 433% over the same quarter last year. The positive results in the first quarter of 2021 are primarily due to an increase in sales volume and prices, as well as ongoing positive market dynamics in all regions of the country. The Brazilian cement market ended the first quarter of 2021 with a total of 15.3 million t traded, an increase of 19% over the previous year, according to the National Cement Association (SNIC). The main performance drivers were favourable weather conditions, the fact that civil construction continued to be considered an essential service and the continuous growth of the self-construction and real estate sectors. SNIC estimates that the cement sector will grow between 1% and 2% in 2021.
In North America, the company’s net revenue was R$815 million in the first quarter of 2021, an increase of 29% over 1Q2020, which is primarily explained by higher sales due to favourable weather conditions, which recurrently affect operations and results in the Northern Hemisphere, in addition to the positive impact of the exchange rate. Adjusted EBITDA was R$42 million in the first quarter of 2021, compared to negative R$5 million in 1Q2020.
In Europe, Africa and Asia, Votorantim Cimentos’ net revenue was R$814 million, an increase of 72%. Adjusted EBITDA increased 162%, totalling R$249 million in the quarter. The positive results are due to a higher demand in all countries compared to the same period last year, when the region was impacted by COVID-19 restrictions. Other contributing factors include positive price dynamics and the devaluation of the real, in addition to a positive effect of a non-recurring item related to the sale of land in Turkey.
In Latin America, the company’s net revenue in the first quarter was R$170 million, an increase of 24% compared to 1Q2020, and the adjusted EBITDA was R$86 million, an increase of 185% over the first quarter of 2020. These results reflect high sales volume and positive price dynamics, especially in Uruguay, in addition to cost management and the positive effect of the exchange rate. Also, COVID-19 restrictions impacted 1Q2020 results in Bolivia.
In March, Votorantim Cimentos issued its first ESG (Environmental, Social and Governance) debentures in Brazil, with targets linked to sustainability indicators. These were the first ESG debentures issued in the Brazilian market by a company in the construction sector. The R$450 million facility has a five-year term (maturing in February 2026), and an interest rate adjusted according to CDI + 1.45% per year. The proceeds were used to prepay debts maturing in 2023. The performance indicators (KPIs) that will be measured are CO2 emissions per ton of cement and thermal substitution rate, two sustainability parameters that are important for the cement industry and aligned with the 2030 Sustainability Commitments made by the company in November 2020. By achieving targets set every two years, Votorantim Cimentos will benefit from better debt prepayment terms.
In the first quarter, Votorantim Cimentos and its subsidiary VCNNE, through RB Capital Companhia de Securitização, issued a Certificate of Real Estate Receivables (CRI) in the amount of R$400 million. This was the company’s second CRI issuance in the Brazilian capital market. The certificate has a 12-year maturity term and an annual cost of IPCA + 4.47%. The company and its subsidiary also contracted a swap to exchange the floating IPCA+ rate for the floating CDI+ rate , resulting in an annual cost of CDI + 1.33%.
In April, Votorantim Cimentos and Caisse de dépôt et placement du Québec (CDPQ), a long-term institutional investor, announced the conclusion of the transaction to combine their cement operations in North America. After the completion of closing conditions, including approval by regulatory authorities in Brazil, Canada and the United States, St Marys Cement Inc. (Canada), a wholly-owned subsidiary of Votorantim Cimentos, will proceed with the process to incorporate McInnis Cement Inc. Votorantim Cimentos Internacional (VCI), an international investment platform and wholly-owned subsidiary of Votorantim Cimentos, will have an 83% stake in the new entity, and CDPQ will have a 17% stake. The combination of the St Marys Cement (Canada) and McInnis Cement businesses is expected to significantly strengthen the strategic position of the North American operations by increasing cement production capacity and operational efficiencies, and expanding the distribution network in the region.
Also in April, Juntos Somos Mais received a R$100 million capital investment from its shareholders Votorantim Cimentos, Gerdau and Tigre. Created by Votorantim Cimentos in 2014, the company Juntos Somos Mais maintains the largest loyalty programme in the building materials retail market and the largest marketplace in the sector, with more than 25 construction and service companies and 500 000 members, including store owners, sales professionals and construction workers. The company’s long-term plan is to be a one-stop shop for construction by offering solutions for retailers and end consumers working on minor home repair projects. The investment reinforces the shareholders’ commitment to support innovative projects that result in the development and modernisation of the sector in the country.
Read the article online at: https://www.worldcement.com/the-americas/20052021/votorantim-cimentos-shares-q1-financial-results/
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