Banca IMI cuts Italcementi rating on weak Egyptian business

Banca IMI cuts Italcementi rating on weak Egyptian business
Published: 03 November 2011

Brokerage Banca IMI cut today the rating on Italy’s cement maker Italcementi SpA to "hold" from "buy" to reflect lowered earnings forecasts due to a pessimistic view on the company’s business in Egypt.

Banca IMI also slashed its price target to EUR4.95 from EUR8.65 ahead of Italcementi’s third-quarter results release on November 7.

The downgrade reflects the lowered EBITDA estimates by an average 9.3% for 2011-2012, due to the inflation and lower costs in Egypt – expected to put under pressure the group’s profit margins, and to the lower sales volumes expected on the domestic market.

Banca IMI sees Italcementi reporting stable consolidated revenues both in the third quarter and in the nine months to September. In Italy cement sales in the third quarter are forecast to have dropped by a double-digit figure and prices to have risen slightly.

The broker also forecasts prices and sales in the US to have also fallen. In North Africa, Italcementi’s sales in Morocco are seen to have increased, at flat prices, but sales in Egypt are expected to have deteriorated on an annual basis.

The visibility on the 2012 profits is also low in terms of sales in western Europe and the United States, Banca IMI said.