Italcementi incapable of meeting 2010 targets after 3Q – analysts

Italcementi incapable of meeting 2010 targets after 3Q – analysts
Published: 09 November 2010

Some Italian brokers said on Monday they did not exclude the possibility that local cement producer Italcementi could make a notable cut in the 2010 and 2011 estimates after the group published disappointing third-quarter results on Friday.

Italcementi’s net financial debt was the only item that beat the analysts’ expectations, improving to EUR 2.357bn, against EUR 2.468bn forecast, most probably as an effect of net circulating capital and reduced investments.

The group’s EBITDA, however, were affected by lower domestic prices compared to the second quarter, by rising costs and slight drop in prices against an expected feeble increase in France, and by lower-than-expected prices in India.

Considering these factors, it is reasonable to expect a significant downgrade in the 2010 and 2011 estimates, the analysts at UniCredit commented.

According to them, the target of EUR880m EBITDA in 2010, which would necessitate an unrealistic 10% annual increase in the last quarter alone, would be lowered by at least EUR40m–EUR 50m.

Equita, whose 2010 EBITDA estimates are already 4% below those of the analysts’ consensus, affirmed on Monday morning a “hold” rating and a share price target of EUR 6.90 on Italcementi.
UniCredit also keeps a “hold” recommendation with a EUR-7.10 price target.

“The results are worse than our expectations,” said the experts of Intermonte who kept a “neutral” stock rating on the group.

Given the weak profit dynamics and the very low possibility for inversion in the sales volumes trend, Mediobanca analysts confirmed a “neutral” rating and a share price target of EUR 7.40.

Although the broker sees a limited downside risk for Italcementi, the signs for weakness in trade volumes in the emerging markets such as Egypt, along with the downward price trend in India and Italy, could make the investors consider the group shares “dead money” in the short run, the analysts at Mediobanca concluded.