Buzzi Unicem sees continued pricing pressures

Buzzi Unicem sees continued pricing pressures
Published: 14 May 2010

Italy’s No. 2 cement group Buzzi Unicem reported a fall in turnover of 21.7% in the first quarter 2010 to €459.63m as weak demand and adverse weather conditions deeply affected results. EBITDA dropped 64.6% to €13.92m, resulting in a trading loss that jumped from €12.11m to €40.27m.



Cement shipments declined 19.6% to 4.4Mt and group ready-mixed concrete deliveries were off by 14.1% to 2.6Mm³. The slowdown in demand resulted in cement pricing pressure in various regions.
 
Group Italian cement and clinker volumes dropped 21% compared a relatively good performance in the previous year and some market share was lost.

Excess market capacity put pressure on prices which weakened by 9.9%. In Eastern Europe turnover fell 25.1% and EBITDA dropped by 34.3% to €4.8m in a bad winter. In the USA, first quarter cement shipments were off 23.2% and average prices declined 7.7%.
 
Net financial costs were 3.2% higher at €33.51m, resulting in a pre-tax loss 64.3% increasing to €50.50m. Net debt at the end of March was 9.1% higher at €1319.7m, which gave a still very comfortable gearing level of 46.6%. Kiln fuel costs were lower, but prices for electric energy increased.  
 


Capital investment was slightly down at €90.3m compared with €98.7m, of which €67.7m were spent on investment projects in Russia, the Ukraine and Mexico.
 
During the first quarter Buzzi said March figures showed a significant improvement over the two previous months thanks to improved weather conditions and, possibly, a stabilisation in underlying demand.

While the company has said construction activity may recover strongly and volumes may improve from spring onwards, it has forecast lower 2010 results in light of the recent quarter.  A competitive pricing scene is expected to continue in Italy, Russia and the United States for the remainder of this year, outweighing a recovery in sales volumes as these markets feature intense competition and substantial excess capacity.  “Given an unsatisfactory first quarter, we…confirm expectations for lower [2010] operating results and net profit,” Buzzi said in a statement.