Higher interest charges depress Titan’s profits

Higher interest charges depress Titan’s profits
Published: 24 October 2008

Titan’s turnover increased by 3.5% to EUR1,183.5m in the first nine months of 2008, while the EBITDA declined by 15.4% to EUR289.3m. Net debt at the end of September was 114.2% higher at EUR1,133m after having incurred capital expenditure of EUR139m and having spent EUR470 on acquisitions, predominantly in the Near East. In addition, Titan spent EUR56m on buying back its own shares. Higher interest charges contributed to the 27.7% reduction in the pre-tax profit to EUR179m, while the reduced US contribution helped to lower the tax rate and the decline in the net attributable profit was limited to 15.6% to EUR163m.

Cement shipments were boosted by the acquisitions in Egypt and Turkey and rose by 10.7% to 12.96m tonnes, but downstream volumes declined because of weaker markets in the Untried States and in Greece as a result of which deliveries of aggregates declined by 7.2% to 14.03Mt, sales of ready-mixed concrete by 5.5% to 4.14Mm³ and concrete blocks by 27.4%.

Greece and Western Europe increased turnover by 4.1% to EUR488.1m, but this was not sufficient to fully absorb the higher energy costs and the EBITDA fell by 12.0% to EUR133.8m. The Greek domestic cement sales continued to decline, while aggregates and ready-mixed concrete deliveries were little changed, thanks to some smaller acquisitions. Greek volumes were affected by delays to infrastructure projects and by an excess supply of new housing stock.

Turnover in South Eastern Europe advanced by 34.5% to EUR218.7m, helped by an increase in cement volumes of around 20%. Higher costs, however, limited the increase in the EBITDA to 8.7% to €82.6m. Titan has bought out the minority interest in the Albanian import operation and the new 1.5Mta cement works currently being built in Albania should come on-stream in just over a year’s time.

The turnover in the United States fell by 11.4% to US$559.2m, which translates into a 21.5% reduction to EUR366.5m, while a 56.4% fall in EBITDA to US$53.5m translated into a 61.3% drop to EUR35.1m. In spite of higher energy costs, average cement price declined somewhat, though the price impact was limited by a sharp drop in imports. Although the Pennsuco quarry in Florida was re-opened in May, weak demand led to a 20% drop in aggregates shipments and the ready-mixed concrete and concrete block deliveries suffered from the dire state of the US housebuilding market.

Titan’s full ownership of the former Egyptian joint venture with Lafarge and the new Turkish joint venture have combined to substantially boost turnover and profits from the Near East. Turnover jumped by 141% to €110.2m and the EBITDA rose by some 64% to EUR37.9m. Higher prices were achieved in Egypt, but the increases achieved only partially covered the higher energy costs and raw material fees. The €150m investment in a 1.5m tonnes per annum capacity increase at the Beni Suef works should be commissioned towards the end of next year. Cement prices in Turkey have come under pressure from the substantial new capacity that has been installed, particularly as exports to Russia down.