Italcementi H1 EBITDA may rise less than sales due to higher costs

Italcementi H1 EBITDA may rise less than sales due to higher costs
Published: 31 July 2007

Italcementi SpA’s second-half results, due to be released Friday, may show EBITDA rising less than sales compared to a year earlier, due to higher energy and production costs, thus leading to a further decline in margins, analysts said.  
They also said that sales are expected to grow less than in the first three months of the year, due to less favourable weather conditions.  
The fifth largest cement maker is expected to post sales of EUR3.072-3.165bn in the second half, up at least 5.9 per cent from
EUR2.909bn a year earlier, while recurring EBITDA is seen rising to EUR745-757m from EUR750.5m, they said.  
’The main point will be margins. EBITDA should have risen less than sales as we expect a greater pressure from energy and production costs, particularly in Italy and Egypt,’ an analyst at a European bank said.  
Italy and Egypt contribute one third to the group’s revenues and margins.  
The analyst expects EBITDA margin on sales to decline by 70 basis points compared to a year earlier, after a 200 basis points decline in the first half.  
He also said that sales in the second quarter should have grown less than in the previous quarter, due to less favourable weather conditions in some parts of Europe, mainly France and Italy, ’where it rained a lot’.  
’In Q2 the group did not benefit from the favourable weather conditions which explained the strong Q1 performance,’ said Exane BNP in a note.  
The French broker also said the slowdown in the US continued to hit and that ’there is a question mark’ also on Turkey, following indications from Vicat of a competitive situation in ready-mix concrete.  
On the US, the first analyst said he does not expect the second quarter to have performed much better than the ’disastrous’ first quarter in the light of macroeconomic data released in the country.  
’But fortunately the US weights less than 10 per cent on the group’s revenues’.  
On acquisitions, the analyst at the European bank said that after the recent purchase of a cement plant in China, the next move of Italcementi could be in Saudi Arabia, where he said, ’it is currently in talks with a local company to set up a joint activity’.  
’Italcementi is continuously looking at acquisitions in emerging markets. A move in Saudi Arabia would be very appreciated by the market, since that market is growing very fast, though I don’t expect an announcement shortly,’ he said. 
The net profit is expected to fall three per cent to
EUR223m by Exane and to EUR219m by a domestic broker.  
An analyst at a domestic brokerage said the expected ’weak’ results explain why the shares have performed poorly recently, and that the ’cautious’ outlook of full-year operating results in line with 2006 is likely to be reaffirmed.