Cimpor full-year 2011 boosted by emerging markets

Cimpor full-year 2011 boosted by emerging markets
Published: 01 March 2012

Tagged Under: Cimpor Portugal 

In its full-year 2011 results, Cimpor reported that Brazil continues to be its main contributor to growth, however, recoveries in Mozambique, Turkey and China helped offset significant declines in Portugal and Egypt.

Diversification and a presence in emerging markets helped Cimpor achieve EBITDA of EUR616m which is down 2.2 per cent YoY despite economic contractions in Iberia and difficulties arising from the political situation in Egypt, the group said. Turnover increased by 1.6 per cent to EUR2275, driven by favourable cement prices in most markets. Impairments in Spain, tax provisions in Brazil and the increase in financial charges impacted net profit which fell 18.1 per cent to EUR198m from EUR242m in 2010.

Consolidated cement and clinker sales in 2011 totalled 27.5Mt, falling 2.7% against the 28.3Mt sold in 2010. Emerging markets (including export destinations) are increasing their weight in Cimpor portfolio and now account for 82% of the total.

Cement consumption in Portugal and Spain saw significant drops (around 15 per cent and 17 per cent, respectively according to latest estimates). Cement and clinker sales in Portugal for the year were down 18.8 per cent YoY to 3.7Mt while in Spain volumes contracted 16.1 per cent to 2.4Mt. Additionally in Portugal, the group saw a 25 per cent drop in total exports mainly due to a reduced need for clinker in Egypt. Measures implemented to adjust to the current economic climate (including a cost cutting programme involving the use of alternative fuels and optimizing logistics costs) were not enough to offset the downturn in the market and a fuel price hike of over 20 per cent, driving EBITDA down 28 per cent in 2011.

In Spain, despite an even greater drop in cement consumption than in Portugla, leasing a milling facility in Antequera (Malaga province) allowed Cimpor’s domestic sales to fall less than the market. Although exports were also lower than in 2010, the favourable change in selling prices and several cost cutting measures made it possible for the group to offset high fuel and electricity prices and increase EBITDA by 6.4 per cent.

In Cape Verde, a slight drop in cement sales (-3 per cent to 0.227Mt) was more than offset by price improvements and a notable rise in aggregate sales. EBITDA in the this market rose 11 per cent against the previous year.

Brazilian cement and clinker sales rose 5.6 per cent to 5.6Mt driven by government projects such as the Growth Acceleration Programme and the “My House My Life Project.” Cement prices also progressed and EBITDA in Brazil increased 10 per cent YoY to EUR210.1m.

The Mediterranean rim saw stable markets in Morocco and Tunisia. Drops in Egypt were partially offset by a turnaround in Turkey. In Morocco Cimpor benefited from demand growth as cement sales rose 6.5% against 2010. However, as a new operator entered the market it was impossible for cement prices to rise in line with cost increases, particularly fuel, which, along third-party clinker usage led to a 1.6% fall in EBITDA YoY.

In Tunisia, despite demand falling against 2010 as a result of social and political events, Cimpor managed to prevent these events from having a significant impact in its industrial operation and even increased its sales within the domestic market by around 1% (taking exports in account sales were unchanged form the previous year) and in 2011 was the country’s market leader. As a result of an increase in cement sales in the domestic market, of extraordinary growth in the aggregates business (sales rose four-fold against 2010 when production began only in the mid of the year) and despite significant rises of fuel and staff costs, Cimpor’s EBITDA in Tunisia rose 2.5% against the previous year.

Cimpor’s Egyptian operations were considerably affected by social and political events sparked off at the beginning of 2011 by the “Arab Spring.” These events not only had an impact on the drop, albeit slight, in demand for cement in the country, but also led to a stoppage at the plant for several days in February and in May, to extraordinary staff cost increases, significant exploration fees increases and a lack of fuel for clinker production, particularly in the last quarter, which led to the need to purchase some clinker from third parties. Additional capacity was added to the market, which had a negative effect not only on Cimpor’s market share but especially on the average sales price, which fell against the previous year. Thus, despite some additional clinker exports whilst there was no fuel shortage, Cimpor’s sales in Egypt fell 11.8% compared to 2010. As a result of the above factors and with the added negative impact of more than 10% average depreciation of the Egyptian pound against the euro, EBITDA fell 42.5% against 2010 levels.
Cimpor’s Turkish cement and clinker volumes rose 5.2 per cent to 3Mt. Cement prices also improved significantly, which helped to offset the very significant increase in some costs, such as fuel costs which rose by over 30%. Thus, despite a heavy depreciation of the Turkish lira (almost 17% on average), the very favourable economic climate and the measures put in place to improve profitability in Turkey resulted in year-on-year EBITDA growth of 42.4%.

Following two years of decreased cement sales (2009 and 2010) in 2011 Cimpor increased its sales in South Africa. Although, according to the latest estimates, domestic demand increased by just over 3%, cement sales, including some exports, increased by 6.8% on the previous year (1011: 1.23Mt). Even with a slight drop in the sales price, volume increased enough to offset significant price rises in fuel and especially electricity, and EBITDA rose 1.3% as compared to 2010.

In 2011 Cimpor significantly increased the volume and profitability of its operations in Mozambique. In a market that continues to poste notable growth rates, an improvement in industrial performance, as a result of the investment and rehabilitation programme launched in 2010, made it possible to increase clinker production by over 30% and thus substantially reduce imports. In this way, and driven by positive price performance (with some drops in the second half of the year due to increased pressure from imports and the launch of a new operator on the market) and because of the appreciation of the metical, EBITDA more than doubled in relation to the previous year, growing 106.5%.

In Asia, despite the end of the year being affected by operating problems and by a drop in cement prices against the previous months due to increased supply and a cooling off of demand in areas in which the Group is present, 2011 was overall a very positive year for Cimpor’s operations in China. The reason behind the two-fold increase in EBITDA – which rose from just €8.9m in 2010 to almost €18m in 2011 (+100.9%) – is a substantial rise in sales price based on more favourable market conditions since the end of 2010 and a number of management measures implemented by Cimpor with a view to strengthening control of operations and improving their efficiency.

In India, despite the country economic growth, Cimpor activity in 2011 was affected by strong supply pressure in the area where the company is present (Gujarat), which prevented sales from rising against the previous year. The price, although it oscillated throughout the year, overall performed positively on average compared to 2010, but was not enough to offset significant rises in the price of the main production factors, notably fuel and electricity, which rose by more than 20%. With an average annual depreciation of the rupee of almost 8%, EBITDA generated in India dropped 21.9% compared to the figure for the previous year.