The US recovery is the one bright spot for Titan

The US recovery is the one bright spot for Titan
Published: 30 August 2012


Titan’s first half turnover declined by 1.6 per cent to €547.9m and the EBITDA fell by 21.3 per cent to €112.1m, as the cement producer is caught amid a continued downturn it its domestic market of Greece and US operations prove to be its only bright spot.

Titan’s trading profit fell 39.5 per cent to €50.5m, but the net financial charge dropped by 54.9 per cent to €20.5m, reducing the fall in the pre-tax profit to 21.8 per cent to €29.5m. The net attributable profit emerged 65.3 per cent lower at €8.3m.

Capital investment was cut by a further 43 per cent to €17.7m, after the considerable reductions seen in the past two and a half years and an increase in capital expenditure must now be expected during the second half, though capital expenditure should still continue to run at below depreciation. Net debt at the end of June was 14.1 per cent lower than a year earlier at €640.2m, giving a gearing level of 39.6 per cent.

Group deliveries of cementitious materials recovered by 2.6 per cent to 7.8Mt, but aggregates shipments declined by a further 5.6 per cent to 5.1Mt and ready-mixed concrete deliveries were down by 8.8 per cent to 1.66Mm³.

The Greek and Western European turnover declined by a further 18 per cent to €118.9m, but the EBITDA showed a 4.4 per cent recovery to €28.3m as the margin recovered from 18.7 per cent to 23.8 per cent. Greek cement volumes continued to decline, but exports showed a good recovery, with higher volumes going to the USA, West Africa and North Africa. As a result, capacity utilisation improved, though there were still carbon emission rights to sell, albeit at lower prices than a year ago. Downstream volumes in Greece continued to drop. The decline in Greek demand for cement and downstream products will continue to fall for the rest of this year, at least, but the restructuring programme should deliver further reductions in fixed costs. In Greece, bad debt provisions now cover some 29 per cent of trade receivables.

The South Eastern European turnover lost all of last year’s gain and declined by 6.2 per cent to €101.4m and the EBITDA fell by 27.7 per cent to €31.1m. After a particularly harsh winter, the second quarter did not show the extent of recovery that had been expected as European markets remained weak and public spending was reduced. Cement prices started the year on a positive note, but competition has intensified from the late spring onwards. Titan has executed an option to buy out the outstanding minorities in Kosovo, but has also improved the equity base by selling an 11.5 per cent stake in the operations in Macedonia, Serbia and Kosovo to International Finance Corporation for €50m.

In The United States, on the other hand, the group is seeing a clear improvement. Turnover recovered by 16.4 per cent to €176.1m and there was a positive EBITDA of €4.3m, compared with a revised €4.1m loss last year. Capacity utilisation at the two US cement works remains low, but prices have begun to recover. Volumes in both cement and aggregates are showing encouraging double-digit growth rates. US$34.8m in disposal proceeds from the sale of non-core assets will help finance increased working capital as markets improve. Separation Technologies, the subsidiary than installs and operates fly ash processing plants, continues to grow and is expanding into industrial minerals.

The Eastern Mediterranean operations, which cover Egypt and Turkey, saw turnover ease by 0.7 per cent to €151.5m while the EBITDA fell by 35.5 per cent to €48.5m as the previous year’s first half results had benefited from a €25m clay tax repayment in Egypt. The underlying decline was thus a more modest 5.6 per cent. Egyptian cement prices have recovered, but are still below those the year before, while costs of electricity and gas have risen sharply. Much of the excess supply has been absorbed by a 10 per cent increase in cement consumption. Turkey is recovering from the very harsh winter and exports are increasing, while prices continue to improve.