Titan's profits decline, except in the USA

Titan's profits decline, except in the USA
Published: 05 March 2013


Titan Cement of Greece reported a 3.6 per cent recovery in turnover for 2012 to €1130.7m, following the 19.2 per cent drop in the previous year. EBITDA, however, continued its double-digit decline and fell by 19.8 per cent to €195.8m. While consumption in its home market of Greece has fallen to less than a quarter of the 2006 peak level, Titan has witnessed a reversal in fortunes in its US operations.

In spite of a swing from a €11.9m loss on foreign exchange to a €1.5m profit, there was a pre-tax loss of €1.3m compared with a to €37.7m profit a year ago. The previous year's the net attributable profit of €11m, which had been an 89.3 per cent drop, was turned into a €24.5m loss. For the second consecutive year, no dividend is being paid.

Capital expenditure was reduced by a further 13.8 per cent to €50m, having been reduced by 31.8 per cent and 48.8 per cent respectively in the previous two years. Net debt at the end of December was reduced by a further 15.8 per cent to €596m, to give a gearing level of 38.8 per cent compared with 41.6 per cent year earlier, a notably healthier ratio than the sector average.

Sales boosted by exports from Greece

Group sales of cementitious materials recovered by 5.3 per cent to 16.1Mt, mainly thanks to higher exports from Greece. Sales of aggregates, mainly influenced by the United States and Greece, were static overall at 10.9Mt, while ready-mixed concrete deliveries declined by a further 7.1 per cent to 3.40Mm³.
 
Greek cement consumption is estimated by Titan to have dropped by some 35 per cent in 2012 and is now less than a quarter of the peak level seen in 2006. However, the rate of decline did slow in the fourth quarter. Exports, which were hit by political events in North Africa in 2011, did recover to a more normal level, but prices were weak. Titan's Greek and Western European turnover declined by a further 10.6 per cent to €240.2m, having fallen by 38.5 per cent in the previous year, but the EBITDA was just 9.l per cent lower at €32.1m, having dropped 59.7 per cent in 2011. Higher export volumes meant that there were fewer emission rights to be sold. With domestic demand being at such low levels price are under pressure in cement, aggregates and concrete.

Turnover in South Eastern Europe declined by 6.7 per cent to €225.1m and the EBITDA fell by 26.4 per cent to €63.9m. Average cement sales in the region were lower and the profit contribution from the sale of emission rights in Bulgaria also declined. Cement prices across the region were raised in the early part of the year, but most of these price gains evaporated during the second half. Titan bought out the minority shareholder in Kosovo, but also sold an 11.5 per cent stake in the Serbian, Macedonian and Kosovo operation to International Finance Corporation for €50m. Ready-mixed concrete deliveries also declined because of reduced construction activity.

US turnover reverses decline

The US turnover has reversed its decline, going back several years, and increased its turnover by 21.7 per cent to €369.5m, helped by a stronger dollar, and the €5.7m loss incurred in 2011 at the EBITDA level was turned into a €5.8m profit. Cement demand is now recovering in all of Titan's US markets, including Florida, where capacity utilisation improved. Growth in cement deliveries are now increasing on a quarterly basis and prices are showing signs of recovery from low levels. The improvement has come in spite of the US$4.4m cost of an accident at Pennsuco, in Florida. Double-digit growth rates are now being seen in both cement and aggregates.

Eastern Med remains largest profit earner

The Eastern Mediterranean regional turnover recovered by 6.6 per cent to €296m, though the EBITDA fell by 26.4 per cent to €94.09m. In spite of this, the region remains the largest profit earner in the group, accounting for 48.0 per cent of the total.

The 4.9 per cent growth in the Egyptian cement market cement has reduced the recent excess capacity. Profitability has suffered from notably higher gas and electricity prices and a shift to petcoke is now a possibility. The previous year also had the benefit of a €25m clay fee refund, which did not happen in 2012. On the other hand, the ready-mixed concrete activities saw a good volume increase. The lack of political stability makes the outlook somewhat uncertain.

The Turkish joint venture has seen the rate of volume growth slow down, but remains positive, while pricing is generally stable