Italcementi down

Italcementi down
10 November 2003

Italcementi has reported its results for the nine months
ending 30 September 2003. Sales for the group came in at Euro 3,242m, up
0.5% and slightly below Deutsche Bank forecast of Euro 3,258m. Operating
profit declined 6.5% to Euro 519m, due difficulties in the company¹s ability
to pass increases in costs on to the customers, in particular in Italy and
the USA. Italcementi continues to serve the buoyant North Italy market from
its plant network predominately in the south. Exceptional items to the value
of Euro 44.9m flattered the group¹s bottom line. They consist of a recovered
provision from a long outstanding tax issue in Belgium for Euro 28m and the
disposal of non core assets in Southern Spain for Euro 10m. While the
reported net profit for the nine months rose by 10%, the net profit pre
exceptionals and amortisation of goodwill declined by 22%. On the plus side
net debt declined by Euro 209m in Q3 to Euro 1,973m, implying a gearing
ratio of 72.2% vs. 93.1% in June 2003.

As Arnaud Palliez, Senior Building Materials analyst at Deutsche Bank noted:

Overall the results were slightly below expectations. Carrying on from Q2
the group¹s operating performance was disappointing; with operating margins
falling to 16.0% from 17.2% in the corresponding period last year; One off
exceptional items amounting to Euro 44.9m flattered the group¹s bottom line.
We have reduced our operating forecast for 2003 and 2004 by 4.5% and 2.7%
respectively. Italcementi bought no further shares in Ciments Francais over
the quarter, indicating the fact that they are relatively expensive, in our
view. We continue to prefer Italcementi to Ciments Francais on valuation
grounds. Italcementi trades on a 2003E PE of 6.8x vs. 8.6x for Ciments
Francais and 9.8x for the cement average ­ Arnaud Palliez concluded.


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