Cementir bets on US for 2018-20 revenue targets

Cementir bets on US for 2018-20 revenue targets
29 June 2018

Cementir will seek long-term value creation by doubling earnings per share by 2020 compared to 2017, announced Francesco Caltagirone, chairman and CEO of the Italian cement producer this week at the company's investor conference in Milan'

According to the group's ambitious 2018-2020 business plan, the company is targeting revenues and EBITDA of EUR1.34bn and EUR270m, respectively, by 2020, while net debt is forecast to fall to EUR50m at the end of the period.

 The USA is seen as the main growth area and its share of local revenues is expected to rise from one per cent in 2017 to 10 per cent in 2020.

Cementir announced the acquisition of a further 38.75 per cent of Lehigh White Cement Co on 29 March 2018, giving the group a holding stake of 63.25 per cent in the US subsidiary.

The Scandinavian operations, consisting of Denmark, Norway and Sweden, are expected to see revenue contribution to the group’s total decline from 51 per cent in 2017 to 47 per cent in 2020. Belgium and France are forecast to make the same contribution to group revenues in 2020 as they did in 2017 at 20 per cent. Turkish sales are forecast to dip to 16 per cent in 2020 from 17 per cent in 2017, while Egypt’s revenue to group totals will stay the same at three per cent for the period under review and Asia Pacific will remain stable at seven per cent.

By 2020, the Nordic and Baltic and United States areas will generate about 72 per cent of the group's revenue, while the Eastern Mediterranean area (Turkey and Egypt) will generate 20 per cent and the Asia-Pacific region will account for around six per cent of the revenue stream.

Meanwhile, Cementir stated that "investments up to 2020 will total approximately EUR70-75m per year and will be directed towards developing production capacity and maintaining plant efficiency."

Revenue drivers
Cementir believes it has many favourable factors that will enable it to achieve its revenue goal such as strong customer relationships, innovative products, large-scale plants, quality products and significant pure limestone reserves. The group’s strategic priorities for 2018-20 are defined, in order of importance, as: profitability, cash flow generation, global leadership in white cement, innovation and alternative fuels and raw materials, with people development across all these priorities.

With profitability as the key goal there will be a drive for process rationalisation and containment of costs, alongside increasing volumes in all business areas and geographical areas. There will be a focus on pricing and value-added products and services, and optimisation of purchases and logistics, while process improvement will call for fuel reduction and lower electricity consumption to counterbalance increases in fuel prices and freight costs. 

Lower dependence on emerging markets
In total the group currently has 9.8Mta of grey cement capacity and 3.3Mta of white cement capacity. The grey cement unit is not running at total capacity with sales of 8Mt in 2017 and there is also room for higher production in the company’s white cement division that sold 2.3Mt of white cement in 2017. The white cement market is expected to grow by 2.5 per cent on average by 2022, but most of this growth will be in Asia and China, where Cementir is established with plants in Malaysia and mainland China.

In addition, the company operates 106 ready-mix concrete plants and 11 quarries. Ready-mix sales reached 5Mm3 in 2017 and aggregate sales 9.1Mta.

The geographical portfolio balance is 73 per cent located in mature markets with 27 per cent held in emerging markets. Cementir believes its lower dependence on emerging markets gives it a reduced exposure to risk with product sales in Nordic and Baltic regions, together with Belgium and France, contributing most significantly to sales.

Published under Cement News