Buzzi Unicem sees 12% rise in sales, stable net profit in 2019

Buzzi Unicem sees 12% rise in sales, stable net profit in 2019
26 March 2020

Italy-based Buzzi Unicem reported a 12.1 per cent rise in net sales in 2019 to EUR3.221bn in 2019, up from EUR2.874bn. The company posted a 4.3 per cent YoY rise in cement sales to 29.122Mt in 2019 while ready-mix sales remained stable at 12.1Mm3 over the same period. EBITDA surged to 26.1 per cent to EUR728.1m in 2019 while recurring EBITDA saw a 23.9 per cent jump to EUR704.4 when compared with the previous year. Net profit advanced by 0.8 per cent to EUR385.9m and consolidated net profit edged up by 0.9 per cent to EUR385.7m in 2019. “Overall, the progress achieved in all the markets where the group operates, in particular in the United States of America, also favoured by the positive exchange rate effect, and in Italy, contributed to the strengthening of operating results,” said the company in a statement.

Amortisations and depreciations amounted to EUR259.9m, compared to EUR225.4m in 2018. Net finance costs and income went from EUR24.7m income to EUR58.6m costs, mainly due to the volatility of non-cash items, such as the valuation of derivative instruments, despite a reduction in interest expense referred to net debt. Losses on sale of investments recorded a negative contribution of EUR1.5m, while equity in earnings of associates, among which its joint venture operating in Mexico stands out, decreased from EUR87.9m to EUR73.8m. The tax charge for the year was EUR96m, compared to EUR82.5m in 2018.

Consolidated net debt as at 31 December 2019 stood at EUR567.8m, down EUR322.7m from EUR890.5m at year-end 2018. In 2019 the group distributed dividends of EUR26.6m and paid total capital expenditures of EUR339.3m, EUR42.9m thereof allocated to capacity expansion or special projects. In particular the block purchase of second-hand machinery and equipment for the Korkino plant in Russia (EUR23.6m), the modernisation and expansion of the Maryneal plant in Texas (EUR9.1m), acquisition of new batching plants in Germany, Italy and Poland (EUR8.5m), expansion of the shipping department of the Nikolaev plant in Ukraine (EUR0.9m) were all factors. Additional investments attributable to strategic development projects amounted to EUR82.2m, mostly relating to the execution of the contract with HeidelbergCement regarding the purchase of a full-cycle cement plant in Tuscany and two grinding plants in the northwest of Italy. As at 31 December 2019, total equity, inclusive of non-controlling interests, stood at EUR3690.8m versus EUR3143.6m at 2018 year-end. Consequently the debt/equity ratio decreased to 0.15 from 0.28 in the previous year. In 2019 the parent company Buzzi Unicem SpA reported a net profit of EUR87.2m (EUR97.9m in 2018) and a cash flow of EUR126m.

In Italy mild weather at the start of the year supported sales, a trend maintained by a change in scope attributable to the Testi cement plant and two grinding units in Piedmont, despite a lower export contribution. Average prices improved on the back of a more stable market. Output stabilised and prices recovered in the ready-mix sector. As a result, total net sales advanced 9.8 per cent (7.5 per cent like-for-like) YoY to EUR504.7m in 2019.

Central Europe
In Germany cement deliveries were robust in the 1H19 as mild weather and the additional contribution of the Seibel & Söhne plant supported sales. A more regular pace was observed in the 2H19 to close the year up 3.2 per cent YoY. Average selling prices were also reported to have improved. Ready-mix concrete output confirmed the levels reached at year-end 2018 (-0.2 per cent), while average selling prices increased. Overall net sales increased from EUR632.5m to EUR679.6m (+7.5 per cent) and EBITDA from EUR82.5m to EUR102.3m (+24 per cent). Net of non-recurring items, EBITDA improved by EUR12.7m on the previous year (+14.7 per cent).

In Luxembourg and The Netherlands cement and clinker sales slipped 0.9 per cent YoY in 2019 and the ready-mix concrete sector reported an eight per cent decline in sales volumes, mainly as a key infrastructure project in The Netherlands slowed down. Net sales fell 2.4 per cent YoY to EUR192.5m although prices recovered. EBITDA stood at EUR22.7m against EUR23.2m in 2018.

Eastern Europe
After a sound start to the year, cement volumes in Poland took on a more regular shape in the second half of 2019, closing 1.6 per cent down when compared to year-end 2018. However, there was a marked improvement in average selling prices in local currency. The ready-mix concrete saw results fall by 6.6 per cent although average local currency prices rose. Net sales were up 11.1 per cent to EUR111.4m in 2019 while EBITDA improved from EUR32.1m to EUR31.9m, up 0.9 per cent YoY.

In the Czech Republic, cement sales confirmed a 1.5 per cent drop but average selling prices improved. The ready-mix concrete sector, which also includes Slovakia, posted weaker production levels, offset by rising prices. Consolidated net sales increased 2.2 per cent  to EUR168.2m. EBITDA advanced 6.3 per cent to EUR46.3m.

Ukrainian cement sales improved, supported by reduced imports from Russia, Belarus and Moldova following anti-dumping measures. Ready-mix concrete output confirmed a weak trend but average prices improved. Net sales reached EUR131.9m, jumping by 49.3 per cent YoY. EBITDA trebled to EUR21m.

In Russia cement shipments were up five per cent YoY. Net revenues increased 15.6 per cent YoY to EUR214.5m and EBITDA rose 15 per cent YoY to EUR57.7m.

In the US cement sales improved by six per cent in 2019 compared to 2018 while ready-mix concrete output jumped by 16.5 per cent, supported by moderate price growth. Total net sales advanced 16.2 per cent to EUR1069.6m while EBITDA was up 18 per cent YoY to EUR402.7m in 2019.

Latin America
In Mexico the sales of associate Corporación Moctezuma began to stabilise after a clear drop in the 1H19 but closed the year down with prices in local currency declining. Ready-mix concrete showed an even more marked decrease YoY but prices improved. Net sales and EBITDA in local currency declined by 9.8 and 17.1 per cent, respectively. The appreciation of the Mexican peso favoured the translation of the results into euros. With reference to 100 per cent of the associate, net sales stood at EUR593.2m (-5 per cent) and EBITSA at EUR252.2m (-12.7 per cent).

Buzzi Unicem shipments in Brazil, which were carried out by the new joint venture maintained a positive development, mainly due to the contribution of the northeast region. Average selling prices in local currency showed a marginal improvement. Net sales and recurring EBITDA, in local currency, posted an increase of 3.8 per cent and a decrease of 24.8 per cent, respectively. The depreciation of the Brazilian real negatively affected the translation of the results into euros. With reference to 100 per cent of the associate, net sales stood at EUR134.7m (+1.3 per cent) and EBITDA at EUR23.4m (-26.6 per cent).

“The assumptions and objectives developed during the budget process outlined for the current financial year a substantial confirmation of the particularly positive results achieved in 2019, through further progress expected both in Italy and in Central Europe and basically neutral changes in Eastern Europe and the United States of America, all this assuming a fairly stable dollar and ruble exchange rate. The sales performance and the turnover so far during the first quarter of 2020, at least until a week ago, have been in line with the forecast of the original budget,” said the company.

However, the recent developments concerning new Coronavirus (COVID-19) infection outbreaks in Europe, Asia, the Middle East and the United States of America have obviously changed the company’s view according to which the health emergency would be short-lived and limited to China. Almost all the countries involved are responding with very severe measures regarding the mobility of
people and the carrying out of production and commercial activities. The economy is constrained and is rapidly moving towards a phase of global recession. The collapse of the stock markets was joined by that of the oil price and by the rapid devaluation of some currencies which are relevant to its financial statements, such as the Russian ruble, the Mexican peso and the Brazilian real.

“From the new scenario that is emerging we expect impacts that could be significantly adverse on our business, such as: a marked drop in the demand for cement and ready-mix concrete, especially in markets where there are more infection cases and more severe restrictions, a favourable change in the fuel and electric power cost, partly offset by interruptions and difficulties in transportation and supply chains.

“At the moment we are not able to reliably estimate the unfavourable effects of the ongoing pandemic on the group's results, which will mainly depend on its duration and the intensity of the infection in the various geographical areas of business. We will provide the market with more precise information when the visibility on short-term expectations improves. Once the crisis is over, the rebound should be guided by the important support measures that governments have already approved or will approve in the next days (expansionary monetary policy, infrastructure projects, support to work and employment),” said Buzzi Unicem.

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