Earnings Release • Jul 28, 2022
Earnings Release
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Brussels, 28 July 2022, 08:30 CEST – Titan Cement International SA (Euronext Brussels, ATHEX and Euronext Paris, TITC) announces the second quarter and half year 2022 results.
Helped by stronger Q2 2022 performance, the Group's consolidated revenue for H1 2022 surpassed the €1 billion threshold and reached €1,035.5m, up 26.1% versus the first half of 2021. This reflects solid demand across most markets coupled with price increases across countries and products. Top line growth was supported by stronger US\$ and US\$-linked currencies (in local currencies growth was 21.3%). EBITDA increased by 7.1% to €92.7m in Q2, while for H1 2022 it reached €139.1m, down by 2.5%, held back by the spike in energy costs and freight rates, as the effect of price increases was not yet fully in place in Q1. Net profit after taxes and minority interests was €43.9m in Q2, 2.9% higher than Q2 2021, while for H1 it reached €45.2m vs €58.0m last year, due to the weak Q1 result.
In Q2 2022, sales continued strongly in all regions of operation. The Group was able to move forward with price increases, announced at the end of 2021 and in the first half of 2022, in order to offset the continuously rising energy and input costs. The Group is constantly monitoring various input costs amidst this volatile environment and is following a dynamic pricing policy, safeguarding profitability levels.
| In million Euros | H1 2022 | H1 2021 | % yoy |
|---|---|---|---|
| Revenue | 1,035.5 | 821.1 | 26.1% |
| EBITDA | 139.1 | 142.6 | -2.5% |
| Net Profit after Taxes & Minorities | 45.2 | 58.0 | -22.0% |
Titan operations in Q2 2022 in the US recorded a solid performance, supporting the view that market fundamentals are well in place underpinning demand in a strong economy. In both of the Group's main geographies demand remained at high levels. Residential build-up and continued infrastructure activity supported demand in the Mid-Atlantic, while Florida's economy is racing ahead at full steam. Florida's residential demand is burgeoning, while commercial resurgence reflects the move of considerable business activity to the region. A growing number of infrastructure investment programs are underway in both Florida and Mid Atlantic.
Amidst this positive environment, the Group has successfully realized price increases this year and managed to gradually restore profitability with Q2 EBITDA at €42.8m coming close to Q2 of 2021 (€44.9m). As the last implementation of price increases took place in June, further margin recovery is expected to materialize in Q3.
Wide adoption of type IL cement and generally lower-clinker cement products improve the Group's financial and environmental results.
Revenue in the USA recorded a 23.4% increase to €595.4m during the first six months of 2022 (11.7% increase in US \$ terms), while EBITDA reached €66.8m versus €83.4m, a 20% drop vs H1 2021. The discrepancy is due to the relatively delayed effect of implemented price increases compared to the earlier and persistent pressure of high input costs, such as energy, logistics, labor, and raw materials.
The Greek domestic market continued evolving well in the first half of the year with increased volume of sales. Two successive price increases - one in the last quarter of 2021 and a second one towards the end of the first quarter of the year, have been implemented to cover the cost increases recorded across production inputs. Similarly, on the export front, price increases have been implemented across all export destinations in order to cover higher production and freight costs. In terms of activity, the large urban clusters of Athens and Thessaloniki as well as those of Crete in the periphery account for the lion's share of activity with major projectsstarting to pull in volumes while renovation and small private projects are somewhat softer reflecting the uncertainties of the current cost environment. On the operational front, the group has continued pursuing its decarbonization and digitalization initiatives across installations in order to reduce its carbon footprint as well as to navigate more efficiently through the turbulence generated by the tight cost environment.
Total revenue for region Greece and Western Europe in the first half of 2022 grew by 21.3% to €158.3m while EBITDA improved to €16.1m versus €14.8m.
The region of Southeast Europe has exhibited high revenue growth in the first half of the year, despite volatile political circumstances, with variations across different markets. Tight supply conditions in the region coupled with significant production input cost increases served as the backdrop for price increases in all markets and have helped maintaining profitability close to previous year in most of the countries in the region. Real estate activity continues, also serving as a safe haven for investors in the current volatile cost and interest rate environment. Infrastructure projects continue to contribute a significant part of cement consumption in most countries in the region. Substantial progress has been made in the Group's decarbonization efforts through the introduction of lower clinker cement types across more countries. In order to improve its efficiency and manage its cost base, the Group is investing further in alternative fuel utilization, debottlenecking, alternative energy sources as well as in digitalizing further its operations.
Revenue for the region as a whole in the first semester of 2022 increased by 27.5% to €168.6m while EBITDA increased by 4.2% to €43.8m.
In Egypt, construction activity remains well-oriented despite the country's macroeconomic challenges. The pricing environment hassignificantly improved, retaining the momentum achieved as a result of the rationalization of the country's domestic supply situation, which is still in place. Public housing development and infrastructure projects already underway continue to account for the bulk of cement demand. The country is also in step with the overall trend towards the adoption of more blended cement types, a positive development in ameliorating both the carbon footprint and the cost base.
In Turkey, the economic environment has rapidly deteriorated with the country reaching hyper-inflation levels, not seen in 20 years. Domestic volumes have declined as a result of severely curtailed public investment activity and a particularly harsh winter at the beginning of the year weighing on first half volumes. Amidst this predicament, prices have increased to cover inflation as producers moved swiftly to mitigate their risks. Moreover, the current macroeconomic turmoil has elevated real estate into the most preferred investment, spurring a surge in new real estate developmentsto accommodate needsfor relative stability. IAS 29 for hyperinflation was applied in Turkey, increasing depreciation cost by €1.6m, tax charged by €1.7m and realizing an equity gain of €14.6m. A goodwill impairment of €10.4m was recognized by management in order to reverse the gain in goodwill that resulted by indexation.
Total revenue in the Eastern Mediterranean reached €113.1m in the first half of 2022. an increase of 48.9% year on year, while EBITDA increased significantly, reaching €12.4m versus €2.4m.
In Brazil, the testing state of the national economy, marked by high interest rates, high inflation, and the compression of private disposable income all affected cement consumption which declined by 2.7% in the first half of the year. As in other markets, input costs increased across the board, in terms of energy, raw materials and transport while cement price increases rose at a slower pace. On the other hand, there is a drive, especially ahead of this year's general elections in October, in public housing and infrastructure investments, as well as government efforts to address affordability concerns.
In the first half of the year, Apodi posted an increase in revenue to €50.5m, versus €36.7m in the first half of 2021, while EBITDA reached €3.6m versus €8.8m in 2021.
Operating free cash flow for the first six months of the year recorded a net outflow of €49m compared to a net inflow of €60.5m in the first half of 2021. Cash flow generation has been affected by the extensive CAPEX program (€96m in H1 2022 vs €54m in2021) in progress, mainly in the US, as well as by fuel inventories purchased at higher prices compared to last year and trade receivables at higher levels, as a result of higher revenue levels.
Group's net finance costs in H1 2022 were reduced to €14.6m, while the Group net debt at the end of the first six months of 2022 was €795m, higher by €81m from the end of 2021.
On March 16, 2022, the Board of Directors decided the return of capital of €0.50 per share to all shareholders of the Company on record on April 28, 2022, which was paid on July 5th , 2022.
The Group has been implementing consecutive share buy-back programs and in the period from January 1st until June 30th, 2022, has purchased 943,076 shares on Euronext Brussels and the Athens Exchange (ATHEX) for a total consideration of €12.2 million. On June 30th, the Group owned treasury shares representing 3.10% of total voting rights. A new buy-back program of €10m was decided by the Board of Directors on July 27th 2022. The new program will begin following the end of the current running program and will be up to €10 million with a duration of up to six months. TCI will keep the market fully informed of the progress of the relevant transactions in line with applicable regulations.
Trading in the second quarter has been stronger than that of the first quarter, showcasing the impact of price increases in all markets during an environment of continuously high production and transportation costs amidst signs of resilient demand. In the prevailing volatile environment, cement sales in the domestic markets showed resilience.
Group consolidated revenue for the second quarter of 2022, reached €580.9m, a 29% increase over the second quarter of 2021, with all regions displaying growth ratesin excess of 20%. Reversing the trend of previous quarters, EBITDA improved by 7.1% as price increases caught up with the cumulative increase in key cost elements such as energy, raw materials, logistics and transportation impacting all geographies. Net Profit after Tax (NPAT) for the quarter reached €43.9m versus €42.6m in the second quarter of 2021.
| In million Euros | Q2 2022 | Q2 2021 | % yoy |
|---|---|---|---|
| Revenue | 580.9 | 450.3 | 29.0% |
| EBITDA | 92.7 | 86.5 | 7.1% |
| Net Profit after Taxes & Minorities | 43.9 | 42.6 | 2.9% |
Being an early adopter and leader of digital innovation in the cement industry, TITAN continued to record progress and cross new milestones as it rolls out a growth-oriented, streamlined and digitally empowered operating model for the Group.
The first half of the year saw our second cement plant in the US going live with end-to-end real-time optimizers (RTOs) meaning that now the cement manufacturing at both our plants in the US, using a unique mix of proprietary licensed software, have digital applications that enhance the plants' output, reduce the energy consumption, provide alerts for operational or process anomalies and closely monitor the quality of the end product. As a result, the Group realizes an increase in clinker and cement output owing both to process optimization and breakdown avoidance. Moreover, RTOs help the Group to achieve lower levels of energy consumption, higher environmental performance, and increase our products' quality. RTOs are now live in five Group plants and will be eventually rolled out across the Group's asset base by end of 2023.
The Group is now moving ahead with another pioneering step: Titan has acquired from its technology partner, Precognize, the global rights of the machine learning failure detection solution for the cement industry sector. Titan has set up CemAI, an affiliate company that will serve the global building materials sector with this unique AI predictive maintenance solution, based on the remote service center concept.
In the first half of the year, TITAN recorded substantial progress towards its sustainability goals.
CO2 emissions1 declined by 38 kg per tonne of cementitious product (-5.6%) on a year-on-year basis, driven by a significant reduction in the clinker-to-cement ratio. Titan America is well on its way to reach its target of 100% of its cement sales to be in lower clinker products by December 2022. In addition, the Group is introducing similar products to more markets in the other regions.
In Greece, a €25 million upgrade of the Kamari plant, near Athens, which will enable the increase of alternative fuels substitution in the range of 80%, is progressing according to schedule and will be operational in 2023.
Meanwhile, a pilot carbon capture unit was installed at the same plant, in the context of the EU Funded Carbon Capture and Utilization (CCU) project RECODE. The project involves the production of value-added chemicals and materials by utilizing the captured CO2.
Furthermore, TITAN Cement Group joined decarbonization and electrification investment leaders Breakthrough Energy Ventures and Energy Impact Partners to invest in Rondo Energy, a start-up company aiming to provide new solutions for decarbonizing cement manufacturing and other industries through its innovative "heat battery" technology.
1 Refers to net direct CO2 emissions (Scope 1)
The macroeconomic turmoil manifesting itself since the beginning of this year has elevated volatility and unpredictability to key determining factors; much depends on how the war evolves in Ukraine, its duration, and its aftermath on the global economy. At the same time, central monetary authorities around the world are facing the dilemma of preventing the economy from further overheating while avoiding stomping out growth altogether. In this environment, TITAN is focusing on the levers at its disposal to safeguard production, protect margins, improve efficiencies and continue with its carbon mitigation strategies. Decarbonization projects are underway in all regions, lower-clinker types of cement are being rolled out in all markets and meeting with very good uptake, while digitalization investments across the stages of production translate into cost savings and improved production output. As cost pressures are expected to persist across geographies, the Group will continue to address global cost headwinds by adjusting pricing, in a dynamic manner in order to safeguard its performance. In the US, fundamentals remain solid. Residential activity is robust, despite concerns of rising interest rates and affordability, while the supply of cement is tight. With state budgets at historic highs, construction activity from
public projects is expected to continue until the new infrastructure package starts in 2023 to boost infrastructure spending further. It should be emphasized that the Group is present in some of the USA's top growing regions which outpace the rest of the US economy. TITAN, especially after the current round of investments in the USA, will be in a prime position to capitalize on the growth of the market.
European economies remain more affected by the crisis owing to their geographical proximity and more direct exposure to the disrupted energy networks. While Europe is stepping up its efforts to address its energy security and maintain growth rates in the region, the outlook for construction remains positive but does carry significant uncertainty. The ongoing war and duration of steep energy costs could impact underlying demand in the second half.
In Greece activity should continue to be supported by the large investment projects now commenced which offer a supply horizon for several years ahead. Moreover, with the conclusion of what appears to be another strong tourism season, projects related to the sector should start by the end of the season in preparation for the following year. Market demand is subject to uncertainties related to the macroeconomic developments. Lack of available skilled labor in construction sites may be a factor affecting the pace of works, a phenomenon alas recorded in markets across Europe and the US.
Activity in southeastern Europe is expected to continue to reflect differences across markets while overall levels of activity should be maintained. The evolution of costs in the second half of the year will very much determine
overall levels of profitability as well. Otherwise, the Group will continue to utilize its strategic regional positioning to serve market needs in the most efficient manner.
In Egypt, the market should withstand the macroeconomic challenges considering the importance of the construction sector in this large country. Moreover, a continuation of the cement production quota, not finalized yet, safeguards healthy prices and the recovery of profitability levels.
In Turkey, volumes will continue to decline so long as the economy does not stabilize. Elections currently slated to take place in 2023 might offer some respite, while the market has been adept in managing the crisis through both dynamic pricing and the full exploitation of Turkey's considerable export outlet potential.
Brazil is another country with a large and young population and feeling the brunt of inflationary pressures. The cement market may soften somewhat, especially as the government wishes to maintain the momentum of its housing program and ameliorate affordability concerns in what is a critical election year.
| (all amounts in Euro thousands) | For the six months ended 30/6 | ||
|---|---|---|---|
| 2022 | 2021 | ||
| Revenue | 1,035,500 | 821,068 | |
| Cost of sales | -869,822 | -661,553 | |
| Gross profit | 165,678 | 159,515 | |
| Other net operating income | 3,903 | 879 | |
| Administrative and selling expenses | -100,509 | -83,402 | |
| Operating profit before gain on goodwill restatement in hyperinflationary economies and impairment losses on goodwill |
69,072 | 76,992 | |
| Gain on goodwill restatement in hyperinflationary economies | 10,390 | - | |
| Impairment losses on goodwill | -10,390 | - | |
| Operating profit | 69,072 | 76,992 | |
| Finance income/costs | -14,575 | -15,718 | |
| (Loss)/gain from foreign exchange differences | -1,921 | 3,159 | |
| Gain on net monetary position in hyperinflationary economies | 4,248 | - | |
| Share of (loss)/profit of associates and joint ventures | -2,800 | 1,144 | |
| Profit before taxes | 54,024 | 65,577 | |
| Income tax | -8,617 | -7,565 | |
| Profit after taxes | 45,407 | 58,012 | |
| Attributable to: | |||
| Equity holders of the parent | 45,202 | 57,961 | |
| Non-controlling interests | 205 | 51 | |
| 45,407 | 58,012 | ||
| Basic earnings per share (in €) | 0.6257 | 0.7551 | |
| Diluted earnings per share (in €) | 0.6249 | 0.7520 |
| (all amounts in Euro thousands) | For the six months ended 30/6 | |
|---|---|---|
| 2022 | 2021 | |
| Operating profit before gain on goodwill restatement in hyperinflationary economies and impairment |
||
| losses on goodwill | 69,072 | 76,992 |
| Depreciation and amortization | 69,999 | 65,599 |
| Earnings before interest, taxes, depreciation, amortization and impairment (EBITDA) |
139,071 | 142,591 |
| (all amounts in Euro thousands) | 30/06/2022 | 31/12/2021 |
|---|---|---|
| Assets | ||
| Property, plant & equipment and investment property | 1,688,919 | 1,556,362 |
| Intangible assets and goodwill | 390,282 | 363,430 |
| Investments in associates and joint ventures | 97,836 | 88,753 |
| Other non-current assets | 42,757 | 27,229 |
| Deferred tax assets | 6,049 | 8,867 |
| Total non-current assets | 2,225,843 | 2,044,641 |
| Inventories | 364,637 | 305,131 |
| Receivables, prepayments and other current assets | 333,285 | 248,987 |
| Cash and cash equivalents | 87,897 | 79,882 |
| Total current assets | 785,819 | 634,000 |
| Total Assets | 3,011,662 | 2,678,641 |
| Equity and Liabilities | ||
| Equity and reserves attributable to owners of the parent | 1,425,859 | 1,321,626 |
| Non-controlling interests | 27,886 | 15,260 |
| Total equity (a) | 1,453,745 | 1,336,886 |
| Long-term borrowings and lease liabilities | 728,944 | 687,465 |
| Deferred tax liability | 133,694 | 113,604 |
| Other non-current liabilities | 113,023 | 99,860 |
| Total non-current liabilities | 975,661 | 900,929 |
| Short-term borrowings and lease liabilities | 153,482 | 105,620 |
| Trade payables, income tax and other current liabilities | 428,774 | 335,206 |
| Total current liabilities | 582,256 | 440,826 |
| Total liabilities (b) | 1,557,917 | 1,341,755 |
| Total Equity and Liabilities (a+b) | 3,011,662 | 2,678,641 |
| (all amounts in Euro thousands) | For the six months ended 30/6 | |
|---|---|---|
| 2022 | 2021 | |
| Cash flows from operating activities | ||
| Profit after taxes | 45,407 | 58,012 |
| Depreciation and amortization of assets | 69,999 | 65,599 |
| Impairment of goodwill | 10,390 | - |
| Interest and related expenses | 17,122 | 15,439 |
| Provisions | 5,103 | 2,104 |
| Hyperinflation adjustments | -14,841 | - |
| Other non-cash items | 8,410 | 3,039 |
| Income tax paid | -8,969 | -4,037 |
| Changes in working capital | -94,140 | -29,350 |
| Net cash generated from operating activities (a) | 38,481 | 110,806 |
| Cash flows from investing activities | ||
| Net payments for property, plant & equipment and intangible assets | -95,487 | -52,823 |
| Net (payments)/proceeds from other investing activities | -1,059 | 276 |
| Net cash flows used in investing activities (b) | -96,546 | -52,547 |
| Cash flows from financing activities | ||
| Acquisition of non-controlling interests Net proceeds/(payments) of credit facilities |
- 94,367 |
-40,817 -113,953 |
| Interest and other related charges paid | -15,511 | -18,133 |
| Payments for shares bought back | -12,196 | - |
| Other payments from financing activities | -70 | -230 |
| Net cash flows from/(used in) from financing activities (c) | 66,590 | -173,133 |
| Net increase/(decrease) in cash and cash equivalents (a)+(b)+(c) | 8,525 | -114,874 |
| Cash and cash equivalents at beginning of the year | 79,882 | 206,438 |
| Effects of exchange rate changes | -510 | 2,131 |
| Cash and cash equivalents at end of the period | 87,897 | 93,695 |
| Measure | Definition | Purpose |
|---|---|---|
| CAPEX | Acquisitions/additions of property, plant and equipment, right of use assets, investment property and intangible assets |
Allows management to monitor the capital expenditure |
| EBITDA | Operating profit before impairment losses on goodwill plus depreciation, amortization and impairment of tangible and intangible assets and amortization of government grants |
Provides a measure of operating profitability that is comparable among reportable segments consistently |
| Net debt | Sum of long-term borrowings and lease liabilities, plus short-term borrowings and lease liabilities (collectively gross debt), minus cash and cash equivalents |
Allows management to monitor the indebtedness |
| NPAT | Profit after tax attributable to equity holders of the parent |
Provides a measure of total profitability that is comparable over time |
| Operating free cash flow | Cash generated from operations minus payments for CAPEX |
Measures the capability of the Group in turning profit into cash through the management of operating cash flow and capital expenditure |
| Operating profit before gain on goodwill restatement in hyperinflationary economies and impairment losses on goodwill |
Profit before income tax, share of gain or loss of associates and joint ventures, gains or losses from foreign exchange differences, net finance costs, other income or loss, gain on goodwill restatement in hyperinflationary economies and impairment losses on goodwill. |
Provides a measure of operating profitability |
| Operating profit | Profit before income tax, share of gain or loss of associates and joint ventures, gains or losses from foreign exchange differences, net finance costs and other income or loss |
Provides a measure of operating profitability that is comparable over time |
The statutory auditor, PwC Réviseurs d'entreprise SA, represented by Didier Delanoye, has executed a review of the Interim Condensed Consolidated Financial Statements of Titan Cement International SA. The statutory auditor has no comments. For the statutory report, please refer to the Interim Condensed Consolidated Financial Statements of Titan Cement International S.A. on our website, https://ir.titan-cement.com/en/investorinformation/financial-results
DISCLAIMER: This report may include forward-looking statements. Forward-looking statements are statements regarding or based upon our management's current intentions, beliefs or expectations relating to, among other things, TITAN Group's future results of operations, financial condition, liquidity, prospects, growth, strategies or developments in the industry in which we operate. By their nature, forward-looking statements are subject to risks, uncertainties and assumptions that could cause actual results or future events to differ materially from those expressed or implied thereby. These risks, uncertainties and assumptions could adversely affect the outcome and financial effects of the plans and events described herein. Forward-looking statements contained in this report regarding trends or current activities should not be taken as a report that such trends or activities will continue in the future. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You should not place undue reliance on any such forward-looking statements, which speak only as of the date of this report. The information contained in this report is subject to change without notice. No re-report or warranty express or implied, is made as to the fairness, accuracy, reasonableness or completeness of the information contained herein and no reliance should be placed on it. In most of the tables of this report, amounts are shown in € million for reasons of transparency. This may give rise to rounding differences in the tables presented in the trading update. This trading update has been prepared in English and translated into French and Greek. In the case of discrepancies between the two versions, the English version will prevail.
Titan Cement International is a multiregional cement and building materials producer. Business activities cover the production, transportation and distribution of cement, concrete, aggregates, fly ash, mortars and other building materials. The Group employs about 5,500 people and is present in 15 countries, operating cement plants in 10 of them, the USA, Greece, Albania, Bulgaria, North Macedonia, Kosovo, Serbia, Egypt, Turkey and Brazil. Throughout its history, the Group has aspired to serve the needs of society, while contributing to sustainable growth with responsibility and integrity.
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