Earnings Release • May 13, 2020
Earnings Release
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Brussels, 13 May 2020, 18:00 CEST – Titan Cement International SA (Euronext Brussels, ATHEX and Euronext Paris, TITC) announces the first quarter 2020 financial results.
From the emergence of the coronavirus pandemic, which appeared in our countries of operation in early March, our focus was to protect our employees and their families, along with our business partners, customers and our local communities, particularly the most rural and distant from authorities and public care.
We took additional protective measuresfor those working on-site to ensure they operate under the safest possible conditions. Over 35% of total employees switched to remote working. We organized communication with management and experts to ensure that all may have updated and complete information and support as needed. We also continued our collaborative efforts with local authorities, public health institutions and civil society organizations focused on health, safety and hygiene. We supported financially and with equipment the operation of local hospitals and medical care centers in several locations. At the same time, we ensured that disruptions to our operations were minimal and that we continued to provide the best possible service to our customers.
Since mid-March 2020 the outbreak of the coronavirus had a significant, although unevenly distributed impact on demand for our products. The early impact of the pandemic on our sector was less severe than what was initially feared. Construction has been deemed to be an essential service in most markets and all our cement plants continued their operations, adjusting their production to satisfy the current level of demand.
Indicatively, we estimate that cement markets have declined over the past six weeks by some 10% in Florida and the Mid-Atlantic, as well as Turkey, to about 30%-40% in more severely affected markets like Southeast Europe and New York. Greece is somewhere in between, while in Egypt there was growth despite the adversities. As lockdown measures are gradually lifted, we already observe increases in market consumption.
In the context of considerable uncertainty, we have taken action to anticipate developments:
We are closely monitoring the situation in order to adjust further as the market dynamics evolve.
"The following should guide our actions in the short term:
At the same time, we continue to think about the longer term, in the best of TITAN's traditions: taking care of our people, actively supporting local communities, positioning ourselves intelligently in the market place, reducing our carbon footprint, embracing new technologies and innovating. This crisis too will pass and we want to hit the ground running when it does."
Sales started 2020 on a strong footing. Based on robust US demand and resilience of markets in the Eastern Mediterranean, Group consolidated revenue increased by 6.1% in Q1 2020 reaching €384.8m, despite the slowdown of business due to COVID-19 since mid-March. EBITDA declined by €3.7m, reaching €40.6m, mainly due to the upfronting of about €10m of costs associated with the earlier timing of the plant maintenance in Florida (done in Q2 last year).
These early maintenance related costs, came to the benefit of the April results. Preliminary April year to date financials show that total Revenue comes flat compared to 2019 at €508 m while EBITDA reached €67.2m, up by €5.7m or 9.3%.
The Group Q1 2020 net result after taxes and minority interests was a loss of €15.8m compared to a loss of €6.2m in the first quarter of 2019. This year's decline was caused by €9m of one-off mark to market losses on fixed US\$ interest rate hedges.
Sales volumes were positive across all product lines. Group cement sales increased by 4% supported by higher demand across most markets. Aggregates sales increased by 3% and ready-mix sales increased by 2%.
In the light of the government measures imposed under to the COVID-19 pandemic, the board of directors decided to hold the General Meeting on May 14, 2020 remotely.
| In million Euros, unless otherwise stated | Q1 2020 | Q1 2019 | %yoy |
|---|---|---|---|
| Revenue | 384.8 | 362.7 | 6.1% |
| EBITDA | 40.6 | 44.3 | -8.5% |
| Net Results after Taxes & Minorities | -15.8 | -6.2 | -156.9% |
Activity in the USA saw a strong start to the year, supporting the industry's growth expectations regarding construction dynamics. Robust market trends were assisted by a favorable weather environment which led to growth ahead of last year. Operations continued uninterruptedly with a moderate slow-down of demand in Florida and the Mid-Atlantic since mid-March. The effect of lock-down measures were more felt by our import terminal that supplies the NY Metro area, (markets where sales have since dropped by some 35-40%).
Revenue in the USA recorded a 6.2% increase in the first quarter of 2020 and reached €237.8m. The cost of the stoppage of the cement plant in Florida, for its annual maintenance in March 2020 as planned (compared to Q2 in 2019), weighed on profitability and EBITDA decreased by €13.6m to €27.7m.
In Greece, the market recorded an increase from the beginning of the year. In a seasonally low quarter, demand in the local market was supported by peripheral construction projects and private investments. Export sales were higher than last year and also benefited from the strengthening of the US\$.
Total revenue for region Greece and Western Europe in Q1 increased by 2.4% reaching €57.5m. On the operating level, EBITDA turned positive to €1.4m gains compared to a €0.8m loss in the first quarter of 2019.
Construction in Southeastern Europe had a strong start to the year, which was offset by lower demand in March, due both to the pandemic outbreak and to unfavorable weather conditions. The combination of a positive pricing environment with declining cost of solid fuels, led to a significant improvement in profitability. Revenue for the region as a whole posted a marginal 1% decrease at €47.9m. EBITDA reached €12m increasing by
2.8m compared to the first quarter of last year.
Demand in Egypt recorded solid growth in Q1, posting about 5% volume increase, despite measures taken in March to contain the spread of COVID-19. In Turkey on the other hand, we experienced growth in domestic sales as well as in exports, while in the country there were notable regional differences, depending on the lockdown measures taken.
Total revenue in the region of Eastern Mediterranean posted a Q1 21.3% increase reaching €41.5m. In an environment of declining solid fuel costs, but stagnant market prices at low levels, operating performance came close to break-even at the EBITDA level and recorded a €0.4m loss versus an €5.2m loss in the same period in 2019.
The market in the North East of Brazil posted growth in Q1 2020. This allowed our joint venture Apodi to expand volume sales, increase revenue in local currency and improve profitability.
Group net debt at the end of March 2020 closed at €878m., below the peak of 2019, but higher by €42m against the end of 2019 and was inflated by the strengthening of the US\$. TITAN Group has robust key financials and has strengthened its liquidity position to €400m, in combination of cash in hand and available committed bank credit facilities.
Capex in Q1 2020 reached €20.8m versus €22.6m in the corresponding period in 2019, with the majority of funds invested to improve competitiveness of the US activities. The seasonal cash outflow from operations in the first quarter was -€17m, improved by €10.3m compared to Q1 2019.
On March 19, 2020 the Board of Directors activated the share buy-back programme for the acquisition of up to 1m TCI shares for an amount up to €10m. During the period from March 20, 2020 until May 11, 2020 incl. the Group acquired 590,092 shares for a total value of € 6,569,028. On May 11, 2020 the Group owned in total 5,364,905 treasury shares representing 6.51% of TCI's share capital.
On March 19, 2020 the Board of Directors decided the return of capital of €0.20 per share to all shareholders of the Company on record on May 14, 2020. The date of payment will be July 7th 2020, as was ratified by the Board today.
Finally, as was announced yesterday evening by MSCI, TCI (TITC) was among four companies the shares of which will be deleted from the MSCI Greece Index due to not meeting the capitalization threshold. TCI will be added to the MSCI Greece Small-cap index. As a reminder TCI is also a constituent of the FTSE/ATHEX large cap index.
Climate change remains at the top of our agenda and we work to set new targets related to CO2 in line with climate science. We seek to further expand our scope of measuring emissions in the value chain and strengthen our commitment to protect biodiversity by joining our forces with key stakeholders at both European and global level. Amidst the current crisis our commitment to progress on environmental, social and governance issues which are material to our stakeholders remains intact.
We are clearly in unchartered territory, with low visibility and high uncertainty over the next few months.
We expect demand for our products to be hit, although the depth and duration of any decline cannot be assessed at this time. In particular, demand for housing will likely be held back by declining confidence and rising unemployment. Similarly, commercial projects risk being postponed or cancelled.
On the positive side, the resilience of the sector will be supported by a number of factors:
As previously mentioned, we are taking decisive and targeted measures in the areas that are under our control:
We remain vigilant and flexible to adjust further as developments warrant.
At the same time, we continue to think about the longer term, in the best of TITAN's traditions: taking care of our people, actively supporting local communities, positioning ourselves intelligently in the market place, continuing efforts to reduce our carbon footprint, embracing new technologies and innovating.
| (all amounts in Euro thousands) | For the three months ended 31/3 | ||
|---|---|---|---|
| 2020 | 2019 | ||
| Revenue | 384,763 | 362,704 | |
| Cost of sales | -338,082 | -311,372 | |
| Gross profit | 46,681 | 51,332 | |
| Other net operating income | 579 | 836 | |
| Administrative and selling expenses | -41,878 | -41,316 | |
| Operating profit | 5,382 | 10,852 | |
| Net finance costs | -21,686 | -15,008 | |
| Loss from foreign exchange differences | -2,814 | -3,123 | |
| Share of loss of associates and joint ventures | -303 | -1,429 | |
| Loss before taxes | -19,421 | -8,708 | |
| Income tax | 3,126 | 1,368 | |
| Loss after taxes | -16,295 | -7,340 | |
| Attributable to: | |||
| Equity holders of the parent | -15,799 | -6,151 | |
| Non-controlling interests | -496 | -1,189 | |
| -16,295 | -7,340 | ||
| Basic losses per share (in €) | -0,2035 | -0,0770 | |
| Diluted losses per share (in €) | -0,2021 | -0,0766 |
| (all amounts in Euro thousands) | For the three months ended 31/3 | |
|---|---|---|
| 2020 | 2019 | |
| Operating profit | 5,382 | 10,852 |
| Depreciation and amortization | 35,185 | 33,491 |
| Earnings before interest, taxes, depreciation, amortization and impairment (EBITDA) |
40,567 | 44,343 |
| (all amounts in Euro thousands) | 31/3/2020 | 31/12/2019 |
|---|---|---|
| Assets | ||
| Property, plant & equipment and investment property | 1,703,177 | 1,710,706 |
| Intangible assets and goodwill | 430,000 | 425,340 |
| Investments in associates and joint ventures | 93,049 | 113,858 |
| Other non-current assets | 36,810 | 28,373 |
| Deferred tax assets | 26,021 | 13,939 |
| Total non-current assets | 2,289,057 | 2,292,216 |
| Inventories | 291,591 | 283,519 |
| Receivables, prepayments and other current assets | 232,512 | 197,296 |
| Cash and cash equivalents | 138,713 | 90,388 |
| Total current assets | 662,816 | 571,203 |
| Total Assets | 2,951,873 | 2,863,419 |
| Equity and Liabilities | ||
| Equity and reserves attributable to owners of the parent | 1,353,562 | 1,375,165 |
| Non-controlling interests | 32,066 | 34,626 |
| Total equity (a) | 1,385,628 | 1,409,791 |
| Long-term borrowings and lease liabilities | 874,016 | 822,820 |
| Deferred tax liability | 95,098 | 96,319 |
| Other non-current liabilities | 148,033 | 133,001 |
| Total non-current liabilities | 1,117,147 | 1,052,140 |
| Short-term borrowings and lease liabilities | 142,384 | 103,307 |
| Trade payables, income tax and other current liabilities | 306,714 | 298,181 |
| Total current liabilities | 449,098 | 401,488 |
| Total liabilities (b) | 1,566,245 | 1,453,628 |
| Total Equity and Liabilities (a+b) | 2,951,873 | 2,863,419 |
| (all amounts in Euro thousands) | For the three months ended 31/3 |
|
|---|---|---|
| 2020 | 2019 | |
| Cash flows from operating activities | ||
| Loss after taxes | -16,295 | -7,340 |
| Depreciation, amortization and impairment of assets | 35,185 | 33,491 |
| Interest and related expenses | 12,491 | 14,700 |
| Provisions | 3,494 | 2,808 |
| Other non-cash items | 9,692 | 3,745 |
| Income tax received/(paid) | 531 | -3,571 |
| Changes in working capital | -40,741 | -51,542 |
| Net cash generated from/(used in) operating activities (a) | 4,357 | -7,709 |
| Cash flows from investing activities | ||
| Net payments for property, plant & equipment and intangible assets | -20,820 | -22,626 |
| Net proceeds from changes in investments to affiliates and other investing activities |
680 | 880 |
| Net cash flows used in investing activities (b) | -20,140 | -21,746 |
| Cash flows from financing activities | ||
| Payments for shares bought back | -2,186 | -5,188 |
| Interest and other related charges paid | -5,698 | -11,462 |
| Net proceeds from/(payments of) loans and leasing | 71,356 | -12,841 |
| Net cash flows from/(used in) financing activities (c ) | 63,472 | -29,491 |
| Net increase/(decrease) in cash and cash equivalents (a)+(b)+(c) | 47,689 | -58,946 |
| Cash and cash equivalents at beginning of the year | 90,388 | 171,000 |
| Effects of exchange rate changes | 636 | 1,827 |
| Cash and cash equivalents at end of the period | 138,713 | 113,881 |
CAPEX is defined as acquisitions of property, plant and equipment, right of use assets, investment property and intangible assets.
EBITDA corresponds to operating profit plus depreciation, amortization and impairment of tangible and intangible assets and amortization of government grands.
Net debt corresponds to the sum of long-term borrowings and lease liabilities, plus short-term borrowings and lease liabilities (collectively gross debt), minus cash and cash equivalents.
NPAT is defined as profit after tax attributable to equity holders of the parent.
Operating free cash flow is defined as cash generated from operations minus payments for CAPEX.
Operating profit is defined as 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.
| 14 May 2020 | Annual General Meeting |
|---|---|
| 30 Jul 2020 | Publication of financial results for the First Half 2020 |
| 12 Nov 2020 | Publication of financial results for the Nine Months 2020 |
This press release may be consulted on the website of Titan Cement International SA via this link https://ir.titan-cement.com
For further information, please contact Investor Relations at +30 210 2591 257
An analyst call will be held at 16:00 CEST on May 14 2020, please see: http://87399.themediaframe.eu/links/titan200514.html
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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