Saturday 17 November 2018

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8/11/2018

Financial Results for the Nine Months 2018


In the third quarter of 2018 TITAN Group improved its performance compared to the same period of the previous year. Turnover in the third quarter increased by 5.0%, reaching €389.4m. Earnings before Interest, Depreciation and Amortization (EBITDA) increased by 3.2% reaching €74.7m. Net profit after minority interests and the provision for taxes increased by 32.5% to €25.4m, compared to €19.2m in the third quarter of 2017.

Consolidated turnover in the nine months stood at €1,101.9m, recording a 3.7% decline compared to the same period in 2017. EBITDA declined by 8.2% and stood at €196.9m. Net profit after minority interests and the provision for taxes increased by 51.8% reaching €50.2m.

 

m

Q3:18

Q3:17

% change

Nine months
2018

Nine months
2017

% change

Turnover

389.4

370.7

5.0%

1,101.9

1,144.5

3.7%

EBITDA

74.7

72.4

3.2%

196.9

214.5

8.2%

Profit before tax

30.7

27.4

12.1%

65.9

59.1

11.5%

Net profit*

25.4

19.2

32.5%

50.2

33.1

51.8%

*after tax and minority interests

 

REVIEW OF OPERATIONS

In the US, despite the particularly wet weather, which has prevailed on the Eastern seaboard this year, demand for cement continues to trend upwards, providing a supportive backdrop for price increases. In the third quarter, turnover improved by 6.6% and EBITDA increased by 2.8%, despite hurricane Florence which struck the Southeastern and Mid-Atlantic US in September 2018. The extreme meteorological phenomena held back sales, much like hurricane Irma, which struck Florida in 2017. Moreover, in the first semester of 2018, production challenges at the Group’s Florida operations necessitated an increase of imports into the Group’s terminal in Tampa in order to satisfy customer commitments, albeit at lower margins. In total, nine months 2018 turnover recorded a 4.2% decline and stood at €639.3m (it is worth noting that in US Dollars turnover recorded a 2.7% increase), while EBITDA declined by 7.9% and stood at €127.9m.

In Greece, building activity remains at low levels. There are positive trends in areas driven by growth in tourism. Domestic sales in the third quarter posted modest growth compared to the previous year. In the course of 2018 operating margins were impacted by higher energy costs, which could not be passed on through higher pricing. Exports remained strong with the US representing the Group’s single biggest export market. Turnover in Group’s Greece and Western Europe region declined by 3.1% in the third quarter and stood at €58.9m (in the nine months turnover reached €173.4m recording an 8.7% decline). EBITDA in the third quarter declined by 18.8% and stood at €5.4m (for the nine months EBITDA reached €10.7m recording a 47.7% decline).

In the markets of Southeastern Europe, demand increased in the third quarter and margins were impacted by higher energy costs. Turnover in the third quarter increased by 10.4% and reached €72.1m (for the nine months turnover posted a marginal increase of 1.1% reaching €175.2m). EBITDA in the third quarter reached €20.5m recording a marginal decline of 0.3% (for the nine months EBITDA stood at €44.5m, a 0.6% increase).

In Egypt, cement demand was at levels similar to those of 2017. Competition intensified, following the entry of new capacity in the market during the second quarter of the year although prices improved somewhat, against the extremely low levels recorded a year ago. However, the spike in electricity costs witnessed since July, as well as the additional levies applied to each tonne of cement produced, have eroded margins. In total, in the third quarter, turnover in the Eastern Mediterranean remained essentially flat at €33.5m (for the nine months turnover was also flat at €114m). EBITDA in the third quarter reached €1.1m versus losses of €1.3m last year, which included extraordinary restructuring costs (for the nine months EBITDA reached €13.9m, posting a 25.4% increase compared to 2017).

In Turkey, in the shadow of the rapid deterioration of the macroeconomic situation, the construction sector witnessed an abrupt slowdown in the third quarter. The decline by 53% in the value of the Turkish Lira against the Euro in the nine months and the increase in energy costs in the third quarter have negatively affected Adocim results.

In Brazil, demand has been showing encouraging signs in 2018 although in recent months the election put the market temporarily on hold. Apodi results improved, at both sales and EBITDA level.

Group capital expenditure in the nine months of 2018 stood at €77m, €14m less than in the same period in 2017. Group free operating cash flow stood at €62m and was €10m higher compared to the nine months of 2017, reflecting lower EBITDA levels but also lower capital expenditure and lower working capital requirements. Group net debt as at 30 September 2018, stood at €784m, representing an increase of €26m versus net debt at 30 September 2017.

 

SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD

On 18 October 2018, TITAN Cement International S.A. (TCI) announced, in accordance with Law 3461/2006, the submission of a voluntary share exchange tender offer to acquire all of the ordinary and preference shares of the Company (the TITAN shares), in consideration for new shares issuable by TCI at an exchange ratio of one TCI share for each TITAN share. The purpose of the share exchange offer is to facilitate the listing and the admission of shares of TITAN Group for trading on Euronext Brussels through the primary listing of all the shares of TCI on Euronext Brussels. TCI seeks to become the direct parent company of the Company and the ultimate parent company of TITAN Group. TCI will also apply for the secondary listing and admission for trading of its shares on the Athens Exchange and Euronext Paris.

On 11 October 2018, following the completion of the corporate and regulatory procedures required, the closing of the agreement which was signed in August 2018 between Titan Group and Cem Sak Group was concluded. As of the above date, Titan Group holds 75% of Adocim Cimento Beton Sanayi ve Ticaret A.S. (Adocim), which owns an integrated cement plant in Tokat – Turkey, with a production capacity of 1.5 million tons of cement and three ready-mix concrete units. At the same time, Titan disposed of its participation in a separate grinding unit, which is now solely owned by the Cem Sak Group.

 

OUTLOOK FOR 2018

In the US, the outlook for the construction sector remains positive. The Portland Cement Association (PCA) recently confirmed its estimates for an increase in demand over the period 2018-2023. TITAN Group is well positioned to take advantage of this growth, having a strong presence in expanding metropolitan areas and the operating leverage to meet growing demand.

In Greece, the restart of major projects, which would energize the construction sector, is not anticipated before the end of 2018, while private building activity remains at low levels.

In the countries of Southeastern Europe, there are expectations for a mild, longer-term growth of the construction sector. Τhe Group’s plants are currently operating at levels well below their nominal capacity and thanks to recent investments are increasing their competitiveness through the expansion of the use of alternative fuels, to the benefit of the Group’s operations as well as of the local communities.

In Egypt, the entry into operation of the Egyptian army’s new 12m MT cement plant increases the pre-existing surplus capacity, resulting in the contraction of operating margins of existing plants. Furthermore, the increases applied to the cost of electricity and additional levies imposed on each tonne of cement produced as of 1st July, 2018, necessitate an increase in prices which, however, appears challenging in the short-term.

In Turkey, the deterioration in macroeconomic indicators (inflation, interest rates, and foreign exchange rates) in tandem with the pressure on the banking system is expected to lead to a significant further reduction in cement demand in the near term. Adocim is well prepared to face the anticipated downturn, owing to its modern asset base, competitive cost structure and low gearing.

In Brazil, the conclusion of the pre-election period increases expectations for the advent of a new growth cycle in the cement market.

 

Important Notices

These materials are not for release, distribution or publication, whether directly or indirectly and whether in whole or in part, into or in the United States, Canada, Australia or Japan or any (other) jurisdiction where to do so would constitute a violation of the relevant laws of such jurisdiction.

These materials are for information purposes only and are not intended to constitute, and should not be construed as, an offer to sell or a solicitation of any offer to buy the securities of TITAN Cement International SA (the Company, and such securities, the Securities) in the United States, Canada, Australia or Japan or in any other jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration, exemption from registration or qualification under the securities laws of such jurisdiction.

The Securities are not and will not be registered under the U.S. Securities Act of 1933, as amended (the Securities Act) and may not be offered or sold in the United States absent registration or an exemption from the registration requirements of the Securities Act. The Company has no intention to register any part of the offering in the United States or make a public offering of Securities in the United States. Any securities sold in the United States will be sold only to “qualified institutional buyers” (as defined in Rule 144A under the Securities Act) in reliance on Rule 144A.

In the United Kingdom, this document and any other materials in relation to the Securities is only being distributed to, and is only directed at, and any investment or investment activity to which this document relates is available only to, and will be engaged in only with, "qualified investors" (as defined in section 86(7) of the Financial Services and Markets Act 2000) and who are (i) persons having professional experience in matters relating to investments who fall within the definition of "investment professionals" in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the Order); or (ii) high net worth entities falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as "relevant persons"). Persons who are not relevant persons should not take any action on the basis of this document and should not act or rely on it.

The Company has not authorised any offer to the public of Securities in any Member State of the European Economic Area other than Greece. With respect to any Member State of the European Economic Area, other than Greece, which has implemented the Prospectus Directive (each a Relevant Member State), no action has been undertaken or will be undertaken to make an offer to the public of Securities requiring publication of a prospectus in any Relevant Member State. As a result, the Securities may only be offered in Relevant Member States (i) to any legal entity which is a qualified investor as defined in the Prospectus Directive; or (ii) in any other circumstances falling within Article 3(2) of the Prospectus Directive. For the purpose of this paragraph, the expression "offer of securities to the public" means the communication in any form and by any means of sufficient information on the terms of the offer and the Securities to be offered so as to enable the investor to decide to exercise, purchase or subscribe for the Securities, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State and the expression "Prospectus Directive" means Directive 2003/71/EC (and amendments thereto), and includes any relevant implementing measure in the Relevant Member State.

No action has been taken by the Company that would permit an offer of Securities or the possession or distribution of these materials or any other offering or publicity material relating to such Securities in any jurisdiction where action for that purpose is required.

The release, publication or distribution of these materials in certain jurisdictions may be restricted by law and therefore persons in such jurisdictions into which they are released, published or distributed, should inform themselves about, and observe, such restrictions.

This announcement does not constitute a prospectus. An offer to acquire Securities pursuant to the proposed offering will be made, and any investor should make his investment, solely on the basis of information that will be contained in (i) the prospectus which is expected to be published by the Company in connection with the contemplated admission of its Securities to trading on the regulated market of Euronext Brussels with a secondary listing and admission to trading on the Athens Exchange and Euronext Paris, following formal approval by the Belgian Financial Services and Markets and notification to the Hellenic Capital Market Commission pursuant to article 18 of the Prospectus Directive, and (ii) an information circular to be made generally available in Greece in accordance with Greek Law 3461/2006, in each case in connection with such offering.

Information to Distributors Solely for the purposes of the product governance requirements contained within: (a) EU Directive 2014/65/EU on markets in financial instruments, as amended (MiFID II); (b) Articles 9 and 10 of Commission Delegated Directive (EU) 2017/593 supplementing MiFID II; and (c) local implementing measures (together, the MiFID II Product Governance Requirements), and disclaiming all and any liability, whether arising in tort, contract or otherwise, which any “manufacturer” (for the purposes of the MiFID II Product Governance Requirements) may otherwise have with respect thereto, the Securities have been subject to a product approval process, which has determined that such Securities are: (i) compatible with an end target market of retail investors and investors who meet the criteria of professional clients and eligible counterparties, each as defined in MiFID II; and (ii) eligible for distribution through all distribution channels as are permitted by MiFID II (the Target Market Assessment). Notwithstanding the Target Market Assessment, Distributors should note that: the price of the Securities may decline and investors could lose all or part of their investment; the Securities offer no guaranteed income and no capital protection; and an investment in the Securities is compatible only with investors who do not need a guaranteed income or capital protection, who (either alone or in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom. The Target Market Assessment is without prejudice to the requirements of any contractual, legal or regulatory selling restrictions in relation to the transaction.

For the avoidance of doubt, the Target Market Assessment does not constitute: (a) an assessment of suitability or appropriateness for the purposes of MiFID II; or (b) a recommendation to any investor or group of investors to invest in, or purchase, or take any other action whatsoever with respect to the Securities. Each distributor is responsible for undertaking its own target market assessment in respect of the Securities and determining appropriate distribution channels. HSBC acts exclusively for the Company and no-one else in connection with any offering of Securities and will not be responsible to anyone other than the Company for providing the protections afforded to their respective customers or for providing advice in relation to any offering or any transaction or arrangement referred to herein.




Report 2017