Press releases

March 30, 2012

Results approved for the year ended December 31, 2011

Sizeable increase of demand in emerging countries and Central Europe more than offsets results shrinking in Italy and the United States of America

Ebitda up 11% to €429 million and net debt down by €124 million

Net profit of €54 million. Dividend proposal: € 0.05 per ordinary and savings share


Consolidated data

  
2011
   
2010
   
% 11/10

Net sales

€m 2,787.4 2,648.4 +5.2

EBITDA

€m 429.4 387.0 +11.0

Net profit

€m 54.1 (41.4) -

Consolidated net profit

€m 26.4 (63.5) -
Dec 11 Dec  10 change

Net debt

€m 1,143.1 1,266.9 (123.9)



The Board of Directors of Buzzi Unicem met today to examine the statutory and consolidated financial statements for the year ended December 31, 2011.

In 2011, the main emerging countries maintained a high rate of growth, while in more mature economies a sound enough recovery phase has not begun yet. Specifically, starting from the second part of 2011, in the euro zone the sovereign debt crisis deepened, giving rise to worrisome uncertainty factors linked to the effects of public accounts consolidation and the growing banking sector difficulty to grant credit to the economy, which cooled down production activity. The general hope is for the economic slowdown to be of short duration, but the risk exists that, due to stringent budget policies and new financial tensions, the economic weakness could lengthen. In the United States of America, from the fourth quarter onwards, trading conditions began to improve but it’s too early to understand whether this means a real economic recovery. Inflationary pressure on energy factors mitigated mainly in mature countries. Construction investments, on which cement and ready-mix concrete demand depends in our areas of operations, showed a clear expansion trend in Eastern Europe and confirmed a progress beyond expectations in Central Europe. Conversely the sector was still penalized by the on-going weakness of residential building in the United States and by the difficult economic situation Italy is facing, having practically entered into recession.

In 2011, the group sold 28.2 million tons of cement (+6.2% vs. 2010) and 15.1 million cubic meters of ready-mix concrete (+4.8%).
In the various markets of presence, the year 2011 showed very different operating conditions. In Italy, the domestic demand weakening and the effect on available income of public accounts austerity measures led to a fall in consumer spending and investments, especially from the third quarter onwards. Central Europe economies, structurally more solid, maintained the benefits deriving from foreign trade dynamism and took advantage of the mild climate they enjoyed in the first and last quarter of the year. In Eastern Europe markets, a double-digit increase in deliveries was reported, as an indication that the construction sector product is bouncing back to pre-crisis levels (2007-2008). In the United States, demand in the residential segment showed no signs of recovery, the non-residential building continued to suffer from the reductions carried out by the private sector and public spending in infrastructures was limited by the high indebtedness of many States of the union. In Mexico, where the country maintains a positive and consistent rate of progress, some major projects of civil engineering adequately underpinned construction investments.

In 2011, consolidated net sales were up 5.2% to €2,787.4 million from € €2,648.4 in 2010. Changes in scope were favorable for €25.9 million while foreign exchange rates negatively impacted for €44.8 million. Like for like, net sales would have increased by 6.0% from the previous year. Ebitda increased by 11.0% from €387.0 million to €429.4 million. Consolidation changes had a positive effect of €3.3 million and foreign exchange was negative for €7.8 million. The figure reported in 2011 however is inclusive of non-recurring income for €7.1 million, referring to the gains on disposal of an investment property in Luxemburg, while the 2010 one included non-recurring charges referred mainly to the write down of the Oglesby, Illinois cement plant. Excluding the non-recurring items, Ebitda went up 6.0%, from €398.3 million to €422.3 million, with Ebitda to sales margin at 15.2% (15.0% in 2010). Profitability benefited from volumes recovery and price strengthening in Eastern Europe, remaining stable at good levels also in the less dynamic countries (the Czech Republic and Poland). In Central Europe and Mexico, the improvement stemmed from the volume effect and concerned absolute values and not so much the Ebitda/sales ratio. In the United States due to a further decline of prices, which combined with an underutilization of production capacity and some pressure on the costs front, profitability probably hit the lowest point in the cycle. The volumes effect was very unfavorable in Italy, where the good rebound of selling prices could not offset the rise of production unit costs caused both by the hikes in energy factors and the plants underutilization. Promising signs of production efficiency improvement appeared in the countries where major investment projects had recently been completed. In Ukraine, after two very difficult years, Ebitda bounced back into the black, while Russia reported the highest profitability in the group.

Amortization and depreciation amounted to €243.5 million vs. €386.7 million in the previous year. The figure for 2010 included the impairment of property, plant and equipment located at the Oglesby, Illinois cement plant for overall €163.9 million. Ebit stood at €185.9 million vs. €0.3 million in 2010. Net finance costs decreased to €99.8 million from €103.6 million in 2010. The improvement was due to a positive net effect of foreign exchange differences and derivative instruments as well as to the reduction of net debt. Gains on disposal of investments accounted for €1.2 million while equity in earnings of associates brought about a loss of €3.0 million mainly due to the poor performance of our US associates. As a consequence of the above, profit before taxes reached €84.3 million vs. a loss before taxes of €102.1 million in 2010. After income taxes for €30.2 million, corresponding to a tax rate of approx. 36%, income statement for the year 2011 reported a net profit of €54.1 million compared with a loss of €41.4 million in the previous year. Profit attributable to owners of the company amounted to €26.4 million vs. a loss of €63.5 million in 2010.

Cash flow, gross of non-recurring items, stood at €297.6 million vs. €345.3 million in 2010. As at December 31, 2011, net debt amounted to €1,143.1 million, down €123.9 million from €1,266.9 million at 2010 year-end. In 2011 the group paid out dividends for €15.8 million, €1.2 million thereof distributed by the parent Buzzi Unicem SpA, and carried out capital expenditures on a cash basis of €156.6 million overall, €60.3 million thereof for capacity expansion or special projects.

As at December 31, 2011, total equity, inclusive of non-controlling interest, stood at €2,844.8 million vs. €2,803.7 at 2010 year-end. Consequently debt/equity ratio decreased to 0.40 from 0.45 in the previous year.

In 2011 the parent company Buzzi Unicem SpA reported a loss of €5.7 million from a net profit of €44.3 million in 2010, with cash flow at €30.3 million.

Italy
The on-going crisis of the building market led to a decline of consumption for the fifth year in a row. Our cement and clinker volumes, exports included, decreased by 10.5%. Sales policy focused on price improvement; the rebound achieved was remarkable (+8.4% from the previous year) but such an effort needs to continue in the future to align the intrinsic value of our product with the market one. In the ready-mix concrete output fell by 11,5% from 2010. Selling prices moved slightly upward (+0.7%) also thanks to the initiatives following the H2NO project, through which Unical guarantees concrete delivery at the job site with the required consistency, without need for dangerous water additions which would compromise its properties.
Italian operations’ net sales decreased from €614.2 million to €568.1 million (-7.5%). During the year the company sold CO2 emission rights which were in excess due to the modest output, thus realizing operating revenues for €13.5 million (€31.0 million in 2010). Ebitda came in at €10.3 million, down 68.3% from €32.5 million in 2010, with a reduced Ebitda to sales margin of 1.8%. Capital expenditures amounted to €22.4 million.

Central Europe
In Germany, our cement deliveries showed a brilliant development from the previous year (+12.8%) in a price environment unfortunately still soft (-1.5% in the average level). Ready mix-concrete sector posted a 27.5% growth, 11.5% thereof due to the change in consolidation scope (acquisition of SIBO group as from July 2010) while prices were virtually stable (-0.5%) Thus overall net sales were up 16.0% from €548.5 million in 2010 to €636.6 million in 2011 (+11.3% at constant scope). Ebitda increased by 18.3% to 90.3 million vs. €76.3 million in 2010, with and Ebitda to sales margin of 14.2%. Other operating revenues include the sale of CO2 emission rights for a total of €2.6 million (€6.0 million in 2010). Capital expenditures amounted to €29.0 million.

In Luxembourg, cement and clinker volumes sold, exports included, showed a positive development (+22.3%) while average unit revenues slightly contracted (-1.8%). Net sales totaled €112.8 million vs. €92.3 million in the previous year (+22.2%) and Ebitda more than doubled, coming in at €33.4 million from €16.4 million in 2010. Recurring Ebitda stood at €26.4 million, with Ebitda to sales margin equal to 23.4%. The strong improvement of results was influenced by the sale of CO2 emission rights estimated to be surplus to production output for €5.7 million (€0.4 million in 2010) and other non-recurring income for €7.1 million referring to the gains on disposal of an investment property. Capital expenditures made amounted to €2.2 million.

In the Netherlands, ready-mix concrete volumes at 0.9 million cubic meters slightly improved (+3.6% vs. 2010). Net sales at €109.7 million were down by 3.0% from  €113.2 million in the previous year due to price softness (-3.0%). Ebitda stood at €1.6 million vs. €0.6 million in 2010, when income statement was impacted by restructuring charges for €1.5 million. Capital expenditures were equal to €2.3 million.

Overall, the Central Europe operating segment realized net sales for €826.7 million (€728.5 million in 2010) and an Ebitda of €125.4 million (€93.3 million in 2010).

Eastern Europe
In Poland group’s cement sales were up 7.8% with a high utilization of capacity and ready-mix concrete volumes increased by 17.2%. Cement average prices in local currency were virtually unchanged (+0.8%), since in the country capacity still unused exists, while ready-mix concrete ones, after having plunged in 2010, were on the rise (+10.2%). Such market dynamics led to a 11.4% increase of net sales which came in at €144.0 million from €129.3 million in 2010. Zloty devaluation negatively impacted net sales, like for like they would have been up 14.9%. Ebitda stood at €36.9 million vs. €33.4 million in 2010 (+10.5%). Other operating revenues include €1.5 million (€0.4 million in 2010) from the sale of CO2 emission rights estimated to be surplus to production output. Capital expenditures amounted to €2.2 million.

In the Czech Republic, our sales improved by 26.2%, taking advantage of the vertical integration in the country and increasing exports towards Poland and other adjoining countries. Average prices in local currency suffered from the competitive pressure coming from neighboring Slovakia and were penalized by higher distribution costs (-11.5%). Ready-mix concrete sector, which includes also Slovakia, showed an overall positive trend with volumes up 11.9% and prices lower by 3.9%. Overall net sales amounted to €172.0 million, up 7.8% from €159.4 million in the previous year. Ebitda stood at €35.2 million vs. €32.8 million in 2010. Ebitda to sales margin at 20.5% was virtually stable (20.6% in 2010). Among operating expenses, to be remarked the favorable trend of fuels and the increase of energy (+7%). The Czech koruna revaluation positively impacted the translation of the results into euro; net of foreign exchange effect, net sales and Ebitda would have increased by 5.2% and 4.2% respectively. Other operating revenues include €0.5 million (0.3 million in 2010) from the sale of CO2 emission rights estimated to be surplus to production output. Capital expenditures amounted to €3.0 million.

In Ukraine, cement and ready-mix sales progressively improved and closed the year with an increase of 24.0% and 22.6% respectively. Also average selling prices, driven by the strong demand, maintained a constant positive trend, rising by 16.8% for cement and 12.7% for ready-mix concrete. Net sales came in at €112.5 million, up 37.9% from €81.5 million in 2010, despite the local currency depreciation. Net of foreign exchange effect, net sales would have increased by 45.4%. Ebitda was positive for €6.9 million vs. a negative amount of €10.5 million in 2010. In addition to revenues improvement, the result benefited from the higher production efficiency achieved following the fine tuning of the new systems to use coal as a main fuel rather than gas in both cement plants. Capital expenditures amounted to €14.4 million.

In Russia, in 2011 cement sales were buoyant (+33.7%). Selling prices in local currency began to strengthen only in the second part of the year, closing with an increase of 6.6% compared with 2010 average. Net sales at €175.5 million were up 41.4% from €124.1 million in the previous year. Net of foreign exchange negative impact (-1.5%), the increase would have been of +43.6%. In addition to pricing and volumes favorable dynamics, profitability benefited from the efficiencies achieved thanks to the new dry-process production line and consequently Ebitda progress was remarkable, from €39.7 million in 2010 to €65.7 million (+65.5%). Expressed in local currency Ebitda posted a 68.3% increase. Ebitda to sales margin which improved from 32.0% to 37.4% represented the excellence level within the group. Capital expenditures made were equal to €36.8 million.

Overall, the Eastern Europe operating segment realized net sales for €598.3 million (€492.7 million in 2010) and an Ebitda of €144.7 million (€95.3 million in 2010).

United States of America
Sales realized by the group were slightly lower than in the previous year (-1.6%) and also ready-mix concrete volumes were penalized by the stagnation (-1.3%). Poor demand continued to affect cement selling prices in local currency which decreased by 5.3% while ready-mix concrete ones showed a more favorable trend (+1.9%). Overall net sales came in at €557.9 million (-7.2%). Dollar depreciation (-5.0% during the year) caused a foreign exchange unfavorable effect, which negatively impacted net sales for €27.9 million. The protracted underutilization of the production capacity and the hikes in fuel and distribution prices did not allow to improve unit production costs. Ebitda thus declined from €88.7 million to €66.6 million (-24.9%), with a recurring Ebitda to sales margin at 11.9% vs. 16.6% in 2010.
Capital expenditures amounted to €24.1 million.

Mexico (50% consolidation)
Thanks to the positive contribution of the new plant in Apazapan, Veracruz State, the associate Corporación Moctezuma closed the year with sales volumes up 13.6% and prices on the rise by 5.9%. Net sales and Ebitda in local currency posted an increase of 15.2% and 10.3% respectively. The devaluation of the peso (-3.3%) penalized the translation of the results into euro: net sales increased by 11.5% over 2010, from €213.4 million to €237.9 million and Ebitda was up 6.8% to €82.4 million (€77.2 million in 2010). The Ebitda to sales margin could not maintain the previous year’s level (36.2% in 2010 vs. 34.6% in 2011) due to an unfavorable variance of production costs caused by energy factors inflation, but remained  at an excellence level. Capital expenditures amounted to €20.2 million.


Outlook
In the countries where the group operates, especially during the first half of 2011, the emerging economies and Central Europe featured a good recovery of sales volumes. Conversely in the United States and mainly in Italy building materials demand continued to be weak. Very favorable weather conditions in the first and in the fourth quarter of the year contributed to consolidate the market progress. A turnabout in our sector’s  economic activities has indeed occurred, but only in some geographic areas; other countries, of major importance for the group, seem to require longer time. In the short-term, visibility is limited and hindered by the cooling down of economic growth in Europe, where the recent financial tensions and the sovereign debt crisis have not been overcome yet.

In the first months of this year good shipments were achieved in the United States, where climate was mild. Conversely, in Central and Eastern Europe, the exceptional cold wave virtually stopped building activity during the month of February. In Italy, the intense cold in February added to the haulers’ strike in January and the country’s entry into an economic recession. A better understanding of the real trends of demand will be possibile only at the end of the first six months, when seasonality effect mitigates.

In Italy, selling prices should settle at a higher level compared with the 2011 exit value but we expect demand to be weak, since the country is in a very difficult economic situation, in which the private sector tends to postpone investment decisions and the revival of public infrastructure works clashes with the stringent restrictions of public finance. Consequently operating results will continue to be disappointing. In addition to price trend, positive indications come from fuel prices, which should undergo a favorable change compared with the 2011 peak and cost reductions implemented through new measures for continuous improvement.

In Central Europe markets, volumes should remain stable at the high levels attained in 2011 and average prices should be not lower than in the previous year. Taking into account some degree of inflation on the costs front, operating profitability is likely to remain similar to that of the year just closed.

In Eastern Europe, we expect Polish activities to continue their positive trend, underpinned by the completion of the infrastructure works for the European soccer championship and by an economy not free from risks but however among the most promising in the EU. In the Czech Republic, construction investments are not likely to pick up, but our operations (cement and ready-mix concrete) are very competitive and good synergy opportunities exist with Poland’s southern regions. In the short-term vision, for the current year Russia and Ukraine should report volumes and prices still on the rise. However these countries feature a quite penalizing cost trend, especially where only one supplier exists (electric power, fuels) or increases are set by law (minimum wage). Overall, we expect  from these two markets a greater contribution than in the previous year.

In the United States, the most reliable researches on the construction industry postpone to 2013 the bounceback of demand from the present rock-bottom. Much depends on the creation of new jobs in the country and hence from the trend of unemployment rate in the forthcoming months. The opportunities for price improvement are promising, starting from the second quarter. If the market, as it is likely, accepts the producers’ announced increases, it should be possible to adequately offset an inflation on main costs in the range of 4/5% and obtain from this geographic area a contribution not lower than in the previous year.

In Mexico, the construction sector should benefit from the stimulus given to public works by the federal and state government, in view of the presidential election which will be held in July 2012. An improvement in our volumes might be achieved in line with demand development. Prices should remain remunerative and, on the cost front, remarkable savings are expected, thanks to the decrease of petcoke purchasing price.

Based on the above considerations, which show emerging economies well set to achieve a further progress in profitability, a stable situation in Central Europe, some opportunities for an earlier recovery in the United States and on-going difficulties in Italy, we can state that at consolidated level the next financial year should close with operating results similar to those of 2011.


The Board of Directors will propose to the Annual General Meeting, convened in first call for May 11, 2012:
- to cover the loss for the year reported by the parent company Buzzi Unicem SpA, by drawing on the reserve Retained earnings;
- to distribute out of reserves available, a dividend of €0.05 euro per ordinary share and per savings share. The dividend is the same for both categories of shares since it is distributed out of reserves available, pursuant to art. 28 of the By-laws. The dividend payment, if approved by the Shareholders’ Meeting, will be effected as from May 24, 2012 (with coupon detachment on May 21, 2012).

The Shareholders’ Meeting has also been convened in order to take, pursuant to art. 2386 of the Civil Code, the required resolutions on the term of office expiration of Director Ester Faia who was appointed by cooptation on March 8, 2012 as well on report on remuneration ex per article 123 ter of Legislative Decree n. 58/1998.

Treasury shares
The Board of Directors resolved to ask the Shareholders’ Meeting to authorize (and thus revoke the authorization adopted on May 13, 2011 to the extent of the non-used portion) the buy-back of a maximum of additional #4,000,000 ordinary and/or savings shares. The authorization is asked also for the sale of the treasury shares held by the company.
The above authorization to the purchase, as well as to the disposal of treasury shares is required to allow the company to intervene in case of fluctuation of the shares price beyond the normal market volatility, within the extent allowed by the law and the market rules, as well as to give the company an instrument for liquidity investment. The authorization is also required to allow the company to purchase treasury shares in order to use them as a payment in extraordinary transactions, also of equity interest swap or for distribution, for a consideration or without consideration, to directors and employees of the company or its subsidiaries as well as for allocation to shareholders without consideration. The authorization is asked for a length of 18 months as from the Shareholders’ Meeting approval.

The proposed purchase price, inclusive of additional charges, ranges from a minimum of €0.60, equal to par value, to a maximum of €10 for savings shares and from a minimum of €0.60, equal to par value, to a maximum of €15 for ordinary shares, or at the highest price allowed by the market general rules approved by Consob by resolution no. 16839 of 19 March 2009, in case these rules are adopted by the company. The maximum possible purchase expense is equal to €60 million.
The treasury shares shall be purchased on the market, according to Borsa Italiana rules. Moreover the company can avail itself also of the procedure provided by the market rules approved by Consob by resolution no. 16839 of 19 March 2009.
Treasury shares selling transactions can be effected at any time, wholly or partly, in one or several transactions, through sale of the same or as a payment in extraordinary transactions, also of equity interest swap or for distribution, for a consideration or without consideration, to directors and employees of the company or its subsidiaries ex art. 2359 of the civil code as well as for allocation to shareholders without consideration.
Based on the previous authorization of the ordinary Shareholders’ Meeting of May 13, 2011, as of today no transactions have been effected on treasury shares while, according to the resolution of today’s Board of Director, #110,865 savings treasury shares will be assigned effective from May 31, 2012 to the managers of the company and its subsidiaries under the MBO scheme adopted for the years 2009-2011. Information relating to such allotment  will be included in the report to be drawn up and disclosed pursuant to article 84 bis of Consob Regulation no 11971/99.

As of today the company owns #500,000 ordinary treasury shares and #140,155 savings treasury shares equal to 0.31% of capital stock.

Corporate Governance
The Board of Directors approved the annual report on the company’s Corporate Governance system, which will be made available at the same time as the draft of the statutory financial statements and the consolidated financial statements of the year 2011.
The Board of Directors has also assessed that DirectorsYork Dyckerhoff, Ester Faia, Aldo Fumagalli Romario, Gianfelice Rocca and Maurizio Sella meet the criteria of independence as per Code of Conduct approved by Borsa Italiana (such as applied by the company as stated in the Report on corporate governance and ownership structure).

By-laws Amendments
The Board of Directors resolve to ask Extraordinary Shareholders’ Meeting to:
- renew for 5 years the directors’ power to increase capital up to maximum amount of €25 million, also making an exception to the pre-emption right;
-  renew for 5 years the director’s power to issue convertible bonds and/or warrants for a maximum amount of €300 million, also making an exception to the pre-emption right;
-  renew for 5 years an additional power to the directors to increase capital for a further maximum amount of €12 million, also to be used for the issue of convertible bonds and/or warrants excluding the pre-emption right within the limit of 10% of share capital.

Senior Notes and Bonds on maturity
During the year 2011 no new bonds were issued.

In the 18 months subsequent to December 31, 2011, the following repayments of bond principals shall be effected:
- on May 29, 2012, $80.0 million referred to the Senior Notes Series B issued by the subsidiary RC Lonestar Inc. in 2002;
- on May 29, 2013, $80.0 million referred to the Senior Notes Series B issued by the subsidiary RC Lonestar Inc. in 2002;

The mezzanine loan issued by the subsidiary Dyckerhoff AG for a principal amount of €200.0 million will be due in December 2012.


Finally, the Board of Directors of Buzzi Unicem resolved the issue, by December 31, 2012, of a bond for a maximum amount of €350 million to be placed with institutional investors only. The final terms of the offering will be defined upon pricing, based on future market conditions. The notes will only be offered and sold outside the United States to institutional investors that are non-US persons under Regulation S and have not been and will not be registered under the US Securities Act of 1933, as amended.

The manager responsible for preparing the company’s financial reports, Silvio Picca, declares, pursuant to paragraph 2 of Article 154 bis of the Consolidated Law on Finance, that the accounting information contained in this press release corresponds to the document results, books and accounting records.


Company contacts:
Investor Relations Assistant
Mariangiola Fiore
Phone. +39 0142 416 404
Email: mfiore@buzziunicem.it

The Buzzi Unicem 2011 financial statements will be illustrated during a conference call to be held on Monday, April 2 at 10.00 am Italian time. To join the conference, dial +39 02 8020911.