In the first nine months of 2021, all of TITAN Group’s markets recorded solid volume growth which translated into increased revenue for the Group. Performance was supported by continued strength in the US, an encouraging recovery and pick-up of construction activity in Greece and a solid delivery in Southeastern Europe. Egypt confirmed indications earlier in the year that with the rationalization of production imposed, operational performance can start to recover its lost momentum. Clouds have been gathering over Turkey owing to the country’s macroeconomic challenges while Brazil continued to grow.
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As a result, Group consolidated Revenue for the first nine months of 2021 reached €1,262.8m posting a 5.0% increase. Revenue growth in local currencies was 10,1%. Witnessing the global input cost inflation hitting many industries, the building materials sector had a more visible impact during the third quarter of the year, with energy and freight costs reaching a peak in Q3. The reversal of this trend started in October and current prices indicate that we should expect a more favorable cost environment going forward. Owing to the unprecedented spike in costs and the inevitable time-lag in mitigating pricing actions, EBITDA came under pressure to €219.6m posting a 4.3% decline.
The Group nine-month 2021 net result after taxes and minority interests rose to a profit of €81.9m compared to a profit of €58.0m in the same period of 2020, higher by 41.4%, being largely the result of the Group’s lower leverage and successful refinancing strategy.
The macroeconomic environment continues to provide a solid backdrop for building materials demand in the USA. Our markets enjoy robust employment and increased consumer spending which sustain demand, amidst a tight housing inventory and attractive mortgage rates. In the nine months to 30th September, trends confirm the dynamic recorded so far in the year and the prospects for further growth ahead. The Group is taking an active stance in promoting cement with a reduced carbon footprint in the US, thereby not only addressing pressing environmental priorities but also effectively augmenting the available product offering to customers. Titan America is a leader in the Green cement sector and currently is the largest producer of Type 1L (low carbon Cement) sold in the US. The well-documented by now spike in all categories of input costs (mainly energy, logistics and labor cost) has been reflected in profitability margins which have come under pressure as a result, particularly in the third quarter of the year. The Group took action to recoup costs through a second price increase in late summer but considering contracts already in place and the magnitude of the spike in costs, the effect of those mitigating actions will inevitably manifest itself with a time-lag. A new round of price increases was announced applicable on January 1st aiming to recover the margin lost due to cost inflation.
Revenue in the USA recorded a 8.7% increase in US $ terms in the first nine months of 2021, translated into a corresponding increase of 2.1% in Euro terms to €731.3m. EBITDA softened to €126.7m, (5.1% decline in US $) 10.6% below the first nine months of 2020 in Euro-terms.
The market continued its encouraging performance in Greece, lending further support to the belief that it is now in a steady long-term growth path. Sales volumes increased in both the last quarter and the nine months. All construction segments are providing an impetus to demand. Building activity is driven by upgrade and expansion works across a multitude of private infrastructure and small industrial unit projects in logistics and warehousing throughout the country. Residential activity is also strong especially in the main metropolitan urban centers. Against this market backdrop, price increases have also been realised, still not sufficient enough to cover the surge in electricity, fuel and freight costs which was recorded particularly in the third quarter of the year. Group exports continued apace in response to the upsurge in global demand across markets served by the Group’s network.
Total revenue for the region of Greece and Western Europe in the first nine months of 2021 grew by 10.3% to €194.5m while EBITDA came in at €20.4m versus €16.2m in the first nine months of 2020
The Group’s markets in Southeastern Europe continued delivering a strong performance following a strong first half of 2021. Volumes and prices developed well across the region reflecting both solid infrastructure and residential housing trends, depending on the particularities of each market. Rising energy costs however, both in terms of electricity and fuel, continue to penalise the performance of the region with the Group playing catch-up in terms of price increases to mitigate the inflationary effects. Higher levels of utilization at the Group’s cement plants across the region continued to testify to the region’s satisfactory overall performance, while there is still ample production potential to meet stronger levels of demand in the future.
Revenue for the region overall increased by 9.2% to €214.6m while EBITDA declined by 5.2% to €69m in the first nine months of 2021.
In Egypt, the market continues to exhibit positive signs growing at c.7% year-to-date. Our plants have been operating at the levels of the production cap applied across the market while prices have also consistently maintained their upward trend. As a result, operational profitability in the country is improving after many years of unsatisfactory performance. The market is largely driven by public investment which includes a sizeable proportion of public housing and recently a rehabilitation of the country’s port infrastructure.
In Turkey, deteriorating macroeconomic fundamentals have started to manifest themselves in a slowdown in the economic activity. Inflationary pressures on the input cost side -mainly fuel- are further exacerbated by the weakening local currency. Investment in real estate which has historically provided a safe haven for investors is in turn compromised by high interest rates while public investment has slowed down further. Overall, the domestic market is exhibiting softness while high freight rates are also reducing the attractiveness of exports. Although prices remained elevated in both the quarter and the nine months, they only partly set-off cost inflation.
Total revenue in the Eastern Mediterranean reached €122.4m, posting an increase of 8.1% year on year, while EBITDA jumped to €3.5m versus a €1.1m loss in the first nine months of 2020, returning the region’s profitability to positive territory.
Brazil (Joint venture)
The market in Brazil continued to grow, posting a 9.4% increase in volumes versus the first nine months of 2020, supported by both residential and commercial sectors projects in the region. Our joint venture Apodi posted an increase in revenue to €60.6m (vs €50.5m in the first nine months of 2020) as well as in EBITDA to €14.4m vs €11.7m in 2020, enhancing its contribution to the Group’s net results.
ESG Performance
In October, TITAN Cement Group signed the “Business Ambition for 1.5°C” Commitment letter, joining a number of leading companies worldwide that are committed to keeping global warming to 1.5°C and reaching net-zero emissions by 2050. TITAN is one of the first cement companies worldwide with decarbonization targets validated by the Science Based Targets initiative (SBTi). The Group aspires to deliver society with carbon-neutral concrete by 2050.
TITAN is now monitoring Scope 3 CO2 emissions from the supply chain across all cement operations. With a view to further improving disclosure of climate-related information, TITAN has already started implementing the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) assessing climate related risks according to different IPCC scenarios.
The Group further reduced the carbon footprint of its products by shifting to lower carbon cements in Egypt and Greece, and began to export lower carbon Portland limestone cement (Type IL), from Greece to the US. Moreover, the production of Type IL cement in Titan America has now reached 50% of its total cement output. Titan America’s plant Pennsuco in Medley, FL is today the largest U.S. producer of Type IL cement, which has approximately 15% lower carbon emissions than Type I or Type II cement. The Group has also been making progress in energy efficiency, with 86.8% of its total clinker production now covered by ISO50001 certification or energy audits.
Furthermore, TITAN continues to invest in Research & Innovation, participating in collaborative efforts and evaluating more than five novel decarbonization and carbon capture and utilization technologies. TITAN is also exploring further optimization of the cement kiln’s combustion efficiency by hydrogen enrichment with two industrial scale pilot tests in Greece and Bulgaria. Moreover, the national authorities in Greece have included the Group’s project H2CEM, which involves the production and use of green hydrogen for manufacturing cement clinker in industrial kilns, in the pre-notification stage of the first wave of important projects of common European interest (EU Hydrogen IPCEI).
In full alignment with the Group’s sustainability ambitions and its commitment to participate actively in the circular economy, TITAN has partnered with TERNA ENERGY to participate in the public tender process for the PPPs (Public Private Partnerships) of the Mechanical & Biological Waste Treatment (MBT) plants in Attica and Central Macedonia in Greece. The Group is also investing €25 million for the installation of a pre-calciner at its plant in Kamari, Viotia, Greece, to enable the utilization of greater quantities of alternative fuels and further help address the problem of Municipal Solid Waste (MSW) in Attica.
Last but not least, in line with the Group’s commitment to continuous, open and transparent communication with its stakeholders, all business units in Southeastern Europe, Greece and Egypt have published their 2020 annual sustainability reports.
Financing and Investments
Group operating free cash flow reached €68m, a decrease of €60m compared to the nine months of 2020 due to a seasonal increase of working capital and higher Capital expenditure that was increased by 50% to €90m, up by €29m compared to the Covid-restrained investment programme of 2020.
Following increased Capex, higher capital needs and payment to IFC of the last instalment of €41m, Group net debt at the end of September 2021 was €735m, lower by €31m compared to a year earlier.
Share buy-back: The Board decided to implement a share buy-back programme of up to a maximum amount of EUR 10,000,000 in Euronext Brussels and the Athens Exchange. The expected term of the programme is 6 months and its implementation started on October 14, 2021.
Financial Results of the third quarter of 2021
In the third quarter of 2021, Group Revenue increased by 6.2% compared to last year reaching €441.7m testifying the continued strong demand momentum across most of our markets. Group Revenue was up by 7.1% in local currency terms. Group EBITDA declined by 16.8% to €77m, reflecting the sharp rise in energy, electricity and freight costs. Third quarter 2021 net result after taxes and minority interests was a profit of €24.0m compared to a profit of €35.5m in the same period of 2020, lower by 32.5%.
In million Euros, unless otherwise stated |
Q3 2021 |
Q3 2020 |
%yoy |
Revenue |
441.7 |
416.1 |
6.2% |
EBITDA |
77.0 |
92.6 |
-16.8% |
Net Profit after Taxes & Minorities |
24.0 |
35.5 |
-32.5% |
Outlook
The fundamentals driving demand across our markets, namely the strong recovery of economic activity, increased consumer spending and a surge in public and private investment against a low interest rate environment, continue to stimulate growth. At the same time we have clear signs that the peak of energy and freight costs’ spike is behind us, though not reverting to 2020 levels. Recently announced price increases for our products will aim to recover the margin lost over the past couple of quarters due to cost inflation.
In the US, we anticipate housing demand to continue to exceed supply thereby ensuring the growth of residential construction. Infrastructure investments, in order to address America’s ageing infrastructure and shifting demographic trends, received the long-awaited impetus with the approval last week of US$550bn of new spending as part of the Infrastructure Investment and Jobs Act (IIJA). With large amounts specifically allocated to cement-intensive roads and bridges projects, the bill will underpin increased levels of demand for heavy building materials in the US for several years ahead. Amidst this solid industry backdrop, surging cost inflation requires significant price increases to safeguard operational profitability. At the same time, recognizing the growth potential of the US market over the next few years we are investing to expand our product supply capacity in the market and we have just announced the construction of a new storage dome at our Tampa terminal that will greatly enhance its capacity. Aiming to improve operational efficiencies we will also continue with our investments in the digitalization of our plants and processes as well as with carbon mitigation, so that we are a preferred low-carbon cement supplier of choice in the market.
In Greece, indicators are encouraging that the stimuli of demand are in place to sustain the pace in recovery for the years ahead. Residential construction is supported by an increased number of permits issued which should translate into building activity in the coming years. On the commercial/private industrial segment, many projects are continuing across the country while following a very strong summer tourist season, more tourism-related projects are now underway.
In Southeastern Europe, solid performance should continue to the year’s end and beyond in a favorable construction sector climate with a mix of residential, private commercial/industrial as well as infrastructure projects across the region. The Group will remain vigilant to address inflationary pressures on the cost side so as to mitigate their impact on operational profitability.
In Egypt, the stabilizing macroeconomic environment and the country’s housing and infrastructure needs bode well for demand amidst the rationalized production regime set by the authorities. Under these conditions, demand should continue to recover and prices to further pick up, conducive to an improvement in operating performance.
In Turkey, the precarious, state of the economy weakens outlook for construction. However, thanks to the modern assets and healthy balance sheet of Adocim, our subsidiary in Turkey, we remain confident in its operational efficiency to withstand the turbulence.
In Brazil, demand drivers are in place and construction confidence indicators remain stable, but a lot will depend on the macroeconomic situation in the country.
|
|||||
(all amounts in Euro thousands) |
For the nine months ended 30/9 |
||||
2021 |
2020 |
||||
Revenue |
1,262,792 |
1,202,358 |
|||
Cost of sales |
-1,018,122 |
-957,399 |
|||
Gross profit |
244,670 |
244,959 |
|||
Other net operating income |
1,901 |
2,393 |
|||
Administrative and selling expenses |
-126,745 |
-121,872 |
|||
Operating profit |
119,826 |
125,480 |
|||
Finance income and expenses |
-28,474 |
-38,964 |
|||
Fair value changes in interest rate swaps |
609 |
-6,754 |
|||
Gains/(losses) from foreign exchange differences |
3,409 |
-6,550 |
|||
Share of profit of associates and joint ventures |
2,380 |
1,413 |
|||
Profit before taxes |
97,750 |
74,625 |
|||
Income tax |
-15,553 |
-16,758 |
|||
Profit after taxes |
82,197 |
57,867 |
|||
|
|||||
Attributable to: |
|
||||
Equity holders of the parent |
81,945 |
57,958 |
|||
Non-controlling interests |
252 |
-91 |
|||
82,197 |
57,867 |
||||
Basic earnings per share (in €) |
1.0860 |
0.7507 |
|||
Diluted earnings per share (in €) |
1.0814 |
0.7481 |
|||
|
|||||
Earnings before interest, taxes, depreciation, amortization and impairment (EBITDA) |
|
||||
(all amounts in Euro thousands) |
For the nine months ended 30/9 |
||||
2021 |
2020 |
||||
Operating profit |
119,826 |
125,480 |
|||
Depreciation and amortization |
99,737 |
103,859 |
|||
Impairment of tangible and intangible assets |
40 |
68 |
|||
Earnings before interest, taxes, depreciation, amortization and impairment (EBITDA) |
219,603 |
229,407 |
|||
|
|||||
|
|||||
(all amounts in Euro thousands) |
30/09/2021 |
|
31/12/2020 |
|
|
|
|
||||
Assets |
|
|
|||
Property, plant & equipment and investment property |
1,566,992 |
1,540,963 |
|
||
Intangible assets and goodwill |
364,367 |
352,292 |
|
||
Investments in associates and joint ventures |
88,773 |
|
85,610 |
|
|
Other non-current assets |
19,842 |
|
19,248 |
|
|
Deferred tax assets |
11,545 |
|
15,201 |
|
|
Total non-current assets |
2,051,519 |
2,013,314 |
|
||
|
|
|
|
||
Inventories |
288,016 |
248,586 |
|
||
Receivables, prepayments and other current assets |
253,599 |
210,595 |
|
||
Cash and cash equivalents |
71,773 |
206,438 |
|
||
Total current assets |
613,388 |
665,619 |
|
||
|
|||||
Assets held for sale |
1,281 |
- |
|
||
|
|||||
Total Assets |
2,666,188 |
2,678,933 |
|
||
|
|||||
Equity and Liabilities |
|
|
|||
Equity and reserves attributable to owners of the parent |
1,314,440 |
1,242,693 |
|
||
Non-controlling interests |
21,132 |
|
23,990 |
|
|
Total equity (a) |
1,335,572 |
1,266,683 |
|
||
|
|||||
Long-term borrowings and lease liabilities |
658,158 |
|
666,993 |
|
|
Deferred tax liability |
116,565 |
102,078 |
|
||
Other non-current liabilities |
106,977 |
|
97,930 |
|
|
Total non-current liabilities |
881,700 |
867,001 |
|
||
|
|
||||
Short-term borrowings and lease liabilities |
148,583 |
|
223,850 |
|
|
Trade payables, income tax and other current liabilities |
300,333 |
|
321,399 |
|
|
Total current liabilities |
448,916 |
545,249 |
|
||
|
|
||||
Total liabilities (b) |
1,330,616 |
1,412,250 |
|
||
|
|
||||
Total Equity and Liabilities (a+b) |
2,666,188 |
|
2,678,933 |
|
Summary of Interim Consolidated Cash Flow Statement |
||||
(all amounts in Euro thousands) |
For the nine months ended 30/9 |
|||
2021 |
2020 |
|||
Cash flows from operating activities |
|
|||
Profit after taxes |
82,197 |
57,867 |
||
Depreciation, amortization and impairment of assets |
99,777 |
103,927 |
||
Interest and related expenses |
28,044 |
38,254 |
||
Provisions |
4,610 |
5,254 |
||
Other non-cash items |
7,013 |
29,889 |
||
Income tax paid |
-9,037 |
-6,391 |
||
Changes in working capital |
-63,838 |
-46,980 |
||
Net cash generated from operating activities (a) |
148,766 |
181,820 |
||
Cash flows from investing activities |
|
|
||
Net payments for property, plant & equipment and intangible assets |
-88,178 |
-58,337 |
||
Net proceeds from changes in investments to affiliates and other investing activities |
903 |
1,746 |
||
Net cash flows used in investing activities (b) |
-87,275 |
-56,591 |
||
Cash flows from financing activities |
|
|
||
Acquisition of non-controlling interests |
-40,817 |
-1,498 |
||
Dividends paid and share capital returns |
-31,227 |
-16,730 |
||
Payments due to share capital transactions |
-767 |
- |
||
Proceeds from sale of treasury shares |
935 |
691 |
||
Payments for shares purchased back |
- |
-8,816 |
||
Interest and other related charges paid |
-27,809 |
-36,557 |
||
Net (payments)/proceeds of credit facilities |
-99,085 |
70,110 |
||
Net cash flows (used in)/from financing activities (c ) |
-198,770 |
7,200 |
||
Net (decrease)/increase in cash and cash equivalents (a)+(b)+(c) |
-137,279 |
132,429 |
||
Cash and cash equivalents at beginning of the year |
206,438 |
90,388 |
||
Effects of exchange rate changes |
2,614 |
-4,464 |
||
Cash and cash equivalents at end of the period |
71,773
|
218,353 |