Delivering global performance leadership

Transcription

1 Delivering global performance leadership Borsa Italiana and DrKW, Frankfurt 28 th September 2005 Rodolfo Danielli (COO) 0

2 Executive summary Italcementi Group is the 5 th largest global cement player with leadership in the Mediterranean Rim and a consolidated production capacity in excess of 70 million tonnes Q results impacted by poor weather conditions, while Q volume recovery led to overall good results for the Group, with the exception of Italy, where the action plan launched in 2004 is in progress Major steps in the development process in 2005, with the acquisition of the controlling stake of Suez and of Asec (total cement capacity + 12 mt) Other strategic and performance targeted industrial investments will support profitability improvement in the years ahead Shareholders structure Italmobiliare Spa 58.7% ordinary shares Italcementi Spa 75.9% Ciments Français SA All listed companies 1

3 Agenda Company overview st Half key results and Outlook Recent strategic developments Ongoing industrial strategy 2

4 Italcementi Group is the fifth largest global cement player Cement sales (Mt) Lafarge Holcim Cemex Heidelberg Italcementi Sources: Annual Reports, Press Releases and Italcementi estimates * Suez, fully consolidated from Q2-05, ASEC fully consolidated from August 2005 Major steps in the development process: Suez* and Asec*, 11 mt cement volumes sold in

5 with a global production and trading network encompassing 19 countries, 62* cement plants, with capacity in excess of 70 million tonnes Italcementi Group network in the world U.S.A. & CANADA SPAIN 3 37 ALBANIA 1 BULGARIA 2 9 KAZAKHSTAN MOROCCO INDIA MAURITANIA 1 THAILAND 3 GAMBIA 1 33 SRI LANKA FRANCE EGYPT 5* GREECE CYPRUS 1 TURKEY 1 BELGIUM ITALY TOTAL GROUP 62* Cement plants 12 Grinding centers 561 Concrete plants 155 Quarries 4 Terminals (one of which is also grinding center) Over 17,000 Employees (N employees in the consolidated area) SALES BREAKDOWN BY BUSINEES (2004) Cement and Clinker Ready-Mix Aggregates 61% 35% All figures as of 31st December Full capacity included for all shareholdings > 33% * Including 2 plants of Asec Cement, consolidated from August

6 The Group has successfully expanded from local to global player, achieving outstanding profitability Key financial figures (local GAAP) CAGR , % Sales EURm 4,063 2,825 3,018 1,029 1, % GOP % Ebit % Group Net Income

7 whilst maintaining a sound financial structure Financial ratios (local GAAP) 76% Gearing Indebtedness / Shareholders equity 65% 67% 65% 51% Leverage Indebtedness / GOP Coverage GOP / financial income-charges

8 Agenda Company overview st Half key results* and Outlook Recent strategic developments Ongoing industrial strategy * Unless otherwise indicated, all figures are IFRS compliant H1 figures in this presentation might be different from those published in 2004 due to the application of IFRS. Full detailed results in appendix. 7

9 Following FTA (1) on 2004 results, as from Q the Group has been releasing IFRS (2) compliant financial statements Transition to IFRS: main impacts on 2004 results (3) Positive impact on Net Income (mainly due to no amortisation of goodwill) + EUR 71m Slight increase in net financial debt (mainly due to securitisation) Strengthening of Shareholders equity (mainly due to revaluation of available for sale investments) + EUR 178m + EUR 149m Sound financial structure also after IFRS implementation Gearing From 51.4% To 54.6% (1) First time adoption (2) International Financial Reporting Standards (3) Effects of IAS adoption on 1 st January 2005 included Detailed IFRS impacts are available on related specific documents on 8

10 2005 first half results characterised by a weak first quarter and an improving second H key results EURm Q % H % Net Revenues 1, % 2, % Gross operating profit before other income / (expense) % on sales % 24.2% % 20.8% Gross operating profit - GOP % on sales Net Profit % on sales Group net profit Minority Interest Cash flow % 23.4% % 11.5% % % % 20.7% % 8.9% % % % 9

11 Large increase in cement volumes driven by sales in North America and all emerging countries and by consolidation of Suez in second quarter Sales volumes by business* % % % H1-04 H1-05 Cement and Clinker (Mt) H1-04 H1-05 Aggregates (Mt) H1-04 H1-05 Ready-Mix Concrete (Mmc) * Including intra-group sales 10

12 Results impacted by positive price effect and Egypt consolidation, more than offset by strong escalation in variable and fixed costs GOP* variation analysis EURm 62 (88) (39) Egypt EUR 29m (only Q2-2005) GOP H before other income-expense Volumes Prices Variable cost Fixed cost Scope Exchange GOP rate and other H before other income-expense * Before other income-expense 11

13 Increase in net financial position driven by lower cash flow and higher industrial and financial investments with Cash flow EURm H H Cash flow Changes in working capital (200) (211) Capital expenditure, net (196) (136) Cash flow after industrial (69) investments 44 Equity investments, net (187) (8) Dividend and other (110) (105) Inventories (6) Trade receivables (228) Trade payables 48 Other (15) Comprising: Italy (66) France (24) North America (41) Spain (10) Egypt (124) Italy (73) Ciments Fr. shares (6) Change in net financial position Net financial position (30 th June 2005) (365) (69) (2,103) Including ITC ord. shares purchase (10) 12

14 ... continuing sound financial structure Financial ratios 83 Gearing Indebtedness / Shareholders equity Leverage Indebtedness / GOP before other income-expense (12 months) Coverage GOP before other income-expense (12 months) / financial income-charges (12 months) IFRS 1 JAN JUNE 2005 Local GAAP 30 JUNE DEC JUNE DEC

15 Overall positive outlook in H2-2005, with recovery in Italy and ongoing positive trend in other markets, mainly US and emerging countries Cement market outlook in H Italy France Belgium Spain Greece North America (Group market area) Bulgaria Turkey Morocco Egypt India Thailand Kazakhstan Volumes vs. H Domestic market Prices (local currency) vs. H Overall trend per area Increase Stability Decrease 14

17 The Group has strengthened its leadership in Egypt through ASEC acquisition, Current Group position in Egypt Production network in Egypt: ASEC SUEZ ASEC main figures USDm H1-05 H Sales GOP* % on Sales 50.1% 41.0% 39.6% Group main figures** USDm H1-05 H Sales GOP* % on Sales 48.6% 43.8% 43.1% Cement capacity (kt/y): 1,500 3,000 4,500 * before other income / (expense) ** Pro-forma including 12 months of Suez and Asec 16

18 with a cash out for Italcementi of USD 145m Asec acquisition financial structure Objectives: Objectives & assumptions Leverage SCC to acquire a 100% stake in ASEC Cement s share capital Maintain control of SCC Key assumptions: Financing sources (USDm) Italcementi* cash out: 145 Other co-investors commitment: 100 Enterprise Value (USDm): 800 EV / Ebitda 2005: 8.3 Asec Cement net financial debt: USD 195m Bank loan to Suez Cement: 260 Use of cash availability: 100 By end of August 2005, Suez Cement controls 98.6% of Asec Cement * Through Ciments Français 17

19 The acquisition provides several high value-added benefits, Asec: Rationale of the acquisition Strong improvement of Italcementi Group leadership in Egypt (30% market share) Acquisition of 55% share of the attractive Egyptian white cement market Good synergies with Suez Cement Very low cost base production platform Excellent export base Strengthening of Group leadership position in the Mediterranean Rim 18

20 a transforming transaction for Italcementi Group Impact on Italcementi Group GOP (1) Mediterranean (2) 14% Asia 7% South & East Italy, Spain Greece 39% South & East Mediterranean (2) 28% Italy, Spain, Greece 29% North America 11% Asia 5% France, Belgium 30% North America 12% (1) Pro-forma based on 2005 expectations, including Suez and ASEC results for 12 months France, Belgium 26% (2) Bulgaria, Egypt, Morocco, Turkey 19

21 and an opportunity to recover the leadership position in white cement in the Mediterranean Rim White cement capacity in the Mediterranean Rim Group white cement capacity White cement capacity in Mediterranean Rim mt mt Italcementi Cemex Aalborg Cimsa Lafarge ASEC

23 Long-term industrial efficiency improvement will be achieved through strategic and performance investments Group s industrial investments Average yearly investments, EURm ~ 450 The Group is focusing on Strategic and Performance investments ~50% ~35% ~25% * Strategic and Performance (capacity and efficiency capex) Others investments (environment, safety and maintenance capex) 22

24 In Italy the Group is rationalising its production network adding new clinker and cement capacity and Italian system reconfiguration: clinker and cement Clinker projects projects in centre Italy for total additional capacity of 350 kt/y ( ) revamping semi-dry kilns with pre-heater towers ( ) Acquisitions/increase of grinding capacity Emilia Romagna, cement capacity 200 kt/y (2005) Lazio, cement capacity 550 kt/y (2005) Piemonte: cement capacity 500 kt/y (2006) Further acquisitions envisaged 23

25 improving flexibility and market penetration Italian system reconfiguration: logistic and ready mix Coastal terminal network enlargement (storage capacity, tonnes) Ancona (9,000) La Spezia (11,000) Ortona (4,500) Genoa (3,500), from Sep-05 Further actions forecasted in 2005 and beyond Strengthen ready-mix operations in areas not yet consistently covered by the network: Emilia Romagna, 5 plants, 200,000 m3/y (2005) Sardinia, 3 plants, 80,000 m3/y (2005) Umbria, 1 plant, 40,000 m3/y (2005) Further acquisitions and/or installations in 2005 and beyond 24

26 Indian cement consumption growth will increase plants utilisation rate and, Cement consumption in South India mt 60 Plant Group utilisation Rate* Market 77% 89% 96% 82% 88% 40 CAGR 04-10E: 5-7% 20 CAGR 00-04: 9% E 2006E 2007E 2008E 2009E 2010E * Taking into account a supply evolution and net inflow-outflow 25

27 in order to capitalise on this favourable environment, the Group is investing in additional clinker and cement capacity Investments in India Group Production network in India Projects description Additional 1.5 mt/y clinker line in Yerraguntla New grinding centre in Chennai (cement production capacity of approx. 0.8 mt/y) Total investment: EUR 87m New 40 MW coal power plant (EUR 30m investment in partnership with an experienced local player) Commissioning by end 2007 Yerraguntla Chennai Cement capacity (kt/y): 500 1,000 1,500 Grinding centers: Rationale Meet local market growth Support Tamil Nadu market expansion Logistic savings Synergies in operating expenses Availability of power at competitive price and of fly ash 26

28 Internationally the Group is undertaking several industrial investments Major industrial projects under way Spain Morocco North America Capitol (Martinsburg) Malaga Agadir Agadir New line with a cement capacity of 1.2 mt/y (+ 15%) replacing 2 old lines Investment: 73 EURm Commissioning: mid 2007 * Permitting phase New clinker line*: clinker capacity approx. 3,300 tpd Investment: 91 EURm Commissioning: end 2007 Replace 2 small-scale wet process plants with a larger state-of-the-art facility, increasing the cement capacity to 1.6 mt/y (+40%) Investment: 320 USDm Commissioning: beginning

29 Conclusions Weak Q1-2005, but volume recovery in Q-2 led to overall good results for the Group, with the exception of Italy The Group is facing a challenging environment but through several actions already in place will improve results thus consolidating its leadership position Long term value-creation through focused industrial investments and ongoing strategic developments 28

30 Appendix: 2005 First Half Results 29

31 2005 first half results impacted by a weak first quarter and an improving second Appendix H key results EURm Q % H % Net Revenues Gross operating profit before other income / (expense) % on sales Gross operating profit - GOP % on sales Net Profit % on sales Group net profit Minority Interest Cash flow 1, % % 24.2% % 23.4% % 11.5% % % 2, % % 20.8% % 20.7% % 8.9% % % % 30

32 In a market frame overall stable in mature countries and growing in emerging countries, large increase in cement volumes Sales volumes by business* Appendix % % % H1-04 H1-05 Cement and Clinker (Mt) H1-04 H1-05 Aggregates (Mt) H1-04 H1-05 Ready-Mix Concrete (Mmc) * Including intra-group sales 31

33 ... driven by sales in North America and all emerging countries and by consolidation of Suez in the second quarter Cement sales volumes by country (1) H1 % Var. (2005 vs. 2004) Italy -0.5 France Domestic -0.6 Belgium (2) market 27.2 Spain (2) 1.1 Greece North America 3.5 Bulgaria Turkey Morocco 9.1 Egypt (3) Kazakhstan 10.8 (3) 10.5 India 19.7 Thailand Trading 6.4 Total Italcementi Group 9.6 (4) Market trend H Appendix Increase Stability Decrease (1) Consolidated cement and clinker including exports (2) Excluding intra-group sales to France (3) like-for-like (4) like-for-like:

34 Increase in revenues also sustained by full consolidation of Suez from the second quarter, Appendix Revenues by business EURm H H % variation Actual l-f-l Cement and clinker 1,474 1, Ready-mix and aggregates Other business Total Italcementi Group 2,398 2,

35 ... and by overall favourable price effect Appendix Revenues by country (1) % var. H cement EURm prices (Local curr.) H vs. H Italy France Belgium Spain Greece North America Bulgaria Turkey Morocco Egypt 60 n.s. Kazakhstan India Thailand Trading Other and eliminations (177) n.s. Increase Stability Decrease Like-for like Total Italcementi Group 2, (1) including intra-group sales 34

36 Results impacted by positive price effect and Egypt consolidation more than offset by strong escalation in variable and fixed costs GOP* variation analysis Appendix EURm 62 (88) (39) Egypt EUR 29m (only Q2-2005) GOP H before other income-expense Volumes Prices Variable cost Fixed cost Scope Exchange GOP rate and other H before other income-expense * Before other income-expense 35

37 Fuel costs impacted by strong increase in prices Appendix Fuels: H Fuel costs (at comparable clinker volumes) comprising: - Fuel mix + consumption per ton - Fuel price variation (in Euro) - Translation exchange rate effect 23.1% 0.4% 23.2% -0.5% Fuel mix evolution Coal Petcoke Alternative fuels Others H H % 43.7% 48.1% 43.9% 5.8% 6.0% 6.2% 6.4% 36

38 Overall good performance throughout the world excluding Italy GOP by country var. vs EURm H H Italy 99 (46) France Belgium 17 (3) Spain 39 0 Greece 13 (7) North America 39 1 Bulgaria 14 1 EUR 29m Turkey Before other income / Morocco (expense) 49 4 Egypt 11 n.s. Kazakhstan 2 0 India 2 0 Thailand 29 (9) Trading 5 1 Other (4) 4 Appendix 1.7%, like-for-like 6.5% Total Italcementi Group 495 (27) 37

39 where GOP was heavily impacted by unfavorable weather conditions in Q1 and by a negative trend in prices and costs but Cement activity in Italy Appendix Volumes Strong decrease due to very bad weather condition in Q1-05 (- 8.8 % vs. Q1-04) partially offset by Q2-05 (+ 5.9%) Prices % in H1-05 vs. H1-04 Negative trend of cement prices since September 2004, but recovery since May 2005 Costs Overall heavy increase in all production costs: Raw materials: Increase related to Chrome 6 directive Fuels: + 13 % Power: + 10 % 38

40 where several short term strategies are already under way Appendix Short terms actions in Italy Cement price trend Discount reduction and prices increase Q1 Q2 Q Q4 Larger use of alternative fuels After reduction in H1-05, former levels will be quickly recovered and exceeded Containment of fixed costs Maintenance and personnel cost control Increase production capacity/efficiency Acquisitions/increase of grinding capacity Scafa, Colleferro, clinker capacity kt/y Emilia Romagna, cement capacity 200 kt/y Lazio, cement capacity 550 kt/y 39

41 In North America, GOP growth limited by the Appendix constraints of an industrial system in a transition phase North America Essroc market growth lower than total U.S. market Good increase in volumes sold (+3.5%) Favorable prices trend (+12.3%) but Strong increase in costs mainly due to energy cost and unfavorable mix of product sold (produced/imported) 40

42 but H results improvement is expected Appendix Short term actions in North America From July 1st, price increase by 5-7 USD/t in East Coast and Western Pennsylvania From September 1st, price increase in Speed zone, Indiana and Cincinnati, Ohio Increase of self produced cement 41

43 In Egypt, the price effect drives the strong increase in GOP before the non-recurring early retirement charges Suez Cement Company results* Appendix Voluntary retirement scheme: N. of employees 1,100 EURm H H % Net Revenues GOP before other income / (expense) % on sales Provision Tourah Gross operating profit % on sales % % 47.6% 45.3% (18.0) % 32.1% 45.8% * Pro-forma 42

44 Slowdown in GOP led to slight decrease in Net Profit, despite lower financial charges and taxes Appendix Income statement EURm Gross operating profit - GOP % on sales Amortisation and depreciation Impairment variation Operating income Suez 11.3 % on sales Financial income and charges Result of companies valued with the equity method Profit before Tax - PBT % on sales Current income tax Net Profit % on sales Group net profit Minority Interest Cash flow H H (27) 20.7% 23.1% (167) (150) (17) (0) (1) (44) 13.7% 16.5% (29) (39) (32) 13.0% 15.2% (99) (126) (5) 8.9% 9.6% (8) (64) 43

45 Reduction in financial charges mainly due to positive interest rates effect and to a lower level of debt which however Financial income and charges Appendix EURm Income from equity investments H H Volume effect 4 Interest rate Effect 3 Net financial interests (33) (41) 8 Net forex gains and losses Other income and charges (7) (6) 0 TOTAL (29) (39) 10 44

46 rises at the end of H1-2005, driven by lower cash flow and higher industrial and financial investments Appendix Cash flow EURm H H Cash flow Changes in working capital (200) (211) Capital expenditure, net (196) (136) Cash flow after industrial (69) investments 44 Equity investments, net (187) (8) Dividend and other (110) (105) Inventories (6) Trade receivables (228) Trade payables 48 Other (15) Comprising: Italy (66) France (24) North America (41) Spain (10) Egypt (124) Italy (73) Ciments Fr. shares (6) Change in net financial position Net financial position (30 th June 2005) (365) (69) (2,103) Including ITC ord. shares purchase (10) 45

47 The significant increase of shareholders equity, mainly due to the consolidation of Suez, Appendix Balance sheet 30 Jun Jan Non-current assets 5,841 5,078 Current assets 2,735 2,188 Total Assets 8,575 7,266 Total Equity 3,767 3,183 Non-current liabilities 2,955 2,543 Current liabilities 1,854 1,540 Total Equity and Liabilities 8,575 7,266 46

48 ... helps to maintain a sound financial structure Appendix Financial ratios 83 Gearing Indebtedness / Shareholders equity Leverage Indebtedness / GOP before other income-expense (12 months) Coverage GOP before other income-expense (12 months) / financial income-charges (12 months) IFRS 1 JAN JUNE 2005 Local GAAP 30 JUNE DEC JUNE DEC

49 Investor relations ITALCEMENTI GROUP Investor Relations Department Via G. Camozzi, Bergamo Italy Andrea Arrigoni Tel Fax Giancarlo Berera Tel Fax Fabienne Moreau Tel Fax fmoreau@cimfra.com 48