Cementir Holding announced good 9M 22 results, with revenue at €1,258m (+24% yoy), and EBITDA at €238m (+11% yoy). All regions posted sharp increases in revenues which helped partially to offset input cost inflation. It has hedged its fuel requirement for Q4 and has re-iterated its guidance mainly because of the uncertainties brought by the application of IAS 29 in Turkey, in the absence of which the top-line guidance could have been upgraded by 10% at least.
Performance by segment
- The Nordics and Baltics (revenue: €531.1m, up by 15.3%): Denmark saw a sharp increase in cement demand (+14%) due to increased market activities but the other countries registered a decline in demand. Norway’s sales were supported by new infrastructure projects, while there was a slight contraction in residential and commercial demand. Volume sales were significantly down in Sweden due to the completion of major infrastructure projects. EBITDA was up by 4.6% to €115m, thanks to the highly profitable cement business in Denmark. The outlook for this region remains strong as it is significantly exposed to the white cement business which is less exposed to the economic cycle.
- Belgium and France (revenue: €238.7m, up by 16.4%): This region delivered a strong performance with volume sales broadly flat but with an average price hike. EBITDA increased by 18%, benefiting from higher prices, despite the sharp rise in fuel and electricity costs, raw materials and fixed costs.
- North America (revenue: €151.3m, up by 30.7%): North America demonstrated the strongest performance with a 2% increase in cement volumes, positive FX effect of 12% and 31% increase in EBITDA. Being the only white cement producer in this region, the company will be able to manage its profitability going forward too.
- Asia Pacific (revenue: €91.7m, up by 19.7%): In China, volumes were down by 8% but revenue was up by 11.5%, driven by higher cement prices. However, price over cost was still negative and hence EBITDA declined by 9%. Malaysia too suffered from a negative price over cost and, hence, saw an 11% decline in EBITDA.
- Turkey (revenue: €187m, up by 44.7%): There was an overall drop in domestic cement due to weak economic conditions, the end of infrastructure projects related to the January 2020 earthquake and unfavourable weather conditions in the Kars area. However, cement exports increased by 10% and aggregate volumes increased by 70% yoy due to a perimeter change as the quarry acquired in H2 21 ramped up its operations. EBITDA increased by 123.2% (including the one-off of a €10.7m non-industrial properties revaluation). Note that we have a conservative outlook for this region because the worsening economic situation may lead to the cancellation of new projects and delays to existing ones.
- Egypt (revenue: €44m, up by 16.5%): Egypt suffered from weak domestic demand as well as lower exports due to the decline in deliveries to Saudi Arabia. Nonetheless, EBITDA increased by 24.1%, supported by a margin increase of 120bp.
Very well managed margins
Unlike other cement players which saw significant collapses in their margins for traditional businesses, Cementir Holding saw an EBITDA margin decline of just 100bp (excluding the impact of IAS29 in Turkey), thanks to its competitive product pricing accompanied by limited blows from energy price inflation due to its hedging policy.
Guidance for 2022 maintained
The group maintained its FY22 guidance of revenue of >€1.5bn, EBITDA of €305-315m, net cash position of €60m and capex of €95m, despite the strong 9M result. Based on the current trends and FX, management believes that revenue could even be around €1.65bn and EBITDA beyond the guided range but, because of the added uncertainties from the implication of IAS 29 (since the final FX rate is used instead of average rate), management decided to stick with the current guidance.
Following this release, we have made some tweaks to our model with no significant impact on our target price.
