FY 20: performance beyond full-year guidance

Cementir Holding has published better than expected preliminary FY20 results with revenue 4% and EBITDA 13% above our expectations. The positive surprise is mainly from the strong performance in the Mediterranean and land revaluations which completely offset the one-offs recorded until Q3.

Along with the guidance for FY21, the group has provided an updated Industrial Plan 2020-23, which revolves around the same pillars as the Industrial plan 2019-22, but has more aggressive targets.

  • Cement volumes up by 12.9%, thanks to solid performance in Egypt and Turkey
  • Revenue up by 1.1% at €1,225m
  • EBITDA stable at €263.7m
  • EBIT up by 3.6% to €157.2m
  • Guidance for 2021: revenue at €1.3bn, EBITDA at €285-295m, Net financial debt at €30m
  • Industrial Plan 2020-23 announced

Cementir Holding published better than expected FY20 results with revenues up by 1.1% to €1,225m, thanks to a strong performance in the Mediterranean (cement volumes were up by 13%, thanks to a 39% increase observed in Turkey). EBITDA was almost flat, with the one-offs recorded up to Q3 completely offset by a €6.7m rise in land revaluations.

With sustainability as the biggest concern in this sector, the group did not fail to address this issue. Its CO2 emission target is <500kg CO2/ton for grey cement and 808kg CO2/ton for white cement by 2030 (from 696 and 926kg CO2/ton respectively in 2019). Due to its small market size, white cement is currently not in the taxonomy of the regulations and, hence, its <500kg CO2/ton target for grey cement is to be compared with peers.

Guidance for 2020

For the year 2021, the group expects to achieve consolidated revenues of c.€1.3bn and EBITDA of €285-295m, growth supported largely by the Turkish market, which under the positive macro-economic backdrop, continues to see cement demand under-served despite imports from Africa. New aggregate business in Turkey will contribute further. Additionally, the group expects financial debt to be c.€30m, including investments of c.€95m. A significant M&A is unlikely as the group is focusing more on organic growth. It is, however, still open for white cement greenfield opportunities in China.

New industrial plan proves ‘coming out stronger from the pandemic’

The impact of COVID-19 on 2020 EBITDA was about €20m and, hence, the company had to take multiple steps to heal its wounds. To preserve its profitability and cash, the group managed its working capital more efficiently and deferred non-essential capex. As a result, the company could not take a step forward towards digitalisation and sustainability (aka initiate green capex) too. Thus, the group has come up with a new Industrial Plan, which revolves around the same pillars as before, but with more aggressive financial targets. It now expects a top-line CAGR of 6.3% and EBITDA CAGR of 8.8% over 2020-23 instead of 3% and 4.4% respectively for 2019-22. The cumulative green capex has been increased from €100m to €107m, and the group now expects to reach a net cash position of €250m by 2023.

Capital allocation of utter importance

Since the group is expected to have a net cash position of about €250m by the end of 2023, resulting in one of the strongest balance sheets in its peer group. Hence, capital allocation will be of utter importance. We believe that the group will reinvest the cash to boost organic growth, rather than going for a big acquisition. It is carbon rights long only to the end of this year and, hence, upgrading its kilns and lowering its opex sustainably will be its target. It is also still considering a greenfield project in China to match with the growing demand in the lucrative south of China market. Lastly, we expect the dividend to remain constant at the current level until 2023, but the group may remunerate its shareholders further through share buy-backs.

We will be revising our model upwards following the better-than-expected results. This could have a positive impact on our recommendation.

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