Italcementi. Italcementi Group. Consolidated quarterly report at 30 September 2000

Transcription

1 Italcementi Italcementi Group Consolidated quarterly report at 30 September 2000

2 Contents Comments on operations and significant events of the quarter 3 Consolidated financial schedules 14 Notes to the consolidated financial schedules 17 Format of the quarterly report This quarterly report has been prepared in an international format and in English for the convenience of international readers. It is based on Italcementi Group's quarterly figures prepared in Italian for statutory purposes in accordance with CONSOB s - National Commission for Listed Companies - Communication no of 14 May Copies of the Italian report are available on request from the company's head office in Via G. Camozzi 124, Bergamo, Italy. Unless stated otherwise, all financial figures in this report refer to Italcementi Group, quarter end balances are as at 30 September All references to Italcementi are understood to mean Italcementi Group (Italcementi S.p.A. and its consolidated subsidiaries).

3 Consolidated quarterly report at 30 September 2000 November 8, 2000 Italcementi Italcementi Group Italcementi S.p.A. Head Office in Bergamo, Via G. Camozzi 124 Share capital 282,548,942 fully paid-up Bergamo Companies Register no 694

4 Antonio Catani Honorary Chairman Board of Directors Giovanni Giavazzi 1 Chairman Pierfranco Barabani 1 Vice Chairman Giampiero Pesenti 1-2 CEO and Managing Director Mario Arcelli Alberto Falck 1-2 Danilo Gambirasi Bruno Isabella Karl Janjöri Italo Lucchini Yves Réné Nanot 1 Massimo Pellegrini Carlo Pesenti 1 Marco Piccinini Ettore Rossi Attilio Rota Emilio Zanetti 2 Paolo Santinoli 3 Secretary to the Board Board of Statutory Auditors Acting Auditors Substitute Auditors Luigi Guatri Claudio De Re Claudio Cavalli Eugenio Mercorio Dino Fumagalli Paolo Marchi Chairman Rodolfo Danielli General Manager KPMG S.p.A. Independent Auditors 1 Member of the Executive Committee 2 Member of the Remuneration Committee 3 Secretary to the Executive Committee 2

5 Osservazioni sull andamento gestionale e sui fatti più significativi del periodo This report on the performance of the Italcementi Group in the third quarter of 2000 has been drawn up in accordance with the instructions set out by CONSOB, the National Commission for Listed Companies and the Italian Stock Exchange. Since this is the first year in which the Group has published quarterly reports, as allowed, systematic comparisons with 1999 third-quarter and year-to-date figures are not given. Nevertheless, 1999 third-quarter and year-to-date figures are provided for net sales, gross operating profit and operating income. Comments on operations and significant events of the quarter The international economy continued to expand in the third quarter. Nevertheless, renewed pressure on oil prices combined with the continued fall of the euro and the high volatility of the stock markets produced some slight uncertainty over short-term prospects. The main effect of this situation in the building industry, given the high energy content per product unit, was higher production costs. On the markets in the euro area on which the Group operates, overall demand was lively, despite some weakening during the quarter, especially in France and Belgium. The high levels of activity in North America also showed signs of slackening, mainly as a result of a slowdown in the residential building segment. In the emerging countries in which the Group operates, demand rose in Turkey, although the significance of the improvement will take some months to assess. 3

6 Group financial highlights (in millions of euro) (in billions of lire) 3 quarter rd quarter rd quarter Net sales 1,922 1, Gross operating profit % of net sales Operating income % of net sales Income before taxes 301 % of net sales 15.7 milioni di euro miliardi di lire Year-to-date at Year-to-date at Year-to-date at Full year ,871.2 Net sales 5,560 4,919 6, Gross operating profit 1,382 1,257 1,619 % of net sales Operating income % of net sales Income before taxes % of net sales Employees at end of period (units) 17,784 17,374 18,086 milioni di euro miliardi di lire 30 September 30 September 30 June 31 December (1,673.9) Net debt (3,241) (3,475) (3,344) The third-quarter operating results substantially confirmed the trends reported in the first part of the year. Significant growth in net sales (up 9.4%) was accompanied by a more modest improvement in operating income (up 7.8%) given the significant increase in costs, in particular energy costs, largely due to the rise in the dollar. For the period January-September 2000, Group net sales grew 13% compared with the corresponding year-earlier period, while operating income improved by 10.1%. Income before taxes for the first nine months was Lire 751 billion, compared with Lire 770 billion for full-year

7 In addition to operating income of Lire 875 billion, factors contributing to this result were: net financial charges of Lire 155 billion (Lire 213 billion for full-year 1999) non-recurring income, net of non-recurring charges and adjustments to financial asset values, of Lire 32 billion (for full-year 1999, the balance showed net charges of Lire 5 billion). Sales volumes and internal transfer 1 st half 3 rd quarter % change from Year-to-date at % change from rd quarter year-to-date at 1999 (*) (*) Cement (millions of metric tons) Aggregates (millions of metric tons) Ready mixed concrete (millions of m 3 ) (*) at constant size Volumes remained high in the third quarter despite slight slowdowns in a number of countries in the euro area (especially France and Belgium) and in North America. Sales volumes in the core business (cement) continued to grow in Italy and Spain. The largest improvement in third-quarter sales volumes compared with the corresponding year-earlier period was reported in Turkey, where 1999 performance was heavily affected by the earthquake in August. Among emerging countries, also Thailand and Bulgaria (driven by export) reported higher sales volumes. Year-to-date sales volumes at the end of September, at constant size, reflected generalised growth in the cement and ready mixed concrete businesses and stability in the aggregates business. 5

8 Net sales and operating income 1 st half 3 rd quarter % change from Year-to-date % change from rd quarter at year-to-date at (in billions of lire) Net sales 3,638 1, , Gross operating profit , % of net sales Operating income % of net sales Analysis change net sales vs. year-to-date at Size Exchange Business Total 4.0% 2.5% 6.5% 13.0% Third-quarter net sales growth compared with the corresponding year-earlier period (up 9.4%) was slower than first-half net sales growth (up 15.1%), which included a particularly strong first quarter (up 23.2%), mainly as a result of very favourable weather conditions. Year-to-date net sales at the end of September rose by Lire 640 billion, up 13%, compared with the corresponding year-earlier figure. The extension of the consolidation area to include the companies and operations acquired in 1999 (Asmar in Morocco, Asia Cement in Thailand, ready mixed concrete and aggregates operations in France) accounted for approximately 4% of the improvement in year-to-date net sales, while exchange-rate variations (mainly the US dollar exchange) accounted for approximately 2.5%. The net increase in year-to-date net sales, at constant size and exchange rates, was therefore 6.5%, and arose from higher sales volumes and unit net sales. Operating income reflected continuing difficulties on a number of emerging markets (Turkey, Thailand) and, above all, a generalised and continuous increase in operating costs, triggered largely by rising fuel prices, which cannot always be transferred to sales prices. In response to this situation, the Group has been closely monitoring variable and fixed costs on all its operations, so that measures to improve operating efficiency can be taken as quickly as possible. 6

9 Performance by geographical area* (in billions of lire) Net sales Gross Capital operating profit expenditure % change from % change from 3 rd quarte 3 rd quarter 3 rd quarter 3 rd quarter 3 rd quarter European Union Italy France 523 (0.5) 133 (4.3) 29 Belgium 84 (9.7) 27 (9.6) 9 Spain (11.8) 8 Greece North America Emerging countries Turkey (27.3) 7 Morocco Bulgaria 29 (2.5) Thailand** Trading and other (30.0) - Elimination of inter-country sales (168) Consolidated total 1, miliardi di lire Net sales Gross Capital operating profit expenditure % change on % change on Year-to-date year-to-date Year-to-date year-to-date Year-to-date at at at at at European Union Italy 1, France 1, (2.7) 84 Belgium Spain (4.3) 13 Greece North America Emerging countries Turkey 249 (0.6) 17 (64.5) 14 Morocco*** Bulgaria Thailand** Trading and other (73.7) 2 Elimination of inter-country sales (499) Consolidated total 5, , * net sales by geographical area include intra-group transactions among countries ** 1999 figures do not include Asia Cement *** the Marrakech cement plant is included in the consolidation as from 1 May

10 European Union Although no official figures are available, third-quarter cement consumption in Italy increased by an estimated 3.9% compared with the third quarter of Consumption for the first nine months was therefore up by approximately 6.9%, a slower rate than in the first half, when very favourable weather conditions produced a particularly strong first quarter. Group sales of hydraulic binders in Italy rose by approximately 2% in the third quarter and by more than 6% in the first nine months compared with the corresponding year-earlier periods; imports were a key driver. Increased sales volumes and higher sales prices enabled the Group to maintain the upward trend in operating results in the third quarter, despite the considerable rise in energy prices. In the ready mixed concrete sector, despite a slowdown in third-quarter consumption, market trends were positive for the first nine months of the year. Calcestruzzi S.p.A. and its Italian subsidiaries responded to the increase in raw material prices and transport costs by adopting a more selective commercial policy. At the end of September, net sales increased by approximately 8.7%, generating an improvement in operating results. In France, cement consumption rose in the first nine months of the year, despite a slowdown in the third quarter. For the year to 30 September 2000, Ciments Calcia S.A. reported a slight increase in sales volumes and an improvement in sales prices. Operating results were adversely affected by the rise in operating costs, specifically costs for oil products, personnel and maintenance. In the aggregates sector, sales volumes at GSM were in line with those of the first nine months of 1999 at constant size, despite a slowdown in the third quarter; in the ready mixed concrete sector, Unibéton s third-quarter sales volumes were on a par with those of the year-earlier third quarter at constant size; year-to-date sales volumes rose by approximately 9% (3% at constant size). The overall improvement in sales volumes and sales prices in the aggregates and ready mixed concrete businesses more than compensated the increase in some variable costs, leading to higher operating results. In Belgium, Compagnie des Ciments Belges (CCB) reported a slowdown in thirdquarter performance. Cement sales on the local market (Benelux) for the first nine months were slightly lower than those of the corresponding year-earlier period, but the reduction was more than offset by sales to Ciments Calcia S.A. and exports. 8

11 Aggregates sales volumes in the Benelux countries decreased by 4% compared with the particularly strong performance reported in 1999; ready mixed concrete sales volumes dropped by approximately 11% as work was completed on several major projects. Overall, CCB operating results for the first nine months improved thanks to higher sales prices and growing use of alternative fuels. In Spain, the strong market conditions of the first part of the year continued in the third quarter. Compared with 1999, Financiera y Minera increased cement sales volumes by approximately 4% in the third quarter and approximately 6% in the first nine months. Group ready mixed concrete and aggregates sales volumes slowed in the third quarter; in the first nine months, ready mixed concrete sales rose by 7% while aggregates sales were substantially stable compared with the corresponding yearearlier period. Despite the improvement in sales, operating results for the first nine months were slightly down on those of the previous year due to higher clinker procurement costs and the rise in energy costs and some fixed production costs. The favourable market trend in Greece continued in the third quarter of Sales prices on the domestic market were substantially stable, while export sales prices increased; for the first nine months of the year, the Group reported 6% growth in cement sales and 12% growth in ready mixed concrete sales. Operating results also improved, despite higher costs (especially for fuel and maintenance). North America As a result of poor weather conditions in the north east of the USA and a slowdown in residential building, Essroc reported lower cement sales in the third quarter. Growth for the first nine months to the end of September compared with 1999 therefore slowed to approximately 2% (about 4% at the end of June), reflecting disparate regional trends. In areas where competition is particularly fierce, operating results reflected the decrease in average unit net sales. The rise in some fixed costs and the impact of higher fuel prices generated a decrease of approximately 4% in dollardenominated gross operating profit for the first nine months compared with

12 Essroc has filed an application to increase the production capacity of the Speed and Picton cement plants (1 million tons overall); this will involve an estimated outlay of 150 million dollars. Emerging countries In Turkey, trends in the building sector in the first part of 2000 reflected the economic slowdown that began in 1999, aggravated by the 1999 earthquakes. Full-year cement consumption is expected to rise by an estimated 2%, but in relation to a 9% slowdown in Group cement sales for the third quarter increased by approximately 18% compared with the corresponding year-earlier period, when performance was affected by the August earthquake, generating a slight improvement in year-todate figures at the end of September. A similar trend was reported in the ready mixed concrete business, where the third-quarter improvement of approximately 28% brought sales volumes for the first nine months to a level with those for the first nine months of The Group s results in Turkey were severely affected by the sharp decrease in sales prices caused by competitive pressures and the rise in energy costs. In Morocco, at constant size, the Group s cement sales on the local market rose by more than 5% in the first nine months; growth slackened compared with the first half due to the slowdown in third-quarter sales. The average sales price trend for the first nine months improved; operating results also benefited from the savings achieved through synergies with the Marrakech cement plant, which offset in part the increase in fuel costs. In Bulgaria, cement consumption at the end of September confirmed the slowdown of the first six months. Similarly, performance by the Group companies maintained the trends reported in the first half of the year: sales on the domestic market slowed more than industry sales as a whole. Nevertheless, this was largely offset by high export growth, driven by sales within the Group, leading to a significant improvement in overall sales volumes (up approximately 20% in the first nine months). Operating results were affected by the sharp fall in domestic market sales prices, but benefited from the marked containment of energy costs, achieved through the gradual replacement of diesel fuel and gas with coal and petcoke. Results overall were better than those of

13 In Thailand, poor weather conditions and the persisting depression in the building industry pushed cement consumption down to the lowest levels since the crisis of 1997, while the decrease in sales prices continued in the third quarter. Despite this difficult situation, the Group s third-quarter cement sales rose, at constant size, by approximately 4.5% (approximately 2% for the first nine months). Operating results benefited from the improvement in performance, but were adversely affected by higher energy costs. In the ready mixed concrete sector, the Group continued the good performance of the first part of the year, with an increase of about 36% in third-quarter sales volumes. Net debt Net debt at 30 September 2000 amounted to Lire 3,241 billion, an improvement of Lire 234 billion compared with 30 June 2000 and Lire 103 billion compared with 31 December At constant exchange rates, the improvement compared with 31 December 1999 would have been approximately Lire 10 billion higher. At 30 September 2000, the Group had an estimated net debt/equity ratio of 66%, compared with 73% at 31 December 1999 (debt includes net floating rate subordinated securities). Significant events in the third quarter of 2000 In July, Italcementi announced the creation and start-up of BravoBuild, a European B2B portal for the building industry, involving investments totalling approximately Lire 100 billion over the next three years. The portal has been fully operational in Italy since October. 11

14 Outlook The reference scenario for the Group as a whole is positive. The Group expects to continue to perform well on mature markets and in some cases to overcome temporary slowdowns. The outlook for operations in the emerging countries varies, depending on the situation of local economies and building markets. In Turkey, the markets are recovering, but unit net sales are very low; in Thailand, consumption has picked up slightly and prices are rising. The outlook is promising in Morocco both as regards markets and as a result of the synergies arising from the acquisition of Asmar. While the outlook for market performance is favourable, costs will rise as a result of higher fuel prices. Overall, in the absence of unforeseeable events (in particular, bad weather conditions), the Group expects to report a satisfactory improvement in its consolidated results, driven by strong growth in Italy. 12

15 Consolidated financial schedules

16 Prospetti contabili (in millions of lire) 3 rd qurter % Year-to-date % Full year % 2000 at Net sales 1,921, ,559, ,595, Operating costs (net of other revenues and operating income) (1,073,707) (3,213,939) (3,743,563) Added value 848, ,345, ,852, Personnel expenses (300,739) (938,004) (1,190,129) Provisions and writedowns (5,983) -0.3 (25,479) -0.5 (42,764) -0.6 Gross operating profit 541, ,382, ,619, Amortisation and depreciation (166,859) -8.7 (507,431) -9.1 (631,634) -9.6 Operating income 374, , , Financial income and charges (57,120) -3.0 (155,429) -2.8 (212,601) -3.2 Non-recurring items and adjustments to financial asset values (16,211) , (4,975) -0.1 Income before taxes 301, , , Capital expenditure 138, ,065 1,422,519 Financial highlights Comparison 2000/ rd quarter % 3 rd quarter % Change % Net sales 1,921, ,757, , Gross operating profit 541, , , Amortisation and depreciation (166,859) -8.7 (156,645) -8.9 (10,214) 6.5 Operating income 374, , , Year-to-date % Year-to-date % Change % at at Net sales 5,559, ,918, , Gross operating profit 1,382, ,256, , Amortisation and depreciation (507,431) -9.1 (462,214) -9.4 (45,217) 9.8 Operating income 874, , ,

17 (in thousands of euro) 3 rd qurter % Year-to-date % Full year % 2000 at Net sales 992, ,871, ,406, Operating costs (net of other revenues and operating income) (554,523) (1,659,861) (1,933,389) Added value 438, ,211, ,473, Personnel expenses (155,319) (484,439) (614,650) Provisions and writedowns (3,090) -0.3 (13,159) -0.5 (22,086) -0.6 Gross operating profit 279, , , Amortisation and depreciation (86,175) -8.7 (262,066) -9.1 (326,212) -9.6 Operating income 193, , , Financial income and charges (29,500) -3.0 (80,272) -2.8 (109,799) -3.2 Non-recurring items and adjustments to financial asset values (8,372) , (2,569) -0.1 Income before taxes 155, , , Capital expenditure 71, , ,670 Financial highlights Comparison 2000/ rd quarter % 3 rd quarter % Change % Net sales 992, , , Gross operating profit 279, , , Amortisation and depreciation (86,175) -8.7 (80,900) -8.9 (5,275) 6.5 Operating income 193, , , Year-to-date % Year-to-date % Change % at at Net sales 2,871, ,540, , Gross operating profit 713, , , Amortisation and depreciation (262,066) -9.1 (238,714) -9.4 (23,353) 9.8 Operating income 451, , ,

18 (in millions of lire) Net debt 30 September 30 June 31 December (net financial assets) Cash, cash equivalents and current financial assets (402,431) (444,505) (410,655) Short-term financing 824, , ,202 Medium/long-term financial assets (116,460) (115,253) (67,115) Medium/long-term financing 2,935,274 3,112,567 3,294,962 Net debt 3,241,196 3,474,730 3,344,394 Change vs (233,534) -6.7% Change vs (103,198) -3.1% Floating rate subordinated securities, net 245, , ,093 (in thousands of euro) Net debt 30 September 30 June 31 December (net financial assets) Cash, cash equivalents and current financial assets (207,838) (229,568) (212,086) Short-term financing 425, , ,277 Medium/long-term financial assets (60,147) (59,523) (34,662) Medium/long-term financing 1,515,943 1,607,507 1,701,706 Net debt 1,673,938 1,794,548 1,727,235 Change vs (120,610) -6.7% Change vs (53,297) -3.1% Floating rate subordinated securities, net 126, , ,041 16

19 Notes to the consolidated financial schedules Foreword The consolidated financial schedules at 30 September 2000 have been drawn up pursuant to art. 82 of the regulation approved by CONSOB resolution no of 14 May Estimates and accounting policies The consolidated financial schedules have been prepared using the accounts at 30 September 2000 drawn up by the companies included in the consolidation, adjusted, where necessary, to ensure alignment with the Group s classification criteria and accounting policies, by applying the accounting policies and consolidation criteria adopted for the 1999 consolidated financial statements. Consolidation area No significant changes have occurred in the consolidation area with respect to the situation illustrated in the notes to the 2000 half-year report. In brief, the consolidation area has changed with respect to 1999 as a result of the sale of Calci Idrate S.r.l. at the beginning of March and the inclusion of Betoncar S.p.A., a wholly controlled subsidiary. Asmar (subsequently merged with Ciments du Maroc) and Asia Cement Public Co. Ltd have been consolidated respectively as from 1 May 1999 and in the quarterly accounts as from the fourth quarter of Exchange rates used to translate the accounts of non-italian companies The foreign-currency balances of non-italian subsidiaries consolidated on a lineby-line or proportional basis and those of non-italian associated companies valued with the equity method have been translated into the accounting currency using the exchange rates applicable on 30 September 2000 for balance-sheet items and the average rates for the first nine months of 2000 for income-statement items. Net sales Net sales totalled Lire 5,559,502 million. They arose from product sales for Lire 1,570,595 million in Italy and Lire 3,831,501 million in other countries, from services for Lire 67,627 million in Italy and Lire 74,383 million in other countries, and from other revenues for Lire 6,411 million in Italy and Lire 8,985 million in other countries. 17

20 A breakdown of consolidated net sales by business and by geographical area is set out below. by business: (in millions of lire) 3 rd quarter % 3 rd quarter % % change vs 1999 Cement 1,233, ,102, Ready mixed concrete and aggregates 589, , Other 99, , Total 1,921, ,757, (milioni di lire) Year-to-date % Year-to-date % % change Full year % vs Cement 3,503, ,041, ,083, Ready mixed concrete and aggregates 1,769, ,622, ,164, Other 286, , , Total 5,559, ,918, ,595, by geographical area: (milioni di lire) 3 rd quarter % 3 rd quarter % % change vs 1999 European Union 1,276, ,225, North America 357, , Trading and emerging countries 287, , Total 1,921, ,757, (milioni di lire) Year-to-date % Year-to-date % % change Full year % vs European Union 3,900, ,579, ,746, North America 905, , ,056, Trading and emerging countries 753, , , Total 5,559, ,918, ,595, Total at constant exchange rates and consolidation area

21 Operating costs (net of other revenues and operating income) Net operating costs totalled Lire 3,213,939 million. They reflected increases in inventories of finished and semifinished products of Lire 4,101 million, and in internal work capitalised under fixed assets of Lire 24,112 million, other revenues of Lire 80,103 million, consumptions for Lire 1,379,862 million, service costs for Lire 1,787,396 million and sundry charges of Lire 154,997 million. The key items in net operating costs were as follows. Consumptions related to purchases of raw materials and semifinished products (Lire 591,938 million), fuel (Lire 183,131 million), packaging, materials and machinery (Lire 330,132 million), finished products and goods (Lire 300,086 million) and to the variation in inventories of raw materials, supplies and consumables (Lire 25,425 million). Service costs referred in the main to electricity, water and gas (Lire 345,872 million), maintenance (Lire 462,330 million), transport (Lire 535,307 million), consultancy (Lire 87,186 million), rents (Lire 112,938 million), insurance (Lire 34,037 million) and other commercial, production and administrative costs. Sundry charges consisted of subscriptions (Lire 13,469 million), other taxes (Lire 82,527 million) and sundry expenses (Lire 59,001 million). Personnel expenses Personnel expenses totalled Lire 938,004 million and consisted of wages and salaries for Lire 656,009 million, social security contributions for Lire 242,458 million, employee severance indemnities for Lire 19,936 million, pensions and other costs for Lire 19,601 million. The number of employees at the end of the period and the average number for the period were as follows: Year-to-date Full year 1999 Employees at end of period 17,784 18,086 Average number employees 17,993 17,592 Financial income and charges The net balance of Lire 155,429 million arose from income from equity investments of Lire 8,400 million, other financial income of Lire 77,312 million and interest expenses and financial charges of Lire 241,141 million. 19

22 Non-recurring items and adjustments to financial asset values The net total of Lire 32,115 million comprised net non-recurring income of Lire 32,372 million and a net charge of Lire 257 million for adjustments to financial asset values. Investments Investments for the first nine months to 30 September 2000 totalled Lire billion (Lire 1,422.5 billion for full-year 1999). They referred to tangible fixed assets for Lire billion, intangible fixed assets for Lire 27.9 billion and financial fixed assets acquired to increase equity investments in existing subsidiaries and associated companies for Lire billion. Net debt Net debt improved by Lire 103,198 million compared with the position at 31 December 1999, as a result of the following changes: (in millions of lire) Change vs 31 December 1999 Current financial assets 8,224 Short-term financing 297,611 Change in short-term net debt 305,835 Medium/long-term financial assets (49,345) Medium/long-term financing (359,688) Change in medium/long-term net debt (409,033) Change in total net debt (103,198) The improvement in net debt since the beginning of the year arose from cash flow from operations of Lire 738 billion and proceeds from disposals of Lire 57 billion, net of investments totalling Lire 508 billion, dividends of Lire 129 billion and other movements for approximately Lire 55 billion. 20

23 Italcementi S.p.A. Via G. Camozzi Bergamo - Italy Tel: Fax: Telex: ITALC I