Cimpor: restructured for growth

Following the restructuring of Cimpor and asset swaps with InterCement Austria Holding, the Portuguese cement major is looking forward to an increased footprint in Latin America and Africa, two geographic areas with high growth potential.

Essentially, Cimpor acquired the assets held by Camargo Correa, InterCement Austria's ultimate parent, in Argentina, Brazil, Paraguay in exchange for Cimpor's assets in Morocco, Tunisia, Turkey, India, China, Peru, Spain, which were subsequently transferred to Votorantim.
 
Following the swap, Cimpor now controls 39 cement plants with a combined cement capacity of 38Mta, 24 quarries and 128 batching plants.

Restructuring depresses 2012 results

The restructuring led Cimpor to report temporary lower numbers for 2012. Turnover from continuing activities declined by 3.1 per cent to EUR1510m and compares with the actual EUR2275m in 2011 under the old structure.
 
Comparable EBITDA eased by 3.3 per cent to EUR464.7m and compares with an actual EUR616m. Pre-tax profit fell by an underlying 38.9 per cent to EUR167.5m and the net attributable profit result dropped by 74 per cent to EUR51.5m.
 
Pro-forma on the current structure, turnover is given at around EUR2800m and EBITDA about EUR760m. That would suggest an actual improvement in EBITDA in the region of 23 per cent but the two numbers are not strictly comparable as they reflect a very different make-up of the business.
 
Group cement and clinker volumes showed an underlying decline of 0.5 per cent to 14.45Mt. The pro-forma turnover for the business as now constructed was approximately 27Mt of cement, close to the 27.52Mt actually declared by a very different business structure in 2011.

Performance by region

Last year, Cimpor's Portuguese turnover declined 17.9 per cent to EUR310.6m and EBITDA fell 24.8 per cent to EUR74.7m with cement production declining by 7.2 per cent to 3.44Mt. Portugal remains a concern for Cimpor and the company has said to minimise domestic constraints by investing in exports.
 
Brazil remains the largest country for Cimpor in terms of cement deliveries, with a 4.5 per cent increase to 5.88Mt last year. Because of a weaker Brazilian currency, turnover was only 0.3 per cent ahead at EUR690.8m which was still more than twice the contribution from Portugal, the second largest.
 
The rest of Cimpor's assets are largely in Africa. Egypt represented a turnover last year 7.5 per cent higher at EUR178.1m and EBITDA 7.1 per cent ahead at EUR53.5m, though cement and clinker sales were off by 3.7 per cent to 3.11Mt. South Africa cement shipments were 13.1 per cent lower at 1.07Mt and production costs, notably electricity, were higher. In Cape Verde, sales were down 16.8 per cent to 180,0000t.
 
Mozambique continues to be Cimpor's star performer as local turnover last year rose by 17.4 per cent to EUR134.6m and cement deliveries advanced by 21.3 per cent to 1.8Mt. A healthy economy and strong construction sector is expected to keep demand high with growth of 10 per cent expected for 2013-14.

New market profile

South America has now become an important region for Cimpor and the company expects demand in Brazil, Argentina and Paraguay to posts growth of five per cent in the near term. In Argentina, Cimpor now has capacity of 8Mta through market leader Loma Negra and a new project is envisaged for 2016. Meanwhile, a 0.4Mta plans is under construction in Paraguay which is due to start operations in 1H13.
 
Thanks to the addition of Camargo Correa's assets in Brazil, (including seven cement units), Cimpor has become the second-largest domestic cement producer with 14Mta of capacity, though still only about one-third the size of market leader Votorantim. Ahead of expected increases in consumption led by the housing market and infrastructure investments, Cimpor has recently completed a 0.8Mta grinding plant in the Sao Paulo region, and is currently undertaking further projects including a co-processing unit in Ijaci (2013), a new plant in the north (2016) as well as projects in Apiai and Sao Paolo (2013).
 
In Africa, the Camargo Correa deal has added the 1.6Mta Palanca Cimentos project in Angola, a market characterised by high demand growth and strong long-term prospects. Nevertheless, the project appears to have been held up due to investor and/or financing issues, and there are no signs yet that the project will come to fruition.