Vicat optimistic for future growth

This week Vicat announced its 9M18 results with a 7.6 per cent growth in sales, while weaker exchange rates impacted on revenues. Parts of Europe and the US market had a positive effect on results, but Vicat found devaluation of the Turkish lira and production issues in Egypt slowing its progress. Currency headwinds had a negative impact of EUR125m for the group at the end of September. Looking ahead, the group forecasts further growth in the USA and will also want to see market improvements in Brazil where it has recently acquired Ciplan.

Vicat's group chairman and CEO, Jacques Merceron, said: "Over the first nine months of the year, Vicat recorded solid sales growth at constant scope and exchange rates. The group achieved healthy increases over the period in all our territories, except Switzerland and Egypt. In the third quarter business trends held up well despite a downturn in the economic and industry environment in Turkey, which was hit by the sharp depreciation in its currency.

"The acquisition of Ciplan in Brazil, a country with tremendous potential, reinforces Vicat's strategy of sustainable growth, leveraging its high-quality assets and strong regional positions to generate cash flow," Mr Merceron added.

European sales supported by Italy and France
Italy proved to be the star market for Vicat as sales advanced by 10.9 per cent YoY in 9M18. Consolidated cement sales in the third quarter rose 41.7 per cent YoY with volumes advancing 25 per cent on 3Q17.

The French market also provided a boost as sales increased 3.8 per cent YoY to EUR236m in the 9M18. Selling prices edged up. In the third quarter of 2018, sales increased by 4.5 per cent, supported by a three per cent growth in volumes when compared to the 3Q17.

However, in Switzerland Vicat fared less well as its sales contracted by 3.4 per cent in the 9M18 and by 5.4 per cent in the third quarter.

While Turkish cement sales increased 17.9 per cent at constant exchange rates to EUR134m, on a reported basis they were down by 14.2 per cent in 9M18. Over the nine-month period, there was also a sharp decline in cement pricing. A currency devaluation of 37.5 per cent in the 3Q18 also affected performance severely. Volumes contacted by 11 per cent in both the Konya and Ankara regions.

USA stays strong
In the USA Vicat reported an 11.9 per cent YoY growth in cement sales in the 9M18 with volumes up by more than six per cent. The continued strength of the market has been consistently improving the company’s earnings. Sales in the southeast region were supported by better weather conditions. In addition, Vicat managed price rises in 2017 and in 1H18. Performance in the 3Q18 was particularly strong with cement sales advancing by 10.6 per cent when compared with the 3Q17 and volumes increasing by almost five per cent.

Asian volumes up
Vicat achieved cement sales of EUR254m in India for the 9M18, up 23.6 per cent at constant exchange rates (+11.8 per cent). Cement volumes saw 29 per cent YoY hike to more 4.9Mt but selling prices declined. In the third quarter cement sales advanced by 15.2 per cent and volumes by 19 per cent.

The Kazakh cement market also performed well for the France-based cement producer, with sales up 34.3 per cent to EUR52m in the 9M18. Volumes saw a 15 per cent rise over the period. Cement sales in the 3Q18 increased 28.6 per cent YoY.

Africa challenges
Egypt made for a challenging market in the 9M18 as cement sales dropped by EUR27m, down 39.4 per cent YoY at constant exchange rates. Volumes fell by more than 50 per cent, reflecting a shutdown and halt of sales in March and April, linked to military operations in Sinai and to a slowdown in the construction market. A local currency devaluation quickly wiped out any gains in average selling prices. Cement sales in the 3Q18 recorded a fall of 5.9 per cent at constant exchange rates and volumes dropped by 21 per cent.

In west Africa, the markets also presented challenges and cement sales in the first nine months of 2018 crept up by 1.6 per cent to EUR173m. While prices rose in Mauritania and were stable in Senegal, they declined in Mali. Third-quarter sales in west Africa slipped by 5.8 per cent and volumes decreased by 12 per cent.

Outlook
For FY18, Vicat expects an improvement in its EBITDA, focussed on expanding its volumes, raising selling prices where the competitive environment allows and optimising production costs.

Cement volumes in France are forecast to move higher and selling prices are expected to firm up slightly. In Italy sales should improve gradually but in Switzerland, the group expects volumes to contract. Meanwhile, volume growth and price hikes are anticipated in the USA with Vicat targeting California and the southeast for higher cement prices. Housing and the opening up of public spending are expected to support the Indian market while increased exports and a positive housing market in Kazakhstan are to underpin growth in the central Asian country. A gradual pick-up in Egypt is likely while west African volumes are predicted to develop in a similar way, supported by firmer selling prices.