Can Titan expect a better 2019?

This week Titan Group announced its first-quarter 2019 results which saw a 12.5 per cent rise in turnover but also a EUR6.2m loss appearing on the company’s profit and loss account. While the US market and southeastern Europe returned healthy business results, the company’s performance was more muted in its other markets, particularly in Egypt and Turkey. However, going forward Titan sees the overall group outlook for 2019 as more favourable.

The USA is Titan’s most important market, generating 58 per cent of group turnover and 69 per cent of EBITDA through its integrated operations in Florida and Virginia in 2018. Crucially for Titan, the market outlook is positive: The Portland Cement Association (PCA) forecast that cement demand will increase by 2.3 per cent YoY in 2019 and by a further average 1.6 per cent annually in the 2019-2023 period. “Titan Group is well positioned to take advantage of this growth, having a strong presence in expanding metropolitan areas and the operating leverage to meet growing demand,” says the cement producer in its 1Q19 statement.

There are also great expectations for southeastern Europe, where continuing economic growth is set to have a positive effect on construction activity. The region, which includes a cluster of plants in Albania, North Macedonia, Kosovo, Serbia and Bulgaria, generates 16 per cent of company turnover and 23 per cent of its EBITDA. Not only do the group’s cement plants have the capacity to meet significantly higher demand levels, recent investments are also contributing to improving the company’s competitiveness in the region. The expansion of alternative fuel use is a key driver in this positive development.

In 2016 Titan entered Brazil through a 50/50 joint venture with Cimento Apodi, which operates 2Mta capacity in the Ceara state. Brazil’s current political stability is expected to launch a new growth cycle in the cement market. Demographic growth and private construction activity in the country’s northeast is forecast to impact positively on Titan’s local operations.

In Greece a recovery is deferred to the medium term, given anticipated further delays in the start of major projects and low levels of private residential investment in 2019. However, the group is hopeful that tourism-related activities will maintain their positive evolution, supporting domestic demand for cement.

Greece's market is now a shadow of its former self, with annual consumption recorded at 2.4Mt in 2018, some 80 per cent below its 2006 peak.

In Titan's two other key markets, Egypt and Turkey, the company’s profit margins remain challenged. While 2019 demand in Egypt should remain at levels similar to those in 2018, the failure of prices to firm is expected to subdue operating results. Initiatives to further reduce costs will be unable to offset lower profitability. Turkey’s deterioration in macroeconomic indicators as well as the pressure on its banking system is forecast to negatively affect the demand for building materials, including cement, in the short term. However, longer-term projections show a more positive development in the country’s construction sector. “Adocim is well prepared to face the sharp downturn, owing to its modern asset base, competitive cost structure and low gearing,” says Titan.

In April 2019 the company announced a voluntary share exchange tender offer to facilitate the listing of Titan Group in Euronext Brussels, with a parallel listing in Athens Exchange and Euronext Paris.

Headquartered in Greece, TITAN is a geographically diversified mid-size cement group operating a cement capacity of 27Mta in 14 countries including the USA, Brazil, Egypt and Turkey in addition to core operations in Southern Europe and Eastern Mediterranean. In 2018 the company turnover reached EUR1490bn on sales of 18.2Mt cement, 5.3Mm³ concrete and 17.1Mm³ aggregates.