Titan releases 2019 annual report and assesses COVID-19 impact

Titan Group released its 2019 annual report this week, covering its performance financially and with its environmental and social programmes. It also gave an outline of how it had been affected by the COVID-19 pandemic.

Tarkis Arapoglou, chairman of Titan's Board of Directors, said: "The slow, steady and simultaneous recovery of the global economy in recent years continued throughout most of 2019 but regrettably was abruptly interrupted by the advent of the COVID-19 pandemic."

Moderate growth in 2019
Despite the set-back due to the coronavirus, Titan reported that 2019 saw positive growth in the USA for the group and the Greek market showed its first signs of growth, mainly in tourism and private sector construction. Most of the group's markets in southern Europe benefitted from increased demand, while Brazil turned in moderate growth. The downside of the cycle was witnessed in Egypt which saw further decline, together with the commencement of the army's mega plant, leading to a further deterioration of capacity utilisation. The situation in Turkey is similar for the company with Dimitri Papalexopoulos, chairman of the Group Executive Committee, explaining that: "Following a major drop in demand, there are signs of stabilisation at low utilisation levels."

Lower global fuel costs helped performances, but there were also increased electricity and logistical costs, notably in the USA. The net effect of regional performances was stable to positive for the group, with increasing revenues of EUR1609.8m, up eight per cent, and EBITDA increasing 2.8 per cent to EUR267.1m. Net profits after tax fell to EUR50.9m, down 5.5 per cent.

Investment continued with spending of EUR109m in capital expenditure in the year. 


Long-term trends
Up until the emergence of the COVID-19 pandemic, Titan's planning for 2020 was based broadly on a positive outlook. "The coronavirus has created a major source of uncertainty and is expected to have a negative effect on the global economy," said Mr Papalexopoulus.

On a more positive note, the second long-term trend can be seen in the fundamental shifts coming from the digital revolution. "The changes start with the new ways to capture operational efficiencies in our plants, where in 2019 we rolled out several new digital pilots relating to production optimisation and predictive maintenance," added Mr Papalexopoulus. "We expect our digital evolution to go well beyond that, experimenting with tools and platforms that will enhance and possibly redefine our supply chain and the interface with our customers. At this point in our journey, we are focussing primarily on developing our digital capability through accelerated experimentation within our organisation."

"We have further made progress in CO₂ reduction, in particular through the increase in the use of alternative fuels; we expect to meet our 2020 target of a 20 per cent reduction of specific emissions compared to our base year of 1990 with a short delay, due to regulatory and market conditions that influence product and fuel mix," reported Mr Papalexopoulus.

The group has avoided 2.8Mt of CO₂ and 56,600t of dust emissions between 1990-2019. Water consumption was lowered by 29.1Mm³ between 2003-19, while alternative fuel substitution rate has risen to 13.6 per cent in 2019 from 12 per cent in 2018. A total of EUR26.6m has been spent by the group on green investments and EUR7.1m on innovations, including group CO₂ inititatives.

COVID-19 risk assessment
Due to the rapid spread of COVID-19 in most countries, large-scale social distancing measures were imposed from March 2020, disrupting the global economy and reducing demand. Titan expects to be impacted in the short term, although all the group’s cement plants have remained open to this point. Reduced volumes are predicted in 2Q20. The construction and cement sector’s are less exposed than most sectors of society to the immediate effects of the virus, but inevitably results will be impacted.

Titan has strengthened its liquidity position to EUR400m in combination of cash in hand and available committed bank credit facilities. In Greece the optimism for a pick-up in construction in 2020 remains. At the same time, the group has been actively preparing for the upcoming new phase of the CO₂ ETS, which will inevitably lead to a reduction of clinker exports.