Titan successfully navigates pandemic in first quarter
This week Titan Group released its 1Q2020 business results which saw the group's revenues rise by 6.1 per cent to EUR384.8m, compared to 1Q19. ICR looks a little closer now at how the group's operations have been performing.
Dimitris Papalexopoulos, chairman of the group, said: "The Group successfully navigated the first phase of the [COVID-19] crisis. Since the first emergence of the pandemic which appeared in our countries of operation in early to mid-March, our first focus has been to take measures to protect our employees, and our families along of course with our business partners' customers and our local communities."
Titan Group, like many cement companies, has asked 35 per cent of its staff to switch to working from home as the impact of the coronavirus spread to its business regions. The group did manage to maintain operating efficiency in all areas and took emergency measures to enhance its liquidity to EUR400m. It also suspended EUR50m of capital expenditure during 1Q20 (roughly half of the annual total), while implementing EUR33m cost reduction initiatives. Titan's cement plants were designated as 'essential businesses' in countries where lockdowns were imposed, which enabled it to reduce potential losses from shutdowns, even if the trend towards lower cement demand could already be felt in March.
"The early impact of the pandemic on our company and our sector was less severe than was initially feared," added Mr Papalexopoulos. "Within the Titan family we have had no fatalities or serious or mass infection incidents so far. Construction has been deemed to be a safe and essential industry in most countries, and all our cement plants are in operation but are adjusting their production levels to satisfy the current levels of demand."
The significant decline in revenue for the group came in southeastern Europe, New York and Brazil. Here the market decline is assessed to be in the region of 30-40 per cent. Cement demand in southeast Europe softened in March due to the weather as well as the early onset of COVID-19. Revenues for the group in southeast Europe remained stable at EUR48m and were helped by improved prices and the lower petcoke costs.
Total cement and clinker sales for the group reached 3.8Mt in 1Q20, up four per cent on the 1Q19 when sales totalled 3.7Mt. Aggregate sales also rose by three per cent to 4.6Mt, up from 4.4Mt in 1Q19, while ready-mix sales jumped to 1.29Mm3 in 1Q20 from 1.27Mm3 in 1Q19, a rise of two per cent.
While the group's gross debt has been increasing since the 2Q14, it grew again by EUR39m in 1Q20, pushing the group's current gross debt total up to EUR878m. This is still well below the 2Q09, when it totalled EUR1112m, following the Global Financial Crisis.
Regional performance
USA
The group's topline growth remains consistently in the USA. Revenue reached US$237.8m. Sales volume growth in 1Q20 was seen across most product lines. Florida recorded higher cement and block volumes, ready-mix and aggregates had steady sales and only fly ash volume saw a decline, resulting in a US$1.5m loss in profitability.
Michael Colakider, Titan Group CFO, added, "Operations continued uninterruptedly with a moderate slowdown in demand in Florida and the Mid-Atlantic in mid-March. Lockdown measures were more felt by terminals and supplies in metro areas, markets where sales have since dropped by some 35-40 per cent."
Greece and Western Europe
The Greek market had a positive EBITDA of EUR1.4m. Domestic cement consumption was supported by private investments, peripheral projects and tourism infrastructure spending. As well as seeing cement sales volumes improve on the 1Q19, profitability accrued from the lower cost of petcoke and improved performance in alternative fuel use.
Southeast Europe
In this region revenues were slightly down on the 1Q19, a drop of EUR0.5m. This was despite of a positive price improvement and lower solid fuel costs, while alternative fuel use reached 40 per cent in Bulgaria.
Eastern Mediterranean
The eastern Mediterranean region was led by Egyptian cement sales volume, which grew in the first two months of the year, despite slowing in March. Cement prices remain at low levels, but petcoke was cheaper to buy. The Turkish cement market saw softer demand but the group benefitted from Adocim Cement's exports.
Brazil
The Cimento Apodi subsidiary reported 1Q20 cement demand in Brazil at the same levels as in 2019, with a small growth in the northeast part of the country. Cimento Apodi's sales volumes and revenues reported positive growth with profitability helped by higher capacity utilisation, while cement prices remained static.
Outlook
Titan expects housing and non-residential segments to be more heavily impacted than other cement end uses. It forecasts some benefits potentially from government and institutional support, infrastructure spending and energy cost tailwinds.
"Federal spending in the USA is expected to rise and there are some state initiatives for infrastructure developments. There is also the relaunch of major construction projects in Greece and other parts of the world that might provide some counterbalancing support to demand," said Mr Papalexopoulos.
"At the same time as we manage the current crisis, we continue to think about the longer term," said Mr Papalexopoulos... "We are not taking our eye off the ball in addressing the long term climate challenge. To this end we practically support the recent announced Road Map by the European Cement Asociation, CEMBUREAU, which aims to achieve carbon neutrality by 2050."
Titan Cement will be participating in Cemtech's Live Webinar - The cement plant digital transformation: Making cement industry 4.0 happen on 20 May 2020. Click here to register for this free webinar.
