Titan reports a robust 1Q performance

Titan Cement International SA saw a “very strong start to the year” with first-quarter 2023 sales up 29.3 per cent YoY to EUR588.1m, driven by increased demand in some key markets due to mild weather conditions and good pricing performance.

EBITDA saw a 131 per cent jump to EUR107.1m when compared with a low-base 1Q22. The margin expanded due to sales growth, cost performance reflecting the benefits from investment projects as well as an improved energy mix with higher alternative fuel usage and softer energy prices.

Net profit after taxes and minorities advanced from EUR1.3m in the 1Q22 to EUR44.3m in the 1Q23.

Regional performance
In the USA, sales were up 37 per cent in euro terms and 31 per cent in US dollar terms when compared with the 1Q22, reaching EUR362.9m in the 1Q23. EBITDA was up 217 per cent YoY to EUR66.3m. US results were supported by above-average growth in the Southeast and Mid-Atlantic sales regions as well as the shortage of residential properties and healthy demand in the non-residential segment, including infrastructure. In addition, favourable weather conditions also helped the construction industry.

In Greece and western Europe, sales increased by 30 per cent YoY to EUR93.8m in the 1Q23, driven by the company’s vertical integration position in Greece as well as numerous public works and tourism-related investment across mainland Greece. In addition, solid export sales coupled with robust price growth also supported company sales. EBITDA advanced by 86 per cent YoY to EUR17.5m.

Southeast Europe reported a 32 per cent increase in sales to EUR83.8m in the 1Q23 when compared with the 1Q22. EBITDA rose by 68 per cent YoY to EUR18m. High inflation rates of 10 per cent are impacting all input categories but the resilience of demand enabled Titan to augment its sales and recover margins. Demand drivers varied across markets, consisting of a mix of small private projects and renovation works to infrastructure and residential, depending on the country. The company’s plants continued to perform at high-reliability levels, while investments enabled ot to increase the use of alternative fuels, thereby improving its energy mix and reducing costs.

However, the eastern Mediterranean saw an 11 per cent drop in sales in the 1Q23 to EUR47.5m. EBITDA slipped by one per cent to EUR5.4m. Business conditions remained challenging. Egypt’s inflation has reached even higher levels and reforms are progressing at a very slow pace. While the market regulation imposed by the government continues, private consumption has been depressed. Shortages of foreign currency and significant cuts to government capital spending weighed negatively on investment sentiment. In Turkey, despite the macroeconomic challenges and the effects of hyperinflation, performance was solid. Both sales and profitability increased, underpinned by favourable weather, which supported building activity, while hyperinflation is absorbed and reflected in pricing levels. Consumption continued to be driven by private works against a curtailment of public investment with diverging trends across different micro markets in the country.

Increasing investment
In addition, Titan Cement International raised its capital expenditure to EUR50m in the 1Q23 from EUR38.9m in the equivalent period of the previous year, with a focus on the growth potential of the USA and Greece.

In the US the group is making investments in logistics in the two import terminals and the company’s investment in digitisation of cement plants is also affecting performance positively.

In the Kamari plant in Athens, Greece, the landmark calciner investment is now complete and increased alternative fuel and material use is expected to start at the end of this month.

Investments yielding both financial and environmental benefits are ongoing in all regions, focussing on further improvement of the energy mix/increase in alternative fuels and higher use of cementitious materials reducing the clinker-to-cement ratio.

Outlook
Global economic conditions appear to have tentatively stabilised with economic activity being more resilient than initially expected in both Europe and the US, suggesting stronger-than-expected demand. However, the group cautions that this may trigger monetary policy to tighten further or to stay tighter for longer, affecting investment and construction activity.

The US economy entered the year on a strong footing, confirming expectations that fundamentals are resilient. Housing inventories remain low, below their long-run average and demand for multifamily housing covers the decline in single-family residential. Commercial, hospitality and healthcare construction demand is also healthy while infrastructure demand has been strong and the benefits from the IIJA programme will begin to be more visible in the 2H23. “Our privileged geographical footprint, our strong market positions and our improved cost competitiveness lead us to be optimistic for our performance in the US for 2023,” according to Titan.

The group also looks also positively on the future of its Greece, western and southeastern European markets. Greece appears to follow its own track of economic growth, buffered by the robustness of its tourism industry as well as the accelerated absorption of various tranches of EU funding. Major infrastructure projects are starting to draw more volumes, including the major urban development of “Ellinikon” in Athens. Meanwhile, performance in southeastern Europe is expected to continue sustaining the levels of delivery witnessed over the last 12 months. Titan International is well positioned to supply markets through its extensive regional network, with demand supported by a mix of residential and infrastructure according to local market dynamics.

In terms of the eastern Mediterranean, the company looks forward with cautious optimism. In Turkey the significant need for rebuilding houses, transmission lines and infrastructure projects in the damaged areas and the necessity to provide housing for hundreds of thousands of displaced people, as a result of the earthquake, is expected to have a ripple effect on cement consumption in the next years. In Egypt cement consumption is expected to continue exhibiting some softness in the immediate term, while the increasing macroeconomic challenges are accentuating the pressure on the government to undertake structural reforms and revitalise the economy.

“The Group had a strong start to the year. This quarter’s performance demonstrated the strength of our product offering and our regional footprint, capitalising on our network synergies and vertical presence in our key markets of the US and Europe. Our aim is to continue delivering broad-based profitable growth, driven by sustainability, proximity to the customer and efficiency in the use of resources and means of production while we continue accelerating growth investments,” said the company in its outlook.