FREE Breaking News Alerts from StreetInsider.com!
L’ISLE-D'ABEAU, France--(BUSINESS WIRE)-- Regulatory News:
Condensed income statement approved by the Board of Directors on 26 July 2022
Change (at constant scope and exchange rates)
Commenting on these figures, Guy Sidos, the Group’s Chairman and CEO, said: “The basis for comparison in the first six months was unfavourably high given the sales and profitability levels achieved in the same period of the previous year. In an environment characterised by strong energy cost inflation and non-recurring industrial costs in the US, France and India, major price increases were introduced across all the countries where we operate. For the time being, their progressive impact has almost fully compensated the effects of cost inflation with operating profitability again well above its pre-pandemic level (€229 million in the first half of 2019).
The Group is adapting to this environment by diversifying its procurement sources, honing the energy efficiency of its manufacturing facilities and pursuing a pricing strategy tailored to each specific region in which it operates. The Group is also moving forward with its policy of lowering its greenhouse gas emissions by harnessing existing solutions and investing in technologies that will enable it to reach its 2030 and 2050 targets.”
Further information about Vicat is available from its website (www.vicat.fr).
In an environment characterised by very strong inflation in its costs, Vicat’s first-half 2022 sales posted a substantial increase resulting from a large rise in selling prices, which offset to a significant degree the contraction in volumes delivered.
Overall, the Group’s consolidated sales totalled €1,755 million, up from €1,560 million in the first six months of 2021, representing a +12.5% rise on a reported basis and a +14.5% increase at constant scope and exchange rates.
The trend in consolidated sales on a reported basis reflects:
The Group’s operational sales totalled €1,779 million, up +12.1% on a reported basis and up +14.1% at constant scope and exchange rates. Each of the Group’s businesses contributed to this positive trend. In the Cement business, sales (€1,095 million) rose +17.3% at constant scope and exchange rates. The operational sales recorded by the Concrete & Aggregates business (€675 million) rose +14.8% at constant scope and exchange rates. Lastly, the Other Products & Services business (€226 million) posted a -9.0% decline in its sales on a reported basis given the sale of part of this division in Switzerland during the first half of 2021. At constant scope and exchange rates, its sales rose +8.2%.
Vicat’s consolidated EBITDA came to €269 million in the first half of 2022, down -10.4% on a reported basis and down -9.8% at constant scope and exchange rates. The EBITDA margin was 15.3%, down -390 points from the unfavourably high basis of comparison in the first half of 2021. The trend in reported EBITDA reflects an unfavourable currency effect of -€1 million and an organic decline of -€29 million. It’s worth noting that despite this decline, operating profitability was again well above its pre-pandemic level (€229 million in the first half of 2019).
At constant scope and exchange rates, the decline in EBITDA was the result of an unfavourably high basis for comparison in the first half of 2021 and of the very strong inflation in production costs, especially energy, since the second half of 2021, with a significant acceleration in 2022. As a result, energy costs moved up +64.7% compared with the first half of 2021. The increase was especially significant in Egypt, India, Brazil, France and Switzerland. During the first half, cost inflation, with a major impact in France, the Americas, Africa and India, was almost fully compensated by the overall rise in selling prices. EBITDA was also affected by several non-recurring industrial operations amounting to -25 million euros that held back performance in the period, including start-up of the Ragland plant’s new kiln in the United States, exceptional maintenance operations of the Montalieu plant after two pandemic-blighted years, preparation for capacity increase at the Kalburgi Cement plant (debottlenecking investment).
EBIT came to €128 million, down from €171 million in the same period of 2021, representing a fall of -24.9% on a reported basis and of -23.4% at constant scope and exchange rates. The EBIT margin on consolidated sales reached 7.3%.
Operating income came to €128 million, down -20.5% on a reported basis and down -18.3% at constant scope and exchange rates. This fall was mainly attributable to the contraction in operating profitability.
The +€8 million improvement in net financial income (expense) compared with the first six months of 2021 reflects the positive change in the fair value of interest-rate derivatives following the increase in interest rates (+€18 million). This positive trend was partially offset by the increase in the Group’s average debt (negative impact of -€4 million). The increase in other financial expense derived principally from the application of IAS 29 in Turkey as outlined below.
The macroeconomic and inflationary situation in Turkey meets the criteria set out under IAS 29 for application of the accounting arrangements for hyperinflationary economies. Under the standard, non-monetary items are restated based on the change in a general price index between the date those items were recorded and the end of the reference period to reflect their “actual value” at the balance sheet date translated at the year-end exchange rate. In Turkey’s case, application of the standard has prompted:
Tax expense declined €10 million compared with the first six months of 2021. The effective tax rate was 29.6%, below the first-half 2021 rate of 31.1%. This reduction in the effective tax rate resulted chiefly from a more favourable country mix compared with the first six months of 2021 and a fall in the standard tax rate in France from 28.41% to 25.83%.
Consolidated net income was €88 million, down -20.0% at constant scope and exchange rates and down -13.8% on a reported basis.
Net income, Group share fell -22.7% at constant scope and exchange rates and -16.8% on a reported basis to €78 million.
Cash flow from operations came to €218 million, down -9.1% on a reported basis and down -9.9% at constant scope and exchange rates, reflecting the decrease in EBITDA generated over the first half.
1. Income statement analysed by geographical region
Change (at constant scope and exchange rates)
During the first half of 2022, the Group’s sales in France moved higher, despite a small reduction in demand from the record levels seen in the first six months of 2021. Cement consumption held up at a high level. In a high inflation environment, selling prices rose significantly across all the Group’s activities.
Conversely, EBITDA in France declined significantly during the period given the very clear increase in operating costs, particularly energy costs, and an unfavourable basis for comparison in 2021.
Even so, the series of price increases introduced at the beginning of the year and late in the second quarter have for the time being offset only partially the very strong rise in energy costs, especially the cost of electricity. One-off maintenance operations carried out in a period of high activity levels after the two-year-long Covid-19 pandemic incurred non-recurring costs. The EBITDA generated by the Cement business declined by -25.8% over the period.
Given the increase in costs, the EBITDA generated by the business fell -24.3% at constant scope over the period.
1.2 Income statement for Europe (excluding France)
Change (at constant scope and exchange rates)
Business trends in Europe (excluding France) were positive in the first half of 2022, supported by favourable conditions. The decline in sales on a reported basis reflects a scope effect resulting from the sale of the Creabeton precast business in Switzerland, which was finalised on 30 June 2021. EBITDA across the region as a whole rose +6.1% on a reported basis and +5.8% at constant scope and exchange rates.
In Switzerland, the Group’s consolidated sales climbed +3.7% at constant scope and exchange rates (down -12.5% on a reported basis). EBITDA moved up +2.0% at constant scope and exchange rates. Overall, the EBITDA margin on consolidated sales improved to 22.8% during the first half of the year from 19.5% in the same period of 2021 as a result of the positive impact of the Creabeton disposal on margin performance.
Given these factors and despite the strong increase in energy costs, especially the cost of electricity, the EBITDA generated by this business grew by +7.1% at constant scope and exchange rates.
As a result of these factors, the EBITDA generated by this business fell -12.6% at constant scope and exchange rates.
In Italy, consolidated sales grew by +39.2%. Demand and selling prices strengthened significantly throughout the period. As a result, EBITDA climbed +110.2% in the first half.
1.3 Income statement for the Americas
Change (at constant scope and exchange rates)
Demand across the Americas region remained solid in the construction sector. The impact of the surge in energy prices and of the non-recurring costs linked to the start-up of the Ragland plant’s new kiln was offset only partially by the hike in selling prices. As a result, EBITDA declined significantly over the first half from the high basis for comparison in the same period of 2021.
In the United States, the sector environment remained favourable during the first six months of the year. Note that second-quarter performance was adversely affected by the start-up of the Ragland plant’s new kiln in Alabama, which reduced production capacity and deliveries in the region for several weeks. In this environment, the Group was obliged to buy in clinker from external suppliers to cover its commercial commitments. Despite this non-recurring factor, consolidated sales came to €273 million, up +4.2% at constant scope and exchange rates, and EBITDA totalled €35 million, down -31.4% at constant scope and exchange rates.
Construction of the new 5,000-tonne per day kiln line at the Ragland plant in Alabama was completed in the second quarter. This installation has increased the plant’s existing capacity so it can meet the strong demand in the marketplace, significantly reduce production costs and actively help the Group to meet its CO2 emission reduction targets. Adjustments continue to be made at the plant so it can be ramped up progressively during the second half of 2022.
Even so, given the surge in energy costs and the additional non-recurring adjustment costs linked to the start-up of the Ragland plant’s new kiln (inventory run-down, clinker purchases), the EBITDA generated by the business declined by -25.8% at constant scope and exchange rates.
In Brazil, consolidated sales totalled €128 million, up +35.1% at constant scope and exchange rates. Despite an unfavourable basis for comparison, higher interest rates and strong inflation in the country, demand remained supportive in the Group’s markets. That said, the hike in prices has to date only sufficed to partially offset the rise in production costs. As a result, EBITDA declined -29.5% at constant scope and exchange rates to €20 million during the first half.
Change (at constant scope and exchange rates)
Sales in India grew throughout the period, with consolidated sales reaching €214 million in the first half of 2022, up +14.0% at constant scope and exchange rates. This performance was supported by consistently solid demand over the period, especially in the public sector. Amid very strong inflation, higher selling prices only partially made up for the very strong inflation in energy costs. In addition, preparations for the debottlenecking capacity increase at the Kalburgi Cement plant amid high activity levels gave rise to non-recurring operating expenses. As a result, EBITDA fell -27.2% at constant scope and exchange rates to €38 million.
Consolidated sales in Kazakhstan came to €35 million, up +14.4% at constant scope and exchange rates. This performance was achieved through a significant increase in selling prices, which largely offset the decline in volumes delivered over the period and cost inflation. The EBITDA generated during the first half rose +55.4% at constant scope and exchange rates to €15 million.
1.5 Mediterranean (Egypt and Turkey) income statement
Change (at constant scope and exchange rates)
In the Mediterranean region, sales moved sharply higher in both countries amid a situation that still lacks visibility. The key factor behind the increase was a large hike in selling prices, paving the way for operating profitability to pick up with contrasting situations.
In Turkey, although the macroeconomic and sector environment remains upbeat despite the developing hyperinflation, the winter conditions significantly curbed demand during the first quarter. Given the strong increase in selling prices, first-half 2022 consolidated sales totalled €91 million (versus €69 million in the first half of 2021), up +140.4% at constant scope and exchange rates.
EBITDA recorded a significant increase over the first six months to reach €15 million, up from €2 million in the first half of 2021.
Given these factors, the EBITDA generated by this business totalled over €10 million versus just under €2 million in the first half of 2021.
The first-half EBITDA generated by the business came to €4 million, compared with breakeven EBITDA over the same period of 2021.
In Egypt, consolidated sales totalled €54 million, up +60.2% at constant scope and exchange rates. Following the market regulation agreement between the Egyptian government and all producers that entered force in July 2021, selling prices in the domestic market continued to improve during the first half.
As a result of these factors and in line with trends seen the second half of 2021, the first-half EBITDA generated in Egypt topped €1 million (versus a loss of -€8 million in the same period of 2021).
1.6 Africa (Senegal, Mali, Mauritania) income statement
Change (at constant scope and exchange rates)
In Africa, the Group continues to reap the benefit of a dynamic sector environment despite the knock-on effects of the geopolitical crisis in Mali.
Given the very strong inflation in production costs, the EBITDA generated by the business declined -37.8% over the period.
As a result of these factors, EBITDA decreased by -7.2%.
2. Changes in the Group’s financial position at 30 June 2022
At 30 June 2022, the Group’s financial structure remained solid, with a large rise in equity and net debt under control. Consolidated equity totalled €2,896 million at that date, compared with €2,606 million at 31 December 2021.
Net financial debt stood at €1,671 million at 30 June 2022, up from €1,318 million at 31 December 2021 and €1,271 million at 30 June 2021. The key factor behind this increase was a large rise in the working capital requirement of €120 million compared with the level of 30 June 2021 and €193 million compared with the level of 31 December 2021. The sharp increase in the working capital requirement stems from both the growth in sales but also from the impact of inflation on inventories.
On this basis, the Group’s leverage ratio stood at 2.84x at 30 June 2022 (versus 2.49x at 30 June 2021) and its gearing at 57.7% (versus 53.9% at 30 June 2021).
The average interest rate on gross debt as of 30 June 2022 was 3.2%, higher than at 31 December 2021 as a result of the rise in market interest rates. The average maturity of the Group’s debt was 4.6 years at 30 June 2022.
Medium- to long-term borrowings are subject to special clauses (covenants) requiring certain financial ratios to be met. Given the level of Group’s net debt and balance sheet liquidity, the bank covenants do not pose a risk for the Group’s financial position. At 30 June 2022, the Group complied with all financial ratios required by covenants in its borrowing agreements.
3. Capital expenditure and free cash flow
Capital expenditure totalled €178 million in the first six months of 2022, up from €170 million in the equivalent period of 2021. The new kiln at the Ragland plant accounted for a significant proportion of this.
As a result, free cash flow amounted to -€202.6 million, versus -€52.5 million in the first half of 2021. The reduction in free cash flow stems from the decline in EBITDA and especially from the large increase in the working capital requirement attributable to raw materials cost inflation during the period.
4.1 Start-up of the Ragland plant’s new kiln in the United States
The construction of a new 5,000-tonne/day kiln at the Ragland plant in Alabama, which began in 2019, was completed in the second quarter of 2022. The commissioning of this new production facility required a period of fine-tuning and adjustment that came to an end in early July, paving the way for a gradual ramp-up in production from the third quarter onwards.
It’s a production project with multiple dimensions:
4.2 Construction of a new kiln in Senegal
The Group, via its subsidiary SOCOCIM Industries, launched at end 2021 a €240 million investment plan to build a new kiln line in order to meet the following targets:
The new production facility is scheduled for commissioning in 2024.
4.3 Further milestone reached in the development of « CARAT », the first zero-carbon binder
On 12 January, the Vicat Group announced it had developed a binder that retains all the properties and uses of traditional cement with the benefit of a carbon footprint corresponding to a net emissions level of less than 0 kg of CO2 equivalent per tonne.
« CARAT », the first carbon-negative binder, will enrich Vicat’s DECA range of low-carbon solutions, raising the prospect of very low-carbon concrete, with a reduction of close to 90% in the carbon footprint per m3 of concrete. With this innovation, the Group has delivered a practical response to the new RE2020 regulations in France.
To achieve these performances, Vicat’s innovation team developed techniques (some covered by ongoing patent applications) that create formulated cement products with two key ingredients:
Vicat is working with the Soler group and its Carbonex subsidiary to source the biochar. By using this “carbon sink” component, « CARAT » achieves the following net carbon emission levels:
Following the testing of works to qualify the performance of concrete formulated with this binder and validating its use, the Vicat group has conducted larger-scale demonstration projects. The projects completed in March and April 2022 confirmed performance at a low temperature. The ATEx (technical trial assessments) are currently in progress, with permits expected to be issued during 2023. The Group aims to introduce the products on the market shortly afterwards.
Initially, « CARAT » will be produced at the Montalieu-Vercieu cement plant in France and available to begin with in the Auvergne-Rhône-Alpes region. Eventually, Vicat plans to manufacture it at other Group facilities to meet demand across other areas of France.
In 2022, the Group anticipates a strong increase in its sales underpinned by an increase in its activity levels and a large hike in selling prices. The EBITDA generated by the Group in 2022 is likely to grow, but not by as much as in 2021. In the light of these factors, the Group expects erosion in its EBITDA margin in 2022.
The following key trends are anticipated in the second half of 2022:
During the second half of 2022, the Group will keep up its investment drive, focusing chiefly on:
Accordingly, capital expenditure is expected to be higher than in 2021 at around €400 million, including €130 million in “maintenance” investments and €270 million in “strategic” investments.
The Group wishes to make clear that these anticipated trends per country are highly dependent on the latest developments in the pandemic and on the impact of the war in Ukraine:
Presentation meeting and conference call
To accompany this publication, the Vicat group is holding an information conference call in English on 28 July 2022 at 3pm Paris time (2pm London time and 9am New York time).
To take part in the conference call live, dial in on one of the following numbers:
The conference call will also be livestreamed from the www.vicat.fr website. A replay of the conference call will be immediately available for streaming via the Vicat website or by clicking here.
The presentation supporting the event will be available on Vicat’s website or by clicking here from 10:00am.
The Vicat Group has close to 9,500 employees working in three core divisions – Cement, Concrete & Aggregates and Other Products & Services – which generated consolidated sales of €3.123 billion in 2021. The Group operates in twelve countries: France, Switzerland, Italy, the United States, Turkey, Egypt, Senegal, Mali, Mauritania, Kazakhstan, India and Brazil. Vicat, a family-owned group, is the heir to an industrial tradition dating back to 1817, when Louis Vicat invented artificial cement. Founded in 1853, the Vicat Group now operates three core lines of business: Cement, Ready-Mixed Concrete and Aggregates, as well as related activities.
Vicat group – Financial data – Appendix
Definition of alternative performance measures (APMs):
Change (at constant scope and exchange rates)
Cement sales recorded a significant increase during the first six months of 2022, supported by a very tangible hike in selling prices, which paved the way for a contraction in volumes sold, chiefly in Turkey.
To date, the hefty increase in prices has sufficed only to offset partially the very strong inflation in production costs, especially energy, during the first six months of the year, together with certain non-recurring costs in the United States, in France and in India. As a result, EBITDA declined during the period. The EBITDA margin on operational sales fell to 17.3%.
Change (at constant scope and exchange rates)
Concrete volumes (thousands of m3)
Aggregates volumes (thousands of tonnes)
In line with the increase in Cement, the operational sales recorded by the Concrete & Aggregates business moved significantly higher during the first half. This performance reflects a solid increase in selling prices. Although concrete volumes fell slightly, aggregates volumes rose.
Taking these factors and the significant rise in production costs into account, the EBITDA recorded by the business declined, and the EBITDA margin on operational sales contracted by -260 basis points to 9.3%.
Change (at constant scope and exchange rates)
Trends in the Other Products and Services business recorded an increase in the first half.
EBITDA rose +3.3% at constant scope and exchange rates, with the EBITDA margin on operational sales almost stable (down -20 basis points) at 6.2% in the first six months of 2022.
The full set of consolidated financial statements for the first six months of 2022, together with the notes, are now available on the Company’s website at: www.vicat.fr.
'(1) : '- Including IAS 29 impacts (cf. Note 1.1) '(2) : '- Including cash flows from income taxes: € () million as of June 30, 2022 and € (45,5) million as of June 30, 2021. '- Cash flows from interests paid and received: € () million as of June 30, 2022 including € () million for financial expenses on IFRS16 leases and € (14,9) million as of June 30, 2021 including € (5,6) million for interest expenses on IFRS16 leases.
Changes in Consolidated Shareholders’ Equity
'(1) The impact of the application of IAS 29 is detailed in note 1.1 '(2) Breakdown by nature of other comprehensive income: Other comprehensive income includes mainly cumulative translation adjustments from end 2003. To recap, applying the option offered by IFRS 1, the conversion differences accumulated before the transition date to IFRS were reclassified by allocating them to retained earnings as at that date. The Group’s translation reserves break down by foreign currency at 30 June 2021 and 2022 as follows:
View source version on businesswire.com: https://www.businesswire.com/news/home/20220727005456/en/
Investor relations contact: Stéphane Bisseuil Tel + 33 (0)1 58 86 86 05 [email protected]
Press contacts: Karine Boistelle-Adnet Tel +33 (0)4 74 27 58 04 [email protected]
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!