Buzzi released its H1 results with net sales up by 5.8% (+4.5% lfl), the growth driven mainly by Italy, which benefited from the strengthening in domestic demand and an easy comparison base. FX had an unfavourable impact of €81m and €22m on sales and EBITDA, respectively. For the full year, EBITDA is still expected to be below FY20’s level.
Companies: Buzzi Unicem (BZU:BIT)Buzzi Unicem S.p.A. (BZU:MIL)
Buzzi released its Q1 trading statement with net sales down by 0.8% (+4.5% lfl), the growth driven mainly by Italy, which benefited from the strengthening in domestic demand and an easy comparison base. FX had a significant impact of -5% on sales. Buzzi has reiterated its outlook for the year.
Buzzi published a good set of results. Despite the pandemic, it achieved flat sales and an EBITDA growth of 7% yoy. Along with strong operating cash flow generation, Buzzi also benefited from the sale of Kosmos Cement’s assets (+€103.6m impact on net income). It has a strong cash position, with net debt down from €568m to €242m, and Buzzi is forwarding the benefits to the shareholders through a higher dividend and a share buy-back programme.
Buzzi announced 9m sales figure that were in line with last year’s, following which management now expects the recurring EBITDA to be in line with last year’s level instead of a 5-10% decline as guided during the H1 results. Following this trading update, we will revise our numbers upwards.
Companies: Buzzi Unicem S.p.A.
Buzzi announced a good set of results with a strong performance registered in the US due to higher demand, supportive pricing, tailwind from input costs and favourable FX. However, management has a conservative outlook for the US for H2, which largely contributes to its EBITDA outlook of -5-10% yoy. Buzzi’s results were better than expected and, hence, we will be updating our numbers upwards.
Buzzi released its Q1 trading statement with net sales up by 2.5% lfl, benefiting from favourable pricing, especially in Eastern Europe, and favourable weather in the US. Italy was significantly impacted by the lockdown and, even if the production activity returns to normal, domestic sales are most likely to remain below the 2019 level in Italy. Buzzi will provide some guidance post H1, after some more visibility.
Buzzi announced its 2019 preliminary results. Total sales were €3.2bn, up by 12.1% (8.6% like for like). The company performed below our expectations in all regions, except for the US where its sales were 7.5% above our expectations. The prime contributor to the higher sales wasn’t volume growth or price increase, but rather the strengthening of the USD. Management confirmed its recurring EBITDA at ~€700m. The minor tweaks to the model will not change our recommendation of SELL.
Management believes that the recurring EBITDA of FY19 will be higher than that assumed in the guidance previously disclosed to the market.
Following this earnings release, we expect to increase our target price by some 5-10%. This should trigger a change in recommendation from Sell to Reduce.
As expected from the good earnings release of HeidelbergCement, earlier in the same day, in North America thanks to good weather, Buzzi posted outstanding growth in Q1 19 with an increase in sales of 17.6% lfl.
Following this release, we will increase our EBITDA forecast by some 5% with an expected similar impact on the target price. However, we don’t intend to change our Reduce recommendation.
Cement capacity is excessively dependent in terms of profitability on the US and Mexico: virtually all profits stem from these two countries.
Hence, as North America has reached a high point in the cycle and with the inversion of the yield curve, a recession could occur. As a consequence, we expect to change our recommendation from Add to Reduce.
In Italy (21% of cement capacity): the top four players control up to 70% of the market but the utilisation rate lies at 40%. The combination of Italcementi/HeidelbergCement does not change the overall picture, without the closure of excess capacities (estimated at 20-25mt by AlphaValue). Italy is nothing less than a call option.
The US (22% of cement capacity): the EBITDA margin seems to have reached a ceiling, and this country accounted for 70% of the group’s EBITDA.
In Italy (21% of cement capacity), on a lfl basis, volumes sold have trended marginally down, while selling prices increased by a few percentage points. Overall, lfl sales registered a 2.2% decrease.
The US (22% of cement capacity) was strongly affected by unprecedented rainfall according to Buzzi’s management, which was also mentioned by HeidelbergCement as one of the reasons for its profit warning.
Following this earnings release, we expect little impact to our valuation and will keep our re
Lfl EBITDA would have been -13.6% in the US. In view of the fact that cement prices are about $110/t, we believe that from 2018 onwards there will be no more upside on US prices.
The US accounted for 72% of the group’s EBITDA in 2017 and had the highest EBITDA margin of all divisions. Moreover, Mexico accounted for 25% of the consolidated net profit, so that North America accounts for almost 100% of the net profit.
Putting it in a nutshell, we see no short-term catalysts for share price appreciation. And we believe that there is even a downside risk, because of the lack of equilibrium in either EBITDA generation or net profit (including the equity-accounted Mexico), with too much exposure to North America.
Consequently, following this trading update, we will lower our target price, which could lead to a change in recommendation from Add to Reduce.
Despite solid growth in all geographic areas, Buzzi reported FY17e turnover which came in short of expectations mainly because of headwinds in the US. The latter will also have a negative impact on the earnings as management guided for a 2017 recurring EBITDA of c. €580m, ending up at the lower end of the previous guidance. Go for CEE rather than Italy and the US.
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