Cement volumes 28.3 million tons (-9.2%), ready-mix concrete 11.5 million cubic meters (-5.2%)

Last quarter of the year marked by generally weak volumes, however the favorable selling price variance continued

Consolidated net sales at €3,996 million (+16,0%), clearly improving (2021: €3,446 million), also on a like-for-like basis (+9.6%)

For 2022 recurring EBITDA expected at about €880 million, better than guidance, €72 million thereof due to favorable foreign exchange impact
 

Consolidated figures		2022	2021	22/21
Cement sales	t/000	28,332	31,202	-9.2%
Ready-mix sales	m3/000	11,510	12,141	-5.2%
Net sales	€/m	3,996	3,446	+16.0%
		Dec 22	Dec 21	Change
Net financial position	€/m	288	236	53

 

The Board of Directors of Buzzi Unicem SpA has met today to examine the preliminary figures for the financial year just ended.

During 2022, the sales volumes achieved by the group contracted compared to the level reached in the previous year. The generalized slowdown in deliveries, which was already highlighted in the first nine months of the year, became more noticeable in the last quarter, particularly in Italy, Eastern Europe and the United States, where in addition to the weaker demand referring to the residential sector, also some logistical challenges occurred along the Mississippi River. In Central Europe, on the other hand, sales volumes proved somehow stable. The strengthening of selling prices continued also in the last quarter, in all the markets where we operate.

The unfavorable economic situation that slowed down the expansionary pace of world economy during the first nine months of 2022 was amplified, in the fourth quarter, by increased geopolitical uncertainties, by high and persistent inflation, as well as by the tightening of financial conditions. Russia's attacks against Ukraine continued to destabilize commodity markets, fueling energy price volatility. In the main advanced economies, the slowdown in economic activity that occurred in 2022 is mainly due to the start of a cycle of monetary tightening, aimed at countering inflationary pressures and cooling down demand.
Global trade, after showing good resilience in the first half of 2022, with the negative effects of the conflict in Ukraine and ongoing supply-side bottlenecks, lost momentum in the third and fourth quarters, mainly due to weak demand in the advanced economies.
The latest forecasts for 2022, therefore, indicate a slowdown in world GDP growth (+3.2%). Based on these projections, the global economy should confirm its deceleration, albeit continuing to be expansionary, also in 2023 (+2.2%), reflecting a significant drop in growth in mature countries.
In the United States, during the fourth quarter, in line with what has already been observed in the first nine months of the year, the economy was characterized by a generalized weakness of domestic demand, coupled with high inflation and a further rise in interest rates, which continued to erode the purchasing power and the real income of households, curbing consumption. Furthermore, the more difficult accessibility and higher cost of credit weighed on private investments, mainly those in residential construction.
In the Eurozone, economic development, after a slight increase in the third quarter (+0.3%), supported by the expansive dynamics of investments and private consumption, stagnated during the autumn months. High inflation and more restrictive financing conditions slowed down manufacturing production and household spending. In a context characterized, therefore, by persistent uncertainty linked to the development of the conflict in Ukraine and by the risks deriving from potential interruptions in energy supplies, the weakening of the growth dynamics, which was already evident in the industrial sector, also extended to the services sector. Investments in residential construction decreased during the second half of the year: after the decline recorded in the third quarter (-0.7%), activity in the sector continued to weaken also in October and November.
In Italy, GDP grew in the summer quarter, thanks to the strong expansion of domestic demand. Both household consumption and investment spending contributed to growth, the latter slowing down due to the lower contribution from the construction sector. In the fourth quarter, on the other hand, activity weakened, weighed down by the effect of persistent increases in energy prices and by a sluggish recovery in the sectors being most impacted by the pandemic, such as trade, tourism and transport.
As far as emerging countries are concerned, in China, the difficulties associated with the crisis in the residential sector and the new wave of infections, following the lifting of all containment measures, caused a marked deterioration in the economic situation. In Russia, after the clear decrease in GDP in the second and third quarters, the economy entered a recession: the country recorded a smaller drop in exports than previously forecast, while imports suffered a sharp setback as a direct consequence of international sanctions.
As regards the prices of energy goods, starting from mid-October both the price of oil and that of natural gas decreased, following the slowdown in global demand. In particular, the price of natural gas traded on the Dutch TTF market significantly improved, however remaining at historically high levels. Such reduction is the result of a milder climate than expected, as well as of the decline in industrial production in Europe which, together with the stability of gas supply flows, allowed to keep stocks close to maximum levels.
In November and in December the Federal Reserve raised its benchmark rates by 75 and 50 basis points respectively, indicating further increases in the presence of a labor market still under pressure. At the same time, the ECB also increased the benchmark interest rates by 75 and 50 basis points in October and December, assessing that these will still have to rise to allow a timely return to price stabilization. However, the Governing Council established that future rate decisions will also be weighed on the basis of growth and inflation prospects.
The central banks of emerging countries, on the other hand, adopted more heterogeneous approaches: in Brazil, the monetary authorities interrupted the sequence of increases, while in China, in a context of moderate inflation, monetary conditions remained accommodating, also to mitigate the real estate crisis.

Cement sales of the group amounted to 28.3 million tons, decreasing by 9.2% compared to 2021. Ready-mix concrete output, equal to 11.5 million cubic meters, was also down compared to the volumes of last year (-5.2%). The positive price effect more than offset the negative one due to the contraction in volumes, leading consolidated net sales for the financial year to increase from €3445.6 to €3,995.5 million. There were no changes in scope, while exchange rates fluctuations, in particular the revaluation of the ruble and the dollar, had an overall favorable impact of €219.5 million. Therefore, like for like net sales would have been up 9.6%.

Net sales breakdown by geographical area is as follows:

million euro	2022	2021	∆ %	∆ % lfl
Italy	726.2	604.7	+20.1	+20.1
United States of America	1,591.8	1,329.6	+19.7	+6.6
Germany	798.8	708.1	+12.8	+12.8
Luxembourg and Netherlands	226.9	201.1	+12.8	+13.2
Czech Republic and Slovakia	201.2	177.5	+13.4	+9.1
Poland	141.3	126.4	+11.8	+14.7
Ukraine	59.8	127.0	-53.0	-50.4
Russia	290.4	207.4	+40.0	+18.6
Eliminations	(40.8)	(36.2)
	3,995.5	3,445.6	+16.0	+9.6
Mexico (100%)	768.5	661.6	+16.2	+4.0
Brazil (100%)	400.2	253.4	+57.9	+22.0

 

The net financial position at the end of the financial year, including long-term financial assets, is positive and amounts to €288.2 million, showing a favorable variance versus €235.5 million of year-end 2021, but worsening compared to the figure at the end of the third quarter (€328 million). The devaluation of the dollar and the ruble, occurred during the fourth quarter, penalized the value of financial assets denominated in those currencies. Furthermore, always in the last quarter, CO2 emission rights were purchased to cover the deficit expected in 2023 and debited to inventory.

Italy
The positive dynamics of investments in the construction sector was confirmed in 2022 (+12.8% in the first nine months), despite the slowdown in construction during the third and fourth quarters, held back by inflation, by the increase in interest rates and by fears of a potential recession. The residential renovation segment led investments in the industry. The persistent inflationary pressures on the prices of energy and non-energy raw materials, in addition to the delays in the implementation of the PNRR, diluted the contribution of public works. However, domestic cement consumption is estimated to decrease by about 8%, with imports taking a greater share.
According to the most recent estimates, GDP is expected to increase by 3.9% at the end of 2022. After the highs reached in the autumn, the inflation rate, driven by increases in the energy component, decreased slightly in December, remaining however at considerably high levels (+12.3%).
Our hydraulic binders and clinker volumes, being already sharply down during the first six months, weakened further during the second half, suffering the difficult situation on the domestic market and the withdrawal from export sales. The decline in volumes also extended to the ready-mix concrete sector. Average selling prices, both in cement and ready-mix concrete, showed a clearly favorable trend over the year as a whole.
Based on these dynamics, net sales in Italy stood at €726.2 million, up 20.1% versus 2021.

United States of America
Investments in residential construction, the main driver of demand starting from 2020, lost ground in the second half of 2022, impacted by the rise in building materials and the increase in interest rates. High inflation also diluted the potential for investments in public works, which are however expected to increase slightly at the end of 2022. Domestic consumption is estimated to remain substantially stable (+0.3%).
The most recent forecasts on the performance of US economy indicate that GDP could grow by 2.0% in 2022.
During the fourth quarter, our cement sales showed a further contraction, more evident than already highlighted in the previous quarter. The generalized slowdown in cement demand, in addition to the logistical problems due to the low water level in the Mississippi River, which lasted until mid-November, affected the trend of our shipments. Therefore, throughout the year, sales volumes, both in cement and ready-mix concrete, stood at slightly lower levels than in 2021. Conversely, selling prices strengthened further during the fourth quarter. 
Overall net sales amounted to €1,591.8 million, up 19.7% compared to €1,329.6 million in 2021. The appreciation of the dollar (11.0%) had a very favorable impact on the translation of the results into euro. At constant exchange rates net sales would have been up 6.6%.

Central Europe
In Germany, the cost explosion, the growing fears of recession and the increase in interest rates led to a marginal slowdown in construction investments in 2022 (-0.5%), more evident in the commercial sector (-2.0%) and in public works (-1.0%). The residential building component (about 60% of investments), on the other hand, is expected to increase slightly (+0.2%) thanks also to government subsidies for the efficiency of buildings. Inflation, which peaked in October (+11.6%) due to the gradual elimination of government fuel subsidies, further pushed up production costs. In this context, GDP is expected to grow by 1.8% in 2022.
Our shipments of hydraulic binders closed 2022 slightly ahead, despite some slowdown recorded in both the third and fourth quarters, due to weaker demand and a harsher winter. The same trend also extended to ready-mix concrete volumes, which grew slightly at the end of 2022. Selling prices confirmed the good levels already achieved in the first nine months, also in the last quarter.
At year-end 2022, overall net sales thus came in at €798.8 million, up 12.8%, compared to €708.1 million in 2021.

In Luxembourg and the Netherlands, the weakening of demand, already evident in the third quarter, continued during the last months of the year. However, the positive trend in the first half of the year was able to compensate for the slowdown that occurred in the following quarters. Sales volumes, therefore, closed slightly higher than in 2021. The progress in sales of ready-mix concrete in the Netherlands offset the negative trend in Luxembourg. Selling prices showed robust growth, driven by production cost inflation. 
Overall net sales of 2022 amounted to €226.9 million, up 12.8% compared to €201.1 million of the previous year.

Eastern Europe
In Poland, GDP growth is expected to slow down to +0.9% at the end of 2022. The impact of the war in Ukraine on the economy and the construction sector was evident, especially regarding the availability and prices of building materials.
After the progress recorded in 2021 (+3.7%), investments in construction continued to show an expansionary trend in the first part of 2022, then slowing down during the second half. By 2022 year end, investments are estimated to grow by 4.5% compared to 2021. This trend, however, was not reflected in cement consumption, which is expected to decrease compared to the previous year.
These same dynamics affected our cement and ready-mix concrete sales volumes which, after a first half year growing, mainly thanks to the progress recorded at the start to the year, significantly lost ground in the third and fourth quarters, closing sharply down. Selling prices, on the other hand, showed a very favorable development.
Net sales in euros came in at €141.3 million, up 11.8% compared to €126.4 million in 2021. It should be remembered that the weakening of the zloty (-2.6%) led to a negative exchange rate effect: at constant exchange rate, net sales would have been up 14.7%.

In the Czech Republic, during the year investments in construction increased (+1.4%), benefiting from the high volume of building permits after the end of the pandemic. The positive development of business in the non-residential sector, which is mainly concentrated in the main urban centers of the country, offset the weakness in the residential sector and in public works, impacted by the sharp rise in interest rates and inflation.
The most recent estimates indicate that GDP growth in 2022 is expected to slow down to 2.4%. 
Cement sales, after a progressing first semester, showed a rather negative trend both in the third and the fourth quarters, closing 2022 lower than the previous year. Selling prices in local currency clearly increased. The ready-mix concrete sector, which includes Slovakia, recorded similar dynamics, both for volumes sold and selling prices.
Consolidated net sales, on which the appreciation of the Czech koruna had a positive impact (+4.2%), amounted to €201.2 million, up 13.4% compared to 2021. At constant exchange rate the turnover would have been up 9.1%.

In Ukraine, the economic and humanitarian damages caused by the Russian invasion were enormous. The damages to homes, infrastructures and productive assets led to a dramatic reduction in the production of goods and services and to a consequent increase in costs for businesses. In addition, there has been a collapse in private investment and exports. The most recent estimates indicate that the GDP contraction for 2022 will reach 31.5%. The generalized increase in prices, especially those of energy, pushed inflation to over 30%, from approximately 10% before the conflict.
Our production activity, even in the fourth quarter, continued only in the Volyn plant (north-west of the country), while in the production site in Nikolayev (south of the country) it is still idle, due to lack of demand and the operational risks associated with proximity to the fighting. In December, the already complex operating situation was penalized by some interruptions in electricity supplies. The year 2022 therefore closes with sales volumes more than halved, and prices rising sharply, driven by inflation.
Net sales stood at €59.8 million, down compared to €127.0 million recorded in 2021 (-53.0%). The depreciation of the local currency (-5.5%) had a negative impact on the translation of the turnover into euro. At constant exchange rate net sales would have been up 50.4%.

In Russia, GDP, which sharply contracted in the second quarter and stabilized in the following one, is significantly lower than the level prior to the conflict with Ukraine. The sanctions boosted inflation which, after passing the 20% threshold in June, declined to 12%.
Following the decision taken in May to cease all operational involvement in the activity of the subsidiary SLK Cement, the information available to us regarding the trend in demand and the construction market is very limited. In 2022, the sales volume decreased compared to the previous year. However, the decline was less pronounced than initially expected. Selling prices showed a favorable trend.
In this context, net sales stood at €290.4 million, up compared to €207.4 million of last year (+40.0%). The appreciation of the ruble (+15.3%) favorably impacted the translation of turnover into euro. At constant exchange rates, net sales would have been up 18.6%.

Mexico (valued by the equity method)
After the robust growth in the first nine months of 2022, supported by the positive dynamics in the services sector and the solidity of manufacturing, economic activity showed some signs of a slowdown. Exports lost traction, mainly due to weakening demand in the United States, the country's main trading partner. In the mining and construction industries, production also contracted. Inflation remained widespread and high (+8.4% in October) making both monetary and fiscal policy interventions necessary. In particular, the Government introduced a series of measures to limit fuel price increases and to protect the most vulnerable households and businesses. At the moment, public investments seem to be more oriented towards social spending, rather than towards the infrastructural development of the country.
Sales by our joint venture closed 2022 below the level reached last year, albeit showing a good recovery starting from the month of August and throughout the entire fourth quarter. Prices, in local currency, confirmed the clearly positive levels already achieved in the first nine months. Ready-mix concrete sales, on the other hand, showed a more negative trend, with prices on the rise (in local currency).
With reference to 100% of the joint venture, in 2022 net sales came in at €768.5 million, up 16.2% on the previous year, with an appreciation of the Mexican peso (+11.7%) which favorably impacted the translation of the results into euro: at constant exchange rate net sales would have been basically stable (+4.0%).

Brazil (valued by the equity method)
In 2022, the Brazilian economy is expected to grow at a moderate pace (+2.8%), thanks to the good performance of activity in the manufacturing and services sectors. Exports, especially in the agri-food sector, also showed marked progress. The expansionary fiscal policies implemented by the government mainly focused on measures to support families and businesses to counter high energy prices, as well as an increase in funds allocated to the social, health and employment assistance program, Auxílio Brasil. Inflation, at +11.9% in June, decreased in the second half of the year thanks to both the drop in the prices of energy goods and the significant tax cuts, remaining however high (+8.2% in October). At the same time, the Central Bank confirmed its restrictive stance, in an attempt to limit the impact of inflationary pressures on the real economy.
The sales of our joint venture closed 2022 substantially improving, with prices also rising sharply. On a like-for-like basis, however, volumes would have been stable compared to 2021.
With reference to 100% of the joint venture, net sales amounted to €400.2 million, progressing (+57.9%) versus €253.4 million of the previous year. The translation of the results into euro was affected by the appreciation of the Brazilian real (+14.7%): at constant exchange rate and scope of consolidation net sales would have been up 22.0%.

Outlook 2022
In the fourth quarter of the year just ended, the operating context was challenging. The high volatility of raw material prices, energy in particular, as well as further increases in interest rates slowed down demand, especially in the markets where such dynamics were more evident. The incremental changes of selling prices, obtained in some markets also during the fourth quarter, allowed to confirm a price effect on consolidated turnover which more than offset the unfavorable volume effect.
As for economic performance, based on the preliminary information available, we expect the consolidated financial statements for the year 2022 to close with a recurring EBITDA of around €880 million, better than the figure which was communicated at the beginning of November. Versus the previous forecast, the favorable changes concerned Italy, favored by the extension of the tax credit dedicated to energy-intensive companies and by the price-cost effect on the inventory valuation, as well as the United States, where the further upward rounding of selling prices in the last quarter more than compensated for the drop in volumes.

Following the information released last 15 December, on 28 January 2023 we executed the early repayment of the Eurobond “Buzzi Unicem Spa € 500,000,000 – 2.125% Notes due 28 April 2023”.

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Alternative performance measures
Buzzi Unicem uses in its financial disclosure some alternative performance measures that, although widespread, are not defined or specified by the accounting practice. Pursuant to Consob Communication no. 92543/2015 and the guidelines ESMA/2015/1415 set out below is the definition of the measures which have been used in this disclosure.

Net financial position: it is a measure of the capital structure determined by the difference between financial liabilities and assets, both short and long term. Such items include all interest-bearing liabilities or assets and those connected to them, such as derivatives and accruals.

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The manager responsible for preparing the company’s financial reports, Elisa Bressan, declares, pursuant to paragraph 2 of Article 154 bis of the Consolidated Law on Finance, that the accounting information contained in this press release corresponds to the document results, books and accounting records.

Casale Monferrato, 9 February 2023

 

Company contacts:
Investor Relations Assistant
Ileana Colla
Phone +39 0142 416404
Email: icolla@buzziunicem.it