Cementir has published better than expected preliminary FY22 results with revenue 13% and EBITDA 6% above our expectations. However, for FY23, the group has guided for a conservative outlook due to an uncertain macroeconomic scenario and announced a new industrial Plan to highlight its commitment to decarbonization.
Cementir Holding has published better than expected FY22 results with revenues up by 27% to €1,723m, driven by price increases across all geographies despite a decrease in volumes sales in all segments. Cement sales decreased by 2.7%, RMC by 5.8% and Aggregates by 5.3%. The general slowdown in the market did not prevent the company from achieving a record EBITDA of €335m (+14.2%), including a one-off positive impact of €17.8m related to real estate. Even after excluding this one-off event, the actual EBITDA is slightly above our expectations. However, the EBITDA margin decreased by 200bp to reach 20.6%.
Conservative forecast in 2023
The uncertainty of the macroeconomic scenario is forcing the company to be prudent on their outlook for the year 2023. Cementir Holding expects to achieve consolidated revenues of roughly €1.8bn (+4%) with flat growth in EBITDA. Indeed, the company expects a decline in demand resulting in a drop in volume sales, and Cementir would not be able to hike its prices as it did in 2022 unless there is a skyrocketing increase in the carbon price and electricity as the price mechanism of the company is correlated to these costs. However, the company has succeeded in managing its costs and maintaining its margins in 2022 thanks to its strong cost management. We expect Cementir will maintain this efficient cost management in 2023.
Industrial Plan 2023-2025
The group has updated its Industrial Plan, which revolves around the same pillars as before, but with a further commitment to the decarbonization, less aggressive financial targets for the revenue (CAGR of 5.1% vs 6.7% previously) and a better outlook for EBITDA (CAGR of 5.9% vs 5.3% previously). With additional cumulative green capex of €86m, the company is focusing on projects enabling a reduction in carbon emissions. In our sense, the two key levers to achieve the fit to 55 targets set by EU are (i) clinker content reduction and (ii) Carbon capture and storage (CCS) technologies. Cementir has started a pilot project for CCS partly financed by the Danish Innovation Fund and plans to have a clinker ratio of 64% for the grey cement as well as 78% for the white cement by 2030. This puts the company in an advantageous position to address carbon emissions issues.
Following these results, we have updated upwards our model and maintain our positive recommendation. Our target price has been increased by 5% supported by an increase in 2022 EPS (+0.09€), 2023 EPS (+0.08€) and a higher DCF valuation (+0.93€).
