Cementir Holding reported mixed results for 2023, with sales 2% below but EBITDA 3% above our expectations. For 2024, the group has guided for a conservative outlook due to an uncertain macroeconomic scenario and has revised its Industrial Plan, placing greater emphasis on decarbonization. Ongoing projects targeting carbon emission reduction include clinker content reduction and the adoption of Carbon Capture and Storage (CCS) technologies.
Cementir Holding has released mixed financial results for FY23, with sales 2% below and EBITDA 3% above our projections. These outcomes were primarily influenced by price hikes across all regions, despite a decline in sales volumes across all segments. Cement sales decreased by 1.6%, Ready-Mix Concrete (RMC) by 11.1%, and Aggregates by 10.1%. While there was a slight slowdown in the decline of cement volumes, while RMC and aggregates saw further drops in 2023, mainly due to challenges in the Nordics & Baltics regions. Turkey stood out as the only country where the Italian company recorded positive volume growth in cement, aggregates and RMC. This was driven by higher demand in the domestic market following recent earthquakes.
The decrease in sales volumes exerted downward pressure, resulting in a 1.5% yoy decrease in sales to €1,694 million. Despite the overall market slowdown, the company managed to boost non-GAAP EBITDA to €421.9 million, a notable increase of 25.4%. This included a one-time positive impact of €11.8 million from the sale of assets. Even excluding this one-time event, the actual non-GAAP EBITDA of €410.3 million exceeded our expectations by 3%. Consequently, the EBITDA margin expanded by 470 basis points, reaching 24.2%.
Conservative forecast in 2024
Cementir Holding is entering the current year with a cautious outlook, which could potentially prompt a downward adjustment by the market consensus. This cautious approach stems from uncertainties in the macroeconomic landscape, particularly in the construction markets. While the company is not concerned about an increase in energy costs due to its hedging strategy, inflationary pressures on wages are expected to continue to exert downward pressure on margins.
However, in terms of volume, Turkey is anticipated to contribute to further growth. Municipal elections and reconstruction efforts following earthquakes are projected to bolster demand in the domestic market. Additionally, the company is well positioned to capitalize on demand from neighboring countries through exports. Consequently, Cementir Holding expects consolidated revenues of approximately €1.8 billion, representing a 6% increase, while expecting a 6% decline in EBITDA. In relation to our estimates for FY24, the revenue is in line with the company’s guidance, but our EBITDA falls falls 4% short.
Industrial Plan 2024-2026
The group has revised its Industrial Plan, maintaining its core pillars while placing greater emphasis on decarbonization. The financial targets for revenue have been slightly raised (CAGR of 5.7% compared to 5.1% previously), but the outlook for EBITDA has been narrowed (CAGR of 1.2% versus 5.9% previously). With an additional cumulative green capital expenditure of €100 million, the company is concentrating on initiatives aimed at reducing carbon emissions. From our perspective, the two primary strategies to meet the EU’s Fit to 55 targets are (i) reducing clinker content and (ii) implementing Carbon Capture and Storage (CCS) technologies. Cementir currently has two pilot projects underway for CCS and aims to achieve a clinker ratio of 64% for grey cement and 78% for white cement by 2030.
Following these results, we have updated upwards our model and maintain our positive recommendation. Our target price has been increased by 2% supported by an increase in our EPS forecasts for 2023 (+0.03€) and 2024 (+0.04€), and a higher DCF-derived valuation (+0.3€).
