Cement volumes down 5.8%; net sales in slight increase (+0.7%)

Economic scenario fast deteriorating in the fourth quarter

Net profit 2008 expected in significant decline
 

The Board of Directors of Buzzi Unicem met on February 6, 2009 to examine the preliminary figures for the year 2008.

Cement sales total 32.1 million tons, -5.8% over 2007. The result is mostly influenced by the negative trend of the group’s key markets, i.e. Italy and the United States of America. Moreover also some Central and Eastern Europe countries, which had underpinned sales volumes in the first nine months of the year, remarkably slow down their activity level in the last quarter. Sales are positive in Poland and in Germany, stable in the Czech Republic and Luxembourg, slightly negative in  Mexico.
Ready-mix concrete output at 17.0 million cubic meters is in line with the 2007’s one (-0.6%) thanks to the inclusion in the scope of consolidation of some new important operations in the US and the organic growth in the Czech Republic, Poland and Mexico.

Consolidated net sales come in at €3,520 million versus €3,496 million (+0.7%); changes in scope positively impact for €49 million while foreign exchange accounts for a decrease of about €96 million. Like for like, net sales would have increased by 1.9%.

Net debt as of December 31, 2008 amounts to €1,061 million, up €440 million over €621 million at year-end 2007. The net debt increase is mainly attributable to the over €850 million capital expenditures carried out in the year, of which around €635 million referred to capacity expansion projects or special projects, such as the investment in Algeria, the acquisitions in the ready-mix concrete sector in the United States, the purchase of three grinding plants in Italy and the increase of the stake in Dyckerhoff from 88% to 93% of total share capital.

Italy
Cement volumes, exports included, are down 13.2%, in line with the first nine months’ trend. The whole year shows a slowdown of the building industry in nearly all demand segments, especially sharp in new house starts and in further decline in the public sector. Moreover the especially harsh weather conditions in November and December do not allow to recover by year-end some of the volumes not realized in the previous months. Average unit revenues, which had shown a positive trend in the first half of the year, increasingly decline, getting back to the previous year’s average levels, despite the continuous and strong cost inflation recorded in 2008. Ready-mix concrete volumes too are very negatively affected by demand decline, recording a 17.4% slowdown only partly offset by a price average increase of about 5%.
Overall net sales in Italy amount to €850 million, down 11.6% over 2007.

Central Europe
In Germany, after a moderate growth in the first nine months of 2008, construction investments slow down in the last part of the year. However we deem that the German building industry has been hit by the financial shock less severely than other countries, since the trend remains positive mainly thanks to the non-residential and infrastructure segments, less dependent on leverage than housing construction. Considering the export to the neighbouring countries, volumes show a 2.1% growth, with average prices increasing by about 6.7%. Ready-mix concrete volumes, thanks to a wider scope of consolidation, show a 11.9% increase over 2007 with average prices improving by 10.6%.
Overall net sales increase from €515 million in 2007 to €595 million in 2008, up 15.5%. At constant scope a 11.7% increase would have been posted.

In Luxembourg, in 2008 construction market stand at a similar level as in 2007; volumes sold decrease by 1.0% with average unit revenues up 5.1%. Net sales come in at €89 million versus €92 million in 2007; the decrease is due to the change in the scope of consolidation occurred in 2007.

In the Netherlands, where the new 100% subsidiary Basal is active in the business of ready-mix concrete and aggregates, volumes reach 1.17 million cubic meters of ready-mix concrete, up 17.7%, with net sales at €133 million (- 5.5%  versus €141 million in 2007). The decrease is due to a structural downsizing in the trading business of aggregates.

Eastern Europe
In Poland, cement sales are up 9.8% over the previous year, while the Czech Republic posts a 2.1% increase. Such results show that in the two countries demand has not slowed down in the last quarter. Ready-mix concrete volumes record a good progress in both countries: they are up 5.6% in the Czech Republic /Slovakia and 4.6% in Poland.
Net sales in Poland increase by 28.7% from €143 million to €184 million thanks to a very favorable effect of prices in local currency (+13.2%); at constant exchange rate a 19.4% increase would have been posted. Czech Republic and Slovakia operations report net sales of €261 million (€216 million in 2007): the favorable change in the volumes sold has been amplified by a 5.0% rise in cement prices in local currency and a positive foreign exchange effect for about €18 million.

In Ukraine the construction market, which was flourishing throughout the first nine months of the year, falls abruptly in the last quarter as a consequence of the country’s deteriorating industrial and financial environment. Cement sales decrease by 2.2% on an annual basis, while ready-mix concrete volumes are down 6.9%. Lower sales volumes combined with surging prices (+33.9%) lead to a 16.8% increase in net sales which come in at €209 million. Excluding the effect due to the local currency weakness, which worsened dramatically at the end of the year,  the change would have been positive by 30.1%.
.
In Russia, nation which was also hard hit by the international financial crisis, the geographical positioning within the country plays a key role: thanks to the presence in the Ural region the group maintains a sales volume level only slightly lower than the one recorded in the first nine months (-3% over 2007). Average selling prices in local currency show a strong rise (+45.7%), thus bringing net sales at €267 million, up 35.1% over 2007 (+40.5% at constant exchange rate).

United States of America
The strong slowdown in residential construction continues also in the last quarter, worsened by the climax of the financial crisis in October and November. Cement sales decline by 10.5%, less than the overall domestic market, but in the last quarter also the states which in the first part of 2008 had still showed an upward trend, such as Texas, entered into recession. The weak demand impacts the level of pricing, which records an average decrease of 3.2% over 2007. Ready-mix concrete volumes are up 18.9% thanks to a wider scope of consolidation, which includes some acquisitions effected in 2008.
Overall net sales come in at €750 million, down 11.9% over €851 million. Like for like, a 6.8% decrease would have been posted.

Mexico (50% consolidation)
The construction industry maintains a weak trend in the second part of the year, negatively influenced by the US crisis. Corporación Moctezuma cement sales are down 1.7%, while average selling prices in local currency show a positive development (+5.7%). In the ready-mix concrete sector the expansion strategy continues with volumes increasing by 6.2% and prices slightly higher than in the previous year.
Net sales stand at €205 million, down 3.2% over 2007. The currency effect accounts for a decrease of about €18 million.

Based on the preliminary information available, for the full year 2008 we expect a significant decline in net profit.

The Board of Directors for the approval of the statutory and consolidated financial statements is scheduled to meet on March 24, 2009.

The manager responsible for preparing the company’s financial reports, Silvio Picca, 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.

Company contacts:
Investor Relations Assistant
Mariangiola Fiore
Phone. +39 0142 416 404
Email  mfiore@buzziunicem.it