Cement sales down 4.3%; ready-mix sales consistent with last year (+0.5%)
Net sales + 3.8%; Ebitda at €457 million (+6,4%)
Eastern Europe excellent results offset slowdown in the USA and Italy
Positive results expected for full year 2008

Consolidated data

Jan-Jun 08

Jan-Jun 07

% 08/07

Cement sales

m ton

16.0

16.7

-4.3

Ready-mix sales

m m3

8.4

8.3

+0.5

Net sales

€m

1,739.8

1,675.8

+3.8

EBITDA

€m

456.9

429.5

+6.4

Net profit

€m

211.0

194.6

+8.4

Consolidated net profit

€m

168.7

163.7

+3.0

Jun  08

Dec  07

Change

Net debt

€m

863.1

621.2

241.9

 

The Board of Directors of Buzzi Unicem met on August 12, 2008 to examine the interim report as of June 30, 2008.

In the first half of 2008 group’s results show an improvement over the previous year.
Cement volumes at 16.0 million tons are down 4.3% over 2007. The result is due to a positive trend in nearly all emerging countries and in the Central Europe markets, while in Italy and the United States the enduring real estate slump and the very damp weather caused a sharp slowdown in sales. Ready-mix concrete volumes reach 8.4 million cubic meters (+0.5%), with production rising in all countries but Italy, the group’s most weighing market.

Consolidated net sales increase by 3.8% from €1,675.8 million to €1,739.8 million and Ebitda improves by 6.4% to €456.9 million. Excluding the overall unfavorable foreign exchange fluctuations the two figures would have increased by 7.6% and 10.8% respectively. Changes in the scope of consolidation account for an increase of €13.0 million in net sales and €0.9 million in Ebitda. After amortization and depreciation for €108.3 million (€99.0 million in 1H-07) Ebit increases to €348.5 million (€330.5 million at June 2007). Profit before taxes at €317.5 million (€307.6 million in 1H-07, +3.2%) is affected by higher finance costs (from €29.7 million to €34.4 million) and by a lower contribution of the associates accounted for under the equity method. Net profit benefits from a more favorable average tax rate and increases from €194.6 million to €211.0 million (+8.4%), €168.7 million thereof attributable to the equity holders of the Company (+3.0 versus €163.7million in 2007).

Cash flow is equal to €319.3 million versus €293.6 million at June 2007.
Net debt as of 30 June 2008 amounts to €863.1 million versus €621.2 million at 31 December 2007 (+€241.9 million). In the period dividends for €105.5 million were paid out by the group, €87.2 million thereof by the parent company. Capital expenditures amount to €389.1 million.

Italy
Cement and clinker volumes, exports included, are down 13.9% over 1H-07. Unit prices development is satisfactory (+14.0%) but not such as to prevent operating results from falling below the previous year’s level. Ready-mix concrete sales, as already occurred in the first quarter, have faced greater market difficulties, accruing a volume slowdown equal to 17.4% over the previous year.
Net sales amount to €446.3 million, down 9.5% over 1H-07; Ebitda declines by €8.8 million to €89.6 million (-8.9%). The period benefited from €7.0 million non-recurring income, net of which, Ebitda to sales margin stands at 18.5% (19.9% in 2007).

Central Europe
In Germany group’s volumes grow by 5.9% over 1H-07, sustained by exports (to the Netherlands, Poland and Russia). Average price level rises about 7.6%, which allows to slightly improve profitability. Ready-mix concrete sector records a production growth of 12.4%, including the widening in the scope of consolidation, net of which the change would have been all the same positive. Also prices are in improvement by over 7%, thus allowing for a margin recovery.
Net sales stand at €288.9 million versus €238.9 million in 1H-07 (+20.9%); at constant scope of consolidation a 16.8% increase would have been posted. Ebitda improves to €47,0 million from €35.6 million in 2007 (+32.2%). Ebitda to sales margin, net of non-recurring items, comes in at 16.1%, a level that can still be improved, considering the poor pricing level (among the lowest in Europe) and the growing costs.

In Luxembourg, operations are stable. Cement and clinker sale volumes, gross of inter-group trading, are down 2.5% while average unit prices rise by 3.4%.
Net sales stand at €45.9 million, down 5.8%% over the previous year. At constant scope, net sales would have increased by 4.0%. Ebitda increases to €14.7 million versus €8.9 million in 1H-07. Excluding non-recurring items in both years, Ebitda decreases by €4.2 million with a consequent decline of recurring profitability from 24.4% to 16.7%. The worsening is a consequence of higher costs, partly attributable to extraordinary maintenance works in the plants and partly to growing inflation.

In the Netherlands, volumes reach 0.57 million cubic meters of ready-mix concrete, up 17.5% over the previous year with net sales at €69.4 million (€67.9 million in 1H-07). Net sales increase does not match volumes development due to lower sales of aggregates to outside parties. Ebitda comes in at €4.2 million (€4.1 million in 2007) with Ebitda to sales margin virtually unchanged at 6.1%.

Eastern Europe
Cement sales in the Czech Republic and Slovakia are up 8.1%, also thanks to exports to Poland. Average selling prices in local currency rise by 5.7%. Ready-mix concrete trend is positive too, with volumes up 16.5% and average unit revenues in local currency increasing by 4.5%. As a result of the above dynamics and also thanks to a quite good revaluation of the koruna, net sales and Ebitda increase to €125.5 million (€92.9 million in 1H-07, +35.0%) and €32.9 million (€31.7million in 1H-07, +3.9%) respectively. Consequently Ebitda to sales ratio shrinks from 34.1% to 26.2%. To be noticed that in 2007 this indicator benefited from €3.4 million non-recurring income related to the disposal of some lines of business. The remaining higher costs refer to rises in price of electric power, fuels and raw materials as well as to maintenance works in the cement plants and to the distribution function in ready-mix concrete sector.

In Poland cement sales are up 2.8% with prices in local currency rising by 19.2%. Volumes trend would be more favorable, if inter-group trading from Germany and the Czech Republic were included. A very satisfactory performance is reported also by the ready-mix concrete sector, with volumes improving by 6.4% and average unit prices up 16.2%. Consequently, net sales in euro increase by 35.6%, from €65.6 million to €89.0 million and Ebitda improves by 34.4% from €23.4 million to €31.4 million. Ebitda to sales ratio at 35.3% is still at an excellent level (35.7% in 2007).

In Ukraine cement sales improve by 7.2% over 2007, with average prices on continuous rise (+43.8% in local currency). Ready-mix concrete volumes are up 9.8% to 0.2 million cubic meters and prices show a bright development (+25.4% in local currency). Net sales and Ebitda increase to €108.5 million (€79.7 million in 1H-07, +36.1%) and €35.8 million (€23.4 million in 1H-07, +53.2%) respectively, with Ebitda to sales margin for the six months in further improvement to 33.0% from 29.3%.

Cement sales in Russia show a slight negative trend (-3.4%), penalized by the comparison with the previous year when mild weather conditions had favored shipments in wintertime and by the shortage of available rail and/or road means of transports for deliveries. Demand is still positive and sale pricing level records a sizeable further improvement (+98.6% in local currency). Net sales and profitability post an exceptional progress: with net sales up 76.8% to €128.8 million, Ebitda jumps from €23.2 million to €86.6 million.

United States of America
Cement volumes are down 8.8% while ready-mix concrete volumes, thanks to the wider scope of consolidation, increase by nearly 17%. Cement selling prices in local currency have slightly declined (-2.3%) as a natural consequence of the market general weakness. Conversely operating expenses pressure is much higher than the inflation rate, both in fixed costs (maintenance, spare parts) and in variable costs (electric power, fuels, raw materials, transports), thus penalizing Ebitda margin, which falls to 21.1% versus 32.3% in 1H-07. Differently from the previous year, the lower activity level could not be offset by cuts of import cement sales.
Net sales in dollars stand at $529.2 million, down 4.0% versus $551.4 million in 1H-07 and Ebitda decreases to $111.8 million ($178.0 million in 2007, -37.2%). Translated into euro, net sales are down 16.7% to €345.7 million versus €414.8 million in 1H-07 and Ebitda decreases by €60.9 million, from €133.9 million to €73.0 million (-45.5%).

Mexico (50% consolidation)
In the first half of 2008, Corporación Moctezuma’s cement volumes are stable while ready-mix concrete sales are up 12.4%. Cement prices in local currency show an increase in line with the average inflation rate (+3.6%). Ready-mix concrete prices are slightly lower than in the previous year. In local currency net sales are up 6.2% while Ebitda decreases by 1.4%. Once more the peso’s weakening has penalized the translation into euro: net sales and Ebitda decline by 4.9%, (from €106.0 million to €100.9 million) and 11.6% (from €46.9 million to €41.5 million) respectively. Ebitda to sales margin decreases from 44.3% to 41.1% since prices do not rise enough to offset the strong pressure on costs.

Outlook
In Italy, cement demand is expected to go down by around 8%. The rise in prices recorded in the first half of the year should partly stuck but, on an annual basis, the average improvement will probably be not sufficient to counterbalance the decrease in volumes and a trend of production costs more penalizing than budgeted. Consequently operating results are expected to be lower than in 2007.
In Central Europe markets (mainly Germany and the Netherlands) construction investments should remain positive although at lower levels than in the first six months. We expect our operations to fare well also in the second part of the year, allowing for a consolidation of the positive results posted in the first half.
Eastern Europe markets (the Czech Republic, Poland, Ukraine, Russia) will continue to report very positive operating results, albeit in an environment of rising energy costs.
In the United States, residential construction crisis is not foreseen to end in 2008. Our subsidiaries’ cement sales are expected to go down by around 8%, in a slightly negative pricing environment. The sizeable growth in energy and logistics costs will continue to negatively affect profitability, but operating margins trend compared with 2007 should be less unfavorable than in the first six months.
In Mexico operating result in local currency will likely be consistent or slightly lower than the 2007’s one, with Ebitda margin in decline due to rising production and logistics costs.

The beginning of the year’s outlook presents now some degree of uncertainty, due to global markets risks. The group’s good geographical diversification will continue to offset the slowdown reported by some countries and the negative effects of foreign exchange fluctuations. As of now, based on available data, we reckon that the full year 2008 will close with recurring operating results slightly lower than the very satisfactory ones posted in 2007.

Senior Notes and Bonds on maturity
During the first six months of 2008 no new senior notes and bonds were issued by the companies of the group.

In the 18 months subsequent to June 30, 2008, the following repayments of bond principals shall be effected:
-  on October 20, 2008, $18.3 million referred to the Senior Notes Series C issued by the subsidiary Alamo Cement Company in 2004.
- on May 29, 2009, $58.3 million referred to the Senior Notes Series A issued by the subsidiary RC Lonestar Inc. in 2002;
- on October 20, 2009, US$18.3 million and €15.0 million referred to the Senior Notes Series C issued by the subsidiary Alamo Cement Company in 2004.

The mezzanine loan issued by the subsidiary Dyckerhoff AG for a principal amount of €200.0 million will be due at the end of 2012. However, upon attainment of some balance sheet ratios based on the financial statements 2008, the lenders have the option to require the advance repayment starting from December 15, 2008. No material repayments are expected till the final maturity date.


Moreover the Board of Directors updated the by-laws provisions to make them consistent with the rules introduced into Legislative Decree no 58/1998 in compliance with the  European Directive which standardizes transparency obligations for listed companies (Transparency Directive) removing the possibility to convene the Annual General Meeting for the approval of the financial statements within 180 days from the year closing.

The manager responsible for preparing the company’s financial reports, Aldo Arri, 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