Cement sales down 4.5%; ready-mix up 3.1%
Eastern Europe’s excellent results offset slowdown in some mature markets
Net sales rose by 8.5%; Ebitda reached €159 million (+21.4%)
Full year outlook remains unchanged

Consolidated data

Jan-Mar 08

Jan-Mar 07

% 08/07

Cement sales

m ton

6.8

7.1

-4.5

Ready-mix sales

m m3

3.7

3.6

+3.1

Net sales

€m

755.3

696.3

+8.5

EBITDA

€m

158.7

130.7

+21.4

Net profit

€m

73.4

50.3

+46.0

Consolidated net profit

€m

56.5

40.7

+38.8

Mar  08

Dec  07

Change

Net debt

€m

805.5

621.2

184.3

 

The Board of Directors of Buzzi Unicem met on May 13, 2008 to examine the interim report as of March 31, 2008.

In our sector, especially in the market areas having a continental climate, the first quarter of the year is often influenced by seasonability. Compared with 1Q07 which was favored by a very mild weather, the first quarter of 2008 had fewer working days also due to Easter holidays falling this year in the month of March.

In the first three months of 2008 the construction market was sustained in Central Europe countries; Eastern Europe markets reported high sales volumes, driven by trading conditions. The slowdown of the economy was confirmed in Italy and the United States of America where the enduring weakness of housing demand had combined with the harsh weather, which negatively affected sales. The Mexican market trend was in line with the previous year’s one, probably influenced by the US economy uncertainty as well as by the delay in the kick off of some infrastructure works.

Group cement volumes at 6.8 million tons are down 4.5%. Ready-mix concrete volumes reach 3.7 million cubic meters, +3.1% over 1Q07, thanks also to the first-time inclusion in the scope of consolidation of Basal operations in the Netherlands and of the lines of business acquired in the second half of 2007 in the United States.
Cement selling prices in local currency show almost everywhere a favorable dynamics with outstanding changes in Russia, Ukraine and Poland. Conversely in the United States unit average revenues are in line with the previous year’s ones. Also in the ready-mix sector, unit prices generally improve.

Consolidated net sales increase by 8.5% from €696.3 million to €755.3 million and Ebitda by €28.0 million to €158.7 million (+21.4%). Net of non-recurring items, Ebitda would have improved by €21.6 million (+16.6%). Recurring Ebitda to sales margin improves from 18.7% to 20.1%. Changes in the scope of consolidation increase net sales by €38.2 million and Ebitda by €1.0 million. Foreign exchange negatively impacts the two figures for €29.5 million and €8.0 million respectively. Like-for-like, net sales and Ebitda would have increased by 7.1% and 26.8% respectively. After amortization and depreciation for € 49.3 million (€49.1 million in 1Q07) Ebit increases to €109.3 million (€81.6 million in 2007). Production costs trend continues to be very penalizing and more negative than initially foreseen, especially for fuels and electric power. Finance costs slightly decrease over 1Q07, from €9.9 million to €8.5 million. As a result, profit before taxes goes from €73.0 million to €101.8 million and net profit comes in at € 73.4 million (€50.3 million at March 2007), €56.5 million thereof attributable to the equity holders of the company and €16.9 million to minority interest.

Cash flow amounts to €122.7 million (€99.4 million in 2007). As of March 31, 2008 net debt stands at €805.5 million, +€184.3 million versus 2007 year-end; the change is mainly due to the outflow for the acquisition of the 35% stake in two Algerian cement plants and the purchase of the grinding terminal in Cairo (Savona, Italy) for €110.0 million and €41.0 million respectively. In the first three months of the year the group invested €102.3 million in property, plant and equipment versus €65.1 million in 1Q07.
As of March 31, 2008, total equity, inclusive of minorities, stands at €2,471.7 million versus €2,513.4 million as of December 31, 2007. Consequently debt/equity ratio is equal to 0.33 (0.25 at 2007 year-end).

Italy
In the first three months cement and clinker volumes, exports included, are down 20.0%. The construction market continues to show a slowdown trend, also penalized by persisting rains in March and fewer working days compared with 1Q07. To recover some of the cost inflation which in recent years constantly eroded income margins, a rigorous pricing policy was implemented. Also ready-mix concrete sales suffer from the market slowdown, posting a 19.6% decrease with slightly higher prices (+4.9%).
Overall, net sales in Italy come in at €204.9 million, down 12.7% versus €234.7 million in 1Q07. Ebitda stands at €29.3 million (€40.9 million in 2007, -28.4%), with a decline of Ebitda to sales margin from 17.4% to 14.3%.

Central Europe
In Germany, cement sales are up 5.3%, thanks to a moderate growth of the market and to exports mainly to the Netherlands. In the ready-mix concrete sector, volumes  are slightly down (-2.3%). Both cement and ready-mix concrete average unit revenues have improved.
Net sales in Germany stand at €117.6 million versus €99.5 million in 1Q07. Ebitda increases from €3.3 million in 2007 to €9.9 million.

In Luxembourg cement volumes, before intercompany trading, show a slightly negative trend (-2.8%), with prices up 5.4%. Overall net sales decrease 5.5%, from €20.7 million to €19.5 million, only due to the change in the scope of consolidation, net of which they would have increased by 8.9%. Ebitda improves from €2.1 million to €6.5 million. However not factoring in the €7.1 million non-recurring gain from the disposal of the 20.1% stake in Eurobeton, Ebitda would have been virtually nil, as a result also of the concentration in the period of extraordinary maintenance activities.

In the Netherlands, first quarter volumes exceed 250,000 cubic meters of ready-mix concrete, with net sales at €32.0 million. Ebitda stands at €1.0 million.

Eastern Europe
Poland and Ukraine post the strongest progress in cement sales in absolute terms, with an increase of 39.1% and 16.1% respectively. Volumes are sustained also in the Czech Republic, with an improvement of 32.7% partly represented by intercompany sales to Poland, net of which they would have increased by 28.1%. In Russia the construction sector continues to boost thanks to commercial investments and residential building. Tons sold have slightly decreased (-5.0%) due to a seasonability effect which will be recovered during the year.
Average selling prices in local currency improve in all countries and specifically: they show a moderate recovery in the Czech Republic (+4.7%), a significant progress in Poland (+19.4%) and a very strong rise in Ukraine (+50.6%) and especially in Russia (+116.6%). To be reminded that such a rise in prices is mainly due to a carried over effect of the increases occurred during 2007.
Ready-mix concrete volumes are up 22.1%, with all our countries of operations faring well and selling prices generally improving, especially in Ukraine and Poland.

Due to such volume/sale price dynamics, net sales increase by 61.3% from €115.4 million to €186.1 million; foreign exchange effect is favorable in Poland and the Czech Republic, unfavorable in Russia and Ukraine, with an overall negative balance of €2.0 million. Ebitda increases from €27.8 million to €68.8 million; the improvement is attributable mainly to Russia, however also Ukraine and Poland show a strong growth. As of March 31, 2008 the expense booked for the assembly of used machinery for the capacity expansion project in Russia amounts to €4.0 million.

United States of America
In the first three months, group cement sales are down 9.0%. Volume decline is less marked than in the overall market thanks to the positive performance of Texan operations. Slowdown in residential construction continues without commercial and public building making up for. Very adverse weather conditions amplify the negative scenario of the period. Despite a growing competition in some areas, average unit prices remain stable at 1Q07 level. Ready-mix concrete volumes increase by 16.3% thanks to a wider scope of consolidation which includes the newly acquired batching plants in Texas, Missouri and Tennessee. Overall net sales come in at €149.5 million versus €175.6 million (-14.9%) and Ebitda is down 32.1% from €33.7 million to €22.9 million. Excluding the negative effects linked to dollar weakness, the two figures would have decreased by 2.6% and 22.3% respectively.

Mexico (50% consolidation)
Moctezuma’s cement sales increase by 1.2% with average selling prices in local currency improving by some percentage points. Ready-mix concrete sales are up 8.4%, with prices in line with the previous year’s ones. Net sales and Ebitda translated into euro show a negative trend: net sales decrease by 4.9% (from €51.2 million to €48.7 million) and Ebitda is down 11.5% (from €22.9 million to €20.3 million), mainly due to a negative translation effect and a growing cost inflation. At constant rate the two figures would have come in at +6.7% and -0.7% respectively.

Outlook for operations
The first quarter closes with a contrasting scenario for sales volumes and the results posted must be considered as poorly representative of the full year trend, due to seasonability impact. However we may reasonably expect that trading conditions in some mature markets, such as Italy and the United States, will remain much weaker than in 2007.

Moreover we believe that at the end of the year the gap in results between mature and emerging markets will be narrower than in the first quarter, since the positive and/or negative changes in volumes, prices and results will become milder, although in the presence of a double-speed trend and a much more favorable tendency in the Eastern Europe countries.
Consequently, we feel confident that the financial year 2008 will close with recurring operating results similar to the very satisfactory ones posted in 2007.

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