Vicat Group: 2017 Half-Year Results

PARIS LA DÉFENSE--()--Regulatory News:

Vicat group (Paris:VCT):

  • Growth of +0.9% in sales at constant scope and exchange rates to €1.25 billion
  • EBITDA of €188 million (-13% at constant scope and exchange rates)
  • Net income, Group share: €40 million
  • Steep decline in net debt compared with at 30 June 2016

The Vicat Group (Euronext Paris: FR0000031775 - VCT) has today reported its 2017 half-year results, as approved by the Board of Directors on 1 August 2017.

Audited condensed consolidated income statement:

(€ million)   H1 2017   H1 2016 (a)   Change (%)
      Reported  

At constant scope
and exchange

rates

Consolidated sales   1,248   1,237   +0.8%   +0.9%
EBITDA*   188   206   -8.7%   -13.0%
EBIT margin (%)   15.1   16.7        
EBIT**   86   102   -16.2%   -24.6%
EBIT margin (%)   6.9   8.2        
Consolidated net income   45   59   -23.3%   -33.1%
EBIT margin (%)   3.6   4.7        
Net income, Group share   40   48   -17.0%   -24.1%
Cash flow from operations   140   151   -7.3%   -13.6%

(a) The financial statements for the first half of 2016 have been restated in accordance with the new accounting method applied at 12/31/2016 to greenhouse gas emission rights. The nature of the impact of these adjustments is presented in appendix 5.1
*EBITDA: sum of gross operating income and other income and expenses on ongoing business.
**EBIT: EBITDA less net depreciation, amortisation and provisions on ongoing business.

Commenting on these figures, Guy Sidos, the Group’s Chairman and CEO said: “The Vicat Group’s first-half performance was affected by very unfavourable weather conditions in Europe, the United States and Turkey, especially at the beginning of the year, and by a difficult macro-economic and industry environment in Egypt. Other key regions such as India, the United States and France recorded improvements.
In a year that should be characterized by a very strong seasonality effect, Vicat now expects to benefit from a marked progression in its activities in the second semester.
On this basis, the Group expects to record an improvement in its performance, and reiterates its objective of strong cash generation and of reduction in its level of debt”.

In this press release, and unless indicated otherwise, all changes are stated on a year-on-year basis (2017/2016), and at constant scope and exchange rates.

1. Income statement for the first half of 2017

1.1. Consolidated income statement

The Vicat Group’s half-year 2017 consolidated sales came to €1,248 million, up very slightly at +0.8% by comparison with the same period of 2016.

In the first half of 2017, the Cement business posted a -3.6% decline in operational sales on a reported basis, but a +0.9% increase at constant scope and exchange rates. The Concrete & Aggregates business recorded growth of +7.5% in its operational sales on a reported basis, and a rise of +0.8% at constant scope and exchange rates compared with the first half of 2016. The operational sales recorded by the Other Products & Services business rose by +0.2% on a reported basis and by +0.8% at constant scope and exchange rates.

The breakdown of first-half 2017 operational sales by business shows a decrease in the Cement business’s contribution to 51.5% of operational sales from 53.7% in the first six months of 2016. The operational sales contribution from the Group’s Concrete & Aggregates business advanced to 34.4% from 32.2% over the same period in 2016. Lastly, the contribution made by Other Products & Services was stable at 14.1% of the Group’s operational sales.

The contribution made by Vicat’s main businesses – Cement, Concrete and Aggregates – was almost stable at 85.9% of operational sales.

This top-line performance reflected:

  • a negative currency effect of -2.9%, predominantly as a result of depreciation in the Egyptian pound and Turkish lira against the euro;
  • a positive impact of +2.8% deriving chiefly from changes in scope given the acquisitions made at the end of 2016 in the Concrete & Aggregates business in France;
  • a +0.9% improvement in the pace of organic growth as a result of business expansion across all Vicat’s regions, except for Switzerland and West Africa.

The Group’s consolidated EBITDA came to €188 million, down -8.7% and down -13.0% at constant scope and exchange rates. This fall in EBITDA at constant scope and exchange rates mainly reflected:

  • a steep decline in the EBITDA generated in Egypt. Following the sharp devaluation in November 2016 that divided by half the value of the Egyptian pound, the very strong inflation in production costs was countered only to a very limited extent by an increase in selling prices. Against this backdrop, Egypt recorded a loss at EBITDA level during the first half.
  • a significant decline in EBITDA in Turkey, where performance was held back by highly unfavourable weather conditions, especially in the Konya region. Higher volumes and stable selling prices in the Cement business were not sufficient to offset the increase in production costs.
  • the fall in EBITDA in Switzerland triggered by a contraction in the Concrete & Aggregates EBITDA given fiercer competition and poor weather conditions.
  • and, lastly, a moderate EBITDA decline in France given an unfavourable base of comparison as a result of weather conditions in the first quarter, and a smaller number of business days in the second quarter, amid a macroeconomic and industry environment that continues to improve gradually.

These negative factors were partially offset by:

  • Significant improvement in the EBITDA generated in India. After a first quarter characterised by stable prices and a clear increase in volumes, the Group adapted its business policy during the second quarter to ensure that it reaps the full benefit of the significantly firmer selling prices.
  • A healthy increase in the EBITDA generated in Kazakhstan on the back of a significant increase in selling prices, which largely offset the volume decline caused by a selective commercial policy.
  • A stronger EBITDA performance in the United States, amid highly challenging weather conditions in the first half of the year, which curbed the growth in volumes in both Cement and Concrete, but boosted by firmer selling prices, which largely offset the impact of higher production costs.
  • An increase in the EBITDA generated in Italy, supported by the improvement in selling prices in spite of a slight contraction in volumes, as Vicat pursued its selective business policy.
  • And lastly, a slight improvement in the EBITDA generated in West Africa, with a significant increase in EBITDA in the Aggregates business in Senegal, which helped to make up for the lower EBITDA in the Cement business across West Africa as a whole.

Overall, the EBITDA margin on consolidated sales declined during the first half of the year to 15.1% from 16.7% in the first half of 2016.

EBIT came to €86 million, down -16.2% on a reported basis and down -24.6% at constant scope and exchange rates on the €102 million reported in the first half of 2016.

The EBIT margin on consolidated sales came to 6.9% compared with 8.3% during the first half of 2016.

Net interest expense improved by €5.5 million to -€12.9 million (from -€18.4 million in the first half of 2016). This trend reflected a -€1.9 million reduction in the net cost of debt and an improvement in other financial income and expenses.

Tax expense declined -€2.8 million compared with the previous year to -€25.8 million. Overall, the effective tax rate rose by close to +4 points to 38% due to an unfavourable geographic mix and currency adjustments in 2016.

At constant scope and exchange rates, consolidated net income totalled €45 million, down -23.3% on a reported basis and down -33.1% at constant scope and exchange rates. Net income, Group share dropped -17% on a reported basis and -24.1% at constant scope and exchange rates to €40 million. Cash flow from operations came to €140 million, down -7.3% at constant scope and exchange rates and down -13.6% on a reported basis.

1.2. Income statement broken down by geographical region

1.2.1. Income statement, France

(€ million)   H1 2017   H1 2016   Change (%)
      Reported  

At constant scope
and exchange rates

                 
Consolidated sales   444   405   +9.7%   +1.1%
EBITDA   52   50   +3.8%   -1.6%
EBIT   21   20   +3.0%   +3.3%

Consolidated sales in France for the six months to 30 June 2017 grew by +1.1% at constant scope to €444 million. This first-half performance reflected a gradually improving economic and industry climate despite a highly unfavourable base of comparison as a result of far more unfavourable weather conditions than in the first quarter of 2016 and also a smaller number of business days. Notably, the Group’s sales advanced slightly in France (+1.1%) in the second quarter of 2017 compared with the second quarter of 2016 despite the reduction in the number of business days.

EBITDA declined by -1.6% at constant scope to €52 million. As a result, the EBITDA margin dipped to 11.7% from 12.4% in the first six months of 2016.

  • In the Cement business, operational sales edged down -0.5% over the first half as a whole. Consolidated sales were stable (+0.0%). Volumes declined by around -2% with moderate growth in domestic markets due to unfavourable weather conditions, a reduction in the number of business days and a marked decrease in export volumes. During the second quarter, operational sales were stable in spite of a decline in volumes of -3% given the lower number of business days, offset by an improvement in average selling prices, especially in export markets. Average selling prices firmed up gradually during the first half. Taking these factors into account, the Group recorded a decrease of -2.6% in its EBITDA at constant scope. After the unfavourable weather conditions of the first quarter, the EBITDA generated in the second quarter represented a very clear improvement on the first-quarter level of 2017. The EBITDA margin on operational sales contracted by close to 60 basis points, with price hikes only partially offsetting the volume contraction and increase in production costs in the first half.
  • In the Concrete & Aggregates business, operational sales rose +1.2% and consolidated sales rose +1.6% at constant scope (+18.7% and +19.5% on a reported basis). This performance flowed from a tangible rise in concrete prices, which offset the decline in volumes (down around -4% at constant scope and up significantly on a reported basis) and an aggregates volume increase of close to +8% combined with a slight dip in prices. After the very small increase in operational sales recorded by the business in the first quarter (+0.7% at constant scope), second-quarter operational sales posted a strong improvement (+1.6% at constant scope), despite there being fewer business days. As a result of these factors, the EBITDA generated by this business in France was up markedly (+172.6% at constant scope and exchange rates) compared with the first half of 2016.
  • In the Other Products & Services business, operational sales advanced by +2.3% (+1.4% on a consolidated basis). Conversely, the EBITDA generated by the business declined by -7.6% as the profitability of the paper business declined.

1.2.2 Income statement for Europe excluding France

(€ million)   H1 2017   H1 2016   Change (%)
      Reported  

At constant
scope and
exchange rates

                 
Consolidated sales   197   198   -0.5%   -2.3%
EBITDA   42   45   -5.9%   -7.6%
EBIT   24   26   -5.9%   -7.5%

First-half 2017 sales recorded in Europe, excluding France, dipped by -0.5% on a reported basis and by -2.3% at constant scope and exchange rates compared with the first six months of 2016.

In Switzerland, the Group’s consolidated sales dropped -0.6% in the first six months of 2017. At constant scope and exchange rates, they declined by -2.4%. While Cement business remained brisk, the Group’s performance was dragged down by lower sales in the Concrete and Aggregates and Other Products and Services businesses, as the restructuring and product portfolio overhaul launched in late 2016 continued in the first half. As a result, EBITDA fell back -9.3% at constant scope and exchange rates over the period, triggering a contraction of around 160 basis points in the EBITDA margin on consolidated sales.

  • In the Cement business, operational sales moved up +4.3% on a reported basis and +2.4% at constant scope and exchange rates. Consolidated sales rose +8.0% on a reported basis and +6.1% at constant scope and exchange rates. After a significant rise in first-quarter operational sales (+5.2% at constant scope and exchange rates) against a favourable base of comparison, second-quarter sales posted a very small increase of +0.4% at constant scope and exchange rates. Volumes grew over the period as a whole with stronger rate of progression in the first quarter than in the second quarter. Selling prices declined during the first half as a result of the decrease recorded in the 2016 financial year. On a sequential basis (first half of 2017 compared with the second half of 2016), they remained stable. Given these factors and the decrease in production costs, the EBITDA generated by this business grew by +1.1% at constant scope and exchange rates. The EBITDA margin on operational sales suffered a small decline of 40 basis points.
  • In the Concrete & Aggregates business, operational sales moved -5.4% lower on a reported basis and dropped -7.1% at constant scope and exchange rates over the first half as a whole. Consolidated sales contracted by -5.6% on a reported basis and by -7.3% at constant scope and exchange rates. The contraction in operational sales recorded during the first quarter (-11.4% at constant scope and exchange rates) continued during the second quarter, but at a less negative pace (-3.8% at constant scope and exchange rates). This fall over the period as a whole reflected a decline in concrete volumes of -2% and a drop in aggregates volumes of over -8% owing to the completion of road and civil engineering projects, an unfavourable base of comparison in the landfill business given the very high level of activity in the first half of 2016 and, lastly, adverse weather conditions. Average selling prices headed downwards in concrete. Conversely, they moved higher in aggregates. Against this backdrop, EBITDA posted a significant decrease of -28.7% at constant scope and exchange rates given the strong increase in transportation costs, with the EBITDA margin on operational sales narrowing by around 440 basis points.
  • The Precast business posted a decline in its operational sales of -0.9% on a reported basis and -2.7% at constant scope and exchange rates. This decrease was primarily the result of a decline in sales related to the reorganisation of this business (restructuring of production units and streamlining of the product portfolio) to adapt it to trends in the competitive environment following the appreciation in the Swiss franc. The decline also stemmed from a delay affecting orders in the rail sector during the first quarter. Accordingly, after a drop of -3.1% in operational sales in the first quarter at constant scope and exchange rates, the fall recorded in the second quarter was a smaller one (-2.4% at constant scope and exchange rates). The EBITDA generated by this business was boosted by the initial impact of the reorganisation, and it moved up +7.7% at constant scope and exchange rates in the first half. The EBITDA margin on operational sales improved by close to 90 basis points.

In Italy, consolidated sales grew +1.6%. The increase in selling prices helped to offset completely the decline in volumes sold (down just over -1%) in view of the Group’s selective business policy in a domestic market still depressed by a macroeconomic and industry environment providing little visibility. As a result of these factors, EBITDA grew +96.0%.

1.2.3 Income statement for the United States

(€ million)   H1 2017   H1 2016   Change (%)
      Reported  

At constant
scope and
exchange rates

                 
Consolidated sales   192   176   +9.1%   +5.9%
EBITDA   24   22   +6.4%   +3.3%
EBIT   10   8   +22.5%   +18.8%

Business in the United States continued to recover in a still firm macroeconomic environment providing further support for the construction sector in the regions where the Group is present. However, weather conditions were particularly challenging during the first six months of the year—in California during the first and then in the South-East region during the second quarter. Despite the adverse climate conditions, the Group’s consolidated sales grew +9.1% on a reported basis and +5.9% at constant scope and exchange rates. In the second quarter, the Group’s business in the region picked up significantly, with its consolidated sales advancing by +9.3% at constant scope and exchange rates after a +1.8% rise in the first quarter. First-half EBITDA came to €24 million, up +3.3% compared with the first half of 2016 at constant scope and exchange rates.

  • In the Cement business, operational sales grew +12.3% on a reported basis and by +9.0% at constant scope and exchange rates. Consolidated sales rose +12.6% on a reported basis and +9.3% at constant scope and exchange rates. The business continued to grow in the second quarter (operational sales up +8.4% at constant scope and exchange rates). Volumes made further headway in the first half of the year (by more than +4%) in spite of weather conditions that were particularly tough during the first quarter in California and then in Alabama during the second quarter. Overall, the strong volume recovery late in the first half in California offset most of the decline in the South-East region. Selling prices rose across both areas as a result of the full impact of the hikes introduced in 2016 and those announced during the first half of 2017. Driven by these factors, the Group’s Cement EBITDA in this region posted a significant increase of +24.6% at constant scope and exchange rates in the first six months of the year, with the EBITDA margin on operational sales widening by over 260 basis points.
  • In the Concrete business, consolidated and operational sales advanced +7.1% on a reported basis and +4.0% at constant scope and exchange rates. After a business contraction of -4.8% in the first quarter, resulting from a steep drop-off in activity in California owing to poor weather conditions, the second quarter brought renewed growth (+11.3% at constant scope and exchange rates), with a sharp rebound in activity in California offsetting the business contraction in the South-East region in this period. Volumes rose by over +2% during the first half, with California regaining momentum at the end of the six-month period, offsetting the volume contraction in the South-East region caused by the exceptional storms of the second quarter. Prices recorded a small increase in both regions. The EBITDA generated by this business was down -68.1% at constant scope and exchange rates over the period. This decline was primarily attributable to a change in the geographical mix during the first half of the year as a result of the very severe storms, which, given their impact on volumes, fanned fiercer competition in the South-East region, and to a positive non-recurring gain in the first half of 2016. The EBITDA margin on operational sales contracted by close to 320 basis points.

1.2.4 Income statement for Asia (Turkey, India and Kazakhstan)

(€ million)   H1 2017   H1 2016   Change (%)
      Reported  

At constant scope
and exchange rates

                 
Consolidated sales   264   268   -1.5%   +1.8%
EBITDA   48   52   -7.0%   -8.5%
EBIT   24   29   -17.1%   -20.0%

Sales across Asia as a whole came to €264 million in the first half of 2017, down -1.5% on a reported basis, but up +1.8% at constant scope and exchange rates.

EBITDA fell back -7.0% on a reported basis and -8.5% at constant scope and exchange rates.

In Turkey, sales came to €91 million, down -15.8% on a reported basis, but up +1.7% at constant scope and exchange rates. After a steep decline in the first quarter of -9.2% at constant scope and exchange rates as a result of adverse weather conditions, the business returned to growth in the second quarter (+8.8% at constant scope and exchange rates). First-half EBITDA came to €8 million, down a strong -60.9% on a reported basis and down -52.7% at constant scope and exchange rates.

  • In the Cement business, operational sales in the first six months of the year rose by +3.1% at constant scope and exchange rates (consolidated sales up +5.4%). On a reported basis, operational and consolidated sales fell back -14.6% and -12.8% respectively. Following the contraction in operational sales in the first quarter (-6.7% at constant scope and exchange rates), as a result of highly unfavourable weather conditions, the business reverted to a healthy pace of growth in the second quarter (+9.0% at constant scope and exchange rates). This top-line growth in the first half of the year flowed from a pick-up in volumes of over +3%, driven by progressions in the Ankara market and stable volumes in the Konya market. After the volume decline of close to -5% in the first quarter, volumes grew by almost +8% in the second quarter, especially in the Konya region. Selling prices remained stable over the period as a whole, with a slight improvement in the second quarter. The EBITDA generated by the business declined by a strong -40.5% at constant scope and exchange rates as a result of the significant rise in production costs. As a result, the EBITDA margin on operational sales dropped back from 23.7% to 13.7%.
  • The operational sales and the consolidated sales recorded by the Concrete & Aggregates business contracted by -3.5% at constant scope and exchange rates and by -20.1% on a reported basis over the period. Following the steep contraction in operational sales in the first quarter (-9.2% at constant scope and exchange rates) as a result of poor weather conditions, the business returned to growth in second quarter (+0.7% at constant scope and exchange rates). Over the first half as a whole, volumes declined by close to -7% in concrete but rose by more than +1% in aggregates. Selling prices edged slightly higher in concrete and significantly higher in aggregates during the first half. EBITDA fell heavily and posted a loss for the first six months of 2017.

In India, the Group posted consolidated sales of €150 million in the first half of 2017, up +7.1% on a reported basis and up +1.6% at constant scope and exchange rates. After an increase of +4.6% at constant scope and exchange rates during the first quarter, second-quarter sales declined by -1.2%. This reflected a small increase in sales in the Cement business, but a contraction in other businesses (Aggregates, Other). Volumes sold declined by close to -3% during the first half to approximately 2.5 million tonnes. This contraction reflected the business strategy implemented by the Group since the end of the first quarter of 2017 and aimed at harnessing the full benefit of the upturn in prices. After volume growth of over +8% in the first quarter, volumes declined by -12% during the second quarter. Average selling prices increased significantly over the first half as a whole, with the rise gaining traction from April 2017. As a result, EBITDA advanced +12.7% at constant scope and exchange rates to €33 million in the first half of the year. The EBITDA margin on consolidated sales rose by close to 220 basis points.

In Kazakhstan, consolidated sales moved +16.0% higher on a reported basis and +3.8% higher at constant scope and exchange rates. Given the tough weather conditions at the beginning of the year, volumes declined by close to -12% over the period. Selling prices firmed up significantly over the first six months of the year. As a result, the EBITDA generated during the period posted very strong growth of +80.4% at constant scope and exchange rates. The EBITDA margin recorded a strong improvement to 30.7% from 17.7% in the first half of 2016.

1.2.5 Income statement for Africa and the Middle East

(€ million)   H1 2017   H1 2016   Change (%)
      Reported  

At constant scope and
exchange rates

                 
Consolidated sales   150   190   -21.0%   -2.2%
EBITDA   22   37   -40.2%   -50.9%
EBIT   6   18   -68.5%   -107.4%

In the Africa and Middle East region, consolidated sales came to €150 million, down -21.0% on a reported basis and down -2.2% at constant scope and exchange rates. The sales decline across the zone as a whole resulted from business growth at constant exchange rates in Egypt partially offsetting the sales contraction in West Africa. After first-quarter sales growth running at 8.8% at constant scope and exchange rates across the region as a whole, second-quarter sales declined by -13.3% at constant scope and exchange rates. As a result, the region’s overall EBITDA contribution fell back -50.9% at constant scope and exchange rates) given the surge in production costs in Egypt following the November 2016 devaluation in the Egyptian pound.

  • In Egypt, consolidated sales came to €33.7 million, down -49.6% on a reported basis given the very substantial devaluation in November 2016, but up +3.7% at constant scope and exchange rates. After sales growth of +31.8% at constant scope and exchange rates in the first quarter, second-quarter sales posted a decline of -23.8% at constant scope and exchange rates, as the Group decided to curb its volumes amid a severe profitability downturn. In the first half of the year, volumes declined by close to -4%, reflecting an increase of close to +18% in the first quarter and a contraction of over -24% in the second quarter. Selling prices rose over the first half as a whole, albeit nowhere near strongly enough to counter the impact of the very sharp rise in production costs. Against this backdrop, the Group recorded a loss at EBITDA level of -€3.8 million in the first half, compared with €11.7 million in positive EBITDA in the first half of 2016.
  • In West Africa, consolidated sales dropped back -5.4% at constant scope and exchange rates (-5.5% on a reported basis). Following on from a decline of -3.4% in the first quarter, the downturn continued in the second quarter (-7.5% at constant scope and exchange rates). Volumes dropped by close to -12% across the region as a whole. Selling prices edged lower in Senegal and Mauritania. Conversely, they moved higher in Mali. In Senegal, the Aggregates business posted a strong increase during the first half of the year of +64.4% at constant scope and exchange rates. Taking these factors into account, EBITDA came to €26.1 million, up +1.7% at constant scope and exchange rates.

1.3. Income statement broken down by business segment

1.3.1. Cement

(€ million)   H1 2017   H1 2016   Change (%)
      Reported  

At constant scope
and exchange rates

Volume (thousands of tonnes)   10,787   11,074   -2.6%    
Operational sales   734   761   -3.6%   +0.9%
Consolidated sales   612   639   -4.2%   +0.9%
EBITDA   153   167   -8.6%   -11.9%
EBIT   83   94   -11.8%   -20.5%

In the first half of 2017, the Cement business posted a -3.6% decrease in operational sales on a reported basis, but a +0.9% increase at constant scope and exchange rates.
Selling price trends varied from one region to another, with a significant improvement in Egypt, the United States, Kazakhstan, India, Italy and Mali. Selling prices were broadly stable in France and Turkey, but headed lower in Switzerland and Mauritania, and edged down in Senegal. Overall, the price effect was positive in the first half taken as a whole.
The impact of this uptrend in selling prices on operational sales offset a decline of -2.6% in delivery volumes in the first half of the year. This volume contraction was significant in West Africa and Kazakhstan, but less so in France, India, Egypt and Italy. Volumes grew in Turkey, the United States and Switzerland.
Against this backdrop, EBITDA declined by -8.6% on a reported basis and by -11.9% at constant scope and exchange rates given the very strong increase in production costs, especially energy. The EBITDA margin on operational sales contracted by 120 basis points to 20.8% from 22.0% in the first six months of 2016.

1.3.2. Concrete & Aggregates

(€ million)   H1 2017   H1 2016   Change (%)
      Reported  

At constant scope
and exchange rates

Concrete volumes
(thousands of m3)

  4,465   4,331   +3.1%   -3.5%

Aggregates volumes
(thousands of tonnes)

  11,621   10,945   +6.2%    
Operational sales   490   456   +7.5%   +0.8%
Consolidated sales   480   445   +8.0%   +1.1%
EBITDA   24   28   -12.1%   -23.6%
EBIT   1   6   -82.6%   -90.9%

The Concrete & Aggregates business recorded growth of +7.5% in its operational sales on a reported basis, or a rise of +0.8% at constant scope and exchange rates compared with the first half of 2016. This performance reflected the Group’s growth in Senegal, the United States and France, offsetting the decline recorded in Switzerland and Turkey, where adverse weather conditions took a toll in the first part of the year. Concrete volumes rose by more than +3% and aggregates volumes by more than +6%. Concrete selling prices firmed up in France and the United States, and edged up in Turkey. They declined in Switzerland. Aggregates selling prices rose in Turkey, Senegal, and Switzerland, and were almost stable in France. EBITDA came to €24 million, down -12.1% on a reported basis and down -23.6% at constant scope and exchange rates compared with the first half of 2016. The EBITDA margin on operational sales declined by 110 basis points to 5.0% from 6.1% in 2016.

1.3.3 Other Products & Services

(€ million)

  H1 2017   H1 2016   Change (%)
      Reported  

At constant scope
and exchange rates

Operational sales   202   201   +0.2%   +0.8%
Consolidated sales   156   154   +1.0%   +0.2%
EBITDA   11   11   -2.8%   -3.7%
EBIT   2   3   -26.3%   -26.0%

Operational sales were stable on a reported basis and rose +0.8% at constant scope and exchange rates. Sales grew in France and India, but declined in Switzerland. EBITDA came to €11 million, down -3.7% at constant scope and exchange rates compared with the first half of 2016.

2. Balance sheet and cash flow statement

At 30 June 2017, the Group had a solid financial position, with a capital base of €2,405 million in shareholders’ equity compared with €2,403 million at 30 June 2016. Net debt totalled €1,006 million, down -€53 million from its 30 June 2016 level.

Its gearing improved to 41.83% at 30 June 2017 from 44.06% at 30 June 2016, while its leverage ratio pulled back to 2.29x from 2.36x at 30 June 2016.

Bank covenants do not pose a threat to either the Group’s financial position or its balance sheet liquidity. At 30 June 2017, Vicat complied with all financial ratios required by covenants in its borrowing agreements.

Cash flow from operations came to €140 million, representing a decrease of -7.3% and of -13.6% at constant scope and exchange rates.

The Group’s capital expenditure came to €99 million in the first half, an increase on the €60 million of the first-half 2016 level. It is expected to lie in a €160-190 million range over 2017 as a whole.

3. Outlook

After a first semester marked by a certain number of unfavourable factors, the second semester should benefit from a markedly more positive environment, both in terms of volumes and pricing, in a context of gradually stabilizing production costs.
On this basis, and for 2017 as a whole, the Group expects further improvements in its performance, capitalizing on ongoing growth in the United States, France and India, and a return to growth in Europe and Kazakhstan. These factors should offset the expected increase in energy costs and lower profitability in Egypt taking into account the sharp devaluation of the Egyptian pound in late 2016.
Against this background, the Group will continue in 2017 to pursue its policy of optimizing cash flows and reducing its level of debt.

For 2017, the Group provides the following guidance concerning its markets:

  • In France, the Group is expecting the gradual improvement in the macroeconomic and industry situation to continue. As a result, volumes are likely to rise very slightly over the full year, while the pricing environment should continue to improve.
  • In Switzerland, sales should benefit from a more favourable base for comparison in the second semester, notably in the Concrete & Aggregates business with an upturn in infrastructure work. Volumes are likely to remain stable and the price environment should be better than in 2016.
  • In Italy, volumes are likely to stabilize during the year at a historically low level of consumption amid a persistently challenging macroeconomic situation. In light of the recent consolidation in this market and the Group’s selective sales and marketing policy, the positive trend in selling prices of the first semester is expected to continue.
  • In the United States, volumes are expected to rise further, in line with the rate of sector recovery in the country. Selling prices are also expected to increase in the two regions in which the Group operates.
  • In Turkey, due to the current geopolitical situation the market offers little visibility even if market trends are expected to remain firm in the Ankara region and more tense in the Konya region. The Group should capitalize on its strong positions in the Anatolian plateau and its efficient production facilities. Selling prices are expected to remain volatile.
  • In India, the Group remains very confident about its ability to capitalize fully on the quality of its production facilities, staff and positions in a market that should benefit from the continuing upturn in the macroeconomic environment and, more specifically, from infrastructure investments. In a context that should remain favourable for growth in cement consumption, prices – although likely to remain very volatile – should broadly be firm over the full year.
  • In Kazakhstan, the Group will be able to leverage the quality of its manufacturing base and teams against a background that is expected to improve.
  • In West Africa, the market is likely to remain well-oriented in 2017 and should enable the Group to recover the volumes that were lagging in the first semester. Prices are expected to remain volatile given the competitive environment.
  • In Egypt, following the currency devaluation in November 2016, the Group expects its financial performance to deteriorate significantly.

4. Conference call

To accompany the publication of the Group’s 2017 half-year results, Vicat is holding a conference call in English on Friday, 4 August 2017 at 3pm Paris time (2pm London time and 9am New York time).
To take part in the conference call live, dial one of the following numbers:
France: +33(0)1 76 77 22 57
United Kingdom: +44(0)330 336 9412
United States: +1 719 325 2213

To listen to a playback of the conference call, which will be available until 13 August 2017, dial one of the following numbers:
France: +33 (0) 1 70 48 00 94
United Kingdom: +44 (0)207 984 7568
United States: +1 719 457 0820
Access code: 2083812#

Next report: Third-quarter 2017 sales after the close on 6 November 2017.

ABOUT VICAT
The Vicat Group has over 8,000 employees working in three core divisions, Cement, Concrete & Aggregates and Other Products & Services, which generated consolidated sales of €2,454 million in 2016. The Group operates in eleven countries: France, Switzerland, Italy, the United States, Turkey, Egypt, Senegal, Mali, Mauritania, Kazakhstan and India. Almost 68% of its sales are generated outside France.
The Vicat Group is the heir to an industrial tradition dating back to 1817, when Louis Vicat invented artificial cement. Founded in 1853, the Vicat Group now operates three core lines of business: Cement, Ready-Mixed Concrete and Aggregates, as well as related activities.

Disclaimer:
This press release may contain forward-looking statements. Such forward-looking statements do not constitute forecasts regarding results or any other performance indicator, but rather trends or targets. These statements are by their nature subject to risks and uncertainties as described in the Company’s annual report available on its website (www.vicat.fr). These statements do not reflect the future performance of the Company, which may differ significantly. The Company does not undertake to provide updates of these statements.
Further information about Vicat is available from its website (www.vicat.fr)..

5. APPENDIX

5.1 Restated Consolidated Financial Statements:

In the IFRS standards, there is as yet no standard or interpretation dealing specifically with greenhouse gas emission rights. At December 31, 2016, the Group decided to adopt the method recommended by the ANC since 2013, compatible with the IFRS standards in force (Regulation No. 2012-03 of October 4, 2012, approved January 7, 2013), that provides more reliable and relevant financial information to reflect the quotas economic model, in particular eliminating the impacts associated with the volatility of the prices of quotas.

According to this method, once the quotas are intended to fulfil the obligations related to emissions (production model):

• quotas are posted as inventories at the time of their acquisition (free of charge or chargeable). They are drawn down as and when necessary to cover greenhouse gas emissions, as part of the restitution procedure, or at the time of their sale, and are not revalued at closing;

• a debt is posted at closing if there is a quota shortfall.

Since the Group today has only those quotas allocated free of charge by the State under National Quotas Allocation Plans, applying these rules means they are posted as inventories for a zero value. Moreover, as the Group has recorded surpluses to date, no debt is posted to the balance sheet and, if they are not sold, no amount is posted to the income statement. Before December 31, 2016, quotas held above the aggregated actual emissions were posted under assets as other intangible assets at closing and surpluses, sales of quotas and quota swap (EUA) against Emission Reduction Certificates (CER) were posted under income for the year. Thus, the Group had posted income of € 1.4 million in the 30 June 2016 income statement under surpluses recorded during the prior half-year. The financial statements for half-year 2016 have been restated in accordance with the new method applied at December 31, 2016 for comparison purposes. The impacts of this change on the half-year 2016 financial statements are presented below, and detailed in note 24 to the Consolidated Financial Statements at June 30, 2017.

(in thousands of euros)  

June 30,
2016
restated

 

  Impacts  

June 30,
2016
published

 

Net sales   1 237 449       1 237 449
EBITDA   206 314   (1 398)   207 712
EBIT   102 099   (1 398)   103 497
Net income   58 672   (917)   59 589
Portion attributable to Group share   48 198   (917)   49 115
Earnings per share (in euros)            
Basic and diluted earnings per share   1,07   (0,02)   1,09
Cash flow from operations   151 114   (1 398)   152 512

5.2 Definition of alternative performance measures (APMs):

  • Performance at constant scope and exchange rates is used to determine the organic growth trend in P&L items between two periods and to compare them by eliminating the impact of exchange rate fluctuations and changes in the scope of consolidation. It is calculated by applying exchange rates and the scope of consolidation from the prior period to figures for the current period.
  • A geographical (or a business) segment’s operational sales are the sales posted by the geographical (or business) segment in question less intra-region (or intra-segment) sales.
  • Value-added: value of production less consumption of materials used in the production process.
  • Gross operating income: value-added, less staff costs, taxes and duties (other than on income and deferred taxes) plus operating subsidies
  • EBITDA (earnings before interest, tax, depreciation and amortization): sum of gross operating income and other income and expenses on ongoing business.
  • EBIT: (earnings before interest and tax): EBITDA less net depreciation, amortisation, additions to provisions and impairment losses on ongoing business.
  • Cash flow from operations: net income before net non-cash expenses (i.e. predominantly depreciation, amortisation, additions to provisions and impairment losses, deferred taxes, gains and losses on disposals and fair value adjustments)
  • Net debt represents gross debt (consisting of the outstanding amount of borrowings from investors and credit institutions, residual financial liabilities under finance leases, any other borrowings and financial liabilities excluding options to sell and bank overdrafts), net of cash and cash equivalents, including remeasured hedging derivatives and debt.
  • Gearing is a ratio reflecting a company’s financial structure calculated as net debt/consolidated equity.
  • Leverage is a ratio reflecting a company’s profitability, which calculated as net debt/consolidated EBITDA.

5.3 Breakdown of operational sales in the six months to 30 June 2017 by country and by business segment:

(€ million)   Cement  

Concrete &
Aggregates

 

Other
Products &
Services

 

Operational
sales

 

Inter-segment
eliminations

 

Consolidated
sales

France   182   226   128   536   -92   444

Europe (excluding
France)

  82   82   58   222   -26   197
United States   105   120   0   225   -33   192
Asia   236   41   16   292   -28   264
Africa and Middle East   129   21   0   151   -0   150
Operational sales   734   490   202   1,426   -178   1,248

Inter-sector
eliminations

  -122   -10   -46   -178   178    

Consolidated
sales

  612   480   156   1,248   0   1,248

5.4 Consolidated financial statements for the six-month period to 30 June 2017 approved by the Board of Directors on 1 August 2017

The consolidated financial statements for the first half of 2017 and accompanying notes are available in their entirety on the Company’s web site at www.vicat.fr.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
   
ASSETS June 30, 2017 December 31, 2016
(in thousands of euros)   Notes        
NON CURRENT ASSETS            
Goodwill 3 1,034,261 1,048,954
Other intangible assets 4 119,997 106,465
Property, plant and equipment 5 1,918,020 1,992,508
Investment properties 17,326 17,839
Investments in associated companies 40,292 41,070
Deferred tax assets 139,871 150,918
Receivables and other non current financial assets       96,198   110,941
Total non current assets       3,365,965   3,468,695
CURRENT ASSETS            
Inventories and work in progress 379,927 385,770
Trade and other accounts 485,731 389,504
Current tax assets 54,560 53,447
Other receivables 185,766 188,721
Cash and cash equivalents   6   213,618   242,770
Total current assets       1,319,602   1,260,212
TOTAL ASSETS       4,685,567   4,728,907
 
LIABILITIES June 30, 2017 December 31, 2016
(in thousands of euros)   Notes        
SHAREHOLDERS' EQUITY            
Share capital 7 179,600 179,600
Additional paid in capital 11,207 11,207
Consolidated reserves       1,970,756   2,022,313
Shareholders' equity       2,161,563   2,213,120
Minority interests       243,344   257,054
Shareholders' equity and minority interests       2,404,907   2,470,174
             
NON CURRENT LIABILITIES            
Provisions for pensions and other post employment benefits 8 125,691 142,353
Other provisions 8 115,111 107,101
Financial debts and put options 9 986,628 980,017
Deferred tax liabilities 183,355 197,980
Other non current liabilities       5,652   2,228
Total non current liabilities       1,416,437   1,429,679
CURRENT LIABILITIES            
Provisions 8 10,083 10,757
Financial debts and put options at less than one year 9 284,931 250,266
Trade and other accounts payable 318,611 316,345
Current taxes payable 49,570 46,835
Other liabilities       201,028   204,851
Total current liabilities       864,223   829,054
Total liabilities       2,280,660   2,258,733
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY       4,685,567   4,728,907
CONSOLIDATED INCOME STATEMENT
   
June 30, 2017 June 30, 2016
(in thousands of euros)   Notes       restated (a)
 
Sales   11   1,247,682   1,237,449
Goods and services purchased       (820,016)   (806,854)
Added value   1.22   427,666   430,595
Personnel costs (216,450) (205,482)
Taxes       (34,761)   (32,626)
Gross operating income   1.22 & 14   176,455   192,487
Depreciation, amortization and provisions 12 (104,287) (102,725)
Other income and expenses   13   8,492   12,177
Operating income   14   80,660   101,939
Cost of net financial debt 15 (12,827) (14,712)
Other financial income 15 8,726 6,318
Other financial expenses   15   (8,834)   (10,033)
Net financial income (expense)   15   (12,935)   (18,427)
Earnings from associated companies       3,095   3,759
Profit (loss) before tax       70,820   87,271
Income tax   16   (25,822)   (28,599)
Consolidated net income       44,998   58,672
Portion attributable to minority interests 5,007 10,474
Portion attributable to the Group       39,991   48,198
 
             
EBITDA   1.22 & 14   188,336   206,314
EBIT   1.22 & 14   85,568   102,099
Cash flow from operations   1.22   140,103   151,114
             
Earnings per share (in euros)
Basic and diluted Group share of net earnings per share 7   0.89   1.07
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
   
(in thousands of euros) June 30, 2017 June 30, 2016
        restated (a)
         
Consolidated net income   44,998   58,672
 

Other comprehensive income items

 
Items not recycled to profit or loss :
Remeasurement of the net defined benefit liability 13,664 (41,488)
Tax on non-recycled items (3,601) 12,220
 
Items recycled to profit or loss :
Net income from change in translation differences (90,850) (83,320)
Cash flow hedge instruments 8,266 8,700
Tax on recycled items (2,397) (3,338)
         
Other comprehensive income (after tax)   (74,918)   (107,226)
         
Total comprehensive income   (29,920)   (48,554)
Portion attributable to minority interests   (5,506)   (7,312)
Portion attributable to the Group   (24,414)   (41,242)
CONSOLIDATED CASH FLOWS STATEMENT
   
(in thousands of euros) Notes June 30, 2017 June 30, 2016
            restated (a)
 

Cash flows from operating activities

 
Consolidated net income       44,998   58,672
 
Earnings from associated companies (3,095) (3,758)
Dividends received from associated companies 1,189 922
Elimination of non cash and non operating items :
- depreciation, amortization and provisions 108,950 105,758
- deferred taxes (9,711) (8,969)
- net (gain) loss from disposal of assets (1,383) (1,797)
- unrealized fair value gains and losses (1,655) (514)
- other 811 802
             
Cash flows from operating activities 1.22 140,104 151,116
 
Change in working capital requirement (106,966) (34,622)
             
Net cash flows from operating activities (1)   18   33,138   116,494
 

Cash flows from investing activities

 
Outflows linked to acquisitions of non-current assets :
- property, plant and equipment and intangible assets (93,613) (68,252)
- financial investments (6,731) (24,697)
 
Inflows linked to disposals of non-current assets :
- property, plant and equipment and intangible assets 6,841 2,873
- financial investments 2,013 496
 
Impact of changes in consolidation scope (13,106) -
             
Net cash flows from investing activities   19   (104,596)   (89,580)
 

Cash flows from financing activities

 
Dividends paids (73,684) (77,857)
Increases in capital - -
Proceeds from borrowings 270,595 1,371
Repayments of borrowings (199,039) (21,877)
Acquisitions of treasury shares (11,783) (244)
Disposals or allocations of treasury shares 52,892 2,412
             
Net cash flows from financing activities       38,981   (96,195)
Impact of changes in foreign exchange rates       (6,053)   (8,200)
Change in cah position       (38,530)   (77,481)
Net cash and cash equivalents - opening balance 20 208,909 225,096
Net cash and cash equivalents - closing balance 20 170,379 147,615
STATEMENT OF CHANGES IN CONSOLIDATED SHAREHOLDERS' EQUITY
(in thousands of euros)   Capital  

Additional
paid in
capital

 

Treasury
shares

 

Consolidated
reserves

 

Translation
reserves

 

Share-holders'
equity

 

Minority
interests

 

Total share-
holders'
equity and
minority
interests

At January 1, 2016 restated
(a)

  179,600   11,207   (67,008)   2,207,548   (93,804)       2,237,543       292,160       2,529,703
                     
Restated net income (a) 48,198 48,198 10,474 58,672

Other comprehensive
income (1)

(23,770) (65,670) (89,440) (17,786) (107,226)
                                               

Total comprehensive
income (a)

              24,428   (65,670)       (41,242)       (7,312)       (48,554)
 
Dividends paids (66,292) (66,292) (13,880) (80,172)

Net change in treasury
shares

3,368 (787) 2,581 2,581
Other changes (340) (340) (145) (485)
                                               

At June 30, 2016 restated
(a)

  179,600   11,207   (63,640)   2,164,557   (159,474)       2,132,250       270,823       2,403,073
                                               
At January 1, 2017   179,600   11,207   (63,609)   2,275,851   (189,929)       2,213,120       257,054       2,470,174
 
Consolidated net income 39,991 39,991 5,007 44,998

Other comprehensive
income (1)

14,659 (79,064) (64,405) (10,513) (74,918)
                                               

Total comprehensive
income

              54,650   (79,064)       (24,414)       (5,506)       (29,920)
 
Dividends paids (66,341) (66,341) (7,707) (74,048)

Net change in treasury
shares

2,836 (466) 2,370 2,370

Changes in consolidation
scope and additional acquisitions

Increases in share
capital

Other changes (2) 36,828 36,828 (497) 36,331
                                               
At June 30, 2017     179,600   11,207   (60,773)   2,300,522   (268,993)       2,161,563       243,344       2,404,907

(a) : The financial statements for the first half of 2016 have been restated in accordance with the new accounting method applied at 12/31/2016 to greenhouse gas emission rights. The nature of the impact of these adjustments is presented in notes 1.7 and 24.
(1) : Other comprehensive income includes mainly cumulative conversion differences from end 2003 as at end June 2017. To recap, applying the option offered by IFRS 1, the conversion differences accumulated before the transition date to IFRS were reclassified by allocating them to retained earnings as at that date.
(2) Mainly including the refund of € 38.9 million as a result of claims relating to the tax treatment of the capital gain on disposal of Soparfi securities, in 2014, by group subsidiaries (cf. note 2)

Group translation differences at June 30th, 2017 and 2016 are broken down by currency as follows (in thousands of euros) :
  June 2017   June 2016
US Dollar : 36,265 45,861
Swiss franc : 198,315 200,555
Turkish new lira : (193,367) (147,996)
Egyptian pound : (131,420) (68,335)
Kazakh tengue : (83,506) (85,323)
Mauritanian ouguiya: (6,698) (5,115)
Indian rupee : (88,582)   (99,121)
(268,993) (159,474)

Contacts

VICAT
Investor Relations contact :
Stéphane Bisseuil, T. + 33 1 58 86 86 14
stephane.bisseuil@vicat.fr
or
Presse contact :
Marion Guérin, T. + 33 1 58 86 86 26
marion.guerin@tbwa.com

Release Summary

Vicat / 2017 half-year results.

Contacts

VICAT
Investor Relations contact :
Stéphane Bisseuil, T. + 33 1 58 86 86 14
stephane.bisseuil@vicat.fr
or
Presse contact :
Marion Guérin, T. + 33 1 58 86 86 26
marion.guerin@tbwa.com