FY 24: A cautious outlook despite positive volume trend
FY 24: A cautious outlook despite positive volume trendEARNINGS/SALES RELEASES
Cementir Holding reported positive FY24 results, exceeding sales and EBITDA projections, driven by positive volume trends. However, currency devaluations in Turkey and Egypt weighed on overall performance and are expected to remain a challenge in 2025. Despite this, the company has upgraded its industrial plan, projecting EBITDA growth in the coming years and aiming for a significant increase in cash by 2027. Additionally, Cementir will continue investing in decarbonisation initiatives to reduce its CO2 footprint.
FACT
Revenue: €1,686.9m, down 0.4%
EBITDA: €407.3m, down 0.9%
Guidance for 2025: Revenue of around €1.75bn, EBITDA around €415m, net cash position at €410m, capex ~€98m.
Industrial Plan 2025-2027 announced.
ANALYSIS
Cementir Holding has released positive financial results for FY24, with sales 1.1% and EBITDA 3.6% above our projections. These outcomes were due to robust demand in Turkey and other regions, except for Belgium and China. Indeed, we observed a positive volume trend at the group level, with cement volumes up 0.5%, RMC up 7%, and aggregates up 7.1%. This positive volume trend bodes well for future results, which might indicate that the company has passed the trough.
Despite positive volume growth and stable pricing, the company’s sales were flat (-0.4%) at €1,686.9 million, mostly because of FX headwinds due to the devaluation of the Turkish and Egyptian lira. EBITDA was slightly down (-0.9%) to €407.3 million, as the positive results in Turkey, Egypt, and Sweden partially offset the lower EBITDA in other regions.
Conservative forecast for 2025
Cementir Holding is entering the current year with a cautious outlook. While Turkey and Egypt might continue to deliver resilience in volume, there is concern about the devaluation of their currencies. This devaluation has a significant negative impact on Cementir’s consolidated results, and any positive trends in monetary policy to ease this devaluation will be beneficial for the company.
Regarding guidance, the company expects EBITDA to increase by around €8 million in 2025 and by €50 million over the following two years. In addition to hoping for an easing of currency devaluation in Turkey and Egypt, the company also anticipates a recovery in Denmark and the Asia Pacific region by 2026, along with increased capacity in Egypt.
Cementir has a net cash position of €290 million and expects to reach around €700 million by 2027. The company is accumulating cash that it might use to expand its business. With increased investment in Carbon Capture and Storage (CCS) and higher carbon rights costs, the company expects asset prices to become more affordable in the future for expansion. Currently, these asset prices do not include significant capex requirements for CO2 emission reduction, which is what the company is awaiting before making a move.
Industrial Plan 2025-2027
The group has revised its Industrial Plan, maintaining its core pillars while placing greater emphasis on decarbonisation. The financial targets for revenue have been raised (CAGR of 6.6% compared to 5.7% previously), as well as the outlook for EBITDA (CAGR of 4.8% versus 1.2% previously). The company is focusing on initiatives aimed at reducing carbon emissions, with a cumulative green capital expenditure of €53 million.
Given the lower free allowances and higher carbon rights costs, cement companies will need to invest to reduce their carbon footprint. From our perspective, the two primary strategies to meet the EU’s Fit to 55 targets are:
Reducing Clinker Content: Cementir aims to achieve a clinker ratio of 64% for grey cement and 78% for white cement by 2030.
Implementing CCS Technologies: The ACCSION Project, a carbon capture initiative, has been selected to receive a non-refundable grant of €220 million from the EU Innovation Fund. This project, a collaboration between Aalborg Portland (a subsidiary of Cementir Holding) and Air Liquide, will be located at the Aalborg plant in Denmark and is set to become operational by 2030. The CCS facility aims to reduce CO2 emissions by approximately 1.5 million tons annually. Most of the Capex will be covered by the EU grant, with Air Liquide covering part of it. Cementir’s portion is expected to be around €90 million, in the three years 2027-2029.
CCS technology can significantly increase energy requirements and related opex. Therefore, the company is also in discussions with the Danish Carbon Fund to potentially secure coverage for the opex of this technology over a 20-year period.
IMPACT
Following these results, we have updated our model upwards and maintain our positive recommendation. Our target price has been increased by 7%, supported by an increase in our EPS forecasts for 2024 (+0.07€), 2025 (+0.08€), and a higher DCF-derived valuation (+2.36€).
Cementir Holding is an Italian multinational company that produces and distributes grey and white cement, ready-mix concrete, aggregates and concrete products.
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