Vicat: Nine-Month 2015 Sales up +1.9% on a Reported Basis

Regulatory News:

Vicat (Paris:VCT):

• Third-quarter sales up +1.7% and down -3.7% at constant scope and exchange rates
• Robust business trends in the United States
• Activity growth in Asia underpinned by Turkey and India
• Reduced downtrend in the Cement business in France in the third quarter
• Lower activity in West Africa and the Middle East

The Vicat group (Euronext Paris: FR0000031775 – VCT) has today reported sales of €1,883 million for the nine-month period to 30 September 2015, up 1.9% compared with the same period of the previous year. At constant scope and exchange rates, the Group’s sales fell by 5.3% compared with the same period of 2014. In the third quarter, sales grew by 1.7% on a reported basis and declined by 3.7% at constant scope and exchange rates.

Consolidated sales by business segment:

Commenting on these figures, the Group’s Chairman and CEO said: "Vicat’s third-quarter performance reflects a still contrasting picture from one region to another, but there were signs of improvement in certain markets. Strong increases were recorded in the United States and Turkey, while volumes in India returned to growth in a still favourable pricing environment, and, lastly, our production unit in Kazakhstan ran at full capacity in a market nevertheless affected by a strong currency devaluation. In France, the shortfall compared with 2014 declined significantly in the Cement business over the past quarter, and the market currently appears to be gradually stabilising at an historically low level for French cement consumption. Against this backdrop, Vicat remains focused on its objectives of maximising its cash flow and reducing its debt, while leveraging the efficiency of its manufacturing facilities, its geographical diversification and its strong positions in its local markets.”

Consolidated sales in the first nine months of 2015 came to €1,883 million, representing an increase of +1.9% and a decline of -5.3% at constant scope and exchange rates compared with the same period of 2014.

Operational sales advanced by +1.8% on a reported basis, but declined -5.2% at constant scope and exchange rates. This overall trend reflected:

• growth in the Cement business of +2.5% (down -4.9% at constant scope and exchange rates);
• an increase in the Concrete & Aggregates business of +1.9% on a reported basis (down -5.4% at constant scope and exchange rates);
• near-stability (-0.9%) in Other Products & Services on a reported basis (down -5.5% at constant scope and exchange rates).

As a result, an analysis of operational sales by the Group’s various businesses shows a very small increase in the contribution from Cement, which stood at 53.9% of operational sales, up from 53.6% in the same period of first nine months of 2014. Concrete & Aggregates generated 31.8% of operational sales, identical to the level in the first nine months of 2014. Lastly, Other Products & Services posted a decline in its contribution to 14.3% of nine-month 2015 operational sales, compared with 14.7% in the equivalent period of 2014.

In the third quarter of 2015, consolidated sales totalled €640 million, up +1.7% compared with the same period of 2014, down -3.7% at constant scope and exchange rates.

Operational sales advanced by +2.2% on a reported basis in the third quarter, but declined -2.9% at constant scope and exchange rates. This overall trend reflected:

• stability in the Cement business (-0.2%) on a reported basis (-5.0% at constant scope and exchange rates);
• a solid increase of +5.2% in the Concrete & Aggregates business (-1.0% at constant scope and exchange rates);
• a +4.6% increase in the Other Products & Services business (+0.6% at constant scope and exchange rates).

In this press release, and unless indicated otherwise, all changes are calculated based on the first nine months of 2015 by comparison with the first nine months of 2014 and are stated at constant scope and exchange rates.

1. Geographical breakdown of consolidated sales in the nine months to 30 September 2015

1.1. France

Consolidated sales in France fell -9.6% at constant scope and exchange rates to €581 million. In a persistently tough economic climate, consolidated sales dropped by a more moderate -6.2% in the third quarter, as the market now appears to be progressively stabilising at a historically low level.

• In the Cement business, operational sales declined -8.3% over the period as a whole (consolidated sales down -6.8%). A decrease that resulted from lower volumes (just below -6%) and a very small reduction in average selling prices.
  • Operational sales fell by -3.3% in the third quarter (consolidated sales were down -3,5%) owing to a very steep deceleration in the rate of decline, after operational sales decreased by -14.1% in the first quarter and -7.5% in the second quarter. The bulk of this decline resulted from a volume shortfall by comparison with the previous year. This differential narrowed continuously to just over -1% in the third quarter from -11% in the first and -5% in the second. Average selling prices moved slightly lower compared with the third quarter of 2014, but did not decrease on a sequential basis.
• In the Concrete & Aggregates business, operational sales fell back -14.4% (consolidated sales down -14.7%) over the first nine months of the year. The volume contraction of just under -13% over the period in both Concrete and Aggregates reflected the impact of weak demand in a challenging macroeconomic environment and far less favourable weather conditions than in 2014 over the first part of the year. Selling prices posted a slight increase in Aggregates, but declined slightly in Concrete.
  • After the very steep decline in operational sales recorded in the first quarter (down -21.3%), the second-quarter fall was smaller (down -11.7%) and slightly smaller in the third quarter (down -11.0%). In the third quarter, volumes made up ground on 2014, with the decline settling at just under -10% in Concrete and merely -3% in Aggregates. Average selling prices declined very slightly in Concrete and rose in Aggregates.
• In the Other Products & Services business, consolidated sales declined by -1.3% in the first nine months of the year. This performance reflected a +1.9% top-line rebound in the third quarter.

1.2. Europe (excluding France)

Nine-month 2015 sales recorded in Europe excluding France, rose by +3.4% on a reported basis, but fell -9.4% at constant scope and exchange rates.
In the third quarter, sales rose by +6.9%, with a decline of -5.2% at constant scope and exchange rates.

In Switzerland, the Group’s consolidated sales rose by +5.0% in the first nine months of 2015. At constant scope and exchange rates, they declined by -8.4%. This contraction over the first nine months of 2015 reflected an unfavourable base of comparison created by the exceptionally mild weather conditions of the first quarter of 2014 and the ending of a number of major projects in August 2014.

In the third quarter, sales advanced by +8.2% on a reported basis, with the decline at constant scope and exchange rates narrowing to -4.4%.

• In the Cement business, operational sales rose by +4.1%, but declined -9.2% at constant scope and exchange rates. Consolidated sales moved up +7.7%, but fell back -6.1% at constant scope and exchange rates. Volumes contracted by around -5% over the period. Average selling prices dropped significantly owing to fiercer competition.
  • In the third quarter, operational sales rose by +4.3% on a reported basis, but decreased -7.8% at constant scope and exchange rates (down -6.3% on a consolidated basis). The factors contributing to this contraction were a decline in volumes of just under -4% and continuing pricing pressures.
• In the Concrete & Aggregates business, operational sales picked up slightly (up +2.3%), but declined -10.8% at constant scope and exchange rates. Consolidated sales rose 2.5%, and decreased 10.7% at constant scope and exchange rates. The top-line contraction over the period came from a reduction in volumes of around -11% in both Concrete and Aggregates, offset partly by an improvement in average selling prices.
  • In this business, the third quarter confirmed the progressive closing in the performance gap on the previous year, with operational sales down
    -5.2% at constant scope and exchange rates (consolidated sales down -4.6%). This far less significant decrease in the third quarter reflected a modest contraction in Concrete volumes (around -3%) and a drop of close to -10% in Aggregates, offset partly by an improvement in average selling prices in both Concrete and Aggregates.
• Consolidated sales recorded by the Precast business fell -7.6% at constant scope and exchange rates owing chiefly to a drop in sales of rail sleepers arising from completion of the Gothard tunnel in 2014. Another contributing factor was the later, but dynamic, start-up of track replacement and modernisation work from the end of the first half of 2015.
  • As a result, the fall in consolidated sales during the third quarter was only modest (down -2.8%), owing to the near +3% increase in volumes against the backdrop of a slight dip in selling prices.

In Italy, consolidated sales dropped by -29.9% over the first nine months. This decline reflected a contraction of close to -27% in volumes, in a domestic market that is still very badly affected by the macroeconomic and industry environment and the Group’s selective business policy intended to keep a tight rein on its credit risk. Against this backdrop, selling prices dipped very slightly.

• Third-quarter sales fell -22.7%, with volumes declining (by around -20%) at a slightly slower pace than in the first two quarters of the year. Selling prices edged very slightly lower.

1.3. United States

Business in the United States continued to recover in a firm macroeconomic environment providing support for the construction sector. As a result, the Group’s consolidated sales rose by +41.5% and by +16.3% at constant scope and exchange rates.

In the third quarter, the Group recorded another significant increase in its consolidated sales (up +18.6% at constant scope and exchange rates) in this zone.

• In the Cement business, operational sales grew by +24.5% at constant scope and exchange rates over the first nine months (up +51.5% on a reported basis). Consolidated sales moved up +24.0% at constant scope and exchange rates (up +50.8% on a reported basis). This performance was driven by an increase of over +14% in volumes, with very strong momentum in the South-East region, as well as a solid increase in prices, especially in California.
  • Growth picked up pace in the third quarter, with operational sales advancing by +28.7% (+32.9% on a consolidated basis) at constant scope and exchange rates. Volumes continued to move higher (by close to +22%), with another very strong increase in the South-East owing to the strength of demand in Atlanta, where the Group has very strong positions, and in California. Selling prices moved up significantly in California and more modestly in the South-East.

• In the Concrete business, consolidated sales over the period as a whole advanced by +13.1% at constant scope and exchange rates (up +37.5% on a reported basis) on the back of healthy volume growth (of close to +9%), especially in California. Average selling prices also increased, substantially, especially in the South-East.
  • In this business as well, third-quarter performance reflected the strength of the Group’s business in the region, with consolidated sales advancing by +12.7% at constant scope and exchange rates. Volumes increased by close to +7% across the region, but the rise was stronger in California than in the South-East. Average selling prices continued to rise, with a slightly stronger increase in the South-East than in California.

1.4. Asia (Turkey, India and Kazakhstan)

Sales across Asia came to €442 million, up +9.5% on a reported basis and + 1.4% at constant scope and exchange rates.
The Group’s performance improved significantly in the third quarter, with consolidated sales advancing by +3.2% at constant scope and exchange rates (up +4.4% on a reported basis).

In Turkey, sales over the first nine months of the year came to €172 million, up +0.9% and up +2.1% at constant scope and exchange rates. Business growth was stronger in the third quarter with consolidated sales rising +9.8% at constant scope and exchange rates.

• In the Cement business, the Group recorded a very small increase in its operational sales over the first nine months of +1.3% at constant scope and exchange rates (down -0.7% on a consolidated basis). This performance reflected a rise in volumes of close to +3% in a stable pricing environment. The favourable conditions prevailing in markets served by the Bastas plant, especially Ankara, fully offset a slight dip in business in the Konya region.
  • In the third quarter, the Group recorded a healthy top-line increase, with operational sales moving up +5.4% (consolidated sales up +2.4%) at constant scope and exchange rates. This further increase in sales was underpinned by volume growth of close to +10%, fully offsetting a very slight erosion in average selling prices. It should be noted that there was renewed growth on the Konya market with a solid increase in volumes in the latest quarter, with prices down slightly.
• The operational sales recorded by the Concrete & Aggregates business rose + +7.1% at constant scope and exchange rates (up +5.9% on a reported basis). This healthy business growth was driven by an increase of close to +13% in Concrete volumes and +10% in Aggregates, amid lower pricing conditions.
  • In the third quarter, the Group’s business accelerated sharply, with its operational sales up +22.8% (consolidated sales +25.3%) at constant scope and exchange rates, with a significant volume increase of over +32% in Concrete and of close to +31% in Aggregates, in still unfavourable pricing conditions.

In India, the Group posted consolidated sales of €206 million in the first nine months of 2015, up +18.4% on a reported basis and up +1.9% at constant scope and exchange rates. The strong hike in average selling prices over the period helped to make up for a contraction in Cement volumes of close to -15%, with over 3 million tonnes sold, and reflects the more selective business strategy implemented by the Group from the second half of 2014 across all its operations to reap the full benefit of the firm recovery in selling prices.

• In the third quarter, sales advanced by +1.3% at constant scope and exchange rates. Over the period, the Group recorded a slight increase in volumes of close to +2%, fuelled mainly by a steep increase in clinker volumes to export markets. Average selling prices were stable over the period with a less favourable base of comparison and geographical mix. Even so, they continued to move higher in the domestic market.

Kazakhstan recorded an increase in its consolidated sales to €64 million, representing a rise of +8.4% on a reported basis, and a decline of -2.2% at constant scope and exchange rates. Overall, volumes moved up by close to +9% in the first nine months of the year, almost completely offsetting the contraction in selling prices recorded at the beginning of the year in a fiercely competitive environment as a result of imports from Russia.

• Third-quarter sales declined by -7.4% at constant scope and exchange rates. The slight increase in volumes of over +2% did not fully offset the strong decline in prices observed at the beginning of the year. However, the pressure from imports has subsided considerably with the sharp devaluation in the Kazakhstani tenge over this latest period. Against this backdrop, given the impact of lower prices on the least efficient industry operators, the Group anticipates a change in the pricing environment which is expected to improve in this region.

1.5. Africa and Middle East

In the Africa and Middle East region, sales came to €272 million, down -9.5% on a reported basis and down -14.0% at constant scope and exchange rates. The Group’s performance was marked across the region by a fall in sales, but it was particularly significant in West Africa given the stronger competition in Senegal. Business trends in Egypt were affected by a strong decline in selling prices.

• In Egypt, sales came to €92.2 million, down -0.4% on a reported basis and down -11.4% at constant scope and exchange rates. This performance reflected a marked decline in selling prices from the second quarter onwards, together with stable volumes over the period as a whole.
  • In the third quarter, the Group recorded a -24.2% decline in its sales at constant scope and exchange rates (down -18.0% on a reported basis). This sharp contraction was the result of a near -7% decline in volumes owing in particular to the impact of the Eid Al-Fitr religious festival in September (versus October in 2014) and the start-up of the coal grinders, temporarily disrupting both kilns’ production in September. In addition, average selling prices recorded a very significant fall over the quarter amid fiercer competition.
• In West Africa, sales declined -15.2% at constant scope and exchange rates (down -13.6% on a reported basis) from a very high level of activity in 2014. This decline mainly reflected the impact to the competitive landscape caused by a newcomer in Senegal early 2015, which resulted in a contraction in Cement volumes of around -12%. Even so, average selling prices dipped only slightly over the first nine months of the year.
  • In the third quarter, sales dropped -23.7% at constant scope and exchange rates (down -22.6% on a consolidated basis). A volume decrease of -21% resulting from rigorous wintering, the effect of religious festivities and continued market penetration on the part of the newcomer as well as a slight dip in average selling prices led to this decline.

2. Breakdown of nine-month 2015 sales by business segment

2.1. Cement

Consolidated sales in the Cement business grew by +1.9%, but declined by -5.6% at constant scope and exchange rates. Volumes moved -4.4% lower over the period.
In the third quarter, consolidated sales declined by -2.0% or -6.6% at constant scope and exchange rates. Cement volumes were stable over the latest period.

2.2. Concrete & Aggregates

Consolidated sales in the Concrete & Aggregates business rose slightly (up +1.9%), dipping -5.5% at constant scope and exchange rates.
Concrete volumes delivered were stable (down -0.1%) over the period, but Aggregates volumes declined by -4.8%.
Third-quarter consolidated sales rose by +5.6% and were almost stable (-0.7%) at constant scope and exchange rates. Volumes moved up +6.6% in Concrete and rose by +3.4% in Aggregates.

2.3. Other Products & Services

Consolidated sales in the Other Products & Services business edged up +2.4%, but were -3.6% lower at constant scope and exchange rates. During the third quarter, consolidated sales advanced by +6.2% and were stable at constant scope and exchange rates.

3. Trends in financial structure

Financial position at 30 September:

Vicat’s financial position remains very healthy. Gearing (net debt/equity) stood at 43.7% at 30 September 2015, versus 46.8% at 30 June 2015.

Bank covenants do not pose a threat to either the Group’s financial position or its balance sheet liquidity. Vicat meets all the ratios laid down in the covenants stipulated in the financing agreements.

4. Outlook for 2015

For 2015, the Group provides the following comments concerning its markets:

• In France, the Group expects the macro-economic environment to remain unfavourable to the construction sector. The first half of the year has been characterised by a particularly challenging comparison base due to the exceptional weather conditions recorded during this period in 2014. In the second half of the year, the Group expects stabilisation or even very gradual improvement in the construction sector. In view of these factors, volumes are likely to be down over the full year, in a globally unchanged pricing environment.
• In Switzerland, the Group expects its performance to remain robust in 2015, after having been impacted in the first half of the year by less favourable weather conditions than in 2014 and by the completion of major projects in the second half of 2014. The second half of the year could however benefit from the launch of new infrastructure works. On this basis, volumes are expected to remain close to 2014 levels, with lower prices.
• In Italy, with the economic climate likely to continue to be marked by recession, volumes are expected to decrease, but at a slightly slower pace. Meanwhile, in light of the first signs of consolidation in this market and the Group’s selective sales and marketing policy, the trend in selling prices could be more favourable.
• In the United States, volumes are expected to rise further, in line with the rate of sector recovery in the country. Selling prices should also increase in the two regions in which the Group operates.
• In Turkey, market momentum is expected to remain brisk. The Group should capitalise fully on its strong positions in the Anatolian plateau and its efficient production facilities. In this respect, the Group will benefit from the modernisation and restart of its second kiln at the Bastas plant at the end of the year. In this environment, the trend in selling prices should remain volatile but globally stable.
• In Egypt, the gradual restoration of security should enable the Group to confirm the upturn in sales over the course of the year. The first nine months were affected by still high energy costs. In the last quarter of the year, the Group should achieve a significant a sharp reduction in these costs in light of the commissioning of the two coal grinders. Against this backdrop, volumes are expected to progressively return to growth in a pricing environment that should remain highly volatile.
• In West Africa, the market is expected to remain well oriented over the course of the year. However, the competitive climate is likely to become more difficult due to the ramp up of the new player.
• In India, the Group remains very confident about its ability to capitalise fully on the quality of its production facilities, staff and positions in a market that should benefit this year from an upturn in the macro-economic environment and more particularly from the announced investments in infrastructure. In a context that should remain favourable for growth in cement consumption, prices – although expected to remain very volatile – should overall be well oriented over the full year.
• In Kazakhstan, the Group will be able to leverage on the quality of its production unit and staff in an environment marked by the sharp devaluation of the Kazaksthani tenge at end August 2015. In this environment, the competitive situation should gradually improve in a market whose growth potential remains intact.

5. Conference call

To accompany the publication of its nine-month 2015 sales, the Vicat group is organising a conference call in English that will take place on Wednesday 4 November 2015 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:

To listen to a playback of the conference call, which will be available until 7pm on 11 November 2015, dial one of the following numbers:

ABOUT VICAT

The Vicat Group has over 7,700 employees working in three core divisions, Cement, Concrete & Aggregates and Other Products & Services, which generated consolidated sales of €2,423 million in 2014.
The Group operates in eleven countries: France, Switzerland, Italy, the United States, Turkey, Egypt, Senegal, Mali, Mauritania, Kazakhstan and India. Nearly 66% 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).

Vicat group – Financial data - Appendices

Breakdown of nine-month sales to 30 September 2015 by business segment & geographical region

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