Titan Cement

The positive outlook of the US (despite a mediocre start to the year due to adverse weather) is still counterbalanced by weak market conditions in Egypt and Greece for which we expect now an even slower pace of recovery. On the other hand, group’s strong market position in the US and competitive cost structure in all regions should translate to solid FCF generation (average 5-year FCF yield of 8%), allowing management to combine deleveraging, satisfactory dividend and growth capex. Overall, our revised estimates result in a target price of EUR 22.00 from EUR 22.40 previously, which at current market levels yields a “Neutral” recommendation.


ü  Greece: Continued weak residential demand and delays in the implementation of new infrastructure projects after the completion of four motorways in 2017 point to a high single-digit drop in domestic cement demand in 2018. On the other hand, cost savings (a EUR 4m staff reduction charge was taken in 4Q17) and high export volumes which are supported by healthy demand in the US should mitigate the impact. In this framework, we expect for this year flat EBITDA of EUR 18m (below our previous estimate of EUR 24m) on turnover of EUR 239m (-4% YoY).

ü  US: The healthy medium-term outlook remains on sustained cement demand growth from both private and public sectors and favourable price environment. On the flip side, 2018 results should be affected by the translation effect of the weaker USD (we assume an exchange rate of 1.20) as well as lower sales in 1Q18 due to high rainfalls. Overall, 2018 turnover is projected to increase modestly by 5% to EUR 912m, while margin expansion on better price/volume mix and cost containment should drive EBITDA up by 13% to EUR 209m (vs. EUR 215m estimated previously).

ü  SE Europe: Demand outlook in the region remains cautiously optimistic, limited by a competitive price environment. Fine-tuning our estimates, we currently forecast for 2018 turnover of EUR 238m and EBITDA of EUR 60m compared to EUR 226m and EUR 57m realized in 2017.

ü  Egypt: Despite a small improvement in recent months due to cement price increases (still lagging considerably the EGP devaluation of over 50% in 2016 and higher electricity costs) and temporary closure of two cement plants, the outlook remains uncertain as sales from army’s new cement plant, still in ramp up process, should hit the market soon, while further increases in electricity tariffs are likely. For 2018 we make small changes to forecasts, expecting turnover of EUR 170m and EBITDA of EUR 23m, reducing however our medium-term estimates.

ü  Group P&L: Following the revision of our estimates to incorporate recent dynamics in each region, we have reduced 2018 group turnover by 5% YoY to EUR 1,560m and group EBITDA by 4% to EUR 310m, still suggesting a EUR 39m uplift to 2017 EBITDA. Net income has also been reduced by 12% at EUR 97m.

ü  FCF, net debt & dividend: Assuming capex of EUR 118m, working capital needs of EUR 26m, and cash taxes of EUR 16m, for 2018 we calculate FCF of EUR 150m compared to EUR 60m in 2017 which included capex of EUR 171m. Group net debt at the end of 2018 is estimated to settle lower at EUR 680m from EUR 723m at the end of 2017. For FY18 we expect management to propose a higher DPS (including capital return) of EUR 0.65 (vs. EUR 0.55 in FY17), implying a dividend yield of 3%.

Comments

Post a Comment

Popular posts from this blog

Greece Moves Closer to Bailout Exit After Deal With Creditors

Greece and its creditors agreed on the next steps for completing the country’s final bailout review, a key milestone for exiting the program and striking a deal on debt relief. Government officials and representatives from the International Monetary Fund and euro-area creditor institutions completed a week of discussions in Athens on Saturday. Greek Finance Minister Euclid Tsakalotos said reaching a technical deal to conclude the fourth bailout review, the so-called staff level agreement, paves the way for discussion of debt relief measures. Euro-area finance ministers may begin a discussion over how to ease the country’s debt burden of about 320 billion euros ($377 billion) at a May 24 meeting. The SLA agreement also lets policy makers to proceed with designing a framework for the country’s post-program monitoring and determining what sort of strings would be attached to the debt relief. Tsakalotos said such a mechanism will be discussed at the June 21 Eurogroup meet...
Read more

Friends, sun, sand, and sea, that sounds like a summer to me!!!!!!

Image
  It's summertime!!! Back in 3 weeks!!! Smell the sea and feel the sky.  Katelios - Kefalonia, is a small fishing village on the southeast of the island and 32 kilometres away from Argostoli. Two decades ago in the village there were only fishermen who had their cottages and huts there. Gradually it became much more popular, initially among the residents of Argostoli who chose Katelios for their short excursions because of its local 'tavernas' with the delicious seafood. Since then there has been significant tourist development, although Katelios remains a quiet and peaceful destination, ideal for nature lovers and those seeking relaxation. The village is divided into Ano Katelios where the permanent residents have their properties and Kato Katelios which is the area with most of the tourist accommodation. Despite tourism Katelios hasn’t lost its character and therefore the peaceful and tranquil atmosphere along with the beautiful green surroundings m...
Read more

GREECE - IMF

The  head  of the  Euro Working Group  Vijlbrief expressed confidence that at the 21 June Eurogroup  there will be a comprehensive agreement for Greece, which most likely will not include financing from the IMF, although the Fund is expected to remain somehow involved in the programme (recall that Lagarde said recently that the IMF could be engaged in multiple forms and under multiple statuses). Vijlbrief, who expressed some concern over the nonparticipation of the IMF with funds, estimated that the Greek government will still not ask for a precautionary credit line. Vijlbrief also noted that the final tranche Greece can expect after the completion of the fourth review will be in the range of EUR 11-12 bn, while the size of the cash buffer for the post-bailout period has not been decided yet. Finally, the EWG head said that Greece would have to continue to fulfill three terms after the end of the current programme in August: reforms implementation, fiscal disci...
Read more