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Cementos Portland Valderrivas reduces losses by 99% to 0.6 million euro

23/07/2013

Cementos Portland Valderrivas reduces losses by 99% to 0.6 million euro

• Cement consumption in Spain declined by 24.2% in the first half of 2013
• The asset swap with Irish company CRH provided capital gains of 104.8 million euro
• The Group booked 60.8 million euro in provisions for asset writedowns and workforce restructuring

 

In a context of a sharp decline in demand in Spain, Cementos Portland Valderrivas (CPV) reduced losses by 98.9%, to 0.6 million euro, compared with losses of 48.6 million euro in the first half of 2012. CPV also swapped assets with Irish company CRH in 1H13, which provided capital gains of 104.8 million euro.

An agreement was reached on 25 February whereby CRH transferred its 26.34% stake in Corporacion Uniland to CPV. In consideration, CPV transferred its 99.03% stake in Cementos Lemona to CRH. As a result of this operation, Cementos Portland controls 99.99% of Uniland. Additionally, CRH acquired the cement terminal in Ipswich (UK) from CPV for 22.1 million euro. This deal generated pre-tax capital gains of 104.8 million euro: 89.8 million euro from the asset swap and 15 million euro from the cement terminal sale.

According to José Luis Sáenz de Miera, Chairman and CEO of Cementos Portland Valderrivas, results for the first half reflect "efforts last year to reduce costs in Spain, where demand continues to shrink, and to improve efficiency in operations in the US, where consumption of construction materials is on the rise".

Cement consumption in Spain declined by 24.2% in 1H13, to 5.5 million tonnes. This performance was visible in Cementos Portland Valderrivas' results: revenues slipped by 20%, to 270 million euro, compared with 338 million euro in the same period of 2012. This decline was exacerbated by lower sales of CO2 trading rights in the first half of the year. The greater contribution by the US subsidiary partially offset the decline in revenues and sales of CO2 rights.

Countries other than Spain accounted for 58% of total revenues (158 million euro). Excluding the sale of Cementos Lemona and the Ipswich terminal, revenues declined by 14%.

EBITDA amounted to 25.5 million euro, compared with 31.1 million euro in the first half of 2012, i.e. a decline of 18%, and EBIT totalled 23.5 million euro, compared with -36.1 million euro in the same period last year.

Measures to boost profitability

In view of this decline in activity in Spain, the Group is implementing additional measures to adapt production capacity and the business structure to the current market situation. This includes a revision of the 2012-2021 business plan, and new measures as part of the NewVal Plan. To this end, the Group booked 60.8 million euro in provisions for asset writedowns and workforce restructuring.

Other measures include the temporary shut-down of plants, which will lead to temporary redundancy plans, set to commence in the coming months. The company presented a redundancy plan in June, which affected 318 plant employees.

It will also close concrete, mortar and aggregate plants in Spain, maintaining only profitable facilities whose book value has already been provisioned. The Group will make adjustments to the corporate structure, in terms of both staff and offices, to adapt it to its operating needs. The company presented a redundancy plan in June that affected 227 staff to attain a leaner and more centralized structure.

Other measures include wage cuts, which will be applied to executives as from July and to the rest of the workforce in the coming months, and simplification of the Group's corporate structure. All of these measures will improve recurring EBITDA by around 40 million euro, with an extraordinary cost of 29 million euro.

Furthermore, the company is currently negotiating to divest around 15 million euro from several non-strategic assets.