Press release

At a meeting today, the Italcementi S.p.A. Board of Directors examined and approved the consolidated half-year report as at and for the year June 30, 2010.

During the first six months of the year Group sales volumes slackened slightly in cement and aggregates, and made a small improvement in ready mixed concrete. Specifically, after a first quarter that saw a significant reduction in volumes, in part due to particularly adverse meteorological conditions, the second quarter of 2010 reported sales growth in all lines of business compared with the second quarter of 2009 (notably an improvement of 2.5 % in cement and clinker). Performance in the second part of the six months enabled the Italcementi Group to make a significant recovery with respect to the decline for the year to the end of March and to close the first half with cement and clinker sales volumes of 27.5 million metric tons (-1.1% on an historic basis), reflecting strong support from the emerging countries, which, with the exception of Bulgaria, made general progress. Sales volumes for aggregates amounted to 19.2 million metric tons (-4.0%), while ready mixed concrete volumes totaled 5.7 million cubic meters, an improvement of 1.8%, driven in particular by progress in Turkey, Thailand and Kuwait.
Difficult market conditions led to significant price reductions in India, Bulgaria, USA and Italy. In Italy, nevertheless, the Group reported an increase in sales volumes toward the end of the first half compared with the year-earlier period. Meanwhile, the positive trend in revenues per unit was confirmed in most of the emerging countries, and in Egypt and Morocco in particular.
To combat and limit the consequences of the fall in volumes and reduction in prices, the Group continued to roll out its program of variable and fixed cost containment measures, which once again produced significant savings (on an annualized basis the cost reduction was an estimated 100 million euro).
For the first half of 2010 the Group reported consolidated revenues of 2,455.1 million euro, reflecting a downturn of 5.1% compared with the first half of 2009 (-6.0% at constant size and exchange rates). An improvement in revenues among the emerging countries (with the exception of Bulgaria and India) and the positive contribution of the Trading sector were offset by the reductions in Western Europe and North America.
Operating results, too, were penalized by the volume/price dynamic, whose effects were counterbalanced in part, as noted above, by the decrease in operating expenses.
Earnings, which fell sharply in the first quarter of the year, made a recovery in the second quarter, enabling the Group to bring the return on revenues back above 21%. First-half recurring EBITDA was 434.5 million euro (-12.6%), of which 298.8 million euro in the second quarter (-3.1%), while EBIT, at 197.9 million euro, fell by 16.8% during the period.
After net finance costs of 57.7 million euro (+2.3%), which reflected the impact of non-recurring costs of approximately 21.4 million euro, impairment losses of 20.7 million euro on financial assets (not present in the first half of 2009) and income tax expense of 43.9 million euro (-23.8%), net profit for the period was 81.8 million euro (-35.8%). The reduction in results of companies with limited minority interests and the greater weight of the results of companies with material minority interests virtually cancelled out net profit attributable to the Group (0.4 million euro) in favor of net profit attributable to minority interests (81.4 million euro).
Investments in fixed assets of 274.4 million euro (394.3 million euro in the first half of 2009) were substantially for measures to boost industrial efficiency and complete a series of strategic projects (Morocco, India and Italy).
Careful management of cash flows and, specifically, close attention to the working capital requirement, meant that at the end of June 2010 Group net debt, at 2,458.1 million euro, was in line with net debt at the end of 2009 (2,419.9 million euro); shareholders' equity increased once again, rising to more than 5 billion euro (5,088.4 million euro compared with 4,692.2 million euro at December 31, 2009). The gearing ratio (net debt/shareholders' equity) was 48.3% at June 30, 2010 (51.6% at the end of 2009 and 60.8% at June 30, 2009).

In the first half of 2010, operations at Calcestruzzi (illustrated in detail later in this release) were again not included in the Italcementi Group scope of consolidation. After the ruling of the preliminary investigating magistrate on April 27, 2010, including an order for the return of assets only with regard to the company’s ordinary powers of management, the Calcestruzzi Board of Directors instructed the company CEO to conduct a review of the company’s situation as quickly as possible with a view to the formulation, in the second half, of an industrial/financial plan for the company.

Outlook – For the second half of the year the macro-economic situation is expected to show significantly different trends in the various regions where the Group operates. Construction investment will remain lively in the emerging countries, especially in the Med Rim countries, with benefits for cement sales volumes and sales prices alike. Conversely, the effects of the economic crisis and consequent restrictive budget policies will continue to affect the European market in the second half of the year. In the USA, after a lengthy period of recession, expectations of a recovery in demand are confirmed for the second part of the year.
Within this overall situation of equilibrium for the Group, sales price conditions will continue to be difficult in some countries, including Italy and India, with an adverse effect on operating results. Group programs to reduce structural costs and boost industrial efficiency will continue, bringing important results in addition to the already excellent benefits achieved in 2009.
Second-half operating results are expected to be comparable with those of the first six months of 2010.
The measures introduced to reduce the working capital requirement, which led to an improvement both in 2009 and in the first half of 2010, will continue for the rest of the year, helping the Group maintain a solid Net Financial Position.