Brazil holds back Cimpor

Challenges in the market, particularly in Brazil, are said to have cancelled out signs of positive development for Portuguese cement company Cimpor in its first quarter results.

It said sales of cement and clinker of 6.8 million tonnes in the first quarter of 2015 were the result of growth in Argentina, Paraguay, Portugal and South Africa, but that this had not been enough to offset a downturn in Brazil and Egypt.

The first three months of 2015, compared to the same period of 2014, saw a total drop in cement and clinker sales of 5.3%.

Sales rose 7.4% to €636.6 million, it said, bolstered by an overall rise in average prices. It claimed that this made up for a consolidated downturn in cement volumes of 5.3% against the same period last year.

Cimpor said accumulated EBITDA (earnings before interest, taxes, depreciation and amortization) of €123.4 million reflected the lower activity in the first quarter.

In the Brazilian market, it said that its cement sales were affected by the economic contraction. Local constraints on the water supply affected the construction market, which in turn hit demand for cement. This led to a drop in profitability in the concrete business, said Cimpor. It also pointed to pressure on energy costs to explain the EBITDA trend against the first quarter of the previous year.

In Argentina, where it already claimed to be the market leader, Cimpor said it outperformed growth in local consumption, which it said was robust. Cement consumption in Paraguay remained dynamic, it said, and Cimpor, now making use of all of its local production capacity, had shown a marked improvement in EBITDA margin.

In Portugal, after a long period of downturn in consumption, the market returned to growth in the quarter against the same period in 2014. Cimpor said its Portuguese operation managed to capture this growth in domestic market demand while also maintaining its export capacity.

In South Africa, despite strong competition from a new operator in Cimpor’s operating region, as well as from imported cement, it said its commercial policy and the launch of co-processing made it possible to take advantage of growth in local demand.

Demand for cement in Egypt was expected to have fallen in comparison to the previous year, it said. This effect was said to be more pronounced in Cimpor’s volumes because of an adjustment to its natural market share after posting an unusual level of sales in 2014. This was based on competitors’ operations being negatively affected by fuel scarcity.

It said a new commercial dynamic introduced into its activities in Mozambique had come to fruition in the first quarter of this year. Despite a negative market trend over the previous year – with adverse weather and problems with local power supply, as well as increased pressure from importers – the company’s cement sales were said to be practically unchanged against the same period of the previous year, with a fall of just 1.5%.