Greece: Titan Group has recorded a poor set of financial results for the second quarter and first half of 2011, in line with independent forecasts. Turnover in the first six months of 2011 was down by 18.2% year-on-year to Euro557m, earnings before interest, tax, depreciation and amortisation (EBITDA) declined by 12.4% to Euro141.4m and the group's net profit was Euro23.4m, down a massive 65.7% on 2010.
The weakening of the Egyptian pound and Turkish Lira, as well as the US Dollar versus the Euro, led to negative foreign exchange effects. At stable exchange rates, the decline in Group turnover would have stood at 14.1% and the decline in EBITDA would have been 6.6%. The group's results were also negatively impacted by increases in the price of fuels.
The deterioration in operating results was mainly attributed to the sharp decline in construction activity in Greece (reaching a nearly 40-year low), in conjunction with the deep and persisting depression of construction activity in the USA. In contrast, Group's activities in developing countries, particularly in the Eastern Mediterranean region, increased their contribution to the group's operating results.
In Greece, the combination of growing uncertainty regarding employment and attendant future household income, coupled with the decline in new loans issuance on the part of banks and the existing surplus housing stock, resulted in a sharp decline in demand for building materials. The repeated cutbacks in public investment programmes and the state's inability to cover its arrears, have brought public works to a standstill. In Greece Titan's EBITDA consequently declined by 49.4% compared to the first six months of 2010 to stand at Euro26.9m.
In the USA, construction activity continues to be faced with a very poor set of circumstances. Uncertainty regarding the timing of the economy's turnaround in conjunction with the country's debt crisis, the containment of public expenditure and the high levels of unemployment are preventing the recovery of the construction sector. Activity in the south east states, where Titan is primarily active, remains particularly stagnant at the very low levels witnessed in recent years. EBITDA in the USA recorded a loss of Euro4.8m in the first six months of 2011.
In south east Europe, indications emerged that the recovery in the region's economies is gradually beginning to have a positive impact on construction activity. Within the context of its stated goal of reducing its carbon footprint, the group completed the installation of a new unit in Bulgaria within the plant's perimeter for the pre-processing and recycling of municipal waste, which is expected to come on stream in the third quarter of 2011. EBITDA in the region of south east Europe recorded marginal growth, reaching Euro42.7m.
The social upheaval in Egypt is gradually affecting the country's growth rates and subsequently also pulling down the construction sector. In contrast, the growth of the Turkish economy has led to higher demand in the construction sector as well. EBITDA in the eastern Mediterranean region grew by 19.5% to Euro76.5m.
The prospects for Greece in the second half of 2011 remain very poor. Cement demand for the full year is forecast to stand at just 35% of 2006-7 levels. Support from the EU, which aims to kick-start investments and public works, is not expected to lead to a meaningful improvement in the coming year. In line with poor expectations in Greece and Titan's other major areas of interest, the group has said that it will continue to focus its efforts on the generation of free cash flow aiming at improving its financial flexibility.
