Titan S.A. (TITC.AT) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. I'm [ Vassilios, ] your Chorus Call operator. Welcome, and thank you for joining the Titan Group conference call and live webcast to present and discuss the first half 2025 results. Please note, this call and presentation is intended for analysts and investors only. [Operator Instructions] And the conference has been recorded. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Marcel Cobuz, Chair of the Group Executive Committee; and Mr. Michael Colakides, Group CFO. Mr. Cobuz, you may now proceed.

Thank you. Welcome all. Good morning, good afternoon, everyone. So I'm joined by Michael here, but also by John Ioannou, our designate Group CFO, who will be taking over from Michael and will be present at -- will be presenting our quarter 3 results as of 1st of November this year. Welcome, John. Very excited to report another growing first half of the year. That's the third year in a row of growing Titan. And for reference, over this 3-year period, we have doubled our absolute EBITDA. Growing first half with increasing sales and over proportional EBITDA growth, 2% in local currency, that would be the equivalent of 3.5% in sales and 4.9% in EBITDA growth quite a good performance. We have outperformed the market in a context of rather difficult weather events, considering the number of lost days in the Western Balkans and across the U.S. market, we could count at least an impact of $30 million in sales. We had also recorded resilient pricing in our key markets as well as pricing up potential in well seized in key markets like Greece and Egypt. I think throughout the presentation, we will also illustrate the cost management focus, particularly in -- on the energy side, which has improved also our cost base. Very happy to report that as part of our Titan Strategy 2026, we are well on track to deliver in advance our strategic KPIs and our strategic initiatives are well implemented. First, I will refer to the IPO successfully completed of Titan America earlier this year, which has also resulted into a record dividend payout of the year at EUR 3 per share, including an ad hoc dividend of EUR 2 per share. We have also executed -- announced and executed the divestment and repositioning of our Turkish assets from Eastern Turkey to Western Turkey with full divestment of an integrated cement plant Adocim. On the cementitious materials part, on alternative cementitious materials, we have announced new business model approaches with a joint venture in India for trading purposes of fly ash, another partnership and investment in U.K. on a site to be decommissioned of a coal-fired power plant where we are leveraging a proprietary technology to reclaim landfill fly ash. These 2 partnerships will give us access to ample fly ash sources in excess of 15 million tonnes. We pursue our organic development in aggregates, cement and ready-mix with a number of initiatives in increasing capacity, but also beefing up the logistics coverage. This first half of the year, we have announced 2 more bolt-on acquisitions, both in aggregates, both in Greece, and that's adding close to [ 145 ] million tonnes of aggregates to already important reserves of the group. Finally, the road map is well on execution for both decarbonization and digital as clear enablers of our strategy. We have published today an improvement on our CO2 footprint, decreasing by 18 kilograms or close to 3% our CO2 footprint per tonne of cementitious, while we pursue the improvement of alternative fuels usage, which has reached record high 22% lowering also the power consumption, increasing the cementitious usage in our blended cement. And on the digital side, we are pursuing now with more than 50% of our assets under real-time optimizers, which allow increased reliability, lower cost everywhere where we operate. So overall, a good first half with our teams, managing in an efficient way our assets, a lean way and execution focused. Michael will give more color on the financials, and then I'll take a position on the outlook for the second half of the year. Please, Michael.

Good morning and good afternoon, everybody, from me as well. We are pleased to report today our first half results with the group reaching higher EBITDA profitability levels, supporting by solid sales performance. In the first half of the year, sales reached EUR 1.329 billion, marking a 0.4% year-on-year increase, thanks to strong performance in the U.S., Greece and Egypt. We are very happy that we have managed to record sustained levels of volumes and pricing despite reduced U.S. dollar value versus the euro, adverse weather conditions, mainly in the U.S. and Southeast Europe, weak U.S. residential market performance and also the market uncertainty surrounding all these tariff threats and negotiations. Group EBITDA rose by 2% to EUR 287 million with resilient margins supported by cost discipline and operational efficiencies. Net profit after tax reached EUR 68.4 million after recording a one-off scope change of EUR 51.9 million due to the sale of cement operations in Eastern Turkey. Net income attributable to minority shareholders of Titan America of EUR 10 million as well as higher depreciation costs and incremental taxes. At this moment, let me please comment on the one-off scope change of EUR 51.9 million related to the sale of Adocim in May, of which EUR 38.5 million represent previously recognized net FX losses in equity, which at the time of Adocim sale disposal in line with the IFRS requirements were reclassified through P&L and then went back to equity. In the end, this accounting treatment has no impact on net equity. Our liquidity position has further strengthened on the back of the execution of the 2 corporate transactions mentioned before, with net debt standing at EUR 137 million at the end of June and a debt leverage of 0.2x EBITDA. Following the EUR 3 per share dividend payment made on July 3, the current leverage ratio stands at 0.6x EBITDA. Additionally, on July 1, we launched a new EUR 10 million share buyback program, reinforcing our commitment to delivering value to our shareholders. Our CapEx reached EUR [ 127 ] million, marking the fourth consecutive year of elevated capital investments as we continue to invest for growth, focusing on capacity improvements, energy mix enhancements, advanced technologies, sustainability initiatives and expanded storage capacities. We also made significant strides in our Titan 2026 growth strategy, having formed new partnerships in alternative cementitious materials, while Titan's venture capital fund has invested and committed EUR 25 million in total in the start-up ecosystem in building materials. We also completed bolt-on acquisitions of 2 more aggregate quarries in Greece, further strengthening our vertical integration. In terms of sustainability, we made progress in decarbonizing our footprint. Specific CO2 emissions declined by 18 kilos from 618 to 600 kilos per tonne of cementitious product, and our thermal substitution rate reached a new high of 22.6%, while our clinker cement ratio stands at 76.6%. Lastly, we are proud to share that Titan Group was recognized by Time Magazine for the second consecutive year as one of the world's most sustainable companies. Looking ahead, our outlook remains cautiously optimistic. We expect robust volumes and firm pricing to continue, supported by efficiency gains from our ongoing investments in digitalization and decarbonization. Moving on to the next slide. At the top of the page, we present the graphs of the first half of 2025 on illustrating our improved sales and EBITDA performance despite the FX translation impact of EUR 41 million on sales and EUR 8 million on EBITDA. At the bottom of the page, you can see our performance during the second quarter of the year, which was solid despite the shift in timing of the annual maintenance outage and the weather-related headwinds in the U.S. Performance was supported by the volume growth in cement, ready-mix and aggregates and the firm pricing across our products. On the following slide, we highlight the 12-month rolling figures for sales and EBITDA comparing June 2022 with June 2025, showcasing our growth performance trajectory and resilient profitability levels as we are operating now at a double EBITDA environment compared to 3 years ago. We are at EUR 586 million compared to EUR 269 million 3 years ago. Our income statement on the next slide, you can see that our sales remained robust despite the FX headwinds, while the improved cost performance and further operating efficiencies resulted in resilient and 2% improved EBITDA levels. Moving to the next slide, we present a few charts on some critical cost factors for our business. Based on futures, we observe an overall stable trend in solid fuel costs, while electricity prices, especially in Europe, are on the rise. Now turning to our sales volumes. Domestic cement volumes reached 8.6 million tonnes, a slight drop of [ 1% ] year-on-year. However, adjusting for the sale of Adocim, volumes were equal to those of last year. Volume growth in Greece and Egypt did offset softness in the U.S. and normalized demand in Southeast Europe. Volumes of aggregate rose by a strong 14%, supported by recent and targeted capacity investments in the U.S. and Greece, while those of ready-mix concrete grew by 5%. Export volumes to our terminals in France and the U.K. improved, but were softer in Italy and the U.S. In the second quarter, overall, volumes were higher in all key products in domestic cement, in aggregates and in ready-mix. Our capital expenditure, looking at the next slide, were high at EUR 127 million compared to EUR 109 million of the same period last year, with investments focused on leveraging technology to support long-term growth and enhance cost competitiveness. In the U.S., investments were also directed towards core expansion, new ready-mix and block plants and logistics upgrades. In Europe, the focus was on the cost-saving initiatives, particularly in alternative fuels, storage enhancements with the establishment of new silos. In Egypt, CapEx was primarily allocated to strengthening our production and our export capabilities. Now looking into our cash flow, where the high EBITDA levels despite the increased CapEx led to the strong positive operating free cash flow of EUR 102 million. Additionally, the proceeds from the U.S. IPO, along with the divestment of Adocim have contributed to a large reduction of net debt by EUR 485 million. Looking at the next slide, this reduction of net debt led to a June net debt position of EUR 137 million, down significantly from the EUR 602 million at year-end 2024, with debt leverage reaching the low of 0.2x EBITDA, which, after the payment of the dividend in early July has grown to a leverage ratio of 0.6x. It is reminded that there is no significant bond maturity in the next 2 years, with the next one being in -- of EUR 250 million maturing at the end of 2027. Now some comments on the individual markets performance. Let's take a look at each region individually, starting with the U.S., where our U.S. operations demonstrated resilience among adverse weather conditions and headwinds in demand in the residential sector. Sales and EBITDA declined by a small 1.3% in U.S. dollars, reaching $825 million and $175 million, respectively. Despite this slight drop, profitability margins remained stable, reflecting disciplined cost management and operational focus. Firm pricing in cement helped offset volume pressures while increases were achieved further down the value chain, particularly in aggregates, ready-mix and fly ash. Cement and ready-mix volumes were softer, impacted by persistent unfavorable wet weather conditions, causing more lost sales days and continued weakness in the residential construction sector. Public infrastructure and heavy nonresidential construction activity remained robust with a solid order book, while significant growth was seen in aggregates and fly ash. Capital expenditure was focused on growth and cost efficiencies, while digital transformation efforts continue reshaping the business with breakthroughs in logistics optimization, customer portal enhancements and AI-driven manufacturing improvements driving efficiency and customer engagement. Turning to Greece now. Titan's operations in Greece and its EU terminals delivered a strong performance in the first half, with sales increasing by 14% to EUR 258 million. This growth was driven by volume increases across all product lines, supported by robust pricing that reflects the positive momentum in the country. EBITDA grew to EUR 38.7 million, marking a 20% increase with profitability supported by lower fuel costs, which were partially offset by higher electricity charges. Cement market demand saw close to 10% increase, fueled by major infrastructure projects, a booming tourism sector and continued expansion in warehouse and logistics. Ready-mix and aggregate sales grew at an even higher rate. Titan continued to invest heavily in its Greek operations with capital expenditure allocated to aggregates and ready-mix expansion, logistics upgrades and cost-saving initiatives. Sustainability remains a key focus with improvements in the thermal substitution rate following targeted investments, while the clinker to cement ratio remained low, supporting the group's decarbonization goals. Moving now to Southeast Europe. Titan's operations in the region faced some headwinds in the first half of the year, with sales declining by 5% to EUR 197 million. While the drop was mainly driven by adverse weather in the first quarter, which disrupted construction activity and weighed on volumes, the comparison is also skewed by an exceptionally strong first half in 2024. EBITDA reached EUR 66.5 million, reflecting the combined effect of lower sales and the rising electricity cost while, however, the group was able to maintain and continue delivering higher EBITDA margins. Market fundamentals remained stable, supported by ongoing infrastructure and housing projects as well as the rollout of transregional transport initiatives that continue to provide a reliable demand base. Pricing strategies varied across the region with adjustments made to reflect intensified competition in some markets and rising production costs in other. Let's now turn to East Mediterranean, which presented a nice positive surprise. East Mediterranean region delivered a strong performance with sales despite massive currency devaluations increasing by 5% to EUR 120 million, driven primarily by construction boom in Egypt. EBITDA surged to EUR 23 million despite the divestment of Adocim in Turkey, and this performance reflects mostly the rebound of Egypt. In Egypt, domestic demand was supported by increased foreign investment in mega tourism-related developments and the resumption of public infrastructure projects, including hospitals, schools and transportation. Prices rose significantly in both local currency and euro terms, while cement exports expanded, benefiting from higher margins enabled by recent investments. As a result, Egypt's EBITDA increased by EUR 20 million. As a reminder, Titan's operations in Turkey as of June consists of the grinding unit in Marmara region and the Pozzolana quarry in Vezirhan on the eastern side of Marmara. I had a couple of comments on Brazil, where, as a reminder, we consolidated figures on an equity basis. Year-to-date cement demand in Brazil grew by 3.5% with a stronger momentum in the Northeast region where our joint venture operates. Apodi sales closed at EUR 50 million compared to EUR 55 million last year; however, sales rose in local currency, supported by strong pricing and higher volumes. EBITDA increased by EUR 3.5 million, reaching EUR 12.2 million, assisted also by lower energy and freight costs. Now let me turn to decarbonization and digitalization for a couple of comments. In the first half of the year, Titan Group made significant progress in our Growth '26 strategy, achieving new high of 22.6% alternative fuel substitution rate and specific CO2 emissions dropping to 600 kilos per tonne of cementitious material, marking an 18 kilos per tonne reduction year-on-year. A key step in the Growth 2026 strategy was Titan's investment in a supplementary cementation materials platform at the former power station in the U.K., where Titan will build an operating facility to process ponded fly ash into high-quality material using STETs, our subsidiary's proprietary technology to make lower carbon concrete. Additionally, we signed a strategic agreement with Ecocem to codevelop low-carbon cement products, initially targeting the Greek market to reduce the carbon footprint by up to 70%. This year, Titan earned multiple awards, including recognition by the Financial Times as one of Europe's climate leaders for the second consecutive year. Titan was also included in the CDP A list for climate-focused supplier engagement and awarded an Ecovadis Silver Badge, placing it among the top 7% of companies in its industry. Further distinctions included the Best Corporate Governance in Greece '25 Award from the World Finance Awards. And now on digital. In the first half of the year, Titan Group made strong progress in advancing its digital transformation across manufacturing, supply chain and customer experience. We have now completed the end-to-end installation of our proprietary AI-based real-time optimizers at 6 cement plants, and we're on track to deploy this technology across all our cement manufacturing assets by the end of next year. Alongside this, our machine learning failure prediction system is fully rolled out and continuously improving, enhancing reliability and remote service capabilities with significant savings from failure cost avoidance and less stoppage downtime. Following successful pilots in the U.S., we're also expanding new AI-driven cement quality optimization tools across our U.S. operations. On digital business, CemAI continues to grow its global customer base, offering fast returns through reduced downtime and maintenance costs to our actual cement company customers. It has also commercialized its own RTO-based process optimization solution. On the supply chain side, we've completed the rollout of our dynamic logistics platform for ready-mix in the U.S. This AI-powered solution significantly boost supply chain productivity and customer service and is now being prepared for deployment across other key markets. Lastly, on the customer experience side, the group continues digitalizing the way it interacts with customers with digital customer portals operating in all business units in Southeastern Europe, France and Greece. And with this, I will turn you now to Marcel for our outlook comments.

Thank you. And thank you, Michael, for complementing the financial view of our performance with highlights on decarbonization and digital, which are changing -- transforming the business model of Titan. Regarding the outlook, you had seen our press release, and you may remember what we have said a couple of weeks ago when we published the full year results, and we maintained a rather optimistic outlook reconfirming that this is a year with sales growth and EBITDA margin expansion for the remainder of the year. In the U.S. we see the underlying strength in our markets despite volatility. We see accelerated investments in infrastructure projects, growth in data center, which continue. Commercial and industrial demand remains strong as well as pricing showing resilience. Of course, the macroeconomic uncertainty and impact on business and consumer sentiment, and we witnessed continued soft demand in residential, which is driven by higher for longer interest rates and housing affordability concerns. In Greece, construction sector is set for further growth. Of course, we already highlighted to you the significant investments on the absorption of EU funds. So we expect again, sales and profitability as infrastructure initiatives across the whole country along the large projects like Ellinikon, where we have a presence on site with a dedicated ready-mix unit, all this being increased demand from projects as well as from housing, which will all continue to drive higher demand. As Michael mentioned, the construction sector in Southeast Europe is set also to benefit from continued infrastructure projects, mainly related to energy initiatives, but also the pre-accession to European Union efforts. There may be political uncertainties and global economic conditions, which may cause risk to sustained growth; however, for the remaining of the year, again, we expect sustained performance. Egypt, thanks to the turnaround of our operations, a big thanks to the team. There, we have reoriented a good part of our production towards exports, which is monetizable. And that is in addition to seizing opportunities as key contributors to growth, thanks to public-private partnerships and increased foreign direct investments that we have seen in the past months. So we expect, again, improved performance backed also by the growth of our exports, while we are watching out all the developments. In Turkey, we have proceeded with the divestment of our Eastern activities. We maintain our presence in the western part where we are seizing opportunities to grow. And we also witnessed a construction sector, which is rather resilient. In a nutshell, we are optimistic for the second half. The order books are solid, both in U.S., Greece and other markets backed by the infrastructure. We had lower comparables last year due to weather events, and we still have resilient pricing everywhere we operate. Second, the fundamentals remain strong everywhere we operate, both in terms of housing needs. So residential, even in the most challenged market is expected to stabilize and going upwards in 2026. The decarbonization push in European Union in preparation of CBAM is going to act as a key driver for growth. We maintain a high level of CapEx for the year, higher than 2024. And of course, we will be increasing the faster return projects and the growth and efficiency projects where we are aiming at least 50% in the overall number of projects. Given our low level of leverage, we are well positioned to seize opportunities and continue investments in our strategic drivers. In conclusion, growing top line and growing EBITDA for the rest of the year. Having said that, open to questions. Operator, please moderate.

[Operator Instructions] The first question comes from the line of Katsios Nestoras with Optima Bank.

Congratulations on your results. So one question from my side. If I remember correct, you had mentioned an Investor Day coming up this year -- later this year, obviously. Do you have any update on this matter?

Thank you. You are anticipating. I was keeping this news for the end of our conversation. Yes, we will be publishing our quarter 3 results on November 6, and we will be calling for an Investor Day, and I hope you will all be there on November 11. So 11/11, we will have a nice Investor Day.

The next question comes from the line of [ Coias Vasilis with Vandelaki Securities. ]

I have 2 questions. The first question, associates, I would like to provide us more color about the volumes trajectory in the U.S. during July. Is there any rebound in volumes? And the second question is associated with the tariffs imposed by Donald Trump to EU exports to U.S. If you see any pricing pressure, which will benefit your sales in the local market?

Thank you for your question. I'll start and then please, Michael, on the tariff. So on the back of good order book in U.S., we see good demand, particularly infrastructure and high-level commercial projects, but also data centers, our position in Florida. And I just came back with Michael, the number of cranes you can see across Miami, both in infrastructure projects, flyovers, bypasses, but also investments in high-rise business. And there, our integrated model of being able to supply the market with cement, with aggregates, but also with ready-mix is really bearing its fruits. In Mid-Atlantic, where we are present mainly with cement and ready-mix, we have a dedicated ready-mix plant for the large projects. And we have a number of data centers in Virginia. We should also be reminded that last year, we have experienced the sequence of 3 hurricanes impacting our sales in Florida. So we have a rather low comparable to last year. Tariffs, we are watching out on everything which happens. We already have booked a minimal impact in the first half, they kicked in, in April. By the time the...

Material is still...

Exactly. The vessels reached. So that's less than $2 million overall impact. And for the second half, the expectation with the latest forecast, Michael?

Well, it's still early days because not the whole tariff menu has been completed, and there are other regions, other geographies, which still haven't been finalized. So the competitiveness of imports and the cost of imports is still -- it's still out to see where it will end up. The U.S., no matter what happens, is a net importing country. It imports something like 25% of its needs. And whatever will happen, it will continue importing for a long time. So how the prices will adjust domestically, obviously, importers will be pushing for a price increase. I suspect that locally produced cement players who are very much close to being fully sold out, will welcome this opportunity. So our expectation is that we will see price increases as a result of the tariff implementation as is happening in other products as well. And we are running a long supply chain being integrated where the largest part of our volumes needed in U.S., the ones which are imported are coming from our Greek plants or from Turkish sourcing, so we can act on efficiencies, both at the source as well as at the destination. So we continuously minimize this impact.

And of course, the price increases will support the locally produced cement by increasing the relevant margin.

[Operator Instructions] Ladies and gentlemen, we will now move on to the written questions from our webcast participants. The first written question comes from Iakovos Kourtesis with Piraeus Securities and I quote, what is your expected CapEx for full year 2025?

Michael.