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

Ladies and gentlemen, thank you for standing by. I am [ Gelli ], your Chorus Call operator. Welcome, and thank you for joining the Titan Group conference call and live webcast to present and discuss the 9 Months 2025 Results. Please note, this call and presentation is intended for analysts and investors only. [Operator Instructions] The conference is being recorded. [Operator Instructions]. At this time, I would like to turn the conference over to Mr. Marcel Cobuz, Chair of the Group Executive Committee; Mr. John Ioannou, Group CFO; and Mr. Michael Colakides, Managing Director, Group CFO until the end of October. Mr. Cobuz, you may now proceed.

Thank you. Thank you, and hello, everyone. Very happy to be here to present once again a very strong set of quarterly results, which confirm our value growth trajectory of Titan. I'm with 2 CFOs today, and that's another testimony of an excellent continuation and renewal we are doing at the group. Michael Colakides will continue working with me for the next years, particularly focused on M&A projects, as well as on strategic issues, and he remains a very valued Board member. So thank you, Michael, for all these years at the helm of our financial function and for steering with an iron fist the trajectory of the group. Would you like to say a few words, Michael?

Thank you. Thanks, Marcel. Well, I would like to thank everybody for staying with us. It's been now 10 years that I've been handling the investor calls and having close relationships with many of you, with investors and analysts. And I would like to thank you for that. I'm very glad that we have picked a record quarter to hand over to John. John, you all have read his CV and you will see him on Tuesday at the Investor Day. I'm very happy to be passing on the baton to him for the CFO role as we have quite a job to do to satisfy to meet the targets that we will be setting on Tuesday. So thank you all. And now I'm passing on to John.

Of course, and you will all see Michael on Tuesday on the stage as well as mingling with you all at the Investors Day. So this quarter is in the good tradition of the past 3 years, overperforming the markets by Titan. Excellent performance in delivering growth. Yes, we have been helped a bit by the better weather in U.S. But we have registered a record quarter with positive growth in sales, more than 3.4%, and that doesn't include the ForEx impact. An over proportional EBITDA growth of more than 20% before ForEx impact. Net profit of more than 35% and that's what is not in the press release is also that the margin expansion is by more than 400 basis points. So we have reached 27% -- 27.3% for the quarter. As well as the ROCE, which remains top of the class in our industry at more than 17% now for the second year in a row. This quarter is also marked by a lot of activity on the inorganic growth. We have completed 3 bolt-on acquisitions here in Greece, 2 in aggregates, one in ready-mix. The one we have announced yesterday is in Crete. And overall, we have added through the bolt-ons more than 200 million tons of aggregates and essential material, particularly for the infrastructure as well as the concrete works around the country, and channel capacity building. We have entered the precast joint venture in Western Balkans, which is a very promising market together with Molins, and we have announced our investment in Bosnia Herzegovina with ramifications in all the neighboring markets. We have announced 1 hour ago after the due or customary announcements to the employees that we have also entered into exclusive negotiation in France for an acquisition in Northern France, a very promising market for cementitious, where we have acquired the business comprising a terminal, a grinding capacity, a state-of-the-art business. We continue our transformation and capabilities building and the execution of our Strategy 2026 at a fast pace backed by a very strong balance sheet given our low leverage. Over the strategy execution years, we have strengthened the core in cement and aggregate by promoting low-clinker solutions. We have invested in cementitious platforms and adjacencies, and this is a topic we will discuss more at the time of the Investor Day. But also, we are among the early adopters of new technologies as we have entered the development stage for our carbon capture project in the plant near Athens. We are progressing at a fast pace with our calcined clay project in our plant in U.S., in Roanoke. And we have announced recently pioneering another revolutionary technology, which is meca clay and activating a new generation of cementitious together with Polysius, where the first pilots will be in Greece. On the customer innovation fronts, we are well balanced, exposed to infrastructure, data centers, the commercial segment as well as to residential end markets in all our markets. Another element which features our strategy execution is the profitable decarbonization trajectory. As a reminder, we are long on our CO2 rights beyond 2030. And we have, for the first time, reduced the CO2 emissions below 600, reaching 588. Not to forget, the good results have led to a strong balance sheet with low leverage and a significant dry powder, which we can deploy for further growth CapEx and bolt-on acquisitions. On the culture and organization, I would like once again to thank you all our teams for the excellent performance and dedication in achieving this result and also to share the news that we have recently set up a dedicated organization for developing at fast pace a business on alternative cementitious materials. We also continue on innovation front with more partnerships and corporate venture capital investments. Now for more details on the quarterly results as well as granularity on the regions, I'll pass the floor to John. John, maybe you want to say also how this month of onboarding happened to you, and then please dive into the results.

Thank you, Marcel, and thank you, Michael, as well, and good morning, good afternoon, everyone from my side. I've taken officially the role on November 1, but I've been on board since July 1, where we had a very detailed and articulate onboarding procedure, the Titan way, and I'm very happy now to stand in front of you, present to you our quarter 3 results. I'm also very excited because these results and our performance of this quarter are exceptionally good on many fronts. So moving to the highlights page. The group continued its upward trajectory in the third quarter, delivering robust sales and growth in profitability. For the 9 months sales surpassed the $2 billion mark, up 1.4% year-on-year. EBITDA for the quarter 3 grew by 20%, while on a year-to-date basis, we reached EUR 474 million, plus 8.4% versus prior year. If we were to adjust for the sale of Adocim and the ForEx translation impact, the growth would have been plus 13%. NPAT for the quarter increased by 35%. And for the 9 months, we closed at EUR 223 million, adjusted for the one-off loss of EUR 52 million from the sale of Adocim, which was recognized in the second quarter of 2025. Group's liquidity remains strong with net debt standing at EUR 302 million as at September 25, down from EUR 622 million in December '24, a significant reduction primarily driven by proceeds from the U.S. IPO and the disposal of Adocim. As a result of that, leverage decreased to 0.5x EBITDA even after accounting for the dividends paid last July. It should be noted that in October, Fitch upgraded Titan's credit rating to BB+ with positive outlook from stable outlook, recognizing the group's improving performance. Our CapEx reached EUR 185 million versus EUR 181 million in the same period last year, underscoring the group's continued focus on key strategic priorities to drive operational efficiencies and cost optimization. On a year-to-date basis, we completed 3 strategic bolt-on investments, as Marcel also shared in Greece and a JV with a precast company in Southeast Europe. And we're evaluating some attractive growth investments. Our outlook for the remainder of the year is positive, supported by solid volume growth, resilient pricing, cost initiatives and efficiency gains. Moving to the next slide. At the top, you can see the group's continued upward trajectory in the third quarter, delivering robust sales and profitability growth. Quarterly sales reached EUR 684 million, up 3.4% year-over-year. EBITDA closed at EUR 186.6 million, up 19.9% versus prior year, while NPAT closed at EUR 102.4 million versus EUR 75.9 million last year and grew by 35%. Supported by this strong performance in Q3 at the bottom charts, you can see the group sales year-to-date increased by 1.4%, driven by increased volumes and overall firm pricing levels in Greece, the U.S. and Egypt. Group EBITDA grew by 8.5% (sic) [ 8.4% ], driven by cost discipline and energy efficiencies, while NPAT for the 9 months closed to EUR 222.7 million adjusted for the one-off loss of EUR 51.9 million from the sale of Adocim. This performance is effectively at about last year's level despite the increased minorities due to the IPO of Titan America. On Slide 3, you can see the 12 months rolling, our sales and profitability. EBITDA of the last 12 months reached EUR 617 million and reflects improved margins by more than 100 basis points. Our NPAT reached EUR 304 million. This figure excludes scope changes related to Adocim and minority interest due to the IPO. Looking now at the detailed P&L, you can see that both in Q3 and on a year-to-date basis, we not only grew in sales, but we have also reduced cost of goods sold, enhancing in this way our margins. And we also kept SG&A flat on a year-to-date basis. On the volumes front, for the 9 months period, domestic cement volumes reached 13.2 million tons, up 1.7% after adjusting for the sale of Adocim. Aggregate volumes rose across all regions with an overall strong growth of 11%. This growth was fueled by strategic investments in the U.S. and Greece. Ready-mix concrete volume grew by 4%. Looking at the third quarter, volumes were higher in all products with domestic cement sales up 5%, aggregates plus 7% and ready-mix plus 2%. Our strong volumes contribute to serving customers across diverse geographies and market segments. The next slide presents a sample of projects where our products are used throughout our value chain. In Greece, we participate in numerous infrastructure and construction projects, including the Thessaloniki flyover and the Ellinikon, the largest urban redevelopment project in Europe. In the U.S., we support clients investing in data centers in Virginia, one of the world's leading hubs for data center development. Infrastructure activity remains robust across the U.S. and in Miami, we're involved in a wide range of projects spanning residential, hospitality and infrastructure sectors. Moving to the next slide. Our capital investments year-to-date reached EUR 185 million versus EUR 181 million last year, underscoring the group's continued focus on maintaining a world-class asset base and supporting key strategic priorities, including capacity and logistics infrastructure enhancements, energy efficiency improvements and digital transformation projects. Year-to-date, the group also advanced with targeted bolt-on transactions and has a strong pipeline of M&A projects. Looking now at our operating free cash flow. You may notice a difference versus the previous reporting cycles. We have included the finance and tax expenses, while we have excluded from the operating free cash flow, the CapEx. In this way, we want to highlight and emphasize the group's funding capacity for growth investments, organic and inorganic, and return to our shareholders. You can see that year-to-date, the group's operating free cash flow reached EUR 307 million compared to EUR 275 million in '24, reflecting the improved EBITDA performance. Additionally, proceeds from the U.S. IPO and Adocims' divestments have compensated for the high CapEx levels and the extraordinary dividend paid earlier in July, leading eventually to a reduction of the group's net debt by EUR 320 million. As a result of this, in the next slide you can see on the left graph that the group's net debt stood at EUR 302 million as of September '25. Leverage decreased to 0.49x EBITDA. And additionally, in October, as I've mentioned before, Fitch upgraded Titan's credit rating to BB+ with positive outlook. On the right graph, you can see that we have limited upcoming bond maturities in the next 2 years. In fact, more than 80% of our debt is long term. Our robust financial position provides the group with significant financial flexibility and dry powder to pursue additional M&A. I will now provide you with an overview of our market performance by region. Starting with the U.S., where our operations delivered a strong performance in Q3, and as a result, on a year-to-date basis, sales in U.S. terms increased by 1.1%, while EBITDA hiked by 7.6% to $290.1 million. In euro terms, sales in the U.S. reached EUR 1.1 billion and EBITDA grew by 3.6%, reaching EUR 257.5 million. Volumes in cement, ready-mix, aggregates and fly ash all increased in Q3, supported by favorable weather conditions despite subdued housing market dynamics. In Florida, robust aggregates performance offset the slowdown in the residential sector. In the Mid-Atlantic, higher cement and ready-mix volumes contributed to the great top line performance. Infrastructure activity remained robust, driven by sustained federal and state investments. And in the commercial segment, data center construction continued to grow, while population migration to suburban areas and trends such as onshoring further supported momentum across commercial categories. Furthermore, in September, our U.S. operations received certification for over 40 new lintel products in Florida. Moving on to Greece. The Greek domestic market continued to perform robustly, maintaining the strong momentum seen throughout the year. Total sales for the region grew year-to-date by 14.7% to EUR 384.8 million, and EBITDA increased by 19.2% (sic) [ 19.1% ] to EUR 56.6 million. Strong domestic sales volumes were recorded across all product segments with notable growth in ready-mix, reflecting a high degree of vertical integration. Aggregate sales also grew by double digits as did the group's mortars business supported by the introduction of new products. Sustained pricing strength was maintained across all product lines, offsetting a higher cost base driven by increased electricity and production costs. Moving to Southeast Europe, where market conditions remain broadly stable throughout the year. Pro forma comps -- performance comps were impacted, though as we were lapping exceptionally strong volumes in the early months of 2024, which created a high comparison base. The market activity has since normalized. This moderation coincided with increased import competition in certain countries, resulting in heightened pressure on pricing. Despite this, Southeast Europe grew volumes in most markets in Q3 and sustained very high EBITDA margins and profitability. Sales for the region in the first 9 months of '25 stood at EUR 313 million and EBITDA reached EUR 114.5 million. Overall, regional fundamentals remain solid, underpinned by continued infrastructure and residential construction activity as well as the implementation of major cross-border transport projects. As stated already, Titan formed a JV to acquire an 80% stake in a precast concrete and steel structure business in Bosnia and Herzegovina, operating across Bosnia, Croatia and Serbia. Now moving to the East Mediterranean region, where, as a reminder, the group divested its 75% stake in Adocim in May 2024. Hence, most of the Q3 performance is attributed to Egypt, while we continue to operate in Turkey with a grinding plant and the pozzolana quarry. Egypt continued on the growth path started this year with higher domestic and export volumes. This, combined with improved pricing led to a significantly stronger performance. Commercial and tourism-related construction remains the fastest-growing segment in Egypt, supported by Gulf-backed FDI. The group is investing in additional storage capacity to enhance flexibility, allowing our operations to efficiently serve both domestic and export markets. In Turkey, market activity continues to be supported by large-scale reconstruction works in the country's south following recent earthquakes. Finally, a word on Brazil, which we consolidate on an equity basis. Domestic cement construction in Brazil grew by 3% in the 9 months of 2025. In the Northeast region, where we operate, consumption rose by 6.4%, driven by increased public works and growth in the residential segment. Apodi posted year-to-date sales of EUR 78.3 million, plus 5.9% in local currency, while EBITDA increased to EUR 20.3 million, which is a growth of 21.2% in local currency. And now let me pass the word back to Marcel for a couple of words on the outlook.

We remain positive on our outlook. In the U.S., infrastructure and private non-residential remain the key growth drivers, given our unmatched logistics capability and strengthened by the recent investments. We continue seeing a robust growth in Greece, as John mentioned here, supported by the EU-funded infrastructure, but also a very good balance on the end markets between commercial infrastructure and residential, which is fueled by strong private consumption. Southeastern Europe, there the story continues with stable growth and high margins, supported by public investment, foreign remittances as well as increasingly EU funding. So construction and tourists remain key value drivers there. Egypt, it's markedly an improved market where we are equally balanced between domestic market, which is benefiting from increased public investment as well as regional export opportunities in markets which are in a boom of reconstruction. As well as Turkey, which is still improving its market demand post-earthquake of last year, while economic growth is expected to be moderate. However, we maintain a long-term strategic presence following recent portfolio adjustment. So overall, a positive outlook that also illustrates the profile of the group, which is with an exposure to attractive markets, well-balanced portfolio mix, which now presents a strong backlog, strong order book, resilient pricing, including for aggregates and ready-mix. We continue our performance initiatives as we prepare 2026 in pricing, but also cost improvements, and these are mainly energy related, whether it's substitution of fossil fuels by lower cost alternative fuels or mitigating increasing electricity costs and lowering consumption. We continue our growth CapEx and inorganic investments. The growth CapEx goes mainly into grinding, storage. John just mentioned that in the U.S. to increase our exposure to the precast industry in addition to the blocks, we are now having the regulator approval to launch in the market. Lintels, these are important precast elements used to strengthen the windows and doors and given the favorable legislation as well as the increased penetration of concrete in -- for durability of housing, this is another way of preparing for the housing rebound. So this year remains another record profitability year for Titan, which is marked by transformative moves like the investment in cementitious, bolt-ons on aggregate. As a reminder, this is the year we also had the IPO in U.S. We had a record shareholder return with a special dividend at EUR 3 per share. We are delivering top-of-class ROCE. We are portfolio reshuffling, including the recent move in Turkey, and we continue the shares buyback as previously announced. Maybe I will finish to what you should expect from us at the Investor Day on Tuesday. Look, we'll make the case for delivering in advance all the relevant financial targets, 1 year in advance to our Strategy 2026, while we are outperforming the market for -- consistently for the past 3 years in terms of growth. We will share with you our views in pursuing value growth, our views on strong markets with attractive value growths in Europe and U.S. And we'll spend time together with all executives on displaying the value drivers going forward, our cementitious platform, our advanced AI and adoption of new technologies, which is continuously fueling industrial gains, and of course, our expectations on continuing and building the funnel for inorganic growth and M&A. And together with our CFO and Michael here, we will also provide you the financial trajectory and the upgraded target for 2029. So this will be a very interesting day. Looking forward to having you all there and discussing all this excitement news. I think that ends our formal presentation. Happy to take some questions for the remaining time.

[Operator Instructions] The first question is from the line of Burazanes Marios with Eurobank Equities.

Just a couple of questions from my side. I just wanted to maybe ask for a bit more color on the investment in France that you mentioned, if there is a time line out for that? And also maybe some comments on the size of this deal, if you could comment on that. And also, I just wanted to ask about the U.S. as well. You mentioned continuous strength in infrastructure and commercial, but a bit more weaker residential trends. Is this something that you also see continuing into 2026? And is this sort of new trend in profitability also expected to continue for Latin America going ahead?

Thank you for your question. So we did not announce an investment in France. We announced that we entered exclusive negotiation for the acquisition of Vracs de L'Estuaire. That's also in line with the regulation in France where employees are consulted, then there are other customary approvals. So towards the completion, if everything goes well, this will take probably between 3 and 6 months, but we will keep you appraised. We are acquiring a business in Northern France in the Port of Le Havre, not far from one of the markets with the highest growth and profitability and future developments, which is the Greater Paris and the central market of France. This complements our position, which we already have in France, in Southern France, and it's a platform for us to further develop our position by promoting low carbon product, low clinker product, but also directly cement issues. You may remember that over the past 2 years, we have invested in Pozzolanic-based cement. Pozzolan is an excellent cementitious, which can reduce both the clinker as well as the carbon in a market like France, which has specific regulations on the energy efficiency in the buildings and promotes this. We are not disclosing today the financials of this transaction. We may do it at a later stage, but we are very happy with this move. Now on U.S., your reading is right. We are happy with the order backlog, and we are happy with the volumes and pricing resilience across all our business lines, cement, aggregates and ready-mix. We are seeing also nice pricing developments in aggregates and ready-mix and fly ash in the market. Our exposure to infrastructure markets, which continues to be a key driver as well as commercial segments, including data center. And I think at the time of the Investor Day, we provide you more granularity, and you will be happy to hear on how many projects of data centers our teams in U.S. are exposed and they do a new way of selling. Housing remains a challenging segment. While you will see that some of the housing indexes show a certain rebound. This we don't yet see it in the volumes and probably this will continue for a couple of months. There is always a time lag between the interest rates and the investments -- the actual investment. So as we have communicated yesterday to the markets in U.S. or this morning to the markets in U.S., this rebound is expected now to be in the second half of next year. However, the margins, to your question, we believe that the margins will continue to be strong, thanks to both self-help measures on the industrial cost as well as on the other cost categories, but also thanks to preparation of 2026 in terms of pricing.

[Operator Instructions] Ladies and gentlemen, there are no audio questions at this time. I will now move on to our webcast participant written questions. The first question is from Auguste Deryckx with KECH. And I quote, "Congratulations on these excellent results. I have 2 questions, if I may. First, EBITDA growth was largely supported by cost discipline and energy efficiencies. Could you provide more details on which specific efficiency measures delivered the largest impact? How sustainable these cost improvements are going into 2026? And is there still potential for further reduction optimization?"