2012 ANNUAL REPORT Registration Document. (Document de Référence)

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2012 ANNUAL REPORT Registration Document (Document de Référence) Contents How to navigate in this document? Message from the Chief Executive Officer Group presentation... 5 Review of the period Consolidated financial statements Ciments Français SA annual financial statements Corporate governance Information on the company and the capital ANNUAL REPORT Registration Document (Document de Référence) This Document de Référence was filed in the French language with the Autorité des marchés financiers on 20 March 2013 in accordance with article of its General Regulations. It may be used to support a financial transaction if accompanied by an Information Memorandum (Note d opération) approved by the AMF. This «Document de Référence» was prepared by the issuer and is the responsibility of its signatories. Limited Liability Company with a share capital of 143,192,544 euros Registered address: Tour Ariane - 5 place de la Pyramide - Quartier Villon Puteaux RCS Nanterre B Photos: i.lab is the Italcementi Group s new Research and Innovation Center in Bergamo designed by architect Richard Meier. The i.lab building, which covers a surface area of 23,000 square meters, has been built under LEED standards, the most authoritative rating system assessing the energy and environmental sustainability of buildings. From an energy point a view, the building implements photovoltaic cells and geothermal energy to reach a 30% self sufficiency. Message from the Chief Executive Officer 2012 was affected by the impact of the economic crisis which continued to weigh on construction demand in the European industrialized countries. However, signs of a slight recovery were confirmed in the United States and demand continued to grow in most of the emerging countries which accounted for nearly 57% of the Group s revenues, and especially on the Asian markets. In this context, the Group reported sound consolidated revenues at 3,727.4 million euros, down 2.5% on Recurring EBITDA amounted to million euros. The almost 50-million euro decline from 2011 resulted from the contraction in the volumes sold in Europe and North Africa, which was partly offset by the significant measures put in place by the Group to reduce overheads. EBIT was 36.3 million euros, after amortization and depreciation charges for million euros and a stringent program of impairment on assets for million euros. The loss of 85.1 million euros for 2012 (as against a profit of million euros in 2011) was due to the purely accounting effects of impairment testing; net of the effects of impairment, non-activation of tax losses and nonrecurring restructuring costs, 2012 would have closed with a profit of million euros. Net loss - Group share amounted to million euros. Considering the exceptional nature of those items, which affected 2012 results, and the financial soundness of the Group, the Board of Directors, confident in the Group s future results, has proposed the payment of an unchanged dividend of 3 euros. The Group s net financial position improved through a strict management of financial flows, in particular control of capital expenditure and decrease in working capital requirements. Over the period, net financial debt was reduced by million at million euros. In May 2012 the Group sold its stake in Afyon Cimento, thereby putting an end to its presence in Turkey. In June 2012 the Group sold its interest in Fuping Cement (China) to West China Cement, in return for a 6.25% stake in this major Chinese group. Pursuant to Grenelle 2 law of 12 July 2010, Ciments Français is for the first time including information on labor, social and environmental issues in its 2012 Annual report, thus confirming its commitments towards sustainable development and proposing a comprehensive vision of its strategy. In 2013, in a still uncertain context, especially in the Western European markets, the Group will pursue its cost-containing measures, insist on industrial efficiency and promote the research of innovative and sustainable products, while continuing to strengthen its already healthy net financial position. Lastly, I would like to pay tribute to all our colleagues worldwide, who have successfully adjusted their management and efforts to a difficult environment and enabled the Group to look confidently to the future. I would like to extend my heartfelt thanks to all of you. Giovanni Ferrario Chief Executive Officer Table of contents 3 1 Group presentation 1.1 Financial highlights Historical summary Overall Group structure Business segments and markets of the Group Research IT systems Human resources Risk management Table of contents 5 1 Message from the Chief Executive Officer Financial highlights 6 Group presentation Historical summary 10 Review of the period Overall Group structure 12 Consolidated financial statements Business segments and markets of the Group 14 Ciments Français SA annual financial statements Research 22 Corporate governance IT systems 23 Information on the company and the capital Human resources 24 Risk management Financial Highlights The tables below set out the Group s key figures as of 31 December for each of the last two years. The Group s consolidated financial statements have been prepared in accordance with IFRS (International Financial Reporting Standards) published by IASB (International Accounting Standard Board). Consolidated key figures (in millions of euros with the exception of earnings per share and number of employees) 31 December December 2011 Revenues 3, ,823.1 Recurring EBITDA EBITDA Net profit (loss) from continuing operations (93.1) of which attributable to: owners of the parent (150.9) non-controlling interests Basic earnings per share (in euros) (4.24) 3.30 Diluted earnings per share (in euros) (4.24) 3.30 Contribution to revenues by geographical segment (after eliminations) (in millions of euros) % change 2012/2011 at comparable consolidation scope and exchange rate Western Europe 1, , North America Emerging Europe, North Africa & Middle East Asia Trading & others TOTAL 3, , * * Apparent growth rate: -2.5%. 14.0% 6.1% 11.9% 6.2% 31 December December 2011 Total non-current assets 4, ,552.8 Total current assets 1, ,875.3 Total equity 3, ,257.7 of which attributable to: owners of the parent 3, ,422.0 non-controlling interests Total non-current liabilities 1, ,843.2 Total current liabilities 1, ,327.1 Net financial debt ,021.4 Personnel (headcount) 14,776 15,103 Net cash provided by operating activities Net cash used in investing activities (208.2) (209.0) Net cash provided by (used in) financing activities (336.6) (513.0) % 11.8% 42.8% 25.8% % Western Europe North America Emerging Europe. North Africa & Middle East Asia Trading & others 45.5% 6 7 1 Message from the Chief Executive Officer Financial highlights 6 Group presentation Historical summary 10 Review of the period Overall Group structure 12 Consolidated financial statements Business segments and markets of the Group 14 Ciments Français SA annual financial statements Research 22 Corporate governance IT systems 23 Information on the company and the capital Human resources 24 Risk management 25 Contribution to revenues by business segment (in millions of euros) % change 2012/2011 at comparable consolidation scope and exchange rate Cement/clinker 2, , Aggregates/ready mix concrete 1, , Others TOTAL 3, , Sales volumes by business segment (Intercompany sales included) Cement/clinker sales and aggregates volumes are in millions of tonnes; those of ready mix concrete are in millions of cubic meters. ON A COMPARABLE BASIS Cement/clinker (in millions of tonnes) Aggregates (in millions of tonnes) Ready mix concrete (in millions of cubic meters) 4.9% 5.8% % 27.9% % % Cement / clinker Aggregates / ready mix concrete Others 2012/2011 : 2.7% 2012/2011 : 10.4% 2012/2011 : 5.2% Recurring EBITDA by geographical segment (in millions of euros) ON A HISTORICAL BASIS Cement/clinker (in millions of tonnes) Aggregates (in millions of tonnes) Ready mix concrete (in millions of cubic meters) Total: Western Europe North America Emerging Europe, North Africa & Middle East Asia Trading & others Total: /2011 : 2.7% 2012/2011 : 10.4% 2012/2011 : 6.5% 8 9 1 Message from the Chief Executive Officer Financial highlights 6 Group presentation Historical summary 10 Review of the period Overall Group structure 12 Consolidated financial statements Business segments and markets of the Group 14 Ciments Français SA annual financial statements Research 22 Corporate governance IT systems 23 Information on the company and the capital Human resources 24 Risk management Historical summary 1881 Creation of the Ciments Français company After combination with the Poliet et Chausson cement segment, Ciments Français became a leader in the French market Diversification into construction materials (aggregates and ready mix concrete) and first steps towards international external growth: first acquisitions in the United States (1976), Canada (1985), Spain and Turkey ( ), and Belgium, Greece and Morocco (1990) Ciments Français secured a strong industrial position in North America as well as around the Mediterranean rim. Due to excessive indebtedness, the Group became vulnerable to economic recession Acquisition of a controlling interest in Ciments Français by the Italian group Italcementi. The new consolidated entity became one of the leading cement producers in the world. Setting up of a new Group strategy based on four priorities: - Refocus on the core business of cement - Geographic repositioning - Cost reduction and improvement in profitability - Debt reduction Return to profitable results and steady decrease in indebtedness. Implementation of resources developing the synergy between both groups: - Progressive integration of Ciments Français and Italcementi teams - Creation of an executive committee and of the Group Technical Center - Creation of management functions to facilitate the integration of Ciments Français sub-holding into Italcementi Group - Adoption in 1997 of a new corporate Group Identity charter Ciments Français renewed its external growth policy and reinforced its international positions by acquiring companies in Kazakhstan (1998), Bulgaria (1998 and 1999), Thailand (1998 and 1999) and Morocco (1999) The Group strengthened its geographical positions in southern India, on the East coast of the United States, in Egypt and in the Istanbul market in Turkey. It also rationalized its structures in Thailand, Morocco and Greece Rationalization of the construction materials business in Spain In December, the Group launched a public tender offer on Suez Cement Company shares becoming its first reference shareholder with 39.9% of the share capital The Group strengthened its position in Egypt with the takeover of Suez Cement Company and its subsidiaries, and of Helwan Cement Company. Further to these transactions, the Group held 51% of Suez Cement Company share capital The Group strengthened its position in India with the acquisition of the remaining shares of Zuari Cement Ltd and in Egypt in the ready mix concrete segment The Group strengthened its position in ready mix concrete in North America with the acquisitions of Arrow (United States) and Cambridge (Canada). Acquisition of 100% of the capital of Fuping Cement based in Central China The Group further strengthened its position in ready mix concrete in North America with the acquisition of Crider & Shockey, and in Kuwait with the acquisition of German Ready Mix, Al Mahaliya and Gulf Ready Mix. Acquisition of the shares of Intercom in Italy by Interbulk and of a stake in Al Badia in Syria Withdrawal at the end of June from the cross-border merger project between Ciments Français SA and Italcementi S.p.A. announced in February Buyback of the 2002 and 2006 US private placements. Merger of Société Internationale Italcementi France (SIFF) into Ciments Français on December Sale of Set Group Holding (Turkey) to the Turkish conglomerate Limak Holding. Acquisition of 74% of Gulbarga Cement (India) via the Indian subsidiary Zuari Cement. Disposal of Axim (France, Spain, Morocco, North America) in the admixture business to the Swiss group Sika Ciments Français acquired additional shares in two companies in Bulgaria and Thailand. The integration of Ciments Français and Italcementi teams was reinforced through the deployment of people within a shared organizational structure The Group took joint control of Zuari Cement Ltd in India and entered the Egyptian market by becoming Suez Cement Company s strategic partner through the acquisition of 25% of its share capital 1 Message from the Chief Executive Officer Financial highlights 6 Group presentation Historical summary 10 Review of the period Overall Group structure 12 Consolidated financial statements Business segments and markets of the Group 14 Ciments Français SA annual financial statements Research 22 Corporate governance IT systems 23 Information on the company and the capital Human resources 24 Risk management Overall Group structure Ciments Français is organized into different geographical segments, themselves structured by business segments. As of December 31, 2012 the Group included 149 companies (including Ciments Français) located in 17 different countries. The Group is the majority shareholder of 108 companies; 24 companies are held under joint control and 17 are held at equity. Some subsidiaries controlled by the Group are also held by minority shareholders, namely in Thailand (Asia Cement Company and Jalaprathan Cement Public Company), Morocco (Ciments du Maroc) and Egypt (Suez Cement Company and its subsidiaries) who may be industrial or financial partners, State-controlled companies (as a result of privatization programs), or companies held by the general public for listed companies. The most significant companies held in joint ventures are the Société des Carrières du Tournaisis in Belgium, as well as several companies in the construction materials sector in France. The most significant affiliates are Vassiliko in Cyprus, Ciment Québec in Canada and Asment Temara in Morocco. Simplified organization chart as of December 31, 2012 North Western Europe America France/Belgium Spain Other country Egypt Morocco Materials subsidiares Greece (Cyprus) (1) Listed company. (2) Investment held at equity. Cement subsidiares Materials subsidiares Materials subsidiares Emerging Europe, North Africa & Middle East Materials subsidiares Other countries Kuwait Bulgaria Materials subsidiares Cement Thaïland Materials subsidiares Materials subsidiaries Asia India LTD Other country Kazakhstan TERMINALS Cement & materials subsidiaries Operational breakdown The Group is organized into four geographical segments structured by sectors and business segments, with the addition of the cement/clinker trading activity. Others include headquarters, holding companies and fuel trading. Geographical areas & sectors Western Europe France/Belgium Spain Other country (Greece) North America USA/Canada Emerging Europe, North Africa & Middle East Egypt Morocco Other countries (Bulgaria, Kuwait) Asia Thailand India Other country (Kazakhstan) Cement/clinker trading Others Business segments Cement & clinker Construction materials (aggregates, RMC) Others (transports) Cement & clinker Construction materials (aggregates, RMC) Others (transports) Cement & clinker Construction materials (aggregates, RMC) Cement & clinker Construction materials (aggregates, RMC) Cement & clinker Construction materials (aggregates, RMC) Other (bags) Cement & clinker Construction materials (aggregates, RMC) Cement & clinker Construction materials (RMC) Cement & clinker Construction materials (aggregates, RMC) Cement & clinker Cement & clinker Construction materials (RMC) Cement & clinker Construction materials (RMC) Fuel trading, headquarters & holding companies Sales are mainly achieved in local markets. Some subsidiaries (Egypt and Thailand) export to other countries through trading (cement/clinker trading segment) which supplies the terminals in Gambia, Mauritania, Sri Lanka and Albania. Besides, trading is also responsible for the purchase of fuels for the subsidiaries of both the Group and Italcementi. Cement and aggregates activities sell part of their production to the ready mix concrete activity 1 Message from the Chief Executive Officer Financial highlights 6 Group presentation Historical summary 10 Review of the period Overall Group structure 12 Consolidated financial statements Business segments and markets of the Group 14 Ciments Français SA annual financial statements Research 22 Corporate governance IT systems 23 Information on the company and the capital Human resources 24 Risk management 25 Company s activity and relation with subsidiaries The nature of Ciments Français activity is that of holding and assistance to its subsidiaries. It is in particular responsible for the management of its equity investment portfolio, the financing of its operations or those of its subsidiaries, and the monitoring of exchange-rate, interest-rate and liquidity risks. It may grant loans to its subsidiaries and centralizes the cash generated in the Group, whenever regulations permit it. It also gives guarantee for commitments made by its subsidiaries. These operations are remunerated at arms length conditions. In France, Ciments Français is the parent company of the consolidated tax group. Ciments Français provides its subsidiaries with its technical know-how, its industrial manufacturing processes and the use of its patents which are updated on a regular basis by the Group Technical Center (cf. sections 1.5 & Research and innovation); it also offers services and expertise in terms of central functions. These services are invoiced to the subsidiaries based on their revenues. Expertise may be provided by its parent company, Italcementi S.p.A., which re-invoices its services to Ciments Français, as are Group projects, based either on time spent, on a percentage of revenues, or according to keys specific to projects. Services and expertise offered to subsidiaries include legal, fiscal and financial assistance, budget control, procedures and audit, insurance management and assistance in human resources and information technology. Majority shareholder of Ciments Français SA Italcementi S.p.A. is the majority shareholder of Ciments Français SA and Italmobiliare S.p.A. is the majority shareholder of Italcementi S.p.A.; both Italcementi S.p.A. and Italmobiliare S.p.A. are listed on the regulated market managed by Borsa Italiana S.p.A. Ciments Français benefits from financing sources arranged at Italcementi Group level which enable it to take advantage of a wider borrowing capacity and of the synergies resulting from a centralized financial policy. Since 2010, Ciments Français SA arranges its refinancing with Italcementi Finance SA (subsidiary of Italcementi S.p.A.), via arm s length long-term intercompany loans. The aim of such a policy is to secure competitive financing and ensure a balance between average maturity of funding, flexibility and diversification of sources. Further information on Italcementi Group is available in section Business segments and markets of the Group Demand for cement, aggregates and construction materials varies according to weather conditions affecting the level of activity in the construction sector. The Group usually experiences a decrease in sales during the first and fourth quarters reflecting the effect of winter in the European and North American markets, and an increase in sales in the second and third quarters due to better weather conditions. Group operations are of a capital-intensive nature in particular with regard to cement business and require capital investments representing 5 to 10% of revenues; capital investments are primarily related to the maintenance of raw material reserves, plant refurbishment and modernization, productivity improvements and respect for the envir
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