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Cementos Portland Valderrivas adapts its structure to the market situation to earn returns

05/08/2013 | General

Approved the revision of the 2012-2021 Business Plan

The Group reduces its losses by 10.6% excluding extraordinary

The Board of Directors of Cementos Portland Valderrivas has approved the revision of the 2012-2021 Business Plan, which aims to adapt the Group's production capacity and structure to the negative performance of the Spanish market, which has worsened more than expected by the lack of activity in the construction sector, both in construction and in civil works.

Cement consumption has fallen by 29% in Spain in the first quarter of 2013, according to Oficemen, a decrease higher than the industry expected for the full year (around 20%). This reduction comes together with the one recorded in 2012, which was 34%, the highest in the history of Spain for the last 70 years. The demand has increased from 56 million tons in 2007 to 13.5 million in 2012, representing a decrease of 76%.

In the current context, international activity, which contributes for more than half of the turnover of the Group (almost 57%), is not enough to offset the sinking in demand in Spain, so it is necessary to deepen the measures of adjustments defined in 2012-2013 Plan NewVal.

The review of the Business Plan 2012-2021, which was approved after the recent appointments of José Luis Sáenz de Miera, as Chairman and CEO, and Alicia Alcocer Koplowitz, as Vice President, aims to reduce costs and restore profitability of the Group.

The plan includes the adaptation of the cement plants activity in Spain to the market situation and the downsizing of concrete, aggregates and mortar businesses. In addition, the corporate structure will also undergo adjustments,  the corporate scheme will be simplified and the non-strategic assets divestitures will be addressed.

The forecasts included in the Business Plan show that, with these measures, the Group will recover a very attractive level of profitability as soon as demand normalizes Spain.

Measures to earn returns

The Group is committed to maintain activity in Spain’s cement plants which are the ones that, in normal market conditions, provide benefits, but adapting their operations to the current context, so there will be temporary stoppages.

These temporary stops involve the presentation of a  Temporary Labor Force Adjustment Plan (ERTE) to be negotiated with the employee’s representatives.

In the concrete, aggregates and mortar businesses, the activity will be limited to the facilities that are profitable or strategic.

As a result of these adjustments the  corporate structure will be streamlined, both in terms of personnel and in terms of offices, to suit the operational needs of the Group.

Cementos Portland maintains its commitment to innovation and internationalization.

First Quarter Results

In the first quarter, the implementation of the Plan NewVal allowed the Group Cementos Portland Valderrivas to cut its losses by 10.6%, up to 27.7 million Euros, excluding accounting gains derived from Lemona’s swap agreed in February with the Irish group CRH. If included, the Group closed the first quarter with a net attributable profit of 61.6 million, compared with a loss of 31 million in the same period of 2012.

The agreement reached with CRH established Lemona’s swapping for the 26.34% stake the Irish group had in Uniland, operation that generated a profit before tax of 90 million with no effect on cash flow.

Furthermore, Cementos Portland Valderrivas sold Ipswich’s terminal (UK) to CRH for 22 million Euros, which was used to reduce debt. This transaction generated a capital gain of 15 million.

Reducing losses has been achieved in homogeneous terms despite the collapse of cement consumption in Spain. However, the Group's turnover fell by 22% in the first quarter to 121.8 million.

International business now accounts for 56.6% of the sales of the Group, compared with 43.4% in Spain.

Net sales in the Spanish market fell by 38.6%, but sales in the U.S. grew by over 18%, and  inTunisia by 8%, mainly thanks to higher exports to Libya and Algeria.

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