Titan S.A. (TITC) Earnings Call Transcript

Ladies and gentlemen, thank you for standing by. I am Maria, 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 2026 results. Please note, this call and presentation is intended for analysts and investors only. 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; and Mr. John Ioannou, Group CFO. Mr. Cobuz, you may now proceed.

Thank you. Hello, everyone. Good to have you all here. I'm joined by John, our Group CFO; and by Spyros Kamizoulis, our Head of Investor Relations. We are reporting a very good set of results today, and I would like once again to thank all our teams across all our markets for the strong contribution, which is marked by strong sales performance, continued margin expansion and above all, a very accelerated integration of the recently made acquisitions. Sales were up by 6.9%, thanks to the overall increased volumes and improved pricing in most of our markets. Strong operational performance, cost-saving initiatives, and John will go more into the details, which have offset higher energy costs and allowed for 40 basis points margin expansion. And I think we will spend a bit of time in our Project Prime, which we announced at the last conference call, which is impacting positively our financials in the first half and will continue in the second half, in line with what we have announced at the time of the Investor Day of bringing to the bottom line EUR 100 million in cost savings related to efficiencies. The recently finalized acquisitions, and I will remind everyone that we have announced 3 transactions completed in 6 months have been now successfully integrated and the results are consolidated in today's results and they have generated for the first half already an EBITDA of EUR 13 million, and we are well ahead our business case for a good contribution for the full year that we will also discuss later today. We are also presenting today an upgraded 2026 guidance despite continued geopolitical uncertainty. We continue making good progress in the execution of our Forward 2029 strategy on all 3 pillars. First on strengthening the core. And I think here, the fast integration, the margin expansion, the inauguration of our silos in Egypt, which improved the export mix are clear testimonials to that strengthening the core. But also in continue building our platform of alternative cementitious materials. A lot can be said here. A lot is in the motion in -- has been in the motion in the first half, first in terms of securing additional sources of fly ash slag in Serbia, in U.S. in Southeast Asia. Second, in doing already the engineering for an advanced technology center for alternative cementitious materials here in Patras, but also making good progress in -- on the pre-engineering front for our calcined clay project in U.S. and to be marked as well that our products with higher cementitious content have reached 35%, which is a record level for Titan in its overall portfolio. On the third one, which is about building new platforms as well as embracing new technologies, we are making progress on our precast presence, both in Southeastern Europe, but also through the normalization of our product in -- future products in the U.S. We do have a number of projects underway and the pre-engineering phase continues for our carbon capture and storage project in Greece. And we have made a number of transactions on the venture capital front, investing in 2 new start-ups, which supplement well our research and development opportunities, and we have made good progress on digital. We are also announcing today after the decision of the Board, the launch of a new buyback program, which practically doubles the impact on the market. And we are, again, well positioned for the second half, and therefore, we will present an upgraded 2026 guidance. Now I turn the mic to John, who will walk us through the key financials of the first half, including the regional coverage. And then I will finish with the outlook before turning to you for Q&A. John?

Thank you, Marcel. Good morning, and good afternoon from my side as well. Let me start with the key performance highlights of our first 6 months. The first half of 2026 was another strong period for Titan. Sales reached EUR 1.42 billion, up 6.9% year-on-year, supported by higher volumes across our core product categories and improved pricing across most of our markets. EBITDA reached by -- increased by 8.7% to EUR 312 million, while EBITDA margin expanded by 40 basis points despite higher energy costs resulting from the geopolitical developments in the Middle East and one-off headwinds in our U.S. operations. Quarter 2 was a strong quarter with sales reaching EUR 784 million, up 14% reported and 9% on a like-for-like basis. EBITDA reached EUR 174 million, supported by both organic growth and contributions from our recent acquisitions. Adjusted net profit increased by 16% in the first half, demonstrating the operating leverage of our business model and the benefits from our self-help initiatives. Earnings per share reached EUR 2.06. But importantly, we completed all 3 strategic acquisitions during the last 6 months, and we are progressing rapidly with their integration. These acquisitions, as Marcel just stated, have already contributed EUR 13 million of EBITDA in the first half. Our balance sheet is strong. Net debt rose to EUR 877 million, reflecting approximately EUR 700 million invested in acquisitions, while leverage stands comfortably at 1.4x EBITDA. Our liquidity remains robust. Additionally, we are terminating the current share buyback program, as Marcel stated, and we are starting a new one doubling the size. Based on this strong first half performance and positive momentum entering the second half of 2026, we are upgrading our 2026 guidance and now expect high single-digit sales growth and over-proportional EBITDA growth with further margin expansion. Our sales in the second quarter increased to EUR 784 million, representing reported growth of 14% and like-for-like growth of 9%. This marks our 24th consecutive quarter of like-for-like sales growth, demonstrating the resilience of our diversified geographic footprint, our balanced exposure across end markets and our disciplined commercial execution. For the first half, sales reached EUR 1.42 billion, up 7%, both reported and on a like-for-like basis, and our growth was broad-based across the portfolio. We benefited from the strong infrastructure activity in Greece, the resilient demand in the United States despite softer residential construction as well as the strong dynamics across Southeastern Europe, Egypt and Turkey. Moving now to profitability. EBITDA reached EUR 174 million in second quarter, up 6% on a reported basis and 3% on a like-for-like. This was the first quarter that all 3 acquisitions started contributing to the group EBITDA results. EBITDA margins have been affected by an extended scheduled maintenance outage at our Pennsuco plant in Florida and by temporary import logistics challenges resulting from port disruptions in the Mediterranean, which led to substantial delays in our cement imports in the U.S. We expect those impacts to be one-off. Additionally, the consolidation of our recent acquisitions is temporarily affecting the group margins. While the margins of the acquired businesses are expected to improve progressively and ultimately exceed group levels as we fully capture the planned synergies and the businesses mature within our portfolio. For the first 6 months of the year, EBITDA reached EUR 312 million, up 9%, both reported and on a like-for-like basis, while the EBITDA margin grew to 22%, a margin expansion of 40 basis points. The key message here is that our operating initiatives more than compensated the higher energy costs and inflationary pressures. Project Prime delivered approximately EUR 20 million of benefits during the first half, and we remain on track to exceed EUR 50 million of benefits for the full year.In addition, integration synergies from Keystone, Tracim and Vracs de l'Estuaire are progressing according to plan and are already contributing positively to our earnings. Looking at volumes. Cement volumes increased 7%, supported by strong infrastructure activity in Greece, resilient U.S. demand, improved conditions across Southeastern Europe, solid domestic demand in Egypt, coupled with the impact of the newly acquired entities. On a like-for-like basis, cement sales were at last year's levels following a strong June performance. Aggregates volumes increased 6%, benefiting from growth in both Greece and Florida with the growth accelerated in the second quarter. Blocks volumes increased 9%, outperforming the underlying U.S. market. Ready-mix volumes have grown by 1% on a like-for-like basis, mainly demonstrating the resilience of our commercial positioning despite softer residential construction in the U.S. Alternative cementitious material volumes were temporarily affected by the temporary shutdown of our pozzolan facility for productivity and safety upgrades. Turning to cash flow generation now. Operating free cash flow reached EUR 192 million compared with EUR 170 million last year. This reflects strong earnings growth and disciplined working capital management. As expected, the major cash outflow during the period relates to acquisitions, reflecting the completion of the 3 strategic transactions announced previously, which resulted in an increase of our net debt by EUR 663 million. Despite this increase, though our balance sheet remains one of Titan's key strengths. Net debt stands at EUR 877 million at the end of June, and our leverage ratio is at 1.4x EBITDA. While leverage ratio increased following the acquisitions, it remains at very comfortable levels and significantly below our financial capacity. Looking at our debt maturity profile on the right-hand side, you will see that more than 75% of our debt carries a long-term maturity profile and at fixed interest rates, providing protection against volatility in interest rate markets. We continue to maintain substantial liquidity and financial flexibility to support both growth investments and shareholder returns. Our capital expenditure reached EUR 160 million in the first half and remains focused on projects that support growth, efficiency and sustainability with the majority of the CapEx directed in the U.S. operations. Key investment projects are listed on the right-hand side of the page and include fly ash beneficiation projects, quarry expansions, data center-related ready-mix capacity, kiln upgrades, new block plants to name a few. For the full year, we continue to expect CapEx of EUR 300 million to EUR 350 million with the majority directed towards growth and strategic investments. Let me turn now to the market performance. Starting with the U.S. In the United States, performance remained resilient despite a mixed market backdrop. Sales increased 3% on a like-for-like basis, supported by strong demand from infrastructure, commercial construction and data center projects. The Mid-Atlantic region delivered particularly strong performance, while Florida benefited from infrastructure and private nonresidential activity as well as volume growth in aggregates and blocks. EBITDA margins were affected by 2 temporary factors, as mentioned before, an extended plant outage and import disruptions linked to the conflict involved in Iran. Despite these headwinds, margins remain strong and Keystone integration is progressing ahead of plan. In Greece, growth momentum continues as infrastructure projects, commercial construction and residential developments support strong demand. Sales increased 11% on a like-for-like basis to EUR 310 million, while EBITDA increased by 28% to EUR 54 million. The integration of Vracs de l'Estuaire is progressing well and is strengthening our commercial platform in Western Europe. Southeastern Europe continued to deliver highly attractive returns, and this region is reporting the highest margins for the group. Sales increased by 7% to EUR 211 million, and EBITDA increased by 4% to EUR 69 million despite higher fuel and raw materials costs. Regional demand remained resilient across the region and all countries reported improved sales trends during the second quarter. We also launched new lower clinker, high-performance cement products, supporting both sustainability and profitability objectives. In East Med region, as the integration of Tracim in Turkey is progressing very successfully and already delivering strong results, East Med was the strongest performing region during the first half of the year. Sales increased by 25% to EUR 151 million, while EBITDA increased by 77% to EUR 41 million and the EBITDA margin expanded significantly to 27%. Strong pricing in both Egypt and Turkey drove a highly favorable price-cost spread. In Egypt, we completed the first cement shipment to the United States, leveraging a new export infrastructure at Alexandria. And lastly, Brazil, which is a reminder, we do consolidate on an equity basis, also delivered an excellent performance during the first half of the year. Domestic cement consumption in the region where we operate increased faster than the national average, driven by strong housing needs and infrastructure projects. Sales increased by 23%, while EBITDA increased by 85%, driven by pricing discipline and strong production efficiencies. This completes my presentation. I will now pass the mic to Marcel to give us the full year outlook for 2027.

Thank you, John. So our guidance for 2026 is, at the same time, reflecting a strong first half performance. And this time, we are confirming to you that we have now consolidated and we are well advanced in the integration of the newly acquired businesses as synergies are also kicking off strongly. We also have a positive momentum for H2, and that's witnessed by the quality of the order books. Therefore, we aim at high single-digit sales growth as we expect good volumes in the second half, over proportional EBITDA growth, that means margin expansion, and that's the result of contribution both from the organic as well as growth as well as the acquisitions. Mentioning about the acquisitions, considering the impact on the bottom line as well as on the -- thanks to the early synergies, the contribution is expected to be in the range of EUR 45 million to EUR 50 million EBITDA. And that's a combination of network synergies in some of the cases, of course, reliability, storage capacity expansion, but also efficiencies related also to increased use of alternative fuels, energy mix, but also procurement savings. So a lot in that bucket. When it comes to capital expenditures, that's again a strong year where we will continue allocating in a disciplined way capital for investments in recently acquired assets that will support the synergies but also in strategic investment projects and growth, particularly in alternative fuel usage, energy mix improvement, but also aggregate improvements and quality of our export mix. I think John mentioned already that our Project Prime is in full contribution with our self-help cost initiatives well in line to contribute at least EUR 50 million of benefits in 2026 after the EUR 20 million already delivered in first half 2026. That's our guidance for the outlook of the year, which, again, is built on a strong H1 performance positive momentum into H2 and an accelerated pace of integrating the newly acquired businesses. Right now, Spyros, I think we open it up for questions. Operator?

[Operator Instructions] The first question is from the line of Ephrem Ravi with Citi.

Both my questions are on the U.S. business. Firstly, in terms of the decline that we saw, obviously, there was the plant outage and import disruptions that impacted margins. But we've been hearing from other players that the pricing was also much weaker than expected. So can you kind of confirm if you have seen any pricing pressure in your core markets of Florida and North Carolina. And was all the year-on-year delta basically due to the outage and import disruptions? Or if you can kind of somehow split that out of the performance in terms of impact in terms of million dollars? And secondly, on the Keystone integrated synergies, it was obviously an underperforming plant when you bought it. What is your expectation of what you could get from that plant on an annualized EBITDA basis post synergies in let's say 3 years?

Thank you, Ephrem, for your questions. Yes, you're right to point out that the plant outage and some disruption on the imports. I think without this effect, we would have seen a very nice margin expansion in our U.S. business. Plant outage is something which we planned. We do once a decade. It's not a longer one. It's a complicated one. We had 5 more days of outage there, but it's behind us. So we are starting very strongly in the quarter -- for the quarter 3. The disruptions related to the cement imports, Algeria is exporting a lot of grains. That has produced a lot of congestion in the ports, and it has impacted the cement shipments to our operations. As a reminder, we do import about 1/3 of our volumes. And that has occasions local purchase of raw materials that we have handled without any disruption on the customer experience and in the market. I think the overall impact of that is probably around $7 million or EUR 6 million. Again, that would have impacted positively our bottom line and margins. I think the pricing dynamics are there. We are much more confident on Mid-Atlantic, where we see segments which are displaying nice growth perspective. And there, probably the pricing dynamics will occasion that in quarter 3 and quarter 4, we will come with better news to you in terms of pricing. To your Second question on Keystone, again, super positive. We have integration teams running at full speed and in between network synergies, the increased reliability, the early investments for rebricking the kiln, which will also improve the reliability on this immediate quarter, but also the preparation of investments for further capacity expansion. I think that will occasion synergies in around $20 million on a full run rate, which one should add to the results that we have announced at the time of the acquisition of $10 million. So one should expect an EBITDA impact of at least $30 million by year 3.

The next question is from the line of Wim Hoste with KBC Securities.

I have 2 questions, please. First would be on the East Mediterranean zone. The margins -- EBITDA margins progressed very nicely from 19% to 27%. Can you maybe break that down a little bit between the trends in Egypt and Turkey? And then on Egypt, I'm interested in the growth trajectory going forward. You started exporting to the U.S. Can you maybe outline a little bit what the plans are and the speed of further growth in that market you expect from both domestic growth and export growth. And then a second question, we touched already on pricing in the U.S. market, but I'm wondering if you can also elaborate a little bit on pricing in the other markets in light of maybe general inflationary context given the Middle East conflict. Can you maybe also elaborate a little bit on that? That would be helpful.

Maybe you want to comment on the first one, John?

Yes. On East Med, our margins, yes, grew very nicely from 19% to 20%, 27%. This is primarily driven by the introduction of Tracim. We came with an accretive EBITDA margin to the group, approximately -- the first year is approximately 30%. And that really is impacting the overall margins of the region. It also helps the fact that we've implemented a lot of our Project Prime initiatives there, cost initiatives and other self-help measures that drove the cost down and improved the profitability versus prior year. In terms of -- what was your other question on the East Med it was about?

Growth in Egypt.