2024-02-23 01:18:10 ET
Imerys S.A. (IMYSF)
Q4 2023 Earnings Conference Call
February 22, 2024 3:30 AM ET
Company Participants
Alessandro Dazza – Chief Executive Officer
Sebastien Rouge – Chief Financial Officer
Conference Call Participants
Sven Edelfelt – ODDO
Aron Ceccarelli – Berenberg
Jamie Fletcher – The Analyst Research LLP
Matthias Kubli – Tiger Asset Management
Presentation
Alessandro Dazza
Good morning to all of you and thank you for joining us today to review Imerys Q4 and Full Year 2023 Results. With me, as usual, our CFO, Sebastien Rouge. Let me start by giving you some highlights of the year we just closed. Once again, I think in 2023, Imerys continue to demonstrate resilience and agility in what we can call a complex market environment. Revenues were close to €3.8 billion with sales volumes impacted by weak demand in certain or maybe in several end markets, notably residential construction, industrial and paper markets as well as significant destocking throughout the year. Despite last year high comparables, prices were up this year, again 2.6% on a full year basis, though slowing in Q4 with a negative 4% clearly to reflect the end of certain surcharges. Sebastien will deep dive on these in few minutes.
Thanks to price discipline, and really strong actions on costs Imerys posted a current EBITDA for the full year at €633 million in line with guidance even for Q4 2023 EBITDA at €152 millions in line or even slightly above Q4 2022. Good news on the cash side, Imerys generated substantial free operating cash flow for the year €288 million before strategic CapEx €192 million after strategic CapEx compared to €20 million last year, which means 10x. This was possible, thanks to really a great work of my teams, but also structural actions we put in place on working capital management, leading especially to a significant inventory decrease, of course, also helped by lower inflationary pressure in 2023. To conclude, the board of directors will propose to the shareholders meeting in May, a cash dividend of €1.35 per share for the year in line or above historical payout ratios.
If we now look a bit over the last three year development of the group, Imerys confirms its business model, its resiliency even in challenging times, with record inflation in the past, lower volumes this year. Current EBITDA margin remains resilient around 17% confirming the group agility and adaptability to the situation. On the right side, that's a good example. We were capable of adjusting our prices to the evolution of variable costs especially in 2022, but also adjusting to the inflationary pressure on fixed costs and overheads, and we maintained such price even when input costs dropped, like you can clearly see in 2023. This was necessary to maintain our profitability, and all the actions we put in place to reduce the cost base as described in the next slide.
What I want to underline here is really the tremendous effort done by the team on costs, net of all the external events like foreign exchange or perimeter and things that are not directly under our control savings of €126 million in 2023, 3.3% of the overall cost base more than compensating still persistent inflation. And really the action encompassed all aspects of Imerys from purchasing, operational efficiency at plants, capacity adjustments, overheads reductions, discretionary spending limitations. These savings, I think is very important are structural. Therefore, they will durably and positively impact our cost base in the future.
If we now look a bit at our end market, as a reminder, the construction market remains today our largest end market with around 37% followed by consumer, consumer goods in general and healthcare with around 20%, followed by automotive, energy and industrial activities and the others we register here, still our paper activities. If we deep dive on these markets, let's start with construction. As you can see here, overall, construction is showing a positive impact or a positive trend mostly thanks to the dynamic infrastructure sector. Unfortunately, Imerys products are not used or very present in infrastructure. Our exposure is largely on the residential market, which is severely impacted by high interest rates and credit tightening both in Europe and in America, which are our main markets.
Some figures, U.S. housing starts decreased 3% in Q3 and Q4 and 9% for the year. Similar picture in Europe, drop of 1% in Q4, the rolling 12 months, datas are available until September, shows a 9% drop in residential building permits. The good news, there are good news. The good news is that there is a lack of housing certainly in the U.S. and probably in large part of Europe. So we are convinced that as soon as the market will stabilize, there should be a start or a restart or even a jump start of construction supported by an inversion in interest rate trends. Private consumption is holding well in the U.S., robust job market that's helped consumption, a bit more flattish in Europe, following high or higher inflation, good rebound in China post-COVID that continues....
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Imerys S.A. (IMYSF) Q4 2023 Earnings Call Transcript