Regulatory News:

Vicat (Paris:VCT) has today reported its consolidated results for 2008. Earnings per share totalled €5.50, down 14.7%. The Board of Directors will propose a dividend payment of €1.50 per share to shareholders in the AGM, resulting in a substantial increase in the dividend yield and payout ratio.

Simplified consolidated income statement:

(€ million)   2008   2007   Change
      Reported  

At constant scope

and exchange rates

Sales 2,057 2,136 (3.7%)   (3.0%)
EBITDA* 528 593 (10.9%) (9.5%)
EBITDA margin (%) 25.7 27.8
EBIT** 392 480 (18.3%) (16.8%)
EBIT margin (%) 19.1 22.5
Net income 245 299 (18.1%) (14.7%)
Net margin (%)   11.9   14.0        
Cash flow   402   477   (15.7%)   (14.0%)

*EBITDA is calculated as the total of gross operating profit and other ordinary income and expenses

**EBIT is calculated as the total of EBITDA and net depreciation charges and ordinary provisions

In relation to these results, Guy Sidos, CEO, made the following comments:

"Although the macroeconomic environment deteriorated severely in the second half of 2008, particularly in the fourth quarter, Vicat proved its resilience by slightly increasing its EBITDA margin in the second half relative to the first. This performance was made possible by way of the first effects of the ?Performance 2010? plan and did not include the benefit of the "Performance Plus" complementary cost-cutting plan that will only fully impact 2009. As a result, and backed by the Group's very strong financial position, Vicat is prudently pursuing its investment programme. The aims of this programme are to reduce production costs and to strengthen industrial and commercial positions in Vicat's main markets, which continue to show medium- and long-term growth potential. "

1. 2008 income statement

1.1. Consolidated income statement

2008 sales totalled €2,057 million, down 3.7% relative to 2007 and down 3.0% at constant scope and exchange rates.

Weak economic conditions caused sales to decline in France (-1.4%), the USA (-25.8%) and Turkey (-0.9%) at constant scope and exchange rates. However, Vicat's consolidated sales rose year-on-year in Europe (+0.6%) and Africa and the Middle East (+17.1%) at constant scope and exchange rates.

Vicat's operating profitability levels were lower than the record levels of 2007, because of:

  • the substantial fall in US business levels throughout the year, and weaker activity in the French, European and Turkish markets in the second half;
  • a significant decline in prices in Turkey and the USA, caused by stiff competition.

These factors were not offset by Vicat's commercial dynamism in Africa and the Middle East.

Operating margin was also affected by higher energy prices, although the effect was partly compensated for by the improved technical performance of production facilities and increased use of alternative fuels.

Consolidated EBITDA fell by 10.9% to €528 million, and by 9.5% at constant scope and exchange rates. This resulted in EBITDA margin of 25.7%, down from 27.8% in 2007.

Consolidated EBIT was down 18.3% to €392 million, and down 16.8% at constant scope and exchange rates. EBIT margin was 19.1% as opposed to 22.5% in 2007.

The increase in interest expenses was caused by higher debt levels relative to 31 December 2007 and higher interest rates. Gearing was 34.7% at 31 December 2008 versus 30.0% a year earlier. However, gearing fell substantially between 30 June 2008 (38%) and the year-end.

The Group's tax rate was 23.4%, down from 25.1% in 2007. The decrease reflects the stronger contribution of geographical zones where tax rates are lowest, particularly Senegal and Egypt.

Net income was €245 million, down 14.7% at constant scope and exchange rates. Net margin was 11.9%, as opposed to 14.0% in 2007.

1.2. Income statement by geographical zone

1.2.1. Income statement: France

(€ million)   2008   2007   Change
Reported  

At constant scope

and exchange rates

 
Consolidated sales 1,017 1,028 (1.0%) (1.4%)
EBITDA 262 272 (4.0%) (4.1%)
EBIT 209 224 (7.1%) (7.0%)

Consolidated sales in France fell by 1.0%, or 1.4% at constant scope, in 2008.

The weakening economic environment, particularly in the fourth quarter, caused lower sales volumes in both Cement and Concrete & Aggregates. Lower volumes were only partially offset by higher selling prices.

EBITDA fell by 4% to €262 million. EBITDA margin* came in at 25.5%, down from 26.3% in 2007.

In the Cement business, however, EBITDA margin* rose by 24 basis points in 2008, as a result of:

  • higher prices, comfortably offsetting the slight decrease in sales volumes;
  • reduced external purchases of clinker, which had affected profitability in 2007;
  • the commissioning of a new cement mill in Montalieu as part of the Performance 2010 plan, enhancing performance and ending inter-plant transportation of clinker and cement;
  • ongoing work to enhance the technical performance of facilities, and increased use of alternative fuels.

In Concrete & Aggregates, EBITDA margin* fell substantially because of declining volumes throughout the year and particularly in the second half, combined with higher transportation costs.

*EBITDA/operational sales

1.2.2 Income statement: Europe (ex-France)

(€ million)   2008   2007   Change
      Reported  

At constant scope

and exchange rates

Consolidated sales 283 285 (0.6%)   +0.6%
EBITDA 67 70 (4.1%) (3.5%)
EBIT 49 58 (14.3%) (13.8%)

In Europe (ex-France), consolidated sales fell by 0.6%. At constant scope and exchange rates, sales were up 0.6%. In the region as a whole, EBITDA margin* fell slightly, from 24.4% to 23.6%.

Switzerland:

EBITDA was down 2.6% at constant scope and exchange rates, causing a slight decrease in EBITDA margin*. The decline was mainly down to the Cement business, where EBITDA margin* was badly affected by the cost of external purchases of clinker (30,000 tonnes) and cement (25,000 tonnes) and by the higher price of alternative fuels, this despite improved substitution rates. In Concrete & Aggregates, both EBITDA and EBITDA margin* fell. The Precast business put in a solid performance, with firm growth in EBITDA and a substantial increase in margins.

Italy:

EBITDA in Italy fell by 12.3% because of the worsening economic climate. This resulted in lower cement volumes and stiff competition. EBITDA margin* fell by around 100 basis points. Although prices rose, this was not enough to offset the rise in imported material prices and freight charges.

1.2.3 Income statement: USA

(€ million)   2008   2007   Change
      Reported  

At constant scope

and exchange rates

Consolidated sales 268 364 (26.3%)   (25.8%)
EBITDA 49 83 (41.6%) (36.5%)
EBIT 23 59 (61.3%) (54.7%)

Consolidated sales fell by 26.3% and by 25.8% at constant scope and exchange rates in 2008.

The severe deterioration in the macroeconomic environment, in both California and the Southeast, led to a substantial fall in sales volumes. Selling prices also fell, except in the Southeast, where prices rose slightly in the Concrete business.

*EBITDA/operational sales

EBITDA was down 41.6% or 36.5% at constant scope and exchange rates.

EBITDA margin* fell sharply, from 22.8% in 2007 to 18.1% in 2008, mainly due to lower profitability in Concrete & Aggregates.

In the Cement business, EBITDA margin* remained near-flat, despite falling volumes and selling prices. This firm performance was mainly the result of the following factors.

  • Greater efficiency in the production system: in 2007, Cement margins were affected by significant external purchases of cement and clinker following a prolonged stoppage at the Ragland kiln.
  • Greater use of alternative fuels, substitute materials and additives.

1.2.4 Income statement: Turkey and Kazakhstan

(€ million)   2008   2007   Change
      Reported  

At constant scope

and exchange rates

Consolidated sales 187 202 (7.2%)   (0.9%)
EBITDA 35 67 (47.9%) (44.2%)
EBIT 17 55 (68.5%) (66.1%)

Vicat's consolidated 2008 sales in Turkey amounted to €187 million, down very slightly (-0.9%) at constant scope and exchange rates.

EBITDA fell by 44.2% at constant scope and exchange rates. As a result, EBITDA margin* contracted sharply, from 33.3% in 2007 to 18.7% in 2008.

This large decline was mainly due to steep price falls over the whole year, resulting from a very tough competitive environment in both Cement and Concrete.

Cement margins were also affected by:

  • major additional costs arising from the commissioning of the new Bastas kiln, whose improved technical performance, particularly as regards energy consumption, did not have a positive effect until the end of the year;
  • a substantial increase in transport costs caused by the sharp increase in export sales in the first half.

In Concrete, higher sales volumes did not offset the downward pressure on selling prices and higher transport costs. This caused a severe contraction in margins.

*EBITDA/operational sales

1.2.5 Income statement: Africa and the Middle East

(€ million)   2008   2007   Change
      Reported  

At constant scope

and exchange rates

Consolidated sales 302 259 +16.5%   +17.1%
EBITDA 117 101 +15.4% +16.9%
EBIT 94 83 +12.5% +14.2%

Consolidated sales in Africa and the Middle East rose by 17.1% at constant scope and exchange rates to €302 million.

Egypt:

Strong volume growth and rising prices caused sales to rise by 38.2% and EBITDA by 25.1% at constant scope and exchange rates. As expected, however, EBITDA margin* declined because of the significant rise in gas prices imposed by the government in the first half, the new "clay tax" and higher transportation costs resulting from the upturn in exports in the fourth quarter.

Western Africa:

Consolidated sales and EBITDA benefited from a positive operating environment, rising by 6.9% and 9.6% respectively at constant scope and exchange rates. In Cement, EBITDA rose by 11.5% at constant scope and exchange rates, underpinned by firm market conditions and the increased efficiency of production facilities. EBITDA margin* also rose slightly in Cement. However, EBITDA in Concrete & Aggregates fell by 4.3%.

*EBITDA/operational sales

1.3. Income statement by business

1.3.1. Cement

(€ million)   2008   2007   Change
      Reported  

At constant scope

and exchange rates

Operational sales 1,142 1,156 (1.2%)   +0.4%
Consolidated sales 929 929 +0.0% +1.5%
EBITDA 388 415 (6.5%) (5.2%)
EBIT   304   344   (11.7%)   (10.7%)

In 2008, operational sales in the Cement business fell by 1.2%, but rose by 0.4% at constant scope and exchange rates.

Volumes were broadly stable in 2008.

EBITDA came in at €388 million, down 5.2% at constant scope and exchange rates. EBITDA margin* fell from 35.9% in 2007 to 33.8% in 2008.

1.3.2. Concrete & Aggregates

(€ million)   2008   2007   Change
      Reported  

At constant scope

and exchange rates

Operational sales 882 950 (7.2%)   (7.3%)
Consolidated sales 845 914 (7.5%) (7.8%)
EBITDA 109 147 (25.6%) (22.7%)
EBIT   70   118   (40.8%)   (37.0%)

Operational sales in Concrete & Aggregates fell by 7.2% and 7.3% at constant scope and exchange rates.

Concrete delivery volumes were down 5.2%, and Aggregates volumes down 4.4%.

EBITDA came in at €109 million, down 22.7% at constant scope and exchange rates. EBITDA margin* fell from 15.5% in 2007 to 12.3% in 2008.

*EBITDA/operational sales

1.3.3. Other Products and Services

(€ million)   2008   2007   Change
      Reported  

At constant scope

and exchange rates

Operational sales 361 369 (2.3%)   (1.2%)
Consolidated sales 283 293 (3.5%) (2.2%)
EBITDA 31 32 (2.0%) (5.2%)
EBIT   19   18   3.2%   (1.7%)

Operational sales in Other Products and Services fell by 2.3% and 1.2% at constant scope and exchange rates.

EBITDA came in at €31 million, down 2.0% or 5.2% at constant scope and exchange rates.

2. Balance sheet and cash flow

Net financial debt was €678 million at 31 December 2008, up from €515 million at 31 December 2007.

Consolidated shareholders' equity totalled €1,954 million versus €1,717 million at 31 December 2007.

As a result, net financial debt equalled 34.7% of consolidated shareholders' equity at end-2008, as opposed to 30.0% at end-2007.

Given Vicat's low net debt, covenants do not pose any threat to the Group's fina