Increased operational efficiency, net revenues growth in Brazil and better results from the operations abroad drove Votorantim Cimentos' results in 2018. The company closed the year with a global net revenues of R$ 12.6 billion, an increase of approximately 15% over the R$ 10.9 billion recorded in 2017. The 2018 adjusted EBITDA was R$ 2.6 billion, an increase of approximately 51% over the same period in 2017. The EBITDA margin in 2018 was 21%, an increase of five percentage points compared to the previous year.
"Our performance in 2018 is the result of our financial discipline and continued focus on efficiency and competitiveness, combined with the rationalization of our portfolio" said Osvaldo Ayres Filho, global CFO, Votorantim Cimentos.
Some of the key measures implemented last year by Votorantim Cimentos included the approval of several investments aimed at enhancing our competitiveness, an increase in the company's production capacity with the completion of plant expansions in Charlevoix (United States) and Olavarría (Argentina), and the continuation of an expansion project at the San Luis plant, in Argentina, scheduled to be concluded in the fourth-quarter of 2019 and the sale of cement operations in India and Peru. The highlight of the Brazilian operations in 2018 was the growth of the company's net revenue, with an increase in prices due to higher costs associated with production.
Votorantim Cimentos ended the fourth-quarter 2018 with a net financial leverage — measured by net debt to adjusted EBITDA—at a ratio of 3.6, a significant improvement compared to a ratio of 5.2 at the end of 2017. In January 2019, the parent company Votorantim S.A. made a contribution of R$ 2 billion to Votorantim Cimentos, which was used for debt prepayments. As a result, the company's pro forma leverage ratio in January 2019 dropped to 2.8, staying within the limits established by its financial policy.
"This new capital increase from Votorantim S.A. to Votorantim Cimentos demonstrates, once again, their confidence in our company, accelerating the deleveraging process," said Ayres Filho.
Another highlight of 2018 was the creation of Votorantim Cimentos International (VCI), which now aggregates all company investments outside Brazil. Based in Luxembourg, the company, created in October 2018, aims to facilitate the continued international expansion of Votorantim Cimentos, in addition to enabling even more efficient capital management.
In late 2018, the company announced to the market that, after more than five years as the head of the company, Walter Dissinger, Global CEO, communicated his desire to pursue new challenges. To succeed him, Votorantim Cimentos appointed Marcelo Castelli, an executive who began his history in the Votorantim Group in 1997 and held various executive roles before reaching the position of CEO. Castelli will lead the company, continuing its growth trajectory.
Results in Brazil (VCBR)
In Brazil, Votorantim Cimentos' main market, net revenue grew in 2018, despite a decline in the cement market, which fell 1.2% between 2018 and 2017, according to the Brazilian Cement Association (SNIC).
The company's net revenue in Brazil was R$ 6.6 billion, an increase of 13% compared to R$ 5.8 billion in 2017. Adjusted EBITDA was R$ 1.0 billion last year, a 198% growth compared to R$ 344 million in 2017. The adjusted EBITDA growth is also attributed to the positive effect of non-recurring items throughout the year.
Results in North America (VCNA)
Votorantim Cimentos in North American faced a positive environment in the United States, with volumes and prices increasing, mitigated by a challenging market in Canada. However, last year's appreciation of the dollar against the real had a positive impact on the company's result in the region.
In 2018, net revenue was R$ 3.4 billion, 17% higher than R$ 2.9 in 2017. Adjusted EBITDA was R$ 992 million in 2018, compared to R$ 868 million in 2017.
Results in Europe, Asia and Africa (VCEAA)
In Europe, Asia and Africa, Votorantim Cimentos encountered growing demand in Spain and positive results in Tunisia. In Morocco the market maintained a solid EBITDA margin. In Turkey, due to an economic slowdown, cement demand decreased and negatively impacted the region's result.
In addition, in 2018 the appreciation of the euro in relation to the real contributed to a net revenue of R$ 1.9 billion in the region, growth of approximately 14% over 2017 (R$ 1.7 billion). Adjusted EBITDA totaled R$ 461 million last year, compared to R$ 423 million in 2017.
Results in Latin America (VCSA)
The results in Latin America were positively impacted by the performance of the Uruguayan market. Net revenue in the region was R$ 672 million, up 30% from R$ 517 million in 2017. Adjusted EBITDA reached R$ 145 million last year, up 47% from R$ 99 million in 2017.
Acquisitions and Divestments - In July 2018, Votorantim Cimentos concluded the acquisition of Cemex's (Cimento Vencemos do Amazonas Ltda) operations in Manaus (AM). The acquisition aimed to increase product supply in the Amazonas and Roraima markets, in addition to expanding logistics facilities and geographical and portfolio diversification.
In October last year the company sold its 50% stake in Cementos Portland S.A. from Peru. In November, Votorantim Cimentos transferred 75% of its stake in Shree Digvijay Cement Company Ltd. to a private fund based in Mumbai, in India. The transaction is expected to be completed in the second quarter of 2019, with the sale of the controlling stake of the Indian operation.