Today, we are bringing you a detailed overview of the 2022 business performance estimate, as well as the 2023 business plan of Cinkarna Celje.
The Company noted that in 2022, the year was marked by the departure from normality due to the global epidemiological situation and the energy crisis. They managed to minimize the impact on their business by taking swift and effective action. However, their influence is limited in global trade, mainly in the expansion of pigment capacity in China. The current demand for the pigment in that market is at lower levels and, combined with lower transport costs, creates an attractive environment for exports to the European market. 2022 was marked by rising selling prices for the pigment. Prices peaked in Q3, followed by a sharp fall in prices in China and a downward correction in Europe. During the year, the raw material and energy markets rebounded and the volatility stemming from the latter will have a significant impact on the sell and buy side of the industrial products and along the chain also on the final consumers.
On the upstream side, they expect the high prices of titanium-bearing raw materials to be maintained. The lower demand for pigment from different industrial segments, the expected need for further adjustment of selling prices, and the high level of procurement prices for key energy-intensive raw materials will lead to a higher erosion of op. margins. Based on the excellent 9M results and the much tougher op. conditions in the last quarter and the corresponding projections for the rest of the year, they conclude that they will exceed the 2022 profit target. They also note that cross-industry comparisons also show that Cinkarna Celje is one of the best-performing companies in the titanium dioxide pigment industry at the end of 2022.
Because of all the mentioned above, they are cautious about 2023. The profitability plan for 2023 does not meet the forecasts in the medium-term development strategy for the period. The cycle has shifted in recent years due to the circumstances in the global economy and they have exceeded their medium-term plans in all years up to 2022. They estimate that the 2019-2023 medium-term plan will be exceeded on average across all major financial indicators, despite a weaker projected 2023.
Taking into account the current market conditions, the outlook for the titanium dioxide industry, and projections of macroeconomic conditions in the global economy, they have set a plan for 2023.
Margins will stabilize at a lower level, and with uncertain macroeconomic conditions and lower pigment demand, they anticipate that production capacity will not be fully utilized in 2023. Despite the difficult market conditions, their focus remains on maximizing capacity utilization and improving their sales structure. In titanium dioxide pigment, they will reallocate a flexible part of their sales volumes to the most profitable markets on an ongoing basis. In the coming year, they will continue allocating potential and resources to the most profitable areas and programmes, with investments into areas of quality improvement, op. safety and increasing the production capacity of titanium dioxide pigment. In the Metallurgy programme, they continue to further adjust their selling prices and reduce op. costs. They note that if they are unable to ensure continued positive performance in this way, they will discontinue the programme.
Due to the current energy market conditions, they expect a sharp increase in energy costs in 2023. They note that the sourcing of key raw materials remains extremely important in 2023, and they expect that titanium-bearing raw material procurement prices will stabilize at high levels.
Taking all of this into account, as well as many other factors that are detailed in the report, which you can access here, they expect that the net sales revenue will amount to EUR 200.6m in 2023, with sales in the foreign markets reaching EUR 183.3m. The projected net income will amount to EUR 5.9m. The lower net income is a direct consequence of the falling sales prices of titanium dioxide pigment and the rising prices of strategic raw materials and energy products. The EBITDA margin is expected at 10%. The changed circumstances will also lead to a change in the planned dividend policy in 2023. The Company plans to allocate and payout 50% of its net profit as dividends, a change from the dividend policy announced in the Company’s Development Strategy 2019-2023.
Investments will be made on a programme-by-programme basis, according to need, capacity, and potential, and in line with the medium-term strategic plan. They will invest mainly in projects to remove bottlenecks, increase energy efficiency, reduce negative environmental impacts, and improve safe and healthy working conditions. The largest share of investments will be in titanium dioxide production. The planned amount of investments in fixed assets in terms of mitigating energy risks and investing in sustainable development exceeds the average of the last three years and amounts to EUR 20.5m.
Cinkarna Celje 2022 estimate and 2023 plan key performance indicators
|wdt_ID||Name of item||2022 Estimate||2023 Plan|
|3||Net profit (EUR)||40.019.700||5.936.130|
|5||EBITDA margin (%)||27,00%||4,00%|
|6||Net profit margin (%)||17,71%||2,96%|
|7||Return on equity (%)||24,85%||3,39%|
|8||Return on assets (%)||16,33%||2,49%|
Source: Cinkarna Celje, InterCapital Research