Report of the Board of Directors



2013 saw signs that the global economy is turning a corner. US growth started picking up speed and fears over another flare-up of the Eurozone debt crisis receded. Although emerging economies lost some steam, they kept growing at fast rates. But the lingering effects of the financial crisis continued to impact markets, suggesting that the recovery is likely to be turbulent. Persistent unemployment and deflationary fears in the Eurozone, fiscal tightening in the US, political turmoil in the Middle East, and a possible hard landing in China could further delay the return of the world economy to a dynamic and sustainable growth trajectory.



In this challenging environment, Titan Group operating results improved for the first time in seven years. The recovery of the US housing market, the resilience of demand in Egypt and the perseverance on exports enabled the Group to increase sales, generate positive free cash flow, and further reduce net debt, against a backdrop of prolonged weakness in its home market and subdued construction activity in Southeastern Europe.

Consolidated turnover in 2013 increased by 4.0% to €1,176 million. Earnings before interest, taxes, depreciation and amortization (EBITDA) stood broadly unchanged at €196 million and improved on a comparable basis. Adverse foreign exchange fluctuations resulted in a €12 million negative translation impact on consolidated EBITDA. At stable exchange rates, turnover and EBITDA would have increased by 8.3% and 6.4% respectively.

Operating profit after depreciation and amortization (EBIT) grew 22% to €79 million. However, net losses after minority interests and the provision for taxes widened by 47% to €36 million, mainly as a result of a €23 million increase in net realized and unrealized foreign exchange losses. The bottom line was also impacted by the temporary non-recognition of deferred tax assets resulting from carry-forward losses in the US and the retroactive taxation of previous year’s reserves in Greece.

Prioritizing investments, curtailing working capital needs, and lowering costs, the Group generated €142 million in operating free cash flow, and thus contributed to a €57 million reduction in net debt, which at year end stood at €539 million, less than half its 2008, pre-crisis level. Operating free cash flow generation in 2012 was €140 million. In December 2013, Standard & Poor’s upgraded Titan’s long-term credit rating to ‘BB’ with stable outlook.

The stock price of the Company closed at €19.80 a share on 31.12.2013, gaining 42% in 2013 and outperforming the General Index of the Athens Stock Exchange (ASE), which posted a 28% increase. In the five year period 31.12.2008-31.12.2013, Titan shares again rose 42%, while the ASE General Index dropped 35%. Following the reclassification of the ASE as an ‘emerging market’ by Morgan Stanley Capital International (MSCI), the stock was included in the MSCI Emerging Markets Index.

In Greece, domestic cement demand continued to decline for the seventh consecutive year, albeit at a gradually slower pace. High real estate taxes and low disposable income, in conjunction with an illiquid mortgage market and a large unsold housing stock have brought private construction activity to a virtual standstill. Public infrastructure spending remained weak in 2013, while the resumption of the four major road works was postponed into 2014.

Cement demand in the country has now shrunk to a fifth of the levels recorded in 2006 and only one sixth of Titan’s production capacity in Greece was absorbed domestically in 2013. As a consequence, the continued operation of Titan’s plants in Greece depends on exports, amidst intense international competition, particularly from countries not subject to the costs of EU legislation on carbon dioxide emissions. In pursuing the improvement of its competitiveness, Titan continued to invest in the use of alternative fuels, aiming to reduce both its energy cost and its environmental footprint.

As a whole, region Greece and Western Europe posted a 4.0% rise in turnover, which reached €250 million. EBITDA dropped 57% to €14 million.

Operating profitability of Titan’s North American operations improved markedly, primarily due to the strong recovery of the residential market in the USA. With unemployment at a five-year low and residential construction on the upturn, demand for building materials is now on a fast recovery track.

According to the Portland Cement Association (PCA), cement consumption in the South Atlantic States, where Titan’s US plants are located, rose 8.5% in 2013. This figure compares favorably to a national average increase of 4.5%. In Florida demand surged 18.4%, on the back of rising home prices and declining inventory. At the same time, non-residential construction trends were also positive.

Titan America subsidiary, Separation Technologies LLC (ST), which is engaged in the production and operation of fly-ash beneficiation facilities, continued on its profitable growth trajectory. In addition, ST invested in further Research and Development with a view to optimizing its technology for a broader range of minerals applications.

Titan reported sales growth across all product lines in North America. The region now accounts for over a third of Group turnover and a rapidly increasing share of EBITDA. Driven by both higher volumes and improved prices, total revenue in the region grew 11% to €411 million, while EBITDA rose to €32 million, up from €5.8 million in 2012.

Despite modest gains in prices in the second half of the year, margins in Titan’s Southeastern Europe business units continued to lag well behind pre-crisis levels. The growth rates of most Balkan economies improved slightly in 2013, yet foreign direct investment flows to the region were hampered by the weakness in neighboring Eurozone countries, such as Italy and Greece.

As a result, construction activity remained relatively stable at low levels in 2013. However, the use of alternative fuels increased, allowing the Group to improve its energy efficiency and maintain its organic profitability.

Turnover in the region declined 4.3% to €215 million, while EBITDA posted a marginal decline of 1.9% to €63 million.

In Egypt, sales were resilient in the face of severe political turmoil and economic strains. Financial assistance from the Gulf countries has eased immediate financing concerns, yet fiscal problems, inflationary pressures and currency depreciation continue to pose a threat to economic growth. Nevertheless, as reflected by the stock market, the exercise of responsible economic policy has raised hopes for a gradual return to economic stability.

Consumption of building materials in the country dropped slightly in 2013, yet it is unclear whether this contraction reflects a potential softening in demand or the effect of energy supply shortages and production disruptions. Clinker imports supported the production output of Titan plants in a challenging business environment. Margins were eroded by higher energy costs and even though cement prices increased in local currency, they were flat in Euro terms.

Turkey’s construction sector grew further in 2013, despite political instability in the second half of the year. Both exports and domestic sales increased, but results were negatively hurt by the depreciation of the Turkish Lira.

Total turnover in the Eastern Mediterranean region rose 1.3% to €300 million. EBITDA fell 7.1% to €87 million. At constant exchange rates, EBITDA would have increased by 5.2%.

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