Greek cement market shows staying power
The Greek cement market has displayed endurance despite the downturn in the construction of public works after the 2004 Olympic Games. According to a presentation to analysts of Heracles cement company yesterday, the fall in demand for cement was lower than anticipated, around 3 percent. The record year was 2003, when the internal market absorbed 11 million tons, falling to 10.1 million in 2005. Heracles forecasts that demand will rise marginally this year, to 10.2 million tons. The projection is based on an expectation that private home construction will offset any decline in public works construction, and that it will continue growing steadily in coming years. Greece is among the largest cement consuming nations worldwide. This is no doubt strongly linked to the fact that home ownership remains a highly rated investment option. The outlook for cement production is further enhanced by the prospects for holiday housing complexes which will target foreign buyers. This is still an underdeveloped market and offers a wide growth margin. Heracles, controlled by the multinational Lafarge group, has a 52 percent market share in Greece, the rest belonging to Titan and Halyps. Heracles’ strong dependence on the Greek market has spurred management in the last two years into a decision to bolster exports, although they carry a lower profit margin due to rising transportation costs. In 2005, exports amounted to 2.9 million tons (up 15 percent from 2004) and are expected to rise to 3.1 million tons this year. Heracles posted a 64.8 percent rise in after-tax net profit to 158.7 million euros in 2005, from 96.3 million in 2004. However, this rise was accounted for by circumstantial and extraordinary factors, as the group’s operational activity was reduced. Specifically, Heracles realized extraordinary revenues of 44.1 million euros after the favorable adjudication of legal suits against the Greek state, and a tax gain of 50.3 million after the readjustment of property values. In contrast, operational earnings fell 4.54 percent to 92.6 million euros. Higher fuel costs were not offset by the 4.8 percent rise in the price of cement in 2005. Due to the expected absence of extraordinary revenues in 2006, Heracles’ results are not expected to give a substantially improved picture.
