The TITAN Cement Group delivered strong results in 2020 despite the uncertainty caused by the Covid-19 pandemic, with revenue at par with the previous year and EBITDA going up. How did the Bulgarian unit of the group perform and how did you offset the negative effect of the crisis?
Titan Zlatna Panega,
CEO
For TITAN Bulgaria, 2020 was another year of stable financial performance and progress on environmental, social and governance issues. Despite the impact of the COVID-19 crisis, we had solid performance in 2020. Our EBITDA reached 8.7 million euro in 2020. The Group optimised production between its plants and supplied about 100,000 tonnes of cement from its Thessaloniki plant to its customers in Bulgaria. The cumulative EBITDA generated for the TITAN Group from the Bulgarian operations was 15% higher compared to 2019. Due to the annual profit and the optimisation of working capital, our net debt decreased by 2.5 million euro, and we closed the year at cash surplus position.
The results were positively influenced by the low energy prices, which prevailed for most of 2020, on the one hand, and on the other, by the efforts of the management team to reduce costs and working capital.
TITAN Bulgaria continued to implement the highest possible health and safety standards throughout 2020 and we had zero accidents during the year. Despite the COVID-19 challenges, we did not interrupt our operations even for a single day, as the prevention and protection of our direct employees, contractors and third parties continued to be a priority for us.
Our plant in Zlatna Panega was chosen by the TITAN Group for a pilot project for predictive maintenance utilizing a Machine Learning (ML) application. In 2020, significant cost avoidance was achieved thanks to a more targeted predictive maintenance and equipment damage elimination. Following the successful implementation of this innovative and state of the art application, TITAN Group rolled out similar projects in five more plants.
Construction output in Bulgaria has been recovering since the beginning of the year as investor confidence has returned. What are your expectations regarding your financial performance this year?
In 2020, cement consumption in Bulgaria decreased by approximately 2.5%, compared to 2019, thus putting an end to an increase that the market had experienced for three years in a row. The sector came to a standstill for the better part of the second quarter of the year. Specific segments like tourist and commercial buildings were hit particularly hard and did not recover until the end of the year and large infrastructure projects kicked off quite late in the year. Nevertheless, we still have a strong market with demand being 14% higher than the 2017-2018 levels.
The Bulgarian market seems to recover at a slower pace than the markets in other countries in Southeast Europe. Specific sectors of the construction market, which thrived before the COVID-19 crisis, such as office and touristic buildings, are still in a crisis. At the same time, the extended election period has postponed construction recovery. Yet, we are witnessing encouraging signs from the EU, and more specifically, the 11 billion euro recovery fund allocated to Bulgaria for 2021-2027.
Where do you see highest risks and how do you plan to counterbalance them?
We see an escalation of energy prices and CO2 allowance prices, which will negatively impact the industry. It may deteriorate the financial results in 2021 but has strengthened our determination to expedite projects aimed at reducing electricity consumption and CO2 emissions, as well as increasing the usage of renewables.
In 2020, we completed several projects that would help us advance in our energy efficiency efforts and decrease CO2 emissions. These projects aim at improving our raw mix and our ability to process and use alternative fuels. In 2020, we progressed in CO2 reduction, attaining a decrease in specific net CO2 emissions by 4% year-on-year. We reached the highest-ever share of waste in our fuel mix – 33% alternative fuels, 31% of which was carbon-neutral biomass.
TITAN Bulgaria, through its subsidiary GAEA, plays an active role in the local circular economy. The plant has utilised 101,000 tonnes of waste, thus replacing a similar quantity of natural fuels and raw materials. All of the waste is generated in Bulgaria.
TITAN Zlatna Panega’s investments exceeded 130 million euro in the 2004-2020 period. What is the volume of your planned investments in 2021 and 2022 and what are the main areas to which they will be directed?
Our investment will continue to be focused on achieving progress on environmental, social and governance issues. TITAN Zlatna Panega has an investment programme which will exceed 10 million euro for 2021 and The investment activities aim at reducing electrical consumption and CO2 emissions and increasing the use of alternative raw materials and fuels.
TITAN Cement Group targets 35% reduction in CO2 for 2030 compared to 1990 levels, Scope 1 emissions down to 500kg/t cementitious products and delivering carbon-neutral concrete by 2050. How does TITAN Zlatna Panega plan to contribute to achieving this aim?
TITAN Zlatna Panega`s long-term investment plan will reduce emissions in line with the targets of the TITAN Group. However, the efficiency of our plans will depend significantly on the effectiveness of the legislative efforts of the European Union to establish a level playing field for the industrial sectors that are at risk of carbon leakage.
The cement industry in Europe has a significant cost to comply with the high standards of environmental legislation applicable in the EU, the cost of CO2 emission being the most important of the relevant costs. At the same time, the Bulgarian industry faces significant competition from countries with no CO2 costs, which creates difficulties in introducing low carbon products into the market.
You have programmes that stimulate youth employment. What are your observations of the labour market in Bulgaria and young people in particular?
The high unemployment rate in the region, where we operate, leads to its depopulation. As a result, it becomes difficult to hire employees for operational positions. Our near future response is to develop further our relationship with professional schools in the region and explore new locations for potential employees. We will continue to support young people in their professional development, and contribute to the local community where most of our interns come from.
We have various initiatives, for instance, for welcoming interns, mentoring them, and helping them enter the labour market. Our internship programme prepares young people in their third or fourth year at the university, studying silicate technologies, electrical engineering, machine building and technologies, civil engineering, finance etc. To stimulate interest in our internship programme, we offer a labour contract to the interns and a prolonged internship period. Also, for several years now, TITAN Bulgaria participates in the Summer Academy for Leaders in the town of Gabrovo.
Our cement plant and quarries are located in one of the poorest rural areas in the European Union. The rate of children dropping out of elementary school is high. Many of the kids work to earn money to support their parents or young families. Lack of enough teachers for the local community and lack of sufficient kids` motivation were two of the challenges that we tried to address when we started working on a project with the Teach for All Bulgaria foundation.
Some of the goals of that project are to encourage children to stay at school, improve their functional literacy, give them further education, and build basic career starting skills. We try to teach the kids from disadvantaged families in the region that quality education is an opportunity. For nine consecutive years, TITAN Bulgaria, together with Teach for All Bulgaria Foundation has helped over 700 schoolchildren from families with challenging socio-economic status in five elementary schools in the region. As a result of our project, school attendance and functional reading literacy of the children were improved. The rate of kids leaving school before completing primary or elementary education has dropped. Some children not only managed to complete grade seven but also enrolled in high school in nearby cities.
Sustainability of communities in proximity to our operations will continue to be the focus of our community engagement plans. To support the local community’s educational, health and social improvement as well as the infrastructure in the region, TITAN Bulgaria invested in different projects and initiatives by donating in cash and in kind, by hiring interns from the local community, and by providing scholarships for students from the region. More than 65% of our investment was directed to education and schools in the area of our operations. Our donations in kind supported the infrastructural needs of the region – construction and reconstruction of streets, cultural monuments, and buildings.