Buzzi Unicem: A Family-Owned Business With International Operations – Seeking Alpha

Investment Thesis

Cement is an industry where you are geographically tied because the transportation cost of cement is very high relative to production cost. A cement plant typically starts to get non-competitive once you are getting 200-300 kilometers away from the plant. Most cement plants are geographically constrained, so they can only supply within a region and be competitive.

Buzzi Unicem (OTC:BZZUF; OTCPK:BZZUY) is an Italian company with international operations that produces cement, ready-mix concrete, and construction aggregates. Buzzi Unicem is controlled by the Buzzi Family, which holds approximately 59% of ordinary shares.

Business Model

The Buzzi Unicem Group has 37 cement plants, 404 ready-mix batch plants, and 18 aggregate quarries. Total cement production capacity stands at 39.6m tons, while cement production was 28.3m tons in 2019.

Cement plants are well geographically diversified with the highest capacity in Italy (10.8m tons), then US (10.2m tons), and Germany (7.2m tons). Contrary to that, Italy is the third-largest market by net sales, and in terms of profitability, the fourth largest market. By analyzing the markets where the Buzzi Unicem operates more exhaustively, it should be noted that the US is the biggest market in terms of sales and profitability,