HeidelbergCement rising cement sales, outlook affirmed

HeidelbergCement rising cement sales, outlook affirmed
Published: 03 November 2011

HeidelbergCement confirmed its outlook for the year after third quarter turnover rose 6.6% from the year-earlier quarter, supported by sustained growth in Asia-Pacific and Africa, as well as improving markets in the US and Europe.

Excluding exchange rate and consolidation effects, turnover grew by 9.8%, with all group areas recording an increase in turnover. Operating income before depreciation (OBID) was almost unchanged at EUR778m, despite higher energy and raw material costs.

“Due to our advantageous geographical footprint and our dual product strategy focussed on cement and aggregates, we were able to achieve a stable operating income despite significantly increased energy and raw materials costs. Nevertheless, we have so far been unable to translate the volume increases into higher operating profits, as we have not yet been able to completely offset the significant rise in energy and raw material costs by corresponding price increases, particularly in the cement business line,” remarked Chairman of the Managing Board, Dr Bernd Scheifele.

In the third quarter, sales volumes of cement were up 12% to 24.3Mt, ready-mix concrete up 8.9%, and aggregates up 4.1% from a year earlier. Cement volumes rose in most of the countries of Eastern Europe and in Central Asia, the recovery of the construction industry continued. Cement deliveries in North America increased by 10% YoY. Indonesia and India both recorded double-digit growth, as did Africa. In comparison with the previous year, HeidelbergCement benefited from the inclusion of cement production in the Democratic Republic of Congo and the Russian Republic of Bashkortostan.

During the first nine months of the year, group turnover rose by 8.4% to EUR9620m
(previous year: EUR8877). OIBD improved by 2.5% to EUR 1682m (previous year:
1642) and operating income rose by 1.6% to EUR1,063m (EUR 1047). Profit rose to EUR404.2m (EUR: 372.1), while the Group share improved to EUR266.3m (previous year: 243.0).

The company still sees increased turnover and operating income in 2011, and remains focused on cost-cutting measures. The group’s FOX 2013 cost-savings programme exceeded expectations, delivering savings of EUR251m in the first nine months (versus its full year plan of EUR200m).

The pace at which the company reduced debt slowed in the 3Q, falling short of its targets. Net debt fell to EUR8.5bn at the end of the quarter, from EUR8.65bn last year. However, Analysts at JP Morgan say they are encouraged by the group’s continued focus on deleveraging saying it will take some time to re-coup the additional energy and raw material costs, probably into 2Q12 but weaker YoY comparatives will help. A higher YoY margin, JP Morgan believe is key – it should act as a catalyst for the market to look at the asset values of these businesses. Heidelberg remains one of the best placed groups geographically, with exposure to areas of significant growth like Indonesia and avoiding problematic areas like North Africa, JP Morgan comments.