HeidelbergCement profit rises

HeidelbergCement profit rises
Published: 18 March 2011

German cement major HeidelbergCement ended the 2010 financial year successfully, reporting increases in turnover and operating margins. The company attributed its performance to cost-cutting measures implemented at an early stage, in some cases even before the start of the global financial crisis.

"In 2010, the HeidelbergCement team successfully demonstrated implementation capabilities and cost efficiency once again," said Dr Bernd Scheifele, chairman of the managing board. "In addition, HeidelbergCement is one of the few companies in our industry that managed to improve its operating margin overall as well as in the two core business lines of cement and aggregates."

Full-year turnover improved 5.8% to €11,761.8m and EBITDA by 6.5% to €2239.4m. Pre-tax profit was €599.1m compared with a €14.5m loss in 2009. Net debt at the end of the year was 3.3% lower at €8146m and the gearing ratio fell by a further 17.9% to 62.9%. Capital investment began to increase again, rising 6.3% to €872m, with around €1050m being planned for 2011.

Group sales of cementitious materials declined 1.2% to 78.4Mt, but the international trading volume improved 13.8% to 9.6Mt. Cement shipments were stable, but clinker volumes were well ahead, with group companies in Africa and Bangladesh being supplied by Indonesian, Turkish and Scandinavian plants, which also sell to third parties.

In Western and Northern Europe turnover was off by 1% to €3811m. Cement tonnage declined 6.3% to 19.7Mt, and though British, Swedish and Estonian cement volumes were ahead, elsewhere they were lower. Eastern European and Central Asian turnover fell 11.2% to €1138m but an improving trend is being seen in this important market as volumes in Russia, Ukraine, Georgia and Kazakhstan improved. A majority stake in the Russian CJSC “Construction Materials” was acquired during the year and the completion of the Tula works should add 2Mta of capacity in 2011.

North American turnover recovered 4.9% to €3033m, and EBITDA by 31.6% to €448m. Deliveries of cementitious materials were marginally lower at 10Mt but the aggregates volume improved by 2.8% to 105Mt, in both cases helped by strong demand in the Canadian Prairies.

Asia-Pacific turnover rose 18% to €2609m and EBITDA advanced 17.4% to €718m. Cement deliveries were 4.3% higher at 26.6Mt. Two new cement mills with a capacity of 1.5Mta were commissioned at Cirebon, Indonesia, and a 0.8Mta grinding centre in Bangladesh should start operations in 2011. In India, two new works will come on-stream next year adding 2.9Mt, but last year’s volumes declined 1.6%.

In Africa and the Mediterranean, area turnover in cement rose 16.5% to €647m as the volume improved 12.3% to 8.2Mt. Ghana’s market performed particularly strongly and all markets other than Benin improved. Increased grinding capacities are being built in Ghana and in Liberia and are under consideration in other African markets.

Looking ahead, HeidelbergCement anticipates further recovery in Western and Northern Europe with increasing cement and aggregates sales to be driven by strong trends in Scandinavia and Germany. Hungarian and Romanian consumption is expected to remain weak but demand in Poland and Central Asia is set to rise. In North America, it sees a slight increase in cement and aggregate volumes thanks to ongoing investments in road construction in the USA and a continuing positive development of the commodity industry in Canada. The Asia-Pacific and Africa-Mediterranean Basin are expected to continue their positive growth paths.

However, Dr Scheifele warned that the continued sharp rise in energy costs, as well as inflationary pressures, could burden sales in 2011. "In view of the slow recovery in the mature markets and the rising costs and inflationary pressure, we are maintaining our focus on cash flow and stable margins in order to reduce our debt and further improve our key financial ratios.”