HeidelbergCement: markets, margin improving in Asia, Africa

HeidelbergCement: markets, margin improving in Asia, Africa
Published: 09 July 2009

In April and May 2009, HeidelbergCement’s operational performance has improved compared to the first quarter of 2009. The Group’s total turnover reached EUR 4.3bn in the first five months of 2009; this is a decline of 19.2% before any currency impact compared to the same period of the previous year. In the same period, our operating income before depreciation (OIBD) amounted to EUR 608m (a decrease of 30.6% before any currency impact compared to last year).

HeidelbergCement has proactively responded to the economic decline and has adjusted capacities and production structures accordingly. “The OIBD margin for April and May clearly reflects the success of our early started cost measures,” explains Dr. Bernd Scheifele, CEO of HeidelbergCement. “We were able to improve the margin from 8.5% in the first quarter to 21% for the period April to May 2009. In the previous year, the first quarter margin of 13% rose to 22% in the April-May period.”

Sales volumes in the second quarter show initial signs of stabilisation but overall remain below 2008 levels. Stronger demand in Asia and additional cement capacity in Africa could partially compensate for the decline in other core markets like North America and the UK. Consolidated cement and clinker sales volumes decreased by 14.9% to 37.8Mt (previous year: 44.4) in the first six months. While volumes fell by 18.1% in the first quarter, the rate of decline slowed down to 12.4% in the second quarter. Countries like China, Bangladesh, India, Turkey, Africa and Sweden are either above or in line with the prior year. Deliveries of aggregates declined by 24.6% to 107.7 million tonnes (previous year: 142.9) in the first six months. Deliveries of ready-mixed concrete decreased by 24.5% to 16.8Mm3 (previous year: 22.2). Supported by upcoming infrastructure activities asphalt sales volumes came to 4.4 Mt (previous year: 4.9), which represents a decline of 9.8%.

After the successful completion of a comprehensive refinancing of its bank debt, HeidelbergCement has extended the maturities of its bank debt until December 2011. Coupled with its current liquidity position, this provides the company with a stable base to confront the continued challenges of the current economic environment.

Although important aspects of macroeconomic development remain volatile, first signs of improvements can be seen in certain markets, such as China and India, as well as Australia. There are also indications that in these and other markets, the stimulus measures are beginning to take effect.

Cash flow generation remains a clear focus. HeidelbergCement is continuing far reaching cost cutting programmes. Due to successful measures taken in the framework of the “Fitness 2009” programme, expected savings of EUR 380 million will significantly exceed the initial goal of EUR 250 million. As a measure of further financial de-leveraging, the Group remains fully committed to its divestment of non-strategic business units and has so far achieved divestments in the amount of EUR 324 million in the first half of 2009.

“Thanks to our strong international positioning, the focal areas of our product range and the high efficiency of the business in general, HeidelbergCement expects to significantly benefit from the recovery of the markets,” comments CEO Dr. Scheifele.