HeidelbergCement looks for further cost-cutting

German building materials group Heidelberg Cement AG is expected to make an effort to cut costs and clean up its balance sheet, following the appointment of supervisory board chairman Bernd Scheifele as CEO, industry sources said on January 20, 2005.  Scheifele succeeds Hans Bauer, who resigned unexpectedly.  Experts expect the new CEO to adopt a conservative accounting policy, as he did as chief executive of German pharmaceuticals wholesaler Phoenix Pharmahandel AG. 

Scheifele is considered a close associate of HeidelbergCement’s major shareholder Adolf Merckle, who also owns Phoenix. He became chairman of Heidelberg Cement’s supervisory board in May 2004.  Scheifele will be the first outside manager to head the group, effective from January 31, 2005. He is expected to introduce a new management style. 

HeidelbergCement is projected to book a loss for the entire 2004, despite posting a nine-month profit. Deutsche Bank analysts forecast that the group would need to take Euro 500m asset impairment charges for 2004, partly due to the relatively weak performance in the past few years. HeidelbergCement could not catch up with its most important rivals Holcim and Lafarge, failing to translate the boom in the construction industry from the late 1990s into strong earnings growth. Meanwhile, operating profit and cash flow growth have slowed down since the take-over of sector company Scancem in 1999. The group’s free cash flow has fallen by one fourth since 1998. Sales and return on investments are also by one third lower than these of HeidelbergCement’s major rivals, analysts suggest.