HeidelbergCement has reported a rise in revenue and profit for the second quarter of 2012 driven by increased sales in North America and Asia as well as successful price increases. The group has confirmed its targets for the year and expects sustained growth in Asia-Pacific and Africa-Mediterranean Basin as well as continuing recovery in North America but weaking demand in parts of Europe.
The company's revenue for the April-June period rose 11 per cent to EUR3.8bn. Positive exchange rate effects supported the development of revenue particularly in North America, Asia-Pacific, as well as Western and Northern Europe. Excluding exchange rate and consolidation effects, revenue grew by 6.4%, with all Group areas apart from Western and Northern Europe recording an increase.
Operating income before depreciation (OIBD) was up seven per cent to EUR698m while operating income improved by 12.3 per cent to €495m. The growth in cement sales volumes and successful price increases contributed to this improvement in results. Excluding exchange rate and consolidation effects, OIBD increased by 3.8 per cent and operating income by 9.8 per cent.
“The quality of our results has clearly improved in the second quarter,” says Dr Bernd Scheifele, Chairman of the Managing Board. “This is reflected especially by the significant increase in operating cash flow which led to a noticeable reduction in net debt. The price increases that we have implemented to offset the rise in energy costs were mostly successful. This enabled us to increase our cement margins in the second quarter of 2012 compared to the previous year. We will do everything in our power to continue this positive trend in the second half of 2012.”
In the first half of the year, Group revenue rose by 9.7 per cent to €6580m. Operating income before depreciation (OIBD) improved by 0.8% to €912m (previous year: 904); operating income went up 1.6% to €509m. Profit for the first half of the year amounted to €93.2m (previous year: 88.2).
At the end of Q2 2012, HeidelbergCement’s net debt amounted to €8.12bn, which corresponds to a reduction of €456m compared to the end of 2Q11. Gearing improved to 58 per cent, accordingly. A major contributor to debt reduction was the significant increase in operating cash flow by €196m to €505m, compared to the previous year.
The company said its FOX 2013 savings programme is “ahead of schedule” to generate total savings of €200m in 2012. Already in the first half the programme led to an improvement in cash flow of €138m. New initiatives have started to reduced logistic costs (LEO) and improve cement margins (‘PERFORM’)
During the second quarter, cement and clinker sales volumes rose by 3.5 per cent to 24.5Mt (previous year: 23.7Mt).
In terms of group area perfromance, Asia-Pacific contributed most to this increase followed by North America, Eastern Europe Centra-Asia and Africa-Mediterranean Basin. Indonesia and Bangladesh achieved double-digit growth. Cement sales in North America continued to develop strongly with an increase of 10 per cent YoY. In Northern Europe, cement sales increased further but could not compensate for the decline in the deliveries in the UK and The Netherlands. In the first half of the year, cement and clinker sales rose 4.1 per cent to 42.7Mt.
The planed expansion of cement capacities in attractive emerging markets is progressing. In Tanzania, the modernisation of cement kiln No. 3 at the cement plant of Tanzania Portland Cement has been completed. The kiln is currently in the ramp-up phase and is expected to increase the clinker capacity of the plant by 250,000t. The commissioning of new clinker and cement plants in Central India with a cement capacity of 2.9Mt is expected for the second half of 2012. In Ghana and Liberia, HeidelbergCement is constructing new cement mills with capacities of 1Mt and 0.5Mt, respectively. Production is scheduled to start in Q4 2012.
On its outlook, HeidelbergCement said it expects Western and Northern Europe Group area to show a slight decline in demand. In the Eastern Europe-Central Asia Group area, HeidelbergCement expects further but more moderate growth in cement sales volumes. This growth will be largely driven by additional capacities and, to some extent, by strong increases in demand in Russia and Central Asia, but will be slightly weakened by the recent drop in demand in Poland and the Czech Republic. Based on the strong development in the first half of the year in North America, the company expects increasing demand for cement due to the recovery of investments in private residential construction and commercial construction. HeidelbergCement anticipates the demand for building materials of the raw materials industry in Canada and the United States to further support its sales volumes. In its Group areas Asia-Pacific and Africa-Mediterranean Basin, HeidelbergCement continues to expect a sustained positive demand trend.
Regarding costs, HeidelbergCement anticipates a further increase in energy and raw material prices – albeit significantly weaker compared to the previous year – as well as rising personnel costs. HeidelbergCement aims to offset the cost increase and gain back some of the margins lost in 2011 by cost reduction measures and targeted price increases. The Managing Board sticks to its target of further increasing revenue and operating income in 2012 compared to the previous year.