HeidelbergCement raises 2Q13 operating profit

HeidelbergCement raises 2Q13 operating profit

HeidelbergCement, the world’s third-largest cement producer, reported a second-quarter operating profit as it managed to increase prices in its main markets. A rise in demand in Asia, Africa and North America, helped offset a slowdown in parts of Europe.
 
Sales increased by 0.5 per cent in the second quarter to €3799m as successful cement and aggregates price increases had a positive impact on revenue growth in key market regions. Operating income before depreciation (OIBD) improved by 5.6 per cent to €734m. Operating income rose by 6.4 per cent to €524m.

“HeidelbergCement has successfully continued the positive earnings development in the second quarter despite challenging conditions”, stated Dr. Bernd Scheifele, Chairman of the Managing Board. “The measures we introduced to improve margins are showing results. We were able to implement price increases in our principal markets, and our efficiency improvement programmes are progressing according to plan.”

Net debt at the end of the second quarter amounted to to €8.2bn, which was largely stable compared with the end of the second quarter of 2012. Gearing improved slightly to 61.6 per cent (previous year: 58.1 per cent).

Investments of €302.2m were considerably higher than the value of €168.6m for the same quarter of the previous year. In the first half of 2013, investments amounted to €720m.  HeidelbergCement bought the shares in Russian cement maker CJSC Construction Materials and UK building materials firm Midland Quarry Products it did not yet own. It also raised its stake in Cement Australia, the country's largest cement maker, to 50 per cent from 25 per cent in March.

Second quarter cement volumes

During the second quarter, the group’s cement and clinker sales volumes dropped slightly by 0.8 per cent to 24.3Mt (previous year: 24.5Mt).

Construction activity in Europe and North America was hindered by heavy rain and flooding in some areas. However, the group benefitted from sustained increase in demand in its Asia and African markets, as well as continued economic recovery in North America, especially in southern states.

The Asia-Pacific Group area experienced the strongest growth in sales volumes, followed by North America and Africa-Mediterranean Basin. Cement sales volumes in the Western and Northern Europe Group area remained almost stable.

Deliveries in the UK were more than 10 per cent higher than the same period of the year before due to the emerging recovery in private residential construction. Sales volumes in Germany and in the bordering Eastern European countries were affected by heavy rains and flooding. Eastern Europe-Central Asia group region saw a drop of more than 10 per cent in sales volumes with Poland, Romani and the Czech Republic the most severely affected.

In the first half of the year, cement and clinker sales volumes decreased slightly by 0.8 per cent to 42.4Mt compared to 42.7Mt in the same period of the previous year.

Outlook

On its outlook, the company expects sustained growth in Asia-Pacific and Africa-Mediterranean Basin and continued economic recovery in North America. It also anticipates positive development in Germany, Northern Europe, and UK. Benelux and Eastern Europe is expected to be weak while central Asia stable. HeidelbergCement also said it is aiming for an increase in revenue and operating income, as well as a “marked improvement” in pretax profit.

HeidelbergCement’s three-year programme for financial and operational excellence (FOX 2013) has led to an improvement of €139m in cash flow in the first half of 2013. The company said it is on schedule to achieve savings of €240m by year-end.

Projects launched to improve margins – “PERFORM” for cement, “CLIMB Commercial” for aggregates, and “LEO” to reduce logistics costs – are also progressing according to plan and have already contributed to improvements in margins in the second quarter, it noted.