HeidelbergCement announces new mid-term strategic priorities and financial targets

HeidelbergCement announces new mid-term strategic priorities and financial targets
Published: 10 June 2015

HeidelbergCement has announced new mid-term strategic priorities and financial targets for the five-year period until 2019 in advance of hosting its Capital Markets Day 2015 in London later today. On the back of the positive outlook for the current fiscal year and a strong asset base, the Group aims to increase Group revenue from EUR12.6bn in 2014 to more than EUR17bn by 2019. Over the same period, Operating EBITDA is expected to grow from EUR2.3bn to more than EUR4bn.

Following the successful deleveraging over the past years, the company also intends to further shift its priorities for capital allocation towards disciplined growth and increased shareholder returns. The Group projects cumulative free cash flow of about EUR8.8bn for the period from 2015 to 2019. Of this amount, it intends to invest approximately EUR2.5bn in organic growth while using approximately EUR1bn to keep leverage in a range which supports a solid investment grade rating. More than EUR2bn shall be allocated to shareholders through progressive dividend payments. In this context, HeidelbergCement intends to raise the pay-out ratio from 29 per cent for fiscal year 2014 to between 40-45 per cent for fiscal year 2019. Further available cash may be allocated to acquisitions or returned to shareholders through share buy-backs.

Dr Bernd Scheifele, Chairman of the Management Board, commented: “We have delivered on our strategy of growth and deleveraging which we announced in 2010. As we enter the next phase of our corporate development, HeidelbergCement is in an excellent position to capitalise on its considerable strengths and drive future growth and value creation. We have a compelling strategy in place which clearly differentiates us from our competitors and we remain the industry leader in business excellence and cost efficiency. Over the next five years, we intend to achieve continuous growth and significantly increase our free cash flow with the clear commitment to building shareholder value.”

Dr Lorenz Näger, Chief Financial Officer, added: “We are focused on being the first major building materials company to earn our cost of capital in 2015. On this solid financial base, we will allocate our strong free cash flow to carefully selected growth initiatives and increasing shareholder returns. We intend to significantly raise our dividend pay-out ratio and offer our shareholders progressive dividends based on affordability and sustainability.”

Four strategic levers to enhance growth and profitability
HeidelbergCement is setting out for the next phase of accelerated growth. Its mid-term strategic priorities will focus on four levers: benefit from significant operating leverage, sustain cost leadership, leverage operational strength through vertical integration and integrated management of the businesses, and capitalise on growth opportunities in attractive markets to further expand the geographic footprint.

As important markets improve, the group anticipates to benefit from its considerable operating leverage which should drive further earnings growth. HeidelbergCement will continue to realise efficiency improvements through the enhanced digitalisation of the value chain and by promoting a culture of entrepreneurship across the entire Group.

In addition, HeidelbergCement will deepen vertical integration in urban centres as a key driver of future growth and value creation. The Group has already made considerable progress in implementing an integrated management model across its asset base. By further integrating processes across business lines and sites, HeidelbergCement will be able to leverage its operational excellence on a larger scale. This will result in better customer service and improved delivery capabilities and will support a shift towards customer solutions and cross-selling. It will also enable a further reduction of operating costs. Going forward, the Group intends to further expand and develop vertically integrated positions in urban centres around the globe.

HeidelbergCement added that it isoptimally positioned to capture the growth potential in important mature and emerging markets. The Group will carefully deploy capital for selected growth opportunities in existing geographies and expand its footprint to new markets through a targeted and disciplined M&A approach.