HeidelbergCement full-year revenue up 7%

HeidelbergCement full-year revenue up 7%
Published: 16 February 2016

Tagged Under: Results HeidelbergCement Germany 

HeidelbergCement's preliminary 2015 results show a marked increase in operating income with stable volumes and a seven per cent rise in revenue to EUR13.5bn (US$15.1bn).

2015 was by far the best year for HeidelbergCement since the financial crisis”, said Dr Bernd Scheifele, chairman of the Managing Board. “Despite the slowdown of the global economy in the course of the year, we were able to significantly increase our operating income as anticipated. Our strict focus on improving efficiency and margins in recent years, our advantageous geographical positioning, and continuous investments in growth have made a significant contribution.”

Sales volumes of the core products cement and ready-mixed concrete recorded a stable development compared with the previous year. The rise in cement deliveries in North America and Africa almost compensated for the decrease in Europe and Asia. In ready-mixed concrete, the contraction of the Asian market was more than offset by the positive development of sales volumes in eastern Europe, particularly in Poland and Georgia, and in North America. The growth in aggregates sales volumes can be attributed to the favourable trend in North America and eastern Europe.

Thanks to successful price increases in important markets and supported by positive currency effects, revenue is up by nearly seven per cent to EUR13.5bn. The depreciation of the euro, particularly against the US dollar, the British pound and some Asian currencies, has contributed to an increase in revenue of EUR795m and in operating income of EUR84m for the full year.

OIBD improved by 14 per cent to EUR2613m and operating income rose by 16 per cent to EUR1846m. Adjusted for exchange rate and consolidation effects, operating income improved before and after depreciation and amortisation by eight per cent and nearly 10 per cent, respectively. In addition to the price increases in key core markets and the successful implementation of the programmes to improve efficiency and margins, the slightly declining cost of fuels also made a contribution to the positive development of results.

In the fourth quarter, the sales volumes of building materials benefitted from the mild weather and the resulting extended construction period in parts of Europe. The weakening of the euro against other currencies also resulted in a small positive contribution to revenue and results.

Western and northern Europe
Business development in western and northern Europe during 2015 benefitted from the continued recovery in demand for building materials in the UK, which was driven by private residential construction and large infrastructure projects in London. In contrast, the development of sales volumes in Germany was not able to fully match the strong previous year’s level. The colder winter weather at the beginning of the year, in comparison with the previous year, and a slowdown in commercial construction were among the decisive factors. Construction activity regained stability in the Benelux countries.

In Sweden cement sales volumes benefitted from increasing domestic demand, particularly in residential construction. On the other hand, the low oil price led to a slight drop in business activity in Norway. The decrease in cement and aggregates deliveries in western and northern Europe can be mainly attributed to the decline in exports from northern Europe.

Unlike sales volumes, revenue increased. Some of the contributing factors were successful price increases, positive currency effects from the depreciation of the euro against the British pound, and the consolidation of our concrete product activities in northern Europe with the Norwegian KB Gruppen Kongswinger AS to form the new Nordic Precast Group AB. The significantly improved results were enhanced by reduced energy costs.

Eastern Europe-central Asia
The eastern Europe-central Asia group area experienced varying developments in the course of 2015. In Poland, the Czech Republic and Romania, economic recovery boosted construction activity. In contrast, the conflict in Ukraine severely impaired the Ukrainian and Russian economies, and led to a drop in demand. In Kazakhstan the ramp-up of production at the new cement plant represented a significant growth driver. Taking the year as a whole, the decline in Ukraine and Russia could not be offset by the rising cement demand in most countries. On the other hand, sales volumes of aggregates and ready-mixed concrete saw an encouraging increase.

Revenue in eastern Europe-central Asia decreased due to the distinctly negative exchange rate effects resulting from the devaluation of the currencies of Ukraine, Russia, Georgia and Kazakhstan against the euro. Falling prices owing to the price pressure from imports also had a negative impact on operating income.

North America
In North America the recovery of demand for building materials continued, driven especially by the ongoing economic recovery, falling unemployment figures and the increase in residential construction. Particularly strong growth of building materials deliveries was registered in the North of the USA. While there was also an encouraging trend in sales volumes in the West region, growth in the South stagnated due to poor weather conditions, among other things. 2015 saw the wettest weather since records began in 1895.

The drop in sales volumes in the Canadian Prairie provinces as a result of the decline in oil production projects was compensated to a degree by gains in the Vancouver and Seattle regions.

The rise in sales volumes and successfully implemented price increases led to a noticeable improvement in revenue and operating income, which was reinforced by the significant appreciation of the US dollar against the euro.

The positive trend in sales volumes, revenue and results continued in the fourth quarter.

Asia-Pacific
In Indonesia delays in infrastructure programmes led to a weak development of demand and to price pressure as a result of excess capacities. Sales volumes of cement and ready-mixed concrete were down due to the margin-oriented pricing policy of our subsidiary Indocement. In Malaysia demand for aggregates and ready-mixed concrete decreased following the completion of large projects. In Australia sales volumes of building materials increased despite a reduction in mining and infrastructure projects. The growth in sales volumes in Australia, Bangladesh and India did not, however, compensate for the downturn in Indonesia and Malaysia.

As a result of the decreasing sales volumes and the price pressure, revenue and operating income also fell in the Asia-Pacific Group area. The decline was partially compensated by positive currency gains owing to the devaluation of the euro against some Asian currencies.

Africa-Mediterranean Basin
Based on the growth in sales volumes across all business lines, revenue in the Africa-Mediterranean Basin Group area has also risen. Both operating income and margins have increased significantly. The falling cost for clinker imports and efficiency improvements, particularly the commissioning of the new plant in Togo, have offset the pressure on prices.

Outlook
On its outlook, the company said: “Considering the overall positive outlook for the global economy and our advantageous geographical positioning, we are confident about the future,” says Dr Bernd Scheifele. “At the same time, we are aware of the growing geopolitical risks, the potential effects of which are difficult to assess right now. HeidelbergCement is very well equipped to follow up on the new strategic priorities – growth and increase in shareholder value – over the coming years.

"In the current year, we are focussed on the successful conclusion of the takeover of Italcementi. Following the successful takeover, we will take particular care to quickly leverage the synergy potential and reduce our net debt-to-equity ratio (gearing) so it is back within our target range by the end of the year. Our programmes to improve efficiency and margins will also be consistently pursued in 2016. It is our aim to continue to improve our work processes in commercial and operational terms for cement (“CIP – Continuous Improvement Programme”), aggregates (“Aggregates CI”), and logistics (“LEO”).”

“In 2016, we will once again benefit from the economic development in the industrial countries, particularly in North America and the United Kingdom”, continues Dr Bernd Scheifele. “In view of our strong positioning in raw material reserves and production sites in attractive locations, the unique vertical integration, and our excellent product portfolio, we believe we are well equipped for the opportunities and challenges of 2016.”