HeidelbergCement’s bet on Australia reflects ‘Modest’ debt plan

HeidelbergCement’s bet on Australia reflects ‘Modest’ debt plan
16 December 2009

HeidelbergCement AG may only see a slow improvement in credit ratings as the company struggles to find buyers for unwanted assets, according to a report by Fitch Ratings.

HeidelbergCement and French rival Lafarge SA may be hampered by tight credit markets as they seek to sell units to pay down debt, Fitch said today. Without the extra money generated through disposals, debt reduction may only be “modest” for these companies in 2010, it said.

HeidelbergCement plans to generate as much as EUR2bn (US$2.9bn) from asset sales within two years, yet Chief Executive Officer Bernd Scheifele has earmarked units that no longer fit strategically, such as bricks and building products. Australia and Malaysia are “highly attractive” markets that remain part of the strategy, the CEO said Dec. 10.

“Fitch expects the absolute amounts of cash flow from operations in 2010 to continue to be lower than 2007/2008 peaks by about 30 per cent due to still low volumes sold and despite cost containment measures,” Fitch’s Elisabetta Zorzi wrote.

Following a purge on costs and disposals, the credit metrics of European building materials companies including CRH Plc, Cie. de Saint-Gobain SA, HeidelbergCement, Holcim Ltd., and Lafarge will improve gradually at least until 2011, Fitch said. Market demand will remain weak especially in developed countries.

Fitch rates both CRH and Saint-Gobain at BBB+ with a negative outlook, HeidelbergCement BB- with a positive outlook, Holcim Ltd. BBB, and Lafarge BBB-, both with a negative outlook.
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