Heidelberg Cement results preview

HeidelbergCement will publish FY03 results on Thursday 25 th March 2003 and will hold an analyst meeting in Frankfurt. 2003 sales, already disclosed in February, fell 3 per cent to €6372m in line with consensus. On a like for like basis, sales rose 0.4 per cent in line with our forecast - says BNP Paribas (+0.5%). During the last publication, HC confirmed 2003 operating profit before depreciation (OIBD) guidance of €1bn guidance for 2003; a 13 per cent decrease. This amount, already adopted by consensus, is slightly lower than BNP’s expectation (€ 1026m or –10.6%). It expect negative organic growth of 6.9 per cent, negative currency impact of 7 per cent and a positive consolidation scope effect of 3.7 per cent.

BNP expects net profit to have declined 40 per cent to €149m (from €248m in 2002) vs consensus that is more optimistic anticipating €168m (or –32%). It believes that positive exceptionals and tax assumptions could explain the difference, but expect investors to focus more on the OIBD figure than on net profit.

However, the main issue will remain the 2004 outlook and especially the communication on German pricing recovery given HC confirmed in February to expect a +10 to +12€/t average price increase in 2004. This assumption looks more optimistic than the comments made since by RMC, Lafarge and Holcim which have put a question mark over the momentum and pace of the price hike in 2004. NB: HC confirmed that the first price hike of +7.5€/t (announced in September 2003) is in the market, if we exclude the long term contracts negotiated during the price war which end during the first quarter 2004. HC also confirmed the other 12.5€/t price hike announced in January and the implementation of a new pricing system

BNP believes that independent actors around Berlin and in Westphalia are trying to regain domestic market share after having partially cut their exports and are not implementing comparable price hikes as are the dominant players. As an example, rumours exist that 200kt of cement volume formerly exported abroad by ZementWerk Berlin are redirected in 2004 in the Berlin market (Zementwerk Berlin is a grinding station owned by Spenner which is a cement producer also present in Westphalia).