HeidelbergCement's 1Q sales volumes boosted by Italcementi acquisition
In the first quarter, the sales volumes of HeidelbergCement’s building materials rose substantially as a result of the consolidation of Italcementi. The continued recovery of the construction industry in North America and Europe also had a positive impact on the development of sales volumes. In contrast, development in the emerging countries was mixed.
In the first quarter, the group’s cement and clinker sales volumes increased by 58 per cent to 27.8Mt (previous year: 17.6Mt) as a result of the acquisition. On a pro forma basis, ie, taking into account Italcementi’s deliveries in the same period of the previous year, sales volumes remained unchanged.
Cement sales volumes showed an improvement in all Group areas apart from Africa-Eastern Mediterranean Basin. The strongest increase on a pro forma basis was recorded in northern and eastern Europe-central Asia, followed by western and southern Europe as well as North America. In Asia-Pacific, cement sales volumes grew in India in particular, while they declined in Thailand and Bangladesh. Although sales volumes rose substantially in Africa south of the Sahara, they dropped sharply in Egypt due to the weak market development.
Deliveries of aggregates also registered an acquisition-related rise of 23 per cent to 60.9Mt versus 49.3Mt. Taking into account Italcementi’s deliveries in the same period of the previous year, the growth amounts to eight per cent. Higher sales volumes in all group areas, excluding Asia-Pacific, and particularly the consolidation of the Mibau Group in northern Europe contributed to this increase.
Deliveries of ready-mixed concrete also rose as a result of the new consolidations by 31 per cent to 10.4Mm3). On a pro forma basis, sales volumes fell slightly by one per cent. Asphalt sales volumes grew by six per cent to 1.5Mt.
Accelerated growth of revenue
As a result of the consolidation of Italcementi, revenue and result from current operations before depreciation and amortisation increased significantly. Group revenue rose by 34 per cent in the first quarter to EUR3784m. The result from current operations before depreciation and amortisation improved by 19 per cent to EUR383m. After depreciation and amortisation, the result from current operations fell by 21 per cent to EUR108m.
On pro forma basis, revenue increased slightly. The result from current operations before and after depreciation and amortisation, however, declined by two per cent and 13 per cent, respectively. The result from the mature markets of Europe and North America rose significantly in the 1Q17 despite the already relatively strong first quarter of the previous year and bad weather conditions. As the contribution to results from these markets is generally rather weak in the first quarter due to seasonal factors, it could not offset the decline in result in the emerging countries, which was mainly due to a drop in prices in Indonesia and Ghana. The result in western and southern Europe was additionally negatively impacted by higher maintenance costs, which in comparison with the previous year were more pronounced in the first quarter. Energy costs also rose moderately in comparison with the first quarter of 2016.
“We continued our strong operational development in the first quarter and realised further synergies,” says Dr Bernd Scheifele, chairman of the Managing Board. “We were able to almost offset the effect of higher energy costs, bad weather conditions, and increased competition in some emerging countries in the most seasonally weak quarter of the year. Thanks to the ongoing refinancing of our maturities at more favourable terms, we have successfully continued to improve the financial result and made an important contribution to the further rise in our cash flow. All in all, we have slightly increased the Group share of profit for the financial year despite the challenging environment.”
Integration of Italcementi is progressing well
The implementation of the measures to integrate Italcementi is progressing well. In North America, operational best practices that have proven successful have already been transferred to the acquired plants, thereby substantially improving operational key performance indicators. The integration remains on schedule, and the synergy target of EUR470m still applies.
Outlook
On its outlook, the company said: "We remain cautiously optimistic about 2017,” continues Dr Bernd Scheifele. “While the overall outlook for the global economy is positive, major macroeconomic and particularly geopolitical risks remain. HeidelbergCement will benefit from the good and stable economic development in the industrial countries, above all in the USA, Canada, the United Kingdom, Germany, the countries of northern Europe, and Australia. These countries generate approximately 60 per cent of our revenue.”
