HeidelbergCement announces 4Q17 and FY17 preliminary results
HeidelbergCement's preliminary results for the 2017 financial year highlighted a significant rise for cement and clinker sales volumes, due to consolidation, increasing by 22 per cent to 126Mt, compared to 103Mt in 2016. Aggregates sales volumes recorded a growth of 12 per cent to 305Mt, up from 272Mt in 2016, while ready-mixed concrete volumes increased by 11 per cent to 47Mm3 compared to 43Mm3 in 2016.
In the reporting year, sales volumes of the core products cement, aggregates, and ready-mixed concrete rose significantly as a result of the consolidation of Italcementi as from 1 July 2016. In 2016 Italcementi contributed to sales volumes, revenue and result only in the second half of the year, in 2017 in both half years. Revenue rose by 14 per cent to EUR17.3bn up from EUR15.2bn in 2016. Negative exchange rate effects impacted revenue by about EUR311m.
4Q17
In the 4Q17 sales volumes increased in all business lines compared with the prior year's quarter. Cement and clinker sales volumes grew by six per cent to 32Mt up from 30Mt in 4Q16. Aggregate deliveries increased by four per cent to 76Mt from 73Mt in 4Q16. Except for western and southern Europe, all group areas contributed to this growth, especially North America. Ready-mixed concrete volumes improved slightly by 0.5 per cent to 12Mt.
In the fourth quarter, group revenue rose by one per cent to EUR4.3bn. Negative exchange rate effects impacted revenue by EUR235m.
North America
In North America the main drivers in 2017 were commercial and residential construction. With the acquisition of Italcementi’s North American subsidiary Essroc in July 2016, HeidelbergCement has expanded its footprint in the northeast and Midwest USA as well as in the eastern part of Canada. In addition, the company strengthened its vertical integration by acquiring the building materials business of Cemex in the northwest USA and the operational assets of Saunders Companies in the northeast USA.
In the fourth quarter, sales volumes increased in all business lines, especially driven by the strong development in west USA and Canada.
Europe
While construction activity in the eurozone developed positively in 2017, it suffered in the UK from the uncertainties as a result of the Brexit vote. In the UK delays in infrastructure programmes as well as weakening residential and commercial building activities in London led to declining sales volumes in all business lines. In Germany building materials deliveries improved in all business lines due to the strong demand, especially in residential construction. Italy, Spain and France showed signs of a recovery. In Benelux, sales volumes for aggregates and ready-mixed concrete declined while cement remained stable. In total, cement sales volumes improved slightly while aggregates and ready-mixed concrete sales volumes declined.
The positive trend in cement sales continued in the fourth quarter thanks to solid demand in Germany and the southern European countries. Sales volumes of aggregates and ready-mixed concrete, however, declined due to the weak development in Benelux and UK.
Northern and eastern Europe-central Asia
In Norway lively construction activity on infrastructure projects led to a further increase in cement sales volumes. In Sweden demand was driven by private residential construction. Sales volumes in eastern Europe also showed a pleasing development. Cement sales volumes in Poland and Romania benefitted from a rise in private residential construction. Bulgaria could increase cement sales as well. In Russia and Ukraine, however, sales volumes declined, shifting the focus onto increasing prices.
Asia Pacific
In Asia-Pacific, cement demand improved in the course of the year, especially in Indonesia. Sales volume growth in the fourth quarter came in well above the annual average. On a comparable pro-forma basis, revenue increased in the fourth quarter.
In Indonesia demand for building products picked up thanks to the beginning of the infrastructure programmes. However, delays in infra projects and weak residential construction resulted in declining sales volumes in Thailand. Demand in India suffered from the impact of demonetisation and the implementation of a tax reform and declined slightly. In Australia sales volumes of aggregates well increased thanks to strong construction activities on the east coast.
Africa
Market development in Africa was varied. Construction activity in the oil-exporting countries benefitted from the increased oil price. In most of the sub-Saharan countries, cement sales volumes could be increased, in part, considerably. However, this growth was not sufficient to compensate for the decline in Egypt due to the weak economy of the country. On the cost side, Egypt could realise significant savings due to the realisation of synergies and the adjustment of the fuel mix due to the commissioning of a new coal mill.
2018 outlook
Many countries have seen a pick-up in growth, leading to the broadest synchronised global growth upsurge since 2010. Relevant drivers of this development are on the one hand the accelerating growth in the USA, fuelled by the recently adopted tax reform as well as the continued economic recovery in the Eurozone. On the other hand, the growth rates of the emerging markets are anticipated to rise again despite a further economic slowdown in China. Particularly for the countries in northern Africa, the Middle East and sub-Saharan Africa higher growth rates are expected, among others due to the significant increase in oil price last year.
In North America, HeidelbergCement, in conformity with the IMF, expects stronger economic growth and therefore, a further increase in demand for building materials. In the eurozone a continuation of the economic recovery and a robust market development is expected. The uncertainties around the Brexit, however, are hampering the economic development in the UK. In northern Europe, HeidelbergCement expect a continuation of the solid growth. In eastern Europe, the company anticipates growing demand for building materials as a result of the EU infrastructure programme, among other things. The economic situation in Russia and Kazakhstan has improved after the rise of the oil price. The crisis in eastern Ukraine will continue to impair the sales volumes and results of the country.
Competitive pressure in emerging countries remains elevated. In Asia HeidelbergCement anticipates economic growth on high levels. Sales of building materials is supported by increasing infrastructure investments in Indonesia and a recovery in Thailand, Malaysia and India. The positive demand development in Australia is expected to continue. In the African markets, HeidelbergCement anticipates an accelerated growth in demand and continued competition.
The complete consolidated financial statements of HeidelbergCement, including the outlook, will be published on 22 March 2018.
