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HeidelbergCement AG : HeidelbergCement increases sales volumes and turnover in the third quarter – operating income stable

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11/03/2011 | 07:25am CEST
Thursday, November 03, 2011
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Highlights Q3 2011 and outlook 2011:
  • Sales volumes of cement (+11.9%), aggregates (+4.1%), and ready-mixed concrete (+8.9%) increase compared with the same quarter of the previous year
  • Group turnover at EUR 3.6 billion (+6.6% compared with same quarter of previous year)
  • Operating income before depreciation (OIBD) rises slightly to EUR 778 million (+0.1% compared with same quarter of previous year)
  • Profit for the first nine months rises to EUR 404 million (+8.6% compared to the previous year)
  • "FOX 2013" savings programme exceeds expectations - already EUR 251 million cash savings achieved
  • Well prepared for continuing volatility of financial markets: net debt reduced to EUR 8.5 billion - successful refinancing of maturities in difficult market environment
  • Targets and outlook for 2011 unchanged: economic recovery continues at a lower pace - no recession expected in North America and Europe, provided the European Summit decisions are implemented
Overview January - September 2011













Operating income before depreciation (OIBD)





   in % of turnover





Operating income





Additional ordinary result





Results from participations





Earnings before interest and income taxes (EBIT)





Profit before tax





Net income from continuing operations





Net loss from discontinued operations





Profit for the period





Group share of profit










Q3 sales volumes benefit from positive development of demand
Thanks to sustained growth in Asia-Pacific and Africa, as well as improving markets in North America and Europe, the sales volumes for cement, aggregates, and ready-mixed concrete in the third quarter of 2011 were above the figures for the same quarter of the previous year. In North America, the sales volumes recovered after the severe spell of bad weather in the second quarter and exceeded the previous year's level significantly.

During the third quarter, the Group's cement and clinker sales volumes rose by 11.9% to 24.3 million tonnes (previous year: 21.8). The largest increase was achieved in the Eastern Europe-Central Asia Group area, followed by Asia-Pacific, North America, Africa-Mediterranean Basin, and Western and Northern Europe. Sales volumes rose in most of the countries of Eastern Europe; in Central Asia, the recovery of the construction industry continued. Cement deliveries in North America increased by 10.0% in comparison with the same quarter of the previous year. Indonesia and India both recorded double-digit growth, as did Africa. In comparison with the previous year, HeidelbergCement benefited from the inclusion of cement production in the Democratic Republic of Congo and the Russian Republic of Bashkortostan. Adjusted for consolidation effects, cement sales volumes across the Group grew by 9.4%. Deliveries of aggregates rose by 4.1% to 75.9 million tonnes (previous year: 73.0); adjusted for consolidation effects, the increase amounted to 3.9%. This rise was primarily due to the higher demand in Western and Northern Europe, as well as in North America. Deliveries of ready-mixed concrete grew by 8.9% to 10.6 million cubic metres (previous year: 9.7). Asphalt sales volumes increased by 0.9% to 3.1 million tonnes (previous year: 3.0).

In the first nine months of 2011, cement and clinker sales volumes rose considerably, by 11.1% to 65.4 million tonnes (previous year: 58.8). Deliveries of aggregates increased by 5.4% to 191.1 million tonnes (previous year: 181.3). Deliveries of ready-mixed concrete rose by 11.6% to 29.2 million cubic metres (previous year: 26.2); sales volumes of asphalt increased by 6.2% to 7.2 million tonnes (previous year: 6.8).

Operating income stable despite significantly increased energy costs
Group turnover rose by 6.6% in the third quarter to EUR 3,624 million (previous year: 3,401). Negative exchange rate effects impaired the development of turnover, particularly in North America and Africa-Mediterranean Basin. Excluding exchange rate and consolidation effects, turnover grew by 9.8%, with all Group areas recording an increase in turnover.

OIBD remained almost unchanged at EUR 778 million (previous year: 777). Because of the significant rise in energy and raw materials costs since the start of the year, the pleasing increase in sales volumes could not be translated into a higher operating income, despite the price increases already implemented. Operating income fell by 1.8% to EUR 562 million (previous year: 573). Adjusted for exchange rate and consolidation effects, OIBD increased by 2.1%, while operating income fell only slightly, by 0.2%.

"In the third quarter, we benefited from a pleasing rise in demand in our Group areas and were able to increase our sales volumes and turnover significantly," remarks Chairman of the Managing Board Dr. Bernd Scheifele. "Due to our advantageous geographical footprint and our dual product strategy focussed on cement and aggregates, we were able to achieve a stable operating income despite significantly increased energy and raw materials costs. Nevertheless, we have so far been unable to translate the volume increases into higher operating profits, as we have not yet been able to completely offset the significant rise in energy and raw material costs by corresponding price increases, particularly in the cement business line. We are making good progress with our measures to reduce costs and improve liquidity: in the first nine months, our "FOX 2013" programme generated cash-relevant savings of EUR 251 million, which means we have already exceeded the goal of EUR 200 million we set for the whole of 2011. In addition, we have continued our disciplined financial management and raised our liquidity headroom in view of the increased uncertainty on the financial markets through the issuance of two bonds."

The additional ordinary result in the third quarter deteriorated by EUR 48.4 million to EUR -30.4 million (previous year: 18.0). Expenses and depreciation in connection with portfolio optimisations and sustained restructuring expenses had a negative impact on results. The financial result improved by EUR 17.8 million to EUR -144.7 million (previous year: -162.5).

The profit before tax from continuing operations amounts to EUR 402.8 million (previous year: 441.3). Tax expenses in the third quarter of 2011 amount to EUR 82.1 million (previous year: 62.3). Net income from continuing operations amounts to EUR 320.7 million (previous year: 379.0).

Overall, the profit for the period in the third quarter decreased by 14.0% to EUR 316.1 million (previous year: 367.6) because of the deterioration in the additional ordinary result and the higher tax ratio. The Group share fell by 16.8% to EUR 267.7 million (previous year: 321.8).

In the first nine months of the year, Group turnover rose by 8.4% to EUR 9,620 million (previous year: 8,877). OIBD improved by 2.5% to EUR 1,682 million (previous year: 1,642) and operating income rose by 1.6% to EUR 1,063 million (previous year: 1,047). The profit for the first nine months rose to EUR 404.2 million (previous year: 372.1), while the Group share improved to EUR 266.3 million (previous year: 243.0).

At the end of the third quarter of 2011, the number of employees at HeidelbergCement stood at 54,335 (previous year: 54,742). The decrease of 407 employees results essentially from two opposing developments: On the one hand, the number of employees in the North America Group area decreased by more than 800 following the successful implementation of the "WIN NAM" programme to increase efficiency in sales and administration. A significant number of job cuts were also made in the United Kingdom and some Eastern European countries as a result of location optimisations and capacity adjustments. In the UK alone, the number of job cuts amounted to more than 200. On the other hand, the number of employees in Russia rose as a result of the commissioning of the new TulaCement plant south of Moscow and the consolidation of the CJSC "Construction Materials" cement plant in the Russian Republic of Bashkortostan.

"FOX 2013" programme exceeds expectations for 2011
The three-year programme for financial and operational excellence presented at the start of January ("FOX 2013") has generated cash-relevant savings of EUR 251 million, which means that in the third quarter it has already significantly exceeded the savings goal of EUR 200 million set for the whole year of 2011. This was primarily due to savings generated to offset the considerable rise in the energy cost indices, as well as efficiency improvements and energy cost savings in the context of the "OPEX" programme. Significant improvements were also made in our current assets.

Net debt further reduced - liquidity headroom increased
At the end of the third quarter of 2011, HeidelbergCement's net debt amounted to EUR 8.499 billion, which corresponds to a reduction of EUR 75 million compared with the end of the previous quarter. The speed of deleveraging decreased in the third quarter, especially due to investments in operating assets to finance topline growth and due to negative accounting effects. A further decrease in net debt is targeted for the end of the year. Gearing improved in the third quarter to 65.9% (previous year: 71.3%). Through the issuance of two bonds with volumes of EUR 300 million and CHF 150 million, HeidelbergCement increased its liquidity headroom and further optimised its maturity profile.

Targeted expansion of market position in growing markets
The TulaCement plant, located around 150 kilometers south of Moscow in the Tula region, which was inaugurated in July, is in the phase of commissioning. The plant, equippped with state-of-the-art technology, has an annual cement production capacity of 2 million tonnes. On 29 September, our Turkish joint venture Akçansa commissioned a facility for generating electricity from waste heat at the Çanakkale cement plant, which will cover around 30% of the location's electricity requirements in the future. At the Chittagong plant in Bangladesh, we are commissioning a new cement mill with a capacity of around 0.8 million tonnes of cement per year in mid-November. Work on the capacity expansion in Damoh and Jhansi in central India is in full swing; commissioning is set to take place in the first quarter of 2012. The construction of the cement plant in western Kazakhstan, near the city of Aktau with a capacity of 0.8 million tonnes is proceeding according to plan; commissioning of the plant is set to take place in mid-2013.

Outlook 2011/2012: no recession in North America and Europe
The OECD and IMF still forecast a continuation of the global economic recovery this year, although it should be somewhat weaker than in 2010. The growth rates in the emerging countries of Asia and Africa will remain significantly above those of the mature markets in North America and Europe. In the IMF's current forecast, the rates for worldwide economic growth have been revised slightly downward because of the sluggish recovery so far in mature markets and the increased fiscal, financial and economic uncertainties. The revision affected all regions with the exception of Japan and was particularly pronounced in North America. However, we do not expect a recession in the mature markets of North America and Europe in 2011 and 2012, provided the European Summit decisions are implemented.

The uncertainties regarding the effects of the debt crisis in the US and in individual countries of the euro zone, as well as the current growth forecasts, have also been reflected in the projections of the North American cement association PCA and the European research and advisory network Euroconstruct. Already in July, the PCA further reduced its expectations for the increase in cement consumption in the US and, since then, has anticipated only a very slight recovery for 2011 and 2012. In Europe, the forecasts for cement growth in 2011 for HeidelbergCement's core countries in Scandinavia and Western and Eastern Europe, with the exception of the United Kingdom, were raised; in contrast, the expected growth rates in the euro zone's crisis regions in Southern Europe and Ireland - areas in which we do not have a presence apart from some small-scale activities in Spain - were reduced further. In addition, HeidelbergCement is not active in the crisis regions of North Africa or in Japan.

In the Western and Northern Europe Group area, we again anticipate a recovery in demand for the whole of 2011 and thus increasing sales volumes for cement and aggregates, which will be primarily driven by strong trends in Scandinavia and Germany. We expect varying trends in the Eastern Europe-Central Asia Group area: while we continue to anticipate consistently weak development in Hungary and Romania, we expect a rise in demand in Poland and in the Czech Republic, in particular. For Russia, Ukraine, and the countries of Central Asia, we anticipate a further increase in demand and a recovery of prices. Subject to new decisions on debt reduction by the US government, which could also adversely affect expenditure on road construction, we continue to expect a slight volume increase in cement and aggregates in North America, driven by sustained investment in road construction in the US and the continuing growth of the oil and raw materials industry in Canada. We expect demand to continue developing positively in the Asia-Pacific and Africa-Mediterranean Basin Group areas.

The prices for energy and raw materials have passed their peak following the significant rise in the first half of 2011 and have recently experienced a slight decline. Energy, raw materials, and personnel costs are expected to increase overall in 2011 because of inflationary trends, particularly in the emerging countries. Therefore, HeidelbergCement continues its efforts to offset the rise in costs through cost-saving measures as well as price increases and fuel surcharges in the individual markets. Once again, the Managing Board has set the objective of increasing turnover and operating income in 2011 in comparison with the previous year.

"The development of our results is supported by our advantageous geographical footprint and our dual product strategy focussed on cement and aggregates," explains Dr. Bernd Scheifele. "In Europe we continue to benefit from our strong market position in the Northern European countries, where we expect the positive economic development to continue. In Southern Europe, however, we have only minor activities in Spain and therefore potential weak economic growth in this region has hardly any influence on our business. Despite significantly increased energy costs, we were able to achieve a stable operating income in the third quarter. We will maintain our focus on reducing costs and increasing efficiency within the scope of the "FOX 2013" programme and plan further price increases, especially for the year 2012, to counteract cost inflation. Top priority remains reduction of our net debt. In addition, we will continue our cautious financing strategy and, at the same time, continue our targeted investments in new cement capacities in growing markets. With increased liquidity headroom, a continuously falling level of debt, and our strong market position, we believe we are very well prepared for whatever lies ahead."  

HeidelbergCement AG
Group Communication
P.O. Box 10 44 20

69034 Heidelberg

+49(0)6221-481-13 227
+49(0)6221-481-13 217

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Financials (€)
Sales 2018 17 660 M
EBIT 2018 2 269 M
Net income 2018 1 357 M
Debt 2018 8 065 M
Yield 2018 3,04%
P/E ratio 2018 11,48
P/E ratio 2019 10,23
EV / Sales 2018 1,32x
EV / Sales 2019 1,22x
Capitalization 15 258 M
Duration : Period :
HeidelbergCement Technical Analysis Chart | HEI | DE0006047004 | 4-Traders
Technical analysis trends HEIDELBERGCEMENT
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Income Statement Evolution
Mean consensus OUTPERFORM
Number of Analysts 27
Average target price 96,2 €
Spread / Average Target 25%
EPS Revisions
Bernd Scheifele Chairman-Managing Board
Fritz-Jürgen Heckmann Chairman-Supervisory Board
Lorenz Näger Chief Financial Officer
Dennis Lentz Director-Group Information Technology
Josef Heumann Member-Supervisory Board
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