Q3 sales volumes benefit from positive development of demand
Thanks to sustained growth in Asia-Pacific and Africa, as well as recovering markets in North America and Europe, the sales volumes for cement, aggregates, and ready-mixed concrete in the third quarter were above the figures for the same quarter of the previous year.
During the third quarter, the Group’s cement and clinker sales volumes rose by 1% to 21.8 million t (previous year: 21.5). The largest contribution was made by the Asia-Pacific Group area, followed by Africa-Mediterranean Basin. In Asia, HeidelbergCement continued to benefit from its strong position in Indonesia. In Africa-Mediterranean Basin, the countries south of the Sahara are experiencing an increase in production and demand. Sales volumes in North America stabilised at the relatively high level of the previous year, thanks to continued positive business development in Canada and increases in sales volumes in the south and west of the US. While volumes in Eastern Europe-Central Asia still experienced a significant decline, in Western and Northern Europe they almost reached the previous year's level.
Positive development of turnover and results
Group turnover rose by 12.6% in the third quarter to €3401 million (previous year: 3021). Turnover improved in all Group areas except Eastern Europe-Central Asia. Excluding exchange rate and consolidation effects, turnover increased by 1.8%. Operating income before depreciation (OIBD) improved by 0.9% to €777 million (previous year: 770) and operating income rose slightly to €573 million (previous year: 571). The business years 2009 and 2010 differ with respect to the timing of the sale of excess CO2 emission rights. The operating income of the third quarter of 2009 included proceeds from the sale of CO2 emission rights amounting to €83 million, whereas there were almost no proceeds of this kind in the third quarter of 2010. The majority of the sale of excess CO2 emission rights will happen in the fourth quarter of the current year. Adjusted for the sale of
CO2 emission rights and excluding exchange rate and consolidation effects, OIBD improved by 3% in the third quarter of 2010 and operating income even by 6% in comparison with the same quarter of the previous year.
"In the third quarter, we were able to further increase our turnover and results in comparison with the previous year because of our advantageous geographical positioning in local growth markets and the successful continuation of our efficiency and cost-saving programmes," explained Chairman of the Managing Board Dr. Bernd Scheifele. "In the last three months, we have been able to reduce our net debt by over €400 million to around €8.6 billion thanks to the positive business development. Our 'FitnessPlus 2010' programme is still on schedule and generated savings of €203 million in the first nine months."
At the end of the third quarter of 2010, the number of employees at HeidelbergCement was 54 742 (previous year: 55 796). The decrease of 1054 employees results essentially from two opposing developments: the location optimisations and capacity adjustments linked with job cuts, particularly in North America and the UK, and the increase in the number of employees in Africa because of the first-time consolidation of the cement activities in the Democratic Republic of Congo.
Net debt reduced
As a result of a further improvement in the operational cash flow, net debt was reduced by over €300 million to €8647 million at the end of September 2010 (€8971 million at the end of September 2009).
Targeted expansion of cement capacities in growth markets
In the third quarter, HeidelbergCement continued the targeted expansion of cement capacities in growth markets. In Indonesia, two new cement mills were commissioned, with a total capacity of 1.5 million t. In the DRC, HeidelbergCement entered into a partnership with the local market leader Forrest Group and acquired a majority share in three cement plants. The expansion of cement capacities in emerging countries is to be consistently continued with the aim of increasing the proportion of cement capacities in growing markets from around 58% at present to 67% in the long term.
So far, economic development in 2010 has been better than originally expected. The IMF's growth forecasts for the end of 2010 and for 2011 were recently reduced, however, because of increased risks connected with the national debt in individual countries and weaker-than-expected consumer spending in the US.
Development dynamics of the economic growth still clearly differ from region to region. In Asia and Africa, the positive trend is expected to continue. An improvement in economic output is also anticipated for North America and Europe. Uncertainties will still remain over the strength and timescale of the economic recovery because of the high level of unemployment and national debt in individual countries.
For Asia, HeidelbergCement expects sustained strong growth in China, Indonesia, India and Bangladesh. In Australia, stable development is anticipated overall. Above-average growth in comparison with the region south of the Sahara is expected for the Group’s core markets in Tanzania, Ghana, and the DRC.
In North America, on the basis of the sustained expenditure on road construction in the US, the recovery of sales volumes is expected to slowly continue on into the next few quarters. The extent and speed of this recovery are still dependent on spending behaviour in the US states.
In Western Europe, the expectations for future development present a varied picture. For Northern Europe and Germany, the Group anticipates a significant recovery driven by the strong economic development in Germany as well as other factors.
Because of an expected decline in construction activity in Belgium and a weak Dutch construction market, further price pressure is anticipated in this region.
The recovery in Eastern Europe and Central Asia has taken the longest time to arrive. Construction activity in Poland is currently gathering pace again and growth rates are expected to increase towards pre-crisis levels. While demand in the Czech Republic is expected to stabilise and subsequently improve, HeidelbergCement anticipates a continuation of the weak development in Hungary and Romania. In the countries in the eastern part of Eastern Europe and in Central Asia, increasing cement volumes (albeit from a low level) and a price recovery are expected.
Read the article online at: https://www.worldcement.com/europe-cis/04112010/heidelbergcement_turnover_and_results_increase/