HeidelbergCement makes strides in improving operating income

HeidelbergCement’s 1Q13 report shows relatively positive results. Almost all regions saw sales volumes increase, with the exception of Europe, which continues to struggle. Poor weather conditions in Europe and North America also hindered construction activity, dampening cement demand. A reduced number of working days in this quarter compared to the same period of last year negatively impacted cement and clinker sales volumes, which declined only slightly at 18.1 million t in 1Q13 from 18.2 million t in 1Q12. Group revenue for the period was also slightly down by 1.4% at €2761 million. Operating income improved by 35% to €16 million due to successful price increases and decreasing energy costs.

“The improved operating income in Q1, despite declining sales volumes and revenue, shows that we are on the right track”, says Chairman of the Managing Board Dr Bernd Scheifele. “The measures we introduced for improving the margins are showing results. The efficiency improvement programmes are going according to plan and we were already able to implement price increases in many of our markets.”

Expansion in growth markets

HeidelbergCement completed the expansion of its cement and clinker capacities in Madhya Pradesh and Uttar Pradesh in February. Additionally, in March, the company increased its stake in Cement Asutralia from 25% to 50%, doubling the available annual cement capacity to more than 2 million t. This will be boosted by the addition of a 1.1 million tpa grinding plant in Port Kembla, which is scheduled to become operational in 2H13. Furthermore, HeidelbergCement increased its stake in Russian cement producer CJSC Construction Materials in Bashkortostan from 51% to 100%. In the UK, HeidlebergCement acquired the remaining 50% shares in Midland Quarry Products. Planned cement capacity expansion in 2013 therefore rose to just under 7 million t.

Outlook

Continued economic recovery in North America should result in increasing demand for building materials, while cement markets in Asia and Africa are expected to continue performing positively. In Germany, Northern Europe, Russia and Central Asia, HeidelbergCement expects demand to remain stable or experience slight growth, but the rest of Europe is expected to remain weak. Efforts to reduce margins, particularly in the area of energy costs, will continue as planned. The Group wants to realize a further €240 million in cash savings this year as part of the “FOX 2013” programme, while the “LEO” programme for optimising supply chains will also remain in focus. On this basis, the Managing Board is continuing with the objective of further increasing revenue and operating income in 2013 and significantly improving profit before tax.

“The consistent reduction of net debt is still a top priority for us, with the aim of improving the relevant financial key figures to an investment grade level,” said Dr Scheifele. “We will also remain on course with our successful strategy of targeted investments to expand cement capacity in emerging countries. With our global market leadership in aggregates and our advantageous geographical positioning in attractive markets, we will do our utmost to benefit over-proportionally from the continued economic growth.”

Adapted from press release by Katherine Guenioui.

Read the article online at: https://www.worldcement.com/europe-cis/08052013/heidleberg_makes_strides_in_operating_income_973/