HeidelbergCement has announced its financial results for 3Q18, with sales volumes, revenue, and earnings per share all growing.
The company has announced that all of its business lines have experienced growth in sales volumes. It has stated that positive pricing led to a 10% organic revenue growth. Results from current operations before depreciation and amortisation (RCOBD) have grown by 2%, compared like-for-like with 3Q17. In addition, earnings per share were reported to improve by 12% to €2.72, compared to €2.42 in 3Q17.
The company has initiated an action plan that focuses on three major levers. First is portfolio optimisation, accelerating disposals and reviewing further divestment potentials. Secondly, the company will focus on operational excellence, launching a new efficiency programme that focuses on sales, general, and administrative expense, with a €100 million savings target. Finally, the action plan will look at cash flow and shareholder return, with the company adjusting its capex hurdle rate to share buyback valuation. As part of this, it plans to limit growth capex to an average of €350 million per year for the next two years.
HeidelbergCement has reported that positive market dynamics continued in all group areas in 3Q18, leading to growth in sales volumes in all business lines. The Group’s cement and clinker sales volumes increased by 5% to 35.1 million t in the quarter, where this was 33.4 million t in 2017. The growth rate amounted to 6%, adjusted for the disposal of the white cement business in the US, the deconsolidation of the business in Georgia, and the acquisition of Cementir Italia. The company has reported that all group areas contributed to this increase. It has also reported that sales volumes in emerging countries rose above average. However, North America grew only slightly, due to harsh weather conditions in Texas, the Midwest, and Northeast of the US.
Aggregates deliveries increased by 1% to 87.7 million t for the quarter, compared to 86.6 million t in 3Q17. All Group areas reported increasing volumes, with the exception of the Africa-Eastern Mediterranean Basin.
The company has also reported that deliveries of ready mix concrete increased in all Group areas, rising by 4% to 12.9 m3 (being 12.4 m3 in 3Q17). Asphalt volumes are also reported to have improved, growing 5% from 3.2 million t in 3Q17, to 3.4 million t in 3Q18. This is thought to be a result of the positive development of demand in the UK and California, as well as the consolidation effects in the Northwest of the US and Australia. Sales volumes were reported to come in slightly above last year’s level, excluding consolidation effects.
From €4.6 billion in 3Q17, group revenue rose by 7% in 3Q18 to €4.9 billion. When adjusted for negative currency and consolidation effects amounting to €105 million, revenue increased by 10%. It is thought that this growth was particularly driven by strong demand in many markets and positive pricing.
Due to currency and consolidation effects, it was also reported that RCOBD decreased in the quarter by 2% to €1.4 billion, compared to €1.6 billion in 3Q17. When adjusted for these effects, RCOBD grew 2%. The company has reported that cost inflation, in particular for energy, was more than compensated for by volume growth, successful price increases, and efficiency programmes.
Compared to -€104 million in 3Q17, the financial result for the quarter improved by €12 million to -€92 million. This development was contributed to by a further reduction in net interest expenses. Expenses for income taxes decreased significantly to €71 million, having been €176 million in 3Q17. As a result of this, profit for 3Q18 increased to €581 million, a 12% increase on 3Q17’s figure of €519 million. Profit relating to non-controlling interests rose by €3 million to €41 million, having been €38 million in 3Q17. Consequently, the group share increased significantly, by 12% on the previous year (rising from €539 million to €481 million). Earnings per share also rose by €0.30 to €2.72, having been €2.42 in 3Q17.
The company has reported that it continued to earn a premium on the cost of capital in 3Q18. Return on invested capital was 7.1%, clearly exceeding the weighted average cost of capital (6.3%) of the last 12 months.
Free cash flow of the last 12 months was stable at the level of 3Q17, with around €1.2 billion. Weaker RCOBD was compensated for by lower cash outflow for interest payments and taxes. The company expects that working capital will normalise by year end. Compared to the end of 3Q17, net debt decreased by €135 million to €9.52 billion. Leverage increased slightly from 3.0x to 3.1x. This was thought to be due to the decline in RCOBD.
“In 3Q18, the positive revenue and earnings per share trend continued and we could once again earn a premium on our cost of capital,” said Dr Bernd Scheifele, Chairman of the Managing Board at HeidelbergCement. “Improved financial costs and lower taxes overcompensated weaker than expected results from current operations, due to significant rainfalls in our core markets in the US, as well as a higher than planned energy cost inflation. However, due to the weaker operational development, we had to partially adapt our outlook for 2018. As a countermeasure, we have initiated an action plan with focus on three levers: portfolio optimisation, operational excellence, as well as cash flow and shareholder return.
“In light of the weaker than expected operational result development, we take strong actions to drive earnings and cash flow generation. We remain committed to improving shareholder value and maintaining a solid investment grade rating.”
HeidelbergCement is one of the largest building materials companies in the world.
Read the article online at: https://www.worldcement.com/europe-cis/08112018/heidelbergcement-grows-sales-volumes-and-revenue/
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