HeidelbergCement has released its preliminary, unaudited figures for sales volumes, revenue, operating income before depreciation (OIBD), and operating income (OI) for 4Q14 and 2014.
- Revenue improved by 6% to €3.3 billion (like-for-like: +4%).
- Operating income was stable at €442 million.
- Most successful year since the financial crisis, with a significant improvement in sales volumes, revenue and operating income, despite negative exchange rate effects.
- Successful sale of building products business for US$1.4 billion.
- Reduction of net debt below €7 billion; proceeds from BP disposal not yet included.
- Increased sales volumes in all business lines.
- Revenue rose by 4% to €12.6 billion (like-for-like: +8%).
- Operating income improved to €1.6 billion (like-for-like: +13%).
- Further increase in operating margin.
Cement and aggregates sales volumes rose in 2014, in line with the outlook presented in the 2013 Annual Report. Growth was driven by the continuing recovery in North America and the additional capacities that became available in India, Africa, Indonesia, and Kazakhstan. The ongoing economic recovery in the United Kingdom also had a positive impact. Despite significant negative exchange rate effects, the Group’s revenue and OI increased in comparison with the previous year. This development was supported by mild winter weather in Europe in the first quarter and energy costs that continued declining over the course of the year.
“In operational terms, 2014 was by far the most successful year for HeidelbergCement since the financial crisis”, says Dr. Bernd Scheifele, Chairman of the Managing Board. “This success can be summed up in three results: firstly, we were able to increase revenue, OI, and operating margin despite negative exchange rate effects. Only a few companies in our sector could achieve the same, which underlines again our competitive strength. Secondly, we have sold our building products for a good price, and thirdly, we could significantly reduce our net debt. This success was once again based on our disciplined and structured management of costs and margins as well as the implementation of price increases in major markets. In addition, we continued to benefit from our advantageous geographical positioning and the positive economic trend in the industrial countries of North America and Western Europe, as well as in the emerging countries of Asia and Africa.”
All business lines recorded a noticeable growth in sales volumes compared with the previous year. In operational terms, the sales figures for cement and aggregates increased in all Group areas. Thanks to this increase in sales volumes and successfully implemented price increases in key markets, revenue rose moderately despite significant negative exchange rate effects. OI climbed considerably as a result of the consistently implemented initiatives to improve efficiency and margins as well as stable energy costs. The depreciation of many currencies against the euro burdened revenue for the year by €517 million and OI by €118 million. This affected all Group areas, particularly Asia Pacific, Eastern Europe-Central Asia, and Africa-Mediterranean Basin. Nevertheless, the OI and operating margin increased in comparison with the previous year thanks to the positive business development in the North America, Western and Northern Europe, and Africa-Mediterranean Basin Group areas. A noteworthy contribution was made by the margin improvement programmes “PERFORM” for cement, “CLIMB” for aggregates, and “LEO” for logistics optimisation. Before currency effects, OI for the year increased by €194 million.
In 4Q14, sales volumes of building materials benefited from the mild weather, which led to an extended period of construction in Europe. The weakening of the euro against other currencies also resulted in a slight improvement in revenue and results. Excluding the contribution to results of €25 million from the previous year’s sale of a quarry that was no longer in use, the operating margin in the fourth quarter remained at the high level of the previous year that was also characterised by favourable weather conditions. In 4Q14, OI of the Group areas was additionally charged with €29 million from the increase of central allocation of overhead costs for group services for the full year 2014.
Western and Northern Europe
Business development in Western and Northern Europe during 2014 benefited from the continued recovery in demand for building materials in the United Kingdom, which was driven by private residential construction and large infrastructural projects in London. The cement and aggregates sales volumes of the British plants increased by a double-digit percentage. Moreover, the mild winter weather in the first quarter translated into a significant rise in construction activity and therefore in demand for building materials in Europe compared with the previous year. This effect also led to an overall increase for the year in sales volumes for cement and ready-mixed concrete in Germany, Benelux, and Northern Europe. Revenue rose in line with the higher sales volumes and as a result of successfully implemented price increases. The acquisition of a cement grinding plant in Gent and of the majority stake in the Cimescaut Group, both in Belgium, in the first quarter contributed to the growth in revenue and results.
In 4Q14, sales volumes, revenue, and results benefited from the sustained solid construction activity in the United Kingdom and Germany, in particular. After adjustment for the increased allocation of overhead costs at country level, the margins remained at the high level of the previous year that was marked also by favourable weather conditions.
Eastern Europe and Central Asia
The Eastern Europe-Central Asia Group area experienced varying developments in the course of 2014. Mild weather in the first quarter led to a significant increase in sales volumes in all business lines. Sales of cement in the Ukraine declined considerably with the start of the crisis in the eastern part of the country. However, growth in sales volumes in all other countries, particularly in Poland, Kazakhstan, and Georgia, clearly overcompensated for this downturn. All business lines showed noticeable improvements in sales volumes for the year as a whole. Nevertheless, revenue decreased due to the distinctly negative exchange rate effects resulting from the devaluation of the currencies of the Ukraine, Russia, and Kazakhstan against the euro. Falling prices owing to the price pressure from imports also had a negative impact on OI.
In 2014, the recovery of cement demand continued in North America, driven particularly by growth in residential construction. In contrast to the previous year, sales volumes of aggregates, ready-mixed concrete, and asphalt also rose due to the overall growth in construction activity, which includes the infrastructure sector.
The rise in sales volumes and successfully implemented price increases led to a noticeable improvement in revenue and OI, as well as overcompensated significantly for negative currency effects based on the strength of the euro.
Results in 4Q13 include a positive contribution of €25 million from the sale of a quarry no longer in use. Excluding this capital gain, OI in the fourth quarter improved by around 42% in comparison with the previous year.
Economic growth and rising construction activity propelled demand for our products in the Asia Pacific Group area. Furthermore, our sales volumes benefited from the expansion of the production capacities in India and Indonesia.
The Asia Pacific Group area, however, recorded the largest negative exchange rate effect as a result of the weakness of the Indonesian rupiah and Australian dollar against the euro. Revenue and OI before exchange rate effects rose once again. However, increased wage and energy costs, partly due to energy prices based on the US dollar, led to a decline in the operating margin, particularly in the first half of the year.
Africa and the Mediterranean Basin
The positive development of demand in Africa continued in 2014 despite the Ebola epidemic. Thanks to capacity expansions, we were able to increase production in some core markets. Cement sales volumes declined slightly overall due to the sale of loss-making business activities in Gabon. The building materials business of our joint venture in Turkey developed positively.
Revenue and results in the Africa-Mediterranean Basin Group area were also impaired by negative exchange rate effects, particularly owing to the weakness of the cedi in Ghana. The decrease in revenue was furthermore a consequence of the sale of activities in Gabon. Thanks to the strong operational development of costs and prices, we were nonetheless able to further increase OI.
- Positive macroeconomic development in key markets: continued recovery and growth in the United States and United Kingdom and sustained strong development of demand in Africa and Asia.
- Tailwind from raw material prices and exchange rates: a significant drop in oil price will reduce costs and promote growth, alongside an advantageous exchange rate environment.
- Continuation of successful business strategy: strong positioning in raw materials reserves and operating sites at attractive locations, unique vertical integration, and excellent product portfolio; focus on operating efficiency and margin improvement; consistent increase in value through debt reduction and growth.
Adapted from press release by Rosalie Starling
Read the article online at: https://www.worldcement.com/europe-cis/10022015/heidelbergcement-reports-on-strong-2014-financial-performance-303/