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HeidelbergCement – preliminary overview 2009

World Cement,

On 10 February, HeidelbergCement presented its preliminary and unaudited sales volumes, turnover, operating income before depreciation (OIBD) and operating income (OI) for the fourth quarter and full year 2009. These figures decreased in 2009 compared to the prior year, reflecting the impact of the global economic crisis on the overall construction industry. Decline in turnover in the mature markets of North America and Europe continued to slow down in the fourth quarter due to increased spending for infrastructure and the bottoming out of the decline in residential construction, partially offset by further weakening in commercial construction. Bad weather conditions in the fourth quarter prevented a better development in the mature markets. In contrast, turnover in emerging markets in Asia stabilised and results improved as markets recovered and growth accelerated.

“We have proactively and consistently reduced our cost base during the crisis year 2009 and successfully protected our operating margins from the considerable decline in turnover. We have clearly exceeded our saving targets and achieved cost reductions of €550 million in 2009,” said Dr. Bernd Scheifele, CEO of HeidelbergCement. “While global economies are expected to return to growth in 2010, we continue to expect a slow recovery for the construction industry in mature markets. Therefore, we will continue our successful cost saving programme and target additional savings of €300 million in 2010.”

Full year as well as fourth quarter 2009 turnover and results were negatively impacted by currency effects, in particular by the weakening of European currencies outside the Euro and by fluctuations of the US-Dollar exchange rate. Adjusted for exchange rate fluctuations and consolidation effects, full year 2009 Group turnover declined by only 19.4% and OIBD by only 26.1% compared to 2008. The decrease in turnover and OIBD in the fourth quarter 2009 was only 11.7% and 34.0% respectively.

Supported by a solid development in Asia, the decline in turnover and sales volumes continued to slow down in the fourth quarter 2009. Adjusted for consolidation effects in the fourth quarter 2009, cement, aggregates and ready-mixed concrete sales volumes decreased by 6.0%, 15.9% and 12.2%; asphalt volumes even increased by 5.8%. The asphalt business in Singapore and Australia were deconsolidated after their disposal in 2009.

HeidelbergCement continued to consistently adjust its capacities and costs to the weak economic environment, especially in North America. At the end of December 2009, the number of employees in HeidelbergCement’s continuing operations was 53 963, a decrease of more than 1800 compared to end of September 2009 and of almost 7000 compared to end of December 2008.

Solid financing structure for 2010
HeidelbergCement successfully issued Eurobonds with a total issuance volume of EUR 1.4 billion in January 2010. With the proceeds of this transaction, HeidelbergCement has further optimised its maturity profile and reduced the level of bank debt. The company started year 2010 with a solid financing structure and is well positioned to negotiate new credit agreements with better conditions and with selected banks.

Outlook for 2010
HeidelbergCement continues to expect a slow and U-shaped recovery of the world economy with emerging markets decoupling from mature ones. The company expects stimulus programmes, notably in the US, to unfold their full impact in 2010 while a hesitant recovery is assumed for Europe. Visibility on timing and extent of the economic recovery in 2010 is still low, but should improve by the middle of the year. Accelerated growth is expected for China, India, Indonesia, Malaysia and Australia.

“The construction industry in the mature markets is still weak. Therefore, we will continue our successful cost saving programme in 2010 under the name ‘FitnessPlus 2010’, targeting €300 million savings,” explains Dr. Bernd Scheifele. “Our focus remains unchanged on cash flow generation and margin stability in order to further deleverage and improve financial metrics.”

Due to its strong market positions in North America and Europe, HeidelbergCement believes it is well positioned to benefit over proportionally from infrastructure stimulus programmes or a general market improvement in these regions.

The complete annual accounts of HeidelbergCement will be published on 18 March 2010. The full preliminary report, including regional breakdowns, can be viewed here.

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