HeidelbergCement continues costs-cutting course

Q1 sales volumes suffer from economic downturn and long winter
HeidelbergCement's development in the first quarter of 2010 was not only affected by economic influences, but also to a considerable degree by seasonal factors. Long-lasting wintery conditions were experienced both in large parts of North America and in Europe and had a further negative impact on sales development. To which extent the sales volumes decline is caused by the bad weather conditions or the economic development cannot be judged reliably. After the end of the cold period, demand for building products increased noticeably in March, but could not compensate for the volume losses of the previous months.

In total, the HeidelbergCement Group's cement and clinker sales volumes decreased by 5.4% to 15.2 million t (previous year: 16.0). The decline was strongest in the region Eastern Europe-Central Asia, followed by Western and Northern Europe and North America. Cement shipments in Asia-Pacific and Africa-Mediterranean Basin in contrast exhibited double-digit growth rates. Deliveries of aggregates reported a decrease of 9.5% with 40.3 million t (previous year: 44.5). Asphalt deliveries decreased by 21.7% to 1.4 million t (previous year: 1.8). The sales volumes of ready-mixed concrete fell by 8.8% to 6.9 million cubic metres (previous year: 7.6).

Turnover and results
Group turnover fell by 7.6% to €2180 million (previous year: 2359) in the first quarter. Double-digit gains in turnover in Asia-Pacific were offset by losses in the Group areas of Western and Northern Europe, Eastern Europe-Central Asia, and North America. In the Africa-Mediterranean Basin Group area, turnover reached the previous year’s level. Excluding exchange rate and consolidation effects, turnover decreased by 9.9%. The operating income before depreciation (OIBD) decreased by 15.0% to €171 million (previous year: 202). Operating income declined to -€18 million (previous year: 11).

“We consistently continued the strict cost management in the first quarter and were able to compensate most of the negative effects of the weak demand in North America and Europe on our operating income,” explained Dr. Bernd Scheifele, CEO of HeidelbergCement. “Our “FitnessPlus 2010” programme is on track and we already recognized additional savings of €63 million in the first quarter.”

Financial results improved by €19.4 million to -€183.2 million (previous year: -202.6). This is mostly due to a year-on-year reduction in currency devaluations in the amount of €27.0 million.

The loss before tax from continuing operations amounts to -€217.8 million (previous year: -195.0). Results from taxes on income declined by €95.2 million to €60.7 million (previous year: 155.9). This change is primarily the result of a provision for tax risks in Australia that was released in the previous year. The loss after tax from continuing operations thus totals -€157.1 million (previous year: -39.0).

Overall, the loss for the reporting period amounts to -€161.9 million (previous year: -45.9). The increase in profit attributable to minority interests by €20 million to €37.0 million (previous year: 17.0) is largely a consequence of the improvement in results and the changed participation in Indocement. The Group share therefore amounts to -€198.9 million (previous year: -63.0).

At the end of the first quarter of 2010, the number of employees at HeidelbergCement was 52 770 (previous year: 58 851). This decrease by 6081 employees results essentially from the location optimisations and capacity adjustments, particularly in North America and the United Kingdom, which were linked with job cuts.

Outlook
The global economy is still expected – according to forecasts from OECD and IMF - to recover this year. Development dynamics clearly differ from region to region.

HeidelbergCement continues to expect a noticeable positive business development in the Asia-Pacific and Africa-Mediterranean Basin Group areas. For North America and Europe, HeidelbergCement anticipates overall declines in sales volumes in the first half of the year, partly because of the weak first quarter. After a significant increase in promotional funding for road construction in the US in the month of March, a continued recovery of the business development is expected in the second quarter of 2010. The extent and rate will depend on the further development in the residential construction sector, the spending behaviour in the US states, as well as on the still pending decisions of the US Congress on future funding for road construction. In Europe, HeidelbergCement expects a stabilisation of residential construction, a noticeable decline in the commercial construction sector, and positive development in infrastructure for the rest of 2010.

Read the article online at: https://www.worldcement.com/europe-cis/14052010/heidelbergcement_continues_costs_cutting_course/