Heidelberg Cement Heidelberg Cement Preliminary Overview 2012 and Outlook 2013

Editor: Marcel Dröttboom

Heidelberg Cement presented its preliminary and unaudited figures for sales volumes, revenue, operating income before depreciation (OIBD) and operating income (OI) for the fourth quarter and full year 2012, together with an Outlook for 2013. Revenue and operating income rose in comparison to the previous year and in line with the outlook given in the 2011 Annual Report.

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Heidelberg Cement has presented its preliminary and unaudited figures for sales volumes, revenue, operating income before depreciation and operating income for the fourth quarter and full year 2012.
Heidelberg Cement has presented its preliminary and unaudited figures for sales volumes, revenue, operating income before depreciation and operating income for the fourth quarter and full year 2012.
(Picture: Heidelberg Cement)

Heidelberg, Germany – According to the company, the improvements reflect the continuing positive development in Heidelberg Cement’s growth markets and the ongoing recovery in North America. Sales volumes and result declined in Europe, mainly as a result of government budget constraints in some countries which led to significant reductions in infrastructure spending. Measures to reduce costs and increase prices contributed significantly to the rise in OIBD and OI of the Group.

“We are pleased that we achieved our goal of increasing revenue and operating income despite the negative impact of the euro crisis on many countries in Europe,” said Dr. Bernd Scheifele, CEO of Heidelberg Cement. “Once again we could reap the benefit from our advantageous geographical positioning in growth markets and the successful continuation of our programmes for efficiency and margin improvement. The margins in the core businesses cement and aggregates continued to increase. The strong development in our markets in Asia, Africa and North America contributed to the positive margin development.”

Preliminary Group Financials (see Fig. 1)

Cement sales volumes rose slightly compared to the previous year due to a positive volume development in the North America, Asia-Pacific, and Africa-Mediterranean Basin Group areas which more than compensated for the weak demand in Europe. Aggregates and asphalt sales volumes declined due to decreasing infrastructure spending in the USA, the UK, and some Eastern European countries. Group revenue and OI could be increased compared to the previous year, mainly because of the successful implementation of measures for cost reduction, efficiency improvement, and price increases. The strong development in the Group areas Asia-Pacific, Africa-Mediterranean Basin and North America contributed to the improvement of the operating income margin. The “FOX 2013” programme clearly exceeded expectations and resulted in cash savings of €384 million in 2012.

Full year 2012 revenue and results were positively influenced by the weakening of the euro compared to other currencies. This mainly affected the Group areas of Western and Northern Europe, North America, and Asia-Pacific.

Supported by the measures for margin improvement and owing to a sustained strong development in the Group areas of Asia-Pacific, North America, and Africa-Mediterranean Basin, Group revenue and OI continued to improve in the fourth quarter 2012 despite declining sales volumes.

At the end of December 2012, the number of employees was 51,966 (previous year: 52,526). The reduction of 560 employees essentially results from two opposing developments: on the one hand, around 1200 job cuts were made in North America, the United Kingdom, Spain, and some Eastern European countries as a result of overhead efficiency improvement programmes, location optimisations, and capacity adjustments. On the other hand, Heidelberg Cement hired more than 600 new employees in growth markets such as India and Indonesia.

Outlook 2013

In its January 2013 forecast, the International Monetary Fund expects a slightly increased growth for the global economy compared to the previous year, provided that the advanced economies of North America and Europe continue their efforts to resolve the debt crisis and consolidate their budgets. There are still risks for the global economy resulting from the high indebtedness of the USA, the euro debt crisis, and armed conflicts in the Middle East.

In North America, the company expects a continuing economic recovery and consequently a further increasing demand for building materials, especially from residential construction and the raw materials industry. In Europe and Central Asia, Heidelberg Cement anticipates a divided development: while markets in Germany, Northern Europe, Russia, and Central Asia should remain stable or continue growing, a weak development of the economy and demand for building materials is expected in all other regions. In Asia and Africa, the company expects a sustained positive demand.

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“Due to the continuing strong economic growth in the emerging markets and the recovery in the USA, we are cautiously confident for the future”, says Dr. Bernd Scheifele. “Macroeconomic risks have recently eased, but still remain significant. The need for countries to deleverage will likely dampen volume growth in mature markets for the foreseeable future. In addition, we still have not recovered the margin loss from massively increasing energy costs over the past years. Therefore, we will unabatedly continue our efforts to reduce costs and improve efficiency and will continue to right-size capacities where necessary.”

“Since our “FOX 2013” programme clearly exceeded expectations in 2012, we increased the three-year cumulated cash saving target to EUR 1.01 billion compared with the original goal of EUR 600 million. We will put special focus on price increases in 2013. For this purpose we started the projects “PERFORM” for cement in the USA and Europe and “CLIMB Commercial” for aggregates last year in order to achieve EUR 350 million margin improvement by 2015. Deleveraging remains the highest priority for us, in order to regain our investment grade rating. We will also continue our successful strategy of targeted investments to expand cement capacities in the growth markets of Asia, Africa, and Eastern Europe. Due to commissioning of further plants during the next months, we will increase our cement capacities in emerging markets by more than 5 million tonnes in 2013.”

“We will benefit from two important factors in 2013”, says Dr. Bernd Scheifele. “On the one hand our continuous investment through the crisis in new cement capacities in strongly growing emerging markets is paying off, now. Meanwhile, we have a strong footprint in these regions with more than 60% of our worldwide cement capacities. In addition, we benefit from our strong market presence and the continuing market recovery in our Group area North America that contributes about 25% of our revenue.”

The complete consolidated financial statements of Heidelberg Cement including the outlook will be published on 14 March 2013.