HeidelbergCement expects to post a loss of up to Euro 400m in 2004 after booking Euro 700m in one-off charges, the world’s fourth-largest cement maker said on Thursday. "The loss will be around Euro 350m up to a maximum of Euro 400m," Bernd Scheifele, the newly appointed chief executive of HeidelbergCement, said during a conference call. Scheifele also said he would not rule out further provisions if there was a restructuring of the company.
Standard & Poor’s Ratings Services said the move by HeidelbergCement, rated "BB+" with a stable outlook, has no impact on the ratings or outlook on the company. "Although the magnitude of the extraordinary charges is very material, the cash outflow is limited to about 50 million euros over several years, and is expected to be partly compensated by cost reductions," S&P said in a statement.
HeidelbergCement said earlier it would book up to Euro 700m in one-off mainly non-cash charges after revaluing goodwill for its assets in western and northern Europe, and for Indonesia’s second-biggest cement maker Indocement. Others include restructuring provisions for its Belgian-Dutch cement business and valuation adjustments for deferred tax assets.
The charges followed the firm’s impairment test on its assets as firms in Europe are required to apply new accounting rules starting this year. Under the new rules, companies will have to decide once a year whether or not the premiums they paid for acquisitions, called goodwill, were a waste of money - in which case they will have to take an immediate impairment charge. Previously, buyers depreciated, or amortised, goodwill over time, meaning if a deal turned sour only the depreciated rump would hit as a loss - now the full value will hit.
HeidelbergCement said a decision on a proposed dividend would be made later. Business development in the fourth quarter was within expectations, HeidelbergCement added in a statement. The firm said the move would allow it to take advantage of attractive growth opportunities in the future. "One had to expect that that would happen," said Erhard Schmitt, analyst at Helaba Trust. "That also has to do with the fact that there’s a new management, and a new management team first goes through the various accounting positions and makes a clean slate." Shares in HeidelbergCement fell 1.9 per cent to Euro 53.0, after rising as much as 3 per cent earlier as analysts had upgraded the company.
