German cement major HeidelbergCement has reported increases revenue and operating income in
for the third quarter 2012 driven by cost savings and price increases and announced significant reduction in net debt.
Group revenue in the 3Q12 rose by 8.9 per cent to €3944m, driven by increasing prices, and a favourable development of exchange rates. Positive exchange rate effects supported the development of revenue particularly in North America, Asia-Pacific, as well as Western and Northern Europe. Excluding exchange rate and consolidation effects, revenue grew by 1.7 per cent, with Asia-Pacific recording a double digit increase.
Operating income before depreciation (OIBD) increased by 12.4 per cent to EUR874m (previous year: EUR778); operating income improved by 15.5 per cent to EUR649m. Cost savings and successful price increases contributed to this improvement in results. Excluding exchange rate and consolidation effects, OIBD increased by 6.9 per cent and operating income by 10.2 per cent.
“The quality of our results has further improved in the third quarter,” says Dr Bernd Scheifele, Chairman of the Managing Board. “This is reflected by the improving margins and the noticeable reduction in net debt. Our “FOX 2013” programme is a great success and we already beat our 2012 cash savings target. In addition, we were able to complete first disposals of non-core businesses in North America. The balanced approach of cash savings, working capital improvement, disciplined capex, and disposals of non-core businesses is clearly successful. We will do everything in our power to continue this positive trend.”
At the end of 3Q12, HeidelbergCement’s net debt amounted to EUR7.76bn, which corresponds to a reduction of EUR740m compared to the end of 3Q11. Gearing improved to 55 per cent compared to 65.9 per cent, accordingly. Net debt was also €11m lower than at the end of 2011
After nine months of 2012, the three-year programme for financial and operational excellence, “FOX 2013”, surpassed the annual savings target of EUR200m and generated cash savings of EUR241m. Specifically the reduction of working capital and the savings from purchasing and from the OPEX project exceeded company expectations.
Cement sales trends
In 3Q12, the group’s cement and clinker sales volumes remained stable at 24.3Mt compared to 3Q11. Sales volumes in North America increased strongest among all Group areas, followed by Asia-Pacific and Africa-Mediterranean Basin. In North America, the recovery of the residential housing market is driving demand for cement.
The Indonesian cement market continued to develop strongly in the third quarter based on increasing demand for housing and infrastructure. In Central Asia, cement volumes further increased, but could not compensate for the decline in deliveries in Poland and the Czech Republic. Cement sales volumes in Western and Northern Europe declined due to weak demand in the United Kingdom. Aggregates volumes fell by 9.4 per cent to 68.8Mt (previous year: 75.9Mt).
In the first nine months of the year, cement and clinker sales volumes rose by 2.5 per cent to 67Mt (previous year: 65.4). Aggregates shipments declined by 4.3 per cent to 182.9Mt (previous year: 191.1). Deliveries of ready-mixed concrete remained almost stable at 29Mt (previous year: 29.2); sales volumes of asphalt fell by 9.3 per cent to 6.5Mt (previous year: 7.2Mt).
Capacity expansions nearing completion
In cement, some important capacity expansion projects are near completion. The commissioning of new clinker and cement plants in Central India with a cement capacity of 2.9Mta is expected in 4Q12. In Ghana and Liberia, HeidelbergCement is constructing new cement mills with capacities of 1Mta and 0.5Mta, respectively. Commissioning of the mill in Ghana is planned before year-end 2012, production start in Liberia is expected for early 2013.
Outlook
In the Western and Northern Europe Group area, HeidelbergCement continues to expect a slight decline in demand and therefore falling sales volumes of cement and aggregates. This is mainly due to the weather related strong level of sales volumes in the previous year, the cold spell in Europe in the first quarter of 2012, and the decline in demand in the United Kingdom and The Netherlands.
In the Eastern Europe-Central Asia Group area, HeidelbergCement continues to expect further growth in Russia and Central Asia driven by solid demand and additional capacities, while sales volumes are anticipated to decline in Eastern Europe due to weakened demand especially in Poland and the Czech Republic.
Based on the strong development in the first nine months of the year in North America, the company expects increasing demand for cement due to the recovery of investments in private residential construction and commercial construction. HeidelbergCement anticipates the demand for building materials from the raw materials industry in Canada and the United States to further support its sales volumes.
In the Group areas Asia-Pacific and Africa-Mediterranean Basin, HeidelbergCement continues to expect a sustained positive demand trend.
HeidelbergCement aims to offset the cost increase and recover some of the margins lost in 2011 by cost reduction measures, operational efficiency and targeted price increases. The Managing Board sticks to its target of further increasing revenue and operating income in 2012 compared to the previous year.
