HeidelbergCement reduces debt, profit edges ahead

German cement major HeidelbergCement reported increases in revenue and operating income in 2012 as well as a significant reduction in net debt.

Revenue for the 12 months to December 2012 improved by nine per cent to EUR14bn. Operating income climbed nine percent to EUR1.613bn, benefiting from price increases, exchange rate effects and the successful implementation of the "FOX 2013" savings programme. Operating income before depreciation or OIBD increased seven per cent to EUR2.48bn.

Profit for the financial year edged ahead by two per cent to EUR545m despite EUR257m impairment losses from goodwill and property, plant, and equipment as well as losses arising from divestments totaling EUR49m.

Net debt was lowered by more than EUR700m to EUR7bn and, as a result, gearing improved to 51.3 per cent compared to 57 per cent in the previous year.

Dr Bernd Scheifele, Chairman of the Managing Board of HeidelbergCement, said: “In 2012, we took the next consistent step towards reaching our strategic goals”, said Dr. Bernd Scheifele, Chairman of the Managing Board of HeidelbergCement. “We were able to further improve operating income, reverse the negative margin trend, and, in particular, have considerably reduced our net debt. A major contributing factor was the significant increase in free cash flow.

Cement sales volumes rose slightly by 1.4 per cent YoY as positive developments in North America, Asia-Pacific and Africa-Mediterranean Basin Group areas more than offset the weak demand in Europe.

On its outlook, in North America, HeidelbergCement expects a continuing economic recovery and increased demand for building materials, especially from residential construction sector. In Europe and central Asia, a tale of two halves is anticipated: markets in Germany, Northern Europe, Russia, and central Asia should remain stable or continue growing but a weak development of the economy and demand for building materials is expected in all other regions. In Asia and Africa, the Group continues to expect sustained growth of demand.

In terms of cost, price increases have top priority and the group has started the two pricing initiatives “PERFORM” for the cement business in the USA and Europe as well as “CLIMB Commercial” for the aggregates business line.

After “FOX 2013” exceeded expectations in 2011 and 2012, HeidelbergCement increased the savings goal for the 2011 to 2013 period from €600m to €1010m. The group has now said it wants to realise a further €240m of this total in 2013. Furthermore, HeidelbergCement has launched the “LEO” programme for optimising logistics, which has the goal of achieving cost reductions of €150m over the coming years.