HeidelbergCement benefits from Italcementi integration
HeidelbergCement’s first-quarter results benefitted from the inclusion of Italcementi but suffered from competitive pressures in some emerging markets.
Turnover in the three months to the end of March 2017 increased by 33.6 per cent when taking Italcementi’s operations into account, but on a like-for-like basis was little changed (+1.1 per cent) at EUR378.63m. EBITDA rose by 19.3 per cent to EUR383.1m, but the trading profit declined by 19.3 per cent to EUR108.4m.
“We were able to almost offset the effect of higher energy costs, bad weather conditions and increased competition in some emerging countries in the most seasonally weak quarter of the year,” the company said.
Group cement and clinker shipments increased by 38 per cent to 27.82Mt as a result of the addition of Italcementi, but on a comparative basis again these were virtually unchanged. The international trading activities of HC Trading saw volumes increase by 10 per cent to 4.1Mt, and the total trading turnover improved by 12.3 per cent to €301m, while trading in coal and petcoke declined by 4.6 per cent to 1.7Mt.
Cement and clinker sales volumes in the Western and Southern Europe Group area rose in 1Q17 by 86.7 per cent to 6.3Mt, with the substantial increase primarily attributable to the newly-included activities of Italcementi in France, Italy, and Spain, not to mention the positive development of demand in Germany, Benelux and the UK. Excluding consolidation effects, sales volumes increased by 2.8 per cent. The first signs of a market recovery became evident in Italy and Spain. In France, however, sales volumes remained slightly below the previous year’s level.
Northern and Eastern Europe/Central Asia cement deliveries grew by 16.9 per cent to 4.6Mt (like-for-like +4.6 per cent). The increase in sales volumes is attributable to the first-time inclusion of Italcementi’s cement activities in Bulgaria, Greece and Kazakhstan, in addition to the mainly positive development of cement demand in this group area. Domestic volumes were ahead in most countries apart from Romania, which was hit by a bad winter and prices mainly showed a positive trend.
The Asia-Pacific cement and clinker deliveries in the group area grew by 49 per cent to 8.7Mt. Excluding the recently-added activities of Italcementi in India and Thailand, sales volumes remained relatively flat (+0.3 per cent). Indocement in Indonesia saw volumes weaker than expected and lower pricing due to the increased competitive pressure. India had an encouraging start to the year in southern India. Higher sales prices, strict cost management and the accelerated realisation of synergies led to a substantial improvement in margins. On the other hand, Thailand had a disappointing start as restrained demand in the private sector, delays in infrastructure projects and the commissioning of new capacities in export markets resulted in a slight decline in volumes. China is showing signs of recovery, both in terms of volumes and prices.
The cement sales volumes of HeidelbergCement's North American plants benefitted from strong overall demand in the USA despite adverse weather conditions on the West Coast. Deliveries grew by 24.7 per cent to 3.1Mt in the first three months, with the majority of this rise relating to the inclusion of the former Italcementi/Essroc plants in the North region. Excluding consolidation, growth amounted to just one per cent. In the West region, heavy rains and flooding in California and Oregon in particular led to a significant drop in sales volumes. However, these decreases in volumes were more than offset by double-digit percentage growth in sales volumes in the North and South regions. In the Canadian market, the exceptionally cold and wet weather adversely impacted cement deliveries in British Columbia. Price increases were successfully implemented in all key markets of both the US and Canada.
In Africa and the eastern Mediterranean, cement and clinker sales volumes of the Africa-Eastern Mediterranean Basin Group area, which only include the deliveries from HeidelbergCement's African subsidiaries, rose by 157.9 per cent to 4.9Mt. This increase is essentially due to the inclusion of the activities of the former Italcementi Group in north Africa and to the growth in some countries south of the Sahara. Excluding consolidation effects, deliveries rose by 8.2 per cent. In Togo, Tanzania and Burkina Faso, deliveries benefitted from the new capacities as well as from the sustained growth in cement demand. Sales volumes were also up in Benin, Liberia and Ghana. However, Sierra Leone and the DR of Congo registered a considerable decrease in volumes due to higher imports. In some countries south of the Sahara, cement prices decreased – in some cases significantly – as a result of the increased competitive pressure, particularly from imports, and the commissioning of new capacities by competitors. Prices were under pressure in Ghana and in Tanzania. In Egypt deliveries remained substantially below the previous year’s level because of weak demand. However, higher sales prices were able to offset the decrease in volumes. Morocco and Mauritania achieved considerable increases in sales volumes.
In Benin, HeidelbergCement commissioned a 0.25Mta grinding plant in Cotonou in April 2017. It is also expanding cement capacity in Togo. In the north of the country, HeidelbergCement is currently constructing another 0.25Mta grinding plant, which is scheduled for completion in 2Q17. Another planned step towards expansion is the market entry in South Africa to tap into additional growth markets and drive forward diversification in Africa, the group noted.
Prospects
For the full year, HeidelbergCement said it remains 'cautiously optimistic' and expects to benefit from he good and stable economic development in the industrial countries, above all in the USA, Canada, the United Kingdom, Germany, northern Europe and Australia. These areas generate approximately 60 per cent of the group's revenue.
