HeidelbergCement presented its Vision 2020, updating financial targets and strategic priorities for the three-year period starting 2018 at its Capital Markets Day 2018 in Bergamo, Italy. The group aims to increase free cash flow generation to around EUR6bn during this period, driven by further efficiency gains and potential market upsides as well as a reduction in financial costs and disciplined capex spending, said the company in a statement.
HeidelbergCement expects to benefit from market improvements as core markets in southern and eastern Europe as well as emerging countries recover and enter an expansion phase in the current economic cycle. In total the company expects an organic EBITDA growth of around five per cent annually over the three-year period.
Furthermore, the cement producer plans to further improve its asset base by active portfolio management. The business in existing geographies will be strengthened through a selective M&A strategy, which could include increasing vertical integration. It also aims to reduce complexity and risk by disposing of non-core businesses, idle assets and high-risk or limited-growth potential market positions. As a result of such disposals HeidelbergCement forecasts proceeds of around EUR1bn-1.5bn, which will then finance EUR1.5bn-2bn growth capex.
The company will also implement digital platforms to drive savings of more than EUR200m in operations, maintenance, logistics and purchasing.
Dr Bernd Scheifele, Chairman of the Management Board, commented: “We have grown the company with the successful integration of Italcementi and increased shareholder returns by raising our dividend to new record levels. Our successful business model is based on the most advanced vertical integration, a simple structure focussed on three core business lines and a de-centralised, lean organisation with strong local teams. As such, we have a compelling strategy in place which clearly differentiates us from our competitors and we remain the industry leader in business excellence and cost efficiency. HeidelbergCement is well positioned to capitalise on its strengths in the current business cycle. Over the next three years, we intend to significantly increase our free cash flow with the clear commitment to building shareholder value.”
CFO, Dr Lorenz Näger, added: “We have strong cash generation potential not only from operations but also from financial cost reductions and disciplined capex management. We intend to continue with our progressive dividend strategy based on affordability and sustainability, deleverage our balance sheet and optimise our asset portfolio.”
