HeidelbergCement resets for the future
HeidelbergCement released its preliminary figures for the full-year 2020 during the week, seeing an impressive operational performance deliver strong financial results, in spite of the pandemic. Going forward the company is now planning asset disposals to further optimise its asset portfolio and has incorporated carbon reduction targets into the company's remuneration and staff incentive schemes.
Navigating the pandemic
The company's COPE (COVID-19 Contingency Plan Execution) action plan, which was initiated as early as February 2020, helped it to a substantial cash saving of around EUR1.3bn during the year. The savings were made up of a reduction in fixed costs (EUR243m), capex (EUR470m) and other cash savings (EUR560m).
As part of this, maintenance capex was limited to business-critical operations, with postponed spends on maintenance taking place in the 4Q20 to ready operations for 2021. This in turn had an impact on the comparatively weaker results of the North America segment in the final quarter.
Capacity update
HeidelbergCement is also exploring five asset disposal options, according to an analyst call on 23 February 2021. Reports have surfaced that this may include its Spanish portfolio, which currently has three cement plants, but the company has not confirmed this development. Separately, the company was also linked to an asset sale in its North American region in late last year. According to the call, some of the five asset disposals may come to fruition in the first half of 2021.
Dr Dominik von Achten, chairman of the managing board, also confirmed during the call that no major plant closures are expected in its European region this year, despite the increased necessity to optimise capacity utilisation and reduce CO2 emissions. This is due to key investments already made in its Italian, French and German operations. Dr von Achten also noted the improvement in market dynamics in the region and the importance of not closing capacity where it is required. It is, however, working to drive down its clinker incorporation.
Sustainability focus
Moving onto the company’s ambitious sustainability agenda, it has now anchored its CO2 reduction targets in its remuneration systems across the group.
"In the future, full achievement of the variable remuneration will only be given if both the financial targets and the sustainability target are met," said Dr von Achten. This will apply to the members of the managing board as well as to all of its bonus-eligible employee worldwide, as of the 2021 financial year.
This comes as a large show of confidence in its ability to meet its targets and a reaffirmation of its commitment to reduce CO2 emissions.
Price increases
With regards to the company’s pricing strategy going forwards, it is aiming to increase prices to offset rising energy costs and structural investments related to its CO2 agenda. In each of its markets, this could be between a 1-5 per cent increase and even a 10 per cent rise for some markets.
Outlook
Looking ahead, the company has not delivered a complete outlook for 2021 but confirmed that it is optimistic with regards to demand in its core markets, such as in the US, Australia and the UK.
