17 March 2011
HeidelbergCement reports Group annual results 2010
HeidelbergCement increases turnover, operating margin and profit in 2010 - well-equipped for 2011
2010 Group annual accounts
- Group turnover improved by 5.8% to EUR 11.8 billion
- Operating income before depreciation margin increased to 19% thanks to successful measures to reduce costs and increase efficiency
- Group OI-margin improved to 12.2% (previous year 11.8%)
- Profit for the financial year rose to EUR 511 million (previous year: 168)
- Net financial liabilities reduced to EUR 8.1 billion – gearing at 62.9%
- Liquidity reserve at approx. EUR 3.5 billion
Outlook for 2011
- Sustained growth in Asia-Pacific and Africa-Mediterranean Basin and continuing recovery in North America and Europe
- Focus on increasing efficiency, reducing costs, and raising prices in order to offset increasing energy and raw material costs as well as rising inflation
- Debt reduction remains our top priority
- Targeted expansion of cement capacities in growing markets is continued
- HeidelbergCement well-positioned to benefit over-proportionally from a recovery of the global economy
Cost reduction measures successfully continued
HeidelbergCement ended the 2010 financial year successfully in the face of a challenging global economic environment and gained the edge over its main competitors. This was mainly due to cost-cutting measures implemented at an early stage – in some cases even before outbreak of the crisis. Following the successful completion of the "Fitness 2009" programme with savings of more than EUR 550 million, we reached savings of more than EUR 300 million in the reporting year with the follow-up "FitnessPlus 2010" programme. The measures undertaken in the last two years to sustainably reduce administration and distribution costs as well as repair expenses in the cement business, the streamlining of our location portfolio, and our purchasing initiatives are reflected in the improved quality of profit and strengthened competitiveness.
"In 2010, the HeidelbergCement team successfully demonstrated implementation capabilities and cost efficiency once again", said Dr. Bernd Scheifele, Chairman of the Managing Board of HeidelbergCement. "We increased our turnover, operating income, and profit for the financial year in a challenging environment. In addition, HeidelbergCement is one of the few companies in our industry that managed to improve its operating margin overall as well as in the two core business lines of cement and aggregates."
Increased turnover, operating margin and net profit
Group turnover increased by 5.8% to EUR 11,762 million (previous year: 11,117), supported by consistently good performance in the growing markets in Asia and Africa as well as advantageous exchange rate effects. Across the Group, sales volumes for cement and clinker, aggregates, and ready-mixed concrete virtually remained constant.
Operating income before depreciation (OIBD) rose by 6.5% to EUR 2,239 million (previous year: 2,102); operating income increased by 8.6% to EUR 1,430 million (previous year: 1,317). In North America, operating income more than doubled as a result of cost-saving measures and improved margins for cement and aggregates. In Africa, cement sales volumes increased by almost 13% to 5.2 million tonnes and operating income reached a new record. In Asia, operating income before depreciation margin was kept almost constant at 27.5%, a peak value even in comparison with the rest of the industry, thanks to the continuing high level of demand.
Due to lower financing costs and significantly fewer goodwill impairment than in the previous year, the profit for the financial year more than tripled to EUR 511 million (previous year: 168). Earnings per share improved to EUR 1.83 (previous year: 0.30).
In view of the improved business development and the maintained focus on the reduction of net debt, the Managing Board and Supervisory Board will propose to the Annual General Meeting that the dividend be increased to EUR 0.25 per share (previous year: 0.12).
Further improvement in financing structure and credit rating
In 2010, HeidelbergCement noticeably improved its financing structure through successful bond issues with a volume of more than EUR 2 billion and the arrangement of a new credit line of EUR 3 billion, comfortably ensuring liquidity until the end of 2013. As a result, it was possible to reduce credit margins by more than 50% and the number of participating financial institutions to 17 core banks. The rating agencies responded to the successful improvement of the financing structure by further upgrading HeidelbergCement’s credit rating.
Thanks to successful cost-saving measures and consistent cash management, HeidelbergCement reduced its net debt by a further EUR 0.3 billion to EUR 8.1 billion.
As a result, gearing improved to 62.9% (previous year: 76.5%). The liquidity reserve increased to around EUR 3.5 billion at the end of 2010.
Targeted expansion of market position in growing markets
In 2010, HeidelbergCement was consistent and disciplined in continuing the targeted expansion of its market position in the cement business line in growing markets. Two new cement mills with a total capacity of 1.5 million tonnes were commissioned at the Cirebon plant in Indonesia. In September, HeidelbergCement signed an agreement with Forrest Group and now holds the majority share in its cement activities with a capacity of 500,000 tonnes in the Democratic Republic of the Congo. In autumn, we also acquired the majority share in CJSC "Construction Materials", which operates a modern cement plant with a capacity of 2 million tonnes in the Russian Republic of Bashkortostan, an attractive growth region in the Urals.
Construction work on the new Tula cement plant in Russia, with a capacity of 2 million tonnes, proceeded as planned. The start of production, to supply the Moscow market, is scheduled for the end of May 2011. The expansion of capacities at the Górazdze cement plant in Poland is also proceeding as planned, and is set to be completed in 2012.
A cement mill with a capacity of 0.8 million tonnes is currently being constructed in Bangladesh. In addition, a project was started to expand the capacities in central India by 2.9 million tonnes. The complete expansion programme for growing markets, which started as early as 2008, involves capacity expansions of around 20 million tonnes by 2012. HeidelbergCement is thus creating potential for future growth.
Outlook for 2011
HeidelbergCement expects the global economy to continue its recovery, albeit at a somewhat weaker level than in 2010. The growth rates in the emerging countries of Asia and Africa will remain significantly above those of the mature markets in North America and Europe.
In the Western and Northern Europe Group area, we generally anticipate further recovery in demand and thus increasing sales volumes for cement and aggregates, which will be primarily driven by strong trends in Scandinavia and Germany. We expect varying trends in the Eastern Europe-Central Asia Group area: Development should remain weak in Hungary and Romania, while demand is set to rise in Poland and Central Asia in particular and, in the second half of 2011, in the Czech Republic. In North America, we anticipate a slight increase in cement and aggregates volumes because of ongoing investments in road construction in the United States and the continuing positive development of the commodity industry in Canada. We expect demand to continue developing positively in the Asia-Pacific and Africa-Mediterranean Basin Group areas.
On the cost side, HeidelbergCement anticipates an increase in energy and commodity prices as well as rising inflation, particularly in emerging countries. In the mature markets, we also expect an increase in personnel costs. HeidelbergCement's aim is to offset the rise in costs through cost-saving measures and targeted price increases as well as fuel surcharges in the individual markets.
On the basis of these assumptions, the Managing Board has set the objective of further increasing turnover and operating income in 2011.
"In view of the slow recovery in the mature markets and the rising costs and inflationary pressure, we are maintaining our focus on cash flow and stable margins in order to reduce our debt and further improve our key financial ratios", explains Dr. Bernd Scheifele. "With our "FOX 2013" programme launched in January 2011, we are continuing our efforts to consistently reduce costs and increase efficiency. In particular, we want to achieve our aim of making HeidelbergCement not only the largest manufacturer of aggregates in the world, but also the most profitable. At the same time we will continue to invest in a focussed way in cement capacities in growth markets. Thanks to our positioning in attractive markets both in emerging and industrialised countries, and our global market leadership in aggregates, HeidelbergCement is ideally positioned to benefit over-proportionally from the continued recovery of the global economy, supported by growth acceleration in North America."
Overview of the HeidelbergCement Group
|Profit and Loss Accounts|
|in % of turnover||18.9%||19.0%|
|Earnings per share (IAS 33)**||0.30||1.83||509.4%|
|Cash flow statement|
|Cash flow from operating activities||1,164||1,144||-1.7%|
* At constant scope, exchange rates, and stock level.
** Attributable to the parent entity.
*** Excluding puttable minorities.