30 July 2010

HeidelbergCement reports Q2 2010 results

HeidelbergCement increases turnover and operating income – rise in sales volumes of cement, concrete and aggregates

Highlights Q2 2010 and prospects:

  • Trend change: sales volumes of cement, aggregates and ready-mixed concrete increase in comparison to last year
  • Turnover at EUR 3.3 billion (+9.5% compared to same quarter last year)
  • Operating income at EUR 492 million (+10.4% compared to same quarter last year)
  • Profit for the period of EUR 166 million includes expenses of EUR 101 million for restructuring and refinancing
  • Cost-saving programme "FitnessPlus 2010" on track
  • Liquidity and maturity profile further improved through the issue of a new Eurobond
  • Sustained growth expected in Asia-Pacific, Africa-Mediterranean Basin, and North America
  • Focus on reducing debt and targeted expansion of cement capacities in growth regions

Overview January – June 2010

Operating income before depreciation (OIBD)635693836865
in % of turnover21.1%21.0%15.6%15.8%
Operating income446492457474
Additional ordinary result44-3747-51
Result from participations266204
Earnings before interest and income taxes (EBIT)516461524427
Profit before tax35724116223
Net income from continuing operations36717432817
Net loss from discontinued operations-3-7-10-12
Profit for the period3641663185
Group share of profit333120270-79

Q2 sales volumes benefit from recovery in North America

While HeidelbergCement's development in the first quarter of 2010 was characterised not only by economic factors but also, to a considerable extent, by the long period of wintry weather, demand for our building materials recovered significantly in the second quarter. Thanks to sustained growth in Asia-Pacific and Africa, as well as recovering markets in North America, the sales volumes for cement, aggregates and ready-mixed concrete in the second quarter were above the figures for the same quarter of the previous year. In North America, we are now seeing the effects of the infrastructure projects, while demand is recovering in Western and Northern Europe, exceeding last year's level for aggregates and ready-mixed concrete. In the Eastern Europe-Central Asia Group area, sales volumes further decreased in the second quarter, although the declines were noticeably smaller. The growth in the other Group areas clearly outweighed these losses.

During the second quarter, the Group’s cement and clinker sales volumes rose by 1.2% to 21.9 million tonnes (previous year: 21.6). The biggest contribution was made by the Asia-Pacific Group area, followed by North America and Africa-Mediterranean Basin. In Asia, HeidelbergCement benefited from its strong position in Indonesia; activities in North America were driven primarily by demand in Canada and the northern part of the United States. While volumes in Eastern Europe-Central Asia experienced a significant decline once again, figures in Western and Northern Europe almost reached last year's level. Deliveries of aggregates reached 68.0 million tonnes (previous year: 63.7), a rise of 6.7%; adjusted for consolidation effects, the increase amounted to 2.8%. This growth was largely attributable to the stronger demand in North America and Western and Northern Europe, which was due to the ongoing infrastructure projects. Deliveries of ready-mixed concrete rose by 3.6% to 9.5 million cubic metres (previous year: 9.2). Adjusted for consolidation effects, asphalt sales volumes declined by 6.6% to 2.4 million tonnes.

In the first half-year, cement and clinker sales volumes slightly decreased by 1.6% to 37.1 million tonnes (previous year: 37.7). Deliveries of aggregates remained stable at 108.3 million tonnes. Deliveries of ready-mixed concrete decreased by 2.0% to 16.4 million tonnes (previous year: 16.8). Asphalt sales volumes fell by 15.4% to 3.7 million tonnes (previous year: 4.4).

Development of turnover and results

Group turnover rose by 9.5% in the second quarter to EUR 3,296 million (previous year: 3,011). Turnover improved in all Group areas except Eastern Europe-Central Asia. Excluding exchange rate and consolidation effects, turnover increased by 0.8%. Operating income before depreciation (OIBD) improved by 9.3% to EUR 693 million (previous year: 635). Operating income rose to EUR 492 million (previous year: 446).

"As a result of the improved development in our core markets and the successful continuation of our cost-saving programmes, we were able to increase our turnover and operating income in the second quarter in comparison with last year", said Chairman of the Managing Board Dr. Bernd Scheifele. "In addition, we further strengthened our liquidity and maturity profile. Our 'FitnessPlus 2010' continues to be on track and generated savings of EUR 124 million in the first half of the year."

Financial result in the second quarter was adversely affected by the refinancing measures and decreased by EUR 61.2 million to EUR -220.5 million (previous year:
-159.3). This is essentially attributable to one-off effects of EUR 57.8 million in connection with the refinancing of the syndicated loan from June 2009. The additional ordinary result decreased by EUR 81.0 million to EUR -36.5 million (previous year: +44.5). Restructuring expenses of around EUR 43 million were responsible for the decline. Furthermore, the figure for the same quarter of last year included income from the sale of shares in the Indonesian joint venture Indocement.

The profit before tax from continuing operations amounted to EUR 240.9 million (previous year: 356.8). Tax expenses in the second quarter of 2010 came to EUR 67.0 million. Income of EUR 10.2 million was recorded in the same period last year. This change is primarily the result of a provision for tax risks in Australia and UK that was reversed in the previous year. Profit after tax from continuing operations amounted to EUR 173.9 million (previous year: 367.0).

Overall, the Group profit for the second quarter decreased by 54% to EUR 166.5 million (previous year: 364.2). Adjusted for special effects in both periods, an increase of 7% is resulting. The rise in profit attributable to minority interests by EUR 15.1 million to EUR 46.4 million (previous year: 31.2) is largely a consequence of the improvement in results and the change in the percentage of shares held in Indocement. The Group share of profit therefore amounts to EUR 120.1 million (previous year: 333.0).

In the first half of the year, Group turnover rose by 2.0% to EUR 5,476 million (previous year: 5,370). Excluding exchange rate and consolidation effects, turnover decreased by 3.8%. Operating income before depreciation (OIBD) improved by 3.4% to EUR 865 million (previous year: 836) and operating income by 3.7% to EUR 474 million (previous year: 457). Group profit for the first half of the financial year amounts to EUR 4.6 million (previous year: 318.3) and the Group share of profit to EUR -78.7 million (previous year: 270.0).

At the end of the second quarter of 2010, the number of employees at HeidelbergCement was 53,572 (previous year: 56,811). The decrease by 3,239 employees results essentially from the optimisation of locations and capacity adjustments, particularly in North America and the United Kingdom, which were linked with job cuts.

Further improvement in maturity structure and liquidity

By issuing a new Eurobond on 22 June 2010 (closing date on 1 July) with an issue volume of EUR 650 million and a term ending on 15 December 2015, HeidelbergCement further improved its maturity profile and increased its liquidity. At the end of the second quarter, the liquidity amounted to EUR 2,874 million; as a result of the bond issue, liquidity increased to EUR 3,524 million on a pro-forma basis. Net debt rose by around EUR 100 million in comparison with the same quarter of last year to EUR 9,066 million. This was mainly a result of exchange rate effects and a slight increase in working capital; both effects were only partially offset by a positive cash flow. In comparison with 30 June 2009, net debt decreased by EUR 2.2 billion.

The appreciation of the US dollar against the euro also led to an increase in shareholders’ equity and an improvement of the equity ratio from 43.5% at the end of March to 44.6% at the end of June 2010. This led to an improvement in the gearing from 77.7% at the end of March to 71.0% at the end of June 2010.


The OECD and IMF have raised the forecasts for global economic growth for the whole year as a result of the positive development in the first half of the year. Development dynamics still clearly differ from region to region. In Asia, continued growth is anticipated, although growth rates in China are expected to weaken slightly in the second half of the year. Economic activity in Western Europe and North America has undergone a significant recovery following the long, hard winter, while Eastern Europe is still grappling with the crisis. According to all forecasts, uncertainties still remain over the strength and timescale of the economic recovery because of the high level of unemployment and national debt in individual countries.

HeidelbergCement continues to expect a noticeable positive business development in the Asia-Pacific and Africa-Mediterranean Basin Group areas. In North America, on the basis of the considerable increase in expenditure on road construction, the recovery is expected to continue in the second half of the year. The extent and rate will depend on the spending behaviour in the US states. Decrease in the unemployment rate remains a decisive factor for the upswing in private residential construction. In Western Europe, HeidelbergCement continues to expect residential construction to stabilise during the remainder of 2010, along with a noticeable decline in commercial construction, and positive development in infrastructure. On a regional level, we expect a positive trend in construction in Northern Europe and the UK, and a slight volume decline in Germany and Belgium. The construction market in the Netherlands is weakening considerably. The recovery in Eastern Europe and Central Asia has been somewhat delayed. While construction activities in Poland are further stabilising, the Czech Republic and Romania show only a slow recovery. Further development in Hungary is expected to be weak. Rising cement consumption from a low level and a recovery of prices are expected in the countries of the eastern part of Eastern Europe and in Central Asia.

"Demand for our building materials improved significantly in the second quarter, particularly because of the successful implementation of the infrastructure projects in North America and Western and Northern Europe", explained Dr. Bernd Scheifele. "However, uncertainties still remain over future developments because of the sustained high level of unemployment and the still unclear impact of budgetary consolidation on infrastructure expenditure in individual countries. So we will consistently continue with our 'FitnessPlus 2010' cost-saving programme and keep working towards our savings goal of EUR 300 million for 2010. Debt reduction remains an important area of focus. At the same time we will continue with our targeted investments in future growth, particularly in cement activities, in the emerging countries of Asia, Africa, and Eastern Europe. With improved cost structures, our operational strength and leading market positions, we believe we are well-equipped to benefit to an above average degree from an economic upturn in the course of this year and the next."

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Andreas Schaller

Group Spokesman, Director Group Communication & Investor Relations
+49 6221 481 13249
+49 6221 481 13217
HeidelbergCement AG
Berliner Straße 6
69120 Heidelberg