6 May 2010
HeidelbergCement: With determination through the crisis
- Double-digit increases in cement sales volumes in Asia-Pacific and Africa–Mediterranean Basin
- Turnover and results in Europe and North America strongly affected by long-lasting winter – increased construction activity in March
- Consistent cost management successfully continued with "FitnessPlus 2010" programme
- Operating income despite long winter only slightly below previous year
- Long-term financing secured
- Outlook unchanged: continuation of positive trend in Asia–Pacific, Africa–Mediterranean Basin and North America in Q 2 expected
- Preparation for future growth: cement capacity expansion programme 2012 expanded to 20 Mt
Overview January – March 2010
|January - March|
|Operating income before depreciation (OIBD)||202||171|
|in % of turnover||8.5%||7.9%|
|Additional ordinary result||3||-15|
|Results from participations||-6||-2|
|Earnings before interest and income taxes (EBIT)||8||-35|
|Loss before tax||-195||-218|
|Net loss from continuing operations||-39||-157|
|Net loss from discontinued operations||-7||-5|
|Loss for the financial year||-46||-162|
|Group share of loss||-63||-199|
Q1 sales volumes suffer from economic downturn and long winter
HeidelbergCement's development in the first quarter of 2010 was not only affected by economic influences, but also to a considerable degree by seasonal factors. Long-lasting wintery conditions were experienced both in large parts of North America and in Europe and had a further negative impact on sales development. To which extent the sales volumes decline is caused by the bad weather conditions or the economic development can not be judged reliably. After the end of the cold period, demand for building products increased noticeable in March but could not compensate the volume losses of the previous months.
In total, the HeidelbergCement Group's cement and clinker sales volumes decreased by 5.4% to 15.2 million tonnes (previous year: 16.0). The decline was strongest in the region Eastern Europe-Central Asia, followed by Western and Northern Europe and North America. Cement shipments in Asia-Pacific and Africa-Mediterranean Basin in contrast exhibited double digit growth rates. Deliveries of aggregates reported a decrease of 9.5% with 40.3 million tonnes (previous year: 44.5). Asphalt deliveries decreased by 21.7% to 1.4 million tonnes (previous year: 1.8). The sales volumes of ready-mixed concrete fell by 8.8% to 6.9 million cubic metres (previous year: 7.6).
Turnover and results
Group turnover fell by 7.6% to EUR 2,180 million (previous year: 2,359) in the first quarter. Double-digit gains in turnover in Asia-Pacific were offset by losses in the Group areas of Western and Northern Europe, Eastern Europe-Central Asia, and North America. In the Africa-Mediterranean Basin Group area, turnover reached the previous year’s level. Excluding exchange rate and consolidation effects, turnover decreased by 9.9%. The operating income before depreciation (OIBD) decreased by 15.0% to EUR 171 million (previous year: 202). Operating income declined to EUR -18 million (previous year: 11).
“We consistently continued the strict cost management in the first quarter and were able to compensate most of the negative effects of the weak demand in North America and Europe on our operating income,” explained Dr. Bernd Scheifele, CEO of HeidelbergCement. “Our “FitnessPlus 2010” programme is on track and we already recognized additional savings of EUR 63 million in the first quarter.”
Financial results improved by EUR 19.4 million to EUR -183.2 million (previous year:
-202.6). This is mostly due to a year-on-year reduction in currency devaluations in the amount of EUR 27.0 million.
The loss before tax from continuing operations amounts to EUR -217.8 million (previous year: -195.0). Results from taxes on income declined by EUR 95.2 million to EUR 60.7 million (previous year: 155.9). This change is primarily the result of a provision for tax risks in Australia that was released in the previous year. The loss after tax from continuing operations thus totals EUR -157.1 million (previous year: -39.0).
Overall, the loss for the reporting period amounts to EUR -161.9 million (previous year: -45.9). The increase in profit attributable to minority interests by EUR 20 million to EUR 37.0 million (previous year: 17.0) is largely a consequence of the improvement in results and the changed participation in Indocement. The Group share therefore amounts to EUR -198.9 million (previous year: -63.0).
At the end of the first quarter of 2010, the number of employees at HeidelbergCement was 52,770 (previous year: 58,851). This decrease by 6,081 employees results essentially from the location optimisations and capacity adjustments, particularly in North America and the United Kingdom, which were linked with job cuts.
Long-term financing secured
In January, HeidelbergCement issued two Eurobonds with a total issue volume of EUR 1.4 billion and used the proceeds for the repayment of the syndicated loan from June 2009. The remaining bank debt were repayed using a new EUR 3 billion syndicated credit facility that HeidelbergCement self-arranged with a group of 17 banks. The new credit facility is mainly intended as liquidity back-up and has a maturity date of 31 December 2013. HeidelbergCement thereby strengthens its financial and operational flexibility. At the same time, the security package granted to the creditors could be reduced significantly compared with the old credit facility. The stabilization of the financing is another important milestone on the way to improved credit ratings.
The global economy is still expected – according to forecasts from OECD and IMF - to recover this year. Development dynamics clearly differ from region to region. Accelerated growth is again anticipated in Asia. As expected, the return to economic growth in Europe and North America proceeds rather slowly and was adversely affected by the severe and long winter in the months of January and February. The noticeable economic upturn in March can be seen as a first positive signal regarding the further development. Nevertheless, there are still considerable forecast-uncertainties as regards the strength and timescale of the economic recovery. Early cutbacks to the economic stimulus programmes, cost-saving measures by some governments on account of the high level of debt, and persistently high unemployment may slow down the impending economic recovery.
HeidelbergCement continues to expect a noticeable positive business development in the Asia-Pacific and Africa-Mediterranean Basin Group areas. For North America and Europe, HeidelbergCement anticipates overall declines in sales volumes in the first half of the year, partly because of the weak first quarter. After a significant increase in promotional funding for road construction in the US in the month of March, a continued recovery of the business development is expected in the second quarter of 2010. The extent and rate will depend on the further development in the residential construction sector, the spending behaviour in the US states, as well as on the still pending decisions of the US Congress on future funding for road construction. In Europe, HeidelbergCement expects a stabilisation of residential construction, a noticeable decline in the commercial construction sector, and positive development in infrastructure for the rest of 2010.
“Due to the currently still prevailing weak economic situation in the industrial countries, HeidelbergCement consistently proceeds with its "FitnessPlus 2010" cost-saving programme and steadfastly pursues its goal of EUR 300 million in savings in 2010,” explains Dr. Bernd Scheifele. “At the same time, targeted investments are being made concerning projects in Asia, Africa, and Eastern Europe to lay the foundation for future growth. In the first quarter of 2010, HeidelbergCement increased the 2012 cement capacity expansion plan by 3 million tonnes to 20 million tonnes. With its improved cost structures, its high operational strength, and world-wide leading market positions, HeidelbergCement believes it is well-equipped to benefit above average from an economic upturn in the course of this year and the next year.”