4 November 2009

HeidelbergCement successfully realigned in third quarter 2009

  • OIBD-margin up to 25.5% (previous year: 22.5 %) in Q3; cost reduction programmes show effect
  • Group turnover declined to EUR 8.4 billion (-22% compared to previous year) due to adverse volume effects. Notably positive market development in Asia
  • Net debt fell to below EUR 9 billion
  • Financing structure after capital increase and bonds issue significantly improved
  • Free float >75%; good prospects for entry into German DAX index in 2010
  • Focus on liquidity, ambitious cost saving programmes and disposals are consistently pursued

Overview January – September 2009

Operating income before depreciation (OIBD)8717702,1611,606
in % of turnover22.5%25.5%20.0%19.1%
Operating income6715711,5721,028
Additional ordinary result17-354411
Results from participations17275148
Earnings before interest and income taxes (EBIT)7065631,6671,087
Profit before tax5132811,092442
Net income from continuing operations359209818537
Net income/loss from discontinued operations-10-61,261-15
Profit for the financial year3492032,079522
Group share in profit3101491,985419

*) Figures have been restated following the reclassification of the unwinding of discount to the other financial result

Market development remains problematic

In the first nine months of 2009, cement and clinker sales volumes of HeidelbergCement reached 59.2 million tonnes (previous year: 68.5) and were 13.5% below the previous year’s level. Sales volumes improved in the Asia-Australia-Africa Group area in the third quarter, driven by a strong demand in China and a favourable development in Bangladesh. Tanzania benefits from the successful capacity expansion. During the last few months, the development in sales volumes of individual Eastern European countries, e.g. Poland, indicates improving prospects. The sales volumes for aggregates decreased by 21.9% to 178.7 million tonnes (previous year: 228.9) in the first nine months. The reduction in deliveries of ready-mixed concrete also slowed down only slightly and the total volume of 26.1 million m3 (previous year: 33.7) meant a decrease of 22.5% in the first nine months. The development of deliveries of asphalt, which fell by 8.8% to 7.6 million tonnes (previous year: 8.3), continues to be supported by new activities in the infrastructure sector.

Group turnover reached EUR 8,391 million (previous year: 10,809) during the first nine months, a decline of 22.4% compared to the previous year. Excluding exchange rate and consolidation effects, turnover decreased by 21.8%. The increase in turnover in Asian emerging countries could not offset the decline in other Group areas. The operating income before depreciation (OIBD) fell by 25.7% to EUR 1,606 million (previous year: 2,161) and the operating income dropped to EUR 1,028 million (previous year: 1,572), which corresponds to a decline of 34.6%. Dr. Bernd Scheifele, Chairman of the Managing Board, explains: “With 25.5% (previous year: 22.5%), the third quarter’s OIBD margin was noticeably above the level of the previous year. This shows clearly that our comprehensive cost reduction programmes are reflected increasingly in the development of results!”

The profit for the financial year amounted to EUR 521.6 million (previous year: 2,079.2) for the first nine months. Last year’s result was affected by the high book profit amounting to EUR 1,276.9 million from the sale of maxit Group. The Group share of profit amounted to EUR 419.3 million (previous year: 1,984.7).

Net debt fell to below EUR 9 billion; apart from the proceeds from the capital increase in September, the cost reduction programmes, the operating cash flow and the divestment of non-strategic business units have significantly contributed to the debt reduction.

Successful capital markets transactions

After refinancing its bank liabilities in June 2009, HeidelbergCement successfully completed a rights issue together with a placement of existing shares in September. By making use of the authorized capital, the company‘s subscribed share capital has increased by 50% through the issue of 62.5 million new shares in return for cash contributions. The subscription price for the new shares and the offer price for the previous, private placement of the new shares solely with institutional investors was set at EUR 37 per share. The company received net proceeds of EUR 2.25 billion from the rights issue, which were used to repay existing liabilities to banks. The share offering, which was oversubscribed several times, brought HeidelbergCement a number of qualified institutional investors, mainly from the US and the United Kingdom.

By the completion of the capital increase, free float rose to 75.6%. This includes investments of around 3.5% held by the state of Norway and of around 3% held by FMR LLC, Boston/USA and Gartmore Investment Ltd, London/United Kingdom. According to information available to the company, Ludwig Merckle now holds 24.4% of the shares.

As a result of the rights issue and the placement of existing shares, HeidelbergCement’s free float market capitalisation and daily share trading turnover have increased significantly. Therefore there are good prospects for HeidelbergCement to be included in the German DAX 30 index in 2010.

In October, HeidelbergCement issued three Euro-Bonds to national and foreign institutional investors with a total issue volume of EUR 2.5 billion: The bonds were well received by investors and oversubscribed several times. The proceeds from the issue were exclusively used to partly repay the syndicated loan. Together with the proceeds from the capital increase, from disposals and the operating cash flow, the Group’s bank debts have been reduced by more than EUR 4 billion. At the same time, the maturity structure of the liabilities has improved accordingly. The remaining maturities in 2011 and 2012 have been reduced to a manageable size and will further decrease through the operating cash flow, disposal of assets and capital markets activities in 2010 and 2011.

After the successful completion of the capital markets transactions, the rating agencies Standard & Poor’s and Fitch increased their credit rating assessment of HeidelbergCement by two notches to B+ and BB- with a positive outlook.

Prospects for 2009

Key indicators point to a gradual stabilisation of the world economy and a slow recovery to which expansive economic policy measures substantially contributed. However, in the current year, economic performance in most European countries and North America will still noticeably lag behind that of last year. The economies in the large emerging countries of Asia begin to gain momentum. Overall, the recovery still remains fragile and it is difficult to assess the development for the coming months.

Therefore, HeidelbergCement will unremittingly continue with its comprehensive cost saving programmes. Cash flow orientation also remains a key issue and will be complemented with specific measures. Even after the successful steps taken in 2009, debt reduction still remains a main focus. The sale of non-strategic business units at acceptable conditions will continue.

Dr. Bernd Scheifele expects turnover also for the last quarter of 2009 to decrease. “The upturn in the Asian markets will not be able to offset the persistent weakness in the remaining Group areas. Operating income, which is supported by our massive cost saving measures, will also fall behind last year’s results. We expect a further substantial reduction in total debt by the end of 2009. With a significantly improved financing and cost structure, HeidelbergCement is well prepared to emerge from the current economic crisis in a stronger position in 2010.

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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