19 March 2009
HeidelbergCement: Strong results in 2008 thanks to global market position
- In a difficult environment, Group turnover rises by 30.6 per cent to EUR 14.2 billion (previous year: 10.9); (like for like at the high level of the previous year)
- Operating income increases by 16 per cent to EUR 2.1 billion (previous year: 1.9); (like for like: growth of 6.1 per cent)
- Group share of profit decreases by 10.6 per cent to EUR 1.8 billion (previous year: 2.0)
- Net indebtedness reduced by around EUR 3 billion to EUR 11.6 billion
- Capacities and production structures already adjusted to declining markets at an early stage
- Successful integration of Hanson underpins profitable growth in the long term
- Reorganisation of the financing structure planned in the course of 2009
- Decline in turnover and results development expected in 2009
Growth as a result of drive and efficiency
In 2008, HeidelbergCement's strong operational development continued unabated, despite the global economic weakness and declining international building materials markets. In a difficult economic environment, the Group increased its turnover by 30.6 per cent to EUR 14,187 million (previous year: 10,862). The acquisition of Hanson in August 2007 and the successful integration in the 2008 financial year made a significant contribution to this growth. The Group also benefited from the healthy operational development in Asia, Africa and the majority of European countries.
Excluding consolidation and exchange rate effects, turnover once again reached the high level of the previous year. The adverse impact of exchange rate effects amounted to approximately EUR 465 million.
The operating income rose by around 16 per cent to EUR 2,147 million (previous year: 1,850), the highest value in the Group's history. Europe made the biggest contribution to this increase, followed by the Asia-Australia-Africa Group area. Although earnings remained significantly below expectations in the United Kingdom and North America, both markets were able to achieve positive results despite the difficult economic environment. In the past year, HeidelbergCement adjusted its capacities in these regions at a very early stage, and thus reduced costs. On a like for like basis, the operating income improved by 6.1 per cent overall in comparison with 2007.
The Group was also able to reduce its net financial debt by approximately EUR 3 billion in the past year to EUR 11.6 billion (previous year: 14.6). This was largely due to the strong cash flow as well as the proceeds from a capital increase and from the sale of maxit Group, amounting in the latter case to EUR 2,125 million. In 2008, the cash flow reached EUR 2,044 million, an increase of 21.7 per cent compared with the previous year.
"The outstanding achievement of the past year was surely the exceptionally fast and successful integration of Hanson," said Dr. Bernd Scheifele, Chairman of the Managing Board. "In our view, the global reorientation of the Group with an integrated business model was the right strategic step to take in order to safeguard the Group's strong earnings potential in the long term and create the basis for future growth. Thanks to the acquisition of Hanson, HeidelbergCement is now the global market leader in aggregates according to sales volumes and has leading positions in the cement and concrete business."
Strong geographical presence and integrated market position
In the past year, the Group was already able to benefit significantly in operational terms from the integration of Hanson. Cement and clinker sales volumes rose by 1.3 per cent during the past year to 89.0 million tonnes (previous year: 87.9). Excluding consolidation effects, this figure would have decreased by 2.3 per cent as a result of the heavy decline in the US market. The deliveries of sand and gravel (aggregates) increased by 66.8 per cent to 299.5 million tonnes (previous year: 179.6). Excluding the consolidation of Hanson, sales volumes fell by 12.2 per cent. This was primarily caused by the significant decline in demand in North America. Asphalt sales volumes rose by around 152 per cent to 12.1 million tonnes (previous year: 4.8). In operational terms, i.e. excluding consolidation effects, the figure decreased by 16.7 per cent. Ready-mixed concrete sales volumes grew by 35.7 per cent to 44.4 million cubic metres (previous year: 32.7). Excluding the substantial contribution made by the consolidation of Hanson, sales volumes fell by 5.0 per cent.
In Europe, HeidelbergCement operates in 23 countries. In this region, the construction industry weakened heavily in the second half of the year, particularly in Spain and the United Kingdom. Demand in the two countries decreased accordingly. In order to safeguard its competitiveness, HeidelbergCement responded to the situation in the United Kingdom at a very early stage with capacity adjustments and plant closures. In contrast, activities in most Eastern European countries, Germany, the Benelux countries and Northern Europe recorded pleasing development overall in 2008.
The turnover of the Europe Group area increased by 25.4 per cent in 2008 to EUR 7,190 million (previous year: 5,732). Excluding consolidation and exchange rate effects, the turnover was only slightly below the previous year's level, with a decrease of 0.8 per cent.
For North America, 2008 was a year of considerable challenges. In the Group's largest market region, the integration of Hanson led to extensive organisational changes and a significant expansion of our market presence. At the same time, HeidelbergCement is heavily affected by the property crisis in North America, as one of the leading manufacturers of aggregates, ready-mixed concrete, cement, asphalt and building products. Excluding consolidation effects, sales volumes decreased in all business lines. Nevertheless, the Group responded to this at an early stage with considerable regional capacity adjustments and cost savings and thereby achieved a robust operating income even in a difficult environment.
The turnover of the North America Group area rose by 23.5 per cent to EUR 3,958 million (previous year: 3,205). Excluding consolidation and exchange rate effects, it decreased by 15.9 per cent.
The growth in the Asia-Australia-Africa Group area is attributable to the full-year inclusion of Hanson as well as the positive development in China, Indonesia, Turkey and Ghana. However, even the economic dynamics of this region were stifled by the effects of the financial crisis in the last few months.
The turnover of the Asia-Australia-Africa Group area rose by 54.1 per cent to EUR 2,943 million (previous year: 1,909). Excluding consolidation and exchange rate effects, the increase amounted to 22.5 per cent.
Turnover in the Group Services business unit, which includes the trading companies, increased by 3.1 per cent in 2008 to approximately EUR 701 million (previous year: 680).
Cash relevant investments in 2008 amounted to EUR 1,251 million (previous year: 12,774). Investments in tangible fixed assets and intangible assets reached the previous year's level at EUR 1,101 million (previous year: 1,039). Investments in financial fixed assets fell to around EUR 150 million (previous year: 11,735); the previous year's amount was essentially characterised by the acquisition of Hanson.
Major investments in tangible fixed assets related to the construction of the new Tula cement plant in Russia, the modernisation of clinker production at our plant in Beremend, Hungary, the expansion of capacities at the Wazo Hill plant in Tanzania and the construction of a second production line at the Chinese cement plants Fufeng and Jingyang. Other significant investments were used for the modernisation of kiln lines in Romania and the Czech Republic, the expansion of the clinker capacity at the plant in Górazdze, Poland, the construction of two cement mills at the Cirebon plant in Indonesia and the construction of a plant for manufacturing concrete pipes and manholes in the Canadian province of Alberta.
Reorganisation of the financing structure
In view of the globally weak growth in 2009 and the repayments of portions of the Hanson financing due in 2010, HeidelbergCement is currently working on a comprehensive reorganisation of its financing structure. The aim is to put the Group's financing on a stable basis for the long term. HeidelbergCement is currently investigating the options available in this area, on both the shareholders’ equity and debt capital sides. "We are confident of being able to reach a successful solution in the course of 2009," stated Dr. Scheifele. In order to provide further debt relief, the Group is also planning to sell non-strategic business units in the next few years.
Prospects: Economic downturn adversely affects development of turnover and results
As a result of the worldwide economic downturn, HeidelbergCement anticipates a decline in turnover and operating income in 2009. More specific statements cannot be made at present, as important parameters such as exchange rates as well as energy and raw material prices are extremely volatile.
"In order to successfully overcome the exceptional challenges we will face in 2009, HeidelbergCement will focus on consistent cost management and on generating the highest possible cash flow," declared Dr. Scheifele. "The “Fitness 2009” programme, additional cost-saving measures and synergy effects from the Hanson integration are expected to have a further significant positive impact on costs this year." From the second half of 2009, the Group expects the first impetus to come from the worldwide economic programmes focusing, for example, on road construction and infrastructure – sectors in which HeidelbergCement is particularly strong throughout the world.