21 February 2007

HeidelbergCement – Overview 2006

  • Increase in turnover to EUR 9.2 billion
  • Double-digit growth of sales volumes in all business lines
  • “win” restructuring project leads to noticeable increase in efficiency
  • Profit for the financial year exceeds EUR 1 billion
  • Further expansion in growing markets

The economic upturn continued in our most important markets during the fourth quarter. The mild winter weather also helped to sustain a high level of construction activity. HeidelbergCement increased its sales volumes and turnover in all Group areas. During 2006, total cement and clinker sales volumes increased by 16.7% to around 80 million tonnes (previous year: 68.3). The Europe-Central Asia Group area, in addition to China and Turkey, experienced particularly pleasing development. In North America, slight growth was achieved once again from an already high level.

Ready-mixed concrete sales volumes grew by 10.1% across the Group to 31.1 million cubic metres (previous year: 28.2); an increase of 13.6% was achieved in sales of aggregates, which reached 104.0 million tonnes (previous year: 91.5).

Group turnover rose by 18.3% to EUR 9,234 million (previous year: 7,803). Half of this increase came from Europe-Central Asia. Adjusted for consolidation effects, the growth amounts to 14.5%; exchange rate effects did not play a role.

The “win” project to increase efficiency, which will be completed by the end of 2007, is well underway. Just under 80% of the personnel adjustments have already been made. We will achieve the planned annual savings of around EUR 50 million. With a few exceptions, fundamental administrative tasks have been grouped together in shared service centers throughout the Europe-Central Asia Group area. With our newly installed Group Purchasing we achieve bundling effects and corresponding improvement of margins.

These consistent intensive measures to restructure and increase efficiency have allowed us to achieve a significant double-digit increase in operating income before depreciation (OIBD) and operating income. The profit for the financial year exceeded EUR 1 billion, a record in HeidelbergCement’s history.

The complete annual accounts of HeidelbergCement will be published on 22 March 2007.

Growth in all Group areas

Sales volumes, turnover and results increased significantly in comparison with the previous year in almost all countries of the Europe-Central Asia Group area. The highest growth was recorded in Eastern Europe; in several countries, our production sites reached full capacity.

Turnover rose by 22.7% to EUR 4,230 million (previous year: 3,446); cement and clinker sales volumes increased by 20% to 39.8 million tonnes (previous year: 33.2). Our new consolidations in Kazakhstan, Ukraine and Denmark also contributed to this growth. In Germany, where construction activity has finally reached a turning point after a decline lasting more than ten years, our plants achieved an increase of 11.4% in sales volumes, with a total of 8.5 million tonnes. Construction activity also boosted the ready-mixed concrete and aggregates business; we achieved high growth rates in both operating lines in most countries. As part of the strategy of vertical integration, we will step up efforts to extend these activities – mainly limited to Europe so far – to Russia and the countries of Central Asia.

In the US, the property markets weakened in the second half of the year. Nevertheless, our plants in North America achieved a further increase of 1.8% in sales volumes, reaching a total of 15.0 million tonnes (previous year: 14.7) of cement and clinker – the highest sales volumes ever achieved. Turnover rose by 14.2% to EUR 2,447 million (previous year: 2,142). Ready-mixed concrete sales volumes also increased considerably; in contrast, deliveries of aggregates declined slightly. Successful price increases and consistent cost adjustments led to a significant increase in results in North America.

In the combined Group arean Asia-Africa-Mediterranean Basin, turnover increased by 23.2% to EUR 1,302 million (previous year: 1,057). Besides the growing cement demand, cost reduction programmes also contributed to the considerable improvements in results. In Asia, booming construction activity as well as new consolidations in China and India led to a significant increase in our cement and clinker sales volumes. Turkey also recorded a remarkable rise in sales volumes. In Africa, our sales figures were slightly above the previous year’s level. Overall, the cement and clinker sales volumes of the Asia-Africa-Mediterranean Basin Group area increased by just under 22% to 24.9 million tonnes (previous year: 20.5).

Almost all markets of maxit Group developed positively, which led to a considerable rise in sales volumes. The company achieved the highest growth in Northern Europe. In Germany, the largest market, maxit is operating in the black once again after extensive reorganisation measures. In the growth countries of Russia and China, a breakthrough was achieved with the first major orders. In 2006, turnover rose by 10.6% to EUR 1,237 million (previous year: 1,118).

Turnover in the Group Services business unit, which includes trading in cement and clinker as well as fossil fuels, improved by 11.1% to EUR 642 million (previous year: 578). The cement and clinker trade volume grew by 7.0% to 12.4 million tonnes (previous year: 11.6).

Expansion strategy continued

In the fourth quarter of 2006, HeidelbergCement continued its expansion in markets of the future. By acquiring a majority participation of 80% in Liaoning Gongyuan Cement, we extended our activities in China to the northeast of the country. This means that we are represented in three important regional markets in China with a production capacity of more than 10 million tonnes. In the Caucasus region, we further expanded our market position by acquiring a participation of 75% in Saqcementi, the largest cement manufacturer in Georgia. In addition, we are planning to construct a new cement plant in Western Kazakhstan with a capacity of 2 million tonnes. The plant will supply the oil and gas-rich region on the Caspian Sea as well as the neighbouring markets in Uzbekistan, Turkmenistan and Azerbaijan.

Prospects 2007

The general economic environment remains positive in 2007. Growth of just under 5% is forecast for global economy. The overall optimistic assessment is partly due to the easing of energy prices. In Europe, economic growth is increasingly accompanied by an improvement in the employment situation. In Germany, signs that the upturn is continuing – despite the increase in VAT – are becoming clearer. In the US, we expect the weakness of the property markets to result in a less marked expansion of economic output. The emerging countries in Asia are likely to experience above-average growth rates once again. Risks arising from global imbalances, the development of the US dollar exchange rate and the continuing volatility of oil prices are still factors to be considered.

HeidelbergCement intends to remain on course for growth in 2007 through increased efficiency and competitiveness. We therefore anticipate a further noticeable improvement in turnover and results for the current year.

Turnover by Group area and business line: see attached file to the right.

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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