4 August 2006

HeidelbergCement – Interim Report January to June 2006

– Extract –

  • Group turnover rises by 22%
  • Positive trend in results: OIBD (+52%) and operating income (+93%)
  • Market development and noticeable efficiency increase led to a significantly improved quality of results
  • Market entry in Georgia and expansion of market positions in India and Russia
  • Double-digit growth in results for the whole year confirmed

Overview January – June 2006

EURmApril - JuneJanuary - June
2005200620052006
Turnover2.1422.5323.4984.276
Operating income before depreciation (OIBD)449624534814
Operating income325498291562
Additional ordinary result36391561
Results from participations42555382
Earnings before interest and income taxes (EBIT)403592359705
Profit before tax342535244603
Profit for the financial year235378138415
Group share in profit218346113375
Investments281142421304

The global economic recovery has broadened. The US, China and India are continuing to show strong growth; demand and production have also recovered to a noticeable extent in Europe. High energy prices, imbalances in the global economy and the development of the US dollar exchange rate and US property market remain ongoing risks.

In the first half of the year, cement and clinker sales volumes rose by 16% to 36.6 million tonnes (previous year: 31.5). Excluding changes in the consolidation scope, the increase amounted to 10.8%. Demand in the European countries and the Africa-Asia-Mediterranean Basin Group area experienced particularly lively development. In North America, sales volumes in the second quarter increased only slightly, but remained at a high level overall.

Ready-mixed concrete sales volumes grew by just under 14% in total to 14.2 million cubic metres; a pleasing increase of 17.2% was recorded in sales volumes of aggregates, which reached 44.6 million tonnes.

In the first half of the year, turnover rose by 22.3% compared with the previous year to EUR 4,276 million (previous year: 3,498). Excluding exchange rate and consolidation effects, Group turnover grew by 16.7%. All major countries achieved double-digit growth.

The positive development of the first quarter also continued in operating income before depreciation (OIBD) and operating income. OIBD rose by 52.4% to EUR 814 million (previous year: 534). Operating income increased to EUR 562 million (previous year: 291) in the first half of the year. The increases in results are, on the one hand, attributable to the broad recovery in the European countries and the continuing high level of demand in North America. On the other hand, the positive effects of the consistent implementation of the “win” project are markedly reflected in our results. Clear organisation structures, consistent leadership and streamlined hierarchies with short reporting processes contributed significantly to the noticeably increased productivity, markedly reduced administrative costs and extended running times of the kilns.

Our French participation Vicat exerted a considerable influence on the growth in results from participations, to EUR 82 million (previous year: 53). The additional ordinary result of EUR 61 million (previous year: 15) includes sales of CO2 emission permits. One of our primary environmental protection goals is to continuously decrease our specific carbon dioxide emissions. Our financial results improved, with a decrease in interest cost. Taxes on income rose to EUR 188 million (previous year: 106) as a result of the improved development of results in all Group areas. In the first half of the year, the profit for the financial year reached EUR 415 million (previous year: 138), with the Group share in profit increasing to EUR 375 million (previous year: 113).

Expansion strategy continued

In recent months, HeidelbergCement has continued its expansion in growth markets. Important steps were taken to expand the Group’s strong market position in Eastern Europe and Central Asia, with the market entry in Georgia and further investments in Russia. In May, we acquired a participation of 51% in the Georgian cement company Kartuli Tsementi, which operates a grinding plant with a capacity of 100,000 tonnes; by the beginning of 2008, the plant’s production capacity is expected to be increased to 500,000 tonnes. In July, we signed an agreement for the acquisition of a majority participation in the Volsk cement plant in the Volga region of Russia with a capacity of 210,000 tonnes. Together with a local partner, we will modernise the production facilities and, by the end of 2008, construct a new cement plant with a capacity of 2 million tonnes.

In addition, we intend to further expand our presence in India and take over the majority share in the cement manufacturer Mysore Cements. The company based in Bangalore operates two cement plants and a grinding plant in central and southern India with a total capacity of 2.6 million tonnes. Mysore Cements provides a good base for supplying the rapidly developing markets in the western part of India.

Employees

In the first half of the year, the number of employees rose to 43,050 (previous year: 42,055).The increase from the consolidation of our activities in Kazakhstan and the expansion in the Ukraine outweighed the decrease resulting from restructuring measures in Europe and Asia.

Investments

In the first half of the year, cash flow investments amounted to EUR 304 million (previous year: 421). Investments in tangible fixed assets, which primarily relate to maintenance and optimisation measures in our cement plants, totalled EUR 213 million (previous year: 208). Investments in financial fixed assets decreased to EUR 91 million (previous year: 213). The impact of our expansion measures in growing markets, which we have already published, will not be seen until the second half of the year.

Europe experiences strong growth

As a result of the stronger demand and, to some extent, new consolidations, our cement deliveries in all countries increased in the first half of the year, with significant growth in most cases. The highest growth rates were recorded by the countries of Eastern Europe, with the exception of the Czech Republic. Germany, Sweden, the Benelux countries and the United Kingdom also achieved noticeable increases in sales volumes. In total, our cement and clinker sales volumes in Europe rose by 20.7% to 17.8 million tonnes (previous year: 14.8). Excluding the new consolidations, this corresponds to a growth of 12.4%. Sales volumes of ready-mixed concrete and aggregates also developed positively in almost all countries, with considerable increases in most cases.

The turnover of the Europe Group area rose by 21.5% to EUR 1,868 million (previous year: 1.537).

North America maintains a high level

In our market regions, construction demand in the US is supported primarily by commercial and public construction and, in Canada, by residential construction. In the first half of the year, the cement and clinker sales volumes of our plants were 8.8% above the previous year’s level, with 7.4 million tonnes (previous year: 6.8). With full utilisation of production capacities, sales volumes rose slightly once again in the second quarter. Around a quarter of the total sales volumes are imported from other Group areas. Deliveries of ready-mixed concrete and aggregates also increased; however, this is partly attributable to consolidation effects.

The turnover of the North America Group area rose by 32.2% to EUR 1,205 million (previous year: 912).

Strong dynamics in the Africa-Asia-Mediterranean Basin Group area

The cement and clinker sales volumes of the Africa-Asia-Mediterranean Basin Group area rose by a total of 14.1% in the first half of the year to 11.4 million tonnes (previous year: 10.0). Excluding the consolidation effect from the inclusion of the new joint venture Fufeng in China, the increase amounted to 9.7%. With an increase in sales volumes of just under 47% on a like-for-like basis, China recorded the biggest growth, followed by Bangladesh and Turkey. Our Indonesian subsidiary Indocement was able to more than compensate for the weak cement demand by increasing its exports of clinker. In the middle of June, the foundation was laid for a second production line at the Turkish Çanakkale plant. This will increase the clinker capacity of our joint venture Akçansa to 5.7 million tonnes and the cement grinding capacity to 9 million tonnes. Our African countries presented a varied picture as regards sales volumes; however, deliveries were slightly above the previous year’s level overall.

The turnover of the Africa-Asia-Mediterranean Basin Group area improved by 23.3% to EUR 611 million (previous year: 496).

Good development for maxit Group

In the first half of 2006, most of maxit Group’s markets, including the countries of Northern Europe in particular, experienced good development. The situation in Germany, the Group’s biggest market, is still not satisfactory. With the new management the effects of the restructuring measures will be evident this year. The turnover and results of the last few months confirm this expectation. In the Benelux countries and Portugal, results were improved through cost reductions; the restructuring measures in Italy will have an impact in the second half of the year. In view of the rising raw material and fuel prices, cost optimisation remains the focus for the management. We want to increasingly introduce innovative products and processes more quickly in several countries at the same time.

In the first six months, maxit Group’s turnover rose by 6.3% to EUR 562 million (previous year: 529).

Group Services

The trade volume of our subsidiary HC Trading grew significantly by 16.1% in the first half of the year to 6.8 million tonnes (previous year: 5.9). Declines in dry mortar and related materials were more than compensated for by the considerable increase in cement and clinker trade volumes.

Turnover in the Group Services business unit, which also includes our trading in fossil fuels, increased by 19.3% to EUR 334 million (previous year: 280).

Prospects

In 2006, the global economic environment will remain positive despite the increasing volatility of the financial markets and tension on the oil markets. As regards further development, a slight weakening is forecast. The risks arising from the development of the energy prices, US dollar exchange rate and US property market remain high. HeidelbergCement has seen improved development during the second quarter; we can therefore confirm our forecast for the whole year – double-digit growth in turnover and results. We are making good progress in the implementation of our “win” project. In 2006, we will noticeably increase the efficiency of the company. The resulting markedly improving earnings power forms a sound basis for our growth strategy.

10,960 characters

Andreas Schaller

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

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