4 May 2006

HeidelbergCement – Interim Report January to March 2006

– Extract –

  • Group turnover grows significantly by 29%
  • Noticeable increase in results in the first quarter
  • Market entry in India
  • First positive results from the implementation of the “win” project lead to significant increase in efficiency

Overview January – March 2006

EURm20052006
Turnover1.3551.744
Operating income before depreciation (OIBD)85190
Operating income-3564
Additional ordinary result-2122
Results from participations1127
Earnings before interest and income taxes (EBIT)-44113
Result before tax-9968
Profit/loss for the financial year-9637
Group share-10529
Investments140162

The dynamic prelude to economic development is strengthening confidence in worldwide expectations for growth. Despite the optimistic prospects, however, the continuing high oil price and rising interest rates are a source of risk.

In the first quarter, HeidelbergCement experienced a satisfying development in sales volumes. Significant growth rates were achieved in almost all countries. In Europe and North America, the adverse seasonal effects were comparatively weaker than in the previous year. Total cement and clinker sales volumes rose by 16.8% to 14.8 million tonnes (previous year: 12.7). Excluding changes in the consolidation scope, the increase amounted to 12%.

In the first quarter, turnover rose by 28.7% compared with the previous year to EUR 1,744 million (previous year: 1,355). The strongest increases were achieved in North America, Asia, Europe – particularly the United Kingdom, Norway and the countries of Eastern Europe – and Turkey. Excluding exchange rate and consolidation effects, Group turnover increased by 19.1%.

Operating income before depreciation (OIBD) more than doubled, reaching EUR 190.1 million (previous year: 85.2). Operating income improved from EUR -34.7 million in the previous year to EUR 63.8 million. The highest increases were achieved by North America, followed by Europe and Asia. The first savings gained through the “win” project, the new transparent and lean Group organisation as well as the noticeably increase in efficiency contributed to an improvement in results.

Our French participation Vicat exerted a considerable influence on the results from participations, which amounted to EUR 27.5 million (previous year: 11.3). Due to reduced interest payments and favourable exchange rates development, the financial results improved by EUR 9.1 million to EUR -45.1 million (previous year: -54.2). As a result of the overall pleasing development, the profit before tax rose to EUR 68.1 million (previous year: -98.7). The taxes on income increased by EUR 33.2 million to EUR 31.1 million (previous year: -2.2). This is attributable in particular to the positive development of results in North America. The profit for the financial year improved to EUR 37.0 million (previous year: -96.5). The Group share in profit amounts to EUR 29.3 million (previous year: -104.8).

Market entry in India

With the conclusion of a 50:50 joint venture in March 2006, HeidelbergCement extended its activities to the Indian subcontinent for the first time. The joint venture includes the cement grinding plant Indorama Cement Ltd., with a capacity of 750,000 tonnes of cement, which supplies the cities of Mumbai and Pune on the west coast of India. The company also operates a loading terminal near Mumbai. The authorisation procedure for the construction of a clinker plant in the Indian state of Gujarat is currently in progress.

Employees

In the first three months, 41,069 people (previous year: 41,602) were employed by HeidelbergCement across the Group. The decrease of 533 employees results largely from restructuring measures in Europe and Asia.

Investments

In the first quarter, cash flow investments rose by EUR 22 million in comparison with the same period last year to EUR 162 million (previous year: 140). Of this figure, EUR 96 million (previous year: 93) was invested in tangible fixed assets and EUR 66 million (previous year: 47) in financial fixed assets. Disinvestments of EUR 35 million (previous year: 26) and changes in the consolidation scope amounting to EUR 5 million (previous year: 9) led to a total of EUR -122 million (previous year: -105) in net cash used in investing activities.

Group structure streamlined

As part of the measures related to the restructuring and organisational reshuffle within the Group, which were initiated in 2005 and primarily affect Europe, we streamlined the Group structure accordingly and modified the external reporting format at the beginning of this year. From 2006, HeidelbergCement reports on the basis of the following Group areas: Europe, which comprises the former regions Central Europe West and East as well as Western and Northern Europe, North America, Africa-Asia-Mediterranean Basin (the Mediterranean Basin includes the activities in Turkey and the United Arab Emirates), maxit Group and Group Services, which combines our trading activities.

Growth recovery in Europe

In Europe, the signs of an economic recovery are strengthening overall. The forecasts for this year are being revised upwards.

Sales volumes improved in all countries as a result of the increased demand and new consolidations, with significant growth in most cases. The highest increases were recorded by the countries of Eastern Europe, as well as Germany, Norway, the United Kingdom and the Baltic region. Total cement and clinker sales volumes in Europe rose by 23.3% to 6.3 million tonnes (previous year: 5.1). Using the same basis for comparison, the increase amounted to 15.1%. Sales volumes of ready-mixed concrete and aggregates also grew in comparison with the same period last year in almost all countries, with significant increases in some areas.

In the first three months, turnover in Europe grew by 24.6% to EUR 674 million (previous year: 541). Adjusted for consolidation effects, turnover rose by 16.4%.

Further significant increases in North America

The high level of economic activity in the US declined slightly in the first quarter. In our market regions in the US and Canada, however, construction activity remained at a high level, with the result that the cement and clinker sales volumes of our plants rose by just under 20% in the first three months to 3.4 million tonnes (previous year: 2.8). Even with full utilisation of production capacities, the high demand can only be covered by additional imports. These make up around a quarter of the total sales volumes and are mostly obtained from other Group regions. Deliveries of ready-mixed concrete and aggregates also increased. However, part of this growth is attributable to consolidation effects.

The turnover of the North America Group area rose by 50.7% to EUR 553 million (previous year: 367).

Dynamic development in Africa-Asia-Mediterranean Basin
Economic development in the individual regions was varied: the strongest impetus for growth came from China and Turkey.

Overall, sales volumes rose by 8.2% in comparison with the same quarter last year to 5.2 million tonnes (previous year: 4.8). Excluding the new activities in China, the increase would have been 4.0%. To this increase, China contributed a rise in sales volumes of 32%, which is the strongest growth in the Group area, followed by Turkey. Deliveries from our Indonesian subsidiary Indocement remained slightly below the previous year’s level due to market conditions. The sales volumes in the individual African countries were extremely varied in the first quarter; however, we were able to achieve a volume increase in Africa overall.

The total turnover of the Africa-Asia-Mediterranean Basin Group area rose by 22% to EUR 280 million (previous year: 230).

Increase in the activities of maxit Group

maxit Group’s markets, particularly the countries of Northern Europe, developed positively in the first quarter. The situation in Germany remains strained, but we should reach a turning point this year with a new management and as a result of extensive restructuring. Measures to reduce costs in the Benelux countries, France and Portugal are now coming to fruition. A focal point of maxit’s activities is faster launching and marketing of new products and concepts in several countries simultaneously.

In the first three months, turnover rose in almost all countries – with the exception of Germany. Overall, maxit Group’s turnover increased by 9% to EUR 217 million (previous year: 199).

Group Services

The trade volume of our subsidiary HC Trading rose by 14.7% in the first quarter to 3.1 million tonnes (previous year: 2.7). Particularly strong growth was achieved in cement trading. Over 60% of HC Trading’s deliveries go to North America. The remaining volumes are supplied to the Africa-Asia-Mediterranean Basin Group area.

Turnover in the Group Services business unit, which also includes our trading in fossil fuels, increased by 20.8% to EUR 149 million (previous year: 123) as a result of high freight proceeds.

Prospects

The positive assessment of the economic environment was strengthened further in the first few months of 2006. However, the developments of energy prices and of the US dollar exchange rate remain risk factors. The development of HeidelbergCement in the first quarter has confirmed our estimation for turnover and results to achieve double-digit growth in 2006. Strategic acquisitions, such as the entry into the Indian market, increase our potential for growth.

9,577 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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