8 November 2005

HeidelbergCement – Interim Report January to September 2005

– Extract –

  • Adjusted Group turnover rises by 8 %
  • North America, Northern Europe and Central Europe East with double-digit turnover growth
  • Germany further impaired by overall economic situation
  • Energy and transport costs considerably increased
  • Implementation of project “win” for cost reduction and increase in efficiency started
  • Spohn Cement together with persons acting in concert with them hold a share of 79% in HeidelbergCement
  • Third quarter confirms expectations for full year

Overview January - September

July-Sept.January-Sept.
EURm2004200520042005
Turnover1.9742.2475.2155.744
Operating income before depreciation (OIBD)4585769431.111
Operating income344453584744
Additional ordinary result-26-77-26-62
Results from participations389170144
Earnings before interest and income taxes (EBIT)356467627826
Profit before tax310410431654
Profit for the financial year201300300438
Group share in profit171274268387
Investments114115301536

Despite the high energy prices, the positive development of the global economy continued, boosted by the sustained strong growth dynamics in North America and Asia. In the euro zone, the economic dynamics remained weak as a result of the increase in oil prices. The lively demand for exports continues to provide the impetus in Germany. As a result of the situation in the job market, domestic demand will recover only slightly in the next few months. Construction investments remain in overall decline.

In the first nine months of the year, Group turnover rose by 10.1% to EUR 5,744 million (previous year: 5,215). Adjusted for currency and consolidation effects, the increase amounts to 7.5%. The regions North America, Northern Europe and Central Europe East achieved double-digit growth in turnover. Price increases were necessary in almost all regions in order to at least partially offset the considerably increased energy and transport costs.

By the end of September, operating income before depreciation (OIBD) increased by 17.8% to EUR 1,111 million (previous year: 943). At EUR 744 million (previous year: 584), operating income increased by 27.4% compared to the previous year. North America made the strongest contribution to growth in both OIBD and operating income.
Considerable one-time restructuring charges within the scope of the project “win” and proceeds from the sale of parts of our concrete products business in the US determine the additional ordinary result of EUR -62 million (previous year: -26).
The results from participations, which amounted to EUR 144 million (previous year: 70), were considerably affected by one-time earnings at Südbayerisches Portland-Zementwerk Gebr. Wiesböck & Co. GmbH and by our Vicat S.A., France.
The financial results improved by EUR 25 million to EUR -172 million (previous year: -197). This was primarily due to the hedging of currency risks at Indocement. As a result the foreign exchange rate losses were reduced compared to the previous year.
Profit before tax amounts to EUR 654 million (previous year: 431). Against the backdrop of the increase in results and revised German tax laws, taxes on income rose in the first three quarters of 2005 by EUR 85 million to EUR 216 million (previous year: 131). Due to the positive development of Indocement’s profit for the financial year, the minority interests amount to EUR 51 million (previous year: 32). The Group share in profit totals EUR 387 million (previous year: 277).

Takeover bid by Spohn Cement GmbH completed

The takeover bid by Spohn Cement GmbH was completed at the end of the respite period on 12 August 2005. Spohn Cement, including the persons acting in concert with it and its subsidiaries, now holds around 79% of the shares in HeidelbergCement.
Spohn Cement GmbH is owned by members of the Merckle family, who have held shares in HeidelbergCement for decades and are also represented in our Supervisory Board.
In connection with the takeover bid, Schwenk Beteiligungen GmbH & Co. KG reduced its share in HeidelbergCement to 7.5%.

Cement and clinker sales volumes

In the first nine months, cement and clinker sales volumes rose by 4.5% overall to 51.4 million tonnes (previous year: 49.2). Excluding consolidation effects, the total sales volumes were 1.0% above the previous year. The significant increase in the third quarter is primarily attributable to the healthy development in North America, Northern Europe and Central Europe East.

Employees

In the first nine months, 41,613 people (previous year: 42,589) were employed by HeidelbergCement across the Group.
The decrease of around 980 employees results from restructuring measures in almost all regions.

Investments

Compared to the previous year, cash relevant investments increased by EUR 235 million to EUR 536 million (previous year: 301) in the first three quarters. Of this figure, EUR 306 million (previous year: 282) was invested in tangible fixed assets and EUR 230 million (previous year: 19) in financial fixed assets. Net cash from disinvestments amounted to EUR 149 million (previous year: 76).

Implementation of project “win” started

With the project “win”, HeidelbergCement intends to create the necessary scope for long-term growth by making savings and exploiting additional potential. The measures to streamline administrative locations in Europe will lead to the loss of around 1,100 jobs. The employee representatives are involved in the process according to the regulations in each country.

As part of this project, the Group functions will be concentrated in Heidelberg. At a national level, the aim is to set up a Shared Service Center in each country for the cement, ready-mixed concrete, and sand and gravel business areas for standardised personnel and accounting services. We agreed in negotiations with the industrial trade union IG Bau to establish the Shared Service Center for Germany in Leimen near Heidelberg. The agreement became possible by finding competitive conditions for the service center in an in-house collective agreement. This contains essentially an increase in working hours, the shortening of additional benefits as for example, the holiday pay and the variable organisation of parts of the Christmas bonus. The Shared Service Center will start business on 1 January 2006.

The technical services will also be centralised and more heavily integrated into line management, in order to support the plants even more efficiently. Further savings will be achieved through the centralisation of the IT infrastructure and the standardisation of the Group’s software. The plants are subject to a consistent optimisation process. The progress of this process will be measured regularly by uniform key performance indicators.
The common aim of these measures is to improve purposefully the profitability clearly to create the conditions for safeguarding and expanding the position of HeidelbergCement amongst the international competition.

Prospects

We anticipate a moderate increase in sales volumes and turnover for the whole of 2005. The economic environment in the USA, the new EU countries and Asia is also expected to remain stable in the coming year. For Germany, the growth forecasts have fallen slightly; only a slight acceleration is forecast for 2006.

The significant increase in OIBD and operating income expected for the whole of 2005 will be primarily created by North America, Central Europe East and Africa-Asia-Turkey. The measures initiated to improve our efficiency will also sustainably increase the contribution to profits made by Germany, Western and Northern Europe in the future.

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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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