9 August 2005

HeidelbergCement – Interim Report January to June 2005

- Extract -

  • Adjusted Group turnover rises by 7.0%
  • North America makes the strongest contribution to growth
  • Improved results due to volumequantity and price increases in almost all regions
  • Germany cyclically below planned levels
  • China under increasing competitive pressure
  • Takeover bid by Spohn Cement GmbH at EUR 60 per share
  • Spohn Cement together with persons acting in concert with them held a 66.8 % stake on Offer accepted for 40.8 million shares as of 26 July 2005

Overview January - June

  Januar - AprilJanuary - June
EURm2004200520042005
Turnover1.8952.1423.2413.498
Operating income before depreciation (OIBD)395449485534
Operating income273325240291
Additional ordinary result-1836-115
Results from participations30423253
Earnings before interest and income taxes (EBIT)284403272359
Profit before tax204342121244
Profit for the financial year15923599138
Group share in profit15521896113
Investments103281187421

The economic development in the western developed countries, and particularly in Europe, has weakened as a result of the dramatic rise in oil prices. In the US, the stable economic growth continued. The upturn continues to be strongest in the emerging countries of East and South-East Asia. In Germany, domestic demand is extremely weak this year. A decline is expected once again for the construction industry. While improvement is expected in international economic development, there is no clear sign of a trend reversal in Germany, despite the improvement in several indicators.

In the first half of the year, Group turnover increased by 7.9% to EUR 3,498 million (previous year: 3,241). Adjusted for currency and consolidation effects, the increase amounts to 7.0%. Once again, North America recorded the strongest growth, but a welcome improvement in turnover was also achieved in Northern Europe and Africa-Asia-Turkey; price increases contributed to this to a varying extent in different regions.

At EUR 534 million (previous year: 485), operating income before depreciation (OIBD) was 10.2% above the previous year’s level. North America made the strongest contribution to growth in both OIBD and operating income. The US dollar, which rose again recently, supported this development. However, the other regions were also able to at least partially compensate for the shortfalls of the first few months, which were due to adverse weather conditions. The additional ordinary result of EUR 15.2 million (previous year: -0.7) essentially results from the sale of parts of our concrete products business in the US. Our French participation Vicat considerably influenced the results from participations, which amounted to EUR 41.7 million (previous year: 29.8) in the second quarter.

The financial results increased by EUR 35 million to EUR -115 million (previous year: -150). This was primarily due to the fact that no foreign exchange loss was incurred at Indocement, as it was in the previous year.

Profit before tax amounts to EUR 244 million (previous year: 121). As a result of the welcome increase in results and revised German tax laws, taxes on income rose in the first half of 2005 by EUR 84 million to EUR 106 million (previous year: 22). As a result of the positive development of Indocement’s profit for the financial year, the minority interests total EUR 25 million (previous year: 3). The Group share in profit amounts to EUR 113 million (previous year: 96).

Takeover bid by Spohn Cement GmbH

On 28 June 2005, Spohn Cement GmbH submitted a takeover bid to the shareholders of HeidelbergCement AG. In a detailed statement published on 11 July 2005, the Managing Board welcomes the takeover bid and indicates that the bid price of 60 EUR per share is adequate. The Managing Board feels strengthened and supported in its strategy by the aims of Spohn Cement as expressed in the bid document. In a separate statement, the Supervisory Board agreed with this assessment of the takeover bid.

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.

As of the end of the acceptance period on 26 July, the offer had been accepted for a total of 40,788,797 shares. This brings the total number of HeidelbergCement shares for which the offer has been accepted, plus the shares already held by Spohn Cement together with persons acting in concert with them and their subsidiaries, according to the German Securities Acquisition and Takeover Act, to 76,982,656 shares, which corresponds to 66.8% of the share capital and voting rights of HeidelbergCement AG. The additional respite for accepting the takeover bid began on 30 July and ends on 12 August 2005.

Cement and clinker sales volumes

The heavy losses of the first quarter, resulting from adverse weather conditions, were not yet completely compensated by the end of June. Overall, cement and clinker sales volumes rose by 2.7% to 31.5 million tonnes (previous year: 30.7) in the first half of the year, as a result of continuing increases in North America, Northern Europe and Africa-Asia-Turkey. Excluding consolidation effects, the total sales volumes were still slightly below the previous year’s level after six months.

Employees

In the first half of the year, HeidelbergCement employed 42,055 people (previous year: 42,698) across the Group. The decrease of 650 employees results from restructuring measures in almost all regions.

Investments

In the first half of the year, cash relevant investments increased by EUR 234 million in comparison with the previous year to EUR 421 million (previous year: 187). Of this figure, EUR 208 million (previous year: 169) was invested in tangible fixed assets and EUR 213 million (previous year: 18) in financial fixed assets. Net cash from disinvestments amounted to EUR 100 million (previous year: 65).

Prospects

Despite the weakening of the global economic environment, we again anticipate a moderate increase in sales volumes and turnover for the whole of 2005. The construction industry in the US, the new EU countries and Asia remains solid. In Germany, growth is expected to recover next year; on the other hand, a decline is forecast once again for construction activity.

Due to the positive international economic development, we expect a noticeable increase in operating activities for the full year. However, heavily increasing energy costs are affecting the level of improvement in results this year. In Europe and the US, electricity prices are significantly higher than in the previous year. We are striving to offset increased fuel costs through the increased use of alternative raw materials.

Our project “win” with the aim to reduce costs and increase efficiency will not have a significant effect until next year. Our objective is to become cost leader. Therefore we work very hard to markedly reduce complexity within the organisation and to standardise core processes world-wide. These are prerequisites for benchmarking and the Group-wide application of best practices. With these measures, we strengthen the international competitiveness of HeidelbergCement and form the basis for further profitable growth.

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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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