23 March 2005

HeidelbergCement – Annual Report 2004

– Extract –

  • Turnover increased by 5,8 % adjusted for currency and consolidation effects
  • Further debt reduction achieved
  • North America and growth markets again the strongest contributors to the growth
  • Dr. Bernd Scheifele new Chairman of the Managing Board
  • Elimination of balance sheet risks led to one-time extraordinary charges of around EUR 700 million
  • Cash capital increase of more than EUR 270 million successfully completed
  • Moderate increase in sales volumes and slight rise in turnover expected in 2005
  • Long winter affects markets in Central Europe in the first quarter 2005
  • Management focus on efficiency improvement and cost cutting
  • Cautious participation in the global industry consolidation planned

Increase in turnover to EUR 6.9 billion

In 2004, we moved ahead with our measures for cost saving and restructuring to achieve better capacity utilisation. We continued to concentrate on our core business and pursue our aim of becoming the regional market leader with our cement activities.

In 2004, Group turnover increased by 8.8% to EUR 6,929 million (previous year: 6,372). Our operational growth of EUR 353 million was primarily achieved in North America, Africa-Asia-Turkey and Central Europe East. Other significant influential factors were new consolidations with a plus of EUR 511 million, of which EUR 411 million were contributed by Indocement alone, and currency effects with a minus of EUR 186 million, which were mainly attributable to the reduced US dollar exchange rate. A minus of EUR 121 million resulted from disinvestments. Adjusted for currency and consolidation effects, turnover increased by 5.8%.

For the first time, HeidelbergCement exceeded the 65 million tonnes mark for cement and clinker sales volumes: During 2004, they rose to 65.2 million tonnes (previous year:51.1). This is largely attributable to the first-time consolidation of Indocement, which contributed 12.5 million tonnes. Welcome increases in sales volumes were achieved in North America, Central Europe East, and China. Excluding consolidation effects, the increase compared with the previous year amounted to 2.2%.

One-time extraordinary charges impair results

The expansion of the consolidation scope, the discontinuation of goodwill amortisation, amounting to EUR 170 million, and the improved proceeds situation in Germany were significant influential factors for the increase of 19% in operating income before depreciation (OIBD) to EUR 1,219 million (previous year: 1,024) and of 88% in operating income to EUR 735 million (previous year: 391).

Extraordinary charges in the order of around EUR 700 million arose during the financial year. The majority of this is due to the impairment of goodwill (Impairment of Assets) in the Western Europe and Northern Europe regions, as well as for Indocement. Other significant amounts result from the laying of restructuring provisions for the Belgian-Dutch cement business and valuation adjustments for deferred tax assets. The majority of these charges are mainly non-cash items resulting from valuation adjustments in connection with the elimination of regular goodwill amortisation and changes in German tax legislation. In addition, restructuring costs arose from the new strategic orientations.

The impairment of goodwill and restructuring provisions resulted in a negative additional ordinary result of EUR -674 million (previous year: 22). The results from participations, which amounted to EUR 67 million (previous year: 89) were also affected by extraordinary depreciation. Earnings before interest and income taxes (EBIT) reduced overall to EUR 128 million (previous year: 502). Financial results fell by EUR 58 million to EUR -280 million (previous year: -222). As the Indocement group – included in the Group annual accounts for the first time – is financed in US dollars and Japanese yen for historical reasons, there were foreign exchange losses of EUR 46 million. Additionally, there were interest expenses of the Indocement group of EUR 16 million. The Group’s net financial liabilities increased by only EUR 65 million to EUR 3,668 million (previous year: 3,603), despite net financial liabilities of EUR 448 million being included as a result of the first-time consolidation of the Indocement group. Result before tax fell to EUR -152 million (previous year: 280). Income tax expense in-creased to EUR 181 million (previous year: 146), primarily as a result of the valuation adjustments for deferred tax assets. Overall, the loss in results for the financial year amounts to EUR -333 million (previous year: 133). The Group share in results amounts to EUR -366 million (previous year: 117).

Group profit and loss accounts (short form)

EURm 20032004change
Turnover6.3726.9299%
Operating income before depreciation (OIBD)1.0241.21919%
Depreciation and amortisation-633-484-24%
Operating income39173588%
Additional ordinary result22-674
Results from participations8967-25%
Earnings before interest and income taxes (EBIT)502128-74%
Financial results-222-28026%
Profit/loss before tax280-152
Taxes on income-146-18124%
Profit/loss for the financial year133-333
Group share117-366

Dividends

The Managing Board and Supervisory Board will propose to the Annual General Meeting on 4 May 2005 the distribution of a dividend for the financial year 2004 of EUR 0.55 per share.

Capital increase

With the consent of the Supervisory Board, the Managing Board of HeidelbergCement AG decided to carry out a capital increase with subscription rights for shareholders, following the extraordinary charges of the 2004 financial year. The capital increase was successfully completed at the end of March 2005. The Group received around EUR 270 million to strengthen the shareholders’ equity base. The issue price was EUR 35 per share. For every 13 existing shares, a subscription right was granted for one new share.

Prospects

Varied growth in construction industry

The outlook for the construction industry is varied. Conditions remain favourable for our North American and Asian activities. Construction activity also exceeds the average in the countries of our Central Europe East region. Stabilisation or even a slight recovery should be achieved in Scandinavia, Belgium, and the Netherlands. For Germany, a decline in construction activity of around 1.5% is expected once again.

Turnover and results

Due to moderate increases in sales volumes in the majority of our markets and an improved proceeds situation in some areas, we anticipate a slight growth in turnover. Our efforts to significantly increase efficiency and noticeably reduce costs in the whole Group will be reflected in an improved development of results.

Investments and financing

In the current year, we plan to intensify investment activity. Investments in tangible fixed assets will include the completion of our comprehensive modernisation at Castle Cement, UK and, in the US, the increase in the grinding capacity of Union Bridge. Following the significant debt reduction in the past two years, we will continue to focus on optimising our financial structure.

7,360 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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