19 March 2014
HeidelbergCement: earnings per share more than doubled in 2013
2013 consolidated financial statements
- Group revenue reaches €14 billion (+3.4%*)
- Operating income (OI) above previous year at €1.61 billion (+5.2%*)
- Financial result improved by €79 million
- Profit for the financial year reaches €945 million (+79%); earnings per share more than doubled to €3.98
- Dividend proposal €0.60 per share (+28%)
- Net debt at €7.5 billion – ratio of net debt to operating income before depreciation (OIBD) at 3.1x
Outlook for 2014
- Positive outlook for the global economy; macro-economic risks remain
- Currently no impact from political crisis on business in the Ukraine and Russia
- Growth in sales volumes of cement, aggregates, and ready-mixed concrete expected
- Focus on debt reduction and improvement of margins
- Expansion of cement capacities in growth markets will be continued
- Increase in revenue, OI, and profit for the financial year*
- HeidelbergCement well-positioned to benefit over-proportionally from the noticeable economic recovery, particularly in the USA and the UK
* Adjusted for currency and consolidation effects (like-for-like or l-f-l); profit for the financial year adjusted additionally for non-recurring effects
Strong operating business development in 2013
HeidelbergCement has brought the 2013 financial year to a successful close despite a very challenging environment, particularly in the second half of the year. The decisive factors in this achievement were the Group’s geographical positioning in countries experiencing solid economic development in North America, Europe, Asia, and Africa, in addition to successfully implemented price increases in major markets and the surpassing of saving goals from the “FOX 2013” programme.
“In 2013, we generated our best results since the financial crisis”, said Dr. Bernd Scheifele, Chairman of the Managing Board of HeidelbergCement. “This was mainly due to the successful implementation of our “FOX 2013” programme, price increases in major markets, reduced financing costs, and lower non-recurring charges. Consequently, we were able to improve revenue, OI, and operating margins in all our business lines on a comparable basis. At the same time, we clearly achieved our target of noticeably increasing profit for the financial year and earnings per share.”
Net result significantly increased – dividend proposal raised by 28%
Cement sales volumes rose slightly year on year, driven by the positive development of sales volumes in the North America, Asia-Pacific, and Africa-Mediterranean Basin Group areas, which more than offset the decline in demand, especially in Eastern Europe. Sales of aggregates were marginally below the previous year. Adjusted for exchange rate effects, a moderate increase was achieved in revenue, which was largely due to successfully implemented price increases in important markets as well as growth in sales volumes of cement. The depreciation of several currencies against the euro impaired revenue by €664 million in 2013, resulting in a slight decrease to €13,936 million (previous year: 14,020).
Operating income rose moderately by 5.2% before exchange rate and consolidation effects. Besides price increases, the positive development of results can also be attributed to the successful “FOX 2013” savings programme. It significantly exceeded expectations and led to cash-relevant savings of €391 million in 2013. Although operating income was impaired by negative exchange rate effects of €115 million, it increased slightly to €1,607 million (previous year: 1,604).
Thanks to the price increases and cost reductions, we were able to improve our operating margin in all four business lines – cement, aggregates, building products, and concrete-service-other – on a comparable basis.
The financial result increased by €79 million, which reflects lower interest expenses and the elimination of burdens in the other financial result.
Profit for the financial year rose by 79% to €945 million and earnings per share have more than doubled to €3.98. Besides the improvement in the financial result, this was mainly due to an increase of €411 million in the additional ordinary result to €1.6 million (previous year: -409.0). Profits from the divestment of a non-controlling interest in a precast concrete producer in Saudi Arabia, as well as a non-cash relevant gain from the liquidation of a company structure owned by Hanson in the United Kingdom that was no longer required, had a particularly favourable impact on this development. These positive factors were able to offset non-cash relevant impairment of goodwill and other fixed assets amounting to €195 million as well as restructuring expenses of €47 million, which were predominantly incurred in the fourth quarter.
In view of the positive business development and the considerable increase in profit for the financial year, the Managing Board and Supervisory Board will propose to the Annual General Meeting on 7 May 2014 an increase of 28% in the dividend to €0.60 (previous year: 0.47) per share. The Group is thus continuing the dividend’s moderate and steady upward trend of the past few years. In the medium term, HeidelbergCement remains on course to reach its goal of a payout ratio of 30%–35%.
Increase in investments and net debt – financing structure improved
Contrary to the strategic objective, net debt increased by just under €500 million to €7.5 billion in 2013. This was particularly due to negative exchange rate effects, the payment of the German cartel fine amounting to €161 million and a higher investment activity. In the first half of the 2013 financial year, HeidelbergCement made three strategically sound and low-risk acquisitions, increasing its participation in the Australian cement company Cement Australia from 25% to 50%, acquiring the remaining 50% of the British aggregates and asphalt company Midland Quarry Products as well as increasing the holding in the Russian cement company CJSC “Construction Materials”, Sterlitamak to 100%. As a result, investments exceeded the target value of €1.1 billion by around €300 million.
The debt-to-equity ratio (gearing) rose to 59.7% (previous year: 51.3) and the ratio of net debt to OIBD to 3.1x. The liquidity reserve totalled €4.2 billion at the end of 2013.
In 2013, HeidelbergCement improved its financing structure and financial result despite a higher level of net debt at the end of the year. The refinancing of the US$750 million bond under more favourable terms in the spring played a substantial role. In the fourth quarter, the Company also issued two bonds of €300 million and €500 million with terms of seven and eight years and a coupon of just 3.25%. In addition, the Commercial Paper Programme was expanded and the margins of the €3 billion syndicated credit facility were reduced further.
Targeted expansion of market position in growth markets
In 2013, HeidelbergCement remained consistent and disciplined in pursuing the targeted expansion of its market position in the cement business line in growth countries. Cement facilities with a total capacity of over 5 million tonnes commenced production or test runs. In central India, the expansion of capacities by 2.9 million tonnes was completed in February 2013. In June 2013, a new cement mill with a capacity of 0.5 million tonnes was commissioned in the Liberian capital of Monrovia. At the end of the year, test runs were launched for the new grinding installation in the Citeureup plant in Indonesia as well as the new cement plant in Kazakhstan. In 2014, additional capacities of over 5 million tonnes are planned to start operations, including around 3.5 million tonnes in Africa alone. By doing so, HeidelbergCement is gradually creating new potential for further growth.
Outlook for 2014
In its forecast from January 2014, the International Monetary Fund (IMF) expects the global economy’s growth rate to increase significantly during 2014 in comparison with the previous year. The main contributors to this development are the increasing pace of economic growth in the United States and the economic recovery in almost all countries of the euro zone. However, the necessary budgetary consolidation measures in the industrial countries and their effects on the emerging countries continue to threaten the development of the global economy. The tapering of the US Federal Reserve, which has already commenced, may lead to further capital outflows and exchange rate adjustments. In addition, the political tensions in the Middle East and the Ukraine pose risks to the economic development.
In North America, HeidelbergCement expects a continuing economic recovery and consequently a further growth in demand for building materials. Besides residential construction, commercial and infrastructural construction are also making an increasingly strong contribution to this growth. A stabilisation of the Eastern European market is anticipated following the weak phase experienced during 2013. Poland is expected to be the first country in this region to benefit from an incipient recovery. We project a further rise in demand for building materials in Central Asia. Currently, the political crisis in the Ukraine does not affect operating business in the Ukraine and Russia. In Western and Northern Europe, positive market development is expected in all countries. This is based on the healthy economic development in Germany and Northern Europe, as well as a recovery in the United Kingdom and Benelux. In Asia and Africa, the Group still counts on sustained growth in demand. In view of the positive development of demand and the commissioning of new capacities, HeidelbergCement anticipates an increase in the overall sales volumes of the core products cement, aggregates, and ready-mixed concrete.
In terms of costs, the Group expects a light to moderate rise in the cost base for energy, raw materials, and personnel. The objective is to offset this increase by means of suitable measures and to improve our margins in the cement and aggregates business lines, bringing them back to pre-crisis levels. To this end, HeidelbergCement will continue pursuing its two price initiatives “PERFORM” for the cement business in the United States and Europe, and “CLIMB Commercial” for the aggregates business. Another area of focus in 2014 will be to not only safeguard but continuously improve the cost savings and efficiency increases in cement and aggregates that were achieved in the past few years with “OPEX” and “CLIMB”. Moreover, the “LEO” programme aims to optimise logistics with the goal of reducing costs by €150 million over the next few years. For 2014, HeidelbergCement projects a slight decline in financing costs because of the improved financing structure, despite the higher level of net debt at the start of the year.
On the basis of these assumptions, the Managing Board has set the goal of further increasing revenue, operating income, and profit for the financial year in 2014 on a comparable basis, i.e. adjusted for exchange rate and consolidation effects as well as non-recurring effects.
“Our strategic points of focus remain unchanged in 2014”, explains Dr. Bernd Scheifele. “Deleveraging in order to regain investment grade rating, remains the highest priority for us. To this end, we will continue to be very disciplined in our spending in 2014 and focus more intensively on the sale of the building products business line in the United Kingdom and North America, as well as other assets that do not belong to our core business. At the same time, we will remain on course with our successful strategy of targeted expansion of our cement capacities in growth markets. Investments in optimising and expanding capacities of €1.2 billion are planned for 2014. We will continue unabatedly with our programmes to improve margins, “PERFORM” in the cement business, “CLIMB Commercial” in the aggregates business, and “LEO” to optimise logistics.”
“In 2014, we will benefit from the economic development in the industrial countries, particularly in North America, the United Kingdom, Germany, and Northern Europe”, continues Dr. Bernd Scheifele. “These countries generate almost 50 % of our revenue. Furthermore, we are improving our market position in growth markets with the commissioning of modern production facilities. In view of these factors as well as our high operational efficiency, we consider ourselves well-equipped to benefit over-proportionally from the accelerating economic growth in the interests of our shareholders.”
Overview of the HeidelbergCement Group
|in % of revenue||17.7%||17.4%|
|Profit for the financial year||529||945||79%|
|Earnings per share in € (IAS 33)***||1.52||3.98||162%|
|Statement of cash flows|
|Cash flow from operating activities||1,513||1,057||-456|
* Values have been restated due to the retrospective application of IAS 19R and IFRIC 20
** At a constant scope of consolidation and unchanged exchange rates
*** Attributable to parent entity
****Excluding non-controlling interests with put options