HeidelbergCement reports preliminary figures
HeidelbergCement reports preliminary figures for Q4 and full year 2014
Adjustment of figures according to IFRS:
The financial data for the 2013 financial year were adjusted in line with the new accounting standards for joint ventures (IFRS 10/11) and as a result of the disposal of the building products business in North America and the United Kingdom.
| €m | 2013 reported | IFRS 10/11 | 2013 adjusted Jan.’14 | Disposal of building products1) | Cement Australia2) | 2013 adjusted Dec.’14 |
| Full year 2013 | ||||||
| Revenue | 13,936 | -797 | 13,138 | -754 | -256 | 12,128 |
| Operating income before depreciation | 2,424 | -89 | 2,335 | -78 | -33 | 2,224 |
| Operating income | 1,607 | -36 | 1,571 | -34 | -18 | 1,519 |
| Q4 2013 | ||||||
| Revenue | 3,485 | -209 | 3,276 | -104 | -62 | 3,111 |
| Operating income before depreciation | 661 | -23 | 638 | -12 | -11 | 614 |
| Operating income | 463 | -12 | 451 | -2 | -8 | 441 |
1) IFRS 5; 2) IFRS 10/11, IFRIC tentative agenda decision
Q4 2014:
- Revenue improved by 6% to €3.3 billion (like-for-like*: +4%)
- Operating income stable at €442 million
Full year 2014:
- Most successful year since the financial crisis
- Significant improvement in sales volumes, revenue, and operating income despite negative exchange rate effects
- Successful sale of building products business for USD1.4 billion
- Reduction of net debt below €7 billion; proceeds from BP disposal not yet included
- Increased sales volumes in all business lines
- Revenue rises by 4% to €12.6 billion (like-for-like*: +8%)
- Operating income improves to €1.6 billion (like-for-like*: +13%)
- Further increase in operating margin
Initial Outlook for 2015:
- Positive macroeconomic development in key markets:
- Continued recovery and growth in the United States and United Kingdom
- Sustained strong development of demand in Africa and Asia
- Tailwind from raw material prices and exchange rates:
- Significant drop in oil price reduces costs and promotes growth
- Advantageous exchange rate environment
- Continuation of successful business strategy:
- Strong positioning in raw materials reserves and operating sites at attractive locations, unique vertical integration, and excellent product portfolio
- Focus on operating efficiency and margin improvement
- Consistent increase in value through debt reduction and growth
* Adjusted for currency and consolidation effects (like-for-like or l-f-l)
Today, HeidelbergCement presented its preliminary, unaudited figures for sales volumes, revenue, operating income before depreciation (OIBD), and operating income (OI) for the fourth quarter and the full year of 2014.
| January-December | October-December | ||||||||
| €m | 2013 | 2014 | % | % l-f-l | 2013 | 2014 | % | % l-f-l | |
| Revenue | 12.128 | 12.614 | 4,0% | 8,4% | 3.111 | 3.309 | 6,4% | 3,8% | |
| Operating income before depreciation (OIBD) | 2.224 | 2.288 | 2,9% | 9,1% | 614 | 625 | 1,7% | 0,9% | |
| in % of revenue | 18,3% | 18,1% | 19,7% | 18,9% | |||||
| Operating income | 1.519 | 1.595 | 5,0% | 12,9% | 441 | 442 | 0,1% | -0,2% | |
| in % of revenue | 12,5% | 12,6% | 14,2% | 13,4% | |||||
| Sales volumes (Mt expt. Rmc) | |||||||||
| Cement/clinker/GGBS | 78,1 | 81,8 | 4,7% | 5,5% | 20,1 | 20,6 | 2,6% | 3,1% | |
| Aggregates | 230,6 | 243,6 | 5,6% | 4,8% | 58,3 | 62,8 | 7,8% | 7,1% | |
| Rmc (Mm³) | 34,9 | 36,6 | 4,8% | 4,1% | 9,1 | 9,5 | 5,0% | 1,5% | |
| Asphalt | 8,4 | 9,3 | 11,4% | 7,4% | 2,3 | 2,4 | 4,7% | 4,7% | |
Cement and aggregates sales volumes rose in 2014, in line with the outlook presented in the 2013 Annual Report. Growth was driven by the continuing recovery in North America and the additional capacities that became available in India, Africa, Indonesia, and Kazakhstan. The ongoing economic recovery in the United Kingdom also had a positive impact. Despite significant negative exchange rate effects, the Group’s revenue and OI increased in comparison with the previous year. This development was supported by mild winter weather in Europe in the first quarter and energy costs that continued declining over the course of the year.
“In operational terms, 2014 was by far the most successful year for HeidelbergCement since the financial crisis”, says Dr. Bernd Scheifele, Chairman of the Managing Board. “This success can be summed up in three results: Firstly, we were able to increase revenue, OI, and operating margin despite negative exchange rate effects. Only a few companies in our sector could achieve the same, which underlines again our competitive strength. Secondly, we have sold our building products for a good price, and thirdly, we could significantly reduce our net debt. This success was once again based on our disciplined and structured management of costs and margins as well as the implementation of price increases in major markets. In addition, we continued to benefit from our advantageous geographical positioning and the positive economic trend in the industrial countries of North America and Western Europe, as well as in the emerging countries of Asia and Africa.”
Preliminary Group figures
All business lines recorded a noticeable growth in sales volumes compared with the previous year. In operational terms, the sales figures for cement and aggregates increased in all Group areas. Thanks to this increase in sales volumes and successfully implemented price increases in key markets, revenue rose moderately despite significant negative exchange rate effects. OI climbed considerably as a result of the consistently implemented initiatives to improve efficiency and margins as well as stable energy costs. The depreciation of many currencies against the euro burdened revenue for the year by €517 million and OI by €118 million. This affected all Group areas, particularly Asia-Pacific, Eastern Europe-Central Asia, and Africa-Mediterranean Basin. Nevertheless, our OI and operating margin were increased in comparison with the previous year thanks to the positive business development in the North America, Western and Northern Europe, and Africa-Mediterranean Basin Group areas. A noteworthy contribution was made by the margin improvement programmes “PERFORM” for cement, “CLIMB” for aggregates, and “LEO” for logistics optimisation. Before currency effects, OI for the year increased by €194 million.
In the fourth quarter, sales volumes of building materials benefited from the mild weather, which led to an extended period of construction in Europe. The weakening of the euro against other currencies also resulted in a slight improvement in revenue and results. Excluding the contribution to results of €25 million from the previous year’s sale of a quarry that was no longer in use, the operating margin in the fourth quarter remained at the high level of the previous year that was also characterised by favourable weather conditions. In the fourth quarter, OI of the Group areas was additionally charged with €29 million from the increase of central allocation of overhead costs for group services for the full year 2014.
Western and Northern Europe
| January-December | October-December | ||||||||
| €m | 2013 | 2014 | % | % l-f-l | 2013 | 2014 | % | % l-f-l | |
| Revenue | 3.779 | 4.012 | 6,2% | 4,1% | 1.003 | 1.021 | 1,8% | -3,2% | |
| Operating income before depreciation (OIBD) | 524 | 562 | 7,2% | 5,2% | 169 | 157 | -7,2% | -9,6% | |
| in % of revenue | 13,9% | 14,0% | 16,8% | 15,3% | |||||
| Operating income | 290 | 329 | 13,7% | 12,4% | 109 | 96 | -12,0% | -13,6% | |
| Sales volumes (Mt expt. Rmc) | |||||||||
| Cement/clinker/GGBS | 20,9 | 21,6 | 3,4% | 3,2% | 5,3 | 5,3 | 0,7% | 0,2% | |
| Aggregates | 62,1 | 65,2 | 5,0% | -0,7% | 16,3 | 16,4 | 0,7% | -5,2% | |
| Rmc (Mm³) | 12,1 | 13,0 | 7,7% | 6,4% | 3,2 | 3,4 | 8,0% | -0,7% | |
| Asphalt | 2,6 | 3,1 | 17,9% | 5,0% | 0,7 | 0,8 | 5,1% | 5,1% | |
Business development in Western and Northern Europe during 2014 benefited from the continued recovery in demand for building materials in the United Kingdom, which was driven by private residential construction and large infrastructural projects in London. The cement and aggregates sales volumes of our British plants increased by a double-digit percentage. Moreover, the mild winter weather in the first quarter translated into a significant rise in construction activity and therefore in demand for building materials in Europe compared with the previous year. This effect also led to an overall increase for the year in sales volumes for cement and ready-mixed concrete in Germany, Benelux, and Northern Europe. Revenue rose in line with the higher sales volumes and as a result of successfully implemented price increases. The acquisition of a cement grinding plant in Gent and of the majority stake in the Cimescaut Group, both in Belgium, in the first quarter contributed to the growth in revenue and results.
In the fourth quarter, sales volumes, revenue, and results benefited from the sustained solid construction activity in the United Kingdom and Germany, in particular. After adjustment for the increased allocation of overhead costs at country level, the margins remained at the high level of the previous year that was marked also by favourable weather conditions.
Eastern Europe-Central Asia
| January-December | October-December | ||||||||
| €m | 2013 | 2014 | % | % l-f-l | 2013 | 2014 | % | % l-f-l | |
| Revenue | 1.243 | 1.182 | -4,9% | 7,2% | 306 | 264 | -13,6% | -0,8% | |
| Operating income before depreciation (OIBD) | 259 | 230 | -11,1% | -2,3% | 72 | 41 | -43,3% | -37,6% | |
| in % of revenue | 20,8% | 19,5% | 23,5% | 15,4% | |||||
| Operating income | 151 | 129 | -14,0% | -6,3% | 45 | 16 | -65,0% | -62,3% | |
| Sales volumes (Mt expt. Rmc) | |||||||||
| Cement/clinker/GGBS | 16,0 | 17,1 | 7,3% | 7,3% | 4,0 | 3,9 | -3,1% | -3,1% | |
| Aggregates | 18,7 | 20,4 | 8,9% | 12,0% | 5,7 | 5,8 | 1,7% | 4,1% | |
| Rmc (Mm³) | 2,7 | 2,9 | 9,2% | 9,2% | 0,8 | 0,8 | 10,6% | 10,6% | |
| Asphalt | 0,0 | 0,0 | 0,0 | 0,0 | |||||
The Eastern Europe-Central Asia Group area experienced varying developments in the course of 2014. Mild weather in the first quarter led to a significant increase in sales volumes in all business lines. Sales of cement in the Ukraine declined considerably with the start of the crisis in the eastern part of the country. However, growth in sales volumes in all other countries, particularly in Poland, Kazakhstan, and Georgia, clearly overcompensated for this downturn. All business lines showed noticeable improvements in sales volumes for the year as a whole. Nevertheless, revenue decreased due to the distinctly negative exchange rate effects resulting from the devaluation of the currencies of the Ukraine, Russia, and Kazakhstan against the euro. Falling prices owing to the price pressure from imports also had a negative impact on OI.
North America
| January-December | Oktober-December | ||||||||
| €m | 2013 | 2014 | % | % l-f-l | 2013 | 2014 | % | % l-f-l | |
| Revenue | 2.766 | 3.049 | 10,2% | 11,9% | 685 | 800 | 16,8% | 8,5% | |
| Operating income before depreciation (OIBD) | 555 | 610 | 9,9% | 12,5% | 138 | 161 | 16,8% | 10,8% | |
| in % of revenue | 20,1% | 20,0% | 20,1% | 20,1% | |||||
| Operating income | 362 | 412 | 14,1% | 17,6% | 91 | 107 | 18,2% | 13,5% | |
| Sales volumes (Mt expt. Rmc) | |||||||||
| Cement/clinker/GGBS | 11,6 | 12,1 | 4,1% | 4,1% | 2,9 | 2,9 | 0,9% | 0,9% | |
| Aggregates | 104,1 | 110,5 | 6,1% | 6,1% | 25,0 | 28,4 | 13,2% | 13,1% | |
| Rmc (Mm³) | 5,8 | 6,3 | 8,5% | 7,3% | 1,4 | 1,5 | 8,8% | 6,3% | |
| Asphalt | 3,0 | 3,6 | 16,4% | 16,4% | 0,8 | 0,9 | 13,7% | 13,7% | |
In 2014, the recovery of cement demand continued in North America, driven particularly by growth in residential construction. In contrast to the previous year, sales volumes of aggregates, ready-mixed concrete, and asphalt also rose due to the overall growth in construction activity, which includes the infrastructure sector.
The rise in sales volumes and successfully implemented price increases led to a noticeable improvement in revenue and OI, as well as overcompensated significantly for negative currency effects based on the strength of the euro.
Results in the fourth quarter of 2013 include a positive contribution of €25 million from the sale of a quarry no longer in use. Excluding this capital gain, OI in the fourth quarter improved by around 42% in comparison with the previous year.
Asia-Pacific
| January-December | October-December | ||||||||
| €m | 2013 | 2014 | % | % l-f-l | 2013 | 2014 | % | % l-f-l | |
| Revenue | 2.877 | 2.818 | -2,1% | 7,3% | 707 | 785 | 11,0% | 7,3% | |
| Operating income before depreciation (OIBD) | 778 | 743 | -4,6% | 5,0% | 200 | 221 | 10,0% | 6,5% | |
| in % of revenue | 27,0% | 26,4% | 28,4% | 28,1% | |||||
| Operating income | 651 | 623 | -4,4% | 5,1% | 172 | 189 | 10,1% | 6,8% | |
| Sales volumes (Mt expt. Rmc) | |||||||||
| Cement/clinker/GGBS | 23,4 | 24,6 | 5,0% | 7,0% | 6,4 | 6,9 | 7,9% | 4,0% | |
| Aggregates | 36,2 | 37,7 | 4,2% | 5,9% | 9,4 | 9,8 | 4,7% | 7,7% | |
| Rmc (Mm³) | 11,4 | 11,4 | -0,3% | -0,3% | 3,0 | 3,0 | 1,0% | 1,0% | |
| Asphalt | 2,2 | 2,3 | 4,7% | 4,7% | 0,6 | 0,6 | -1,8% | -1,8% | |
Economic growth and rising construction activity propelled demand for our products in the Asia-Pacific Group area. Furthermore, our sales volumes benefited from the expansion of the production capacities in India and Indonesia.
The Asia-Pacific Group area, however, recorded the largest negative exchange rate effect as a result of the weakness of the Indonesian rupiah and Australian dollar against the euro. Revenue and OI before exchange rate effects rose once again. However, increased wage and energy costs, partly due to energy prices based on the US dollar, led to a decline in the operating margin, particularly in the first half of the year.
Africa-Mediterranean Basin
| January-December | October-December | ||||||||
| €m | 2013 | 2014 | % | % l-f-l | 2013 | 2014 | % | % l-f-l | |
| Revenue | 949 | 910 | -4,1% | 11,4% | 235 | 231 | -1,5% | 11,1% | |
| Operating income before depreciation (OIBD) | 195 | 213 | 9,0% | 28,1% | 46 | 55 | 18,8% | 39,2% | |
| in % of revenue | 20,5% | 23,4% | 19,7% | 23,8% | |||||
| Operating income | 166 | 184 | 10,4% | 31,7% | 39 | 46 | 18,8% | 42,2% | |
| Sales volumes (Mt expt. Rmc) | |||||||||
| Cement/clinker/GGBS | 6,6 | 6,4 | -1,9% | 0,3% | 1,6 | 1,6 | -0,1% | 2,4% | |
| Aggregates | 11,3 | 10,8 | -4,2% | -0,5% | 2,7 | 2,7 | -2,2% | 2,3% | |
| Rmc (Mm³) | 3 | 3 | 1,2% | 1,2% | 0,8 | 0,7 | -3,9% | -3,9% | |
| Asphalt | 0,5 | 0,4 | -22,8% | -22,8% | 0,1 | 0,1 | -25,2% | -25,2% | |
The positive development of demand in Africa continued in 2014 despite the Ebola epidemic. Thanks to capacity expansions, we were able to increase production in some core markets. Cement sales volumes declined slightly overall due to the sale of loss-making business activities in Gabon. The building materials business of our joint venture in Turkey developed positively.
Revenue and results in the Africa-Mediterranean Basin Group area were also impaired by negative exchange rate effects, particularly owing to the weakness of the cedi in Ghana. The decrease in revenue was furthermore a consequence of the sale of activities in Gabon. Thanks to the strong operational development of costs and prices, we were nonetheless able to further increase OI.
First Outlook for 2015
In its forecast from January 2015, the International Monetary Fund (IMF) expects the global economy to grow slightly during 2015 in comparison with the previous year. Accelerating factors are the continued rise in economic growth in the United States and a further recovery of the economy in the euro zone. The significant drop in the oil price since September 2014 is also acting as an additional economic stimulus programme for countries that import crude oil. In contrast, the growth rate of the emerging countries is expected to stagnate. On the one hand, this is due to the weakening growth in China, and on the other hand, due to the subdued outlook for countries that export raw materials in general. Uncertainties concerning the future development of the oil price represent an additional dimension among the risks relating to global economic development. These include the effects of monetary policy measures, particularly those of the US Federal Reserve, on cash flows and exchange rates in the emerging countries, as well as geopolitical risks. The IMF believes that structural reforms and the stimulation and safeguarding of economic growth should have priority worldwide.
In North America, HeidelbergCement, in line with the IMF, expects a continuing economic recovery and consequently a further increase in demand for building materials. Besides residential construction, commercial and infrastructural construction are also making an increasingly strong contribution to this growth. In Eastern Europe, markets should continue to stabilise and the first impetus is expected to stem from the EU’s new infrastructure programme. We anticipate a further rise in demand for building materials in Central Asia. The crisis in eastern Ukraine, however, is impairing the sales volumes and results of the country, but has not yet had a significant effect on the operating activities of HeidelbergCement in Russia. However, the currencies of both countries have depreciated considerably against the euro since the crisis began. In Western and Northern Europe, positive market development is expected. This is based on the recovery in the United Kingdom, the consistent robust German economy, and stable economic development in Northern Europe and Benelux. In Asia and Africa, the Group still counts on sustained growth in demand.
“Considering the positive outlook for the global economy and our advantageous geographical positioning, we are confident about the future”, says Dr. Bernd Scheifele. “However, volatility of the economic environment further increases, particularly concerning raw material prices and exchange rates. There remain both geopolitical and monetary policy risks, which are difficult to estimate from today’s perspective. In 2015, we will continue with our successful strategy of adding value by means of debt reduction and growth, as well as keep our focus on improving our operating efficiency and margins.”
“Our programmes to optimise costs and processes and to increase margins will once again be consistently pursued in 2015. They include the projects “PERFORM” for cement in the United States and Europe and “CLIMB Commercial” for aggregates, “LEO” to optimise logistics and “CIP” to create a culture of continuous improvements at employee level. Deleveraging remains the highest priority for us, in order to regain our investment grade rating. With this goal in mind, we will continue to exercise financial discipline in 2015. At the same time, we will remain on course with our effective strategy of targeted investments to expand our cement capacities in the growth markets of Asia and Africa. With the commissioning of new production facilities in 2015, we will have around 5 million tonnes of additional cement capacities in Indonesia and the African countries south of the Sahara.”
“In 2015, we will once again benefit from the economic development in the industrial countries, particularly in North America and the United Kingdom”, continues Dr. Bernd Scheifele. “The considerable drop in the oil price and the weaker euro should provide us with additional tailwind. Around 80% of our revenue is generated in countries that import crude oil and just about 14% in the euro zone. Thanks to the commissioning of additional modern production facilities in the African countries south of the Sahara as well as in Asia, we are also improving our market position in growth markets. In view of our strong positioning in raw material reserves and production sites in attractive locations, the unique vertical integration, and our excellent product portfolio, we believe we are well-equipped for the opportunities and challenges of 2015.”
The complete consolidated financial statements of HeidelbergCement including the outlook will be published on 19 March 2015.
13,200 characters