HeidelbergCement – Interim Report January to September 2006

• Group turnover rises by 19% on previous year
• Europe offsets weakening dynamics in US
• Further notable progress made in increasing efficiency
• Operating income and profit for the financial year significantly improved
• Continued expansion in growing markets
• Clear confirmation of forecast for 2006
  

Letter to the shareholders

In the first nine months, the cement and clinker sales volumes of HeidelbergCement rose by 14.3% to 58.8 million tonnes (previous year: 51.4). Excluding consolidation effects, the increase amounted to 8.9%. The growth in Europe was strongest, followed by the Africa-Asia-Mediterranean Basin Group area. In North America, sales volumes decreased during the third quarter in comparison with the previous year.

Ready-mixed concrete sales volumes grew by just under 12% in total to 23.2 million cubic metres (previous year: 20.8); an increase of 14% was recorded in sales volumes of aggregates, which reached 76.6 million tonnes (previous year: 67.1).

Turnover for the period January to September rose by 19.4% to EUR 6.9 billion (previous year: 5.7). Excluding exchange rate and consolidation effects, an increase of 14.6% was achieved. Besides the broad organic growth, the positive effects of our “win” restructuring programme are increasingly being reflected in the development of earnings figures. Operating income before depreciation (OIBD) grew by 31.8% to EUR 1.5 billion (previous year: 1.1). Operating income rose to EUR 1.1 billion (previous year: 0.7) in the first nine months. The increases in profit are primarily attributable to the acceleration of development in the European countries as well as in Asia and the Mediterranean Basin. In North America, the rates of growth are levelling off.

At EUR 146 million (previous year: 144), the results from participations rose slightly in comparison with the previous year; a significant proportion of this is due to our involvement in the French Vicat Group. The additional ordinary result remained largely unchanged in comparison with the first half of the year at EUR 61 million (previous year: -62). Taxes on income rose to EUR 334 million (previous year: 216) as a result of the improved development of results in all Group areas. In the first nine months, the profit for the financial year exceeded last year’s amount considerably and reached EUR 790 million (previous year: 438), with the Group share in profit increasing to EUR 721 million (previous year: 387).

Further expansion in growing markets

In the third quarter of 2006, HeidelbergCement consistently pursued its strategy of geographical diversification with a focus on cement in growing markets. Important steps were taken to expand our market positions in Eastern Europe and Asia by means of acquisitions in Russia, India and China.

Number of employees increased due to new consolidations

In the first nine months of 2006, the number of employees across the Group amounted to just under 43,000 (previous year: 41,600).The increase from the consolidation of our activities in Kazakhstan and the expansion in the Ukraine outweighed the decrease resulting from restructuring measures in Europe and Asia.

Increase in investments

In the first half of the year, cash flow investments amounted to EUR 574 million (previous year: 536). Investments in tangible fixed assets, which primarily relate to maintenance and optimisation measures in our cement plants, totalled EUR 327 million (previous year: 306). Investments in financial fixed assets rose to EUR 247 million (previous year: 230). Significant individual items related to the expansion of our activities in China and the Ukraine as well as to our involvement in India.

Strong contribution to growth from Europe

Our cement deliveries experienced predominantly marked growth in all countries as a result of increased construction activity and, in some cases, new consolidations. The strongest growth was achieved by the countries of Eastern Europe, with the exception of the Czech Republic. We were also able to noticeably increase our sales volumes in Germany, Sweden and the Benelux countries. In total, the cement and clinker sales volumes of the Europe Group area rose by 18.8% to 29.5 million tonnes (previous year: 24.9). Adjusted for consolidation effects, the increase amounted to 10.3%. Likewise, sales volumes of ready-mixed concrete and aggregates grew considerably in almost all countries. The turnover of the Europe Group area improved by 21.6% to EUR 3,080 million (previous year: 2,533).

North America maintains a high level

After a slight decrease in the third quarter, the cement and clinker sales volumes of our plants in North America were 3.5% above the previous year’s level at 11.4 million tonnes (previous year: 11.0) as of the end of September. As the capacities of our plants are fully utilised, around a quarter of the total sales volumes had to be imported from other Group areas. Deliveries of ready-mixed concrete and aggregates also increased, although this is partly attributable to consolidation effects, particularly in the southern US. The turnover of the North America Group area rose by 21.2% to EUR 1,884 million (previous year: 1,555).

Further growth in the Africa-Asia-Mediterranean Basin Group area

The cement and clinker sales volumes of the Africa-Asia-Mediterranean Basin Group area rose by a total of 14.8% to 17.8 million tonnes (previous year: 15.5). Excluding the consolidation effect from the inclusion of the joint venture Fufeng in China, founded at the end of 2005, the increase amounted to 10.5%. With growth of 41.5% on a like-for-like basis, China recorded the biggest increase in sales volumes in the Group area, followed by Bangladesh and Turkey. In Indonesia, the cement market began to recover slightly in the third quarter. Deliveries from our subsidiary Indocement significantly exceeded the previous year’s level as a result of increased clinker exports. In Africa, we were able to achieve a slight overall rise in cement sales volumes with varied development in the individual countries. The turnover of the Africa-Asia-Mediterranean Basin Group area grew by 20.5% to EUR 945 million (previous year: 784).

maxit Group on track

In the first nine months, the building materials activities of maxit Group recorded positive development in most markets. In particular, the countries of Northern and Eastern Europe as well as France, the United Kingdom, Portugal and Turkey recorded healthy sales volumes. In Germany, the restructuring measures have already contributed to rising results. At EUR 923 million (previous year: 847), the turnover of maxit Group was 9% above the previous year.

Group Services

Trading in cement and clinker increased significantly in the first three quarters, more than compensating for declines in dry mortar and related materials. The overall trade volume rose by 10.3% to 9.6 million tonnes (previous year: 8.7). Turnover in the Group Services business unit, which also includes our trading in fossil fuels, increased by 13.6% to EUR 484 million (previous year: 426).

Significant double-digit growth confirmed

The global economic expansion should slow down in the next few months. However, we do not anticipate a fundamental change in the positive economic environment. In the US, the slowdown in the real estate market is expected to lead to significantly weaker economic dynamics. In Germany, the upturn is being dampened by a more restrictive finance and fiscal policy. The risks arising from the development of the US dollar exchange rate and the energy markets remain high.

HeidelbergCement’s development in the third quarter confirms our expectations. The “win” project is proving effective: Emphasis on performance and results, efficiency, productivity and speed have increased considerably in the Group. Our key figures have improved noticeably. For the whole of 2006, we anticipate significant double-digit growth in turnover and results. We consistently continue the expansion of our positions in growing markets.

Heidelberg, 6. November 2006

Caption:Cement plant Gongyuan in the Chinese province of Liaoning,
Photograph: HeidelbergCement

At imprint, specimen copy requested:
HeidelbergCement AG, Group Communication
P.O.Box 10 44 20, 69034 Heidelberg, Germany
Phone +49-6221-481-227, Telefax +49-6221-481-217
www.heidelbergcement.com , E-Mail: info@heidelbergcement.com