Strategy and Targets

Business Excellence

In a market with largely standardised products, customer focus and service quality are extremely important in order to market our products and services. Moreover, we aim to ensure a competitive cost structure in all areas. The productivity enhancement in input factors such as working time, capital, and energy should at least offset inflation-related cost increases.

For countries with high inflation, this is valid to the extent that we cannot compensate inflation by increased sales prices in the market. The basis and prerequisite for operational excellence is a culture of continuous improvement.

We compare performance both internally and in relation to competitors, in order to identify optimisation potential. We aim to achieve a long-term position in the top quartile for efficiency and cost structure, productivity, margin, growth, and value enhancement. 

Portfolio Management

In portfolio management, the focus is on simplifying our portfolio of countries and prioritising the strongest market positions. We have defined clear financial and non-financial criteria according to which all our markets have been assessed.

This includes divestments of businesses and markets that do not meet these criteria in the medium term. We will continue to operate and expand our activities in countries that meet these criteria.

Selective acquisitions in existing markets must meet high result and return expectations. Basically, the company maintains its balanced positioning in mature and growth markets. We will continue our vertical integration in the countries in which we are achieving strong synergy effects and are able to strengthen and expand our market positions.

People and Organisation

As a company with a focus on performance and results, we greatly value the competence of our employees and management. The focus is on comprehensive efficiency and clear customer orientation.

HeidelbergCement pursues an integrated management approach, the success of which is based on a balance between local operational responsibility, Group-wide standards, and global leadership.

Our local operations are key for the success of our business. Local management bears full responsibility for revenue and results, production, market cultivation, and personnel management.

Digital Transformation

Throughout the value chain, from raw materials mining, production, and logistics processes to the interface with the customers, digital transformation plays a crucial role.

By introducing digital solutions, we intend to significantly increase our efficiency and reduce costs in production and administration. The strategy is centered on the three digital pillars HConnect, HProduce, and HService.

While HConnect aims to cover more than 75% of our global sales volume via digital interfaces to customers by 2025, HProduce and HService will focus primarily on improving efficiency and reducing costs. At Managing Board level, the Chairman of the Managing Board of HeidelbergCement is responsible for digital transformation. 

Sustainability

For us, sustainability means integrating economic, ecological, and social goals into our business strategy. In this context, we have defined the fundamental principles of our sustainability strategy in six action areas along the value chain and published them in our Sustainability Commitments 2030:

• Driving profitability and innovation
• Achieving excellence in occupational health and safety
• Reducing our ecological footprint 
• Enabling the circular economy
• Being a good neighbour
• Ensuring compliance and creating transparency

Within the framework of “Beyond 2020”, we are significantly pushing our ambitious climate goals. We want to achieve our original target for 2030 of a 30% reduction in specific net CO2 emissions compared with 1990 already by 2025.

By 2030, we intend to reduce our specific net CO2 emissions to below 500 kg per tonne of cementitious material. This corresponds to a further decrease of more than 15% compared with 2019.

We will achieve these goals by using proven techniques and measures such as maximising the use of alternative fuels, optimising the product mix, or improving the efficiency of our plants. To this end, we have defined specific measures for all plants worldwide. We aim to offer CO2-neutral concrete by 2050 at the latest.

To achieve this, however, tried-and-tested techniques and measures alone are not sufficient. We are therefore researching and testing several new technologies such as the capture and use/storage (CCU/S) of CO2 and are intensifying the circular economy in order to reduce CO2 emissions in the long term. 

Financial Strategy/Capital Allocation 

In connection with “Beyond 2020”, the company has set itself new medium-term targets for RCOBD margin and return on invested capital. By 2025, the ratio of the result from current operations before depreciation and amortisation to revenue (RCOBD margin) is to increase to 22%.

The primary margin drivers are active portfolio management, business excellence initiatives in sales, production, and administration as well as the digital transformation. On this basis, the company aims to achieve a return on invested capital (ROIC) of well over 8% by 2025. Our priorities for capital allocation are:

• Covering the investment required to operate our production sites efficiently and meet market demands
• Reducing net debt in order to maintain or improve our investment grade rating 
• A progressive dividend policy
• Medium-sized investments in attractive companies in our core markets
• Share buyback option

HeidelbergCement has limited the amount of net investments to around €1.2 billion per year. Net investments refer to the balance of investment and divestment in the area of property, plant and equipment. 

HeidelbergCement aims to further reduce its net debt. The target corridor for debt is 1.5 to 2.0 times the result from current operations before depreciation and amortisation. Our guideline for the leverage ratio is to maintain our rating in the investment grade range over the long term or improve it. HeidelbergCement wants to remain an attractive investment opportunity for its shareholders and aims to continue its progressive dividend policy after the Coronavirus crisis.

We will use the surplus capital and the proceeds from divestments to make medium-sized investments in attractive companies in our core markets if they meet our margin expectations. Depending on good business performance and attractive investment opportunities, the Group retains the option to also buy back its own shares in the future, thereby improving earnings per share.