HeidelbergCement reports Q1 2011 results

HeidelbergCement increases turnover and results in first quarter – mild winter and stronger than expected economic recovery lead to significant growth in sales volumes

• Double-digit increase in sales volumes in all business lines because of mild winter and stronger than expected economic recovery in Western and Northern Europe as well as in Eastern Europe-Central Asia
• Group turnover improved by 19% to EUR 2.6 billion
• Operating income before depreciation (OIBD) increased by 48% to EUR 253 million (previous year: 171)
• Outlook unchanged: sustained growth in Asia-Pacific and Africa-Mediterranean Basin and continuing recovery in North America and Europe expected
• Continued focus on increasing efficiency, reducing costs and raising prices in order to offset increasing energy and raw material costs as well as rising inflation

Overview January – March 201

Sales volumes in first quarter benefit from mild winter and economic recovery in Europe

Milder winter weather and catch-up effects following the heavy snow in December and a stronger than expected economic recovery in our markets in Western and Northern Europe as well as Eastern Europe-Central Asia led to a significant rise in sales volumes in all business lines in the first quarter. In North America, demand for building materials increased only slightly in comparison with the previous year, as a result of a hard winter in Canada. The markets in Asia and Africa continued to develop positively, exhibiting consistently strong growth rates overall.

The Group’s cement and clinker sales volumes rose by 14.4% to 17.3 million tonnes (previous year: 15.2). The Western and Northern Europe, Eastern Europe-Central Asia and Africa-Mediterranean Basin Group areas reported double-digit growth rates. In Asia, demand continued to develop strongly, particularly in Indonesia. Cement sales volumes in North America recovered slightly. Deliveries of aggregates across the Group amounted to 46.3 million tonnes (previous year: 40.3), an increase of 14.9%. Ready-mixed concrete deliveries rose by 20.6% to 8.4 million cubic metres (previous year: 6.9). Asphalt sales volumes grew by 16.7% to 1.6 million tonnes (previous year: 1.4).

Turnover and results improved

On the basis of the strong increases in sales volumes, Group turnover rose considerably in the first quarter, by 19.4%, to EUR 2,602 million (previous year: 2,180). All Group areas, with the exception of North America, recorded double-digit growth rates. Positive exchange rate effects favoured the development of turnover in Western and Northern Europe and Asia-Pacific. Excluding exchange rate and consolidation effects, turnover increased by 14.3%. Operating income before depreciation (OIBD) rose by 47.5% to EUR 253 million (previous year: 171). Operating income improved to EUR 60 million (previous year: -18).

"The mild winter and the sustained economic recovery in our European markets led to a significant improvement in demand in the first quarter, which we successfully translated into increasing turnover and noticeably improved results", explains Dr. Bernd Scheifele, Chairman of the Managing Board. "In some markets, we were already able to push price increases through in view of the rising costs of energy and raw materials."

Financial results improved by EUR 42.9 million to EUR -140.3 (previous year: -183.2). This is essentially due to the reduction in expenses relating to both interest and measures to reorganize the financing structure.

The profit before tax from continuing operations improved to EUR -86.5 million (previous year: -217.8). The expenses relating to taxes on income amounted to EUR 29.3 million, compared with income of EUR 60.7 million in the previous year. This change results essentially from deferred taxes on losses carried forward in North America, which were not capitalised in the reporting period. The loss after tax from continuing operations thus totals EUR -115.8 million (previous year: -157.1).

Overall, the loss for the first quarter was reduced to EUR -120.3 million (previous year: -161.9). The Group share amounts to EUR -160.7 million (previous year: -198.9).

At the end of the first quarter of 2011, the number of employees at HeidelbergCement stood at 53,771 (previous year: 52,770). The increase of 1,001 employees results essentially from the rise in the number of employees in Africa and Russia following the consolidation of the cement activities in the Democratic Republic of Congo and the cement plant CJSC "Construction Materials" in the Russian Republic of Bashkortostan.

"FOX 2013" programme progressing according to plan

The three-year programme for financial and operational excellence ("FOX 2013") presented at the start of January is well on the way to achieving the targeted improvement of EUR 600 million in cash flow over the next three years. Analyses of the pilot projects in the aggregates and cement business lines have confirmed the savings goals for these business lines. Leverage points for the optimisation of working capital by EUR 100 million were identified and around EUR 30 million of potential has already been secured.

Net debt reduced in comparison with the previous year

At the end of the first quarter of 2011, HeidelbergCement's net debt amounted to EUR 8.63 billion, which corresponds to a reduction of EUR 0.33 billion in comparison with the end of the first quarter of 2010. As a result, the gearing improved to 71.0% (previous year: 77.7%).

Targeted expansion of market position in growing markets

At the end of March, HeidelbergCement completed the expansion of the clinker capacity at the Górazdze cement plant in Poland on schedule. At the beginning of April, the second modernised kiln line started operation for the first time with a capacity of 6,000 tonnes of clinker per day. In a further project phase, the cement grinding capacity will also be expanded by approximately 1.2 million tonnes per year, with a new mill set to be constructed by mid-2012. For the current year, HeidelbergCement is planning to commission new cement capacities of more than 6 million tonnes per year.

Outlook

The OECD and IMF still forecast a continuation of the global economic recovery this year, although it should be somewhat weaker than in 2010. The growth rates in the emerging countries of Asia and Africa will remain significantly above those of the mature markets in North America and Europe.

In the Western and Northern Europe Group area, we generally anticipate further recovery in demand and thus increasing sales volumes for cement and aggregates, which will be primarily driven by strong trends in Scandinavia and Germany. We expect varying trends in the Eastern Europe-Central Asia Group area: while we continue to anticipate consistently weak development in Hungary and Romania, we expect a rise in demand in Poland and Central Asia in particular and, in the second half of 2011, in the Czech Republic. In North America, we anticipate a slight increase in cement and aggregates volumes because of ongoing investments in road construction in the United States and the continuing positive development of the raw materials industry in Canada. We expect demand to continue developing positively in the Asia-Pacific and Africa-Mediterranean Basin Group areas.

On the cost side, HeidelbergCement anticipates an increase in energy and raw material prices as well as rising inflation, particularly in emerging countries. We also anticipate rising personnel costs in the mature markets. HeidelbergCement's aim is to offset the rise in costs through cost-saving measures as well as targeted price increases and fuel surcharges in the individual markets. Once again, the Managing Board has set the objective of increasing turnover and operating income in 2011 in comparison with the previous year.

"The considerable growth in sales volumes in the first quarter was the result of a better than expected economic recovery as well as a significantly milder winter in our European markets. For the whole of 2011, we still anticipate a slow recovery in the mature markets as well as rising cost and inflationary pressure. We are therefore maintaining our focus on cash flow and stable margins in order to reduce our debt and further improve the key financial ratios," explains Dr. Bernd Scheifele. "We will consistently continue our efforts to reduce costs and increase efficiency within the scope of the "FOX 2013" programme. At the same time, we will continue to make targeted investments in new cement capacities in growing markets. Thanks to the advantageous geographical placement in attractive markets in both emerging and industrialised countries, and as global market leader for aggregates, HeidelbergCement is perfectly positioned to benefit over-proportionally from the further recovery of the global economic situation, supported by an accelerated upturn in North America."

9,553 characters