HeidelbergCement said it 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 program.
“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’ program, 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.”
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 percent before exchange rate and consolidation effects. Besides price increases, the positive development of results can also be attributed to the successful FOX 2013 savings program. 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, the company said it was able to improve its 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 percent 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 favorable 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.
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 percent, acquiring the remaining 50 percent 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 percent. As a result, investments exceeded the target value of €1.1 billion by around €300 million.
In 2013, HeidelbergCement said it 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 tons commenced production or test runs. In central India, the expansion of capacities by 2.9 million tons was completed in February 2013. In June 2013, a new cement mill with a capacity of 0.5 million tons 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 tons are planned to start operations, including around 3.5 million tons in Africa alone. By doing so, HeidelbergCement is gradually creating new potential for further growth.
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 U.S. 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 stabilization 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.