The weakening of the Euro against numerous currencies had a €162m positive effect on the company’s revenue. Operating income before depreciation improved by 8% to €865 million and operating income rose by 8% to €675 million.
Besides the price increases in key core markets and the successful implementation of the margin improvement programmes in the aggregates business line, in particular, the low cost of fuels also made a contribution to the positive development of results.
"Despite partly adverse market conditions, the third quarter saw us continue our successful development and further increase our results," said HeidelbergCement chairman, Bernd Scheifele.
"This was largely due to our advantageous geographical positioning and our good overall cost management. Consequently, we were able to considerably improve our operating margins once again. From our perspective, the weaker development of sales volumes compared with the previous quarters is temporary. The acquisition of
In the third quarter of 2015, HeidelbergCement's cement and clinker sales volumes fell by 3% year-on-year to 21.8 million tonnes. Whereas Africa registered double-digit growth, volumes in the other group areas remained stable or declined slightly.
In Asia, the delayed start of the infrastructure projects announced by the Indonesian government had a negative impact on sales volumes. Volumes decreased in the Eastern Europe-Central Asia group area and in Russia, in particular, due to a downturn in investments.
In the Western and Northern Europe group area, especially the Netherlands and the Baltic States, a decline in sales volumes was reported. In North America, deliveries remained more or less at the same level as in 2014, despite the bad weather in Texas and the unfavourable timing of building projects in Florida. In the first nine months of 2015, cement and clinker sales volumes decreased by 1% to 60.6 million tonnes.
At the start of September 2015, joint work teams from Italcementi and HeidelbergCement started preparing for the integration. In the first instance, they embarked on best-practice comparisons and carried out an assessment of potential synergies. Based on the initial findings, it was able to increase the post-closing synergy target from an original €175 million to €300 million.
The positive effects of financing costs and taxes were taken into account for the first time in the new synergy target. The combination of Italcementi's export-oriented cement plants in the Mediterranean Basin with the global trading business of HeidelbergCement following completion of the transaction also gives rise to significant potential beyond the identified synergies, as does the optimal use of Italcementi's production facilities.
Import demand, for example in North America or Africa, that used to be bought from third party sources in the past, can be covered by Italcementi's plants in the future, thus leading to a higher capacity utilisation there. A savings potential in current assets of €100 million could be confirmed.
The bridge financing could be reduced by €1.1 billion to €3.3 billion because the initial risk of a mandatory takeover offer to minority shareholders in Morocco could be excluded and some of Italcementi's creditor banks have agreed to waive their change of control clauses.
In addition, HeidelbergCement has reduced its target for cash-relevant investments from €1.2 billion to €900 million in accordance with the capital expenditure savings announced in the context of the Italcementi takeover. All necessary filings or pre-filings were lodged with the competition authorities in October 2015 as planned.
The competition authority in India has already given its approval. HeidelbergCement expects the acquisition of the 45% stake to be completed in the first half of 2016.
In North America, HeidelbergCement expects a continuing economic recovery and a further increase in demand for building materials. Besides new residential building, commercial and infrastructure construction is 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.
In Western and Northern Europe, a stable overall market development is expected. This is based on the recovery in the UK, the stable development in Benelux and a slight slowdown in Germany as well as in Northern Europe, where exports are declining.
In Asia, the delay in infrastructure projects in Indonesia is leading to a reduction in cement and ready-mixed concrete sales volumes. In Africa, the group is still counting on a sustained growth in demand. HeidelbergCement anticipates stable sales volumes for the core products of cement and ready-mixed concrete and an increase in the sales volumes of aggregates for the year.
As a result of the sustained fall in prices for crude oil and fuels, HeidelbergCement expects a moderately declining cost basis for energy in 2015. A modest rise in the cost of raw materials and personnel is still expected, partly owing to the devaluation of the euro. It plans to offset this by means of suitable measures and to further improve the margins in the cement and aggregates business lines. Process optimisations are expected to achieve a sustainable improvement in results of at least €120 million by the end of 2017. In addition, the optimisation of logistics activities in connection with the LEO programme will be pursued with the aim of reducing costs by €150 million over a period of several years.
Based on the developments described in the first nine months, HeidelbergCement expects a moderate to significant growth in revenue and remains confident that the operating income and profit for the financial year before non-recurring items will increase significantly in 2015.
"We remain on track to significantly increase our results and substantially reduce our net debt in 2015," said Bernd Scheifele.
"This provides us with a solid base for the acquisition of Italcementi. The acquisition process is on schedule and we expect the share purchase from Italmobiliare to be completed in the first half of 2016. Thereby, we significantly accelerate the growth of HeidelbergCement and create additional potential for higher returns for our shareholders. Following the acquisition, we want to reduce the leverage by the end of 2016 to a level that is in line with a solid investment grade rating."
