HeidelbergCement reports preliminary figures for Q4 and the whole of 2016
Q4 2016:
Significant rise in sales volumes, revenue, and OIBD after the consolidation of Italcementi
- Sales volumes: 31 million tonnes of cement (+50 %); 73 million tonnes of aggregates (+16%); 12 million cubic metres of ready-mixed concrete (+27%)
- Group revenue up by 25 % to €4.2 billion (previous year: 3.4)
- OIBD increased by 18% to €818 million (previous year: 696)
Full year 2016:
- Best year since financial crisis
- Significant rise in sales volumes, revenue, and operating income after the consolidation of Italcementi
- Group revenue up by 13% to €15.2 billion
- Operating income before depreciation (OIBD) increased by 13% to €2.9 billion
Pro forma* 2016
- Moderate increase of sales volumes in all business lines
- Revenue almost stable on a like-for-like basis
- Operating income up by 6% on a like-for-like basis
Initial outlook for 2017:
- Overall positive macroeconomic development: Accelerated upward trend in the USA and higher infrastructure spending in oil-exporting countries
- Significant increase in global risks: Inflation and rising energy prices; Political uncertainties in the European Union
- Implementation of the strategy for growth and increase in shareholder returns
- Realisation of synergies resulting from the acquisition of Italcementi
- Continued focus on operational excellence and improving margins
*) Pro forma basis: taking into account the contributions of Italcementi since the beginning of 2015
Today, HeidelbergCement presented its preliminary, unaudited figures for sales volumes, revenue, operating income before depreciation (OIBD), and operating income for the fourth quarter and the whole of 2016.
“The year 2016 was an important milestone for HeidelbergCement,” said Dr. Bernd Scheifele, Chairman of the Managing Board. “With the acquisition of Italcementi, we made a big leap in growth and achieved the best operating income since the financial crisis. The integration of Italcementi is well under way and offers significant earnings potential resulting from the implementation of identified synergies. With the investment grade rating, we reached our strategic target as result of our strengthened business profile and improved creditworthiness. Our consistent focus on efficiency and margin improvement during the last years made a major contribution.”
Preliminary figures of the Group
| Key financial figures | January-December | Q4 | ||||||
| €m | 2015 | 2016 | Variance | Like-for- like1) | 2015 | 2016 | Variance | Like-for- like1) |
| Sales volumes | ||||||||
| Cement (Mt) | 81,105 | 103,816 | 28% | 1% | 20,525 | 30,769 | 50% | -2% |
| Aggregates (Mt) | 249,244 | 272,024 | 9% | 0% | 63,257 | 73,337 | 16% | -5% |
| Ready-mixed concrete (Mm3) | 36,708 | 42,537 | 16% | 0% | 9,585 | 12,131 | 27% | -2% |
| Asphalt (Mt) | 9,122 | 9,371 | 3% | 3% | 2,202 | 2,300 | 4% | 4% |
| Income statement | ||||||||
| Revenue | 13,465 | 15,166 | 13% | -2% | 3,389 | 4,238 | 25% | -7% |
| Operating income before depreciation (OIBD) | 2,613 | 2,939 | 13% | 2% | 696 | 818 | 18% | -9% |
| in % of revenue | 19.4% | 19.4% | 20.5% | 19.3% | ||||
| Operating income | 1,846 | 1,984 | 7% | 3% | 499 | 507 | 2% | -11% |
| in % of revenue | 13.7% | 13.1% | 14.7% | 12.0% | ||||
1) Adjusted for currency and consolidation effects
In the reporting year, sales volumes of the core products cement, aggregates, and ready-mixed concrete rose significantly as a result of the consolidation of Italcementi as from 1 July 2016.
In the fourth quarter, cement sales volumes rose by 50% to 30.8 million tonnes (previous year: 20.5). They include sales volumes of Italcementi in Italy, France, Spain, Greece, Bulgaria, Kazakhstan, India, Thailand, Egypt, Morocco, Mauritania, Gambia, and North America.
Aggregates sales volumes recorded an increase of 16% to 73.3 million tonnes (previous year: 63.3). They include the shipments of Italcementi in France, Italy, Spain, Greece, Morocco, and North America.
In the fourth quarter, total ready-mixed concrete deliveries rose also due to consolidation effects by 27% to 12.1 million cubic metres (previous year: 9.6). Therein included are contributions from Italcementi markets in France, Italy, Spain, Greece, Kazakhstan, Egypt, Morocco, Thailand and North America.
Revenue and operating income also increased significantly as a result of the consolidation of Italcementi in 2016. In the fourth quarter, Group revenue rose by 25% to €4.2 billion (previous year: 3.4). OIBD could be increased by 18% to €818 million (previous year: 696) and operating income by 2% to €507 million (previous year: 499).
In the reporting year, Group revenue rose by 13% to €15.2 billion (previous year: 13.5). Currency effects had a negative impact of €326 million on revenue. OIBD improved by 13% to €2.9 billion (previous year: 2.6) and operating income by 7% to €2.0 billion (previous year: 1.8).
Pro-forma
| Pro-forma key financial figures | January-December | Q4 | ||||||
| €m | 2015 | 2016 | Variance | Like-for- like1) | 2015 | 2016 | Variance | Like-for- like1) |
| Sales volumes | ||||||||
| Cement (Mt) | 121,929 | 124,983 | 3% | 2% | 31,155 | 30,769 | -1% | -1% |
| Aggregates (Mt) | 278,452 | 287,405 | 3% | 0% | 70,653 | 73,337 | 4% | -5% |
| Ready-mixed concrete (Mm3) | 47,433 | 48,117 | 1% | 1% | 12,379 | 12,131 | -2% | -2% |
| Asphalt (Mt) | 9,122 | 9,371 | 3% | 3% | 2,202 | 2,300 | 4% | 4% |
| Income statement | ||||||||
| Revenue | 17,331 | 17,084 | -1% | -1% | 4,358 | 4,238 | -3% | -4% |
| Operating income before depreciation (OIBD) | 3,153 | 3,195 | 1% | 5% | 818 | 818 | 0% | 2% |
| in % of revenue | 18.2% | 18.7% | 18.8% | 19.3% | ||||
| Operating income | 2,037 | 2,073 | 2% | 6% | 530 | 507 | -4% | -3% |
| in % of revenue | 11.8% | 12.1% | 12.2% | 12.0% | ||||
1) Adjusted for currency and consolidation effects and CO₂ gains in Q115: 21 m€ ; Q215: 29 m€ ; Q216: 17 m€ ; Q416: -20 m€
On pro forma basis, i.e. taking into account contributions of Italcementi for the full years 2015 and 2016, sales volumes in all business lines increased moderately year-on-year. All Group areas recorded a positive development in sales volumes of cement and aggregates. Higher sales volumes of ready-mixed concrete in Western and Southern Europe as well as Northern and Eastern Europe-Central Asia could more than offset the decline in North America, Asia, and Africa.
On a comparable pro forma basis, that means adjusted by currency and consolidation effects as well as by sales of CO₂ rights, revenue decreased slightly by 1% in the reporting year. OIBD grew by 5% and OI by 6%, respectively, in accordance with the increased outlook from May 2016. In addition to the growth in sales volumes, lower energy and fuel costs, contributed particularly to this positive development of results.
In the fourth quarter, development of the pro forma sales volumes was varied. Compared to the previous year, building materials sales volumes were affected by bad weather in some regions, such as Southern Germany, some parts of the USA and Canada, as well as by a weak market development in Indonesia. Cement sales volumes declined due to weak demand in Africa and Asia that could not be offset by a further increase in North America. The decline in aggregates sales volumes in North America could be more than offset by increases in all other Group areas. Especially, full consolidation of Mibau Group in the Northern and Eastern Europe-Central Asia Group area made a major contribution. The positive development of ready-mixed concrete sales volumes in both European Group areas could not fully offset weaker sales volumes in the other Group areas.
On a comparable pro forma basis, revenue declined by 4% in the fourth quarter in line with the weaker sales volumes. OIBD, however, could be increased slightly by 2%.
Explanations in the following text refer to the pro forma development in the individual Group areas.
Western and Southern Europe
| Pro-forma key financial figures | January-December | Q4 | ||||||
| €m | 2015 | 2016 | Variance | Like-for- like1) | 2015 | 2016 | Variance | Like-for- like1) |
| Sales volumes | ||||||||
| Cement (Mt) | 28,099 | 28,601 | 2% | 2% | 7,052 | 7,073 | 0% | 0% |
| Aggregates (Mt) | 78,971 | 79,654 | 1% | 1% | 19,349 | 19,486 | 1% | 1% |
| Ready-mixed concrete (Mm3) | 17,069 | 18,080 | 6% | 6% | 4,379 | 4,596 | 5% | 5% |
| Asphalt (Mt) | 2,994 | 3,044 | 2% | 2% | 714 | 818 | 15% | 15% |
| Income statement | ||||||||
| Revenue | 4,907 | 4,768 | -3% | 2% | 1,192 | 1,138 | -5% | 1% |
| Operating income before depreciation (OIBD) | 688 | 622 | -10% | 4% | 177 | 108 | -39% | -25% |
| in % of revenue | 14.0% | 13.1% | 14.9% | 9.5% | ||||
| Operating income | 352 | 310 | -12% | 13% | 92 | 25 | -73% | -51% |
| in % of revenue | 7.2% | 6.5% | 7.7% | 2.2% | ||||
1) Adjusted for currency and consolidation effects and CO₂ gains in Q115: 21rm€ ; Q215: 19 m€ ; Q216: 11 m€ ; Q416: –17 m€
Pro forma sales volumes in Western and Southern Europe benefited from the strong growth in Germany, the continued recovery of building materials demand in the United Kingdom, driven by private residential construction and big infrastructure projects in London and Southern England, as well as a positive trend reversal in the Netherlands. However, building materials demand in Italy, France, and Spain developed rather weakly.
In 2016, revenue and operating income were impaired by the devaluation of the British pound against the euro. On a comparable pro forma basis, revenue and operating income increased due to a rise in sales volumes and the decrease in energy costs, in particular.
On the one hand, building materials sales volumes benefited from mild weather and high construction activity in the United Kingdom and Benelux; Southern Germany, on the other hand, was impacted by bad weather. Revenue rose slightly on a like-for-like basis. Operating income was impaired by several effects, of which €37 million are attributable to effects from currency, consolidation and CO₂ emission rights.
Northern and Eastern Europe-Central Asia
| Pro-forma key financial figures | January-December | Q4 | ||||||
| €m | 2015 | 2016 | Variance | Like-for- like1) | 2015 | 2016 | Variance | Like-for- like1) |
| Sales volumes | ||||||||
| Cement (Mt) | 24,250 | 25,388 | 5% | 5% | 5,736 | 5,744 | 0% | 0% |
| Aggregates (Mt) | 34,336 | 38,034 | 11% | -5% | 9,092 | 12,748 | 40% | -16% |
| Ready-mixed concrete (Mm3) | 5,819 | 6,324 | 9% | 4% | 1,609 | 1,629 | 1% | 1% |
| Asphalt (Mt) | 0 | 0 | 0% | 0% | 0 | 0 | 0% | 0% |
| Income statement | ||||||||
| Revenue | 2,257 | 2,484 | 10% | 0% | 586 | 658 | 12% | -11% |
| Operating income before depreciation (OIBD) | 402 | 461 | 15% | 12% | 100 | 115 | 15% | 10% |
| in % of revenue | 17.8% | 18.6% | 17.1% | 17.5% | ||||
| Operating income | 243 | 293 | 20% | 17% | 57 | 72 | 25% | 13% |
| in % of revenue | 10.8% | 11.8% | 9.8% | 10.9% | ||||
1) Adjusted for currency and consolidation effects and CO₂ gains in Q215: 10 m€ ; Q216: 6 m€ ; Q416: –3 m€
In the Group area Northern and Eastern Europe-Central Asia, the strong development of construction activity continued in the Northern European countries. Especially in Norway, lively construction activity on infrastructure projects led to a further increase in cement and ready-mixed concrete sales volumes. In Sweden, demand was driven by private residential construction and Poland benefited also from a rise in residential construction. The Czech Republic was also able to increase cement sales volumes. Although the situation in Ukraine has stabilized, the conflict continues to burden the economic development. In Russia, demand rose due to the positive development in the markets of St. Petersburg and Moscow. Total sales volumes of cement and ready-mixed concrete increased in this Group area. The rise in aggregates sales volumes results mainly from the full consolidation of the Mibau Group. Without Mibau, the sales of aggregates declined for the full year and the fourth quarter.
The positive market development and the consolidation of Mibau is reflected in the development of revenue and results in the Northern and Eastern Europe-Central Asia Group area.
North America
| Pro-forma key financial figures | January-December | Q4 | ||||||
| €m | 2015 | 2016 | Variance | Like-for- like1) | 2015 | 2016 | Variance | Like-for- like1) |
| Sales volumes | ||||||||
| Cement (Mt) | 15,357 | 15,931 | 4% | 4% | 3,845 | 3,994 | 4% | 4% |
| Aggregates (Mt) | 117,999 | 119,369 | 1% | 1% | 30,250 | 28,327 | -6% | -6% |
| Ready-mixed concrete (Mm3) | 7,194 | 6,680 | -7% | -7% | 1,796 | 1,547 | -14% | -14% |
| Asphalt (Mt) | 3,675 | 3,991 | 9% | 9% | 929 | 861 | -7% | -7% |
| Income statement | ||||||||
| Revenue | 4,157 | 4,235 | 2% | 2% | 1,053 | 1,043 | -1% | -3% |
| Operating income before depreciation (OIBD) | 859 | 990 | 15% | 16% | 236 | 268 | 14% | 12% |
| in % of revenue | 20.7% | 23.4% | 22.4% | 25.7% | ||||
| Operating income | 572 | 690 | 21% | 22% | 158 | 185 | 17% | 16% |
| in % of revenue | 13.8% | 16.3% | 15.0% | 17.7% | ||||
1) Adjusted for currency and consolidation effects
In North America, the growth in demand for building materials continued, in particular due to the sustained economic recovery and declining unemployment figures. Main drivers in 2016 were commercial construction and the construction of multi-family houses. With the acquisition of Italcementi’s North American subsidiary Essroc in July 2016, we have significantly expanded our footprint in the Northeast and Midwest of the USA as well as in the eastern part of Canada.
Particularly strong growth of building materials deliveries was recorded in the North and South of the USA. Sales in the West region suffered from bad weather in the first quarter, but remained almost stable over the year. The drop in sales volumes in the Canadian Prairie provinces, as a result of the decline in oil production projects, was compensated to a certain degree by increases in the Vancouver and Seattle areas.
Revenue grew slightly on a comparable pro forma basis. The operating income, on the other hand, rose significantly, partly due to the decline in energy costs and price increases.
In the fourth quarter, sales volumes of aggregates, ready-mixed concrete and asphalt declined due to the early end of the construction season. Especially in Canada sales volumes were impaired by an early winter start. However, operating income could be further significantly improved.
Asia-Pacific
| Pro-forma key financial figures | January-December | Q4 | ||||||
| €m | 2015 | 2016 | Variance | Like-for- like1) | 2015 | 2016 | Variance | Like-for- like1) |
| Sales volumes | ||||||||
| Cement (Mt) | 33,696 | 34,386 | 2% | 2% | 8,944 | 8,799 | -2% | -2% |
| Aggregates (Mt) | 36,986 | 39,807 | 8% | -2% | 9,458 | 10,458 | 11% | 0% |
| Ready-mixed concrete (Mm3) | 11,773 | 11,434 | -3% | -3% | 3,112 | 3,015 | -3% | -3% |
| Asphalt (Mt) | 2,045 | 1,840 | -10% | -10% | 469 | 506 | 8% | 8% |
| Income statement | ||||||||
| Revenue | 3,350 | 3,186 | -5% | -5% | 844 | 826 | -2% | -7% |
| Operating income before depreciation (OIBD) | 832 | 756 | -9% | -10% | 205 | 206 | 1% | -4% |
| in % of revenue | 24.8% | 23.7% | 24.2% | 25.0% | ||||
| Operating income | 657 | 573 | -13% | -14% | 161 | 154 | -5% | -10% |
| in % of revenue | 19.6% | 18.0% | 19.1% | 18.7% | ||||
1) Adjusted for currency and consolidation effects
Economic growth in the Asia-Pacific Group area further slowed down in 2016. In Indonesia, delays in infrastructure programmes on the main island of Java led to a weaker demand and to price pressure as a result of excess capacities. Our subsidiary Indocement was able to defend its market share. Competitive pressure has increased in Thailand. In Malaysia, demand for aggregates and ready-mixed concrete decreased following the completion of large building projects. In India, cement demand recovered significantly, particularly as a result of infrastructure projects in the south of the country. In Australia, sales volumes of building materials increased despite a reduction in mining and infrastructure projects, thanks to a strong development in residential construction on the East Coast.
As a result of the significant drop in prices in Indonesia and Thailand and declining demand in Malaysia, revenue and operating income decreased in the Asia-Pacific Group area on a comparable pro-forma basis. The price decline in Indonesia could be stopped at the end of the year.
Africa-Eastern Mediterranean Basin
| Pro-forma key financial figures | January-December | Q4 | ||||||
| €m | 2015 | 2016 | Variance | Like-for- like1) | 2015 | 2016 | Variance | Like-for- like1) |
| Sales volumes | ||||||||
| Cement (Mt) | 19,910 | 20,148 | 1% | 0% | 5,413 | 5,039 | -7% | -8% |
| Aggregates (Mt) | 10,161 | 11,005 | 8% | 8% | 2,503 | 2,782 | 11% | 11% |
| Ready-mixed concrete (Mm3) | 4,804 | 4,955 | 3% | 3% | 1,248 | 1,185 | -5% | -5% |
| Asphalt (Mt) | 408 | 496 | 22% | 22% | 91 | 116 | 28% | 28% |
| Income statement | ||||||||
| Revenue | 1,919 | 1,800 | -6% | 3% | 492 | 423 | -14% | 5% |
| Operating income before depreciation (OIBD) | 465 | 462 | -1% | 5% | 109 | 129 | 18% | 28% |
| in % of revenue | 24.2% | 25.7% | 22.2% | 30.6% | ||||
| Operating income | 334 | 338 | 1% | 5% | 77 | 95 | 23% | 24% |
| in % of revenue | 17.4% | 18.8% | 15.7% | 22.6% | ||||
1) Adjusted for currency and consolidation effects
Market development in Africa was varied. Construction activity in the oil-exporting countries was weak. Competition with local producers increased significantly in the sub-Saharan countries, which affected especially Ghana, Tanzania and the Democratic Republic of the Congo. In Togo and Burkina Faso, however, development of sales volumes was positive. Also in Morocco, cement sales volumes increased.
The weakening of the Egyptian pound has impacted the development of revenue and operating income in 2016. On a comparable pro-forma basis revenue and operating income could be improved despite the competitive pressure. This was mainly due to lower cost for raw materials and energy as well as the successful realization of synergies in Morocco and Egypt.
First outlook 2017
In its forecast of January 2017, the International Monetary Fund (IMF) expects a slight increase in global economic growth from 3.1% in 2016 to 3.4% in 2017. Driver of this development is on the one hand an accelerating growth in the USA; on the other hand, the growth rates of the emerging markets are expected to rise again despite a further economic slowdown in China. Particularly for the countries in sub-Saharan Africa and in Asia (without China), higher growth rates are expected.
Global risks have increased significantly compared to the previous year. This concerns both geopolitical and macroeconomic risks. Geopolitical risks include, in particular, the conflicts in the Middle East and eastern Ukraine. Macroeconomic risks include, above all, the rise in energy prices and inflation, the unpredictable consequences of the economic slowdown in China and political uncertainties in Europe in connection with to upcoming elections.
In North America, HeidelbergCement, in conformity with the IMF, expects a stronger economic recovery and therefore a further increase in demand for building materials. In Western and Southern Europe, a positive market development is expected. This is based on the continuing recovery of the United Kingdom, the continuing solid condition of the German economy, and stable economic growth in Benelux. In Eastern Europe, we anticipate growing demand for building materials as a result of the EU infrastructure programme, among other things. The crisis in eastern Ukraine will continue to impair the sales volumes and results of the country. The economic situation in Russia and Kazakhstan has improved after the rise of the oil price. In the African markets, we expect an accelerated growth in demand and continued competition. In Asia, HeidelbergCement anticipates a general upturn in demand, in particular due to increasing infrastructure investments in Indonesia. In China, a further decline in demand and an increase in excess capacities are expected. Repercussions on exports are limited because a large proportion of Chinese capacities is located inland.
“Considering the overall positive outlook for the global economy and our advantageous geographical positioning, we are confident about the future,” says Dr. Bernd Scheifele.
“At the same time, we are aware of the increased macroeconomic risks, in particular the rise in energy prices and inflation as a whole. In addition, uncertainties arise from geopolitical risks in Ukraine, the Middle East and due to important elections in Europe in 2017. HeidelbergCement is very well equipped to follow up on the new strategic priorities – growth and increase in shareholder return – over the coming years. In 2017, we will focus on the realisation of the synergies from the Italcementi acquisition and on measures in view of cost inflation. Price increases will play an important role in this context. Our programmes to improve efficiency and margins will also be consistently pursued in 2017. It is our aim to continuously improve our commercial and operational work processes for cement (“CIP – Continuous Improvement Programme”), aggregates (“Aggregates CI”), and logistics (“LEO”).”
“In 2017, we will once again benefit from the economic development in the USA,” continues Dr. Bernd Scheifele. “With our strong positioning in raw material reserves and production sites at attractive locations, our unique vertical integration, and excellent product portfolio, as well as our margin management which is best-in-class in our industry, we believe that we are well equipped for the opportunities and challenges of 2017.”
The complete consolidated financial statements of HeidelbergCement including the outlook will be published on 16 March 2017.
13,044 characters
