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HeidelbergCement lifts prices to stem cost surge

May, 03 2012

(Frankfurt, Germany) -- German cement maker HeidelbergCement joined peers in raising prices after posting a 77 percent decline in operating profit in the first quarter, a bigger fall than expected due to higher energy costs.

Operating profit in the first three months of the year declined to 14 million euros ($18 million) from 60 million euros a year earlier, the company said on Thursday.

That was below than the 52.9 million euros expected on average by analysts in a Reuters poll.

"In view of the higher costs of energy and raw materials we launched price increases and in some markets we were already able to execute them in order to improve our operating margins," Chief Executive Bernd Scheifele said on Thursday.

Shares were indicated down 1.6 percent at 0543 GMT before the start of trading, according to brokerage Lang & Schwarz, while the German bluechip index DAX was seen up 0.5 percent.

CEO Scheifele wants to get energy costs under control to maintain the company's profitability at least at last year's level, when it was among the highest in the industry.

Mexican rival Cemex, one of the world's biggest cement makers, posted a smaller-than-expected first-quarter net loss last week as it raised prices in the United States and increased sales there, offsetting a weaker performance in northern Europe.

Profit and sales will climb for a third year in a row in 2012, Scheifele reiterated, without being more specific, ahead of the company's annual meeting of shareholders meeting in Heidelberg.

"You cannot blame the company for the higher costs, in particular since it beat its savings target last year and then increased the target," said Silvia Quandt Research analyst Ralf Groenemeyer.

"The earnings situation in North America and Asia is better than expected and I expect t hat t o make up for the weak f irst-quarter r esults o ver the full year," he said.

The cement maker in 2011 cut almost 184 million euros more in annual costs than it had planned and increased its savings programme to a total of 1 billion euros by 2014 compared with its 2010 cost base.

Making cement, the most heavily consumed substance on earth after water, costs a lot of energy as its ingredients have to be crushed and burned.

HeidelbergCement trades at 12 times expected earnings per share, the average amongst peers such as Holcim, according to Thomson Reuters StarMine, which weighs analyst estimates according to their accuracy.

The company's shares have risen 27 percent this year. ($1 = 0.7603 euros)

By Peter Dinkloh
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