Europe / Middle East / Africa
HeidelbergCement lifts prices to stem cost surge
May, 07 2012
(Germany) -- Germany's HeidelbergCement, the world's third-largest cement maker, joined peers in lifting prices after soaring energy costs pushed down quarterly profit by more than three quarters and way below estimates.
Cement makers, heavy consumers of coal, natural gas, oil and power to grind and burn limestone and gypsum into cement, have been hit by a 10 percent increase in the price of oil this year.
Mexico's Cemex, the world's No.2 manufacturer, posted a smaller-than-expected quarterly net loss last week thanks to price increase in the United States and said it may further raise prices in the second half of the year.
HeidelbergCement's operating profit in the first three months of 2012 slumped by 77 percent to 14 million euros ($18 million), missing a consensus forecast of 52.9 million.
Its shares slid 3.2 percent to 41.20 euros by 1048 GMT, making them the biggest decliners on Germany's blue-chip DAX index, which was up 1.1 percent.
"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.
HeidelbergCement still expects 2012 profit and sales to grow for a third year in a row, Scheifele said at the company's annual meeting of shareholders meeting, without being more specific.
Analysts expect operating profit to rise to 1.62 billion euros this year from 1.47 billion in 2011, according to a Reuters poll.
"The earnings situation in North America and Asia is better than expected and I expect that to make up for the weak first-quarter results over the full year," Silvia Quandt Research analyst Ralf Groenemeyer said.
The Portland Cement association, an industry association for the United States and Canada, last week raised its forecast for the increase in cement consumption this year to 3.7 percent from 0.5 percent.
Scheifele also wants to keep a tight grip on expenses to maintain the company's profitability at least at last year's level, when it was among the highest in the industry.
The cement maker cut annual costs more than planned in 2011 and increased its savings programme to a total of 1 billion euros by 2014 compared with its 2010 cost base.
HeidelbergCement trades at 12 times expected earnings per share, the average among peers such as Holcim, according to Thomson Reuters StarMine, which weights analyst estimates according to their accuracy.
Peer Lafarge, the world's largest cement maker by sales, plans to post first-quarter results on Friday. ($1 = 0.7603 euros).
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