North / South America
Price increases bolster HeidelbergCement profits
Jul, 31 2012
Q2 revenues 3.78 bln euro vs Rtrs poll avg 3.63 bln
(Frankfurt, Germany) -- Price increases and cost cuts at Germany's HeidelbergCement started paying off in the second quarter, halting a slide in cement margins and putting the company on track to reach its 2012 targets.
- Q2 core oper profit 698 mln euro vs poll avg 679 mln
- Confirms 2012 outlook for higher revenues, oper profit
HeidelbergCement's operating income before depreciation (OIBD) for the three months through June rose 7 percent to 698 million euros ($854.52 million), it said on Tuesday, beating a consensus forecast of 679 million.
The company's efforts to chip away at its cost base, easing energy costs and price increases pushed through this year all helped HeidelbergCement post a 0.2 percent improvement in cement margins following steady declines last year and early this year.
"We will do everything in our power to continue this positive trend in the second half of 2012," Chief Executive Bernd Scheifele said in a statement.
Cement makers, heavy consumers of coal, natural gas, oil and power to grind and burn limestone and gypsum into cement, were hit by an increase in the price of oil in the first quarter. But prices have eased in recent months.
In addition, demand for cement has remained robust in North America and Asia, prompting HeidelbergCement to affirm its outlook for a third consecutive year of growth in 2012 sales and operating profit.
HeidelbergCement has also benefited from a slide of the euro against the U.S. dollar in the second quarter, which helped boost group revenue growth by 5 percentage points to 11.4 percent. Net profit was up 16 percent at 184 million euros.
Macroeconomic data has been pointing to improving demand for cement in the United States, HeidelbergCement's biggest single market, where groundbreaking on new U.S. homes rose to its fastest pace in over three years in June.
Larger Mexican peer Cemex earlier this month reported its highest quarterly operating core profit in nearly three years on a pickup in its U.S. business.
HeidelbergCement now sees cement volumes in North America rising 8-11 percent this year, compared with a previous forecast of 4-7 percent, with higher prices, while sales in western and northern Europe could decline by as much as 2 percent.
But the company slashed its global outlook for volumes to 4-6 percent growth, down from 6-9 percent, as its assessment of eastern Europe and Africa deteriorated.
"The growth in sales volumes, due to the additional capacities and a more or less significant increase in demand in Russia and Central Asia, is being somewhat muted by the latest decline in demand in Poland and the Czech Republic," it said.
French peer Lafarge, the world's No.1 cement maker by sales, reported improved quarterly sales and operating profit last week, though its net income plunged due to a 200 million-euro writedown on Greek assets.
Swiss rival Holcim is due to report first-half results on Aug. 15.
HeidelbergCement trades at 10.8 times 12-month forward earnings -- at a discount to Holcim and Lafarge, which trade at multiples of 14.5 and 11.8, respectively -- according to Thomson Reuters StarMine, which weights analyst estimates according to their accuracy.
Its shares, which have advanced almost 18 percent so far this year, were down 0.7 percent at 38.31 euros by 0838 GMT, while Germany's blue-chip index was up 0.8 percent.
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