HeidelbergCement AG (HDELY.PK, HEI.DE) Thursday reported lower earnings for 2012, but debt reduced over 700 million euros and the company announced a 34 percent increase in dividend. The German cement giant upped its cost-cutting target and looks to increase revenue and operating income in 2013.
For the year, group share of profit declined to 301.2 million euros ($390.3 million) from 348.1 million euros. However, profit for the year edged up 2 percent to 545 million euros due to higher earnings from discontinued operations.
Profit for 2012 included 257 million euros impairment losses from goodwill and property, plant, and equipment as well as losses arising from divestments totaling 49 million euros.
Annual revenue advanced 9 percent to 14.020 billion euros, amid price increases and positive exchange rate effects, despite mixed development in sales volumes.
Operating income climbed 9 percent to 1.613 billion euros, benefiting from price increases, exchange rate effects and the successful implementation of the "FOX 2013" savings program. Operating income before depreciation or OIBD increased 7 percent to 2.48 billion euros.
Dr. Bernd Scheifele, Chairman of the Managing Board of HeidelbergCement, said, "We were able to further improve operating income, reverse the negative margin trend, and, in particular, have considerably reduced our net debt. A major contributing factor was the significant increase in free cash flow.''
Cement sales volumes rose 1.4 percent as positive development in the North America, Asia-Pacific, and Africa-Mediterranean Basin Group areas more than offset the weak demand in Europe.
Sales of aggregates and asphalt fell due to decreasing infrastructure investments in the U.S., the U.K. and several Eastern European countries.
In 2012, HeidelbergCement significantly increased its free cash flow and reduced its net debt by more than 700 million euros to 7.0 billion euros.
Quarterly profit slid to 130 million euros from 129 million euros. Operating income increased 11 percent to 455 million euros. Revenue for the quarter increased 6 percent to 3.495 billion euros from 3.282 billion euros in the prior year.
The company proposes to increase dividend by 34 percent to 0.47 euros per share from last year's 0.35 euros per share.
The company looks to further increase revenue and operating income in 2013 and significantly improve profit before tax.
In North America, HeidelbergCement expects a continuing economic recovery in 2013 and consequently increased demand for building materials, especially from residential construction and the raw materials industry.
Markets in Germany, Northern Europe, Russia, and central Asia are expected to remain stable or continue growing, while weak economic development and demand for building materials are expected in other regions. In Asia and Africa, the firm continues to expect sustained growth of demand.
After its "FOX 2013" program exceeded expectations in 2011 and 2012, HeidelbergCement increased the savings goal for the 2011 to 2013 period to 1.010 billion euros from 600 million euros.
The group hopes to realise a further 240 million euros of this total in 2013, in comparison with the base year 2010. HeidelbergCement has launched the "LEO" program for optimising logistics, which aims at achieving cost reductions of 150 million euros over the coming years.
The stock advanced 0.5 percent to settle at 54.58 euros on Wednesday.
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