HeidelbergCement with strong result in 2020

• Record result despite corona-related decline in demand: result from current operations
  before depreciation and amortisation increases like-for-like by around 6% to €3.7 billion compared with the previous year

• ROIC at 7.9% – well on track to reach strategic medium-term target of “clearly above 8%”

• Adjusted earnings per share increase by €0.48 to €6.88

• Faster than expected return to progressive dividend policy: dividend proposal of €2.20 per share

• Significant drop in net debt by €1.5 billion reduces leverage ratio to 1.86x – already clearly within the target range of 1.5x-2.0x

• Further reduction of CO2 emissions; good progress in implementing CCU/S technologies on an industrial scale; pioneer in linking remuneration to CO2 reduction target

• Good start to the year confirms optimistic outlook for 2021

HeidelbergCement closed the 2020 financial year with top results in key figures. Result from current operations before and after depreciation and amortisation as well as earnings per share adjusted for non-recurring effects rose to new record levels. Thanks to the very good free cash flow, net debt was significantly reduced. In 2020, a clear premium on the cost of capital was earned. The dividend is to increase by 5% to €2.20 per share compared with the pre-corona year 2018.

“The entire HeidelbergCement team has demonstrated exceptional flexibility and resilience over the past year,” said Dr. Dominik von Achten, Chairman of the Managing Board of HeidelbergCement. “As a result, we were able to achieve top results in key figures despite an unprecedentedly difficult year. This also applies to the important topic of sustainability, where we have once again made significant progress. I would like to thank all our employees for their extraordinary commitment. We have thus laid the foundation for a successful future.”

Considerable increase in results despite corona-related decline in demand – ROIC rises significantly to 7.9%

Group revenue decreased by 6.6% to €17,606 million (previous year: 18,851) in comparison with the previous year. On a like-for-like basis, the decline amounted to 4.6%. The €601 million decrease in HC Trading's revenue due to the decision to significantly reduce fuel trading with third-party customers contributed significantly to this decline.

Result from current operations before depreciation and amortisation increased by 3.5% to €3,707 million (previous year: 3,580). On a like-for-like basis, the increase amounted to 6.1% compared to the previous year. In addition to successful price increases and lower energy costs, significant savings from the COPE (COVID Contingency Plan Execution) action plan, launched in February 2020, had a particularly positive impact on the result. Result from current operations rose by 8.1% to €2,363 million (previous year: 2,186). On a like-for-like basis, the increase amounts to 11.0%.

The additional ordinary result of €-3,678 million (previous year: €-178 million) was adversely affected by impairment of goodwill and other non-current assets totaling €3,497. This resulted essentially from the COVID-19-related revaluation of the HeidelbergCement Group's asset portfolio.

Excluding the additional ordinary result and a non-recurring deferred tax income in connection with the impairment of goodwill in 2020, the Group share of profit rose by 7.6% to €1,365 million (previous year: 1,269). Adjusted earnings per share increased accordingly by €0.48 to €6.88 (previous year: 6.40).

In the financial year, the return on invested capital (ROIC) reached already 7.9% (previous year: 6.5%). This means, HeidelbergCement has again earned a clear premium on its cost of capital in 2020. “We have made considerable progress in 2020 in terms of return on invested capital. This puts us on track to achieve our strategic medium-term target earlier than expected,” said Dr. Dominik von Achten. The Group aims to achieve a ROIC of clearly above 8% by 2025.

Strong cash flow – leverage ratio already within the target range

Despite the difficult market environment, the cash inflow from operating activities of the continuing operations increased significantly by €370 million to €3,046 million (previous year: 2,676) in the 2020 financial year. The cash inflow was used in particular for the reduction of net debt. The considerable increase in cash inflow from operating activities was based on the good operating business and the consistent spending discipline within the framework of the COPE action plan.

Net debt decreased by around €1.5 billion compared to 2019 to €6.9 billion (incl. accounting for lease liabilities). The leverage ratio decreased accordingly to 1.86x.

“As part of our COPE action plan, we were able to realise cash savings of around €1.3 billion,” said Dr. Lorenz Näger, Chief Financial Officer of HeidelbergCement. “As a result of the strong cash flow, we were able to reduce net debt in 2020 even more significantly than in previous years. In this way we have already reached the target corridor for our leverage ratio of 1.5x to 2.0x and are thus in an excellent financial position.”

Dividend leap to €2.20 per share proposed

Following the positive business trend in 2020, HeidelbergCement is resuming its progressive dividend policy faster than expected. For the past financial year, the Managing Board and Supervisory Board propose to the Annual General Meeting the distribution of a dividend of €2.20 (previous year: 0.60) per share. This corresponds to a payout ratio of 32.0% in relation to the Group share of adjusted profit for the financial year. Compared to the pre-corona year 2018, the dividend is to increase by 5%.

Leading the way in climate protection and sustainability

HeidelbergCement considers climate change as a central challenge for the future, both for the company and for society. As one of the world's leading building materials manufacturers, HeidelbergCement has the ambition and the innovative strength to actively shape this change in a pioneering role.

For this reason, the company is giving high priority to the topic of sustainability. By 2025, HeidelbergCement aims to reduce specific net CO2 emissions to below 525 kg per tonne of cementitious material. This corresponds to a reduction of 30% compared with 1990. In 2020, specific net CO2 emissions decreased by 2.3% to 576 kg per tonne of cementitious material compared with the previous year (minus 23% compared with 1990).

The company is also making great strides in the industrial scaling of CO2 reduction and capture technologies. Three CO2 capture and utilisation/storage (CCU/S) projects are entering the next phase. The CCS project in Brevik, Norway, is scheduled to start regular operations by 2024. In the pilot project “catch4climate” at the cement plant in Mergelstetten, Germany, a demonstration plant for CO2 capture will be built on a semi-industrial scale. With the “LEILAC 2” project, the LEILAC technology is to be implemented on an industrial scale at HeidelbergCement’s Hanover cement plant by 2025. HeidelbergCement is also active in other partnerships, including the HyNet North West consortium in the United Kingdom and the collaboration with the materials technology company Fortera at the Redding cement plant, California, United States.

To put even more emphasis on the sustainability goals, the company is consistently linking its CO2 reduction targets to the worldwide remuneration systems. In future, full variable remuneration can only be achieved if both the financial targets and the sustainability target are met. The regulation will apply to all members of the Managing Board and to every bonus-eligible employee worldwide from the 2021 financial year.

Outlook 2021

HeidelbergCement expects demand to develop positively in many markets in the 2021 financial year. “The good start to the year confirms our optimistic outlook for 2021,” says Dr. Dominik von Achten. “There should be tailwind from the partly massive infrastructure programmes in many countries. The private residential construction sector should also continue to grow.”

Based on the overall economic and industry-specific outlook for the building materials industry and the specific growth prospects for the markets in which HeidelbergCement operates, the company expects a slight increase in revenue before exchange rate and consolidation effects in 2021. HeidelbergCement anticipates further increases in the costs of raw materials as well as secondary cementitious materials and expects moderately rising energy costs, particularly for electricity, diesel, and petroleum coke, on a like-for-like basis. Against this background, HeidelbergCement anticipates a slight increase in the result from current operations before exchange rate and consolidation effects for 2021, as well as a significant increase in ROIC to above 8%.

Decisive for the actual extent of growth are, in particular, the further development of the corona pandemic and progress with vaccinations, as well as local economic development and the level of public and private investments.

Group financial figures

1) Adjusted for currency and consolidation effects
2) Adjusted for the additional ordinary result and a non-recurring deferred tax income in connection with the revaluation of the asset portfolio in 2020
3) Attributable to the shareholders of HeidelbergfCement AG
4) Recommendation to the Annual General Meeting

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