HEIDELBERG (dpa-AFX) - Heidelberg Materials, like all other building materials groups, is particularly dependent on energy and raw material prices. Already in the summer, there was an easing here - although still partly at a high level - after the price jump in the previous year due to Russia's war against Ukraine. Heidelberg also took countermeasures by raising prices and putting the brakes on costs. The Dax company recently raised its profit target for the current year once again. What's going on at the company, what the share is doing, and what experts have to say.

WHAT'S GOING ON AT HEIDELBERG MATERIALS:

After a surprisingly profitable summer quarter, the building materials group recently became more optimistic for the current year once again. Earnings before interest and taxes adjusted for special items are expected to reach 2.85 to 3 billion euros in 2023. Management had only raised its forecast to 2.7 to 2.9 billion in July.

Meanwhile, the Group is sticking to its sales target: like-for-like earnings are expected to increase moderately. In 2022, adjusted earnings before interest and taxes had amounted to just under 2.5 billion and sales to a good 21 billion euros.

According to preliminary figures, Heidelberg Materials generated sales of just over 5.6 billion Euro in the third quarter, four percent down on the previous year. Adjusted operating profit, meanwhile, rose by almost a quarter to just under 1.1 billion euros. The company, formerly known as Heidelbergcement, plans to publish its final quarterly figures on November 2.

Heidelberg Materials is one of the world's largest building materials companies. In Germany, it says it is the market leader in cement and ready-mix concrete, as well as sand and gravel. The company, which has more than 51,000 employees, aims to produce climate-neutral concrete by 2050. To achieve this goal, Heidelberg Materials is expanding its building materials recycling business, including through acquisitions.

WHAT ANALYSTS SAY:

Of the 13 experts covered by dpa-AFX since August, eight recommend buying the share and four recommend holding it. Only one analyst recommends selling. The average target price is around 83 euros - the most recent price was a good 68 euros.

Analyst Thorsten Reigber from DZ Bank was positively surprised by the preliminary quarterly figures and the renewed increase in the outlook. The weak demand in private residential construction could be compensated by infrastructure projects and commercial construction. In addition, energy costs were lower year-on-year, although they were still high in absolute terms. Strict cost discipline and moderate price increases also continued to pay off for Heidelberg Materials. Interesting infrastructure projects are expected in the important North American market in 2024.

Despite the difficult environment, analyst Glynis Johnson from Jefferies sees investment opportunities for stocks in the building materials sector. Investors have confidence in the growth of companies in the sector. In the case of Ireland's CRH, for example, these opportunities lie in the US infrastructure market. But even shares for which they had previously been more cautious appeared increasingly valuable. At Saint-Gobain and Heidelberg Materials, for example, low year-on-year comparables and price increases could drive margins and lead to a strong recovery in the first half of 2024.

Meanwhile, analyst Harry Goad of private bank Berenberg believes that a takeover of Summit Materials - should speculation surrounding a possible bid for the U.S. cement maker prove true - would be a wiser move than previous larger acquisitions by the building materials group.

For Gregor Kuglitsch of the major Swiss bank UBS, however, the economic logic of such a transaction is debatable. It is possible that Heidelberg Materials wants to increase its commitment in North America. In view of the very low valuation of Heidelberg shares, Kuglitsch is more in favor of distributing money to shareholders.

WHAT THE SHARE DOES:

The Heidelberg Materials share, which is listed on the Dax, had made an impressive recovery for a good year since its multi-year low of 29 euros at the start of the Corona crisis in the spring of 2020. Its price had risen to a good 80 euros in the spring of 2021. Then it went down again. Accelerated after the start of the Russian war of aggression on Ukraine, the share reached an interim low of around 39 euros in September 2022.

Since then, a recovery has been underway, and since the turn of the year alone, the share price has risen by more than a quarter to almost 68 euros, almost the same price as two years ago.

However, it is still a long way from the record high of around 112 euros reached in 2007. In the following year, the global financial crisis caused an unprecedented drop in the share price to less than 20 euros.

With a market capitalization of around 12.8 billion euros, the Group is one of the lightweights in the Dax and also lags behind its European competitors. By way of comparison, the French building materials manufacturer Saint-Gobain has a market capitalization of around 26 billion euros, the Irish building materials group CRH 35.8 billion euros and Holcim from Switzerland the equivalent of around 34 billion euros./mne/tav/mis