2020 Half Year Results

30 July 2020

Dr. Dominik von Achten - Group CEO Dr. Lorenz Näger - Group CFO

Key Messages Q2 2020

  • Solid result in unprecedented challenging environment
  • Margin improvement despite significant demand pressure
  • COPE action plan with high cost savings and preservation of liquidity
  • 1.4 b€ net debt reduction driven by very strong free cash flow generation
  • Solid start into Q3 but business visibility still limited for H2 2020

2020 Half Year Results

Financial Highlights

Sustainability Update

Key Takeaways

Appendix

2 0 2 0 H A L F Y E A R R E S U L T S

Margin improvement despite volume driven revenue decline

Revenue (m€)

Operating EBITDA (m€)

Operating EBITDA Margin

Operating EBIT (RCO) (m€)

Lfl: -10%

Lfl: -2%

Lfl: -5%

+205 bps

Lfl: -6%

-10%

-2%

-7%

-6%

Lfl: -4%

Lfl: -12%

9,212

1,438 1,404

23.1%

+139 bps

754

-5%

710

8,254

21.0%

698

651

-13%

1,046

998

15.6% 17.0%

4,973 4,324

Q2

Half Year

Q2

Half Year

Q2

Half Year

Q2

Half Year

2019 2020

4

2020 Half Year Results | 30.07.2020

2 0 2 0 H A L F Y E A R R E S U L T S

COPE action plan with strong contribution

Q2 Operating EBITDA Bridge (m€)

-4.0%

1,046

-6

1,040

-193

152

999

0

998

Q2 2019 EBITDA

Currency

Q2 2019

Net volume

Price over cost 1)

Q2 2020

Scope

Q2 2020 EBITDA

LfL EBITDA

LfL EBITDA

1) Includes COPE cost savings of 158m€

5

2020 Half Year Results | 30.07.2020

2 0 2 0 H A L F Y E A R R E S U L T S

Stable EBITDA in a challenging market environment

H1 Operating EBITDA Bridge (m€)

-2.2%

1,438

-8

1,430

-236

1,399

5

1,404

205

H1 2019 EBITDA

Currency

H1 2019

Net volume

Price over cost 1)

H1 2020

Scope

H1 2020 EBITDA

LfL EBITDA

LfL EBITDA

1) Includes COPE cost savings of 183m€

6

2020 Half Year Results | 30.07.2020

2 0 2 0 H A L F Y E A R R E S U L T S

COPE action plan on track despite much higher revenue than anticipated

COPE cash savings as of June 2020 (m€)

1,000

65

354

106

183

Fixed cost

CapEx

Other cash

Total cash 2020 Target

savings

saving

Proactive and successfully implimented action plan

  • Cope action plan already initiated in February
  • Minimization of all non-essential expenses and reduction of staff costs clearly visible on results
  • Maintenance CapEx only for business critical projects
  • Suspension of tax prepayments and strict receivables policy

7

2020 Half Year Results | 30.07.2020

2 0 2 0 H A L F Y E A R R E S U L T S

Covid-19 leads to demand decline in all business lines

Sales volumes

Development in key markets

CEMENT (mt)

2019

2020

Change

LfL

North America

COPE savings and positive pricing minimizes the negative impact

Q2

32.4

28.7

-3.8

-10.9%

from significant decline in volumes

Half year

61.0

56.3

-4.7

-6.6%

Trend turning positive after very difficult April and May

AGGREGATES (mt)

2019

2020

Change

LfL

Europe

Q2

82.7

74.7

-8.0

-9.2%

Solid pricing and saving initiatives lead to margin improvement in

Half year

145.6

134.8

-10.8

-6.9%

a historically difficult quarter

Good demand in June, especially in Nordics, Eastern Europe and

READY-MIX (mm3)

2019

2020

Change

LfL

Germany

Q2

13.1

11.0

-2.0

-15.4%

Asia-Pacific

A difficult quarter driven by full lock-down in India and strict

Half Year

24.4

21.7

-2.7

-11.5%

ASPHALT (mt)

2019

2020

Change

LfL

measures taken in Australia and Indonesia

Africa - Eastern Mediterranean

Q2

3.0

2.6

-0.4

-13.6%

Limited impact from Covid-19, tailwind from energy costs and

Half Year

4.8

4.3

-0.5

-11.2%

COPE savings lead to both absolute EBITDA and margin

improvement in Q2

8

2020 Half Year Results | 30.07.2020

2 0 2 0 H A L F Y E A R R E S U L T S

Q2 2020 EBITDA growth in NEECA and Africa - Eastern Mediterranean

North America

m€

-26m

315

-8%

288

Q2 2019

Q2 2020

Western & Southern Europe

m€

-28m

272

-10%

244

Q2 2019

Q2 2020

North & Eastern Europe - Central Asia

m€

+28m

+14%

203

231

Q2 2019

Q2 2020

Asia Pacific

m€

-38m

187

-21%

149

Q2 2019

Q2 2020

Africa - Eastern Mediterranean

m€

+9m

+10%

88

96

Q2 2019

Q2 2020

9

2020 Half Year Results | 30.07.2020

S U S T A I N A B I L I T Y U P D A T E

Sustainability Report 2019 pubished

11th SR of HeidelbergCement published on 25 June 2020

  • Focus on climate protection and reduction of CO2 emissions
  • Thorough coverage of human rights and compliance as well as occupational health and safety
  • Further key topics: Social responsibility, supply chain and supplier management, R&D, biodiversity, responsible land use and water management, etc.
  • Commitment to the UN Global Compact and the UN Social Development Goals
  • Stakeholder engagement: next materiality assessment to be carried out until end of 2020

10 2020 Half Year Results | 30.07.2020

Key Financial Messages June 2020

  • Revaluation of the asset portfolio leads to impairment of goodwill and other assets of ~3.4 billion EUR
  • Adjusted for the additional ordinary result, Group Share of Profit increases by 5% to 356 million EUR per June 2020
  • Strong free cash flow generation - High cash conversion rate (53%) pushing free cash flow LTM to 1.9 billion EUR
  • COPE action plan with focus on cost savings, tight CapEx spending and disciplined working capital management took effect in Q2'20
  • Net debt reduced by 1.4 bn€ compared to June 2019

F I N A N C I A L H I G H L I G H T S

Adjusted Group share of profit increased by 5%

Income Statement per June (m€)

2019 1)

2020

Delta

Revenue

9,212

8,254

-957

RCOBD (Operating EBITDA)

1,438

1,404

-34

Depreciation and amortization

-684

-693

-9

Result from current operations (RCO)

754

710

-44

Additional ordinary result

-128

-3,490

-3,362

Financial result

-176

-157

+19

Income taxes

-150

-138

+12

Net result from continuing operations

300

-3,075

-3,375

Net result from discontinued operations

-9

-20

-11

Non-controlling interests

-79

-39

+40

Group share of profit

212

-3,133

-3,346

Group share of profit adjusted for AOR

340

356

+16

Key developments

  • Revaluation of asset portfolio leads to impairment of goodwill and other assets of 3.4 bn€ in AOR
  • Financial result improved due to the decrease in interest expenses (+38 m€)
  • Negative accounting effect from change in discount rate for the measurement of provisions
    (~50 m€ booked in financial result and discontinued operations)
  • Income taxes 12 m€ below prior year; further improvement expected for second half of the year

12

2020 Half Year Results | 30.07.2020

1) Prior year values adjusted

F I N A N C I A L H I G H L I G H T S

Portfolio revaluation led to goodwill and asset impairment of 3.4 bn€

Split by geography

UK

WSE (excl. UK)

34%

49%

8%

6%

NAM

3%

Other APAC

Split by line item

Financial fixed

assets / JVs Other fixed

0.4% assets

21.8%

77.8%

Goodwill

Reasons for revaluation

  • Corona pandemic as triggering event
  • Original business expectations have decreased in the specific planning period
  • Brexit impacts negatively on business expectations in UK
  • Increased MRP and risk-free debt spreads
  • Long term business prospects continue to be good
  • Impairment does not affect short term operational development; very little (positive) cash effect

13 2020 Half Year Results | 30.07.2020

F I N A N C I A L H I G H L I G H T S

Strong free cashflow and significant net debt reduction

Free cash flow1) generation (m€)

Cash conversion rate: 53%

3,546

-307

128

-350

-904

1,883

-230

Jun 2020

Interest

Tax

Change in

Sustaining

Other

FCF

EBITDA

payment

payment

working

CapEx

Generation

capital

LTM

LTM

  1. FCF = Operating cash flow minus sustaining capex

Net debt development (m€)

-1,443

10,437

293

149

8,994

-1,883

-2

Net debt

FCF

Net growth

Dividends

Currency

Net debt

Jun 2019

CapEx

/ other

Jun 2020

14 2020 Half Year Results | 30.07.2020

Key Messages Q2 2020

  • Solid result in unprecedented challenging environment
  • Margin improvement despite significant demand pressure
  • COPE action plan with high cost savings and preservation of liquidity
  • 1.4 b€ net debt reduction driven by very strong free cash flow generation
  • Solid start into Q3 but business visibility still limited for H2 2020

A P P E N D I X

Sales volumes

Sales Volumes

Cement ('000 t)

Aggregates ('000 t)

Ready Mix ('000 m3)

Asphalt ('000 t)

QUARTER

Q2 19

Q2 20

Change

LfL

Q2 19

Q2 20

Change

LfL

Q2 19

Q2 20

Change

LfL

Q2 19

Q2 20

Change

LfL

North America

4,443

3,847

-595

-13.4%

34,924

33,711

-1,213

-3.5%

2,099

1,952

-147

-7.0%

1,495

1,356

-139

-9.3%

West / South Europe

8,187

6,748

-1,439

-16.1%

22,262

18,365

-3,897

-18.9%

4,912

4,090

-822

-17.6%

859

700

-159

-18.5%

North / East Europe

6,765

6,324

-441

-5.0%

13,492

12,930

-561

-3.2%

1,820

1,566

-254

-12.2%

Asia Pacific

8,118

6,659

-1,459

-18.2%

9,902

8,244

-1,658

-10.9%

2,878

2,372

-506

-17.0%

520

439

-81

-15.6%

Africa / Med. Basin

4,772

4,983

211

5.6%

2,195

1,413

-782

-35.6%

1,228

1,029

-200

-16.2%

107

80

-27

-25.0%

Group Service

158

97

-61

-38.8%

117

31

-87

-73.6%

HC GROUP

32,444

28,659

-3,785

-10.9%

82,693

74,682

-8,011

-9.2%

13,054

11,039

-2,015

-15.4%

2,980

2,575

-405

-13.6%

Sales Volumes

Cement ('000 t)

Aggregates ('000 t)

Ready Mix ('000 m3)

Asphalt ('000 t)

YEAR TO DATE

Jun 19

Jun 20

Change

LfL

Jun 19

Jun 20

Change

LfL

Jun 19

Jun 20

Change

LfL

Jun 19

Jun 20

Change

LfL

North America

7,474

7,108

-367

-4.9%

57,515

56,225

-1,291

-2.2%

3,573

3,601

28

0.5%

1,911

1,815

-95

-8.0%

West / South Europe

15,071

12,891

-2,180

-12.5%

42,277

36,614

-5,663

-14.8%

9,194

7,910

-1,283

-15.1%

1,733

1,453

-280

-16.2%

North / East Europe

11,210

10,910

-301

0.0%

21,806

21,895

88

1.3%

3,158

2,841

-317

-8.0%

Asia Pacific

17,071

15,015

-2,056

-12.4%

19,662

16,514

-3,148

-9.9%

5,608

4,924

-684

-13.4%

984

877

-107

-10.9%

Africa / Med. Basin

9,847

10,147

300

4.2%

4,442

3,543

-898

-20.2%

2,602

2,262

-340

-13.1%

198

198

0

-0.1%

Group Service

351

278

-73

-20.8%

261

166

-95

-36.2%

HC GROUP

61,025

56,348

-4,677

-6.6%

145,605

134,791

-10,814

-6.9%

24,395

21,705

-2,691

-11.5%

4,825

4,343

-483

-11.2%

17 2020 Half Year Results | 30.07.2020

A P P E N D I X

Operating result

Operating Result

Revenues (m€)

Operating EBITDA (m€)

Operating EBIT / RCO (m€)

EBITDA Margin

QUARTER

Q2 19

Q2 20

Change

LfL

Q2 19

Q2 20

Change

LfL

Q2 19

Q2 20

Change

LfL

Q2 19

Q2 20

Change

LfL

North America

1,297

1,216

-6.2%

-7.9%

315

288

-8.4%

-10.2%

225

191

-15.4%

-17.3%

24.2%

23.7%

-55 bps

-62 bps

West / South Europe

1,388

1,182

-14.8%

-14.6%

272

244

-10.5%

-10.9%

164

143

-12.6%

-13.2%

19.6%

20.6%

+100 bps

+85 bps

North / East Europe

799

765

-4.3%

0.0%

203

231

13.8%

17.0%

152

183

20.6%

23.5%

25.4%

30.2%

+481 bps

+433 bps

Asia Pacific

804

667

-17.1%

-14.7%

187

149

-20.6%

-17.6%

124

85

-31.7%

-28.6%

23.3%

22.3%

-98 bps

-79 bps

Africa / Med. Basin

407

410

0.6%

0.7%

88

96

9.9%

12.7%

59

69

16.1%

21.5%

21.5%

23.5%

+198 bps

+250 bps

Group Service

450

201

-55.4%

-55.4%

7

4

-39.6%

-39.5%

6

2

-62.0%

-62.0%

1.6%

2.1%

+55 bps

+55 bps

HC GROUP

4,973

4,324

-13.0%

-12.3%

1,046

998

-4.6%

-3.9%

698

651

-6.7%

-6.0%

21.0%

23.1%

+205 bps

+202 bps

Operating Result

Revenues (m€)

Operating EBITDA (m€)

Operating EBIT / RCO (m€)

EBITDA Margin

YEAR TO DATE

Jun 19

Jun 20

Change

LfL

Jun 19

Jun 20

Change

LfL

Jun 19

Jun 20

Change

LfL

Jun 19

Jun 20

Change

LfL

North America

2,127

2,136

0.5%

-2.1%

343

340

-0.8%

-2.8%

168

146

-12.9%

-14.3%

16.1%

15.9%

-20 bps

-12 bps

West / South Europe

2,566

2,287

-10.9%

-10.8%

328

306

-6.7%

-8.1%

118

103

-12.1%

-15.6%

12.8%

13.4%

+59 bps

+38 bps

North / East Europe

1,373

1,349

-1.8%

2.4%

259

294

13.4%

15.0%

158

197

25.0%

26.0%

18.9%

21.8%

+292 bps

+233 bps

Asia Pacific

1,618

1,403

-13.3%

-11.7%

348

280

-19.6%

-17.3%

221

150

-32.3%

-29.8%

21.5%

19.9%

-157 bps

-137 bps

Africa / Med. Basin

837

853

2.0%

0.6%

184

192

4.4%

5.7%

128

137

6.8%

10.1%

22.0%

22.5%

+53 bps

+109 bps

Group Service

1,017

499

-50.9%

-50.9%

16

10

-40.9%

-41.1%

14

7

-47.3%

-47.5%

1.6%

1.9%

+33 bps

+32 bps

HC GROUP

9,212

8,254

-10.4%

-10.2%

1,438

1,404

-2.4%

-2.2%

754

710

-5.8%

-5.3%

15.6%

17.0%

+139 bps

+138 bps

18 2020 Half Year Results | 30.07.2020

A P P E N D I X

Scope and currency impacts

Scope & Currency

Scope Impact on Volumes

Revenue

Operating EBITDA

Operating EBIT (RCO)

QUARTER

CEM

AGG

RMC

ASP

Scope

Currency

Scope

Currency

Scope

Currency

North America

0

0

0

0

0

23

0

7

0

5

West / South Europe

-123

300

44

0

1

-5

1

0

1

0

North / East Europe

-104

-135

-33

0

-7

-27

1

-6

1

-4

Asia Pacific

20

-579

-18

0

2

-25

-1

-6

-1

-4

Africa / Med. Basin

-56

0

0

0

-5

5

-1

-1

-1

-2

Group Service

0

0

0

0

0

0

0

0

0

0

HC GROUP

-262

-414

-7

0

-10

-29

0

-6

0

-5

Scope & Currency

Scope Impact on Volumes

Revenue

Operating EBITDA

Operating EBIT (RCO)

YEAR TO DATE

CEM

AGG

RMC

ASP

Scope

Currency

Scope

Currency

Scope

Currency

North America

0

3

11

57

8

46

0

7

-1

4

West / South Europe

-294

596

103

0

-1

-1

5

0

4

0

North / East Europe

-299

-201

-63

0

-21

-35

4

-7

4

-4

Asia Pacific

57

-1,203

68

0

9

-39

-1

-9

-1

-6

Africa / Med. Basin

-116

0

0

0

-11

22

-3

0

-2

-2

Group Service

0

0

0

0

0

1

0

0

0

0

HC GROUP

-652

-805

119

57

-15

-7

5

-8

4

-8

19 2020 Half Year Results | 30.07.2020

F I N A N C I A L H I G H L I G H T S

Strong operating cash flow development in the first half of 2020

Consolidated statement of cash flows Jan - June (m€)

2019 1)

2020

Variance

Cash flow

1,093

1,094

1

Changes in working capital

-919

-865

55

Decrease in provisions through cash payments

-179

-106

72

Cash flow from operating activities - discontinued operations

-7

-10

-4

Cash flow from operating activities

-11

113

124

Investments (cash outflow)

-501

-458

42

Divestments (cash inflow) and change in consolidation scope

151

51

-101

Cash flow from investing activities - discontinued operations

1

-1

Cash flow from investing activities

-348

-408

-59

Dividend payments

-513

-220

293

Changes in ownership interests in subsidiaries

47

-1

-49

Net change in bonds, loans and lease liabilities

74

-533

-607

Cash flow from financing activities

-392

-754

-362

Net change in cash and cash equivalents

-751

-1,049

-298

Effect of exchange rate changes

36

-40

-76

Change in cash and cash equivalents

-715

-1,089

-374

  • Clear improvement in operating cash flow: strict working capital management and lower utilization of provisions
  • Cash flow from investing activities: disciplined spending on the investments side is offset by lower proceeds from divestments
  • Reduced dividend payment is reflected in the cash flow from financing activities
  • In the light of the Wirecard development an extraordinary audit of cash balances in Q2 showed no findings

20

2020 Half Year Results | 30.07.2020

1) Amounts restated due to reclassifications.

A P P E N D I X

Balance sheet materially impacted by impairment

Consolidated balance sheet June 2020 (m€)

June 2019

Dec 2019

June 2020

Variance vs. prior year

Assets

Intangible assets

11,916

12,155

9,377

-2,539

-21 %

Property, plant and equipment

14,232

14,529

13,235

-997

-7 %

Financial assets

2,124

2,128

2,041

-83

-4 %

Fixed assets

28,272

28,812

24,653

-3,619

-13 %

Deferred taxes

329

313

270

-59

-18 %

Receivables

4,327

3,661

4,101

-226

-5 %

Inventories

2,129

2,199

2,067

-62

-3 %

Cash and short-term financial instruments / derivatives

1,908

3,586

2,527

619

32 %

Assets held for sale and discontinued operations

34

16

-34

Balance sheet total

36,999

38,589

33,619

-3,380

-9 %

Equity and Liabilities

Equity attributable to shareholders

15,604

16,987

13,264

-2,340

-15 %

Non-controlling interests

1,420

1,517

1,373

-47

-3 %

Equity

17,024

18,504

14,637

-2,387

-14 %

Debt

12,391

12,028

11,580

-811

-7 %

Provisions

2,500

2,546

2,569

69

3 %

Deferred taxes

722

726

661

-61

-8 %

Operating liabilities

4,358

4,783

4,171

-187

-4 %

Assets held for sale and discontinued operations

3

1

-3

Balance sheet total

36,999

38,589

33,619

-3,380

-9 %

21 2020 Half Year Results | 30.07.2020

A P P E N D I X

Contact information and financial reporting calendar

DateEvent

16 September 2020 Capital Market Day (virtual)

5 November 2020

Third Quarter Results

Contact Information

Christoph Beumelburg

Director Communication & Investor Relations

Phone: +49 (0) 6221 481 13249

christoph.beumelburg@heidelbergcement.com

Ozan Kacar

Head of Investor Relations

Phone: +49 (0) 6221 481 13925

ozan.kacar@heidelbergcement.com

Piotr Jelitto

Investor Relations Manager

Phone: +49 (0) 6221 481 39568

piotr.jelitto@heidelbergcement.com

Samuel Jakob

Investor Relations Manager

Phone: +49 (0) 6221 481 39670

samuel.jacob@heidelbergcement.com

22 2020 Half Year Results | 30.07.2020

Disclaimer

Unless otherwise indicated, the financial information provided herein has been prepared under International Financial Reporting Standards (IFRS).

This presentation contains forward-looking statements and information. Forward-looking statements and information are statements that are not historical facts, related to future, not past, events. They include statements about our believes and expectations and the assumptions underlying them. These statements and information are based on plans, estimates, projections as they are currently available to the management of HeidelbergCement. Forward-looking statements and information therefore speak only as of the date they are made, and we undertake no obligation to update publicly any of them in light of new information or future events.

By their very nature, forward-looking statements and information are subject to certain risks and uncertainties. A variety of factors, many of which are beyond HeidelbergCement's control, could cause actual results to defer materially from those that may be expressed or implied by such forward-looking statement or information. For HeidelbergCement particular uncertainties arise, among others, from changes in general economic and business conditions in Germany, in Europe, in the United States and elsewhere from which we derive a substantial portion of our revenues and in which we hold a substantial portion of our assets; the possibility that prices will decline as result of continued adverse market conditions to a greater extent than currently anticipated by HeidelbergCement's management; developments in the financial markets, including fluctuations in interest and exchange rates, commodity and equity prices, debt prices (credit spreads) and financial assets generally; continued volatility and a further deterioration of capital markets; a worsening in the conditions of the

credit business and, in particular, additional uncertainties arising out of the subprime, financial market and liquidity crises; the outcome of pending investigations and legal proceedings and actions resulting from the findings of these investigations; as well as various other factors.

More detailed information about certain of the risk factors affecting HeidelbergCement is contained throughout this presentation and in

HeidelbergCement's financial reports, which are available on the HeidelbergCement

website, www.heidelbergcement.com. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in the relevant forward-looking statement or information as expected, anticipated, intended, planned, believed, sought, estimated or projected.

In addition to figures prepared in accordance with IFRS, HeidelbergCement also presents alternative performance measures, including, among others Operating EBITDA, EBITDA margin, Adjusted EPS, free cash flow and net debt. These alternative performance measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with IFRS. Alternative performance measures are not subject to IFRS or any other generally accepted accounting principles. Other companies may define these terms in different ways.

"Operating EBITDA" definition included in this presentation represents "Result from current operations before depreciation and amortization (RCOBD)" and "Operating Income" represents "Result from current operations (RCO)" lines in the annual and interim reports.

Attachments

  • Original document
  • Permalink

Disclaimer

HeidelbergCement AG published this content on 30 July 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 30 July 2020 07:50:09 UTC