HeidelbergCement : Half-Year Financial Report January to June 2022

Half-Year Financial Report January to June 2022

HeidelbergCement half-year results: significant revenue growth, high energy costs almost offset in the second quarter

Revenue in the first half of 2022 increases significantly by 12%1) to €9,950 million

Substantially higher expenses for energy and raw materials burden half-year result

Commercial Excellence Programme gains significant momentum in second quarter - strong cost increase almost offset by price adjustments

Reduction of specific CO2 emissions by around 2.5% in the first half of the year

Outlook: strong revenue growth confirmed, slight decline in result from current operations 1) expected for full year 2022

Key financial figures				January - June						April - June
		2021	2022		Change Like-for-	2021	2022		Change		Like-for-
€m									like 1)								like 1)
Revenue	8,938	9,950	11.3%		11.6%	4,980	5,523	10.9%	10.4%
Result from current operations before depreciation			1,525								1,131
and amortisation (RCOBD)	1,720	-11.4%		-11.8%	1,182	-4.3%	-5.7%
RCOBD margin in %	19.2	15.3		-392 bps 2)		-403 bps	23.7	20.5		-325 bps		-345 bps
Result from current operations (RCO)	1,084	908	-16.3%		-15.6%	862	817	-5.2%	-5.7%
RCO margin in %	12.1	9.1		-301 bps		-295 bps	17.3	14.8		-251 bps		-251 bps
Profit for the period	825	597	-27.7%
Profit for the period attributable to			542
HeidelbergCement AG shareholders	755	-28.3%
Earnings per share in € 3)	3.81	2.82	-0.98
Cash flow from operating activities -			-133
continuing operations	158	-291
Net debt	7,454	6,792	-662
Leverage ratio		1.85x		1.85x	0

1. Adjusted for consolidation and exchange rate effects.
2. Change in basis points (bps).
3. Attributable to HeidelbergCement AG shareholders.

Due to rounding, numbers presented in the Half-Year Financial Report may not add up precisely to the totals provided.

HeidelbergCement | Half-Year Financial Report January to June 2022

Interim Group management report

Fundamentals of the Group

Changes during the reporting period

Adjusted targets for key performance indicators

On its Capital Markets Day on 24 May 2022, HeidelbergCement­ announced new medium-term targets, among others, for its key performance indicators, thereby continuing its focus on transformation towards a sustainable future.

HeidelbergCement has increased its original target of a return on invested capital (ROIC) of "clearly above 8%" and now aims to achieve a ROIC of above 10% by 2025.

Regarding climate protection, the company has set the most ambitious CO2 reduction target in the industry - by 2030, specific emissions are to be reduced by almost half compared with 1990 figures to 400 kg CO2/t cementitious material. Previously, the target was below 500 kg CO2/t cementitious material by 2030.

News from Research and development

In the first half of 2022, HeidelbergCement launched the ANRAV CCUS project in Bulgaria, which will span the entire CCUS value chain and connect carbon capture facilities at the cement plant near Varna with offshore storage sites in the Black Sea via a pipeline system. The project was selected for funding by the EU Innovation Fund.

In May 2022, HeidelbergCement won the German Innovation Award for Climate and Environment (IKU) in the "Process Innovations for Climate Protection" category for its ­ReConcrete-360° concept. In ReConcrete-360°, waste concrete is crushed using novel processes and selectively separated into its components: sand, gravel, and hardened cement paste. The hardened cement paste can be reused as a valuable, low-carbon raw material in clinker and cement production, replacing natural limestone as a raw material in keeping with circular economy principles. In addition, it can bind CO2 permanently, thus acting as a carbon sink.

Changes to the Supervisory Board

The Chairman of the Supervisory Board, Mr Fritz-Jürgen Heckmann, stepped down from the Supervisory Board at the end of the Annual General Meeting on 12 May 2022. Mr Heckmann, who held this office for 17 years, had already announced at the 2019 Annual General Meeting that he would resign as a member of the Supervisory Board at the end of the 2022 Annual General Meeting. Another share-

holder representative, Mr Tobias Merckle, also resigned his Supervisory Board mandate at the end of this year's Annual General Meeting. Mr Merckle had been a member of the Supervisory Board since 2006.

Dr Bernd Scheifele, former Chairman of the Managing Board of HeidelbergCement AG, and Dr Sopna Sury, Chief Operating Officer Hydrogen and member of the Executive Board of RWE Generation SE, were newly elected to the Supervisory Board by the 2022 Annual General Meeting. Following the Annual General Meeting, the Supervisory Board elected Dr Scheifele as its new Chairman. In addition to its existing committees, the Supervisory Board has also set up

a Sustainability­and Innovation Committee and appointed Prof. Dr Marion ­Weissenberger-Eibl as Chair.

In the reporting period there have been no other significant changes to the fundamentals of the Group regarding business model, strategy, control system, and research and development as presented in the Annual Report 2021 on page 24 f.

Economic report

Economic environment

Although the spread of the Omicron variant of the coronavirus has led to fresh peaks in new infections in many countries, the economic impact of the waves of the pandemic is gradually decreasing. Since the end of February, however, the Russian war of aggression against Ukraine and the sanctions imposed in response have put the global economy under considerable strain. The consequences include persistently high prices for energy and raw materials, exacerbated disruption of global value chains, and a significant rise in inflation.

Development of sales volumes

In the first half of 2022, sales volumes in all business lines were slightly below the previous year's level.

Group-wide cement and clinker sales volumes declined by 4.8% to 58.8 million tonnes (previous year: 61.8). In addition to consolidation-related declines - particularly in North America due to the sale of our activities in the West region in October 2021 - the economic slowdown in Europe led to a drop in sales volumes. Excluding consolidation effects, cement and clinker sales volumes decreased by 2.6%.

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Half-Year Financial Report January to June 2022 | HeidelbergCement

Sales volumes				January - June						April - June
		2021		2022		Change	2021	2022		Change
Cement and clinker (Mt)	61.8		58.8	-4.8%		33.5	30.5	-8.9%
Aggregates (Mt)	145.0		141.5	-2.4%		83.7	79.5	-4.9%
Ready-mixed concrete (Mm3)	23.5		22.5	-4.5%		12.7	11.9	-6.5%
Asphalt (Mt)	4.8		3.6	-25.8%		2.9	2.2	-23.1%

Deliveries of aggregates reduced slightly by 2.4% compared with the previous year to 141.5 million tonnes (previous year: 145.0). On a like-for-like basis, deliveries increased by 1.7%. With the exception of economy-related sales declines in Western and Southern Europe, all other Group areas recorded volume increases as a result of a positive demand trend.

Sales volumes of ready-mixed concrete fell by 4.5% to 22.5 million cubic metres (previous year: 23.5). Excluding consolidation effects, sales volumes were almost at the previous year's level. Deliveries in Asia-Pacific, Northern and Eastern Europe-Central Asia, and Africa-Eastern Medi­terranean Basin benefited from a buoyant construction industry. While sales volumes in Western and Southern Europe were slightly below the previous year's level owing to economic factors, the decline in North America was primarily due to consolidation.

Asphalt deliveries decreased considerably by 25.8% to 3.6 million tonnes (previous year: 4.8). On a like-for-like basis, deliveries fell by only 0.9%.

Earnings position

Group revenue in the first six months of 2022 increased significantly by 11.3% in comparison with the previous year to €9,950 million (previous year: 8,938). In particular, price increases in all Group areas contributed to the revenue growth. Excluding consolidation and exchange rate effects, the rise amounted to 11.6%. Changes to the scope of consolidation of €384 million had a negative effect on revenue, while exchange rate effects of €326 million had a positive impact.

In the reporting period, material costs rose by 23.3% to €4,193 million (previous year: 3,400). This rise predominantly resulted from the sharp increase in the price of energy and raw materials. Excluding consolidation and exchange rate effects, material costs exceeded the previous year's level by 24.6%. The material cost ratio rose to 42.1% (previous year: 38.0%). The balance of other operating expenses and income was 17.6% above the previous year's value at €-2,804 million (previous year: -2,384). Excluding exchange rate and consolidation effects, it rose by 16.9%, which was essentially due to the increase in freight costs and external production services. Personnel costs rose slightly by 1.7% to €1,602 million (previous year: 1,575). The personnel cost ratio fell to 16.1% (previous year: 17.6%). The result from

equity accounted investments (REI) fell by 35.3% to €105 million, significantly below the previous year's figure of €162 million, mainly due to the weak development of our joint ventures in Hungary, China, and Australia.

The result from current operations before depreciation and amortisation (RCOBD) fell significantly by 11.4% to €1,525 million (previous year: 1,720). The decline in result was attributable to the significantly higher costs of energy and transport compared with the previous year, which were not completely offset despite increases in our sales prices. ­Excluding consolidation and exchange rate effects, the ­decline amounted to 11.8%. The RCOBD margin, i.e. the ratio of the result from current operations before depreciation and amortisation to revenue, fell by 392 basis points to 15.3% (previous year: 19.2%).

The result from current operations decreased by 16.3% to €908 million (previous year: 1,084). Changes to the scope of consolidation reduced the result by €40 million, while exchange rate effects of €39 million had a positive impact.

The additional ordinary result amounted to €-63 million (previous year: 148). It includes impairments of property, plant, and equipment in Russia totalling €87 million. In the previous year, the result was mainly influenced by reversals of impairment losses totalling €131 million in connection with the sale of business activities in the West region of the USA.

Earnings before interest and taxes (EBIT) decreased accordingly to €845 million (previous year: 1,232).

The financial result improved noticeably by €63 million to €-20 million (previous year: -84). While interest expenses decreased by €24 million to €76 million (previous year: 100) due to improved financing conditions, the currency result deteriorated by €27 million to €-23 million (previous year: 3). The other financial result increased by €71 million to €66 million (previous year: -5). The rise is attributable in particular to higher interest rates for discounting non-current provisions, positive earnings effects from financial derivatives, and interest rate effects from tax liabilities.

Profit before tax from continuing operations fell significantly by €323 million to €825 million (previous year: 1,148). Expenses for income taxes decreased by €86 million to €239 million (previous year: 325). The decline is primarily due to reduced

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HeidelbergCement | Half-Year Financial Report January to June 2022

profit before tax. Net income from continuing operations fell by €238 million to €585 million (previous year: 823).

Net income from discontinued operations amounted to €11 million (previous year: 2) and is attributable to operations of the Hanson Group that were discontinued in previous years.

Overall, the profit for the period totalled €597 million (previous year: 825). The profit relating to non-controlling interests decreased by €15 million to €55 million (previous year: 70). The profit attributable to Heidelberg­Cement AG shareholders therefore amounted to €542 million (previous year: 755). Excluding the additional ordinary result, the profit attributable to Heidelberg­Cement AG shareholders amounted to €604 million (previous year: 608).

Earnings per share attributable to HeidelbergCement­ AG shareholders in accordance with IAS 33 decreased by €0.98 to €2.82 (previous year: 3.81).

Business trend in the Group areas

Western and Southern Europe

The development of sales volumes in all business lines in the first half of 2022 was influenced in particular by the weakening economic environment.

In the first half of 2022, the Western and Southern Europe Group area's cement and clinker sales volumes fell by 5.7% to

14.5 million tonnes (previous year: 15.3). While our deliveries in Belgium and the Netherlands were at the previous year's level, all other countries recorded a decrease in volumes.

The aggregates sales volumes of the Group area fell by 6.3% to 40.7 million tonnes (previous year: 43.4). Excluding consolidation effects, the decrease amounted to 5.6%. While Germany achieved slight volume growth, deliveries in all other countries declined.

Deliveries of ready-mixed concrete reduced by 3.2% to

8.9 million cubic metres (previous year: 9.2). Adjusted for consolidation effects, deliveries declined by 2.3%. Slight volume growth in Germany, Belgium, and the Netherlands was offset by decreases in sales volumes in France, Italy, and Spain. In the United Kingdom, deliveries were only slightly below the strong level of the previous year.

Sales volumes of the asphalt operating line in the United Kingdom decreased by 4.3% compared with the previous year.

Revenue of the Western and Southern Europe Group area rose significantly by 14.0% to €3,155 million (previous year: 2,767). Excluding consolidation and exchange rate effects, the rise was 13.5%. In all countries, sales prices were increased in the first half of 2022 in order to counteract the higher costs of energy and raw materials.

The result from current operations before depreciation and amortisation decreased slightly by 3.5% to €416 million (previous year: 431) as a result of the substantial increase in energy and raw material prices. On a like-for-like basis, the decline amounted to 3.7%. At €241 million (previous year: 241), the result from current operations was at the previous year's level.

Northern and Eastern Europe-Central Asia

The cement and clinker sales volumes of the Northern and Eastern Europe-Central Asia Group area fell by 5.7% to

10.9 million tonnes (previous year: 11.6) in the first half of 2022. In all Nordic countries, with the exception of Iceland and Norway, deliveries were lower than in the previous year, mainly due to increases in the cost of building materials. In Eastern Europe-Central Asia, deliveries in Romania and Bulgaria decreased, significantly in some cases, owing to the effects of the Russia-Ukraine war, while deliveries in Greece, Czechia, and Poland were only slightly reduced.

At 22.2 million tonnes (previous year: 22.3), our deliveries in the aggregates business line were down slightly by 0.5% compared with the previous year. Excluding consolidation effects, a volume increase of 4.0% was achieved. In ­Northern Europe, significant sales growth in Norway and in the cross-border Mibau Group more than compensated for the decrease in volumes caused by weak construction activity in Sweden. In Eastern Europe-Central Asia, Romania and Czechia showed increases.

At 2.9 million cubic metres (previous year: 2.9), deliveries of ready-mixed concrete remained at the previous year's level. Excluding consolidation effects, deliveries increased by 2.5%. In Northern Europe, Norway achieved strong volume growth driven by high demand from infrastructure construction, while sales volumes in Sweden and the Baltic countries declined slightly. In Eastern Europe-Central Asia, sales volume decreases were recorded in Poland owing to weaker demand from residential construction and in Romania due to delays in ongoing projects. In Czechia, deliveries were significantly above the previous year's level.

Revenue of the Northern and Eastern Europe-Central Asia Group area amounted to €1,668 million (previous year: 1,438) and exceeded the previous year's figure significantly by 16.0% as a result of price and volume increases. Excluding consolidation and exchange rate effects, the increase amounted to 16.9%.

The result from current operations before depreciation and amortisation decreased by 8.7% to €294 million (previous year: 322); on a like-for-like basis, the decline amounted to 8.4%. Result from current operations fell by 13.4% to €197 million (previous year: 228); on a like-for-like basis, the decrease amounted to 13.2%.

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