HeidelbergCement AG (HEI) said debt declined more than expected last year as improved earnings covered dividends and repayments, bringing the German company closer to reclaiming investment grade status.
Borrowings declined 700 million euros to 7 billion euros, the company said today. Analysts had predicted 7.4 billion euros, on average.
Chief Executive Officer Bernd Scheifele had been targeting the net debt reduction to 7 billion euros. The Heidelberg, Germany-based company lost its investment grade in 2008 after buying Hanson for $18 billion and suffering a near 100 percent drop in profit amid the onslaught of the financial crisis. The company forecast a “significant” improvement in profit this year.
“In 2012, we took the next consistent step towards reaching our strategic goals,” Scheifele said in today’s statement. “A major contributing factor was the significant increase in free cash flow.”
HeidelbergCement is regaining ground, with some investors speculating the cement maker will now benefit from the strengthening U.S. construction industry.
The company, which makes about 25 percent of its sales in North America, is graded Ba1, the highest junk ranking, by Moody’s Investors Service. It is rated an equivalent BB+ by Fitch Ratings. An “acceleration in the improvement in credit metrics” may justify an upgrade, Fitch said Dec. 17.
A dividend of 0.47 euros was proposed to investors, missing the 0.50 euro average analyst estimate.
HeidelbergCement has raised its cost-cutting target for the three years to the end of 2013 to 1.01 billion euros, of which 240 million will be realized this year. It reduced net debt in the third quarter by almost 10 percent, and beat its spending- reduction target by 21 percent. The rebound in U.S. housing was “pivotal” in meeting targets, Group Tresurer Henner Boettcher told Bloomberg last month.
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