HeidelbergCement AG (HEI) reported second-quarter profit that missed analyst estimates as the world’s third-largest maker of cement succumbed to rising raw-material costs in Asia.
Operating income before depreciation declined 1.5 percent to 699 million euros ($937 million), the Heidelberg, Germany-based company said in a statement. Analysts predicted 714 million euros, on average. Revenue fell 0.5 percent to 3.6 billion euros.
“Margins were flat, despite the volume growth, driven entirely by margin deterioration in Asia-Pacific,” London-based Berenberg Bank analyst Robert Muir said in a note to clients. “Expect some small downward revisions to full year consensus.”
HeidelbergCement’s two larger rivals, Holcim Ltd. and Lafarge SA (LG), are selling units representing 20 percent of their combined revenue in Europe as they seek regulatory approval for a $40 billion merger. HeidelbergCement, which is itself divesting U.K. and North America focused building-materials operations, is expected to evaluate a bid for the assets, people familiar with the plans said last month.
The shares fell 0.7 percent to 58.59 euros as of 9:02 a.m. in Frankfurt, paring gains this year to 6.4 percent and valuing the company at 11 billion euros.
FX Cost Easing
“The negative exchange rate effects, which particularly impacted us in the second quarter, are expected to ease in the second half of the year,” Chief Executive Officer Bernd Scheifele said in the statement. “We will continue to be very disciplined in our spending and focus more intensively on the sale of the building products business line.”
The company confirmed its forecast that sales, operating profit and net income will rise in 2014, adjusted for one-time effects.
Earnings before interest, taxes depreciation and amortization declined to 25 percent of revenue in Asia, from 28.1 percent a year earlier, while proportionately growing in all other regions. Margins improved in the key Indonesian market over the course of the quarter, with HeidelbergCement saying in a presentation posted online that it intends to maintain that profitability with price increases.
Scheifele last year completed a three-year efficiency program, dubbed “FOX 2013”, which realized 1.2 billion euros in savings as he seeks to regain the investment-grade credit rating that the company lost in 2008 following the purchase of British cement maker Hanson for $18 billion. Two further projects are expected to lift profit by 350 million euros by next year.
Holcim also reported profit today that missed analyst estimates, citing weaker currencies in India and Mexico and restructuring costs.
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