- Savings goal from Italy acquisition increased to EU400 million
- Sees reovery in U.S., U.K; risks include unpredictable China
HeidelbergCement AG, the world’s second-largest cement maker, raised its savings forecast from last year’s purchase of Italcementi SpA for the second time in three months after identifying new areas to reduce costs.
The target was increased by a third to 400 million euros ($447 million), three months after it was raised by 50 percent to 300 million euros, the Heidelberg, Germany-based company said in a statement on Tuesday. The cement maker agreed to buy Bergamo, Italy-based Italcementi for 3.7 billion euros in July, a response to the merger of HeidelbergCement’s two larger peers into LafargeHolcim SA and to add emerging markets in Southern Europe and Africa.
“We didn’t expect synergy targets to be raised again quite so fast,” Phil Roseberg, an analyst at Sanford C Bernstein Ltd., said by phone. “Their outlook is still cautiously positive, and management remains confident in closing the Italcementi deal, which could relieve some market concern.”
Financing the acquisition is “making progress,” the company said, following the issue of debt certificates and the availability of 2.7 billion euros in bridge financing. Regulatory approvals have been granted in India, Canada, Morocco and Australia, with talks in Europe and the U.S. ongoing.
The stock gained 2.6 percent to 68 euros as of 9:33 a.m. in Frankfurt. The shares have increased 12 percent over the past three trading sessions, the biggest three-day increase since 2012. That pared 2016 declines to 10 percent, valuing the company at 12.8 billion euros.
Fourth-quarter operating income before depreciation rose 11 percent to 696 million euros, HeidelbergCement said in the statement. That beat the 645-million euro average estimate of eleven analysts in a Bloomberg survey. Revenue gained 2 percent to 3.4 billion euros.
“Despite the slowdown of the global economy in the course of the year, we were able to significantly increase our operating income as anticipated,” Chief Executive Officer Bernd Scheifele said. “Our strict focus on improving efficiency and margins in recent years, our advantageous geographical positioning, and continuous investments in growth have made a significant contribution.”
The cement maker said the U.S. and U.K. markets are showing signs of continued recovery, while Europe is benefiting from the weak oil price. The “unpredictable slowdown” in the Chinese economy will be a challenge this year, alongside instability in the Middle East, HeidelbergCement said.
(An earlier version of this story was corrected to show HeidelbergCement is the world’s second biggest cement maker.)