HeidelbergCement Profit Misses Estimates as Euro Trims Cuts

HeidelbergCement AG, the world’s third-largest maker of cement, posted fourth-quarter profit that missed analyst estimates as the strengthening euro outweighed the impact of a profit improvement program.

Operating income before depreciation dropped 5.3 percent to 661 million euros ($893 million), the Heidelberg, Germany-based company said today in a statement. That missed the 681 million-euro average estimate of nine analysts surveyed by Bloomberg. Sales slipped 0.3 percent to 3.49 billion euros.

“The decline in exchange rates in the second half of 2013 will also impair our revenue and results, particularly in the first half of 2014,” Chief Executive Officer Bernd Scheifele said in the statement. “We will once again work on further improving our margins by means of our ongoing programs.”

Last year, the euro strengthened 4.2 percent versus the dollar even after the European Central Bank cut rates twice. The currency’s gains defied the median prediction of strategists surveyed by Bloomberg, who foresaw a drop to $1.27, from $1.3193 at the end of 2012.

The shares dropped as much as 2 percent to 54.22 euros, and were trading 1.7 percent down as of 9:07 a.m. in Frankfurt. That decline means the stock has lost 1.5 percent this year, valuing the company at 10.2 billion euros.

Downward Pressure

Scheifele had said in November he still expected full-year revenue and operating income to increase, the latter “significantly,” even as he warned that lower energy and raw material costs as well as price increases couldn’t compensate for the negative currency effects. Both sales and profit were little changed in the end.

“The outlook statement is relatively upbeat with growth expected in all regions, although currency movements in Asia Pacific will continue to have a negative impact,” Dublin-based Davy Research analyst Barry Dixon, who rates HeidelbergCement neutral, said in a note to clients. Analyst estimates for 2014 “will likely be revised downwards, which will continue to weigh on the share price performance.”

A three-year efficiency program, dubbed “FOX 2013”, realized 1.2 billion euros in savings, exceeding the 1.01 billion-euro boost expected in July. Two further projects are expected to lift profit by 350 million euros by 2015.

Earnings before interest and taxes increased 2.4 percent to 463 million euros. Excluding currency effects, the jump would have been 12 percent. Cement sale volumes increased in North America, Africa and Asia, outweighing declines elsewhere for a 1.4 percent total increase.

HeidelbergCement added about 594 employees last year, with a 750-person headcount reduction in North America and Europe offset by hirings in Asian growth markets and the acquisition of partners’ joint venture stakes in Britain and Australia.1

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