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Presentation of the CEO Dr. Bernd Scheifele, Annual General Meeting 2017

HeidelbergCement
HeidelbergCement
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Presentation of the CEO Dr. Bernd Scheifele, Annual General Meeting 2017

Presentation of the CEO Dr. Bernd Scheifele, Annual General Meeting 2017

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HeidelbergCement
ANNUAL GENERAL MEETING 2017
10 May 2017
Page 2
Contents
1. 2016: important steps for growth and value creation
for shareholders
2. The capital markets honour the positive development
3. HeidelbergCement is well prepared for the future
a. Increasing value of the Group after acquisition of Italcementi
b. Focus on sustainability and innovation
4. Q1 2017: good operational performance in challenging
environment
5. Outlook for 2017: further increase in results
Page 3
The most important points at a glance...
 HeidelbergCement strengthened by acquisition of
Italcementi
 Strategic target reached: investment grade rating
 Significant increase in result from current operations,
cash flow, and profit for the financial year adjusted for
non-recurring effects (+28%)
 Dividend proposal noticeably increased by 23%
 Positive outlook for 2017, but demanding conditions
3
Page 4
HeidelbergCement strengthened by acquisition of
Italcementi
 HeidelbergCement gains leading market positions
– Market leader in Italy, number 2 in France
– Strong market position in Morocco, Egypt, and Thailand
– High synergies in North America and India
HeidelbergCement
Italcementi
HeidelbergCement and Italcementi
Page 5
Takeover of Italcementi successfully and rapidly
concluded
 Transfer of control on 1 July 2016 following the approval of the
antitrust authorities
 Appointment of new top managers in most Italcementi countries
– France, Italy, Spain, India, North America, Morocco, Egypt, Thailand,
und Kazakhstan
Mandatory tender offer to the remaining shareholders succesful
straight away
Delisting of Italcementi from the stock exchange on
12 October 2016
Sale of production sites in the USA and Belgium (required by the
antitrust authorities) achieved better prices than anticipated
5





Page 6
Integration of Italcementi faster than expected
 Closing of redundant headquarters in Bergamo, Paris,
Brussels, and Madrid
– Relocation of all essential functions to Heidelberg
 Rapid staff reduction
– 1,870 people by year-end 2016
 Introduction of proven HeidelbergCement efficiency
programmes
Synergy goals increased to €m 470
– Operational improvements, selling, general & administrative,
procurement, treasury, and tax
6
HeidelbergCement with strong track record in integration processes




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Presentation of the CEO Dr. Bernd Scheifele, Annual General Meeting 2017

  • 1. Size and move your picture, so that it fits in here. Size and move your picture, so that it fits in here. Size and move your picture, so that it fits in here. Size and move your picture, so that it fits in here. HeidelbergCement ANNUAL GENERAL MEETING 2017 10 May 2017
  • 2. Page 2 Contents 1. 2016: important steps for growth and value creation for shareholders 2. The capital markets honour the positive development 3. HeidelbergCement is well prepared for the future a. Increasing value of the Group after acquisition of Italcementi b. Focus on sustainability and innovation 4. Q1 2017: good operational performance in challenging environment 5. Outlook for 2017: further increase in results
  • 3. Page 3 The most important points at a glance...  HeidelbergCement strengthened by acquisition of Italcementi  Strategic target reached: investment grade rating  Significant increase in result from current operations, cash flow, and profit for the financial year adjusted for non-recurring effects (+28%)  Dividend proposal noticeably increased by 23%  Positive outlook for 2017, but demanding conditions 3
  • 4. Page 4 HeidelbergCement strengthened by acquisition of Italcementi  HeidelbergCement gains leading market positions – Market leader in Italy, number 2 in France – Strong market position in Morocco, Egypt, and Thailand – High synergies in North America and India HeidelbergCement Italcementi HeidelbergCement and Italcementi
  • 5. Page 5 Takeover of Italcementi successfully and rapidly concluded  Transfer of control on 1 July 2016 following the approval of the antitrust authorities  Appointment of new top managers in most Italcementi countries – France, Italy, Spain, India, North America, Morocco, Egypt, Thailand, und Kazakhstan Mandatory tender offer to the remaining shareholders succesful straight away Delisting of Italcementi from the stock exchange on 12 October 2016 Sale of production sites in the USA and Belgium (required by the antitrust authorities) achieved better prices than anticipated 5     
  • 6. Page 6 Integration of Italcementi faster than expected  Closing of redundant headquarters in Bergamo, Paris, Brussels, and Madrid – Relocation of all essential functions to Heidelberg  Rapid staff reduction – 1,870 people by year-end 2016  Introduction of proven HeidelbergCement efficiency programmes Synergy goals increased to €m 470 – Operational improvements, selling, general & administrative, procurement, treasury, and tax 6 HeidelbergCement with strong track record in integration processes    
  • 7. Page 7 Strategic target reached: investment grade rating Rating agency Long-term rating Outlook Moody‘s Investors Service Baa3 stable Fitch Ratings BBB- stable S&P Global Ratings BBB- stable Much more favourable refinancing conditions on the capital markets lead to lower interest costs and higher cash flow
  • 8. Page 8 Review of economy in 2016  With 3.1%, worldwide economic growth was weaker than in 2015 – Slowdown in China, recession in Russia and in the emerging countries in South America – Overall, weak development in growth markets due to lower commodity prices – Recovery in the USA and Europe continued  Unexpected developments – Brexit: economic recovery in the UK continued albeit at a weaker pace; British pound, however, depreciated significantly against the euro – Presidential election in the USA: consumer confidence grew after initial uncertainty  Euro strengthened in relation to numerous currencies  After its low at the beginning of the year, the oil price rose again but remained on average below the previous year
  • 9. Page 9 40 60 80 100 120 $/mt 201720162015 20 40 60 80 $/bbl 201720162015 +80% 2016 – trend reversal in energy costs Price increase in electricity and coal, especially in Q4 2016 Cost increase could be avoided in 2016, higher market prices will influence costs in 2017 20 30 40 50 LC/MWh 201720162015 NAM NR Germany ElectricityCoalOil Asia (NewCastle) Europe (API2) Brent 2015 2016 2017 -10% Pro forma total energy costs API2 Q1 2016: 45 $/mt vs. Q1 2017: 81 $/mt Brent Q1 2016: 35 $/bbl vs. Q1 2017: 55 $/bbl Germany Q1 2016: 24 €/MWh vs. Q1 2017: 33 €/MWh+38% +57% +80%
  • 10. Page 10 HeidelbergCement has reached important targets… Target / Outlook 2016 Actual 2016 Moderate increase in revenue; moderate to significant increase in result from current operations (RCO)1) Revenue: -2% Pro forma like-for-like2) RCO: +6% Moderate to significant increase in profit for the financial year before non-recurring effects Profit for the financial year before non-recurring effects: +28% Earning of cost of capital (ROIC > WACC) ROIC: 7.2% WACC: 7.0% Progressive dividend policy Dividend: 1.60 € (+23%)    … but not everything developed to our full satisfaction:  Weaker than expected sales volumes and revenue (Indonesia and Africa)  Weaker market development in France, Italy, Spain, and Egypt  Significant rise in oil price in the course of the year  1) Corresponds to operating income reported in previous years 2) Taking into account Italcementi for the full year 2015; adjusted for currency and consolidaten effects, and proceeds from the sale of CO2 emission rights HeidelbergCement has delivered despite challenging framework
  • 11. Page 11 Key financial figures €m 2015 2016 Variance Like-for- like1) Revenue 13,465 15,166 13% -2% 2,613 2,939 13% 2% in % of revenue 19.4% 19.4% Result from current operations (RCO) 2) 1,846 1,984 7% 3% Profit for the financial year 983 896 -9% Group share of profit 800 706 -12% Earnings per share in € (IAS 33) 3) 4.26 3.66 -14% Adjusted earnings per share (IAS 33) 4) 4.32 5.34 23% Cash flow from operating activities 1,449 1,874 29% Net debt 5,286 8,999 3,713 Leverage 5) 2.02x 3.06x January-December Result from current operations before depreciation and amortisation (RCOBD) 2) 2016 key financial figures as reported 1) Adjusted for currency and consolidation effects 2) Result from current operations before /after depreciation and amortisation corresponds to operating income before depreciation (OIBD)/operating income (OI) reported in previous years. The change of name occured in the context of the application of an ESMA directive (European Securities and Markets Authority) 3) Attributable to the shareholders of HeidelbergCement AG 4) Excluding additional ordinary result of €m-324 5) Net debt/RCOBD Significant growth due to the takeover of Italcementi
  • 12. Page 12 Pro forma key financial figures Inclusion of Italcementi since beginning of 2015 1) Adjusted for currency and consolidation effects, and proceeds from the sale of CO2 emission rights of €m 50 in 2015 (Q1: €m 21 and Q2: €m 29) and €m -3 in 2016 (Q2: €m 17 and Q4: €m -20) 2) Result from current operations before/after depreciation and amortisation corresponds to operating income before depreciation (OIBD)/operating income (OI) reported in previous years. The change of name occured in the context of the application of an ESMA directive (European Securities and Markets Authority) Operational improvement in demanding market environment Pro forma key financial figures €m 2015 2016 Variance Like-for- like1) Revenue 17,331 17,084 -1% -1% 3,153 3,195 1% 5% in % of revenue 18.2% 18.7% Result from current operations (RCO) 2) 2,037 2,073 2% 6% in % of revenue 11.8% 12.1% Result from current operations before depreciation and amortisation (RCOBD) 2) January-December
  • 13. Page 13 81 104 2015 +28% 2016 +9% 2016 272 2015 249 37 43 +16% 20162015 9 9 +3% 20162015 Sales volumes 2016 January–December Ready-mixed concrete (mm3) Cement (mt) Aggregates (mt) Asphalt (mt) Significant increase in sales volumes due to consolidation of Italcementi since 1 July 2016
  • 14. Page 14 Revenue by Group areas North America 8% 2016 4,027 2015 3,746 Western and Southern Europe +22% 2016 3,928 2015 3,225 Northern and Eastern Europe-Central Asia +14% 2016 2,425 2015 2,124 Africa-Eastern Mediterranean Basin 952 +38% 2016 1,314 2015 Asia-Pacific +5% 2016 2,907 2015 2,775 €m
  • 15. Page 15 Italcementi acquisition strengthens market position esp. in Europe and Africa but also in North America and Asia  Revenue 2015: €m 13,465 (in % and €m) 7.4% 21.6% 29.2% 16.6% 17.4% 7.8% Africa-Eastern Mediterranean Basin Asia-Pacific North America Northern and Eastern Europe-Central Asia Rest of Western and Southern Europe Germany 2,227 2,124 3,746 2,775 952 4.027 1.314  Pro forma revenue 2016*: €m 17,084 (in % and €m) 10.9% 19.3% 25.7% 15.1% 22.2% 6.7% 3,661 2,484 4,235 3,186 1,800 1,107 998 * Taking into account Italcementi for the full year 2016
  • 16. Page 16 Strong growth of result after consolidation of Italcementi Significant increase in result from current operations before depreciation and amortisation (RCOBD*) after consolidation of Italcementi in the second half of 2016 334 44 52 +12% +13% 2016 Result from current operations before depr. & amort. as reported 2,939 OperationalConsolidation 2,561 Currency -52 2015 Result from current operations before depr. & amort. (RCOBD*) 2,613 2015 Result from current operations before depr. & amort. like-for-like €m * RCOBD: result from current operations before depreciation and amortisation, corresponds to operating income before depreciation reported in previous years
  • 17. Page 17 Additional ordinary result 2016 Additional ordinary result strongly influenced by restructuring costs for ITC €m -12 -324 10 Total 2015 Total 2016 Other (net) Devaluation Egyptian Pound Provision Mibau accident -28 Goodwill impairment (DR Kongo) -47 -34 -25 Asset impairments -41 Acquisiton of Italcementi1) -159 Net gain from disposals 1) Includes expenses for restructuring, transcation costs etc. Additional ordinary result impacted by high non-recurring effects in context with the Italcementi acquisition
  • 18. Page 18 Reduction of financing costs despite acquisition of Italcementi and increasing net debt Net debt per quarter -92 -35 -494 -385 -16 -550 -396 -118 Balance of interest income/interest expenses Exchange rate losses Other Development of financial result 2015 2016 €m Q4 8,999 5,286 Q3 8,868 5,970 Q2 5,865 6,331 Q1 5,8906,125 2016 2015
  • 19. Page 19 Significant decrease in interest rate for refinancing Significant decrease in interest rate for refinancing contributes to improved financial result 3,511 1,152 1.9% 5.7% 66.565.3 Repayments 2016 Issues 2016 Volume in €m Average interest rate in % Annualised interest payments in €m
  • 20. Page 20  Earnings per share as reported1) (€) Earnings per share  Adjusted earnings per share2) (€) -14% 2016 3.66 2015 4.26 23% 2016 5.34 2015 4.32 1) Attributable to the shareholders of HeidelbergCement AG 2) Without additional ordinary result of €m-324
  • 21. Page 21 Consolidated balance sheet €m 31 Dec. 2015 31 Dec. 2016 Part of balance sheet total 2016 Intangible assets and property, plant, and equipment 20,310 26,284 71 % Financial assets 1,832 2,387 6 % Other non-current assets 1,526 1,774 5 % Current assets 4,707 6,701 18 % Assets held for sale and discontinued operations 7 0 % Shareholders' equity and non-controlling interests 15,976 17,873 48 % Non-current liabilities 7,531 12,271 33 % Current liabilities 4,867 7,010 19 % Balance sheet total 28,374 37,154 100 % Equity/total capital 56.3% 48.1% Ned debt (€m) 5,286 8,999 Gearing (net debt/equity) 33.1% 50.4% Balance sheet (short form) Increase in balance sheet total due to consolidation of Italcementi and appreciation of US dollar at end of 2016 (5% above the average exchange rate)
  • 22. Page 22 Consolidated statement of cash flows €m 2015 2016 Difference Cash flow 1,777 2,188 411 Changes in working capital -22 97 119 Decrease in provisions through cash payments -244 -383 -138 Cash flow from operating activities – continuing operations 1,511 1,902 392 Cash flow from operating activities – discontinued operations -61 -28 33 Cash flow from operating activities 1,449 1,874 425 Investments (cash outflow) -1,002 -4,039 -3,037 Other inflows of cash and cash equivalents 249 817 567 Cash flow from investing activities – continuing operations -752 -3,222 -2,470 Cash flow from investing activities – discontinued operations 1,245 901 -344 Cash flow from investing activities 493 -2,321 -2,813 Cash flow from financing activities – continuing operations -1,822 1,056 2,878 Cash flow from financing activities – discontinued operations -5 0 5 Cash flow from financing activities -1,827 1,056 2,883 Effect of exchange rate changes 7 13 6 Change in cash and cash equivalents 122 622 500 Statement of cash flows (short form) Noticeable increase in cash flow from operating activities
  • 23. Page 23 Net debt development 2016 Acquisition-related increase in net debt to just below € 9 billion Key metric: leverage (net debt / RCOBD***) of 2.8x after major acquisition on acceptable level +3,713 2016** 8,999 2.8 2015* 5,286 2.0 2014 6,957 3.0 2013 7,307 3.3 2012 7,047 2.9 2011 7,770 3.3 2010 8,146 3.6 2009 8,423 4.0 2008 11,566 3.9 2007 14,608 6.0 Leverage Strategic target (investment grade metrics) Net debt (€m) * Includes non-controlling interests with put-options ** Calculated on pro forma basis *** RCOBD: result from current operations before depreciation and amortisation, corresponds to operating income before depreciation reported in previous years
  • 24. Page 24 Premium earned on cost of capital ROIC of 7.2% exceeds capital costs (WACC) of 7.0% 7.2% 7.0% 7.1% 6.7% 6.3% 6.7% 2016 23,615 2015 21,559 2014 20,849 Before the Italcementi acquisition After the acquisition Invested capital (€m) WACC ROIC HeidelbergCement earned premium on cost of capital even after the Italcementi acquisition
  • 25. Page 25 Dividend proposal: increase by 23% to €1.60 Dividend (€) 1.40 1.60 1.20 1.00 0.80 0.60 0.40 0.20 0.00 2013 1.60 2015 0.75 2014 1.30 +45% +23% Proposal 2016 0.60 2012 0.47 2011 0.35 2010 0.25 2009 0.12 Strategic priority to increase shareholder return is reflected in the progressive increase in dividend proposal Average annual increase Payout ratio: 31%* * Adjusted for the additional ordinary result of €m -324 and with regard to 198,416,477 shares
  • 26. Page 26 Contents 1. 2016: important steps for growth and value creation for shareholders 2. The capital markets honour the positive development 3. HeidelbergCement is well prepared for the future a. Increasing value of the Group after acquisition of Italcementi b. Focus on sustainability and innovation 4. Q1 2017: good operational performance in challenging environment 5. Outlook for 2017: further increase in results
  • 27. Page 27 Share price 2016 60 70 80 90 100 110 120 130 140 11/01/201607/01/201603/01/2016 05/01/201601/01/2016 09/01/2016 12/31/2016 LafargeHolcim HeidelbergCement MSCI World Construction Materials Index DAX Index price (Base 1 January 2016 = 100) HeidelbergCement share price has beaten DAX for the 3rd year in a row +17% +7% +21% +7% Source: Bloomberg
  • 28. Page 28 High return over five-year period  A shareholder who invested €1,000 in HeidelbergCement shares at the end of 2011 generated a total return of about 185% by the end of 2016 (reinvested dividends).  With 23.3%, the annual total return is thus significantly higher than that of the DAX with 13.6%. An investment in HeidelbergCement shares almost tripled over a five-year period Invested capital in € 12/31/2016 2,852 12/31/2011 1,000
  • 29. Page 29 Shareholder structure of HeidelbergCement Shareholder structure further enlarged: share of institutional investors in USA and Italy increased Geographical distribution of shareholders (as of Dec. 2016)  25.52% Ludwig Merckle via participations  10.01% The Capital Group Companies, Inc., Los Angeles/USA  7.34% Stephen A. Schwarzman und Maximilian Management LLC, Wilmington/USA (via First Eagle Investment Management, LLC, New York/USA)  4.995% BlackRock, Inc., Wilmington/USA  3.84% Société Générale S.A., Paris/Frankreich Shareholder structure (latest notifications) 9% 17% 14% 29% 31% UK + Republic of Ireland Rest of the world, retail investors Europe (excl. UK + Germany) North America Germany
  • 30. Page 30 IR work and recommendations by financial analysts 5 4 3 2 1 Buy Hold Sell Source: Bloomberg Focus & success of investor relations work Average recommendation by analysts (as of 28 April 2017)  Geographical enlarged shareholder structure:  share of American and Italian investors increased  Reduction of share price volatility:  share of long-term investors increased  Extel IR survey 2016: HeidelbergCement‘s IR work is the best in the construction sector in all categories: CEO, CFO, IR work, and IR employees
  • 31. Page 31 CDP Ranking 2016  HeidelbergCement was identified by CDP (Carbon Disclosure Project) as one of the global leaders regarding actions and strategies against climate change and has been awarded a position on the “Climate A List”  HeidelbergCement was also recognised as “Sector Leader Energy & Materials” in the DACH region (Germany, Austria, Switzerland) and as “Index/Country Leader DAX”
  • 32. Page 32 Contents 1. 2016: important steps for growth and value creation for shareholders 2. The capital markets honour the positive development 3. HeidelbergCement is well prepared for the future a. Increasing value of the Group after acquisition of Italcementi b. Focus on sustainability and innovation 4. Q1 2017: good operational performance in challenging environment 5. Outlook for 2017: further increase in results
  • 33. Page 33 HeidelbergCement worldwide: 3,000 locations in around 60 countries on five continents No. 1 in aggregates, no. 2 in cement, and no. 3 in ready-mixed concrete
  • 34. Page 34 Expansion of strong market positions Acquisition creates global no. 1 in aggregates no. 2 in cement, and no. 3 in ready-mixed concrete 271 283287* 67 233 125* 5255 48* Cement sales volumes 2016 Aggregates sales volumes 2016 Ready-mixed concrete sales volumes 2016 (mt) (mm3)(mt) *All 2016 figures of HeidelbergCement are pro-forma figures
  • 35. Page 35 HeidelbergCement is well positioned in important urban centers Vancouver San Francisco Los Angeles Dallas Atlanta New York Toronto Chicago London Frankfurt St. Petersburg Moscow Istanbul Delhi Mumbai Bangalore Guangzhou Hong Kong Singapore Kuala Lumpur Jakarta Perth Edmonton Seattle San Diego Houston Brisbane Sydney Melbourne Paris Cairo Marrakech Bangkok Rome Cement plants Aggregates Metropolitan areas
  • 36. Page 36 Continuous growth Our target: increasing shareholder value Increased cash flow Attractive shareholder returns
  • 37. Page 37 Our target: increasing shareholder value Targets in 2019 Revenue in €bn >20 Result from current operations before depreciation and amortisation in €bn >5 Expanding vertical integration in urban centers Benefit from recovery of mature markets, especially aggregates Pricing above inflation rate Targeted and disciplined growth Culture of continuous efficiency improvements Digitisation of value chain Focus on cash generation
  • 38. Page 38 Continuous portfolio optimisation also in 2016  Australia: purchase of Rocla Quarry Products (RQP) – RQP operates mainly 12 sand pits in the metropolitan areas of Perth, Adelaide, Melbourne, and Sydney with an annual production of 6 million tonnes  Northern Europe: share in Mibau increased from 50% to 60% (full consolidation) – Mibau operates 4 aggregates quarries in Norway with an annual production of 10-12 million tonnes  Africa: market entry in Mozambique with the purchase of Austral Cimentos Sofala (ACS) – ACS operates a grinding plant close to the port of Beira with an annual production capacity of 0.35 million tonnes 38
  • 39. Page 39 Italcementi: synergy target increased to €m 470 155 110 400 30 70 155 20 175 2016 20 140 2017 2018 Total 470 Previous target Additional synergies Split €m Operational 165 Sales, general & administrative 115 Procurement 50 Other 95 Total RCOBD* 425 Treasury & Tax 45 Total synergies 470  Synergy target increased due to faster than planned reduction of staff and higher potential to improve efficiency * RCOBD: result from current operations before depreciation and amortisation, corresponds to operating income before depreciation reported in previous years
  • 40. Page 40 Continuous improvement of efficiency and margins “CIP” – Cement  Promote entrepreneurial thinking of employees and culture of continuous improvement  2016: active in 67 cement plants €m 120 sustainable results improvement 2015-2017 “LEO” – Logistics  Centralised order intake/dispatch planning  Real-time monitoring of delivery processes: telematics, electronic delivery note  Demand-oriented inventory management  Fully automatic loading processes €m 150 reduction in logistic costs “Aggregates CI” – Aggregates  Increasing professionalism & efficiency in operational and commercial areas through continuous improvement  Implementation at all locations  Digitisation of operational processes €m 120 sustainable results improvement 2016-2018 “FOX”– Procurement  Continuation of successful cost savings initiative  Standardisation and optimisation of procurement processes  Digitisation of supplier management > €m 100 annual savings Continuous efficiency and margin improvement is part of HeidelbergCement‘s DNA Intensified use of modern IT systems (Industry 4.0)
  • 41. Page 41 RMC: CCR – “Competence Center Readymix”  Margin in ready-mixed concrete of large cement companies are normally lower compared to independent competitors  Priorities for improvements are: material (concrete recipes) and logistics (80% of costs) New programme Room for improvement REVENUE Savings targets in €m 50% 30% 10% 10% Material Logistics Production Fixed costs 30 40 50 120 2019 Total20182017
  • 42. Page 42 Sales: “Sales is a Science”– digitisation and standardisation of processes (Industry 4.0) Really knowing the market Understanding the customer better than anyone else Manage each market individually Selling the right volumes At a better price Market Intelligence  Combination of external and internal information to develop a model for future market trends  Estimation based on micro markets  Detailed segmentation of markets and customers (size, growth, margins)  Global approach and development of model by data experts, but local responsibility for maintenance and usage Sales Processes  Structured sales planning:  Daily, weekly, monthly, and quarterly planning of tasks  Sales meetings every Friday (review of the week, planning of the next week)  Quarterly deviation analysis of planned and actual data (per segment and customer)  Digitisation through CRM Tools that are easy to use “Market Intelligence and Sales Processes” New Group function
  • 43. Page 43 Financing costs: high cash flow potential Significant decrease potential in interest expense as we pay back high coupon bonds 750 500 640 669 753 2025 1,003 1,000 3 2024 752 2 2023 1,028 1,000 2021 524 24 2020 1,825 1,800 25 2019 27 2018 1,556 1,480 76 2017 2,393 1,000 28 2022 Average coupon: 6.9% 7.1% 5.4% 5.9% 3.3% 1.8% 2.3% 2.3% 1.5% Debt instruments Bonds Repaid in January 2017; refinanced with a four-year bond with a coupon of 0.5% Significant cash flow potential due to favourable refinancing of bonds Debt maturity profile as of 31 December 2016 €m
  • 44. Page 44 Our target: achieve attractive returns for shareholders HeidelbergCement 2019 Revenue > €20 billion Result from current operations before depreciation and amortisation > €5 billion ROIC > 10% Leverage 1.5x – 2.5x Earnings per share € ~11 Payout ratio 40% – 45%
  • 45. Page 45 Contents 1. 2016: important steps for growth and value creation for shareholders 2. The capital markets honour the positive development 3. HeidelbergCement is well prepared for the future a. Increasing value of the Group after acquisition of Italcementi b. Focus on sustainability and innovation 4. Q1 2017: good operational performance in challenging environment 5. Outlook for 2017: further increase in results
  • 46. Page 46 Opening of new R&D center in Leimen  Opening on 26 October 2016 after only 15 months of construction time  190 high-quality workplaces and 7,200 m² floor space  Innovative use of concrete: thermal activation of the concrete ceilings for climate control  Location of HeidelbergCement Technology Center (HTC) with its engineering and R&D departments
  • 47. Page 47 Leading in innovation for climate protection  Research projects for CO2 capture – Tests with 4 different technologies at Brevik cement plant in Norway completed – Participation in “CEMCAP” and “LEILAC” research cooperations (EU funded by “Horizon 2020” programme)  Research projects on CO2 recycling – “Power to Gas”: transformation of CO2 with excess of alternative energies into methane – Carbonisation: absorption of CO2 by geogenic minerals – Production of biomass from CO2 (e.g. microalgae) for manufacturing of bio fuels or animal feed  Alternative clinker technology Ternocem ® – Saving of around 30% of CO2 emissions and 18% of energy due to changes in chemical composition; development for marketability on track
  • 48. Page 48 Sustainability: focus on species protection  Quarry Life Award – International scientific and educational competition to promote biodiversity in quarries – Target group: students, researchers, NGOs – 2016: 94 projects in 21 countries  Partnership with BirdLife International (since 2011) – Better biodiversity management due to cooperation with experts of BirdLife and their partner organisations in Europe and Africa
  • 50. Page 50 Example: innovative concrete solutions  Facade of the Dior branch in Miami realised by using the biodynamic cement i.active, based on TX Active technology.  TX Active-based building materials improve air quality and have an aesthetic look.  TX Active is based on the photocatalytic effect: Exposed to sunlight, organic and inorganic substances oxidise in the air and transform into innocuous substances.  The facade received the silver American Architecture Prize in the Commercial Architecture category. Barbaritobancel Architectes, Photo with the kind permission of Alessandra Chemollo
  • 51. Page 51 Contents 1. 2016: important steps for growth and value creation for shareholders 2. The capital markets honour the positive development 3. HeidelbergCement is well prepared for the future a. Increasing value of the Group after acquisition of Italcementi b. Focus on sustainability and innovation 4. Q1 2017: good operational performance in challenging environment 5. Outlook for 2017: further increase in results
  • 52. Page 52 Market and financial overview in Q1 2017  Italcementi acquisition strengthens revenue and result – Marked increase in sales volumes in all business lines – Revenue up 34% to €m 3,784 (Q1 2016: €m 2,832) – Result from current operations before depreciation and amortisation rose by 19% to €m 383 – Earnings per share improved by 7% compared to Q1 2016  Higher result contributions in mature markets – price pressure in emerging markets – Operational result improvement in mature markets despite bad weather almost compensates for pressure on margins in Asia and Africa and rise in energy costs  Successful cash flow management – More than €bn 1 free cash flow in the last 12 months – Improved financial result due to more favourable refinancing  Outlook for year 2017 confirmed Solid result despite strong comparative basis, cost inflation, and bad weather
  • 53. Page 53 Key financial figures in Q1 2017 1) Including Italcementi in Q1 2016 2) Like-for-like: adjusted for currency and consolidation effects 3) Attributable to the shareholders of HeidelbergCement AG Key financial figures January-March reported January-March pro forma1) Variance Variance Like-for- €m 2016 2017 in % 2016 2017 in % like 2) in % Consolidated income statement Revenue 2,832 3,784 34 % 3,743 3,784 1 % 0% Result from joint ventures 31 30 -2 % 321 383 19 % 391 383 -2 % -3% RCOBD margin in % 11.3% 10.1% 10.4% 10.1% 138 108 -21 % 124 108 -13 % -14% Loss for the period -31 -35 -13 % Group share of loss -72 -70 2 % Earnigs per share in € 3) -0.38 -0.35 7 % January - March €m 2016 2017 Variance Consolidated statement of cash flows Cash flow from operating activities -262 -485 -224 Total investments -257 -195 62 Consolidated balance sheet Net debt 5,890 9,601 3,711 Gearing 38.7% 53.8% Result from current operations before depreciation and amortisation (RCOBD) Result from current operations
  • 54. Page 54 Sales volumes in Q1 2017 (Italcementi included since 1 July 2016) 49 +23% 2017 61 2016 28 18 +58% 20172016 Cement (mt) Aggregates (mt) 8 +31% 2017 10 2016 +6% 2017 1.5 2016 1.4 Ready-mixed concrete (mm3) Asphalt (mt)
  • 55. Page 55 We expect now “high single digit” cost inflation; rather than “low double digit” Moderate increase in energy costs in Q1 2017 Total energy 3.5% Electricity 2.5% Fuel 4.2% Increase in energy costs of almost 10% expected on annual level Development of energy costs in the cement business line in Q1 2017 vs. Q1 2016
  • 56. Page 56 Successful refinancing measures in Q1 2017 Refinancing with significantly lower interest rate contributes to improvement of financial result and cash flow 1,750 1,000 1.1% 8.0% 20.0 80.0 Repayment Issue in Q1 2017 Volumes in €m Average interest rate in % Annualised interest payments in €m Placement of two euro bonds with a volume of €bn 1 and €m 750 in January and March
  • 57. Page 57 Contents 1. 2016: important steps for growth and value creation for shareholders 2. The capital markets honour the positive development 3. HeidelbergCement is well prepared for the future a. Increasing value of the Group after acquisition of Italcementi b. Focus on sustainability and innovation 4. Q1 2017: good operational performance in challenging environment 5. Outlook for 2017: further increase in results
  • 58. Page 58 Global cement demand outlook in 2017 Solid demand and steady growth expected in our key markets * Except oil producing countries Nigeria, Gabon, and Angola +4% +5% +1% +1% 0% -4% 0%1% +5 to +10% +2% -3% +2% +2% +5% 0% 0% 2% +2% +2%+2% 0% +1% -1% +2% +7% +5% +8% +3% +1% -5% +1% North America: solid growth in USA; recovery in Western Canada Central America: weak consumption South America: stagnation South Africa: weak demand Sub Saharan Africa: solid growth expected* North Africa: Modest growth Europe: modest recovery UK: stagnation Japan: slight increase Russia & Kazakhstan: recovery India: strong growth Middle East: decrease China: slight decline Philippines: strong demand Australia: steady growth Indonesia: significant increase Turkey: stagnation +2% Egypt: increase Northern Europe: solid growth
  • 59. Page 59 Focus on margins Major drivers for business development in 2017 Overall challenging but positive business environment expected in 2017 Positive trends in Europe Realisation of synergies Solid business in UK and Australia Growth in USA Pressure on African markets Increased inflation Increased competition in Indonesia Energy costs Infrastructure projects in Indonesia Investments in energy projects Outcome of elections in Europe Course of Brexit negotiations Political risks in the Middle East Weakening of the euro RISKS POTENTIALS
  • 60. Page 60  Growth of sales volumes in all Group areas on pro forma basis*  Continuing growth in the USA (increasing sales volumes and prices)  Rising demand in the United Kingdom (strong vertical integration)  Continuing market growth in Germany, Northern Europe, and Australia  Higher demand in Italy, France, Morocco, and Egypt  Increasing sales volumes in Indonesia, India, and the African countries due to rising demand  Significantly increasing energy costs  Decreasing financing costs Outlook 2017 Improved operational and financial results  Growth of sales volumes in all Group areas  Moderate increase in revenue and result from current operations*  Significant increase in profit before non-recurring effects* * Adjusted for currency and consolidation effects and inclusion of Italcementi for full year 2016
  • 61. Page 61 Management focus in 2017  Successful realisation of synergies resulting from the Italcementi acquisition  Containment of cost inflation and compensation through price increases  Further improvement of margins through efficiency improving programmes  Disciplined cash management to decrease leverage
  • 62. Size and move your picture, so that it fits in here. Size and move your picture, so that it fits in here. Size and move your picture, so that it fits in here. Size and move your picture, so that it fits in here. Next Annual General Meeting on 9 May 2018