Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Heidelberg Materials AG (HDELY, Financial) reported a solid improvement in EBITDA and RCO, up 4% and 5% respectively, despite a slight decline in revenues.
- The EBITDA margin improved by 230 basis points, driven significantly by strong performance in North America.
- The company issued its first green bond valued at EUR700 million and initiated a share buyback program worth EUR350 million to EUR400 million.
- CO2 emissions were reduced by almost 2% compared to the previous year, aligning with the company's sustainability goals.
- Free cash flow over the last 12 months was strong at EUR2.2 billion, indicating robust financial health.
Negative Points
- Revenues were slightly down by 2%, indicating a challenge in maintaining top-line growth.
- Volume effects remained substantially negative, impacting overall performance.
- Asia Pacific, particularly China and Australia, experienced sluggish demand and slower quarters.
- The European market showed a mixed picture with Northern and Western Europe running slower and volumes still subdued.
- The company faces pricing pressure in markets like Indonesia and India, which could impact profitability.
Q & A Highlights
Q: On the energy hedging tailwind, is there any remaining for H2 in your hedging strategy, and where do you see energy costs for H2?
A: For the first six months, cost inflation was 12% in our favor. For the rest of the year, we are roughly 40% open. We do not expect another 12% for the next five months because last year H2, electricity was quite low. So, there isn't a huge tailwind coming from energy in addition to what we have seen in the first six months.
Q: You have carried out a number of smaller acquisitions in North America. Should we assume this is the way forward in rebuilding your North American footprint?
A: Absolutely, we always said that small and mid-sized tuck-in acquisitions in North America are the way to go. There is no plan for any multibillion acquisitions around the globe at this point. We are very comfortable with our progress in the US, and the team has done an excellent job pulling these transactions off.
Q: Can you provide more color on the magnitude of the Eastern Central European recovery in terms of volumes?
A: Eastern and Central Europe are going strong in terms of volume and pricing. The demand is driven by EU money flowing into those markets and secondary effects from the war impact in Ukraine. Overall, we are happy with our progress there and continue to build our markets with small acquisitions.
Q: What's your real take on the medium-term outlook for markets like Indonesia and India, given their volatility?
A: No change from what we have said in the past. The markets are short-term under pressure, but we are not overly concerned. Indonesia is fairly consolidated, and we have a top market position. In India, we continue to look at all options, including brownfield and greenfield investments. The vast population growth in both countries will drive growth in the end.
Q: Regarding the funding for the decarbonization of the Mitchell plant, when do you expect to get the cash, and is there an election risk?
A: Negotiations with the DOE are in the final stages. We assume that in the next couple of months, we should get a final agreement with the existing administration, which would mitigate any risk from the upcoming election.
Q: Can you talk about the margins in ready-mix and the reception to price increases in the US?
A: Ready-mix is our least profitable business line, but we look at it as a profit center. We have an action plan in place to improve profitability. On US pricing, we are going selectively for second price increases. We do get positive responses from customers, but it varies by geography and business lines.
Q: Did you lose market shares in Europe by maintaining your prices, or did you outperform the market in terms of volumes?
A: For anti-trust reasons, it's difficult to follow market share on a day-by-day basis. We focus on driving value for our product and maintaining our market footprint. On alternative fuels, the increase is mainly for sustainability reasons but also with a focus on P&L impact.
Q: Could you talk about how demand has progressed through the quarter and the valuation of recent US acquisitions?
A: There is no significant decline in volumes in July compared to April. On US acquisitions, we are working with our financial framework, and there has been no change in valuation.
Q: Can you break down the North America margin improvement into contributions from the new Mitchell plant versus everything else?
A: We can't disclose specific contributions, but the significant step-up is driven by Mitchell and other operational improvements. We are not prioritizing one business line over another but are open to all options within our current scope.
Q: What are the building blocks for the expected top-line acceleration in the second half, and can you provide more details on evoZero?
A: We are formally guiding RCO, ROIC, and CO2. Volumes are stabilizing, and we should be around the zero line on revenue growth. On evoZero, we have a very healthy order book and are in discussions for global accreditation and certification.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
