Rock Products

DEC 2018

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Page 72 of 99 ROCKproducts • December 2018 • 71 HeidelbergCement released its financial results for the third quarter of 2018, noting that positive market dynamics continued in all group areas, which led to growth in sales volumes in all business lines. Group revenue rose by 7 percent in the third quarter to €4.9 billion (previous year: €4.6 billion). Adjusted for negative currency and consolidation effects in the amount of €105 million, revenue even increased by 10 percent. Growth was driven particularly by strong demand in many markets and positive pricing. Result from current operations before depreciation and amortization (RCOBD) decreased by 2 percent to €1,039 million due to currency and consolidation effects. However, adjusted for these effects, RCOBD grew by 2 percent. Volume growth, successful price increases and efficiency programs more than compensated cost inflation, particularly for energy. "In the third quarter, the positive revenue and earnings per share trend continued and we could once again earn a premium on our cost of capital," said Dr. Bernd Scheif- ele, chairman of the HeidelbergCement managing board. "Improved financial costs and lower taxes overcompensated weaker than expected results from current operations due to significant rainfalls in our core markets in the United States as well as a higher than planned energy cost inflation." Dr. Scheifele continued, "However, due to the weaker oper- ational development, we had to partially adapt our outlook for 2018. As a countermeasure, we have initiated an action plan with focus on three levers: portfolio optimization, opera- tional excellence as well as cash flow and shareholder return." In the third quarter, HeidelbergCement's cement and clinker sales volumes rose by 5 percent to 35.1 million metric tons (Mt). Adjusted for the disposal of the white cement busi- ness in the United States, deconsolidation of the business in Georgia, and the acquisition of Cementir Italia, the growth rate amounted to 6 percent. All group areas contributed to this increase. While sales volumes in the emerging countries rose above average, North America grew only slightly due to the harsh weather in Texas as well as in the Midwest and Northeast region of the U.S. Deliveries of aggregates rose by 1 percent to 87.7 Mt. With the exception of the Africa-Eastern Mediterranean Basin, all group areas recorded increasing volumes. Deliveries of ready- mixed concrete grew in all group areas, rising by 4 percent to 12.9 million cubic meters. Asphalt sales volumes improved by 5 percent to 3.4 Mt, owing to the positive demand in the UK and California as well as consolidation effects in the North- west and Australia. Excluding consolidation effects, sales volumes came in slightly above last year's level. PCA: Cement Consumption Growth to Falter Over Next Two Years The Portland Cement Association (PCA) Market Intelligence Group forecast for cement consumption over the next two years, shows less growth compared with 2018. This year's rate of change is 2.9 percent; growth recedes to 2.6 percent in 2019 and to 1.6 percent in 2020. "We are expecting relatively modest but sustained interest rate increases after 10 years of low and stable rates," said PCA Senior Vice President and Chief Economist Ed Sullivan. "The Federal Reserve's actions will gradually slow the construc- tion sector's growth due to, among other things, the higher mortgage rates for residential buildings and higher borrow- ing cost for nonresidential buildings." Sullivan added, "While the tax cuts passed at the end of 2017 have helped to boost the overall economy, the rising debt will frame the discussion of future federal public infrastructure spending." PCA's overall projection for the U.S. economy suggests the considerable strength that will take time to unravel. The seeds of a gradual softening will arise from rising interest rates, the emergence of fiscal difficulties at the state level at a time of relative prosperity, and the aging of the recovery. PCA forecasts the GDP growth rate to be 3.1 percent this year, 2.7 percent in 2019 and 2.2 percent in 2020. The unemploy- ment rate, currently below 4 percent, is expected to trend down – intensifying labor shortages and leading to stronger wage gains. "America's economy is unquestionably strong and resilient," said Sullivan. "The real GDP growth is healthy, wage growth is up, and both the unemployment rate and consumer house- hold debt are at near record lows. While interest rates are rising, they have not reached a threshold that would cause a significant adjustment to the positive overall growth projections." HeidelbergCement Quarterly Revenue Up 7 Percent

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