Heidelberg Materials Ag · XETR:HEI
Heidelberg Materials — HeidelbergCement — Investor Day (June 2018)
146 slides from Heidelberg Materials's investor day presentation, Jun 12, 2018
Slide 1: Capital Markets Day 2018 – Group Strategy Update
Capital Markets Day 2018 Dr. Bernd Scheifele, Group CEO Group Strategy Update ILab Bergamo, 12 June 2018 Slide 1 – Capital Markets Day 2018– 12 June 2018
Slide 2: Contents
Contents HeidelbergCement Overview Strengths & Strategies VISION 2020 Final Messages Slide 2 – Capital Markets Day 2018– 12 June 2018
Slide 3: HeidelbergCement – An operational leader
HeidelbergCement – An operational leader Solid • Best vertically integrated company. business • Simple structure focused on 3 core business lines. model • Lean organization with strong local teams. • Ideal geographical footprint focused on urban centers. Unique asset • Well-balanced business line po
Slide 4: Solid and efficient business model with clearly defined targets
Solid and efficient business model with clearly defined targets Vertical Efficiency Lean Sustainable Integration Gains Organization Development Actively Operate in all Focus on KPIs, Strong local contribute to the core business savings, teams with flat Sustainable lines in key technology, hierarchy
Slide 5: Focus on 3 core business lines
Focus on 3 core business lines Cement Aggregates RMC & ASP Well- 50% 22% 28% balanced of Group revenue of Group revenue of Group revenue portfolio 61% 31% 2% of Group EBITDA of Group EBITDA of Group EBITDA Developed Developed Developed Ideal geographical 54% 92% 84% footprint Emerging Emerging Emerg
Slide 6: Contents
Contents HeidelbergCement Overview Strengths & Strategies VISION 2020 Final Messages Slide 6 – Capital Markets Day 2018– 12 June 2018
Slide 7: Significant asset value located in key markets
Significant asset value located in key markets Cement Aggregates RMC & ASP 20 billion tons 195 mt capacity Fully integrated reserves and resources • 11 bt in US • 93 mt in Europe • 2 bt in UK • 19 mt in NAM • 3 bt in Europe • 1,750 RMC plants • 51 mt in Asia • 2 bt in Australia • 115 ASP plants • 33
Slide 8: Vertical integration improves operational excellence
Vertical integration improves operational excellence CEM AGG 3rd party CEM RMC 3rd party RMC ASP 3rd party ASP End Market Sales channels are protected. Local RMC players source CEM and AGG. Recipe management /optimization in RMC and ASP. Vertical integration improves value and profitability
Slide 9: HeidelbergCement – Most efficient operator in the sector
HeidelbergCement – Most efficient operator in the sector WIN, FITNESS, FITNESS PLUS... Organization and Target: Fixed cost reduction Restructure Requires: Experienced team, accurate decisions Create corporate Challenge: Cultural differences, uncertainties culture with clear 3 to 4 years to a
Slide 10: Continuous focus on efficiency improvement
Continuous focus on efficiency improvement Predictive Control room CCR E-Auctioning maintenance centralization Program Program Better reliability of Pilot tests Digitalization of A new machines, better completed for Purchasing which competence planning, grinding mills. will lead to cost center focus
Slide 11: A proven track record of relentless efficiency optimization
A proven track record of relentless efficiency optimization Revenue per employee (in € ´000)* Ongoing Hanson Optimization after Recovery after financial crisis optimization optimization ITC acquisition Hanson Financial Italcementi acquisition crisis acquisition 296 292 281 270 269 246 251 233 220 20
Slide 12: Committed to sustainable growth, environment and society
Committed to sustainable growth, environment and society. Economic strength & innovation Compliance & Health & Transparency Safety Aligned with the UN Sustainable Development Goals (SDG) enacted 2015 by the UN General Assembly Good Environmental neighbour awareness Circular economy A policy designed
Slide 13: Contents
Contents HeidelbergCement Overview Strengths & Strategies VISION 2020 Final Messages Slide 13 – Capital Markets Day 2018– 12 June 2018
Slide 14: Well-balanced footprint for the business cycle
Well-balanced footprint for the business cycle Vertically integrated business model and urban centers focused footprint enables us to slightly “move ahead” or “follow behind” the cycle in each market. Peak Germany US BeNe, Sweden Canada Spain Morocco Poland, Hungary, Czechia, Baltics Italy Ghana, Ta
Slide 15: VISION 2020
VISION 2020 Continue to grow and Best-in-class operator in the sector with a increase shareholder value solid balance sheet Active Sustainable Strong Return to Comfortable portfolio EBITDA cash shareholders Net Debt level management growth generation €bn 1 to 1.5 disposal Leverage Progressive ~5% p.
Slide 16: Significant cash generation potential
Significant cash generation potential Strong operational cash flow supported by: Active portfolio Reduced Financial cost Improvement in management maintenance reduction taxes CapEx Reduce Cash-focus on Refinance high complexity and local level with coupon bonds Continuous risk structure of new FCF a
Slide 17: Balanced allocation of capital 2018-2020
Balanced allocation of capital 2018-2020 Free Cash Flow generation ~ €bn 6.0 Portfolio optimization Progressive dividends Dividends to Deleveraging Growth Disposals to HC shareholders Minorities to €bn 1.5 - 2.0 €bn 1.0 -1.5 Payout ratio ~40% €bn ~0.4 - 0.5 < 2.0X < €bn 7 Cash allocation potential €
Slide 18: €bn 1 to 1.5 disposal potential in 3 years
€bn 1 to 1.5 disposal potential in 3 years Disposals focused on 3 main categories Non-core businesses Weak market positions Idle assets • Business activities outside of • Non-defendable market • Depleted quarries and land core business lines CEM, positions • Unused fixed assets AGG and RMC/ASP • Mar
Slide 19: Focus on deleveraging
Focus on deleveraging Company has the proven track record to improve leverage Net Debt / EBITDA 4.0 €m 500 accounting & FX Italcementi impact + Cartel Fine Acquisition 3.6 3.3 3.3 3.0 2.8 2.9 2.6 2.0 2.0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Target is to get leverage below 2.0X
Slide 20: Continue to grow with selective M&A strategy
Continue to grow with selective M&A strategy Value creation for Bolt-on M&A company and shareholders Decision Improve Improve Synergies Meet Key criteria market vertical as value financial position integration driver criteria Financial attractiveness Net profit ROIC > WACC Solid FCF accretion in and
Slide 21: Recent deals already started to pay-off
Recent deals already started to pay-off Rationale Business EV Paid Cost Multiple Latest acquisitions Synergy after syn. Potential Vertical integration in Fairburn RMC fast growing Georgia RMC in Atlanta $m 23 $m1 5.8 X market. Vertical integration and RMC & AGG in Saunders Companies expansion in New
Slide 22: Sustainable dividend policy will continue
Sustainable dividend policy will continue Payout ratio: Dividend growth eight years in a row ~ 40% (DPS in €) 1.90 CAGR 1.60 +41% 1.30 0.75 0.60 0.47 0.35 0.25 0.12 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 No decrease in Profit driven increase in Reach payout ratio of absolute DPS
Slide 23: Contents
Contents HeidelbergCement Overview Strengths & Strategies VISION 2020 Final Messages Slide 23 – Capital Markets Day 2018– 12 June 2018
Slide 24: HeidelbergCement – An operational leader
HeidelbergCement – An operational leader Solid • Best vertically integrated company. business • Simple structure focused on 3 core business lines. model • De-centralized, lean organization with strong local teams. • Ideal geographical footprint focused on urban centers. Unique asset • Perfectly bala
Slide 25: Disclaimer
Disclaimer This presentation contains forward-looking statements and information. Forward-looking statements and information are statements that are not historical facts, related to future, not past, events. They include statements about our beliefs and expectations and the underlying assumptions. T
Slide 26: Capital Markets Day 2018 – Western & Southern Europe Market Update
Capital Markets Day 2018 Dr. Dominik von Achten - Deputy Chairman of the Managing Board Western & Southern Europe Market Update ILab Bergamo, 12 June 2018 Slide 1 – Capital Markets Day 2018– 12 June 2018
Slide 27: Contents
Contents HeidelbergCement in Europe UK deep-dive France deep-dive Germany deep-dive Europe key messages Slide 2 – Capital Markets Day 2018– 12 June 2018
Slide 28: HeidelbergCement – An operational leader
HeidelbergCement – An operational leader Solid • High vertical integration in UK, France, BeNe & Germany. business • Cement focus in Italy & Spain. model • Strong country management. • Geographical footprint focused on big urban centers like London, Paris, Unique Frankfurt & Milano. asset base • Cro
Slide 29: Footprint in Western Southern Europe
Footprint in Western Southern Europe 15,500 employees in 7 countries Highly integrated operations in Europe 47.1 mt Cement capacity 3,500 mt / 78.5 mt AGG reserves / sales 960 plants Asphalt, RMC, AGG Strong footprint in major European countries Slide 4 – Capital Markets Day 2018– 12 June 2018
Slide 30: Generating growth and free cash flow in respective markets
Generating growth and free cash flow in respective markets Percentage of revenue (2017) Focus: State of the art efficiency 26% Bottom line focus in Top line focus in 15% Northern markets 22% Southern markets Focus: market recovery 24% 9% 3% Customized approaches in Europe Slide 5 – Capital Markets D
Slide 31: WSE perfectly positioned for the business cycle
WSE perfectly positioned for the business cycle Vertically integrated business model and urban centers focused footprint enables us to slightly “move ahead” or “follow behind” the cycle in each market. Peak Germany BeNe Italy France UK remains to be question mark Trough Spain Southern Europe in reco
Slide 32: Steady profit development in Western Southern Europe
Steady profit development in Western Southern Europe EBITDA [M€] CAGR +2% 689 620 642 637 578 2013 2014 2015 2016 2017 North provides strong fundament, recovery in South provide momentum for result growth Slide 7 – Capital Markets Day 2018– 12 June 2018
Slide 33: Vision 2020 will drive the result
Vision 2020 will drive the result BeNe UK RMC & AGG focus on volumes & prices Regain topline growth, beat peers Logistics & customer process in results optimization Strict cost management Tough cost management Most efficient order to cash process Germany France Above-average price increases Network
Slide 34: Contents
Contents HeidelbergCement in Europe UK deep-dive France deep-dive Germany deep-dive Europe key messages Slide 9 – Capital Markets Day 2018– 12 June 2018
Slide 35: HeidelbergCement in UK
HeidelbergCement in UK Strategic position Market position & strengths Integrated CEM plant Market leader in RMC and Cementitious GGBS plant Vertically integrated business including Marine & CEM terminal Rail RMX or AGG plants Asphalt plant Existing fleet of mobile concrete and asphalt Country
Slide 36: Beginning of recovery in UK expected in 2019
Beginning of recovery in UK expected in 2019 Brexit referendum Economic data 1.35 Brent Crude Oil Price £ per barrel 6.0% GDP Growth % - Year on Year 60 3.0 5.0% 1.30 55 1.25 2.5 4.0% 50 GBP:EUR 1.20 2.0 45 3.0% 1.15 40 2.0% 1.5 1.10 35 1.0% 1.05 1.0 30 0.0% 1.00 25 0.5 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Slide 37: UK focus on new operational excellence & efficiency
UK focus on new operational excellence & efficiency Most efficient order to cash process Tough cost management Comprehensive sales initiative currently Continued focus on cost control being implemented G&A cost reduction initiatives Logistics optimization and efficiencies Energy efficiencies – C
Slide 38: UK Market Outlook
UK Market Outlook Residential Public Commercial Overall UK construction output in 2018 forecast to be flat UK Outlook impacted by weaker Q1 due to adverse weather Delays in large scale infrastructure projects London impacted by greater exposure to commercial London projects Key market for
Slide 39: Top Priorities UK
Top Priorities UK UK Focus on 1. Regain topline growth, beat peers in results 2. Strict Cost Management 3. Most efficient order to cash process Organization & Asset set up in UK perfectly aligned for these goals Slide 14 – Capital Markets Day 2018– 12 June 2018
Slide 40: Contents
Contents HeidelbergCement in Europe UK deep-dive France deep-dive Germany deep-dive Europe key messages Slide 15 – Capital Markets Day 2018– 12 June 2018
Slide 41: HeidelbergCement in France
HeidelbergCement in France Strategic position Integrated CEM plant RMX or AGG plants Country Capital Market position & strengths CEM terminal Grinding plant Major cities Strong market share, 2nd largest player Calcia market share well positioned Favourable locations with geographical proximity
Slide 42: Deep-dive Paris Region
Deep-dive Paris Region Integrated CEM plant Mega projects opportunities CEM terminal Major projects Grand Paris Grand Paris Express consists of the extension of existing lines and construction of new automatic subway. Each day, it will be a flow of about 2 million Olympic vilage Parisians using th
Slide 43: France post merger optimization creating higher than expected value
France post merger optimization creating higher than expected value Operational Network Optimization Strategic Network Optimization Short-term operational action plan to Long-term strategic study to achieve cost optimize production and transportation leadership in France costs to serve clients Stu
Slide 44: France with positive outlook for steady growth
France with positive outlook for steady growth Residential Public Commercial +3%* +1.7%* +3.1%* France Housing starts in 2017 Several large projects Office market hit a new increased by ~15% to be confirmed record in H1 2017 compared to 2016 Nord Europe Channel Commercial building French housing m
Slide 45: Top Priorities France
Top Priorities France France Focus on 1. Push strategic & operational Network Optimization 2. Maximize ITC Synergies 3. Tough Cost Management in operations & SG&A Focus on Market recovery & efficiency gains Slide 20 – Capital Markets Day 2018– 12 June 2018
Slide 46: Contents
Contents HeidelbergCement in Europe UK deep-dive France deep-dive Germany deep-dive Europe key messages Slide 21 – Capital Markets Day 2018– 12 June 2018
Slide 47: HeidelbergCement in Germany
HeidelbergCement in Germany Strategic position Integrated CEM plant CEM terminal Market position & strengths Country capital CEM: market leader especially in the south and Grinding plant metropolitan areas modernized efficient plant AGG plant network RMC plants RMX: market leader with a stro
Slide 48: Positive market outlook with focus on metropolitan areas
Positive market outlook with focus on metropolitan areas Residential Public Commercial +7%* +6%* +5%* Germany Overall Germany construction output in 2018 forecast to be on a high level Outlook impacted by weaker Q1 due to adverse weather Biggest challenge is the staff shortage Metropolitas M
Slide 49: Favorable political framework and further consolidation
Favorable political framework and further consolidation Politics Bottlenecks Focus on construction Restructuring of ministries Establishment of new committee Capacity in manufacturing Segments industry with full Residential order books 2017 demand of 400.000 apartments vs. completion of 300.00
Slide 50: Plant upgrade improves environmental footprint and cost position
Plant upgrade improves environmental footprint and cost position Masterplan Cement (examples) CO2 Reduction Roadmap Capex: ~ €m 370 Capex: ~ €m 17 modernization & improvement of sites Saving CO2: > 210 kt / y All sites with operation permit are compliant Example Lengfurt Catalyst Capex:
Slide 51: Top Priorities Germany
Top Priorities Germany Germany focus on 1. Push above average price increase and FCF generation in good market 2. Finalize Masterplan Cement to increase efficiency 3. Reduce costs by logistics & customer process optimization Push efficiency in good market environment Slide 26 – Capital Markets Day 2
Slide 52: Contents
Contents HeidelbergCement in Europe UK deep-dive France deep-dive Germany deep-dive Europe key messages Slide 27 – Capital Markets Day 2018– 12 June 2018
Slide 53: Transformational change with new tools and processes
Transformational change with new tools and processes Market recovery in Spain, Italy, France Focus on efficiency in UK, Germany, BeNe & France Cost reduction Defining the Production (Masterplan) most efficient Logistic (Network optimization) customer CO2 risks (New technology) journey in our SG&A (C
Slide 54: Just to summarize: Result driven by vision 2020
Just to summarize: Result driven by vision 2020 BeNe UK RMC & AGG focus on volumes & prices Regain topline growth, beat peers Logistics & customer process in results optimization Strict cost management Tough cost management Most efficient order to cash process Germany France Above-average price incr
Slide 55: Disclaimer
Disclaimer This presentation contains forward-looking statements and information. Forward-looking statements and information are statements that are not historical facts, related to future, not past, events. They include statements about our beliefs and expectations and the underlying assumptions. T
Slide 56: Capital Markets Day 2018 – Italy Market Update
Capital Markets Day 2018 Mr. Roberto Callieri, Italy CEO Italy Market Update ILab Bergamo, 12 June 2018 Slide 1 – Capital Markets Day 2018– 12 June 2018
Slide 57: Contents
Contents HeidelbergCement in Italy Italy market update & our strategy Integration Final messages Slide 2 – Capital Markets Day 2018 – 12 June 2018
Slide 58: HeidelbergCement in Italy
HeidelbergCement in Italy • Market reached highest consolidation level in Central/South Europe Well- positioned • We are the largest player with 10 mt CEM capacity post divestments for recovery • Vertically integrated positions in RMC & AGG • Rationalized manufacturing and distribution network Focus
Slide 59: Market overview
Market overview 2007 network Integrated cement plants 17 Tavernola Grinding mills 3 Calusco Rezzato RMC plants 228 AGG plants 19 2016 network Testi Integrated cement plants 7 Spoleto Grinding mills 8 Cagnano RMC plants 124 Guardiaregia AGG plants 17 Colleferro Matera Solid asset base: 2018 network I
Slide 60: Cementir addition: a perfect fit and a key consolidation step
Cementir addition: a perfect fit and a key consolidation step Tavernola Estimated market shares Sarche Calusco Top-3 players represent 70%! Rezzato Trieste Novi L. Full Integrated plant HC ITC Arquata Other Ravenna Grinding mill 24% 30% Reggio Calabria terminal Testi Spoleto 12% Cementir/ 12% Sacci
Slide 61: Contents
Contents HeidelbergCement in Italy Italy market update & our strategy Integration Final messages Slide 6 – Capital Markets Day 2018– 12 June 2018
Slide 62: Significantly below peak years; but recovery mode is on
Significantly below peak years; but recovery mode is on Cement consumption (vs. prior year) * Current market situation CEM demand almost 30 mt behind peak 3% 3% 3% Bottom have been touched in 2016 with 1% cement consumption just above 300 kg per -1% capita -3% -3% -6% -5% -7% 2017 & 2018 are t
Slide 63: We started to see growth in demand first time in years
We started to see growth in demand first time since 8 years High consolidation Volume recovery Significant upside level already visible price potential Demand slowly First price increases Top 3 players improving after the already implemented represent almost 70% market hit bottom in successfully. Mo
Slide 64: Economic indicators also signal a turning point
Economic indicators also signal a turning point GDP looks resilient despite Construction sector still fragile growing political uncertainty but trend on recovery GDP growth Investment in construction (vs. prior year) 1.5% 1.4% 2.4% 0.8% 0.9% 0.1% -0.1% -1.0% -0.7% -1.7% -7.0% -6.8% -2.8% -7.6% 2012
Slide 65: Operating Strategy hinging on 4 key pillars
Operating Strategy hinging on 4 key pillars Rationalized distribution Active price management network with further as top priority opportunities ahead Hands-on management Countrywide industrial Focused management Growth and network team, flat organization Operational vertical Strong bran
Slide 66: Key points with clear focus on result improvement by 2020
Key points with clear focus on result improvement by 2020 Drive operations back to profitability Further Strengthen cash-in with market non core leadership assets via network divestments optimization Best Target is to operator significantly improve in the sector Value profitability creation Sustaina
Slide 67: Contents
Contents HeidelbergCement in Italy Italy market update & our strategy Integration Final messages Slide 12 – Capital Markets Day 2018– 12 June 2018
Slide 68: HC-ITC Grow Together: a new start since 2016
HC-ITC Grow Together: a new start since 2016 • Wind down of former ITC Group HQ with all functions moved to HD Headquarters • Temporary transition division directly reporting to HC Group functions • Relocation of Country headquarters to i.Lab technological center Organization • New Country Organizat
Slide 69: Successful integration clearly improves Italy results
Successful integration clearly improves Italy results Bergamo HQ FTE Country total FTE Synergies (€m) -368 -683 +29 688 2,405 40 1,722 320 11 HC acquisition 2016 Plan 2018 HC acquisition 2016 Plan 2018 Original target Realized Italy Operating EBITDA w/o CO2 Italy Operational Free Cash Flow 233 €m €m
Slide 70: Cementir integration already started
Cementir integration already started New organization All integration work- Rome HQ phasing announced in streams started out process started January working €m 30 cost synergies Wind down of Integration of One customer Signing of by 2020 former Cementir – one invoice binding Cementir operations in p
Slide 71: Lessons learned from the past
Lessons learned from the past Change, Clear and Trust takes time, Walk the talk, Credibility with although consistent vertically and be true stakeholders is painful, is communication horizontally a must at all always an levels opportunity The solid Good news Realigning Habits have Inside value as mu
Slide 72: Contents
Contents HeidelbergCement in Italy Italy market update & our strategy Integration Final messages Slide 17 – Capital Markets Day 2018– 12 June 2018
Slide 73: HeidelbergCement in Italy
HeidelbergCement in Italy • Market reached highest consolidation level in Central/South Europe Well positioned • We are the largest player with 10 mt CEM capacity post divestments for recovery • Vertically integrated positions in RMC & AGG • Rationalized manufacturing and distribution network Focuse
Slide 74: The key assets: a focused management team and organization – Thank you
The key assets: a focused management team and organization Thank you and good bye! Slide 19 – Capital Markets Day 2018– 12 June 2018
Slide 75: Disclaimer
Disclaimer This presentation contains forward-looking statements and information. Forward-looking statements and information are statements that are not historical facts, related to future, not past, events. They include statements about our beliefs and expectations and the underlying assumptions. T
Slide 76: Capital Markets Day 2018 – North America Market Update
Capital Markets Day 2018 Mr. Jon Morrish, Member of The Board North America Market Update ILab Bergamo, 12 June 2018 Slide 1 – Capital Markets Day 2018 – 12 June 2018
Slide 77: Contents
Contents HeidelbergCement in North America Key markets deep-dive VISION 2020 / strategies Final messages Slide 2 – Capital Markets Day 2018 – 12 June 2018
Slide 78: HeidelbergCement in North America
HeidelbergCement in North America Well • Major urban centers in U.S. & Canada positioned in • Broad coverage of 25+ U.S. states & 6 Canadian Provinces all key markets • Fast growth areas – Sunbelt, Texas, West Coast Excellent • Leading cement & slag cement player product • Top tier aggregates produc
Slide 79: NAM – Broad geographic footprint; strong performance
NAM – Broad geographic footprint; strong performance 23% 40% Canada region North region1 Cement plants 2 Cement plants 11 Solid asset base... Grinding plants 1 Slag grinding plants 2 Aggregates sites >50 Aggregates sites >100 > 28 mt CEM RMC & ASP plants >70 RMC & ASP >75 Import te
Slide 80: Well-balanced product & geographical coverage provide depth
Well-balanced product & geographical coverage provide depth Revenue by key Operating geography Operating EBITDA market by segment Other Pipe Prairies Northeast Cement Sunbelt 3% 10% 26% 10% 3% 44% 48% 12% 14% PNW 12% 13% Midwest Aggregates 5% CA RMC & ASP TX Well-positioned in all key Above average
Slide 81: Key financial figures
Key financial figures NAM operating EBITDA margin EBITDA margin per region 26.8% 2015 2016 2017 23.4% 1.8% 20.7% 29% 26% 28% 27% 25% 25% 24% 23% 20% 19% 21% 25.0% 16% 2015 2016 2017 North South West Canada North America ROCE ROCE by region 20.2% 2015 2016 2017 31% 1.8% 25% 26% 16.0% 14.7% 21% 19% 17
Slide 82: Well positioned for the business cycle
Well positioned for the business cycle Vertically integrated business model and urban centers focused footprint enables us to slightly “move ahead” or “follow behind” the cycle in each market. Peak US Midwest & Northeast TX, PNW & Southeast California Trough Significant further potential for existin
Slide 83: Contents
Contents HeidelbergCement in North America Key markets deep-dive VISION 2020 / strategies Final messages Slide 8 – Capital Markets Day 2018– 12 June 2018
Slide 84: California – improving margins with further upside potential
California – improving margins with further upside potential 3 CEM 4 CEM 15 AGG 1 AGG 22 RMC 13 ASP plants terminals plants terminal plants plants Market position Trends & potential Strategy & focus Cement market leader in Largest U.S. state population Clear margin improvement in Northern Cali
Slide 85: Texas – a shining star for NAM with sustained growth
Texas – a shining star for NAM with sustained growth 1 CEM 5 CEM 15 AGG 8 AGG 23 RMC plant terminals plants terminals plants Market position Trends & potential Strategy & focus Strong cement position North TX attracting significant Continue to grow AGG (Texas Lehigh JV) in Central investment a
Slide 86: Pacific Northwest – one of the fastest growing regions
Pacific Northwest – one of the fastest growing regions 1 CEM 1 CEM 8 CEM 22 AGG 8 AGG 40 RMC 3 ASP plant grinding terminals plants terminals plants plants Market position Trends & potential Strategy & focus Market leading AGG position Vibrant economy anchored in Continue with bolt-on deals in
Slide 87: Growing Midwest – a solid and important part of NAM portfolio
Growing Midwest – a solid and important part of NAM portfolio 4 CEM 6 CEM 1 Slag 44 AGG 4 AGG 57 RMC plants terminals grinding plants terminals plants Market position Trends & potential Strategy & focus Leading player in cement Vibrant upper Midwest Realize AGG margin market with strong custom
Slide 88: Market leading positions in Northeast & Mid-Atlantic
Market leading positions in Northeast & Mid-Atlantic 7 CEM 1 CEM 1 Slag 19 CEM 61 AGG 3 AGG 52 RMC 23 ASP plants grinding grinding terminal plants terminal plants plants Market position Trends & potential Strategy & focus Leading player in cement & Solid recovery in recent years Optimize cemen
Slide 89: Well-positioned in growing Sunbelt States
Well-positioned in growing Sunbelt States 1 CEM 1 Slag 7 CEM 30 AGG 5 AGG 23 RMC plant grinding terminals plants terminals plants Market position Trends & potential Strategy & focus Strong AGG business in Atlanta, GA strong market Further vertical integration in Georgia, North Carolina and dem
Slide 90: Contents
Contents HeidelbergCement in North America Key markets deep-dive VISION 2020 / strategies Final messages Slide 15 – Capital Markets Day 2018– 12 June 2018
Slide 91: Vision 2020 – Further improved profitability
Vision 2020 – Further improved profitability High operating leverage in all key markets At least keep current level of leverage well above 50% Further improve the margins, which are already top of the class Strengthen cash conversion (FCF / EBITDA) to above 70% Excellent cash conversion wi
Slide 92: Strong North America cement footprint
Strong North America cement footprint Top cement producer PCA spring 2018 forecast 1) HC’s excellent US & Canada footprint covers mt +4.0% +2.7% key growth markets – with additional (3.5 mt +2.8% +2.8% plant & 8.0 mt import) capacity 106 103 97 100 Recent Essroc acquisition delivered significant
Slide 93: Growing aggregates business, best in class margins
Growing aggregates business, best in class margins Top aggregates producer Aggregates spend outlook 1) Excellent positions in numerous US & Canadian $bn +5.8% +1.1% +1.9% +0.8% markets Strong margins through disciplined cost control 27 29 29 30 30 and consistent price increases 14 15 15 15 15
Slide 94: Disciplined portfolio management – growth without overpaying
Disciplined portfolio management – growth without overpaying Recent noteworthy acquisitions Assets Synergies Multiple1) Value added 6 RMC / 5 Asphalt CEMEX Pacific Northwest Materials Business 6.9x VI growth / expansion 9 AGG sites $m 7 / yr EBITDA into growing markets Pacific Northwest (Jun. 20
Slide 95: Contents
Contents HeidelbergCement in North America Key markets deep-dive VISION 2020 / strategies Final messages Slide 20 – Capital Markets Day 2018– 12 June 2018
Slide 96: North America – key takeaways
North America – key takeaways Leading market positions Broad coverage, both in product & geography Top performing aggregate business, excellent cement position High operating leverage providing significant margin improvement potential Continuous disciplined growth Very well-positioned for the future
Slide 97: Disclaimer
Disclaimer This presentation contains forward-looking statements and information. Forward-looking statements and information are statements that are not historical facts, related to future, not past, events. They include statements about our beliefs and expectations and the underlying assumptions. T
Slide 98: Capital Markets Day 2018 – Indonesia Market Update
Capital Markets Day 2018 Mr. Christian Kartawijaya, Indonesia CEO Indonesia Market Update ILab Bergamo, 12 June 2018 Slide 1 – Capital Markets Day 2018– 12 June 2018
Slide 99: Contents
Contents Indocement: a well-positioned player Macroeconomic trends and market update Vision 2020 – strategies Final messages Slide 2 – Capital Markets Day 2018– 12 June 2018
Slide 100: HeidelbergCement in Indonesia
HeidelbergCement in Indonesia Favorable • Presence in strongly growing markets West and Central Java regional • Strong RMC position in Jakarta with pull-through on CEM exposure Most cost efficient • Lowest cash costs in the sector cement • Absence of interest costs further enhances our competitivene
Slide 101: Strong footprint in West Java as a key advantage
Strong footprint in West Java as a key advantage Integrated CEM plant AGG plant Country capital ANDAMAN SEA CEM terminal RMC plant Asset base BRUNEI MALAYSIA 25 mt CEM capacity 2.8 mt AGG capacity 43 RMC plants Solid results 2017 Jakarta €m 953 revenue €m 209 EBITDA INDIAN OCEAN West Java is the fas
Slide 102: Strategic location of plants & terminals
Strategic location of plants & terminals 13 CEM 8 CEM 2 AGG 39 RMC 18 172 plants terminals plants plants distributors warehouses Market position Trends & potential Strategy & focus 50% market share in West Huge infra projects in West Defending market share in Java and 40% in Jakarta. Java, suc
Slide 103: We are the most efficient cement manufacturer
We are the most efficient cement manufacturer Cash cost per ton in IDR Our competitive advantage Essroc adds Industry Indocement 1.7mt • Application of HC Group best practices. -11% • Overhead saving program. -11% • Commissioning of the P14 kiln will lead to a $ 7 to 8 cost per ton reduction at full
Slide 104: Brand is a very important marketing tool in Indonesia
Brand is a very important marketing tool in Indonesia Our premium Perception Award brand • “Tiga Roda” brand is perceived to have best quality & service in the country. • “Top Brand” since eleven years. • In 2017, we won in the three categories: cement, white cement and mortars. BUILDING MATERIAL CA
Slide 105: Contents
Contents Indocement: a well-positioned player Macroeconomic trends and market update Vision 2020 – strategies Final messages Slide 8 – Capital Markets Day 2018– 12 June 2018
Slide 106: Indonesia – Favorable macroeconomic environment
Indonesia – Favorable macroeconomic environment Strong population Key: growing middle Upward trend in growth class urbanization +32 million +107 million 62.8% 53.3% 264 296 222 +9.5% 115 2017 2030 2017 2030 2015 2030 One of the fastest By 2050 almost 75% of Middle class will have growing countries t
Slide 107: Recent years were challenging but the worst is left behind
Recent years were challenging but the worst is left behind Supply / demand development Price development Utilization (%) Excess capacity (mt) addsDemand (mt) Essroc 1.7mt 93% 86% 81% 71% 66% 69% 71% +6% 128 101 37 86 76 35 62 69 24 9 14 4 91 58 60 62 62 66 2013 2014 2015 2016 2017 2022 Dec-17 Jan-18
Slide 108: Capacity split now stabilizing
Capacity split now stabilizing Newcomers Tier-2 incumbents Top-3 incumbents 3% 8% 10% 15% 21% 9% 21% 9% 10% 10% 87% 83% 76% 69% 69% 2014 2015 2016 2017 2018e Newcomers currently not gaining further capacity share Slide 11 – Capital Markets Day 2018– 12 June 2018
Slide 109: Long-term potential of Indonesia is clearly visible
Long-term potential of Indonesia is clearly visible Cement consumption tons per capita in kg Essroc adds 1.7mt 1,648 1,000 763 Average excluding 617 China: 458 462 399 262 248 244 163 China South Malaysia Vietnam Thailand Australia Indonesia Phillippines India Pakistan Korea Significant headroom for
Slide 110: Contents
Contents Indocement: a well-positioned player Macroeconomic trends and market update Vision 2020 – strategies Final messages Slide 13 – Capital Markets Day 2018– 12 June 2018
Slide 111: Vision 2020 – To be the prominent cement producer in Indonesia
Vision 2020 – To be the prominent cement producer in Indonesia Highest operating margin in the industry Turn around in selling price Cost leadership Highest customer satisfaction & increase market share “Sales is a Science” program to increase our sales and create customer value “Custome
Slide 112: Clear drivers of future growth
Clear drivers of future growth Strong volume momentum and outlook Unique market position of Growth Improving supply – demand Indocement drivers dynamics Pricing stabilized and improving Slide 15 – Capital Markets Day 2018– 12 June 2018
Slide 113: Potential market consolidation as an additional upside
Potential market consolidation as an additional upside Newcomers operate Consolidation at cash losses seems to be imminent Unfavorable cost structure due lower Newcomers actively look for capacity and inferior equipment buyers for their assets Interest to be paid on debt-financed Consolidation will
Slide 114: Contents
Contents Indocement: a well-positioned player Macroeconomic trends and market update Vision 2020 – strategies Final messages Slide 17 – Capital Markets Day 2018– 12 June 2018
Slide 115: HeidelbergCement in Indonesia
HeidelbergCement in Indonesia Favorable • Presence in strongly growing markets West and Central Java regional • Strong RMC position in Jakarta with pull-through on CEM exposure Most cost efficient • Lowest cash costs in the sector cement • Absence of interest costs further enhances our competitivene
Slide 116: Disclaimer
Disclaimer This presentation contains forward-looking statements and information. Forward-looking statements and information are statements that are not historical facts, related to future, not past, events. They include statements about our beliefs and expectations and the underlying assumptions. T
Slide 117: Capital Markets Day 2018 – Group Financials Update
Capital Markets Day 2018 Dr. Lorenz Näger, Group CFO Group Financials Update ILab Bergamo, 12 June 2018 Slide 1 – Capital Markets Day 2018– 12 June 2018
Slide 118: Contents
Contents Achievements & targets Financial strategy Capital allocation Slide 2 – Capital Markets Day 2018– 12 June 2018
Slide 119: Our achievements from 2015 until today
Our achievements from 2015 until today Achieve Refinance Reduce Investment Grade rating at favorable conditions finance costs (€m)1) Investment grade BBB- BBB- -29% territory 6.8% -76% 550 493 391 BB+ 1.6% 2015 Nov 2017 Avg. coupon of Avg. 2015 2016 2017 2016 refinanced bonds refinancing rate Reduce
Slide 120: Increasing shareholder returns
Increasing shareholder returns Earning an increasing premium on WACC Continuously rising dividends ROIC Dividend in € per share 7.2% 7.1% 7.0% CAGR: 1.90 +36% 6.7% 1.60 6.6% 6.3% 1.30 26,064 23,595 0.75 20,849 21,559 2014 2015 2016 2017 2014 2015 2016 2017 WACC* ROIC** Invested capital (in m€)* * Su
Slide 121: Slower economic growth keeps HC from reaching forecast
Slower economic growth keeps HC from reaching forecast Projected development of world economy* (GDP growth) GDP growth in % 5.5 Emerging 5.0 markets 4.5 4.0 World 3.5 3.0 2.5 Advanced 2.0 economies 1.5 1.0 2014 2015 2016 2017 2018 World (FC’14) World (FC’18) Advanced economies (FC’14) Advanced econo
Slide 122: Well-balanced footprint for the business cycle
Well-balanced footprint for the business cycle Vertically integrated business model and urban centers focused footprint enables us to slightly “move ahead” or “follow behind” the cycle in each market. Peak Germany US BeNe, Sweden Canada Spain Morocco Poland, Hungary, Czechia, Baltics Italy Ghana, Ta
Slide 123: VISION 2020
VISION 2020 Continue to grow and Best-in-class operator in the sector with a increase shareholder value solid balance sheet Active Sustainable Strong Return to Comfortable portfolio EBITDA cash shareholders Net Debt level management growth generation €bn 1 to 1.5 disposal Leverage Progressive ~5% p.
Slide 124: Contents
Contents Achievements & targets Financial strategy Capital allocation Slide 8 – Capital Markets Day 2018– 12 June 2018
Slide 125: Increasing focus on Free Cash Flow Generation
Increasing focus on Free Cash Flow Generation Stronger focus to Free Cash Flow Definition of Free Cash Flow Gross cash flow - Interest payments, net - Tax payments, net +/- Changes in Working Capital - Maintenance CapEx = Free Cash Flow (FCF) Rationale behind the stronger focus on FCF More compreh
Slide 126: Strong cash generation a core competence of HC
Strong cash generation a core competence of HC Free Cash Flow generation* ~6.0 ~3.6 ~1.4 ~1.3 ~0.9 2015 2016 2017 Total Total 2018-2020 * IFRS view including ITC from 1 July 2016. Proven business model to generate in total FCF of ~€bn 6 until 2020 Slide 10 – Capital Markets Day 2018– 12 June 2018
Slide 127: CO2 allowance lead to higher costs & investments into modern technology
CO2 allowance lead to higher costs & investments into modern technology… Prices of CO2 certificates (EUAs) Rising certificate prices put pressure on [in €] companies short of allowances. 16 15 14 Companies are forced to invest into 13 efficient technology or risk being 12 pushed out of the market. 1
Slide 128: Successful bond issuances 2015-2018 – further potential ahead
Successful bond issuances 2015-2018 – further potential ahead Bond of €bn 5 issued at average coupon of 1.6 % since 2015 Coupon rate [%] (Values in bubbles indicate the bond size in €m) 11.0% 10.0% Bonds repaid 500 9.0% since 2015. 500 8.0% 650 1,000 750 120 7.0% 170 Bonds 500 6.0% 650 maturing unti
Slide 129: Refinancing of high coupon bonds within the next 2½ years
Refinancing of high coupon bonds within the next 2½ years Bond maturity profile 2018-2020 (in €m) Issuer Maturity year Maturity month Nominal value Coupon HC Finance Lux. 2018 December 500 9.50% HC Finance Lux. 2019 March 500 2.25% HC Finance Lux. 2019 October 500 8.50% ITC Finance 2020 March 750 5.
Slide 130: Refinancing of high coupon bonds contributes to FCF growth
Refinancing of high coupon bonds contributes to FCF growth Financial result (in €m)* Financial result at ca. €m. 250 +/- €m 25 653 in 2020. 579 391 2015 2016 2017 2018 2019 2020 * Pro-forma 2015 and 2016 financial data based on public information from ITC. ** Based in current interest rate environme
Slide 131: A well-balanced basket of currencies…
A well-balanced basket of currencies… HeidelbergCement standalone Pro-Forma combined 10% 8% 9% Other 12% 12% 6% IDR 10% 7% EGP+MAD+THB 22% 19% 15% 8% 9% Eastern Europe 8% 8% 7% Scandinavia 12% 10% 5% 6% 7% AUD 7% 8% 7% 8% 5% GBP 8% 7% 9% 8% 6% 15% EUR 5% 10% 13% 69% 11% 6% CAD 11% 9% 6% 9% 11% 29% U
Slide 132: Global tax trends lead to lower tax rates but broader tax basis
Global tax trends lead to lower tax rates but broader tax basis Global trend 1: decreasing tax rates Global trend 2: broadening of tax base Examples of headline CIT rates 35% Increasing restrictions on the tax 30% deduction of interest expenses. 28% 25% 21% Focus of tax authorities on 19% interc
Slide 133: Tax Strategy: declining tax rates lead to lower taxes
Tax Strategy: declining tax rates lead to lower taxes Cash tax ratio of HeidelbergCement 60 55 50 45 40 35 30 25 22% 20 15 10 5 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Annual cash tax ratio Three-year average cash tax ratio Target: mid-term average tax rate of 22
Slide 134: Working Capital to remain stable despite increasing sales
Working Capital to remain stable despite increasing sales Working Capital Days*: 35.0 35.4 36.0 34.0 32.0 30.1 30.0 29.1 28.0 25.1 26.0 25 24.0 Lowest point in five years 22.0 20.0 2013 2014 2015 2016 2017 * IFRS view, including ITC from 1 July 2016. Target: WC (in absolute terms) to remain stable a
Slide 135: Subsidiary dividend strategy: reducing risks from cash deposits
Subsidiary dividend strategy: reducing risks from cash deposits Dividends paid* (€m) Cash deposits in subsidiaries* (€m) Minorities HC 400 993 1,088 158 404 242 176 65 418 111 181 589 237 2015 2016 2017 Total YE 2017 Mid-term Reduction of FX risks on cash deposits in Repatriation of funds into the G
Slide 136: Mid-term potential for maintenance CAPEX reduction
Mid-term potential for maintenance CAPEX reduction Maintenance CapEx as % depreciation 75 71% 70 68% 67% 65 60 Level of 55% investment 58% 55 required to ensure 50 sustainability of equipment 45 2014 2015 2016 2017 Mid-term Target: Maint. CapEx mid-term at 55% of depreciation & amortization Slide 20
Slide 137: Increase the premium earned on cost of capital
Increase the premium earned on cost of capital Before ITC acquisition After ITC acquisition Increasing returns from ITC assets and improving market cycles. 7.2% 7.1% 7.0% 7.0% 7.0% 6.7% 6.9% 6.7% 6.6% WACC stable without 6.3% major shift in portfolio 6.1% 5.8% 23,595 26,064 21,063 20,086 20,849 21,5
Slide 138: Positive rating development
Positive rating development Rating history of HeidelbergCement BBB+/Baa1 Investment Grade Territory BBB/Baa2 BBB BBB-/Baa3 BBB- BB+/Ba1 BB/Ba2 BB-/Ba3 B+/B1 B/B2 B-/B3 Jan.-09 Jan.-10 Jan.-11 Jan.-12 Jan.-13 Jan.-14 Jan.-15 Jan.-16 Jan.-17 Jan.-18 Mid Term Fitch Moody’s S&P’s Target: stable rating i
Slide 139: Contents
Contents Achievements & targets Financial strategy Capital allocation Slide 23 – Capital Markets Day 2018– 12 June 2018
Slide 140: Balanced allocation of capital 2018-2020
Balanced allocation of capital 2018-2020 Free Cash Flow generation ~ €bn 6.0 Portfolio optimization Progressive dividends Dividends to Deleveraging Growth Disposals to HC shareholders Minorities to €bn 1.5 - 2.0 €bn 1.0 -1.5 Payout ratio ~40% €bn ~0.4 - 0.5 < 2.0X < €bn 7 Cash allocation potential €
Slide 141: Sustainable dividend policy will continue
Sustainable dividend policy will continue Payout Dividend growth eight years in a row ratio: ~ 40% (DPS in €) 1.90 CAGR 1.60 +41% 1.30 0.75 0.60 0.47 0.35 0.25 0.12 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 No decrease in Profit driven increase in Reach payout ratio of absolute DPS
Slide 142: We are targeting to get our leverage below 2.0x by 2020
We are targeting to get our leverage below 2.0x by 2020 Targeted development of Net Debt until 2020 4.0 3.6 3.3 3.3 3.0 2.9 2.8 2.6 2.0 Target 2.0x 8,999 8,695 8,423 8,242 7,868 7,092 7,352 6,957 5,286 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Net Debt (in €m)* Net Debt / EBITDA On
Slide 143: Our proactive three-year portfolio optimization strategy
Our proactive three-year portfolio optimization strategy . Growth (€bn 1.5 – 2) Disposals (€bn 1 – 1.5) → Increasing vertical integration → Non-core / unused assets → Non-performing assets → Improving market position → Non-sustainable market → Promising synergy potential → Disposals reducing complex
Slide 144: Targeted and disciplined approach to investment projects
Targeted and disciplined approach to investment projects Strategy Finance Technical Sustainability Financial Compatibility with Strategic fit, markets Technical aspects of attractiveness and sustainability and competition any project risk evaluation commitments Vertical integration Tools Project
Slide 145: VISION 2020
VISION 2020 Continue to grow and Best-in-class operator in the sector with a increase shareholder value solid balance sheet Active Sustainable Strong Return to Comfortable portfolio EBITDA cash shareholders Net Debt level management growth generation €bn 1 to 1.5 disposal Leverage Progressive ~5% p.
Slide 146: Disclaimer
Disclaimer This presentation contains forward-looking statements and information. Forward-looking statements and information are statements that are not historical facts, related to future, not past, events. They include statements about our beliefs and expectations and the underlying assumptions. T