Heidelberg Materials Ag · XETR:HEI
Heidelberg Materials — HeidelbergCement — Merger or Acquisition (July 2015)
40 slides from Heidelberg Materials's merger presentation, Jul 28, 2015
Slide 1: Accelerating growth at the right time: Acquisition of Italcementi Group
Accelerating growth at the right time Acquisition of Italcementi Group Heidelberg, 28 July 2015 Slide 1 – Acquisition of Italcementi – 28 July 2015
Slide 2: 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 3: HeidelbergCement and Italcementi – a natural fit
HeidelbergCement and Italcementi – a natural fit Unique opportunity to accelerate growth Acquiring high quality assets with and achievement of mid-term goals excellent geographical fit Significant value creation potential Right time for transaction to capitalise on through synergies and operational
Slide 4: Contents
Contents Page 1. Italcementi overview 4 2. Transaction and timeline 14 3. Combination and its merits 18 4. Financials and value creation 29 5. Conclusion 39 Slide 4 – Acquisition of Italcementi – 28 July 2015
Slide 5: Italcementi overview
Italcementi overview 150 years old family owned company Major global More than €bn 4 revenue generation building materials 71m tons cement capacity group Operations in 22 countries Mature markets: France, Italy, USA, Canada, Spain Strong market Emerging markets: India, Egypt, Morocco, Th
Slide 6: Italcementi financial overview
Italcementi financial overview Revenues Recurring EBITDA €bn Cement Volumes (mt) €m Margin (%) 70 25.0% 60 1,447 1,404 20.0% 50 5.9 6.0 5.8 1,113 15.0% 5.0 40 972 4.7 4.7 4.5 934 4.2 4.2 842 3.8 30 701 10.0% 643 631 649 20 5.0% 10 0 0.0% 2000 2006 2008 2010 2012 2014 2000 2006 2008 2010 2012 2014 Ne
Slide 7: Strong market positions in emerging markets and recovering countries
Strong market positions in emerging markets and recovering countries Belgium(2) Bulgaria USA & Canada(1,2) Kazakhstan(2) Morocco Thailand Spain India(1,2) France Egypt Italy Greece Top 3 Outside of Top 3 Strategic portfolio of leading market positions in recovering and emerging countries 1) Refer to
Slide 8: Southern European markets now positioned for growth
Southern European markets now positioned for growth Acquisition at the trough of the cycle Italy France Spain Consumption of cement (mt) Consumption of cement (mt) Consumption of cement (mt) -81% 56.0 -49% 41.7 CAGR 28.1 4.8% -27% CAGR 25.2 24.8 3.2% 22.6 23.0 CAGR 21.1 20.9 21.9 21.4 19.9 19.2 20.4
Slide 9: Growth potential from US recovery and emerging markets
Growth potential from US recovery and emerging markets USA Egypt Thailand Morocco Consumption of cement (mt) Consumption of cement (mt) Consumption of cement (mt) Consumption of cement (mt) -31% CAGR 128.0 8.0% 111.2 102.9 CAGR 95.4 88.7 6.5% 81.7 59.0 78.5 CAGR 55.0 72.0 52.0 48.7 49.2 48.0 50.0 12
Slide 10: Global portfolio of world class assets
Global portfolio of world class assets Cement capacity (mt) / Total: 71 Aggregates quarries / Total: 98 RMX plants / Total: 417 Egypt 14.5 Egypt 0 Egypt 20 Italy 12.5 Italy 17 Italy 104 New Markets (1) France / Belgium 11.9 France / Belgium 69 France / Belgium 185 Thailand 6.3 Thailand 0 Thailand 33
Slide 11: High quality, strategically located operations with nearly €bn 3.5 CapEx invested
High quality, strategically located operations with nearly €bn 3.5 CapEx invested in recent years Rezzato – Italy 1.3 mt cement capacity One of the most efficient cement plants in Europe 75% emissions, 30% variable cost reduction Aït Baha – Morocco Devnya – Bulgaria 2.2 mt capacity plant 1
Slide 12: Strong capabilities in research and innovation
Strong capabilities in research and innovation High-performance and technologically More efficient production processes advanced materials i.nova P E R F O R M A N C E Palazzo Italia, the Italian Pavilion at Expo 2015. Constructed by using Biodynamic cement, an innovative solution developed by Italc
Slide 13: Well-established local brands in key markets
Well-established local brands in key markets Italy: Thailand: Morocco: France: Egypt: USA & Canada: India: Kazakhstan: Slide 13 – Acquisition of Italcementi – 28 July 2015
Slide 14: Contents
Contents Page 1. Italcementi overview 4 2. Transaction and timeline 14 3. Combination and its merits 18 4. Financials and value creation 29 5. Conclusion 39 Slide 14 – Acquisition of Italcementi – 28 July 2015
Slide 15: Key transaction terms
Key transaction terms Two-step transaction: Acquisition of 45% stake followed by mandatory tender offer Implied Equity Value of €bn 3.7 to free float shareholders Contractual agreement to acquire 45% stake owned by Italmobiliare S.p.A. Enterprise Value of €bn 6.7(2) €10.6 per share; combination
Slide 16: Disposals contribute significantly to transaction financing
Disposals contribute significantly to transaction financing Disposal of non-core IT, energy business Disposal of and one building to Italmobiliare already non-core assets agreed Disposals of Focus on overlapping geographies single assets Confident to achieve €bn 1 from disposals Slide 16 – Acquisiti
Slide 17: Timeline and transaction structure at a glance
Timeline and transaction structure at a glance Current timeline envisaged closing of the transaction in H2 2016 Announcement of the Merger filing Execution of capital Mandatory public transaction / including potentially increase against tender offer HC Q2 results required disposal of assets assets /
Slide 18: Contents
Contents Page 1. Italcementi overview 4 2. Transaction and timeline 14 3. Combination and its merits 18 4. Financials and value creation 29 5. Conclusion 39 Slide 18 – Acquisition of Italcementi – 28 July 2015
Slide 19: The combination and its merits
The combination and its merits Excellent geographical fit Significant synergy potential Enlarged platform to roll out HC’s industry leading efficiency management concepts Strengthening R&D through combination of HC’s and Italcementi’s state of the art capabilities Unlocking value and increasing earn
Slide 20: Excellent geographical fit
Excellent geographical fit HeidelbergCement Italcementi Attractive new Completion of HC‘s HeidelbergCement and Italcementi market positions in network in Europe fast growing and North America markets Adding strong Strengthening of market position market positions in in the key countries Mediterranea
Slide 21: Strong position in urban centres
Strong position in urban centres Capitalising on increasing urbanisation Stockholm Edmonton Montreal Oslo St Petersburg Vancouver Seattle Toronto Munich Moscow Chicago Benelux Stuttgart Indianapolis Boston Frankfurt New York London Warsaw Philadelphia Prague Washington DC Paris San Francisco Los Ang
Slide 22: Reinforce strong global market positions
Reinforce strong global market positions Aggregates sales volume - 2014 Cement capacity (1) Ready-mix sales volume - 2014 mt 390 mt mm3 275 265 259 31 200 168 58 56 71 49 244 12 94 24 65 129 37 Combination set to create a global #1 in aggregates, #2 in cement and #3 in ready-mix 1) All figures are a
Slide 23: Significant synergy potential
Significant synergy potential Run-rate synergies Minimum run-rate synergies of €m 175 to be achieved by 2018 with potential for additional upside onwards 175 In €m 25 Purchasing 125 25 Commercial Sales and General 50 Administration 50 75 Operational 2016 2017 2018 Almost 30% of total target synergy
Slide 24: Meaningful savings support financial rationale
Meaningful savings support financial rationale In €m CapEx Working Capital €m 750 cash savings until the end of 2016 415 25 335 75 Total €bn 1.3 CapEx 220 220 220 savings in 5 years 390 260 220 220 220 Efficient working capital management to achieve €m 100 savings until 2016 2015 2016 2017 2018 2019
Slide 25: Experienced management team with strong focus on operational excellence
Experienced management team with strong focus on operational excellence Management Board Dr Bernd Dr Lorenz Dr Dominik Daniel Andreas Dr Albert Scheifele Näger von Achten Gauthier Kern Scheuer CEO CFO North America, NW Europe, Africa Central Europe Asia (Deputy Chairman) Mediterranean Central Asia O
Slide 26: Leverage HC’s proven value creation track record
Leverage HC’s proven value creation track record Successful Hanson Integration integration and unique excellence organisational structure Timely implemented and Operational executed programs leading to excellence Significant potential visible margin improvements for improved results and enhanced val
Slide 27: Significant potential to reduce working capital days
Significant potential to reduce working capital days Working Capital (days) 86 Italcementi HC 73 74 21 days 72 69 68 65 55 52 33 days 46 39 35 2009 2010 2011 2012 2013 2014 Considering HC’s past performance, further working capital savings expected Slide 27 – Acquisition of Italcementi – 28 July 201
Slide 28: Benefit from state of the art R&D capabilities
Benefit from state of the art R&D capabilities Easycrete® Optimisation of production processes Powercrete® Chronocrete® CemFlow New products with innovative functionalities i.design Customer oriented solutions i.active i.drain i.light i.clime Innovative binder concepts Research capabilities will be
Slide 29: Contents
Contents Page 1. Italcementi overview 4 2. Transaction and timeline 14 3. Combination and its merits 18 4. Financials and value creation 29 5. Conclusion 39 Slide 29 – Acquisition of Italcementi – 28 July 2015
Slide 30: Financial rationale
Financial rationale Fair multiple on earnings potential Further value drivers not reflected Implied multiple assumptions in the transaction multiple Purchase of 45% in cash and €bn 1.7 share deal Additional value creation from disciplined management of the Tender offer for free float €bn 2.0 modern
Slide 31: Financial rationale
Financial rationale High quality assets in attractive markets at a fair price Illustrative analysis Replacement cost Implied Italcementi (in €bn) valuation (in €bn) Cement 11.4 Cement 5.4 US$/t of US$/t of 53% cement ~US$178/t cement ~US$85/t discount capacity capacity Ready-mix 0.7 Ready-mix 0.7 Ag
Slide 32: Transaction financing secured – clearly defined refinancing plan
Financial rationale Transaction financing secured – clearly defined refinancing plan Transaction initially financed through cash and fully underwritten debt guaranteed for up to 36 months €bn 0.8 cash savings until Dec 2016, driven by CapEx and working capital savings €bn 1.0 from the sale of non-co
Slide 33: Effect on Net Debt
Effect on Net Debt Proforma ratios post closing consistent with current credit metrics In €bn 2.5x ~2.2x 2.2 11.5 0.8 1.0 1.0 3.7 0.8 8.0 6.9 1.3 5.7 HC 2014A Building HC 2014 Net Italcementi Italcementi Proforma Equity Deleveraging Disposals Reduced Net debt Net debt Products debt pre- equity value
Slide 34: Proforma combined Group EBITDA
Proforma combined Group EBITDA In €bn 0.8 0.1 3.7 -0.1 0.6 2.9 2.3 HC EBITDA Italcementi Total Combined Operational Realised Anticipated 2016E proforma 2014 EBITDA 2014 EBITDA 2014 development synergies by 2016 divestments EBITDA 2015/2016 Slide 34 – Acquisition of Italcementi – 28 July 2015
Slide 35: Further potential for portfolio management
Further potential for portfolio management Footprint of > 60 countries allows for a more active portfolio management Increase presence in Divest market positions markets with growth and/or with diminishing potential to value creation potential generate ROIC Slide 35 – Acquisition of Italcementi – 28
Slide 36: Balancing growth and shareholder return
Balancing growth and shareholder return Progressive dividend €bn > 3.2 (2) Progressive dividend €bn > 3.8 (3) FCF generation(1) €bn ~8.8 €bn ~10.9 Return capital to shareholders Deleveraging €bn ~1.0 €bn ~1.3 Potential share buy-back Growth CapEx €bn ~2.5 €bn ~2.0 Italcementi M&A €bn 0 €bn ~1.9 (4)
Slide 37: Focus on maximising returns
Focus on maximising returns ROIC exceeding WACC by end of 2016 Reaching 40% – 45% pay-out ratio by 2019 Expected to be EPS accretive in first full fiscal year after closing Deleveraging to achieve Investment Grade ratings Accelerating achievement of HC’s mid-term targets Slide 37 – Acquisition of It
Slide 38: Delivering attractive returns to shareholders
Delivering attractive returns to shareholders Maintaining long-term dividend payout target Standalone Combined 2019 2019 Revenues €bn > 17 €bn > 20 EBITDA €bn > 4 €bn > 5 ROIC > 10% > 10% Leverage 1.5x – 2.5x 1.5x – 2.5x EPS € ~10 € ~11 Payout Ratio 40% – 45% 40% – 45% Slide 38 – Acquisition of Ital
Slide 39: Contents
Contents Page 1. Italcementi overview 4 2. Transaction and timeline 14 3. Combination and its merits 18 4. Financials and value creation 29 5. Conclusion 39 Slide 39 – Acquisition of Italcementi – 28 July 2015
Slide 40: Conclusion
Conclusion Unique opportunity to accelerate growth Acquiring high quality assets with and achievement of mid-term goals excellent geographical fit Significant value creation potential Right time for transaction to capitalise on through synergies and operational recovery in key markets efficiency Ful