Heidelberg Materials Ag · XETR:HEI
Heidelberg Materials — HeidelbergCement — Investor Day (November 2016)
151 slides from Heidelberg Materials's investor day presentation, Nov 10, 2016
Slide 1: Driving Growth and Shareholder Returns
Driving Growth and Shareholder Returns Dr Bernd Scheifele, Group CEO HeidelbergCement Capital Markets Day London, 10 November 2016 Slide 1 – Capital Markets Day 2016 – 10 November 2016
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: Contents
Contents Page 1. The new HeidelbergCement 4 2. Operational and financial performance 10 3. Accelerating growth with Italcementi (ITC) 14 4. Strategy and strengths 22 5. HeidelbergCement – the future 31 Slide 3 – Capital Markets Day 2016 – 10 November 2016
Slide 4: Contents
Contents Page 1. The new HeidelbergCement 4 2. Operational and financial performance 10 3. Accelerating growth with Italcementi (ITC) 14 4. Strategy and strengths 22 5. HeidelbergCement – the future 31 Slide 4 – Capital Markets Day 2016 – 10 November 2016
Slide 5: HeidelbergCement: Best managed company in the sector
HeidelbergCement Strong Management team with long standing operational and sector expertise Best managed Continuous improvement in operational and company in the financial metrics. New initiatives started in RMC and sales supported by global competence centres sector with unique business Integration
Slide 6: The new HeidelbergCement Group
The new HeidelbergCement Group Leading vertically integrated player Global: #1 in Aggregates Global/local centres of excellence for all three core #2 in Cement business lines #3 in Ready-mix concrete €bn >17 Revenue1 and €bn >3 EBITDA1 One of the biggest global trading services 1st company in the se
Slide 7: The global footprint of HeidelbergCement today
The global footprint of HeidelbergCement today 62,000 employees in 3,000 locations 60 countries on 5 continents 197 million t Cement capacity 19 billion t AGG reserves 1,900 plants Asphalt & RMC Expanded reach, capacity and expertise Slide 7 – Capital Markets Day 2016 – 10 November 2016
Slide 8: New management: Combined 130 years of industry expertise
New management: Combined 130 years of industry expertise Member of the HC Managing Board since 1 February 2016 Dr Bernd Dr Lorenz Dr Dominik Dr Albert Kevin Hakan Jon Scheifele Näger von Achten Scheuer Gluskie Gurdal Morrish CEO CFO Western & Northern and Asia-Pacific Africa-Eastern North America So
Slide 9: New board members: Additional expertise in AGG and RMC
New board members: Additional expertise in AGG and RMC Kevin Gluskie Hakan Gürdal Jon Morrish Member of the Managing Board Member of the Managing Board Member of the Managing Board Date of birth: 19 June 1967 Date of birth: 21 January 1968 Date of birth: 9 September 1970 Education: Educati
Slide 10: Contents
Contents Page 1. The new HeidelbergCement 4 2. Operational and financial performance 10 3. Accelerating growth with Italcementi (ITC) 14 4. Strategy and strengths 22 5. HeidelbergCement – the future 31 Slide 10 – Capital Markets Day 2016 – 10 November 2016
Slide 11: The past 18 months: Delivering on our strategy
The past 18 months: Delivering on our strategy Operating leverage Cost leadership Capitalizing on recovery in mature markets Competence centres (CEM, AGG, RMC) drive Group-wide efficiency through global programs Tapping into emerging markets’ growth momentum Higher EBITDA and margin leading
Slide 12: Continuous improvement of financial metrics and returns
Continuous improvement of financial metrics and returns EBITDA (LTM) in €m Continuous margin improvement and 2,673 2,541 2,613 2,634 increase in cash flow generation 2,479 Jun 15 Sep 15 Dec 15 Mar 16 Jun 16 Financial cost significantly reduced Net Debt in €m 6,331 5,970 5,890 5,865 5,286 Earned prem
Slide 13: Creating value and earning cost of capital
Creating value and earning cost of capital ROIC in % Before ITC acquisition After ITC acquisition 11 ROIC above 10 WACC by end of 2016 9 8 7.2 6.71 7 WACC: 6.9% 6.11 5.6 5.81 6 5.0 Reduction of WACC 5 after ITC acquisition 4 3.3 3 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 After the ITC
Slide 14: Contents
Contents Page 1. The new HeidelbergCement 4 2. Operational and financial performance 10 3. Accelerating growth with Italcementi (ITC) 14 4. Strategy and strengths 22 5. HeidelbergCement – the future 31 Slide 14 – Capital Markets Day 2016 – 10 November 2016
Slide 15: ITC integration: Progressing faster than expected
ITC integration: Progressing faster than expected Redundant HQs closed (Bergamo/Paris/Brussels) All key personnel decisions taken & implemented. HC’s management philosophy has been consequently introduced FTE reductions (1st wave) ahead of plan. Target is to HC has strong reach 1,500 reductions by y
Slide 16: Timeline and milestones of ITC acquisition
Timeline and milestones of ITC acquisition Announcement Closing of Squeeze-out of the transaction 45% stake and delisting acquisition of ITC shares Year- Year- Year- 28 Jul Integration 1 Jul 12 Oct Integration end end end 2015 preparation 2016 2016 execution 2016 2017 2018 Reduction €m 400+ Disp
Slide 17: Strategic and operational actions taken
Strategic and operational actions taken Streamlining country HQs Bundling ITC Group headquarters closed by YE, all functions moved to Heidelberg HQs Italian country headquarters relocated to i.Lab (Bergamo) New HC Managing Board and leadership teams in all ITC countries in place Organizational i.Lab
Slide 18: Closure of redundant Group & local headquarters
Closure of redundant Group & local headquarters Headquarters in continental Western Europe Brussels: BeNeLux HQ (country org.) Heidelberg/Leimen: Closed: HC’s regional HQ (TEAM) Group HQ (incl. tech. support) Brussels Staff of EMEA regions Germany HQ (country org.) Heidelberg Paris Paris/Gue
Slide 19: New leadership in all major ITC countries
New leadership in all major ITC countries North America Kazakhstan New General Managers in all major ITC France Morocco country organizations Italy Egypt Spain Thailand HC’s bonus system for country management India already completely implemented Trading Local management approach and strong signal o
Slide 20: Significantly more synergies than initially expected
Significantly more synergies than initially expected Key drivers ~10% of target’s revenue Higher than expected synergies from = best in class Operations, SG&A and Purchasing Identification of additional synergies from Trading, Finance and Market Updated run-rate synergy expectations In €m 400+ 1
Slide 21: Operational synergies / focus on efficiency improvements
Operational synergies / focus on efficiency improvements EGY U.S. IND BUL FRA KAZ ITA MOR Katta- Yerra- Sita- Couvrot & Shym- Plants: Suez meya Torah Nazareth Speed guntla puram Devnya Beaucaire kent Rezzato Aitbaha Fuel Mix Optimization Fuel Consumption Improvement Power Consumption Improvement Mai
Slide 22: Contents
Contents Page 1. The new HeidelbergCement 4 2. Operational and financial performance 10 3. Accelerating growth with Italcementi (ITC) 14 4. Strategy and strengths 22 5. HeidelbergCement – the future 31 Slide 22 – Capital Markets Day 2016 – 10 November 2016
Slide 23: Best-managed company in the sector
Best-managed company in the sector Value creative vertically integrated business Market leading Strong operating Unique de-centralised management model margin leverage improvement Integration speed Timely reaction to changes in the markets Track record in Strong cash cost efficiency generation Conti
Slide 24: Cement: Significantly enhancing efficiency
Cement: Significantly enhancing efficiency Starting point HC was not competitive regarding Realistic and measurable targets (2004) cash cost per ton Cement capacity (mt) Number of employees (’000) Reorganisation of HeidelbergCement Technology 25.8 117.2 Centre (HTC) 91.5 WIN: reorganisation an
Slide 25: Aggregates: A top performer in the industry
Aggregates: A top performer in the industry Hanson Aggregates was underperforming / EBITDA margin Starting point EBITDA margin below peer group (2006 / 2007) Hanson Aggregates was clearly seen as partially (2007) 24.2% 25.1% undermanaged Setup of Competence Centre Materials (CCM) 16.1% 15.7% (
Slide 26: Ready-mix: New Competence Centre sets clear saving targets
Ready-mix: New Competence Centre sets clear saving targets Ready-mix margins of big cement companies are typically below best managed privately-owned New activity ready-mix companies Key focus areas are materials and logistics (80% of costs) Improvement opportunities Saving targets in €m REVENUE
Slide 27: Vertical integration: Assets, Process, Business
Vertical integration: Assets, Process, Business CEM AGG RMC ASP Level 3 Business Mind-set, Cross BL Behaviour, Value Chain Approach integration Level 2 Processes, Systems, Functions Process integration (Shared Service, Integrated IT Platform...) Level 1 Plant Network, Raw Material Reserves Asset int
Slide 28: Vertical integration: Benefits
Vertical integration: Benefits Centralized dispatch and Alignment of Superior logistics automated replenishment production and sales network Faster reaction times Improved pit balance at Defend market positions in towards customers AGG sites – reduced fine attractive, hard to reach city stocks a
Slide 29: Paris: Strong, vertically integrated market positions
Paris: Strong, vertically integrated market positions Footprint Good vertical integration with: 4 rail linked cement terminals out of which 3 could be Guerville Gargenville connected to the river Seine Gennevilliers Chelles 1 cement plant connected to the river Seine PARIS Bruneseau 23 ready m
Slide 30: Sales is a Science: Digitalisation and process standardisation
Sales is a Science: Digitalisation and process standardisation New Group Function is Market Intelligence and Sales Processes based on two pillars Market model: Sales process: Mix of external and internal information Structured sales planning: used to forecast market development Daily, weekly,
Slide 31: Contents
Contents Page 1. The new HeidelbergCement 4 2. Operational and financial performance 10 3. Accelerating growth with Italcementi (ITC) 14 4. Strategy and strengths 22 5. HeidelbergCement – the future 31 Slide 31 – Capital Markets Day 2016 – 10 November 2016
Slide 32: Global market outlook 2017
Global market outlook 2017 Stable development in UK post Brexit: Recovery to continue in Eastern Europe and Key infrastructure projects will secure central Asia: demand growth Demand growth to continue Price increases to compensate cost RUS, UKR and KAZ on improving trend inflation linked to
Slide 33: Sophisticated approach to mitigate energy price increases
Sophisticated approach to mitigate energy price increases Group Purchasing (HQ) - policy and standard setting, coordination, monitoring - Decentralized Policy of keeping purchasing by Daily portfolio fuel flexibility to country to take Intelligent mix of monitoring and benefit from non- advantage fr
Slide 34: Mid-term targets 2019 unchanged
Mid-term targets 2019 unchanged Revenue EBITDA ROIC Leverage EPS Payout ratio > €bn 20 > €bn 5 >10% 1.5 – 2.5x ~ € 11 40% – 45% Market pressure in Indonesia Downsides Increased competition in Africa Impact of the elections in US, Italy, Germany and France Uncertainties Consequences of Brexit
Slide 35: Dividend policy
Dividend policy Dividend per share in € Payout ratio1 40% – 45% Ordinary dividend payout ratio 1.30 40% to 45% by the end of 2019 30.5% 0.75 Progressive increase based on affordability and sustainability 2014 2015 2019 1) Payout ratio calculated based on clean EPS, excluding “Additional Ordinary Res
Slide 36: Reiterating capital allocation priorities
Reiterating capital allocation priorities Free cash flow Progressive dividend Return capital to generation shareholders Deleveraging for solid IG ratings Potential share buy-back Invest in organic growth Available cash Disciplined M&A Slide 36 – Capital Markets Day 2016 – 10 November 2016
Slide 37: HeidelbergCement: Best managed company in the sector
HeidelbergCement Strong Management team with long standing operational and sector expertise Best managed Continuous improvement in operational and company in the financial metrics. New initiatives started in RMC and sales supported by global competence centres sector with unique business Integration
Slide 38: Driving Growth and Shareholder Returns
Driving Growth and Shareholder Returns Dr Bernd Scheifele, Group CEO HeidelbergCement Capital Markets Day London, 10 November 2016 Slide 38 – Capital Markets Day 2016 – 10 November 2016
Slide 39: Integration of Italcementi
Integration of Italcementi Dr. Dominik von Achten, Deputy Chairman of the Managing Board HeidelbergCement Capital Markets Day London, 10 November 2016 Slide 1 – Capital Markets Day 2016 – 10 November 2016
Slide 40: 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 41: Contents
Contents Page 1. Timeline and milestones 4 2. Quality of assets and markets 6 3. Synergy update 10 4. Integration management 19 5. Next priorities & summary 22 Slide 3 – Capital Markets Day 2016 – 10 November 2016
Slide 42: Contents
Contents Page 1. Timeline and milestones 4 2. Quality of assets and markets 6 3. Synergy update 10 4. Integration management 19 5. Next priorities & summary 22 Slide 4 – Capital Markets Day 2016 – 10 November 2016
Slide 43: Timeline and milestones of ITC acquisition
Timeline and milestones of ITC acquisition Announcement Closing of Squeeze-out of the transaction 45% stake and delisting acquisition of ITC shares Year- Year- Year- 28 Jul Integration 1 Jul 12 Oct Integration end end end 2015 preparation 2016 2016 execution 2016 2017 2018 Reduction €m 400+ Disp
Slide 44: Contents
Contents Page 1. Timeline and milestones 4 2. Quality of assets and markets 6 3. Synergy update 10 4. Integration management 19 5. Next priorities & summary 22 Slide 6 – Capital Markets Day 2016 – 10 November 2016
Slide 45: Well invested plants with very competitive cash cost
Well invested plants with very competitive cash cost1 Exemplary sample of ITC cement plants Rezzato, Italy Devnya, Bulgaria Starting year: 1964 Starting year: 1954/58 Capacity: incl. white cement Capacity: – Clinker: 1.2mt – Clinker: 1.3mt – Cement: 1.2mt – Cement: 1.8mt Last major update:
Slide 46: Deep-dive France – Strong market position
Deep-dive France – Strong market position Strategic position Integrated CEM plant CEM terminal Market position & strengths Grinding plant RMC or AGG plants Strong market share, 2nd largest player in France Calcia market share well positioned, with the Country capital exception of South East UK N
Slide 47: Deep-dive Italy – Substantial recovery potential
Deep-dive Italy – Substantial recovery potential Integrated CEM plant AGG plant Country capital Strategic position CEM terminal RMC plants Grinding plant Market position & strengths AUSTRIA SWITZERLAND Largest player with 12.5mt cement capacity SLOVENIA Modern integrated cement plants in Rezzato
Slide 48: Contents
Contents Page 1. Timeline and milestones 4 2. Quality of assets and markets 6 3. Synergy update 10 4. Integration management 19 5. Next priorities & summary 22 Slide 10 – Capital Markets Day 2016 – 10 November 2016
Slide 49: Significantly more synergies than initially expected
Significantly more synergies than initially expected Key drivers ~10% of target’s revenue Higher than expected synergies from = best in class Operations, SG&A and Purchasing Identification of additional synergies from Trading, Finance and Market Updated run-rate synergy expectations In €m 400+ 1
Slide 50: Staff reductions – Plan 2016: 460 FTE, latest FC: 1,500 FTE
Staff reductions – Plan 2016: 460 FTE, latest FC: 1,500 FTE Expected staff reductions (FTE) 2,550 Key levers 2,450 1. Closure of duplicate 1,200 HQs (Group/local) 1,500 1,330 2. Benchmark-based adjustments 1,350 3. Reduction of external contractors 2016 2016 2017 2018 YTD YE YE YE Blue collar SG&A S
Slide 51: Closure of redundant Group & local headquarters
Closure of redundant Group & local headquarters Headquarters in continental Western Europe Brussels: BeNeLux HQ (country org.) Heidelberg/Leimen: Closed: HC’s regional HQ (TEAM) Group HQ (incl. tech. support) Brussels Staff of EMEA regions Germany HQ (country org.) Heidelberg Paris Paris/Gue
Slide 52: Example Italy – Fresh start of country organisation in i.lab
Example Italy – Fresh start of country organisation in i.lab Italy, i.lab / Bergamo Before acquisition: – Italcementi Group HQ and Italy country HQ co-located in Via Camozzi, Bergamo – i.lab hosted Italcementi’s R&D and Product Innovation staff After integration: – Offices in Via Camozzi and adj
Slide 53: Leverage HC’s proprietary technical efficiency programs
Leverage HC’s proprietary technical efficiency programs Heidelberg Technology Center (CEM) / Competence Center Materials (AGG) MIP (CEM) CLIMB Ops (AGG) Period: 2008-2011 Period: Since 2011 Cum. benefit: € 100M+ Cum. benefit: € 300M+ Key levers: Key levers: – Standardised – Regular plant
Slide 54: Procurement savings from new supplier management system
Procurement savings from new supplier management system Best-practice at Italcementi … … to be enhanced and leveraged Supplier management system developed and Integration into HC system landscape to improved over the last decade boost process automation from 2017 onwards Utilisation (% of all tender
Slide 55: Leverage unused capacity through global trading network
Leverage unused capacity through global trading network Italcementi surplus capacity … … can be leveraged by HC Trading HC Trading is one of the leading world-wide building materials traders Total revenue: €bn 1.1 (’15) Total shipments: 21.7mt (’15) Destinations/Countries: 175/76 Italcementi
Slide 56: New Group function complementing R&D function
New Group function complementing R&D function Cost Innovation optimisation focus New Global Product Centralised Concrete R&D Innovation analytics applications (Heidelberg) (Bergamo) Concrete mix Go-to-market design push Slide 18 – Capital Markets Day 2016 – 10 November 2016
Slide 57: Contents
Contents Page 1. Timeline and milestones 4 2. Quality of assets and markets 6 3. Synergy update 10 4. Integration management 19 5. Next priorities & summary 22 Slide 19 – Capital Markets Day 2016 – 10 November 2016
Slide 58: Leveraging internal integration track record
Leveraging internal integration track record Monthly Board updates, in pre-Closing Integrated management offices (IMO) phase incl. ITC top management on Group, Area and Country level Dedicated Board member responsible Steers overall process, incl. for overall integration management Board upd
Slide 59: Managing cultural differences – Basis for integration success
Managing cultural differences – Basis for integration success Results from cultural baselining Process-driven Proactively addressed Direct Innovative Owner-led Cautious Italian Result-oriented Strong 1. Regular pulse checks Controlled Communicative (employee surveys) Pragmatic Efficient Centralized
Slide 60: Contents
Contents Page 1. Timeline and milestones 4 2. Quality of assets and markets 6 3. Synergy update 10 4. Integration management 19 5. Next priorities & summary 22 Slide 22 – Capital Markets Day 2016 – 10 November 2016
Slide 61: Next action steps clearly defined
Next action steps clearly defined By end of 2018 Realisation of targeted By end of 2017 €m 400+ run-rate Full synergies implementation Ensure of integration sustainability measures of achieved 90%+ of targeted benefits By end of 2016 FTE reductions Ramp-down IMO realised org. / hand-over t
Slide 62: ITC integration – Progressing faster than expected
ITC integration – Progressing faster than expected Redundant HQs closed (Bergamo/Paris/Brussels) All key personnel decisions taken & implemented. HC’s management philosophy has been consequently introduced FTE reductions (1st wave) ahead of plan. Target is to HC has strong reach 1,500 reductions by
Slide 63: Integration of Italcementi
Integration of Italcementi Dr. Dominik von Achten, Deputy Chairman of the Managing Board HeidelbergCement Capital Markets Day London, 10 November 2016 Slide 25 – Capital Markets Day 2016 – 10 November 2016
Slide 64: North America
North America Jon Morrish, Member of the Board HeidelbergCement Capital Markets Day London, 10 November 2016 Slide 1 – Capital Markets Day 2016 – 10 November 2016
Slide 65: 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 66: Contents
Contents Page 1. Region and leadership 4 2. Market deep-dives 7 Texas Southeast Northeast / Mid-Atlantic California Pacific Northwest / British Columbia 3. Regional themes 13 Slide 3 – Capital Markets Day 2016 – 10 November 2016
Slide 67: Contents
Contents Page 1. Region and leadership 4 2. Market deep-dives 7 Texas Southeast Northeast / Mid-Atlantic California Pacific Northwest / British Columbia 3. Regional themes 13 Slide 4 – Capital Markets Day 2016 – 10 November 2016
Slide 68: NAM – Leading market position, economic growth continues
NAM – Leading market position, economic growth continues Rebounding housing, enacted FAST Act, steady jobs growth continue to drive demand Strong position - #2 in Cement with Essroc, Top Aggregates producer, major Ready-Mix producer Good coverage in most major markets – Essroc strengthens this Footp
Slide 69: Significantly expanded position in U.S. and Eastern Canada
Significantly expanded position in U.S. and Eastern Canada Cement sales volume1 (LTM Sept 2016) Core focus on Cement and AGG, with In mt Essroc adds over 4mt of cement sales vertical integration where value-adding 20.5 18.3 12.2 Rising cement demand provides ability to increase prices, yet some pres
Slide 70: Contents
Contents Page 1. Region and leadership 4 2. Market deep-dives 7 Texas Southeast Northeast / Mid-Atlantic California Pacific Northwest / British Colombia 3. Regional themes 13 Slide 7 – Capital Markets Day 2016 – 10 November 2016
Slide 71: Texas continues to grow despite a wet year
Texas continues to grow despite a wet year Integrated CEM plant AGG plant Strategic position Grinding plant RMC plant CEM terminal Market position & strengths Strong cement position (Texas Lehigh JV) in Central Texas, Houston, Corpus Christi Major AGG player DFW, Houston, San Antonio Verticall
Slide 72: Well-positioned in growing Sunbelt States
Well-positioned in growing Sunbelt States Integrated CEM plant AGG plant Strategic position Grinding plant RMC plant CEM terminal Market position & strengths Strong AGG business in Georgia, North Carolina and South Carolina Cement benefitting from Atlanta recovery Turnaround of Alabama Ready-m
Slide 73: Excellent product footprint across Northeast and Midwest
Excellent product footprint across Northeast and Midwest Integrated CEM plant AGG plant Strategic position Grinding plant RMC plant CEM terminal Market position & strengths Essroc and Lehigh Cement combination creates largest player in cement Good productivity & strict cost control discipline ac
Slide 74: California has further improvement potential
California has further improvement potential Integrated CEM plant AGG plant Major city Strategic position CEM terminal RMC plant Market position & strengths Largest Cement player in Northern California Unique high-margin sand dredging business, strengthens Bay Area AGG business New AGG plants
Slide 75: Pacific Northwest one of the fastest-growing regions
Pacific Northwest one of the fastest-growing regions Integrated CEM plant AGG plant Major city Strategic position CEM terminal RMC plant Market position & strengths Strong vertically integrated positions in British Columbia and Washington state Long history with widespread local brand recognitio
Slide 76: Contents
Contents Page 1. Region and leadership 4 2. Market deep-dives 7 Texas Southeast Northeast / Mid-Atlantic California Pacific Northwest / British Colombia 3. Regional themes 13 Slide 13 – Capital Markets Day 2016 – 10 November 2016
Slide 77: Strong cement footprint, with further upside potential
Strong cement footprint, with further upside potential Cement sales volume1 (LTM Sept 2016) #2 Cement producer Essroc adds over 4mt In mt of cement sales Essroc and Lehigh cement combination gives 20.5 18.3 excellent U.S. and Canada plant and rail terminal network coverage 12.2 Significant syner
Slide 78: Strong Cement & Slag terminal network in key coastal markets
Strong Cement & Slag terminal network in key coastal markets Pacific Northwest Competitive coastal cement plant in British CANADA Columbia Cement terminals in Everett and Seattle, Washington Northeast Opportunity for slag Large cement terminals in cement imports Brooklyn, Baltimore and Provi
Slide 79: Expanding AGG footprint, strong margin improvement
Expanding AGG footprint, strong margin improvement AGG sales volume1 (LTM Sept 2016) Top AGG producer In mt Essroc adds 166.0 1.7mt Excellent positions in numerous growth 144.0 markets 125.0 Industry leading margins through disciplined cost control and price increases Continuous improvement cu
Slide 80: North America
North America Jon Morrish, Member of the Board HeidelbergCement Capital Markets Day London, 10 November 2016 Slide 17 – Capital Markets Day 2016 – 10 November 2016
Slide 81: Asia-Pacific
Asia-Pacific Kevin Gluskie, Member of the Board HeidelbergCement Capital Markets Day London, 10 November 2016 Slide 1 – Capital Markets Day 2016 – 10 November 2016
Slide 82: 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 83: Contents
Contents Page 1. Region and leadership 4 2. Market deep-dives 6 Indonesia India Thailand Australia 3. Regional themes 11 4. Competence Centre Readymix (CCR) 18 Slide 3 – Capital Markets Day 2016 – 10 November 2016
Slide 84: Contents
Contents Page 1. Region and leadership 4 2. Market deep-dives 6 Indonesia India Thailand Australia 3. Regional themes 11 4. Competence Centre Readymix (CCR) 18 Slide 4 – Capital Markets Day 2016 – 10 November 2016
Slide 85: Asia-Pacific – A global growth engine
Asia-Pacific – A global growth engine Growing population – 3.8b people, >50% of the world Beijing High rate of urbanisation – >60% of global rural population New Delhi PACIFIC Dhaka Hong Kong OCEAN Positive economic outlook despite volatility Chennai ARABIAN Bangkok SEA Kuala Lampur Brunei Colombo S
Slide 86: Contents
Contents Page 1. Region and leadership 4 2. Market deep-dives 6 Indonesia India Thailand Australia 3. Regional themes 11 4. Competence Centre Readymix (CCR) 18 Slide 6 – Capital Markets Day 2016 – 10 November 2016
Slide 87: Indonesia – Conquering in West Java, Jakarta area
Indonesia – Conquering in West Java, Jakarta area Integrated CEM plant AGG plant Country capital Strategic position CEM terminal RMC plant Market position & strengths ANDAMAN SEA Most profitable and 2nd largest player with 23mt capacity BRUNEI Largest player in largest cement market MALAYSIA (We
Slide 88: India – High demand driven by infrastructure and housing
India – High demand driven by infrastructure and housing Integrated CEM plant Grinding plant Major city Strategic position CEM terminal Country capital Market position & strengths Strengthened market position especially in South India through ITC acquisition ITC’s footprint complements HC’s foot
Slide 89: Thailand – Cost control and downstream integration
Thailand – Cost control and downstream integration Integrated CEM plant AGG plant Strategic position RMC plant Country capital Market position & strengths Geographically well-positioned, vertically MYANMAR LAOS integrated business, supplying Bangkok and surrounding markets Strong brand and well-
Slide 90: Australia – Growing through volume and margin optimisation
Australia – Growing through volume and margin optimisation Integrated CEM plant AGG plant Country capital Strategic position Grinding plant RMC plant Major city Market position & strengths Industry leaders in AGG and RMC PAPUA NEW Fast growing business: Best practice in sales GUINEA & logistics
Slide 91: Contents
Contents Page 1. Region and leadership 4 2. Market deep-dives 6 Indonesia India Thailand Australia 3. Regional themes 11 4. Competence Centre Readymix (CCR) 18 Slide 11 – Capital Markets Day 2016 – 10 November 2016
Slide 92: Indonesia – Challenging but promising market
Indonesia – Challenging but promising market Situation Cement demand & supply Challenging, oversupplied market with many new In mt entrants +48% New entrants adopt low pricing policies to gain +84% 134 market share 127 117 Direct pressure from government on cement prices 112 104 Infrastructu
Slide 93: India – Consolidating for the better
India – Consolidating for the better Situation Cement capacity & capacity share Major consolidation took place in 2016 (Lafarge, Improved Pricing Jaypee, Reliance, etc.) Consolidation Improved Margins HC active in consolidation – increased capacity to Optimised Production 13mt through ac
Slide 94: China – Low risk of exports disrupting HC APAC markets
China – Low risk of exports disrupting HC APAC markets Situation Cement & clinker exports and FOB price China is transitioning from an investment-driven to a In mt consumption-driven economy 44 43 Resultant severe cement overcapacity due to 41 capacity build up during the building boom in the pa
Slide 95: Australia – Strong GDP and population growth rates
Australia – Strong GDP and population growth rates Situation Population & GDP growth rates Despite fall in mining investment, economy is still 3.0 2.9 resilient and growing due to current high demand for 2.9 2.9 housing, mining exports and domestic consumption 26.0 Market talk of a “housing bubb
Slide 96: Sales is a Science – Strong Australian case acts as role model
Sales is a Science – Strong Australian case acts as role model RESULTS “Sales is a Science” Professional salesforce, roll-out commenced in delivering value to our 2014 customers Initial focus on RMC Significant gains in margins and AGG; CEM now in the right markets for our underway products Organisa
Slide 97: Other APAC markets – Overall, a positive outlook
Other APAC markets – Overall, a positive outlook Situation Outlook Bangladesh Robust economy - growing income from Demand will continue rapid growth in mid- expatriate workers term with government push on housing and Excellent market with strong demand infrastructure development growth over th
Slide 98: Contents
Contents Page 1. Region and leadership 4 2. Market deep-dives 6 Indonesia India Thailand Australia 3. Regional themes 11 4. Competence Centre Readymix (CCR) 18 Slide 18 – Capital Markets Day 2016 – 10 November 2016
Slide 99: Competence Centre Readymix (CCR) – A centre of excellence
Competence Centre Readymix (CCR) – A centre of excellence CCR is a clear reflection of HC vertically integrated strategy AGG RMC HTC CEM CCM CCR Competence Centre Readymix: A new group focused on improving the total RMC Business Significant improvements to be unlocked through implementation of CCR S
Slide 100: CCR – New Competence Centre sets clear saving targets
CCR – New Competence Centre sets clear saving targets Cost Structure Improvement Opportunities Savings TARGET in €m 120 1. Data acquisition 2. Integrated margin Materials 50% 3. Strength control 50 4. Variance management 5. Materials optimization 6. Utilization-based cartage 40 cost Logistics 30% 7.
Slide 101: Asia-Pacific
Asia-Pacific Kevin Gluskie, Member of the Board HeidelbergCement Capital Markets Day London, 10 November 2016 Slide 21 – Capital Markets Day 2016 – 10 November 2016
Slide 102: Africa-Eastern Mediterranean Basin
Africa-Eastern Mediterranean Basin Hakan Gurdal, Member of the Board HeidelbergCement Capital Markets Day London, 10 November 2016 Slide 1 – Capital Markets Day 2016 – 10 November 2016
Slide 103: 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 104: Contents
Contents Page 1. Region and leadership 4 2. Market deep-dives 7 Egypt Morocco Sub-Saharan Africa East Mediterranean 3. Regional themes 13 Slide 3 – Capital Markets Day 2016 – 10 November 2016
Slide 105: Contents
Contents Page 1. Region and leadership 4 2. Market deep-dives 7 Egypt Morocco Sub-Saharan Africa East Mediterranean 3. Regional themes 13 Slide 4 – Capital Markets Day 2016 – 10 November 2016
Slide 106: Africa-Eastern Mediterranean – Expanding in growth areas
Africa-Eastern Mediterranean – Expanding in growth areas BLACK SEA Strong presence in growing megacities Istanbul Ankara (e.g. Cairo, Dar es Salaam, Istanbul) Seven countries with market share MEDITERRANEAN SEA > 35% Rabat Jerusalem Cairo Experienced local management and established brands Nouakchot
Slide 107: ITC integration – Balanced product mix
ITC integration – Balanced product mix BLACK SEA Revenue contribution Istanbul Ankara Eastern Med. Basin Sub Saharan MEDITERRANEAN SEA 20% Africa Rabat Jerusalem 33% Cairo Nouakchott GULF North Africa 48% Ouagadougou OF ADEN Freetown Porto-Novo Monrovia Accra Lomé EBITDA contribution Kinshasa Easter
Slide 108: Contents
Contents Page 1. Region and leadership 4 2. Market deep-dives 7 Egypt Morocco Sub-Saharan Africa East Mediterranean 3. Regional themes 13 Slide 7 – Capital Markets Day 2016 – 10 November 2016
Slide 109: Egypt – High potential operations
Egypt – High potential operations Integrated CEM plant Country capital Strategic position RMC plant MEDITERRANEAN Market position & strengths SEA Largest player with 14.5mt production capacity Cairo Strong presence in megacity Cairo (>20m metropolitan population) with three plants Five integra
Slide 110: Strong vertically integrated market positions in Cairo, Egypt
Strong vertically integrated market positions in Cairo, Egypt Footprint WH Qalyubia Cairo Total capacity of 12mt of grey cement RMC Palm Hills Qattameya Plant 3 grey cement plants in the heart of the city Giza RMC New Giza 1 warehouse located in Delta Tourah Plant 20 batching plants, located
Slide 111: Morocco – Vertically integrated with excellent reputation
Morocco – Vertically integrated with excellent reputation Integrated CEM plant AGG plant Country capital Strategic position Grinding plant RMC plant Market position & strengths Largest player in southern Morocco Well-positioned in metropolitan areas (e.g. Agadir, Casablanca, Marrakech) Rabat S
Slide 112: Sub-Saharan Africa – Strong growth outlook
Sub-Saharan Africa – Strong growth outlook Integrated CEM plant Country capital Strategic position Grinding plant Market position & strengths Strongest player in majority of region Geographically advantageous position to supply megacities (e.g. Dar es Salaam, Accra) GULF Local raw material res
Slide 113: Turkey – Key market in Mediterranean basin
Turkey – Key market in Mediterranean basin Integrated CEM plant AGG plant Country capital Strategic position CEM terminal RMC plant Major city Grinding plant Market position & strengths Strongest player in most populated areas (e.g. Marmara/Istanbul) BULGARIA BLACK SEA Supplier of major projects
Slide 114: Contents
Contents Page 1. Region and leadership 4 2. Market deep-dives 7 Egypt Morocco Sub-Saharan Africa East Mediterranean 3. Regional themes 13 Slide 13 – Capital Markets Day 2016 – 10 November 2016
Slide 115: Egypt is the largest cement market in Africa
Egypt is the largest cement market in Africa Situation Cement demand Established management with a strong track record In mt Synergy savings from integration on target Investments in cost saving technology (e.g. coal mill) CAGR:+4% ongoing 62 64 57 59 Well-diversified product portfolio (grey
Slide 116: Population growth to increase cement consumption in Africa
Population growth to increase cement consumption in Africa Situation Population growth Demonstrable correlation between cement demand In m and population growth 2.478 Cost savings achieved from operational excellence CAGR:+2% (e.g. Group projects) Outperforming integrated plants in Western and
Slide 117: Africa-Eastern Mediterranean Basin
Africa-Eastern Mediterranean Basin Hakan Gurdal, Member of the Board HeidelbergCement Capital Markets Day London, 10 November 2016 Slide 16 – Capital Markets Day 2016 – 10 November 2016
Slide 118: Driving Growth and Shareholder Returns
Driving Growth and Shareholder Returns Dr Lorenz Näger, Group CFO HeidelbergCement Capital Markets Day London, 10 November 2016 Slide 1 – Capital Markets Day 2016 – 10 November 2016
Slide 119: 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 120: Contents
Contents Page 1. Strong foundation for the future 4 2. ITC acquisition enhances financial profile 6 3. Outlook 2016 13 4. Capital allocation 17 5. Growth, returns and mid-term targets 27 Slide 3 – Capital Markets Day 2016 – 10 November 2016
Slide 121: Contents
Contents Page 1. Strong foundation for the future 4 2. ITC acquisition enhances financial profile 6 3. Outlook 2016 13 4. Capital allocation 17 5. Growth, returns and mid-term targets 27 Slide 4 – Capital Markets Day 2016 – 10 November 2016
Slide 122: Delivering growth, performance and shareholder returns
Delivering growth, performance and shareholder returns Strengthened profitability – EBITDA margin of HC increased to 20% (LTM)1 Synergy targets for ITC increased, implementation ahead of schedule HC is standing on solid ground Growth of free cash flow contributes to a strong financial base and is we
Slide 123: Contents
Contents Page 1. Strong foundation for the future 3 2. ITC acquisition enhances financial profile 6 3. Outlook 2016 13 4. Capital allocation 17 5. Growth, returns and mid-term targets 27 Slide 6 – Capital Markets Day 2016 – 10 November 2016
Slide 124: ITC acquisition highly exceeding expectations
ITC acquisition highly exceeding expectations Acquisition of ITC completed – HC fully in control MTO successfully completed, ITC delisted, managing board restructured Disposals on track – proceeds exceed target by more than €m 100 Disposal proceeds of €m 1,140 (previous target €m 1,000) Signific
Slide 125: Disposals on track
Disposals on track Expectations at signing Actual disposal proceeds Disposal of US US$m 660 assets Disposal of Belgian €m 312 business Target €m 1,000 Disposal of Italian non- €m 239 core assets Total €m 1,140 Disposal proceeds exceed target by more than €m 100 Slide 8 – Capital Markets Day 2016 – 1
Slide 126: Synergies of €m 400+ – Significantly more than expected
Synergies of €m 400+ – Significantly more than expected Key Drivers ~10% of target revenue = best in class Higher than expected synergies in initial categories (e.g. Operations, SG&A, Purchasing) Identification of additional synergies Updated run-rate synergy expectations from Trading, Finance a
Slide 127: Staff reductions ahead of plan in time and numbers
Staff reductions ahead of plan in time and numbers Expected staff reductions (FTE) 2,550 Key levers 2,450 1. Closure of duplicate 1,200 offices (HQ/local) 1,500 1,330 2. Benchmark-based adjustments 1,350 3. Reduction of external contractors 2016 2016 2017 2018 YTD YE YE YE Blue collar SG&A SG&A / Bl
Slide 128: Majority of implementation costs incurred in 2016 & 2017
Majority of implementation costs incurred in 2016 & 2017 In €m ~90% ~ 340 ~25 ~45% ~155 ~155 2016 2017 2018 Total Full synergy benefit from 2019 Slide 11 – Capital Markets Day 2016 – 10 November 2016
Slide 129: Potential of new HC Group
Potential of new HC Group Focus on ROIC and Earn premium on WACC and building shareholder continuously increase value shareholder return Identified additional Further reduction of OPEX synergy potential and resulting in an increasing EBITDA raised target to €m 400+ margin Successful completion of Le
Slide 130: Contents
Contents Page 1. Strong foundation for the future 4 2. ITC acquisition enhances financial profile 6 3. Outlook 2016 13 4. Capital allocation 17 5. Growth, returns and mid-term targets 27 Slide 13 – Capital Markets Day 2016 – 10 November 2016
Slide 131: Acquisition related increase in net debt to around €m 8,900
Acquisition related increase in net debt to around €m 8,900 In €m ~1,900 ~2,100 170 901 8,868 33 < 8,900 279 ~1,000 1,800 788 5,865 HC Net Acquisition Capital ITC debt PPA Operating Net debt Acquisition Disposals Operating Other Net Debt Debt Q2 ITC (45%) increase Cash flow Q3 2016 ITC (55%) proceed
Slide 132: Refinancing at favourable market conditions
Refinancing at favourable market conditions Bond maturity profile (in €m) Interest expense1 (in €m) ~ Stable interest ~ Significant reduction in Average coupon rate p.a. expense despite interest expenses from 2016 ITC acquisition to 2019 expected due to 5.7% 6.9% 6.9% 5.4% Investment Grade rating 1,
Slide 133: Upcoming refinancing in 2017
Upcoming refinancing in 2017 Debt maturity profile1 Refinancing plan In €m 3,005 Update EMTN Program in November 755 1,849 1,842 HC bond of €m 1,000 due in Jan 2017 42 212 1,566 86 1,161 ITC bond of €m 500 due in April 2017 161 2,250 1,800 1,637 1,480 1,000 Looking for a window with favourable condi
Slide 134: Contents
Contents Page 1. Strong foundation for the future 4 2. ITC acquisition enhances financial profile 6 3. Outlook 2016 13 4. Capital allocation 17 5. Growth, returns and mid-term targets 27 Slide 17 – Capital Markets Day 2016 – 10 November 2016
Slide 135: How to achieve capital allocating in the Group
How to achieve capital allocating in the Group How to allocate Group the Group Capital Capital? Where Working How much is Sustaining How much is Growth should we Capital needed? Capex sufficient? Capex invest? Capital allocation based on analytical metrics and proven industrial logic A reasonable ca
Slide 136: Strict working capital management
Strict working capital management Working capital per quarter (€bn) 82 10 days 72 72 72 67 72 68 60 60 60 1.9 54 1.8 23 days 1.7 1.7 46 40 13 days 1.3 1.2 1.2 1.1 37 0.9 0.9 0.8 0.8 0.7 0.7 0.6 0.5 2009 2010 2011 2012 2013 2014 2015 2016E WCap HC WCap ITC Days ITC Days HC First improvements at ITC v
Slide 137: Reasonable and disciplined Capex spending
Reasonable and disciplined Capex spending Capex expectations1 Key Points in m€ Reduction of combined Capex to a 305 255 level clearly below the combined level of 435 485 HC and ITC before the acquisition Goal is to achieve the Capex saving targets of €bn 1.3 as announced when 1,430 acquiring ITC 1,3
Slide 138: Continuing to grow with selected projects
Continuing to grow with selected projects Key projects Investment Criteria Greenfield and Brownfield projects with a focus on strengthening market position ROIC > WACC by 3rd year of operation in growing markets Bolt-on acquisitions in urban city centers to create integrated supply chain Group net p
Slide 139: Targeted and disciplined approach to investment projects
Targeted and disciplined approach to investment projects Strategy Finance Technical Strategic fit, markets and Financial attractiveness Technical aspects of competition and risk evaluation any project Market attractiveness Tools Project resources Fit with current footprint DCF analysis Geo
Slide 140: The ITC acquisition improves HC’s geographical balance
The ITC acquisition improves HC’s geographical balance WACC before ITC WACC after ITC 7.0 WACC < 7% 6.9 7% < WACC < 10% WACC > 10% The ITC acquisition strengthens HC’s geographical footprint and balance by diversifying the risks and sources of income Slide 23 – Capital Markets Day 2016 – 10 No
Slide 141: ... and better balances HC's currency portfolio
... and better balances HC's currency portfolio HeidelbergCement standalone Proforma combined 14% 17% 23% 24% USD 11% 11% 10% 15% EUR 22% 19% 15% 11% IDR 12% 10% 8% 8% East EU 5% 6% 9% 8% EGP+MAD+THB 11% 9% 9% 7% GBP 6% CAD 8% 8% 8% 6% AUD 8% 7% 5% 6% Scandinavia 10% 12% 12% 9% Other 2013 EBITDA 201
Slide 142: Development of ROIC
Development of ROIC Dec 2012 Dec 2013 Dec 2014 Dec 2015 Sept 2016 Invested 21,063 20,086 21,311 21,271 25,460 Capital1 Turnover 14,020 12,128 12,614 13,465 14,319 Asset 66.6% 60.4% 59.2% 63.3% 56.2% turnover OPAT2 1,222 1,225 1,428 1,532 1,698 EBIT margin 8.7% 10.1% 11.3% 11.4% 11.8% ROIC 5.8% 6.1%
Slide 143: Creating value and earning cost of capital
Creating value and earning cost of capital ROIC in % Before ITC acquisition After ITC acquisition 11 ROIC above 10 WACC by end of 2016 9 8 7.2 6.71 7 WACC: 6.9% 6.11 5.6 5.81 6 5.0 Reduction of WACC 5 after ITC acquisition 4 3.3 3 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Increasing the
Slide 144: Contents
Contents Page 1. Strong foundation for the future 4 2. ITC acquisition enhances financial profile 6 3. Outlook 2016 13 4. Capital allocation 17 5. Growth, returns and mid-term targets 27 Slide 27 – Capital Markets Day 2016 – 10 November 2016
Slide 145: Confirmation of mid-term targets 2019
Confirmation of mid-term targets 2019 Revenues EBITDA ROIC €bn >20 €bn >5.0 >10% Leverage ratio Earnings per share Dividend payout ratio 1.5x – 2.5x € ~11 40 – 45% Delivering attractive returns to shareholders Slide 28 – Capital Markets Day 2016 – 10 November 2016
Slide 146: Mid-term targets 2019 unchanged
Mid-term targets 2019 unchanged Revenue EBITDA ROIC Leverage EPS Payout ratio > €bn 20 > €bn 5 >10% 1.5 – 2.5x ~ € 11 40% – 45% Market pressure in Indonesia Downsides Increased competition in Africa Impact of the elections in US, Italy, Germany and France Uncertainties Consequences of Brexit
Slide 147: Strong free cash flow generation
Strong free cash flow generation Sources of cash Free cash flow generation in €bn 2.62 €m ~250 reduction in interest expense between 2014 and 2019 1.21 Total €bn 1.3 Capex savings in five years Stronger operating cash flow 2015 2016 2017 2018 2019 generation 5 years cumulative FCF2 €bn >10 1) Exclud
Slide 148: Shifting cash towards growth and shareholder returns
Shifting cash towards growth and shareholder returns Capital allocation strategy Free cash flow generation1 Progressive dividend €bn > 3.8 Return capital to shareholders €bn ~10.9 Deleveraging for solid IG ratings1 €bn ~1.3 Potential Invest in organic share Available cash2 growth buy-back €bn ~2.0 €
Slide 149: Sustainable dividend policy
Sustainable dividend policy Dividend per share in € Payout ratio1 40% – 45% 1.30 0.75 30.5% 0.60 0.47 0.35 0.25 0.12 2009 2010 2011 2012 2013 2014 2015 2019F No decrease in Increase in Achieve Gradual Stable Profit absolute absolute benchmark increase in dividend driven amount of dividend based pay-
Slide 150: Share buy-back policy
Share buy-back policy Maintain solid Investment Grade rating Assess key projects with high return expectations Consider capital need for other projects Return excess cash to shareholders through share buy-backs Slide 33 – Capital Markets Day 2016 – 10 November 2016
Slide 151: Driving Growth and Shareholder Returns
Driving Growth and Shareholder Returns Dr Lorenz Näger, Group CFO HeidelbergCement Capital Markets Day London, 10 November 2016 Slide 34 – Capital Markets Day 2016 – 10 November 2016