Heidelberg Materials Ag · XETR:HEI
Heidelberg Materials — HeidelbergCement — Investor Day (June 2015)
126 slides from Heidelberg Materials's investor day presentation, Jun 10, 2015
Slide 1: Building Shareholder Value
Building Shareholder Value HeidelbergCement Capital Markets Day London, 10 June 2015 Slide 1 – Capital Markets Day 2015 – 10 June 2015
Slide 2: Agenda
Agenda 2:00 pm – 2:05 pm Welcome & Introduction by Andreas Schaller, Spokesman / Director Group Communication & IR 2:05 pm – 3:05 pm Presentation by Dr Bernd Scheifele, Group CEO 3:05 pm – 3:30 pm Presentation by Dr Dominik von Achten, Deputy Chairman / North America / CCM 3:30 pm – 3:50 pm Coffee B
Slide 3: Building Shareholder Value – Dr Bernd Scheifele, Group CEO
Building Shareholder Value Dr Bernd Scheifele, Group CEO HeidelbergCement Capital Markets Day London, 10 June 2015 Slide 3 – Capital Markets Day 2015 – 10 June 2015
Slide 4: 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 5: Contents
Contents Page 1. Introduction 6 2. HeidelbergCement today 9 3. Development 2009 – 2014 16 4. New strategic priorities 24 5. Increasing shareholder value 55 Slide 5 – Capital Markets Day 2015 – 10 June 2015
Slide 6: Contents
Contents Page 1. Introduction 6 2. HeidelbergCement today 9 3. Development 2009 – 2014 16 4. New strategic priorities 24 5. Increasing shareholder value 55 Slide 6 – Capital Markets Day 2015 – 10 June 2015
Slide 7: Introduction: Strategic differentiation
Introduction 1 2 3 Building Strategic Focus on shareholder differentiation returns value Slide 7 – Capital Markets Day 2015 – 10 June 2015
Slide 8: Our mid-term ambitions
Our mid-term ambitions Revenues EBITDA Cumulative FCF1 €bn >17 €bn >4 €bn 8.8 by 2019 by 2019 in 2015 – 2019 Leverage ratio Dividend payout ratio Potential share 1.5x – 2.5x 40 – 45% buy-back Net debt / EBITDA for FY2019 to return further cash 1) Excluding proceeds from Building Products disposal Sl
Slide 9: Contents
Contents Page 1. Introduction 6 2. HeidelbergCement today 9 3. Development 2009 – 2014 16 4. New strategic priorities 24 5. Increasing shareholder value 55 Slide 9 – Capital Markets Day 2015 – 10 June 2015
Slide 10: HeidelbergCement today
HeidelbergCement today 45,000 employees at 2,300 locations in more than 40 countries on 5 continents Leading vertically integrated player with key positions in Cement, Aggregates, RMC and Asphalt Superior global footprint with strong presence in urban centres One of the biggest trading services glob
Slide 11: Strong positions in mature and fast growing markets
Strong positions in mature and fast growing markets Cement Aggregates Focus on growth Focus on mature markets markets and 129 mt capacity industrialisation worldwide1 18 bnt reserves 64% of capacity in 86% of reserves emerging markets in mature markets RMC Asphalt Focus on Focus on u
Slide 12: Experienced management team
Experienced management team 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 Oceania Strategy and Finance, Acc., Purchasing Environ
Slide 13: Performance-driven corporate culture
Performance-driven corporate culture Key enablers in place Strong corporate values Measurable outcome Clear organisational structure Corporate Values Consistent target setting and Loyalty and Integrity evaluation of achievements Keep it simple Can-do / hands-on attitude Flat reporting lines
Slide 14: Organisational approach
Organisational approach Line management combined with functional responsibilities1 Core principles Quarterly Flat, efficient structure and clear Top management Management reporting lines Meeting (CEO, CFO, Area-VS) participants Vertically integrated management Country management approach across
Slide 15: Local business and entrepreneurship in a global company
Local business and entrepreneurship in a global company Global corporate culture Performance and results orientation Sustainable development Global best practice sharing Cement Aggregates RMC Asphalt Local market presence with local brands More than 80% native management Improved footh
Slide 16: Contents
Contents Page 1. Introduction 6 2. HeidelbergCement today 9 3. Development 2009 – 2014 16 4. New strategic priorities 24 5. Increasing shareholder value 55 Slide 16 – Capital Markets Day 2015 – 10 June 2015
Slide 17: Important milestones reached
Important milestones reached Strong EBITDA growth Significant reduction of debt Key Cement capacity expansion in emerging markets achievements Disposal of non-core assets Established industry cost leadership Successfully built a global leader in heavy building materials Slide 17 – Capital Markets Da
Slide 18: Strong EBITDA growth
Strong EBITDA growth Rapid implementation of Delayed US recovery margin effective programmes Unexpected Actions & Fukushima earthquake Optimisation of asset base challenges strategy EURO zone crisis Improvement of vertical integration in key markets 2,870 768 487 2,382 Currency 2,102 IFR
Slide 19: Proven record of deleveraging
Proven record of deleveraging Net debt (in €m) Net debt / Op. EBITDA (LTM) 4.0 3.6 3.3 3.3 2.9 2.5 8,423 8,146 7,770 7,307 7,047 5,684 2009 2010 2011 2012 2013 2014 pro forma1 Net debt down to €bn 5.7 and well in line with strategic target 1) after Building Products disposal Slide 19 – Capital Marke
Slide 20: 17mt capacity expansion for cement and clinker since 2011
17mt capacity expansion for cement and clinker since 2011 Russia Tula: 2,000 kt Poland New Kiln + Mill: Kazakhstan 1,400 kt Shetpe: 800 kt Liberia Indonesia Cement Mill 3: Capacity expansion: 1,500 kt 500 kt P6/P11 Cem cap Incr.: 1,900 kt Burkina Faso India Cement Mill: Damoh: 650 kt 2,900 kt Austra
Slide 21: Disposal of Building Products successfully completed
Disposal of Building Products successfully completed Disposal process announced ... and finalised within targeted time beginning of 2014 … frame and above expected value Geographic presence Preparation of financial statements: start (Combined revenue >US$1 bn) in January 2014 Nomination of inves
Slide 22: Achievements over the last five years
Achievements over the last five years Mid-cycle ambitions 2009 Status end of 2014 EBITDA €bn 3.0 EBITDA up from €bn 2.1 to €bn 2.9 lfl1 Net debt / EBITDA: below 2.8x 2.5x2 Become the most cost efficient company Outperformed peers in margin in the sector development over last 5 years Continue t
Slide 23: Clearly outperformed peers in terms of shareholder return
Clearly outperformed peers in terms of shareholder return Strong share price development1 Continuous rise in dividend payments 91% 0.75 0.60 0.47 0.35 0.25 0.12 13% 9% 8% 2% Competitor 1 Competitor 2 Competitor 3 MSCI World Construction 2009 2010 2011 2012 2013 2014 Materials Index 1) 14 September 2
Slide 24: Contents
Contents Page 1. Introduction 6 2. HeidelbergCement today 9 3. Development 2009 – 2014 16 4. New strategic priorities 24 5. Increasing shareholder value 55 Slide 24 – Capital Markets Day 2015 – 10 June 2015
Slide 25: Building shareholder value
Building shareholder value Accelerating growth and shareholder returns Operational efficiency improvement and deleveraging Right sizing of business 2009 2011 2013 2015 2017 2019 Slide 25 – Capital Markets Day 2015 – 10 June 2015
Slide 26: Mega trends support growth of building materials industry
Mega trends support growth of building materials industry Growth of population Urbanisation Growing middle-class (World’s population in bn1) (Urban population in bn1) (GDP per capita of emerging countries2) +4% +24% 7.6 +8% 13.1 7.6 12.3 7.5 4.0 4.1 4.2 4.3 7.4 4.0 11.6 7.3 11.0 10.5 2015 2016 2017
Slide 27: Strategic levers
Strategic levers Operating leverage Cost leadership Optimal geographic Vertical integration footprint Slide 27 – Capital Markets Day 2015 – 10 June 2015
Slide 28: Strategic levers
Strategic levers Operating leverage Cost leadership Optimal geographic Vertical integration footprint Slide 28 – Capital Markets Day 2015 – 10 June 2015
Slide 29: Significant potential to increase sales volumes in all business lines
Significant potential to increase sales volumes in all business lines Cement Aggregates in mt +52% Sales +23% 117 Expansion in mt 300 4 2015 244 77 113 2014 Production Capacity 2014 2008 2014 Ready-mixed concrete Asphalt Sales +21% Sales +30% in Mm³ 44 in mt 12 37 9 2014 2008 2014 2008 Slide 29 – Ca
Slide 30: Deep dive cement – plenty of headroom to capture demand growth
Deep dive cement – plenty of headroom to capture demand growth North America Western and Northern Europe Asia-Pacific mt1 mt1 mt1 17.9 32.8 33.4 Additional import Capacity increase capacity Indonesia 2015 ~9.5mt >7.5mt left Free capacity >12mt Free domestic Free capacity capacity Currently Currently
Slide 31: Significant operating leverage potential as markets improve
Significant operating leverage potential as markets improve Cement gross margin: ~45% Aggregates gross margin: ~55% Exemplary scenario 28% Exemplary scenario 27% EBITDA margin as of 2014 25% 25% 24% EBITDA margin as of 2014 23% EBITDA margin development when: EBITDA margin development when: Price in
Slide 32: Strategic levers
Strategic levers Operating leverage Cost leadership Optimal geographic Vertical integration footprint Slide 32 – Capital Markets Day 2015 – 10 June 2015
Slide 33: Continuous efficiency improvement
Continuous efficiency improvement 2014 onwards 2014 onwards Continuous improvement CE Supply chain management & CIP LEO 2013 Margin CLIMB & improvement PERFORM 2011 Financial and operational excellence FOX 2009 Right-sizing FITNESS 2007 Integration HANSON 2005 Restructuring WIN Efficiency is part of
Slide 34: Entering the next efficiency level
Entering the next efficiency level Continuous Improvement Program Supply Chain Management (CIP) (LEO) Approach Safeguard achieved efficiency Centralised dispatching improvements in 65 cement plants Integrated replenishment Promote entrepreneurial thinking of Fleet optimisation as well as b
Slide 35: Strategic levers
Strategic levers Operating leverage Cost leadership Optimal geographic Vertical integration footprint Slide 35 – Capital Markets Day 2015 – 10 June 2015
Slide 36: Urbanisation – an important growth driver
Urbanisation – an important growth driver Slide 36 – Capital Markets Day 2015 – 10 June 2015
Slide 37: Population growth and urbanisation – HC well positioned in urban centre hot spots
Population growth and urbanisation – HC well positioned in urban centre hot spots Edmonton Boston New York Oslo Stockholm St Petersburg Vancouver Philadelphia Seattle Washington DC Moscow Munich Warsaw London Stuttgart San Francisco Chicago Los Angeles Indianapolis Frankfurt San Diego Atlanta Buchar
Slide 38: Vertical integration – Assets, Process, Business
Vertical integration – Assets, Process, Business CEM AGG RMC ASP Level 3 Business Mind-set, Cross BL Behavior, 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 39: Level 1: Asset integration
Level 1: Asset integration Aggregates Cement Asphalt Ready-mix concrete Concrete elements Infrastructure Commercial Residential Cement: 50 % Cement: 20 % Cement: 30 % Aggregates: 50-60 % Aggregates: 20-25 % Aggregates: 20-25 % Establish and further develop integrated positions in urban centers Slide
Slide 40: Level 2: Process integration
Level 2: Process integration Integrated IT platform Supply Chain Management Seamless end-to-end CEM AGG RMX ASP processes along the entire value chain and Purchasing across business lines (e.g. purchase-to-pay, Maintenance order-to-cash) Production Efficient management of the entire asset base (e.g.
Slide 41: Level 3: Business integration
Level 3: Business integration Integrated sales management Knowledge sharing Switch from product selling to solution Best-practice transfer across BLs selling Global functions to leverage our Cross selling and integrated resources size and boost professionalization and sales planning “Sales
Slide 42: “Sales as a science”
Bringing sales management to the next level: “Sales as a science” “Sales as a science” Integrated and data driven sales planning across business lines Micro market analysis: right segments Sales planning in the past right products, right customers No sales planning across Pricing principle: business
Slide 43: Vertical integration – Benefits
Vertical integration – Benefits Centralized dispatch and Alignment of Superior logistics automated replenishment production and sales network Faster reaction times towards Improved pit balance at Defend market positions in customers aggregates sites – reduced attractive, hard to reach city Imp
Slide 44: Strong, vertically integrated market positions: London, UK
Strong, vertically integrated market positions Deep-dive: London, UK Footprint Fully vertically integrated with: Edmonton Purfleet Works (GGBS) 1 rail-linked cement terminal at Kings Cross Kings Cross Denham Dagenham (2x) Dagenham (Limestone) 3 rail-linked aggregates depots Kings Cross (Cement)
Slide 45: Strong, vertically integrated market positions: Jakarta, Indonesia
Strong, vertically integrated market positions Deep-dive: Jakarta, Indonesia Footprint Cement capacity of 15.5 mt (one additional plant Tangerang DKI Jakarta Bekasi of 4.4 mt under construction) 1 Cement terminal in Tanjung Priok public port 10 warehouses Depok 16 batching plants, incl. 3 ba
Slide 46: Strong, vertically integrated market positions: Sydney / NSW, Australia
Strong, vertically integrated market positions Deep-dive: Sydney / New South Wales, Australia Footprint Brunswick Heads Byron Bay Lismore Comprehensive footprint with New South Wales Ballina 71 concrete plants Coffs Harbour Gunnedah 15 quarries / sand plants Tamworth Rosewood Sancrox Post Maquar
Slide 47: Strategic levers
Strategic levers Operating leverage Cost leadership Optimal geographic Vertical integration footprint Slide 47 – Capital Markets Day 2015 – 10 June 2015
Slide 48: Strong growth prospects for HC’s key markets
Strong growth prospects for HC’s key markets Annual GDP growth in % Mature markets Emerging markets 6.0 6.0 5.8 5.5 5.2 5.3 5.3 5.1 5.2 4.5 3.5 3.6 3.6 3.6 3.1 3.0 2.9 3.2 2.9 3.5 3.5 3.4 3.5 3.5 3.1 2.8 2.9 2.8 2.9 2.7 2.7 2.3 2.2 2.2 2.1 1.6 1.7 1.5 1.3 1.3 2015 2016 2017 2018 2019 2015 2016 2017
Slide 49: Optimally positioned to capture growth: United States
Optimally positioned to capture growth United States Strategic Position Potential Market position Market development Strong in aggregates with13bt of reserves Significant aggregates volume recovery Domestic cement plants close to key urban potential (volumes still near trough) due to centres p
Slide 50: Optimally positioned to capture growth: United Kingdom
Optimally positioned to capture growth United Kingdom Strategic Position Potential Market position Market development Comprehensive network of sites covering all Structural need for growth: unsustainably low major consumption centres cement consumption per capita (<200kg) for Particularly stro
Slide 51: Optimally positioned to capture growth: Indonesia
Optimally positioned to capture growth Indonesia Strategic Position Potential Market position Market development Second largest and most profitable player in 4th largest population in the world with Indonesia with 20.5mt capacity ~250m #1 in most important market Java with17.5mt Substantial
Slide 52: Optimally positioned to capture growth: Australia
Optimally positioned to capture growth Australia Strategic Position Potential Market position Market development Strong footprint across all major cities Low interest rates to drive housing starts Present in virtually all regional urban centres further up Strong population growth Significa
Slide 53: Optimally positioned to capture growth: Africa
Optimally positioned to capture growth Africa Strategic Position Potential Market position Market development Regionally diversified with 13 plants in 9 High population growth, increasing countries with 10mt capacity urbanization and beginning industrialization Market leader in most local mark
Slide 54: Optimally positioned to capture growth: Scandinavia
Optimally positioned to capture growth Scandinavia Strategic Position Potential Market position Market development Market leader in Sweden and Norway Natural resources and attractive living Ideally located plants for exports to recovering conditions drive population and economic and growing ma
Slide 55: Contents
Contents Page 1. Introduction 6 2. HeidelbergCement today 9 3. Development 2009 – 2014 16 4. New strategic priorities 24 5. Increasing shareholder value 55 Slide 55 – Capital Markets Day 2015 – 10 June 2015
Slide 56: Our growth and profitability ambitions 2019
Our growth and profitability ambitions 2019 Leveraging recovery of mature markets, especially aggregates Revenues in €bn Focused and disciplined growth in emerging markets >17 Pricing in-line or above cost inflation Increasing vertical integration in urban centres EBITDA in €bn Digitalisation of val
Slide 57: New capital allocation priorities
New capital allocation priorities – shifting cash towards growth and shareholder return Free cash flow Progressive dividend Return capital to generation shareholders Deleveraging to achieve Potential solid IG ratings share buy-back Invest in organic growth Available cash Disciplined M&A Slide 57 – C
Slide 58: Building shareholder value
Building shareholder value Increased cash generation Continuous growth Attractive returns to shareholders Slide 58 – Capital Markets Day 2015 – 10 June 2015
Slide 59: Building Shareholder Value – Dr Bernd Scheifele, Group CEO
Building Shareholder Value Dr Bernd Scheifele, Group CEO HeidelbergCement Capital Markets Day London, 10 June 2015 Slide 59 – Capital Markets Day 2015 – 10 June 2015
Slide 60: Building Shareholder Value – Dr Dominik von Achten
Building Shareholder Value Dr Dominik von Achten, Deputy Chairman / North America / CCM HeidelbergCement Capital Markets Day London, 10 June 2015 Slide 60 – Capital Markets Day 2015 – 10 June 2015
Slide 61: 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 62: Contents
Contents Page 1. North America position 63 2. North America performance 67 3. Outlook for Cement business 74 4. Outlook for Aggregates business 78 5. Summary 84 Slide 62 – Capital Markets Day 2015 – 10 June 2015
Slide 63: Contents
Contents Page 1. North America position 63 2. North America performance 67 3. Outlook for Cement business 74 4. Outlook for Aggregates business 78 5. Summary 84 Slide 63 – Capital Markets Day 2015 – 10 June 2015
Slide 64: Balanced footprint covering base and growth markets
Balanced footprint covering base and growth markets 27% 32% Canada Region North Region Cement plants 2 Cement plants 5 Aggregates sites >50 Aggregates sites >90 Ready-mix plants >60 Asphalt plants >20 Import terminals 1 Ready-mix plants >20 Import terminals 5 14% 23% West Region So
Slide 65: Vertically integrated positions in attractive US markets: Texas
Vertically integrated positions in attractive US markets… Deep-dive: Texas, US Footprint Fully vertically integrated with: 1 grey cement plant (JV) 1 white cement plant 5 cement terminals (JV) >15 aggregates plants >20 concrete plants >20 stabilized sand plants Market Position Texas Le
Slide 66: Fully integrated in Western Canada: British Columbia
… and fully integrated in Western Canada Deep-dive: British Columbia, Canada Footprint Fully vertically integrated with: 1 cement plant (Delta) >3 cement terminals >10 quarries / sand and gravel plants >15 concrete plants Market Position Fully vertically integrated with top 3 market positi
Slide 67: Contents
Contents Page 1. North America position 63 2. North America performance 67 3. Outlook for Cement business 74 4. Outlook for Aggregates business 78 5. Summary 84 Slide 67 – Capital Markets Day 2015 – 10 June 2015
Slide 68: Clear profitability improvements – peak not reached yet
Clear profitability improvements – peak not reached yet 682 572 601 448 473 340 555 610 HC’s 2014 US volumes vs. OIBD in €m pre-crisis peaks in 2006 2009 2010 2011 2012 2013 2014 Cement: -15% Revenue in €m 2,892 3,033 3,035 3,441 2,766 3,049 Aggregates: -36% OIBD margin 11.8% 14.8% 15.6% 16.6% 2
Slide 69: Long-term operating leverage since 2009 close to 50%
Long-term operating leverage since 2009 close to 50% NA long-term operating leverage Critical drivers Delta (2014 vs. 2009) 1 Pricing programs, e.g. in €m PERFORM (Cement) CLIMB Commercial (Aggregates) Revenue +725 2 Cost discipline, e.g. FOX (Purchasing) WIN NAM (Overhead) 3 Productivity ga
Slide 70: Cement with above average volume growth
Cement with above average volume growth Benchmark (deep-dive US cement) Cement price development (US)1 NAM cement sales volumes2 Peer A Peer B HC in mt 2008 = 100 100 -0.5 94 (-4%) 12.7 12.2 2008 2009 2010 2011 2012 2013 2014 Cement volume development (US)1 2008 2014 2008 = 100 100 NAM cement EBITDA
Slide 71: Strong aggregates performance with further pricing upside
Strong aggregates performance with further pricing upside Benchmark (deep-dive US aggregates) Aggregates price development (US) NAM aggregates sales volumes1 Peer 1 Peer 2 HC 117 in mt 111 -24 107 (-18%) 135 2008 = 100 110 2008 2009 2010 2011 2012 2013 2014 Aggregates volume development (US) 2008 20
Slide 72: Efforts pay off: Leading profitability – also in aggregates
Efforts pay off: Leading profitability – also in aggregates Benchmark (all business lines / aggregates) Global peers (all business lines) Aggregates peers OIBD margin OIBD margin % % +8.2 +9.5 +6.3 +6.5 -4.1 -2.0 20.0 19.2 26.5 2009 18.0 23.5 2009 20.2 20.2 18.2 19.4 2014 11.8 11.5 2014 9.7 HC NAM P
Slide 73: $m 400 of working capital freed since 2009
$m 400 of working capital freed since 2009 Working Capital (2014 vs. 2009) Critical Drivers in $m Tight payables and receivables -422 management freed > $m 400 of working 1,020 1,063 capital since 2009: 798 773 DPO (Days payables outstanding): 602 598 improved by > 15 days DSO (Days sales outs
Slide 74: Contents
Contents Page 1. North America position 63 2. North America performance 67 3. Outlook for Cement business 74 4. Outlook for Aggregates business 78 5. Summary 84 Slide 74 – Capital Markets Day 2015 – 10 June 2015
Slide 75: Forecasted US cement demand growth of +35mt until 2019
Forecasted US cement demand growth of +35mt until 2019 PCA Spring 2015 Forecast: Total US cement consumption in mt CAGR +7.0% Imports 124.2 117.9 111.2 Domestically produced 102.9 17.9 24.2 95.4 12.4 88.7 9.1 81.7 8.7 78.5 8.4 7.0 7.2 93.8 98.8 100.0 100.0 80.4 86.7 71.4 74.4 2012 2013 2014 2015E 20
Slide 76: We leverage existing >6mt cement import capacity
We leverage existing >6mt cement import capacity… Cement import terminals Terminal Network Ex.: Port Everett Terminal Port Everett Providence Cementon Brooklyn Stockton Baltimore Norfolk Los Angeles1 Jacksonville Cape Canaveral Houston1 Port Everglades Corpus Christi1 More than 6mt import capacity I
Slide 77: We further expand capacities in attractive existing markets
We further expand capacities in attractive existing markets Deep-dive (Capex): Edmonton – New grinding mill (cement) Map Description Add cement grinding capacity with additional vertical roller mill Edmonton Rationale Add additional capacity to serve future demand requirements Become less reli
Slide 78: Contents
Contents Page 1. North America position 63 2. North America performance 67 3. Outlook for Cement business 74 4. Outlook for Aggregates business 78 5. Summary 84 Slide 78 – Capital Markets Day 2015 – 10 June 2015
Slide 79: US aggregates demand still far below previous peaks
US aggregates demand still far below previous peaks USGS crushed stone volume (2014 vs. 2006) 18% -15% -19% -24% -24% -26% -35% -34% -38% -50% GA NC NY CA IN PA IL OH KY TX These states represent HC`s Top 10 US market positions Note: Ordered by relative volume in 2014 vs. 2006 Source(s): USGS (2006/
Slide 80: HC has a very substantial aggregates position
HC has a very substantial aggregates position ~115 ~110 ~100 HC has one of North Remaining AGG America’s most substantial reserve life (in years) reserve positions Reserves are spread out HC Peer 1 Peer 2 across > 200 quarries and NAM pits in all 4 regions Shipments 110 132 147 (in mt, ‘14) Rese
Slide 81: Oil price impact seen on demand and supply side
Oil price impact seen on demand and supply side Oil price development (since 2002) Twofold impact on HC’s business 1 Top-line: slower oil and gas demand US$ per barrel Brent Texas, US WTI ‒ Mining (incl. O&G) ~14% of state GDP 150 ‒ Oil rig count down more than 50% ‒ Switch to regular cement possi
Slide 82: Aggregates would benefit from federal long-term solution
Aggregates would benefit from federal long-term solution Past Federal Programs Current Status No long-term federal infrastructure financing 2015- Under discussion is currently put in place Current MAP-21 extension was due to expire May 31, 2015 but was extended to expire 2013- MAP-21 July 31, 20
Slide 83: Growing our aggregates position in important markets
Growing our aggregates position in important markets Deep-dive (Capex): Lake Bridgeport, Texas – New aggregates plant Map Description Bridgeport Operations - Limestone Build new processing plant at previously 50 Miles closed Lake Bridgeport quarry Rationale Terrell Terminal Complement and improv
Slide 84: Contents
Contents Page 1. North America position 63 2. North America performance 67 3. Outlook for Cement business 74 4. Outlook for Aggregates business 78 5. Summary 84 Slide 84 – Capital Markets Day 2015 – 10 June 2015
Slide 85: Increased focus on expanding and improving footprint
Increased focus on expanding and improving footprint… CEM: Grinding mill (in process) AGG/RMX: M&A (completed) CEM: Grinding mill (investigated) AGG: Underground quarry (planned) AGG: Surface quarry (in process) CEM: Grinding mill (investigated) AGG: Plant & terminals (in process) CEM: Greenfield pr
Slide 86: …with pricing being on top of the agenda
…with pricing being on top of the agenda Aggregates price development (US) Aggregates track record is illustration of HC’s pricing 08 09 10 11 12 13 14 15E 16E 17E implementation strength … Cement price development (US) … which will now be fully leveraged in cement as well as capacity utilisations a
Slide 87: We are well positioned to grow – and we will
We are well positioned to grow – and we will We delivered: strong op. leverage since 2009, while exiting BP successfully Cement: Grew above market, but further pricing potential Aggregates: Margins on pre-crisis level, while big volume upside Working capital: Tight payables & receivables manag
Slide 88: Building Shareholder Value – Dr Dominik von Achten
Building Shareholder Value Dr Dominik von Achten, Deputy Chairman / North America / CCM HeidelbergCement Capital Markets Day London, 10 June 2015 Slide 88 – Capital Markets Day 2015 – 10 June 2015
Slide 89: Break
Building Shareholder Value Break HeidelbergCement Capital Markets Day London, 10 June 2015 Slide 89 – Capital Markets Day 2015 – 10 June 2015
Slide 90: Building Shareholder Value – Dr Lorenz Näger, Group CFO
Building Shareholder Value Dr Lorenz Näger, Group CFO HeidelbergCement Capital Markets Day London, 10 June 2015 Slide 90 – Capital Markets Day 2015 – 10 June 2015
Slide 91: 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 92: Contents
Contents Page 1. Introduction 93 2. Operating from a solid financial base 95 3. Seamless end-to-end process 98 4. Increasing shareholder value 105 5. Shareholder return 117 6. New medium term targets 122 Slide 92 – Capital Markets Day 2015 – 10 June 2015
Slide 93: Contents
Contents Page 1. Introduction 93 2. Operating from a solid financial base 95 3. Seamless end-to-end process 98 4. Increasing shareholder value 105 5. Shareholder return 117 6. New medium term targets 122 Slide 93 – Capital Markets Day 2015 – 10 June 2015
Slide 94: Building shareholder value
Building shareholder value Focus on cash generation Achieve and maintain solid Prudently investment grade ratings balance growth and shareholder Disciplined investment approach returns Progressive dividend policy Slide 94 – Capital Markets Day 2015 – 10 June 2015
Slide 95: Contents
Contents Page 1. Introduction 93 2. Operating from a solid financial base 95 3. Seamless end-to-end process 98 4. Increasing shareholder value 105 5. Shareholder return 117 6. New medium term targets 122 Slide 95 – Capital Markets Day 2015 – 10 June 2015
Slide 96: Entering investment grade territory
Entering investment grade territory Debt reduction Net debt in €bn Net debt reduced to €bn 5.71 6.0 Net debt / Op. EBITDA 14.6 (LTM) 4.0 2.5 8.4 Leverage down to 2.5x1 5.7 2007 2009 2014 pro forma Moody’s changed rating outlook to Positive (30/03/2015) Development of ratings BBB-/Baa3 BB+ / Ba1 BB+/
Slide 97: Strong financial profile
Strong financial profile Total debt maturity profile1 1.7 in €bn Robust debt maturity profile 1.2 1.1 1.1 1.0 1.0 0.5 Interest costs reduced by €m 170 2015 2016 2017 2018 2019 2020 2021 Strong liquidity position Liquidity position in €bn 4.4 €bn +2.4 2.1 Total maturities <12 months Total liquidity 1
Slide 98: Contents
Contents Page 1. Introduction 93 2. Operating from a solid financial base 95 3. Seamless end-to-end process 98 4. Increasing shareholder value 105 5. Shareholder return 117 6. New medium term targets 122 Slide 98 – Capital Markets Day 2015 – 10 June 2015
Slide 99: Vertical integration: Spotlight on Level 2 process integration
Vertical integration: Spotlight on Level 2 process integration CEM AGG RMC ASP Level 3 Business Mind-set, Cross BL Behavior, Value Chain Approach integration Level 2 Processes, Systems, Functions Process integration (Shared Service, Integrated IT Platform...) Level 1 Plant Network, Raw Material Rese
Slide 100: Seamless end-to-end process across all business lines
Seamless end-to-end process across all business lines Customer Excellence Production control Order Logistics intake optimisation Customer Sign on glass Service offerings Slide 100 – Capital Markets Day 2015 – 10 June 2015
Slide 101: Integrated IT platform successfully deployed
Integrated IT platform successfully deployed Integrated IT platform and supply chain management for all business lines Reporting today Finance Supply Chain Harmonised and standardised Controlling CEM Production PP Mainten. PM Sales SD Management processes of all business lines FI/CO Integrated a
Slide 102: Visible benefits for customers, suppliers and organisation
Visible benefits for customers, suppliers and organisation Added value for Operational efficiency: customer: Efficient stock management Automated Centralised Efficient order intake etc. replenishment order intake process etc. Added value for customer: Operational efficiency: On-time deliveries etc.
Slide 103: Deep-dive: Leading logistics Australia
Deep-dive: Leading logistics Australia Key figures 1,250 Concrete trucks 470 Aggregate / cement trucks 75% Company owned Competitive advantages World leading national order/ dispatch centre Full logistics control RMC, AGG, CEM Fully automated replenishment system (MRP) Innovative fleet
Slide 104: Substantial benefits of seamless end-to-end processes
Substantial benefits of seamless end-to-end processes Increased customer benefit Reduction of operating costs Lower idle time (approx. 20%) Improved order intake service of transport vehicles Reliable delivery windows Increased order intake with lateness notification efficiency Less complaints on bi
Slide 105: Contents
Contents Page 1. Introduction 93 2. Operating from a solid financial base 95 3. Seamless end-to-end process 98 4. Increasing shareholder value 105 5. Shareholder return 117 6. New medium term targets 122 Slide 105 – Capital Markets Day 2015 – 10 June 2015
Slide 106: Targeted EBITDA improvement 2014 – 2019
Targeted EBITDA improvement 2014 – 2019 in €bn ~2.0 ~1.5 ~0.3 >4 ~1.0 2.3 2014 Net volume Price Cost JV / Other 2019 EBITDA EBITDA Slide 106 – Capital Markets Day 2015 – 10 June 2015
Slide 107: EBITDA growth per region
EBITDA growth per region in €bn ~0.2 >4 ~0.5 ~0.2 ~0.2 ~0.8 2.3 2014 North Western Eastern Asia / Africa / 2019 EBITDA America Europe Europe Pacific Med. Basin EBITDA Slide 107 – Capital Markets Day 2015 – 10 June 2015
Slide 108: Drivers of revenue and EBITDA growth
Drivers of revenue and EBITDA growth Cement Aggregates Volume Price EBITDA Volume Price EBITDA (CAGR) (CAGR) impact (CAGR) (CAGR) impact North America 6 to 8% 4 to 6% €bn ~0.3 7 to 9% 1 to 3% €bn ~0.4 West/North 1 to 2% 1 to 2% €bn ~0.1 1 to 2% 1 to 2% Europe Eastern Europe 2 to 3% 3 to 5% €bn ~0.1
Slide 109: Declining interest payments
Declining interest payments Bond maturity profile Interest expense in €m in €m Average coupon rate per year 6.6% 5.6% 7.9% 7.6% 5.4% 5.3% €m ~250 reduction in interest expense 1,550 555 1,300 1,093 1,125 980 1,000 ~300 2015 2016 2017 2018 2019 > 2019 2014 2015 2016 2017 2018 2019 Significant decreas
Slide 110: Benefit from tax loss carry forward
Benefit from tax loss carry forward Indicative figures Continuous Average cash tax rate 2010 – 2014 37% initiatives to drive cash tax down Strong recovery in the 2014 cash tax rate 33% US and UK continues Future estimated cash tax rate ~30% Utilisation of existing tax losses carried forward driv
Slide 111: Active management of asset base
Active management of asset base Asset disposals over the last 5 years in €m 280 264 Stockholm property sale already announced for €m >100 200 198 Sale of depleted quarries will 144 continue to improve free cash flow generation Potential of €m >100 cash generation p.a. via asset base management 2010
Slide 112: Continue to grow with carefully selected projects
Continue to grow with carefully selected projects Key projects Investment criteria Greenfield and Brownfield projects with ROIC above WACC by 3rd year a focus on strengthening market position of operation in growing markets Bolt-on acquisitions in urban city centers to create integrated supply chain
Slide 113: Targeted and disciplined approach to investment projects and M&A
Targeted and disciplined approach to investment projects and M&A STRATEGY FINANCE TECHNICAL (Group Strategy) (Group Corporate Finance) (HTC & CCM) Strategic fit, markets and Financial attractiveness and risks Technical aspects of any project competition evaluation Market attractiveness Tools: Pr
Slide 114: Increased focus on improving ROIC
Increased focus on improving ROIC EBIT ( 1 ) - Income Taxes Paid ( 2 ) HC definition ROIC = Equity + Net Debt ( 3 ) 1 Enhancing operational efficiency and profitability Driving EBITDA growth through expansion and consistent business optimisation 2 Efficient tax management Strong recovery in US and U
Slide 115: Continuous improvement of ROIC remains key
Continuous improvement of ROIC remains key ROIC in % 10 9 Target area 8 6.71 7 7.5 6.11 5.6 5.81 WACC: 6.9% 6 5.0 5 4 3.3 3 2 1 0 2008 2009 2010 2011 2012 2013 2014 2019 Generating a sustainable ROIC above WACC 1) Adjusted for exceptional items Slide 115 – Capital Markets Day 2015 – 10 June 2015
Slide 116: Board remuneration closely linked to ROIC and share price performance
Board remuneration closely linked to ROIC and share price performance Annual bonus Long-term bonus = 100% of fixed salary for CEO; = 150% of fixed salary for CEO; 125% for other 80% for other Board Members Board Members 1/2 1/2 2/3 1/3 Management Capital market Group share of net Individual targets
Slide 117: Contents
Contents Page 1. Introduction 93 2. Operating from a solid financial base 95 3. Seamless end-to-end process 98 4. Increasing shareholder value 105 5. Shareholder return 117 6. New medium term targets 122 Slide 117 – Capital Markets Day 2015 – 10 June 2015
Slide 118: Strong cash generation
Strong cash generation Free cash flow generation in €bn 2.32 CAGR +18% 5 years cumulative FCF2 in €bn 1.21 8.8 2015 2016 2017 2018 2019 1) Excluding proceeds from Building Products disposal 2) Before growth CapEx Slide 118 – Capital Markets Day 2015 – 10 June 2015
Slide 119: New capital allocation priorities
New capital allocation priorities – shifting cash towards growth and shareholder return Free cash flow generation1 Progressive dividend €bn > 2 Return capital to shareholders €bn ~8.8 Deleveraging to keep solid IG ratings1 €bn ~1.0 Potential Invest in organic share Available cash2 growth buy-back €b
Slide 120: Dividend policy
Dividend policy Dividend per share in € 40% – 45% payout ratio Ordinary dividend payout ratio 40% to 45% by the end of 2019 30% – 35% payout ratio Achieve 30% to 35% payout ratio for 2015 0.75 0.60 Progressive increase based on 0.47 affordability and sustainability 0.35 Regular increase over time 0.
Slide 121: Share buy-backs
Share buy-backs Achieve and maintain solid investment grade ratings Assessment of key projects with higher return expectations Assessment of unallocated free cash flow and consideration of capital need for other projects Deployment of excess cash to shareholders through share buy-backs1 1) Approval
Slide 122: Contents
Contents Page 1. Introduction 93 2. Operating from a solid financial base 95 3. Seamless end-to-end process 98 4. Increasing shareholder value 105 5. Shareholder return 117 6. New medium term targets 122 Slide 122 – Capital Markets Day 2015 – 10 June 2015
Slide 123: Medium term targets
Medium term targets Actual 2014 Target 2019 Revenues €bn 13 €bn > 17 EBITDA €bn 2.3 €bn > 4 ROIC 6.7% > 10% Leverage 2.5x 1.5x – 2.5x EPS € 2.6 € ~10 Payout ratio 29% 40% – 45% Slide 123 – Capital Markets Day 2015 – 10 June 2015
Slide 124: Building Shareholder Value – Dr Lorenz Näger, Group CFO
Building Shareholder Value Dr Lorenz Näger, Group CFO HeidelbergCement Capital Markets Day London, 10 June 2015 Slide 124 – Capital Markets Day 2015 – 10 June 2015
Slide 125: Q&A Session
Building Shareholder Value Q&A Session HeidelbergCement Capital Markets Day London, 10 June 2015 Slide 125 – Capital Markets Day 2015 – 10 June 2015
Slide 126: Building shareholder value
Building shareholder value Increased cash generation Continuous growth Attractive returns to shareholders Slide 126 – Capital Markets Day 2015 – 10 June 2015