Revenue
Taking into account the general economic and industry-specific prospects for the building materials industry and the special growth prospects for markets in which HeidelbergCement operates, we expect a moderate increase in revenue on a comparable basis, i. e. adjusted for exchange rate and consolidation effects, for 2014. Capacity expansions in the cement business, which have already been completed in 2013 or are set to be finalised in 2014, support this forecast. These include, in particular, the capacity expansions in our Damoh and Jhansi plants in central India, which were commissioned in February 2013, the new grinding capacities in Africa, which were commissioned in 2013, as well as the new cement grinding facility in Indonesia and the new integrated cement plant in Kazakhstan, which should start operations in the first half of 2014. In the cement business, we therefore anticipate moderately rising sales volumes. In the aggregates business, we also expect a moderate development in sales volumes due to the recovery of infrastructure investments in mature markets, especially in North America. In 2014, price increases will continue to take on a
high priority in order to further improve margins towards pre-crisis levels. To this end, the Group has continued its two price initiatives “PERFORM” for the cement business in the United States and Europe as well as “CLIMB Commercial” for the aggregates business.
Group areas
In the Western and Northern Europe Group area, we expect a moderate increase in sales volumes of cement and aggregates, driven by a recovery or continuation of demand growth in the countries in which we operate.
In our Eastern Europe-Central Asia Group area, we anticipate a moderate growth in sales vol- umes of cement and aggregates, which will largely be stimulated by the additional capacities in Kazakhstan, the emerging recovery in Poland, and the ongoing increase in demand in Russia and Central Asia. In the other countries of Eastern Europe, we predict sales volumes to stabilise in 2014, following the weak development in 2013.
In North America, we expect a moderate increase in cement and aggregates volumes as a result of the continued economic recovery, which should now also affect commercial and public con- struction besides residential construction.
In the Asia-Pacific and Africa-Mediterranean Basin Group areas, we count on a consistently positive demand trend. Cement sales volumes should increase considerably, particularly in Indonesia and India, thanks to the capacity build-up. In Africa, we only expect a moderate increase in cement sales volumes since our new capacities are not scheduled to be commissioned until the second half of the year. In contrast, we project demand for building materials to slow down further, partly even considerably, in Spain. Overall, we anticipate a moderate rise in sales volumes of cement and aggregates for both Group areas due to the recently commissioned capacities.
Costs
Prices for energy and raw materials are expected to remain highly volatile. HeidelbergCement anticipates a slight to moderate increase in the cost base for electricity, fuels, raw materials, and personnel in 2014. One of the areas of focus in 2014 will not only be to safeguard but to continuously improve the cost savings and efficiency increases in cement and aggregates that were achieved in the past few years with the “OPEX” and “CLIMB” programmes. In addition, we are optimising our logistics with the new “LEO” programme that has the goal of reducing costs by €150 million over the next few years. In 2014, we expect a slight decrease in financing costs as a result of an improved financing structure and despite the increase in net debt at the beginning of the year.
Results
In view of the positive business development since the beginning of the year, HeidelbergCement projects a moderate increase in operating income on a comparable basis, i. e. adjusted for exchange rate and consolidation effects, for 2014. This assumption is made on the basis that building materials sales volumes will grow as expected, price increases can be implemented, and the rise in energy and personnel costs is only slight to moderate. Excluding non-recurring effects, especially in the areas of additional ordinary result, taxes, and discontinued operations, we anticipate a moderate increase in profit for the financial year. This estimation is based on an improvement in operating income and lower financing costs.
Dividend
As in 2013, we will also adjust the dividend to the development of the ratio of net debt to operating income before depreciation (OIBD) and of the cash flow of HeidelbergCement for the next year, and, in doing so, take into account further general economic developments. In the medium term, we aim to achieve an industry-typical payout ratio of 30 % to 35 % of the Group share of profit.
Investments
As in previous years, HeidelbergCement will continue to exercise strict spending discipline regarding investments. Debt reduction remains an important area of focus. In the 2014 financial year, we will once again align the amount of our investments with the development of the ratio of net debt to operating income before depreciation (OIBD) and the operating income of the Group as well as with the expected general economic trend. At €1.3 billion, our investments in 2013 were significantly above our target of €1.1 billion. In 2014, we will reduce investment activities and aim for cash flow investments of around €1.2 billion.
HeidelbergCement will consistently continue with its targeted investments in future growth – especially in cement activities – in the emerging countries of Asia, Africa, and Eastern Europe-Central Asia. In the long term, we strive to increase the proportion of our cement capacities in these markets from currently 63 % to 67 % of the total capacity. With the commissioning of further production facilities during the coming months, we will have more than 5 million tonnes of additional cement capacities in growth markets by the end of 2014.
Due to the unabated promising growth prospects in Indonesia, Indocement is continuing the expansion of its cement capacity. The construction of an additional cement grinding facility at the Citeureup production site was completed and test runs were started at the end of 2013. The grinding facility with a capacity of 1.9 million tonnes is scheduled to be put into operation in March 2014. Furthermore, we are continuing the expansion of the Citeureup production site. At the beginning of October 2013, the foundation stone was laid for the construction of a new integrated production line with a cement capacity of 4.4 million tonnes, which is to be completed by 2015. In Australia, a new grinding facility with a capacity of 1.1 million tonnes will go into operation in Port Kembla in the second quarter of 2014. Grinding tests commenced in February 2014. The construction of the new CaspiCement plant in western Kazakhstan is progressing according to plan. The plant with a capacity of 0.8 million tonnes will strengthen our nationwide presence and allow us to supply the oil- and gas-rich region on the Caspian Sea more cost-effectively. The plant is to be officially commissioned by the middle of 2014.
Another significant investment focus is on the expansion of our cement activities in Africa. In Togo, the commissioning of our new clinker plant is expected for the end of 2014. The plant, with an annual capacity of 1.5 million tonnes, is located near the town of Tabligbo, around 80 km to the northeast of the capital, Lomé. Moreover, we are constructing a cement grinding facility with a capacity of 200,000 tonnes in the north of the country which is scheduled for commissioning in 2016. We are expanding our cement production capacity in Tanzania with the construction of a new cement mill at our Tanzania Portland Cement plant. The commissioning of the mill with a capacity
of 0.7 million tonnes is scheduled for the end of 2014 and will increase our cement capacity in Tanzania to 2 million tonnes. We are also expanding our cement capacity in Ghana. With the scheduled commissioning of a new cement mill with a capacity of 0.8 million tonnes at the Takoradi plant by the end of 2014, our total cement grinding capacity in Ghana will increase to 4.4 million tonnes. In the second half of 2014, a new cement grinding plant in Burkina Faso with a capacity of 650,000 tonnes is to go into operation near the capital of Ouagadougou. We are also evaluating options for capacity expansions in other African countries.
In addition to these capacity expansions, we will invest in the maintenance and modernisation of our existing capacities in 2014. We will be making investments to upgrade our cement plants, among other things, in order to increase the use of alternative fuels and meet the new emission limits (NESHAP) in the United States, which will come into force in September 2015, in due time. Besides pursuing the successful strategy for the targeted and disciplined expansion of our cement capacities in attractive growth markets, we will intensify divestments at the same time. Deleveraging remains the highest priority for us, with the aim of improving the relevant financial key figures to an investment grade level. Our focus lies on building products in the United States, Canada, and the United Kingdom. Further divestment projects relate to the sale of other assets that do not belong to our core business. The most significant of these are non-core activities in Europe, global assets that are unused and no longer required, and exhausted quarries in North America. The sale of the Raigad cement grinding plant in West India was already completed in early January 2014.