German Corporate Conference Frankfurt, January 2017 Group Investor Relations

Transcription

1 German Corporate Conference 2017 Frankfurt, January 2017 Group Investor Relations Slide 1 Kepler Cheuvreux - German Corporate Conference 2017

2 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. These statements and information are based on plans, estimates, projections as they are currently available to the management of HeidelbergCement. Forward-looking statements and information therefore speak only as of the date they are made, and we undertake no obligation to update publicly any of them in light of new information or future events. By their very nature, forward-looking statements and information are subject to certain risks and uncertainties. A variety of factors, many of which are beyond HeidelbergCements control, could cause actual results to differ materially from those that may be expressed or implied by such forward-looking statement or information. For HeidelbergCement particular uncertainties arise, among others, from changes in general economic and business conditions in Germany, in Europe, in the United States and elsewhere from which we derive a substantial portion of our revenues and in which we hold a substantial portion of our assets; the possibility that prices will decline to a greater extent than currently anticipated by HeidelbergCements management as a result of continued adverse market conditions; developments in the financial markets, including fluctuations in interest and exchange rates, commodity and equity prices, debt prices (credit spreads) and financial assets generally; continued volatility and a further deterioration of capital markets; a worsening in the conditions of the credit business and, in particular, additional uncertainties arising out of the subprime financial market and liquidity crisis; the outcome of pending investigations and legal proceedings and actions resulting from the findings of these investigations; as well as various other factors. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in the relevant forward-looking statement or information as expected, anticipated, intended, planned, believed, sought, estimated or projected. Unless indicated otherwise, the financial information provided herein has been prepared under International Financial Reporting Standards (IFRS). Slide 2 Kepler Cheuvreux - German Corporate Conference 2017

3 Contents Page 1. The new HeidelbergCement 5 2. Operational and financial performance 9 3. Accelerating growth with Italcementi (ITC) Strategy and strengths HeidelbergCement the future 27 Slide 3 Kepler Cheuvreux - German Corporate Conference 2017

4 Contents Page 1. The new HeidelbergCement 5 2. Operational and financial performance 9 3. Accelerating growth with Italcementi (ITC) Strategy and strengths HeidelbergCement the future 27 Slide 4 Kepler Cheuvreux - German Corporate Conference 2017

5 HeidelbergCement Strong Management team with long standing operational and sector expertise Continuous improvement in operational and financial metrics. New initiatives started in RMC and sales supported by global competence centres Integration of ITC notably ahead of schedule and identified synergies increased Sustainable cash flow generation to drive shareholder returns Best managed company in the sector with unique business model focusing on vertical integration Slide 5 Kepler Cheuvreux - German Corporate Conference 2017

6 The new HeidelbergCement Group Global: #1 in Aggregates #2 in Cement #3 in Ready-mix concrete One of the biggest global trading services Leading vertically integrated player Global/local centres of excellence for all three core business lines bn >17 Revenue 1 and bn >3 EBITDA 1 1 st company in the sector earning premium on WACC 1) Proforma 2015 Slide 6 Kepler Cheuvreux - German Corporate Conference 2017

7 The global footprint of HeidelbergCement today 197 million t Cement capacity 62,000 employees in 3,000 locations 60 countries on 5 continents 19 billion t AGG reserves 1,900 plants Asphalt & RMC Asia Pac. EBITDA generation Africa 23% 13% 34% 30% Europe North America Expanded reach, capacity and expertise. Positioned well for future potential. Slide 7 Kepler Cheuvreux - German Corporate Conference 2017

8 Contents Page 1. The new HeidelbergCement 5 2. Operational and financial performance 9 3. Accelerating growth with Italcementi (ITC) Strategy and strengths HeidelbergCement the future 27 Slide 8 Kepler Cheuvreux - German Corporate Conference 2017

9 Continuous improvement of financial metrics and returns in the last 2 years EBITDA (LTM) in m 2,613 2,479 2,541 2,634 2,673 Continuous margin improvement and increase in cash flow generation Jun 15 Sep 15 Dec 15 Mar 16 Jun 16 Financial cost significantly reduced Net Debt in m 6,331 5,970 5,286 5,890 5,865 Earned premium on WACC Jun 15 Sep 15 Dec 15 Mar 16 Jun 16 Free cash flow 1 (LTM) in m Dividend increased ,039 1,169 Share buyback approval obtained Jun 15 Sep 15 Dec 15 Mar 16 Jun 16 1) Before grow th Capex and disposals (incl. cash flow from discontinued operations) Slide 9 Kepler Cheuvreux - German Corporate Conference 2017

10 Constant superior returns driven by: good product mix, unique footprint and experienced management team Organic EBITDA growth Free cash flow (m ) Clean EPS ( ) 7.0% 9.1% 8.2% 6.4% , ) 2) 2) Reliable earnings growth lead to better share price development Share price development 3) Dec 2012 = CAGR +14% HC DAX 140 MSCI Constr Sep 2016 Dec ) Based on proforma figures Sep 16 vs. Sep 15. 2) Based on legal last 12 months rolling as of Sep 16 3) Last 30 days average as of end of the period. Slide 10 Kepler Cheuvreux - German Corporate Conference 2017

11 Creating value and earning cost of capital ROIC in % Only global player in the industry to earn premium on cost of capital 11 Before ITC acquisition After ITC acquisition 10 9 ROIC above WACC by end of Reduction of WACC after ITC acquisition WACC: 6.9% Premium on cost of capital is earned already in the first year of Italcementi acquisition! 1) Adjusted for exceptional items Slide 11 Kepler Cheuvreux - German Corporate Conference 2017

12 Contents Page 1. The new HeidelbergCement 5 2. Operational and financial performance 9 3. Accelerating growth with Italcementi (ITC) Strategy and strengths HeidelbergCement the future 27 Slide 12 Kepler Cheuvreux - German Corporate Conference 2017

13 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 (1 st wave) ahead of plan. Target is to reach 1,700 reductions by year-end (vs. plan 460) Synergies significantly increased to m 400+ HC has strong track record in integrating businesses Proven HC efficiency programs applied at ITC Management of cultural differences main focus Integration & acquisition in HC DNA Slide 13 Kepler Cheuvreux - German Corporate Conference 2017

14 Timeline and milestones of ITC acquisition Announcement of the transaction Closing of 45% stake acquisition Squeeze-out and delisting of ITC shares 28 Jul 2015 Integration preparation 1 Jul Oct 2016 Yearend 2016 Integration execution Yearend 2017 Yearend 2018 Disposals in Belgium & US Reduction 1,700 FTE Synergy savings of ca. m Integration completed m 400+ synergy savings realised Acquisition process and integration notably ahead of schedule 1) Full year run rate Slide 14 Kepler Cheuvreux - German Corporate Conference 2017

15 Closure of redundant Group & local headquarters Headquarters in continental Western Europe Brussels: BeNeLux HQ (country org.) Closed: HC s regional HQ (TEAM) Paris/Guerville: France HQ (country org.) Paris Brussels Heidelberg Heidelberg/Leimen: Group HQ (incl. tech. support) Staff of EMEA regions Germany HQ (country org.) Closed: ITC Group HQ ( Ciments Francais ) Bergamo Bergamo (i.lab): Italy HQ (country org.) Product Innovation function Malaga: Spain HQ (country org.) To be closed: HC s Spain HQ (Madrid) Madrid Malaga Closed: ITC Group HQ Heidelberg/Leimen also hub for regional staff of AEM and NEECA regions only APAC (Singapore) and NAM (Dallas) with local regional headquarters Slide 15 Kepler Cheuvreux - German Corporate Conference 2017

16 New leadership in all major ITC countries North America Kazakhstan France Morocco New General Managers in all major ITC country organizations Italy Egypt Spain Thailand India Trading HC s bonus system for country management already completely implemented Local management approach and strong signal of change into the markets Slide 16 Kepler Cheuvreux - German Corporate Conference 2017

17 Significantly more synergies than initially expected Key drivers Higher than expected synergies from Operations, SG&A and Purchasing Identification of additional synergies from Trading, Finance and Market ~10% of target s revenue = best in class Updated run-rate synergy expectations In m 400+ Pre-signing synergy expectations Other 50+ Purchasing In m 125 at least Sales & General Administration Operations Status: All synergies substantiated with detailed implementation plans and 100% commitment of local owners Slide 17 Kepler Cheuvreux - German Corporate Conference 2017

18 Acquisition at the trough of the cycle ITALY Cement Consumption* FRANCE Cement Consumption* % % % % Peak Peak TOTAL EUROPE Cement Consumption* 2.9% HeidelbergCement will benefit from the upturn in the European countries * Source: Euroconstruct November 2016 Forecast Slide 18 Kepler Cheuvreux - German Corporate Conference 2017

19 Contents Page 1. The new HeidelbergCement 5 2. Operational and financial performance 9 3. Accelerating growth with Italcementi (ITC) Strategy and strengths HeidelbergCement the future 27 Slide 19 Kepler Cheuvreux - German Corporate Conference 2017

20 Best-managed company in the sector Value creative vertically integrated business Unique de-centralised management model Integration speed Timely reaction to changes in the markets Continuous focus on margin improvement Strong operating leverage Track record in cost efficiency Market leading margin improvement Strong cash generation Cement EBITDA margin Aggregates EBITDA margin 29.6% On track to reach pre-crisis margin despite significant macro impacts 24.5% 25.5% 25.8% 25.9% Almost at pre-crisis level, highest margin in the sector 23.1% 24.2% 25.1% Creating value by improving efficiency rather than re-sizing the business 1) LTM rolling as of June 2016 Slide 20 Kepler Cheuvreux - German Corporate Conference 2017

21 Cement: Significantly enhancing efficiency Starting point (2004) HC was not competitive regarding cash cost per ton Realistic and measurable targets Cement capacity (mt) Number of employees ( 000) Key Measures Reorganisation of HeidelbergCement Technology Centre (HTC) WIN: reorganisation and FTE efficiency (2005) Fitness: operational and cost improvements, production and process optimisation OPEX: operational excellence and working capital optimisation Perform: pricing excellence and realisation for margin improvement LEO: supply chain management and logistics optimisation Effects Best margin development in the sector, despite increase in energy costs due to Fukushima Cement EBITDA margin 25.8% 25.5% Customer Excellence Program (CEP): Next steps Improve all aspects of customer offering Continuous Improvement Program (CIP): 24.5% Further improve production processes 1) Capacity and number of employees as of June; margin based on LTM rolling figures as of June Slide 21 Kepler Cheuvreux - German Corporate Conference 2017

22 Aggregates: A top performer in the industry Starting point (2007) Hanson Aggregates was underperforming / EBITDA margin below peer group (2006 / 2007) Hanson Aggregates was clearly seen as partially undermanaged EBITDA margin 24.2% 25.1% Key Measures Setup of Competence Centre Materials (CCM) (2010) CLIMB Operations: efficiency check on key improvement levers in all major quarries CLIMB Commercial: professional sales management supported by a simple excel tool 16.1% 15.7% Pricing principle: price what the market can take LEO: Supply Chain Management and logistics optimisation HC Competitor 2015 LTM June 2016 Effects Strong EBITDA improvement of HC Industry leading profitability AOM: digitalising AGG business Next steps Reduction of administrative efforts Support of continuous improvement efforts with better data and faster access Slide 22 Kepler Cheuvreux - German Corporate Conference 2017

23 Ready-mix: New Competence Centre sets clear saving targets New activity Ready-mix margins of big cement companies are typically below best managed privately-owned ready-mix companies Key focus areas are materials and logistics (80% of costs) Improvement opportunities Saving targets in m REVENUE 120 Materials 50% 50 Logistics 30% 40 Production 10% 30 Overheads 10% Total Significant leverage by optimising materials and logistics costs Slide 23 Kepler Cheuvreux - German Corporate Conference 2017

24 Vertical integration: Assets, Process, Business CEM AGG RMC ASP Level 3 Business integration Mind-set, Cross BL Behaviour, Value Chain Approach Level 2 Process integration Processes, Systems, Functions (Shared Service, Integrated IT Platform...) Level 1 Asset integration Plant Network, Raw Material Reserves (CEM, AGG, RMC) Integrated management key value driver Slide 24 Kepler Cheuvreux - German Corporate Conference 2017

25 Sales is a Science: Digitalisation and process standardisation New Group Function is based on two pillars Market Intelligence and Sales Processes Market model: Sales process: Mix of external and internal information used to forecast market development Forecasting on a micro-market basis Global guidance on the approach with data scientists setting up the model but local ownership of measures to be derived Structured sales planning: Daily, weekly, monthly and quarterly planning for respective tasks Friday sales meeting (review of the week, planning of next week) Quarterly gap analysis between plan and actual (per segment and customer) Digitalisation through easy to use group-wide CRM tool With the aim of: Really knowing the market Understanding customers better than anyone else Managing each individual market Selling the right volume At a better price Slide 25 Kepler Cheuvreux - German Corporate Conference 2017

26 Contents Page 1. The new HeidelbergCement 5 2. Operational and financial performance 9 3. Accelerating growth with Italcementi (ITC) Strategy and strengths HeidelbergCement the future 27 Slide 26 Kepler Cheuvreux - German Corporate Conference 2017

27 Mid-term targets 2019 unchanged Revenue EBITDA ROIC Leverage EPS Payout ratio > bn 20 > bn 5 >10% x ~ 11 40% 45% Downsides Market pressure in Indonesia Increased competition in Africa Uncertainties Impact of the elections in US, Italy, Germany and France Consequences of Brexit Upsides US infrastructure program ITC / increased synergies New efficiency programs CCR & Sales is a Science Recovery in Europe Balanced macroeconomic outlook Slide 27 Kepler Cheuvreux - German Corporate Conference 2017

28 US will continue to be strong Continued recovery is expected across all segments Further increase in margins leading to highest profitability levels in history Significant potential from new infrastructure program in mid-term PCA s Trump Infrastructure Scenario Regional Funding Allocations Allocation of funding based on stock of deficient roads & bridges Overview of HC key states Texas: $70 billion over 10 years California: $55 billion over 5 years New York: $55 billion over 5 years North Carolina: $4.7 billion in 2017 Pennsylvania: $2.9 billion in 2017 Top Third Middle Third Bottom Third 5 states represent more than 50% of our aggregates business HeidelbergCement is well positioned to benefit from future infrastructure programs Slide 28 Kepler Cheuvreux - German Corporate Conference 2017

29 Dividend policy Dividend per share in Payout ratio 1 40% 45% 1.30 Ordinary dividend payout ratio 40% to 45% by the end of % 0.75 Progressive increase based on affordability and sustainability ) Payout ratio calculated based on clean EPS, excluding Additional Ordinary Result Slide 29 Kepler Cheuvreux - German Corporate Conference 2017

30 Reiterating capital allocation priorities Free cash flow generation Progressive dividend Return capital to shareholders Deleveraging for solid IG ratings Potential share buy-back Invest in organic growth Available cash Disciplined M&A Slide 30 Kepler Cheuvreux - German Corporate Conference 2017