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Heidelberg Cement Q3 2011 results

Heidelberg reported Q3 numbers that were a touch ahead of market consensus. Revenue of €3.62bn was 4% ahead of consensus of €3.5bn and EBITDA of €778m was a small beat to consensus of €754m, for a margin of 21.5% (the margin came in line with consensus so the small earnings beat was sales-led). Volumes of cement were up by 11.9% YoY in the quarter. Sustained developments in Asia and Africa, as well as better results in N America (up 10%) and W Europe were the drivers of volume growth.

Net debt down only modestly, but leverage somewhat reduced. Net debt came in at €8.5bn, down €75m from Q2 11, (lower pace of debt reduction explained as due to capex and one-off accounting effects). Leverage at 3.7x, from 3.8x at 1H 2011.

Outlook unchanged. As per Q2, the company has maintained guidance that it aimed for increased turnover and operating income relative to 2010, based on recovery in Western/Northern Europe, varying trends in Eastern Europe/Central Asia (strong in several C/E Europe countries), slight volume increases in N America, and continued positive developments in Asia and Africa. Prices for energy and raw materials have passed the Q2 peak, according to the company.

Overall, reasonable results and positive for the credit given the general uncertainty in the market and challenging conditions in construction spending which is dependent on the overall economic growth and sentiments. Heidelberg continue to perform well under challening conditions and its geographic mix, plus moderately lower leverage make the name more compelling at current levels than its peers.