HeidelbergCement announce new mid-term strategy
Group sets out strategic priorities and financial targets for next five years as it seeks to build shareholder value
IN advance of today’s Capital Markets Day 2015 in London, HeidelbergCement have announced new mid-term strategic priorities and financial targets for the five-year period until 2019. On the back of a positive outlook for the current fiscal year and a strong asset base, the company is aiming to increase Group revenue from €12.6 billion in 2014 to more than €17 billion by 2019. Over the same period, operating EBITDA is expected to grow from €2.3 billion to more than €4 billion.
Following successful deleveraging over recent years, the company says it also intends to further shift its priorities for capital allocation towards disciplined growth and increased shareholder returns. The Group projects cumulative free cash flow of about €8.8 billion for the period from 2015 to 2019. Of this amount, it intends to invest approximately €2.5 billion in organic growth while using approximately €1 billion to keep leverage in a range which supports a solid investment grade rating.
More than €2 billion will be allocated to shareholders through progressive dividend payments, with HeidelbergCement intending to raise the pay-out ratio from 29% for fiscal year 2014 to between 40% and 45% for fiscal year 2019, while further available cash may be allocated to acquisitions or returned to shareholders through share buy-backs.
Dr Bernd Scheifele (pictured), chairman of the management board, commented: ‘We have delivered on our strategy of growth and deleveraging which we announced in 2010. As we enter the next phase of our corporate development, HeidelbergCement is in an excellent position to capitalize on its considerable strengths and drive future growth and value creation.
‘We have a compelling strategy in place which clearly differentiates us from our competitors and we remain the industry leader in business excellence and cost efficiency. Over the next five years we intend to achieve continuous growth and significantly increase our free cash flow with the clear commitment to building shareholder value.’
Dr Lorenz Näger, chief financial officer, added: ‘We are focused on being the first major building materials company to earn our cost of capital in 2015. On this solid financial base, we will allocate our strong free cash flow to carefully selected growth initiatives and increasing shareholder returns. We intend to significantly raise our dividend pay-out ratio and offer our shareholders progressive dividends based on affordability and sustainability.’
HeidelbergCement’s mid-term strategic priorities will be focused on four strategic levers to drive earnings growth, namely: significant operating leverage; cost leadership; vertical integration; and a superior geographic footprint.
As key markets improve, the Group expects to benefit from its considerable operating leverage, which, it believes, should drive further earnings growth. To bolster its position as an industry leader in cost management, the company says it will continue to realize efficiency improvements through the enhanced digitalization of the value chain and by promoting a culture of entrepreneurship across the entire Group.
In addition, HeidelbergCement plan to deepen vertical integration in urban centres around the globe as a key driver of future growth and value creation. This, they say, will result in better customer service and improved delivery capabilities, and will support a shift towards customer solutions and cross-selling, while further reducing operating costs.
Furthermore, HeidelbergCement believe they are optimally positioned to capture the growth potential in important mature and emerging markets. The Group says it will carefully deploy capital for selected growth opportunities in existing geographies and expand its footprint to new markets through a targeted and disciplined approach to mergers and acquisitions.
