Company provides update on financial targets and strategic priorities for next three years
COINCIDING with today’s Capital Markets Day 2018 in Bergamo, Italy, HeidelbergCement have presented their Vision 2020, updating financial targets and strategic priorities for the three-year period starting 2018.
The company is aiming to increase free cash flow generation to around €6 billion in the three-year period until 2020. This improvement is expected to be driven by further efficiency gains and potential market upsides in the current business cycle as well as disciplined capex spending and a further reduction in financial costs.
Following significant growth over the past two years led by the successful Italcementi acquisition, HeidelbergCement say they intend to focus their priorities for capital allocation towards increased shareholder returns, deleveraging and portfolio optimization.
The company is intending to continue its progressive dividend strategy with a target payout ratio of around 40%. In parallel, it plans to reduce leverage to below 2.0x and/or net debt to below €7 billion, paving the way to achieving a BBB/Baa2 rating.
In addition, HeidelbergCement intend to limit their net growth capex in the three-year period to a maximum of €1 billion by active portfolio management and at the same time reduce complexity and risks.
Proceeds from disposals in the range of €1 billion to €1.5 billion are planned to be used to finance selective growth investments between €1.5 billion and €2.0 billion. Further available cash may be allocated to additional deleveraging or higher returns to shareholders in the form of increased dividends or share buy-backs.
Dr Bernd Scheifele, chairman of the management board, commented: ‘We have grown the company with the successful integration of Italcementi and increased shareholder returns by raising our dividend to new record levels.
‘Our successful business model is based on the most advanced vertical integration, a simple structure focused on three core business lines and a de-centralized, lean organization with strong local teams. As such, we have a compelling strategy in place that clearly differentiates us from our competitors and we remain the industry leader in business excellence and cost efficiency.
‘We are well positioned to capitalize on our strengths in the current business cycle. Over the next three years, we intend to significantly increase our free cash flow with the clear commitment to building shareholder value.’
Dr Lorenz Näger, chief financial officer, added: ‘We have strong cash generation potential not only from operations but also from financial cost reductions and disciplined capex management. We intend to continue with our progressive dividend strategy based on affordability and sustainability, deleverage our balance sheet and optimize our asset portfolio.’
