EUR 850.00 For Business Accounts Only

Morningstar | Rising energy costs should only present a near-term challenge to HeidelbergCement's profitability.

HeidelbergCement is one of the world's largest producers of heavy building materials. Its most important products are cement--accounting for about 50% of revenue and 40% of EBITDA--and aggregates, accounting for roughly 20%-25% of revenue and 30% of EBITDA. Because their low value/weight ratios create localized markets, Heidelberg's performance depends on regional dynamics, with minimal cross-regional impacts.Construction is largely a function of economic growth. We use gross domestic product, investment share of GDP, and cement intensity as a basis for our demand forecasts for Heidelberg’s regions.For North America, we forecast volume growth for Heidelberg of roughly 2% for cement and 4% for aggregates amid strong construction demand. While our forecast for Heidelberg's cement shipments is constrained by limited unused capacity, high-capacity utilization should allow Heidelberg to push robust price increases. We forecast healthy margin expansion driven by price increases and high utilization rates.For Western and Southern Europe and Northern and Eastern Europe-Central Asia, we expect cement and aggregates volume growth of roughly 2.5% and 4%, respectively. Despite our expectations for demand growth, we expect meager margin expansion, as we forecast capacity to remain well beneath full utilization.For Asia Pacific, we expect volume growth of about 5% for cement and aggregates. We expect healthy demand growth, particularly driven by India, where we expect government spending to support increased housing and infrastructure activity. However, with excess capacity in the region, pricing increases and margin expansion will be middling.For Africa-Eastern Mediterranean Basin, we expect volume growth of 7% for cement and aggregates. Our regional forecast reflects high growth in African countries and moderate growth in Mediterranean countries. We expect moderate margin expansion driven by price increases and increasing utilization rates.