FRANKFURT: HeidelbergCement, the world’s No.2 cement maker, said on Thursday it would cut costs and investments, hoping to counter a weakening U.S. market and rising energy costs that already forced rival LafargeHolcim to cut its outlook.
Building materials makers depend on energy costs staying under control to power their factories and HeidelbergCement said it expects these to rise by a high single- to low double-digit percentage in 2018.
HeidelbergCement last month slashed its annual profit outlook on these factors, including weakness in the U.S. market due to significant rainfall, with larger peer LafargeHolcim following suit a week later.
North America accounts for more than a third of the group’s core earnings.
“In light of the weaker than expected operational result development, we take strong actions to drive earnings and cash flow generation,” HeidelbergCement Chief Executive Bernd Scheifele said.
Shares in the company rose 2 percent in early Frankfurt trade, the top gainers in Germany’s blue-chip DAX index .
HeidelbergCement said it was “pulling all levers” to boost margins and cash flow, launching an action plan that includes 100 million euros ($114 million) of administrative cost savings over the next two years.
As part of the effort, the group said it was stepping up its asset disposal programme and putting additional non-core or under-performing units under review with a view to divest them.
Annual investments aimed at growing the business will be capped at 350 million euros for 2019 and 2020, down sharply from the 1.1 billion euros expected for this year. The group said it will also consider a share buyback in mid-2019.
HeidelbergCement, which also released broadly in-line third-quarter results, said it would provide further details of its portfolio optimisation and cost cutting initiatives at its full-year news conference scheduled for March 21, 2019.
($1 = 0.8746 euros)
(Editing by Maria Sheahan and Adrian Croft)