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Heidelberg Materials AG

Quarterly Report Nov 11, 2009

202_10-q_2009-11-11_dcb2d665-8dd5-46a3-a0b6-cb0e4dcabcd3.pdf

Quarterly Report

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September 2009

  • OIBD-margin up to 25.5% (previous year: 22.5%) in Q3; cost reduction programmes show effect
  • Group turnover declined to EUR 8.4 billion (-22% compared to previous year) due to adverse volume effects. Notably positive market development in Asia
  • Net debt fell to below EUR 9 billion
  • Financing structure after capital increase and bonds issue significantly improved
  • Free float >75%; good prospects for entry into German DAX index in 2010
  • Focus on liquidity, ambitious cost saving programmes and disposals are consistently pursued
Overview January - September 2009 July - September January - September
EURm 2008
1)
2009 2008
1)
2009
Turnover 3,881 3,021 10,809 8,391
Operating income before depreciation (OIBD) 871 770 2,161 1,606
in % of turnover 22.5% 25.5% 20.0% 19.1%
Operating income 671 571 1,572 1,028
Additional ordinary result 17 -35 44 11
Result from participations 17 27 51 48
Earnings before interest and income taxes (EBIT) 706 563 1,667 1,087
Profit before tax 513 281 1,092 442
Net income from continuing operations 359 209 818 537
Net income / loss from discontinued operations -10 -6 1,261 -15
Profit for the financial year 349 203 2,079 522
Group share of profit 310 149 1,985 419
Investments 274 128 799 419

1) Figures have been restated following the reclassification of the unwinding of discount to the other financial result

Ladies and Gentlemen,

The deterioration of economic performance has slowed during the past months all over the world and seems to have bottomed out in numerous countries. Key indicators point towards a stabilisation but individual countries and markets develop differently and, with the exception of the Asian emerging countries, the overall recovery remains rather hesitant.

Market development remains problematic

In the first nine months of 2009, cement and clinker sales volumes of HeidelbergCement reached 59.2 million tonnes (previous year: 68.5) and were 13.5% below the previous year's level. Sales volumes improved in the Asia-Australia-Africa Group area in the third quarter, driven by a strong demand in China and a favourable development in Bangladesh. Tanzania benefits from the successful capacity expansion. During the last few months, the development in sales volumes of individual Eastern European countries, e.g. Poland, indicates improving prospects. The sales volumes for aggregates decreased by 21.9% to 178.7 million tonnes (previous year: 228.9) in the first nine months. The reduction in deliveries of ready-mixed concrete also slowed down only slightly and the total volume of 26.1 million m3 (previous year: 33.7) meant a decrease of 22.5 % in the first nine months. The development of deliveries of asphalt, which fell by 8.8 % to 7.6 million tonnes (previous year: 8.3), continues to be supported by new activities in the infrastructure sector.

Group turnover reached EUR 8,391 million (previous year: 10,809) during the first nine months, a decline of 22.4% compared to the previous year. Excluding exchange rate and consolidation effects, turnover decreased by 21.8%. The increase in turnover in Asian emerging countries could not offset the decline in other Group areas. However, results developed more successfully and the effects of our comprehensive cost reduction programmes are now becoming increasingly apparent. The operating income before depreciation (OIBD) fell by 25.7% to EUR 1,606 million (previous year: 2,161) and the operating income dropped to EUR 1,028 million (previous year: 1,572), which corresponds to a decline of 34.6 %. OIBD margin for the third quarter of 2009 amounted to 25.5 % and was noticeably above the level of the previous year (22.5%).

The reduction in the additional ordinary result by EUR 32.4 million to EUR 11.4 million (previous year: 43.8) is primarily attributable to restructuring measures and the related depreciation. The results from participations of EUR 47.6 million (previous year: 51.0) remains almost unchanged.

The deterioration of the financial results by EUR 69.1 million to EUR -644.3 million (previous year: -575.2) is mainly the result of the reversal of capitalized financing costs. The reversal took place in connection with the reduction of net indebtedness after the capital increase. The decrease in interest expenses was offset by negative exchange rate effects to the amount of EUR 24.7 million.

The economy-induced decline in operating income with persistently high financing costs resulted in profit before tax from continuing operations to the amount of EUR 442.4 million (previous year: 1,091.6).

The liquidation of provisions, which was partly possible due to the conclusion of tax audits in Australia and the United Kingdom, yielded positive results amounting to EUR 94.8 million (previous year: -273.2) with respect to taxes on income. Profit after tax from continuing operations amounted to EUR 537.2 million (previous year: 818.4).

The profit for the financial year amounted to EUR 521.6 million (previous year: 2,079.2) for the first nine months. Last year's result was affected by the high book profit amounting to EUR 1,276.9 million from the sale of maxit Group. The Group share of profit amounted to EUR 419.3 million (previous year: 1,984.7).

In the first nine months, the balance sheet total fell by EUR 0.6 billion to EUR 25.7 billion. The decrease in fixed assets by EUR 0.2 billion to EUR 20.5 billion is largely due to exchange rate effects. In the context of our "Cash is king" initiative, stocks were decreased by EUR 0.3 billion to EUR 1.4 billion; the trade receivables remained almost unchanged at the amount of EUR 1.7 billion. Cash and cash equivalents amounted to EUR 0.7 billion. Net debt fell to below EUR 9 billion; apart from the proceeds from the capital increase conducted in September, the cost reduction programmes, the operating cash flow and the divestment of non-strategic business units have significantly contributed to the debt reduction.

Successful capital markets transactions

After refinancing its bank liabilities in June 2009, HeidelbergCement successfully completed a rights issue together with a placement of existing shares in September. By making use of the authorized capital, the company's subscribed share capital has increased by 50 % through the issue of 62.5 million new shares in return for cash contributions. The subscription price for the new shares and the offer price for the previous, private placement of the new shares solely with institutional investors was set at EUR 37 per share. The company received net proceeds of EUR 2.25 billion from the rights issue, which were used to repay existing liabilities to banks. Until 30 September 2009, the company received EUR 1.98 billion; after the end of the subscription period, we obtained the outstanding amount of EUR 0.27 billion on 9 October. The share offering, which was oversubscribed several times, brought HeidelbergCement a number of qualified institutional investors, mainly from the US and the United Kingdom.

At the same time as the placement of the new shares, the company's majority shareholders, amongst others Spohn Cement GmbH and VEM Vermögensverwaltung GmbH as well as certain banks, sold 57.2 million existing shares solely to qualified institutional investors.

By the completion of the capital increase, free float rose to 75.6%. This includes investments of around 3.5% held by the state of Norway and of around 3% held by FMR LLC, Boston (USA) and Gartmore Investment Ltd, London (United Kingdom). According to information available to the company, Ludwig Merckle now holds 24.4% of the shares. The notifications on securities transactions we received in the course of the capital increase according to § 15a of the German Securities Trading Act (Directors' Dealings) are available on our website www.heidelbergcement.com under 'Investor Relations'.

As a result of the rights issue and the placement of existing shares, HeidelbergCement's free float market capitalisation and daily share trading turnover have increased significantly. Therefore there are good prospects for Heidelberg-Cement to be included in the German DAX 30 index in 2010.

In October, HeidelbergCement issued three Euro-Bonds to national and foreign institutional investors with a total issue volume of EUR 2.5 billion: One bond of EUR 1 billion with a term of 5 years, a second of EUR 1 billion with a term of 7 years and a third of EUR 500 million with a term of 10 years. The bonds were well received by investors and oversubscribed several times. The proceeds from the issue were exclusively used to partly repay the syndicated loan. Together with the proceeds from the capital increase, from disposals and the operating cash flow, the Group's bank debts have been reduced by more than EUR 4 billion; at the same time, the maturity structure of our liabilities has improved accordingly. The remaining maturities in 2011 and 2012 have been reduced to a manageable size and will further decrease through the operating cash flow, disposal of assets and capital markets activities in 2010 and 2011.

After the successful completion of the capital markets transactions, the rating agencies Standard & Poor's and Fitch increased their credit rating assessment of HeidelbergCement by two notches to B+ and BB- with a positive outlook.

30 September 2009 562,500 187,500,000
Cash capital increase (22 September 2009) 187,500 62,500,000
1 January 2009 375,000 125,000,000
Share capital HeidelbergCement AG Share capital
EUR '000s
Number
of shares

Letter to the shareholders

Employees

At the end of September 2009, the number of employees in HeidelbergCement's continuing operations was 55,796 (previous year: 64,638). The decrease in the number of employees by 8,842 results to a large part from the location optimisations and capacity adjustments in North America and the United Kingdom that were initiated at an early stage.

Investments cut back

In the first nine months, cash flow investments in continuing operations were reduced by 48% to EUR 419 million (previous year: 799). Of this amount, EUR 401 million (previous year: 697) were accounted for investments in tangible fixed assets that were primarily related to maintenance, optimisation and environmental measures at our production sites. The investments in financial fixed assets amounted to EUR 18 million (previous year: 102); these were, in particular, smaller bolt-on acquisitions of shareholdings.

Europe: Signs of slight improvement

A degree of stabilisation in the economy was clearly noticeable in Europe in the third quarter, albeit at different levels in individual countries. Owing to the sharp decline at the beginning of the year, the economic research institutes' autumn reports now expect gross domestic product to shrink by 3.9% over the whole year.

The reduction in deliveries of cement and clinker slowed down further during the last few months, but in most countries, the overall sales volumes lay noticeably below those of the previous year. The slowdown of the decline was particularly noticeable in some Eastern European countries, such as Poland, Romania and Bosnia. In the United Kingdom, stabilisation trends on a low level are noticeable. Overall, our cement and clinker sales volumes in Europe fell by 18.7% to 27.2 million tonnes (previous year: 33.5).

Deliveries of aggregates decreased by 21.4% to 74.9 million tonnes (previous year: 95.3) in the first nine months. A slight improvement due to slowly increasing demand for aggregates can mainly be seen in the Czech Republic, Hungary, Poland, Benelux and Norway. The asphalt operating line's sales volumes of 3.2 million tonnes (previous year: 3.2) remained at the same level as last year, mainly due to the British Government's economic stimulus programme. Sales volumes of ready-mixed concrete shrunk by 22.5% to 14.3 million m3 (previous year: 18.4) by the end of September. However, deliveries of ready-mixed concrete in Germany are starting to increase again due to recently initiated infrastructural projects. In the course of the divestment programme of non-strategic business units, HeidelbergCement agreed to the sale of its activities in Israel, which includes the production of aggregates, readymixed concrete and asphalt. The transaction is expected to be completed by the end of this year.

In the building products business line, which mainly comprises Hanson's building products in the United Kingdom, the continuing weakness of the British residential construction sector resulted in a substantial decrease in volumes, particularly with regard to bricks and lightweight blocks. In Measham (Leicestershire), we have commissioned Europe's leading-edge brick plant. With this highly efficient installation, we are now fully prepared for a recovery in activities in the residential construction sector.

The turnover of the Europe Group area fell by 28.6% to EUR 4,006 million (previous year: 5,610); the operational decrease amounted to 20.6%. Whilst no significant consolidation effects were recorded, turnover was clearly affected by the development of exchange rates: The negative effect of the weakening of the British pound, the Swedish and the Norwegian crowns as well as the Eastern European currencies amounted to EUR 559 million.

North America: Hesitant recovery

In North America, HeidelbergCement is represented in the US and Canada. In the US, the growth of the gross domestic product in the third quarter points to an end of the downturn. The rise in the number of planning permissions and new housing is the first sign of an easing in the residential market. In addition, the housing prices recuperated slightly, although at low levels. However, the recovery process in the US and Canada is hampered mainly by the high unemployment rate and the deterioration of consumer climate that accompanies it.

The cement sales volumes of our North American plants fell by 26.7% to 7.8 million tonnes (previous year: 10.7) in the first nine months. This means that the decline has slowed down somewhat but there is no clear improvement trend discernable as yet. Nearly half the consumption of concrete in the US is generated by public building projects resulting from the economic stimulus programme. Owing to the delay in the allocation of public funds, numerous approved infrastructural projects have been postponed to the coming year.

The decrease in sales volumes also continued in the aggregates and concrete business lines in comparison with the previous year. The deliveries of aggregates fell by 25.7% and reached 78.2 million tonnes (previous year: 105.2) in the first nine months, whereas the sales volumes of asphalt dropped by 15.6% to 2.6 million tonnes (previous year: 3.1) and ready-mixed-concrete by 38.5% to 4.4 million m3 (previous year: 7.2).

Since the building products business line strongly depends on the residential construction sector, the sales volumes of roof tiles and bricks have been particularly affected during the reporting period. We prepared ourselves very early for these difficult market conditions with drastic capacity adjustments.

Total turnover in North America decreased by 24.1% to EUR 2,277 million (previous year: 3,000). Operationally, i.e. excluding exchange rate effects, the decline amounted to 31.9%.

Asia-Australia-Africa: Good development

The national economies in the Asia-Australia-Africa Group area are recovering faster than expected. Spurred on by massive government economic stimulus programmes, the growth of the Chinese gross domestic product accelerated to 8.9% in the third quarter, according to the national statistic office. India and Indonesia are exhibiting solid domestic figures and the Australian economy is also proving to be very robust.

The cement and clinker sales volumes in the Asia-Australia-Africa Group area fell by 0.6% to 24.2 million tonnes (previous year: 24.4) in the first nine months and thus dropped only slightly in comparison with the same period last year. Whilst the decrease still amounted to 1.4 % in the first half of the year, we observed a slight increase of 0.6% in the course of the third quarter. In Indonesia, cement demand recovered in the third quarter after a noticeable weakening during the first six months. Cement and clinker sales volumes of our subsidiary Indocement lay at the end of September markedly below the previous year's level. Thanks to significant cost reductions and a margin-oriented pricing policy, Indocement was able to achieve a considerable increase in results. In China, our joint ventures in the provinces Guangdong and Shaanxi profited from the strong demand resulting from the government infrastructural package. Sales volumes of our plants increased by 65%; this was, in part, also the result of the commissioning of two new production lines in Shaanxi at the end of 2008. The deliveries of our cement plants in India reached the previous year's level and results increased substantially. Because of the good growth prospects, we will expand our cement capacities in India by around 2.8 million tonnes to slightly above 6 million tonnes. In Bangladesh, both the sales volumes and the results increased satisfactorily. As a result of the declining market in Turkey, cement and clinker sales volumes of our joint venture Akçansa fell by 5.0% despite increased export deliveries. In Africa, Tanzania stood out particularly, where our subsidiary TPCC achieved an increase in sales volumes of 36%. In addition to the favourable market development, the completion of our new production line in our plant near Dar es Salaam also contributed to the result. Without taking into account the participations in Nigeria and Niger, which were sold in March 2008, sales volumes of our African cement plants fell only slightly below the previous year's level.

Aggregates sales volumes dropped by 10.0 % to 25.6 million tonnes (previous year: 28.4). The asphalt business also showed a decline. Ready-mixed concrete deliveries fell by 8.1% to 7.4 million m3 (previous year: 8.1).

The turnover of the Asia-Australia-Africa Group area only reached EUR 2,054 million (previous year: 2,109), a decline of 2.6 % compared with the previous year. Excluding consolidation and exchange rate effects, the decline amounted to 5.1%.

Letter to the shareholders

Group Services

The trade volume of our subsidiary HC Trading decreased by 18.6 % to 6.4 million tonnes (previous year: 7.9) in the first nine months. Despite a significant increase in cement deliveries, the substantial decline in the clinker trade volume could not be offset.

The turnover of our subsidiary HC Fuels, which is responsible for the purchase of fossil fuels, sharply decreased as a result of falling prices and the lower demand for fuels. Overall, the turnover of Group Services fell by 30.7% to EUR 380 million (previous year: 548).

Prospects for 2009

Key indicators point to a gradual stabilisation of the world economy and a slow recovery to which expansive economic policy measures substantially contributed. However, in the current year, economic performance in most European countries and North America will still noticeably lag behind that of last year. The economies in the large emerging countries of Asia begin to gain momentum. Overall, the recovery still remains fragile and it is difficult to assess the development for the coming months.

Therefore, HeidelbergCement will unremittingly continue with its comprehensive cost saving programmes. Cash flow orientation also remains a key issue and will be complemented with specific measures. Even after the successful steps taken in 2009, debt reduction still remains a main focus. The sale of non-strategic business units at acceptable conditions will continue.

HeidelbergCement expects turnover also for the last quarter of 2009 to decrease. The upturn in the Asian markets will not be able to offset the persistent weakness in the remaining Group areas. Operating income, which is supported by our massive cost saving measures, will also fall behind last year's results. We expect a further substantial reduction in total debt by the end of 2009.

With its significantly improved financing and cost structure, HeidelbergCement is well placed to emerge from the current economic crisis in a stronger position in 2010.

Heidelberg, 4 November 2009

Yours sincerely,

Dr. Bernd Scheifele Chairman of the Managing Board

Group profit and loss accounts

Group profit and loss accounts
EUR '000s
July - September
2008
2)
2009 January - September
2008
2)
2009
Turnover 3,881,411 3,020,641 10,809,158 8,390,571
Change in stock and work in progress 10,844 -45,737 17,440 -199,815
Own work capitalised 1,280 2,419 2,477 5,909
Operating revenue 3,893,535 2,977,323 10,829,075 8,196,665
Other operating income 49,024 137,219 164,742 271,029
Material costs -1,575,531 -1,124,807 -4,282,627 -3,206,147
Employee and personnel costs -572,898 -493,650 -1,744,316 -1,536,032
Other operating expenses -922,637 -726,077 -2,805,520 -2,119,286
Operating income before depreciation (OIBD) 871,493 770,008 2,161,354 1,606,229
Depreciation of tangible fixed assets -193,558 -193,230 -570,617 -559,661
Amortisation of intangible assets -6,993 -5,992 -18,644 -18,840
Operating income 670,942 570,786 1,572,093 1,027,728
Additional ordinary income 52,049 -10,707 128,399 95,475
Additional ordinary expenses -34,794 -24,646 -84,637 -84,118
Additional ordinary result 17,255 -35,353 43,762 11,357
Result from associated companies 1) 15,714 25,979 44,623 44,512
Result from other participations 1,728 1,442 6,337 3,039
Earnings before interest and taxes (EBIT) 705,639 562,854 1,666,815 1,086,636
Interest income 16,489 15,986 43,377 37,385
Interest expenses -194,449 -143,582 -588,980 -455,596
Foreign exchange gains and losses -219 -13,615 7,206 -24,693
Other financial result -14,646 -141,142 -36,818 -201,376
Profit before tax from continuing operations 512,814 280,501 1,091,600 442,356
Taxes on income -154,175 -71,277 -273,176 94,832
Net income from continuing operations 358,639 209,224 818,424 537,188
Net income / loss from discontinued operations -10,005 -5,950 1,260,781 -15,629
Profit for the financial year 348,634 203,274 2,079,205 521,559
Thereof minority interests 38,224 53,970 94,461 102,244
Thereof Group share of profit 310,410 149,304 1,984,744 419,315
Earnings per share in EUR (IAS 33)
Earnings per share attributable to the parent entity 2.46 1.15 16.00 3.31
Earnings per share – continuing operations 2.58 1.19 5.84 3.43
Earnings per share – discontinued operations -0.12 -0.04 10.16 -0.12
1) Net results from associated companies 14,322 21,167 38,507 35,876

2) Figures have been restated following the reclassification of the unwinding of discount to the other financial result

Group cash flow statement

Group cash flow statement January - September
EUR '000s 2008 2009
Net income from continuing operations 818,424 537,188
Taxes on income 273,176 -94,832
Interest income/expenses 545,603 418,211
Dividends received 32,648 18,955
Interest paid -532,120 -720,354
Taxes paid -254,740 -132,809
Elimination of non-cash items 613,437 647,128
Cash flow 1,496,428 673,487
Changes in operating assets -821,929 148,844
Changes in operating liabilities 53,402 -173,240
Changes in working capital -768,527 -24,396
Decrease in provisions through cash payments -191,957 -162,982
Cash flow from operating activities – continuing operations 535,944 486,109
Cash flow from operating activities – discontinued operations -30,434
Cash flow from operating activities 505,510 486,109
Intangible fixed assets -15,804 -8,768
Tangible fixed assets -680,528 -391,743
Financial fixed assets -102,341 -18,056
Investments (cash outflow) -798,673 -418,567
Proceeds from fixed asset disposals 2,248,685 404,245
Cash from changes in consolidation scope -7,824 -4,950
Cash flow from investing activities – continuing operations 1,442,188 -19,272
Cash flow from investing activities – discontinued operations -5,891
Cash flow from investing activities 1,436,297 -19,272
Capital increase 512,500 1,984,807
Dividend payments – HeidelbergCement AG -162,500 -15,000
Dividend payments – minority shareholders -26,042 -36,913
Proceeds from bond issuance and loans 2,880,671 9,035,492
Repayment of bonds and loans -4,985,496 -11,545,191
Cash flow from financing activities – continuing operations -1,780,867 -576,805
Cash flow from financing activities – discontinued operations 40,802
Cash flow from financing activities -1,740,065 -576,805
Net change in cash and cash equivalents – continuing operations 197,265 -109,968
Net change in cash and cash equivalents – discontinued operations 4,477
Net change in cash and cash equivalents 201,742 -109,968
Effect of exchange rate changes -23,777 8,544
Cash and cash equivalents at 1 January 845,736 843,646
Cash and cash equivalents at 30 September 1,023,701 742,222
Reclassification of cash and cash equivalents according to IFRS 5 -21,716
Cash and cash equivalents presented in the balance sheet at 30 September 1,023,701 720,506

Group balance sheet

Assets
EUR '000s 31 Dec. 2008 30 Sept. 2009
Long-term assets
Intangible assets 10,150,990 10,054,486
Tangible fixed assets
Land and buildings 4,622,182 4,633,438
Plant and machinery 4,299,917 4,168,128
Fixtures, fittings, tools and equipment 237,434 241,147
Payments on account and assets under construction 775,944 694,090
9,935,477 9,736,803
Financial fixed assets
Investments in associates 540,016 593,956
Financial investments 81,631 84,805
Loans to participations 48,631 49,430
Other loans and derivative financial instruments 24,198 24,830
694,476 753,021
Fixed assets 20,780,943 20,544,310
Deferred taxes 129,489 153,148
Other long-term receivables 365,715 329,518
Long-term tax assets 18,410 16,733
21,294,557 21,043,709
Short-term assets
Stock
Raw materials and consumables 734,766 604,220
Work in progress 183,294 142,591
Finished goods and goods for resale 788,254 633,326
Payments on account 24,706 21,235
1,731,020 1,401,372
Receivables and other assets
Short-term financial receivables 160,222 143,909
Trade receivables 1,544,701 1,678,847
Other short-term operating receivables 382,168 356,455
Current tax assets 158,125 170,674
Financial investments and derivative financial instruments 2,245,216 2,349,885
26,013
173,679
Cash at bank and in hand 843,646 720,506
4,993,561 4,497,776
Disposal groups held for sale 148,614
Balance sheet total 26,288,118 25,690,099
Liabilities
EUR '000s 31 Dec. 2008 30 Sept. 2009
Shareholders' equity and minority interests
Subscribed share capital 375,000 562,500
1)
Share premium 3,470,892 5,268,199
1)
Profit and loss reserve 6,316,797 6,678,419
Currency translation -2,442,548 -2,300,371
Equity attributable to shareholders 7,720,141 10,208,747
Minority interests 540,703 736,188
8,260,844 10,944,935
Long-term provisions and liabilities
Provisions
Provisions for pensions 651,973 716,553
Deferred taxes 966,569 844,653
Other long-term provisions 1,062,630 1,021,376
2,681,172 2,582,582
Liabilities
Debenture loans 3,055,379 2,509,847
Bank loans 7,525,359 5,889,879
Other long-term financial liabilities 286,827 287,580
2)
10,867,565 8,687,306
Other long-term operating liabilities 196,014 183,640
Long-term tax liabilities 243,214 123,661
11,306,793 8,994,607
13,987,965 11,577,189
Short-term provisions and liabilities
Provisions 323,793 274,346
Liabilities
Debenture loans (current portion) 430,382 582,975
Bank loans (current portion) 1,017,629 205,274
Other short-term financial liabilities 317,563 292,973
2)
1,765,574 1,081,222
Trade payables 991,308 767,588
Current income taxes payable 198,078 213,822
Other short-term operating liabilities 760,556 789,949
3,715,516 2,852,581
4,039,309 3,126,927
Provisions and liabilities associated with disposal groups 41,048
Total liabilities 18,027,274 14,745,164
Balance sheet total 26,288,118 25,690,099

1) Capital increase (see notes)

2) Includes puttable minorities with an amount of EUR '000s 51,087 (previous year: 50,251)

Statement of recognised
income and expense July - September July - September January - September January - September
EUR '000s 2008 2009 2008 2009
Profit for the financial year 348,634 203,274 2,079,205 521,559
IAS 19 Actuarial gains and losses 4,904 4,904 -75,196
Income taxes 984 -20 984 21,561
5,888 -20 5,888 -53,635
IAS 39 Cash flow hedges -17,465 3,732 -1,065 -2,416
Income taxes 3,717 -935 -901 735
-13,748 2,797 -1,966 -1,681
IAS 39 Available for sale assets 545 5,268 -11,655 4,146
Income taxes 253 -483 443 732
798 4,785 -11,212 4,878
IFRS 3 Business combinations -218 -70 -290 9,595
Income taxes 1 -33 28 -3,215
-217 -103 -262 6,380
Other -1,731 959 -1,051 409
Income taxes 8 55 -163 717
-1,723 1,014 -1,214 1,126
Currency translation 606,754 -323,892 -347,972 168,041
Other comprehensive income 597,753 -315,419 -356,738 125,109
Total comprehensive income 946,387 -112,145 1,722,468 646,668
Relating to minority interests 64,507 92,434 112,860 127,869
Relating to HeidelbergCement AG
shareholders
881,880 -204,579 1,609,608 518,799

Statement of recognised income and expense

Reconciliation of changes in total equity

Reconciliation of
changes in total
equity
EUR '000s Subscribed
share
capital
Share
premium
Retained
earnings
Cash flow
hedge
reserve
AfS
reserve
Asset
revaluation
reserve
Currency
translation
Equity attri
butable to
shareholders
Minority
interests
Total
equity
1 January 2008 360,000 2,973,392 4,720,729 9,734 26,567 4,946 -1,098,404 6,996,964 521,861 7,518,825
Profit for the
financial year
1,984,744 1,984,744 94,461 2,079,205
Other compre
hensive income 1)
4,999 -2,335 -11,212 -262 -8,810 45 -8,766
Exchange rate -189 143 46 -366,326 -366,326 18,354 -347,972
Total compre
hensive income
1,989,554 -2,192 -11,166 -262 -366,326 1,609,608 112,860 1,722,468
Changes in con
solidation scope
-40,038 -40,038
Capital increase
from issuance of
new shares
15,000 497,500 512,500 512,500
Dividends -162,500 -162,500 -26,042 -188,542
30 Sept. 2008 375,000 3,470,892 6,547,783 7,542 15,401 4,684 -1,464,730 8,956,572 568,641 9,525,213
1 January 2009 375,000 3,470,892 6,316,964 -14,234 9,166 4,901 -2,442,548 7,720,141 540,703 8,260,844
Profit for the
financial year
419,315 419,315 102,244 521,559
Other compre
hensive income 1)
-52,509 -1,442 4,878 6,380 -42,693 -239 -42,932
Exchange rate 142,177 142,177 25,864 168,041
Total compre
hensive income
366,806 -1,442 4,878 6,380 142,177 518,799 127,869 646,668
Changes in con
solidation scope
104,529 104,529
Capital increase
from issuance of
new shares 2)
187,500 1,797,307 1,984,807 1,984,807
Dividends -15,000 -15,000 -36,913 -51,913
30 Sept. 2009 562,500 5,268,199 6,668,770 -15,676 14,044 11,281 -2,300,371 10,208,747 736,188 10,944,935

1) Without currency translation

2) The capital increase from issuance of new shares was reduced by net transaction costs of EUR '000s 33,381 in accordance with IAS 32.37 (see notes)

Segment reporting / Notes

Group areas January - September 2009

EURm Europe North America
2008 2009 2008 2009
External turnover 5,564 3,963 3,000 2,277
Inter-Group areas turnover 46 42
Turnover 5,610 4,005 3,000 2,277
Change to previous year in % -28.6% -24.1%
Operating income before depreciation (OIBD) 1,208 776 475 280
as % of turnover 21.5% 19.4% 15.9% 12.3%
Depreciation -301 -271 -186 -201
Operating income 907 505 290 79
as % of turnover 16.2% 12.6% 9.7% 3.5%
Result from participations 28 24 2 3
Additional ordinary result
Earnings before interest and taxes (EBIT) 935 529 292 82
Capital expenditures1) 374 271 136 74
Segment assets2) 9,700 8,469 8,063 7,878
OIBD as % of segment assets 12.5% 9.2% 5.9% 3.6%
Number of employees as at 30 September 28,873 24,703 17,970 14,671
Average number of employees 28,524 25,275 18,164 14,381

1) Capital expenditures = in the segment columns: tangible fixed assets and intangible assets investments; in the reconciliation column: financial fixed assets investments

2) Segments assets = tangible fixed assets and intangible assets

Asia-Australia-Africa Group Services Reconciliation Continuing Operations Discontinued Operations
2008 2009 2008 2009 2008 2009 2008 2009 2008 2009
2,054 1,999 192 152 10,809 8,391 176
54 56 356 228 -456 -326
2,109 2,054
-2.6%
548 380
-30.7%
-456 -326 10,809 8,391
-22.4%
176
463 522 15 28 2,161 1,606 14
22.0% 25.4% 2.7% 7.3% 20.0% 19.1% 8.0%
-102 -106 0 -1 -589 -579 -10
361 416 14 27 1,572 1,028 4
17.1% 20.3% 2.6% 7.2% 14.5% 12.2% 2.5%
21 17 3 51 48 0
44 11 44 11
382 434 14 30 44 11 1,667 1,087 4
187 56 102 18 799 419
3,476 3,408 34 36 21,273 19,791
13.3% 15.3% 43.0% 77.5% 10.2% 8.1%
17,739 16,372 56 50 64,638 55,796
17,743 16,592 56 51 64,487 56,299

Notes to the interim report

Accounting and consolidation principles

The interim Group accounts for HeidelbergCement AG as of 30 September 2009 were prepared according to the International Financial Reporting Standards (IFRS) for interim reporting as applicable in the European Union.

The same accounting and valuation methods were principally applied as in the preparation of the Group annual accounts as of 31 December 2008, as well as IAS 34 "Interim Financial Reporting". The standards and interpretations of the IASB, to be applied for the first time in this financial year, did not bear any impact on the assets, financial and earnings position of the Group. The changes resulting from the revision of IAS 1 (Presentation of Financial Statements) and from the first-time application of IFRS 8 (Operating Segments) solely pertain to the presentation and to the extent of the information disclosed.

Results from participations comprise both income from other participations and amounts written off financial fixed assets.

The interim Group accounts as of 30 September 2009 were not subjected to any audits or reviews.

Seasonal nature of the business

The production and sales of building materials are seasonal due to the regional weather patterns. Particularly in our important markets of Europe and North America, business figures of the first and fourth quarters are adversely affected by the winter months, whereas the warmer months contribute to higher sales and profit numbers in the second and third quarters.

Goodwill

An impairment test on goodwill is performed annually within the HeidelbergCement Group in the fourth quarter once the operating three-year plan has been prepared, or if there are reasons to suspect impairment. On 30 June 2009, management conducted sensitivity analyses with respect to the discount rates for those units that, as already indicated in the 2008 Annual Report, exhibit a less extensive scope for assessment.

Changes in the consolidation scope and divestments

HeidelbergCement sold 520.5 million shares of the Indonesian cement manufacturer PT Indocement Tunggal Prakarsa to international institutional investors on 10 June 2009. This equals a proportion of 14.1% of the former total percentage of shares of Indocement of 65.1%.

On 14 May 2009, HeidelbergCement sold its asphalt operating line in Australia. The 50% stake in the Australian joint venture Pioneer Road Service (PRS) and the Specialised Tanker Transport division of Hanson Australia Construction Materials Pty Ltd were acquired by Fulton Hogan, a civil contracting quarrying and asphalt producing company in Australia.

Proceeds of EUR 404 million were generated in connection with the sales of tangible fixed assets and company shares and rights.

On 30 July 2009, HeidelbergCement divested its activities in Israel. The company's operations there include production facilities for ready-mixed concrete, aggregates and asphalt. Until final closing, the assets and liabilities of the disposal group are classified as held for sale in the Group balance sheet, in accordance with IFRS 5.

In addition, the assets and liabilities of Industry Petrobeton OOO, St. Petersburg/Russia are classified as held for sale in the Group balance sheet, in accordance with IFRS 5.

Notes

Turnover development by Group areas and business lines January to September 2009
Aggregates Building Intra Group
EURm Cement and concrete products eliminations Total
2008 2009 2008 2009 2008 2009 2008 2009 2008 2009
Europe 2,709 1,960 2,691 1,944 539 408 -330 -306 5,610 4,005
North America 864 669 1,586 1,144 687 572 -137 -108 3,000 2,277
Asia-Australia-Africa 1,296 1,304 799 757 48 23 -35 -30 2,109 2,054
Total 4,869 3,934 5,077 3,845 1,273 1,002 -501 -444 10,718 8,337
Group Services 548 380
Inter-Group area turnover -456 -326
Continuing operations 10,809 8,391
Exchange rates Exchange rates at reporting day
Average exchange rates
31 Dec. 2008 30 Sept. 2009 01-09/2008 01-09/2009
EUR EUR EUR EUR
USD US 1.3978 1.4635 1.5219 1.3668
AUD Australia 1.9762 1.6567 1.6684 1.8129
CAD Canada 1.7004 1.5645 1.5500 1.5977
CNY China 9.5365 9.9899 10.6358 9.3375
GBP Great Britain 0.9557 0.9145 0.7816 0.8852
GEL Georgia 2.3231 2.4416 2.2288 2.2705
GHC Ghana 1.7256 2.1528 1.5642 1.9298
HKD Hong Kong 10.8328 11.3415 11.8656 10.5944
IDR Indonesia 15,305.91 14,168.14 14,032.60 14,555.97
INR India 67.9051 69.8382 63.4100 66.7847
KZT Kazakhstan 169.0499 220.8714 183.1331 200.8014
MYR Malaysia 4.8224 5.0622 4.9587 4.8687
NOK Norway 9.7081 8.4428 7.9966 8.8633
PLN Poland 4.1389 4.1988 3.4301 4.3843
RON Romania 4.0286 4.2191 3.6401 4.2313
RUB Russia 42.6679 43.9395 36.6026 44.3794
SEK Sweden 10.9175 10.1841 9.4178 10.7343
CZK Czech Republic 26.7175 25.1795 24.8287 26.6534
HUF Hungary 263.2057 268.7718 247.5584 283.6873
TZS Tanzania 1,789.60 1,925.79 1,793.33 1,801.35
TRY Turkey 2.1526 2.1699 1.8651 2.1510

Related parties disclosures

The following reportable transactions with affiliated companies or persons occurred in the reporting period. Spohn Cement GmbH, Norderfriedrichskoog, currently holds a 24.06% share in HeidelbergCement AG. Heidelberg-

Cement prepared the Spohn Cement 2008 Group annual accounts and charged EUR 50,000 (gross) in return. On 8 September 2009, HeidelbergCement AG reached a co-operation agreement with the following companies that are affiliated with the Merckle Group: Spohn Cement GmbH, VEM Vermögensverwaltung GmbH, HC Treuhand GmbH and VEM erste Treuhand GmbH. The co-operation agreement was concluded to properly handle the placement of HeidelbergCement shares in connection with the capital measures of HeidelbergCement AG.

Contingent liabilities

Since 31 December 2008, there have been no significant changes in contingent liabilities.

Capital increase

After refinancing its bank liabilities in June 2009, HeidelbergCement successfully completed a rights issue together with a placement of existing shares in September. By making use of the authorised capital, the company's subscribed share capital has increased by 50% through the issue of 62.5 million new shares in return for cash contributions. The subscription price for the new shares and the offering price for the previous private placement of new shares solely with institutional investors was set at EUR 37 per share. The capital increase was recorded in the commercial register on 22 September 2009. The net emission proceeds of EUR 2.25 billion were used to repay existing liabilities to banks. After deduction of EUR 33.4 million in net transaction costs, an inflow of EUR 1.98 billion was recorded by 30 September 2009. The outstanding amount of EUR 0.27 billion was received on 9 October 2009, after expiry of the subscription period.

Events after the balance sheet date

In October 2009, HeidelbergCement issued three Euro-Bonds to national and foreign institutional investors with a total issue volume of EUR 2.5 billion: One bond of EUR 1 billion with a coupon of 7.5% p.a. and a term of 5 years, a second of EUR 1 billion with a coupon of 8.0 % p.a. and a term of 7 years and a third of EUR 500 million with a coupon of 8.5 % p.a. and a term of 10 years. The proceeds from the issue were exclusively used to partly repay the syndicated loan. Together with the proceeds from the capital increase, from disposals and the operating cash flow, the Group's bank debts have been reduced by more than EUR 4 billion; at the same time, the maturity structure of our liabilities has improved accordingly.

After the successful completion of the capital markets transactions, the rating agencies Standard & Poor's and Fitch increased their credit rating assessment of HeidelbergCement by two notches to B+ and BB- with a positive outlook.

Financial calendar
First financial highlights for the 2009 financial year February 2010
Press and analysts' conference on annual accounts 18 March 2010
Interim Report January to March 2010 6 May 2010
Annual General Meeting 2010 6 May 2010

HeidelbergCement AG

Berliner Strasse 6 69120 Heidelberg, Germany www.heidelbergcement.com

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