Heidelberg Materials Q2 Earnings Call Highlights

Key Points

• Second-quarter results improved: Revenue rose 6% reported and 7% like-for-like, while operating EBITDA increased 3% reported and 4% like-for-like. Volumes made a positive contribution for the first time since the first quarter of 2022.
• Guidance was narrowed to EUR 3.4 billion–EUR 3.65 billion, with management targeting a positive full-year price-cost result despite a EUR 90 million negative impact in the second quarter. Europe and North America performed well, while Asia-Pacific remained mixed.
• Growth and decarbonization efforts continued: Acquisitions in the U.S., Canada and Turkey expanded the company’s footprint, while a new kiln in France and a carbon-capture plant in Germany advanced emissions-reduction plans.

Heidelberg Materials ETR: HEI reported higher second-quarter revenue and operating results, supported by its first positive volume contribution in more than four years, while management said pricing actions and cost controls remain central to offsetting inflation and higher energy-related distribution costs.

Chief Executive Officer Dominik von Achten said second-quarter revenue rose 6% on a reported basis and 7% on a like-for-like basis. Operating EBITDA increased 3% reported and 4% like-for-like, while operating EBIT rose 4% reported and 5% like-for-like. The company’s operating margin was broadly flat, he said.

“Since Q1 2022, this is the first quarter with a positive volume impact,” von Achten said, describing the development as an important shift after more than four years of volume pressure. For the first half, profit measures were broadly flat from a year earlier while revenue increased slightly, according to management.

Guidance narrowed as company targets positive price-cost result

Heidelberg Materials narrowed its full-year guidance range to between EUR 3.4 billion and EUR 3.65 billion. It expects return on invested capital to be slightly above 10%, net capital expenditure of EUR 1.2 billion to EUR 1.3 billion, and leverage around its medium-term target of 1.5 times.

Management said its second-quarter price-over-cost result was negative by EUR 90 million, with roughly half of that amount related to joint ventures, particularly China. Chief Financial Officer René Aldach said Europe generated a positive price-over-cost contribution in both the second quarter and first half, while Asia-Pacific pricing did not fully cover higher variable costs.

The company expects to return to a positive price-over-cost result for the full year. Aldach said Heidelberg Materials is pursuing further price increases and surcharges, especially to address added distribution charges from suppliers and energy-related inflation. Management said its guidance already assumes energy costs and supplier surcharges remain around current levels in the second half.

Von Achten said the company has announced price increases in North America for July, August and September. Pricing in U.S. cement was below management’s expectations in the second quarter, partly because of import pressure, while pricing trends in aggregates were more favorable.

Regional results varied, with Europe and AMWA advancing

In Europe, Heidelberg Materials reported higher revenue, EBITDA and operating results, with positive price-over-cost performance and modest margin improvement for the region overall. Management cited recovery signs in Germany, Benelux, France and the U.K., though it characterized those signs as limited. Sweden and Norway rebounded more materially, while Italy and much of Eastern Europe remained strong.

Germany’s housing market remains sluggish, von Achten said, although building permits have risen for several quarters and some projects are beginning construction. Commercial construction also remains weak. He said the company is hopeful that government infrastructure funding will begin reaching projects in the second half and in 2027.

North America delivered like-for-like revenue growth of 7%, EBITDA growth of 9% and operating-result growth of 11% during the second quarter. Large projects supported aggregates volumes and margins, while cement margins were affected by inflationary pressure in the energy-intensive business. Management reiterated that the weak first quarter in North America was largely weather-related and said the region recovered in the second quarter.

Asia-Pacific produced a mixed performance. Australia showed resilient demand, improving pricing and favorable cost management, according to von Achten. In contrast, the company said China and Hong Kong remained sluggish, while inflation and costs pressured profitability elsewhere in Asia. Volumes in India and Indonesia are improving, management said, but pricing has yet to fully recover.

The Africa-Mediterranean-West Asia region, or AMWA, posted revenue and profit growth. Cement margin in the region exceeded 30%, up about 300 basis points, while the overall regional margin approached 28%. Von Achten cited solid performance in Sub-Saharan Africa, particularly on the eastern side of the region, as well as in North Africa.

Acquisitions add to growth plans

The company continued to expand through acquisitions during the period. The acquisition of AmeriTex in the U.S. has closed, giving Heidelberg Materials a position in what management described as Texas’ fastest-growing concrete-pipe provider. Its BURNCO transaction closed at the start of the second quarter, strengthening its presence in Western Canada’s Prairie market.

The Akçansa transaction in Turkey closed at the end of June and will begin contributing from the third quarter. Management described the assets as a platform for the Turkish domestic market and export opportunities to Africa, the U.S. and other regions.

Heidelberg Materials also expects an update in coming weeks on its proposed MAAS acquisition in Australia. Aldach said the company’s full-year guidance includes EUR 65 million of scope contribution from Akçansa, AmeriTex and BURNCO, but does not include MAAS.

Separately, the company sold its Bukhtarma business in eastern Kazakhstan, citing the asset’s older wet-kiln technology, profitability challenges and carbon footprint.

Cash flow and decarbonization developments

Adjusted earnings per share rose 2% in the first half, while reported earnings per share and group net income each increased 7.5%, Aldach said. Last-12-month rolling free cash flow totaled EUR 1.9 billion, down because of working capital and capital expenditure.

Working capital created a EUR 99 million cash outflow in the first half. Aldach attributed EUR 60 million to timing in the trading business and the remainder largely to inventory purchases, including opportunistic coal purchases when prices were low, and higher receivables. He said the company targets no working-capital cash outflow by year-end.

Net debt increased EUR 500 million, driven by EUR 760 million in gross capital expenditure and a 13% increase in shareholder returns through dividends and share repurchases. The third tranche of the company’s EUR 1.2 billion share buyback program is underway, with up to EUR 450 million allocated to the tranche.

On decarbonization, von Achten said Heidelberg Materials broadly supports the European Commission’s proposed revisions to the EU emissions trading system. He said the company expects to remain covered by the current framework through at least 2028, though it may reassess individual investments as details are finalized.

The company opened a new kiln in Airvault, France, which management said reduces the site’s carbon footprint by nearly 30%. It also said a Pure Oxyfuel carbon-capture plant in southern Germany, developed with three competitors, has started operations and captured its first carbon dioxide. Heidelberg Materials expects its specific net CO2 emissions to remain around the prior-year level in 2026, primarily due to the Akçansa acquisition’s current carbon footprint.

About Heidelberg Materials (ETR:HEI)

Heidelberg Materials AG, together with its subsidiaries, produces and distributes cement, aggregates, ready-mixed concrete, and asphalt worldwide. It provides cement products; natural stone aggregates, including sand and gravel; crushed aggregates comprising stone chippings and crushed stones; and ready-mixed concrete for use in the construction of tunnels or bridges, office buildings, or schools, as well as to produce precast concrete parts, such as stairs, ceiling elements, or structural components.

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