Multinational cement makers Heidelberg Materials, Holcim and Cemex benefited from lower energy costs and higher cement sales prices in the first half, according to earnings results released today, even as sales volumes dropped in some markets like Europe, the Mediterranean and China.
Germany-based Heidelberg's profit increased by 31pc in the first half to €783mn ($859mn), while Mexico-based Cemex posted a profit of $2.87bn for the first half, up by 19pc on the year. Swiss-based Holcim reported 6pc lower profit in the first half, at 1.35bn Swiss francs ($1.56bn), but this year-over-year drop was the result of divestments in India and Brazil the company made in the second half of last year. On an organic basis, Holcim's sales were up by 7pc on the year in the first half, to SFr13.1bn.
Heidelberg's revenue rose by 5pc on the year to almost €10.47bn in January-June. The higher revenue was the result of increased pricing, as half-year sales volumes declined in all business lines as a result of the global economic downturn, according to the company.
The sharpest drop in cement and clinker shipments was in western and southern Europe as well as in the Mediterranean, following lower residential construction activity. The fall in sales could not be offset by a slight increase in shipments in Asia-Pacific, mainly in Indonesia, as sales in another countries, particularly China and India, remained under pressure from low construction activity and high inflation.
Holcim acknowledged some volume challenges on inflation and higher interest rates, especially in Europe. But these were offset by higher value for products in that region.
"When I look at my European business, … Holcim's volumes might be down something like 6pc in the first half year, but our sales are up more than 10pc," chief executive officer Jan Jenisch said. "And the difference is selling more value-added products and systems, and the profitability is then up more than 30pc."
The company raised prices by around 15pc in its cement, aggregates and concrete segment in the first half to offset the "massive" increases in energy, raw materials and distribution costs, chief financial officer Steffen Kindler said. In Europe, carbon pricing has also helped lock in higher cement pricing. "In the last two years, we saw a heavy impact of the CO2 cost into building material prices, most prominently into cement, which basically made inexpensive cement go away," Jenisch said.
Energy costs drop, but remain volatile
Companies have been able to raise cement prices across the board over the past year to account for the rapid rise in energy costs, but these have now moderated, contributing to the stronger first-half results.
Cemex's cost of goods sold as a percentage of sales slimmed down to 65.4pc in the second quarter, the lowest level in over two years, which it attributed to lower costs and higher prices for its products.
Although the company's fuel cost per tonne of cement increased by 10.7pc on the year in the second quarter, these costs fell by 7.7pc from the first quarter. Fob US Gulf coast 6.5pc sulphur petroleum coke pricing dropped by 35pc sequentially to an average of $84.23/t in April-June.
But coke pricing has so far trended upwards since the beginning of the third quarter, driven by lower prompt supply, with a steep drop in Venezuelan coke loadings since mid-April.
While "inflation is moderating … it is still double-digits, meaning it is not disappearing at all," Cemex chief executive Fernando Gonzalez said. For the full year, Cemex expects a 10pc increase in energy costs per tonne of cement compared with 2022. Heidelberg also noted energy price volatility as a factor to watch for the remainder of this year.
Cement makers' rising use of alternative fuels may also limit margin impact from the rebound in coke prices. Cemex's use of alternative fuels increased to 36.5pc in the first half of the year, up from 33.2pc in the same period of 2022. Heidelberg also intensified the use of alternative fuels in Asia-Pacific in order to counteract high costs and reduce emissions. And Holcim is building five carbon capture and storage plants at facilities in Europe with grants from the EU, in order to offset its carbon costs.
Outlook
Heidelberg expects "a moderate increase in revenue" for the full year, although the company did not specify numbers. The company updated its outlook for full-year 2023 earnings before interest and tax to €2.7-2.9bn compared with €2.5-2.7bn in its first-quarter report.
Holcim also expects strong performance to continue into the second half, highlighting the positive effects of infrastructure projects on its North and Latin American businesses. "We have already secured more than 70 infrastructure projects, and we expect an additional boost of our organic growth by 5pc/yr based on … those new growth opportunities," Jenisch said.
