Both HeidelbergCement and Italcementi released their third quarter financial results for 2015 this week. The results are worth comparing given the impending acquisition of Italcementi by HeidelbergCement.
HeidelbergCement has reported a rise in revenue of 8% to Euro10.1bn for the first nine months of 2015. Its net profit rose by 27% to Euro762m from Euro599m. Its earnings before interest and income taxes (EBIT) rose by 17% to Euro1.4bn. By region, growth in revenue was reported everywhere except for the group's Eastern Europe-Central Asia region. Notably growth in the group's Asian region is slowing, growth is growing in Africa and markets are recovering in North America and the UK. It is also worth noting that the group's cement and clinker sales volumes fell by 1.1% to 60.6Mt in the first nine months of the year.
Italcementi has reported a rise in revenue of 3% to Euro3.2bn for the first nine months of 2015. It reported a loss of Euro8.1m, down from a loss of Euro63.8m in the previous period. Its EBIT fell slightly to Euro166m. By region the group reported that 'positive' trends in North America, India and Morocco, together with reducing operating expenses in Europe, would be insufficient to counteract revenue losses in France and Egypt. Overall cement and clinker sales fell by 1.4% to 32.1Mt.
Compared to its 2014 results, HeidelbergCement seems set to recover some of its revenue and profit growth after fluctuating income since 2008. Meanwhile, Italcementi has been continuing to cut costs, rebuild its business and profitability. So there are no obvious shocks to the apparent value of either company at this stage. It is also worth noting that the good geographical complementarity of each company's assets could make any potential renegotiation less likely. Everybody looks set to gain something should the purchase go through.
The deal in late July 2015 announced that HeidelbergCement would be purchasing 45% of Italcementi's shares at a price of Euro10.60 per Italcementi share for a total price of Euro1.67bn. The only clause mentioned so far has been 'subject to contractual purchase price reductions'. The deal is still expected to be completed in the first half of 2016 following approval from competition authorities. Approval from the Competition Commission of India was announced in September 2015.
The diverging values of Lafarge and Holcim before their merger in mid-2015 had consequences that led to haggling over the deal and the removal of Bruno Lafont as the proposed CEO of LafargeHolcim. The difference here is that HeidelbergCement is buying Italcementi as opposed to merging with it. However, the performances of both companies remain paramount. Now as then the question will be: is the cost worth it?
For more information read Global Cement's article on the HeidelbergCement purchase of Italcementi in our September 2015 issue.
