HeidelbergCement present ‘Beyond 2020’
New Group strategy focuses on medium-term targets for 2025 and pushes climate goals
HEIDELBERGCEMENT have presented their new strategy ‘Beyond 2020’, key elements of which are new medium-term financial and sustainability targets that the Group aims to achieve by 2025.
‘We see climate change and digitalization as the two central challenges of the future for society and for our company,’ said Dr Dominik von Achten, chief executive officer of HeidelbergCement.
‘As one of the world’s leading building materials producers, we have the ambition and the innovative strength to actively shape this change in a pioneering role. At the same time, we see further optimization potential in our plants and processes. Ecology and economy are not contradictory. Our new medium-term targets for 2025 illustrate this claim.’
HeidelbergCement are significantly pushing their ambitious climate goals. By 2025, the company aims to reduce specific net CO2 emissions to below 525kg per tonne of cementitious material. This figure corresponds to a reduction of 30% compared with 1990 and had previously only been targeted for 2030.
The Group, which has already succeeded in reducing its CO2 emissions by 22% between 1990 and 2019, is thus setting new standards in the cement industry. By 2030, emissions are expected to fall to below 500kg per tonne of cementitious material. To achieve this, the company has defined concrete measures for all plants worldwide.
Aiming to be a pioneer in the building materials industry in the gradual reduction of CO2 emissions, HeidelbergCement aim to offer CO2-neutral concrete by 2050 at the latest.
The company has also set itself new medium-term targets for EBITDA margin and return on invested capital (ROIC). By 2025, EBITDA margin is to increase by 300 basis points to 22%, with active portfolio management, business excellence initiatives and digital transformation all being margin drivers. On this basis, the company aims to achieve a ROIC clearly above 8% by 2025.
Portfolio management will focus on simplifying the country portfolio and prioritizing the strongest market positions. This will include accelerated divestments and selective acquisitions to maintain the company’s balanced positioning in mature and growth markets.
As part of their business excellence initiatives, HeidelbergCement intend to further optimize effectiveness, processes and structures in sales, production and administration. In production, a newly introduced ‘Global Operating Model’ will allow the three business lines – cement, aggregates and concrete/asphalt – to standardize processes and achieve additional efficiency gains. In sales, new and sustainable products and services will contribute to improving margins, as will further simplification of the Group’s administrative structures.
At the same time, HeidelbergCement have launched a digitalization initiative. Three digital pillars will contribute to improving the EBITDA margin. Digital HConnect products will improve the interface to the customer and are expected to cover more than 75% of the worldwide sales volume by 2025. The HProduct and HService solutions are expected to deliver significant efficiency gains and cost reductions in the production and administration processes.
Meanwhile, HeidelbergCement say the measures launched as part of the COPE action plan are continuing to make a major contribution to offsetting the negative impact on results resulting from the Corona-related decline in revenue by savings in costs, investments and in many other areas.
‘Even though sales volumes continue to decline in a difficult environment, we had a very good start in the third quarter,’ said Dr von Achten. ‘Our results in July and August were significantly higher than in the respective months of the previous year. The basis for this was, in particular, our cost savings and stable prices.’
Even so, the construction industry environment remains highly volatile, and a new wave of infection could occur at any time, with a corresponding impact on construction projects already started or announced in individual countries. Against this backdrop, HeidelbergCement say it is still not possible to estimate reliably the full impact of the Corona crisis on the company’s results in 2020.