Heidelberg Materials AG

Overview Key strengths Key risks One of the largest producers of cement, aggregates, ready-mix concrete and asphalt. The heavy building material industry's cyclical nature and high capital and energy intensity. Extensive geographic diversification and a high degree of vertical integration in aggregates. Exposure to volatile energy and raw material costs may erode margins despite previous successful pass-throughs to customers. Strong focus on sustainability through both product innovation and carbon emissions reduction, which will support the company's competitive position over the medium term. Heightened climate transition risks for cement companies due to high levels of carbon dioxide emissions, particularly in the EU where tightening regulation is increasing carbon costs. Management's strong commitment to maintaining a 'BBB' rating. Prolonged low activity in

...We now forecast S&P Global Ratings-adjusted funds from operations (FFO) to debt will decline to 40%-45% in 2024 before rising to 45%-50% in 2025, from a high of 45.4% in 2023, indicating ample rating headroom. This reflects our estimate of adjusted EBITDA of 4.1 billion- 4.2 billion in 2024, followed by a moderate increase to above 4.3 billion in 2025, assuming a broadly stabilizing trend in volumes and prices, fueled by recent acquisitions. We expect construction activity will further decline in the private residential market, which will be partly offset by continuously healthy demand in industrial commercial construction and infrastructure projects. We expect leverage metrics will be temporarily affected by increasing merger and acquisition (M&A) transactions this year. Despite weak demand and lower volumes in 2023, all Heidelberg Material's segments have achieved solid margin expansion through continuous price increases and effective cost controls, while raw material and energy costs...

Full Report