HeidelbergCement AG

The stable outlook reflects our view that HeidelbergCement's FFO to debt will remain above 25% on a sustainable basis and that its adjusted EBITDA margin will remain at about 19%. We believe that the group's financial policy and capital allocation strategy are both consistent with a 'BBB' rating. We would lower the rating if the group's leverage metrics worsen beyond its target, with FFO to debt declining below 25% for a sustained period. This would most likely happen if operating and economic conditions are significantly weaker than we currently anticipate. It would also happen if the group pursues sizable mergers and acquisitions. However, we believe that, in such a scenario, the group would likely protect its credit ratios by optimizing

...We forecast that HeidelbergCement will continue to post resilient operating performance over 2021-2022 in most of its regions. HeidelbergCement's EBITDA was up 23% in the first half of 2021 versus 2020, and we forecast that the company will continue to post robust operating performance over the second part of 2021 and in 2022 in most of the regions where it operates. This reflects both volume growth and the group's focus on pricing and cost efficiency ahead of rising inflation. We also have a positive view on business conditions for the construction industry in most of the regions where HeidelbergCement operates, particularly in the U.S. and continental Europe. Taking into consideration current supportive business conditions and assuming a smooth completion of the 1 billion share buyback program announced in July 2021, we expect HeidelbergCement's funds from operations (FFO) to debt to be comfortably above 30% in 2021-2022, which leaves headroom for potential acquisitions. We anticipate...

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