DAVY VIEW

Headline results aside (pre-announced), key take-outs from HeidelbergCement’s (HEI) trading update include: 1) Q4 like-for-like (lfl) sales slowed sharply, down 4.5% year-on-year (yoy), with declines in five of six divisions; 2) margins were better, aided by lower costs and a price over volume strategy; 3) Europe was surprisingly weak in Q4 with lfl EBITDA down 15% yoy due to softness in the UK, Benelux and France; 4) North America was likewise weak due to declines in Western Canada; 5) margin gains in North East Europe/Central Asia and Asia Pacific surprised positively; 6) outlook comments were non-specific, pointing to growth in world cement demand; and 7) there was nothing new or incremental on strategy from the new CEO. We continue to expect the stock to trade sideways as downside risks persist.