HeidelbergCement shares fall to four-year low after profit warning

HeidelbergCement, the world's second-largest cement-maker, trimmed its profit guidance for 2018 on Thursday, sending its shares down as much as 10 per cent to a near four-year low.

The group blamed higher-than expected energy costs and persistent bad weather in the United States for cutting its outlook. North America accounts for more than a third of the group’s core earnings.

It said it now expects core earnings, or the result from current operations before depreciation, to rise by a low to medium single-digit percentage this year, adjusted for currency effects, compared with a previous forecast for a medium to high single-digit percentage rise.

In 2017, the group’s core earnings rose 14 per cent to €3.3 billion.

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Shares in HeidelbergCement, which is due to publish third-quarter results on November 8th, fell as much as 10.3 per cent on the news to their lowest level since January 2015. They closed down 8.6 per cent.

‘A temporary effect’

"Investors should not forget that the strong rise in energy costs is usually a temporary effect as most of it will be compensated by price increases," Bankhaus Lampe analyst Marc Gabriel said in a note, keeping a "buy" rating on the stock.

“However, the quick rise has only partially be compensated by price increases in the course of this year and we expect further price increases to cover most of those effects in the upcoming months.”

HeidelbergCement's profit warning hit shares in bigger European rival LafargeHolcim, which also depends on North America for most of its recurring core earnings, as well as Irish market heavyweight CRH.

LafargeHolcim shares fell as much as 4.7 per cent to their lowest level in more than two years, before rallying to finish 3.9 per cent weaker on the day. The group is scheduled to release third-quarter results on October 26th.

Met targets

CRH closed at its lowest level in more than two years after giving up 4.2 per cent over the session.

HeidelbergCement did maintain its guidance for 2018 sales volumes and revenue, saying they had met targets in the first nine months of this year.

It also said it now expects the ratio of net debt to core earnings to be higher by the end of the year than the previously expected 2.5. – Reuters