HeidelbergCement, issued a profit warning on Thursday dragging lower construction stocks across Europe.
The world’s second-largest cement maker's shares dropped as much as 10.3 percent to a near four-year low after the Germany-based company cut its outlook for 2018 due to higher-than expected energy cost inflation and persistent adverse weather conditions in the USA. North America accounts for more than a third of HeidelbergCement's core earnings.
"These issues are not entirely unexpected but the impact is modestly higher than expected," CNBC quoted UBS analysts as saying.
The DAX corporation said sales volumes and revenue of the first nine months of 2018 developed within expectations and the guidance for the full year remains unchanged. However, the outlook for 2018 for the result from current operations before depreciation(RCOBD), that means adjusted by currency and consolidation effects, is adapted to a low- to mid-single digit percentage decline, compared with a previous forecast for a medium to high single-digit percentage increase.
It also said it now expects the ratio of net debt to RCOBD (leverage) to be higher by the end of the year than the previously expected 2.5. Nevertheless, the 144-year-old company assumes that the share of profit for the year 2018 will be in line with market expectations.
Final results for the third quarter and the first nine months 2018 will be published on 8 November. In 2017, the company's revenue improved by 14% to €17.3 billion. Result from operations rose by 14% to €2.2 billion while earnings per share increased by 36% to €4.62. In 2017, HeidelbergCement also largely completed the task of integrating the activities of Italcementi, the Bergamo-headquartered 154-year-old building materials company.
HeidelbergCement’s profit warning hit shares in other European construction materials firms. LafargeHolcim, which also depends on North America for most of its recurring core earnings fell 3.9 percent, Buzzi Unicem tumbled 6.4 percent, LafargeHolcim plunged 3.9 percent and CRH sank 4.4 percent.
HeidelbergCement was founded in 1874 in Heidelberg, Germany. It is one of the world’s largest building materials companies and the No. 1 in aggregates production, No. 2 in cement, and No. 3 in ready-mixed concrete. The company employs some 59,700 people at more than 3,000 locations in around 60 countries.