Concrete from Heidelberg - boring business or?

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Today's biggest loser on the German DAX30 Exchange was Heidelberg Cement Group! Heidelberg is a smaller town south of Frankfurt, famous for its research and closeness to several university campuses such as four Max Planck institutes. HeidelbergCement AG though is a multinational building materials company such as concrete (#2 producer in the world in concrete) and asphalt. The company is immense with 57.000 employees and 3.000 production sites.

The price closed today at €74.60, -4.04% today, the 52-week high was €81.04 and the 52-week low was €38.83! At the moment, the stock price is too close to the high mark, so I wait! ❌

The 1-year development has been +87%, the 3-year is -7%, the 5-year and 10-year are +1% and +58%! Interesting, if you held the stock for 10-years, you would have made an upside of +50%, excluding dividends! 

Let's look how the long term trend looks like in a chart

We see a long-term trend, which found some kind of support in the €40 mark, and a shorter downward trend since 2018, which we can say is broken since the end of 2020! 

Owners and Shareholders

The biggest owner is Ludwig Merckle with almost 28%, and we see even a Merckle in the Board of Directors ("Aufsichtsratsmitglieder") - big owner who is sitting on the board is a very good sign. Here as well top funds such as Vanguard and BlackRock are partly owning some shares ✅

Balance Sheet and Assets

Here we see clearly how big the company is with Total Assets ("Summe Aktiva") of €32 billion, a cash position of almost €3 billion. The total assets have decreased in the last 5-years, which comes mainly from shrinkage in the Non-Current Assets ("Summe Anlagevermögen"), more specific €1billion decreases in PPE ("Sachanlagen") and €1 billion in Intangibles ("Immaterielle Vermögensgegenstände"), which is a good sign!

Liabilities and Equity

On the other side of the Balance Sheet, we see a healthy Debt ratio of close to 50%. Overall it looks and feels like the cement industry is a very cyclical business and when the market trend of investing in infrastructure begins, HeidelbergCement is well-positioned and can excel again in coming years. ✅

Income Statement

First, we see a big loss in 2020, both on Net Income ("Jahresüberschuss") -€2 billion and EBIT ("Operatives Ergebnis")  of -€1.3 billion. We see that there is some kind of higher than the usual expense of €8 billion taken, which is roughly €3billion higher than 2019! ✅

The long-term development since 2011, on the lower chart, has been very good, and here we see the cyclical behavior. The gross margin, which is new in this post is always close to 60%, and the trend seems that it increases at the same time that revenues increase, a very strong sign for a company! 

Heidelberg Cement is a dividend payer, at the moment the yield is at 2.80%, and without knowing I would guess that today was the first day after the dividend was paid, hence the drop in the price! ✅

Summary: I think the company is very well-positioned for the future and supporting at least one big trend which will secure higher revenue with good gross margins and payout of dividends!