DAVY VIEW

HeidelbergCement has impaired c.11% of its capital employed, citing Brexit and the impact of the COVID-19 pandemic. The vast bulk of the write-down relates to two acquisitions completed almost a decade apart – Hanson and Italcementi. While not entirely unexpected, the write-down is severe, equating to c.€17 per share. That is a bitter pill to swallow for shareholders regardless of the circumstances. Short-term expectations remain unchanged; however, the risk of an earnings reset has also increased in our view. The group will host a Capital Markets Day on September 16th with shareholder return targets and disposals (impaired assets?) now likely to feature prominently.