ANNUAL REPORT 2019 Financial highlights Figures in €m 2015 2016 2017 2018 2019 Number of employees as at 31 December 45,453 60,424 59,054 57,939 55,047 Sales volumes Cement and clinker (million tonnes) 81.1 102.8 125.7 130.0 125.9 Aggregates (million tonnes) 249.2 272.0 305.3 309.4 308.3 Ready-mixed concrete (million cubic metres) 36.7 42.5 47.2 49.0 50.7 Asphalt (million tonnes) 9.1 9.4 9.6 10.3 11.3 Income statement Total Group revenue 13,465 15,166 17,266 18,075 18,851 Result from current operations before depreciation and amortisation (RCOBD 1)) 2,613 2,887 3,297 3,100 3,580 Result from current operations (RCO 2)) 1,846 1,928 2,188 2,010 2,186 Profit for the financial year 983 831 1,058 1,286 1,242 Group share of profit 800 657 918 1,143 1,091 Dividend per share in € 1.30 1.60 1.90 2.10 2.20 3) Earnings per share in € 4.26 3.40 4.62 5.76 5.50 Investments Investments in intangible assets and PP&E 908 1,040 1,035 1,061 1,183 Investments in financial assets 94 2,999 242 663 134 Total investments 1,002 4,039 1,278 1,723 1,316 Depreciation and amortisation 767 959 1,109 1,090 1,394 Cash flow Cash flow from operating activities 1,449 1,874 2,038 1,968 2,664 Cash flow from investing activities 493 -2,321 -837 -1,134 -906 Cash flow from financing activities -1,827 1,056 -922 -348 -873 Balance sheet Equity (incl. non-controlling interests) 15,976 17,792 15,987 16,822 18,504 Balance sheet total 28,374 37,120 34,558 35,783 38,589 Net debt 4) 5,286 8,999 8,695 8,323 8,410 Ratios RCOBD 1) margin 19.4% 19.0% 19.1% 17.2% 19.0% RCO 2) margin 13.7% 12.7% 12.7% 11.1% 11.6% Net debt 4) / equity (gearing) 33.1% 50.6% 54.4% 49.5% 45.5% Net debt 4) / RCOBD 1) 2.02x 3.12x 2.64x 2.68x 2.35x 1) RCOBD = Result from current operations before depreciation and amortisation: 2018 amount was restated see the Notes Other changes, page 119 f. 2) RCO = Result from current operations: 2018 amount was restated see the Notes Other changes, page 119 f. 3) The Managing Board and Supervisory Board will propose to the Annual General Meeting the distribution of a cash dividend of €2.20. 4) 2018 amount was restated due to adjusted net debt definition. 1 – To our shareholders To our shareholders To 5 Letter to the shareholders 1 8 Report of the Supervisory Board 14 Managing Board 16 HeidelbergCement in the capital market 2 – Combined management report of HeidelbergCement Group and HeidelbergCement AG Combined management report 19 Fundamentals of the Group 25 2019 economic report 2 44 Additional statements 47 Non-financial statement 48 Employees and society 52 Environmental responsibility 55 Compliance 58 Procurement 58 Outlook 63 Risk and opportunity report 1) Governance Corporate 3 – Corporate Governance 3 75 Corporate Governance statement 79 Remuneration report 93 Supervisory Board and Managing Board 4 – Consolidated financial statements 99 Consolidated income statement 100 Consolidated statement of comprehensive income 101 Consolidated statement of cash flows Consolidated financial statements 102 Consolidated balance sheet 4 104 Consolidated statement of changes in equity 106 Segment reporting/part of the Notes 108 Notes to the 2019 consolidated financial statements 190 Independent auditor’s report 196 Independent auditor’s limited assurance report 198 Responsibility statement 5 – Additional information Additional information 2 Financial highlights 5 200 Glossary 202 Cement capacities as well as aggregates reserves and resources 203 Imprint 1) Part of the combined management report of HeidelbergCement Group and HeidelbergCement AG Contents 1 To our shareholders 5 Letter to the shareholders 8 Report of the Supervisory Board 14 Managing Board 16 HeidelbergCement in the capital market 16 Overview 16 Development of the HeidelbergCement share 16 Earnings per share 17 Dividend 17 Shareholder structure and trading volume 17 Bonds and credit ratings 17 Investor Relations HeidelbergCement | Annual Report 2019 To our shareholders To 1 Combined management report 2 Dr. Dominik von Achten, Chairman of the Managing Board Corporate Governance Corporate Dear Shareholders, 3 Dear Employees and Friends of HeidelbergCement, 2019 was another good year for HeidelbergCement. In an environment that remained challenging, we were able to improve numerous important key figures. Although Group revenue and the result from current operations before and after depreciation and amortisation rose to new record values, we did not quite achieve our targets for sales volumes and revenue. Sales volumes fell slightly in comparison with the previous year, and revenue was also slightly below our expectations. We were able to considerably improve our earnings per share before non-recurring effects. Thanks to Consolidated financial statements a very good free cash flow, we decreased net debt significantly. Once more, we earned a premium 4 on our cost of capital in 2019. Operations developed very differently in the various Group areas and in each quarter. The highest increase in income was recorded by Western and Southern Europe, followed by Asia-Pacific and Northern and Eastern Europe-Central Asia. Operations in North America and in the Africa-Eastern Mediterranean Basin Group area also developed positively in 2019. This shows once again that we are benefiting overall from our broad regional positioning and the vertical integration from cement and aggregates through to ready-mixed concrete and asphalt. We further optimised our portfolio in 2019. We sold a number of activities that did not meet our return requirements or form part of our core business: around 11% of the share capital of Ciments Additional information du Maroc, a cement plant in Egypt, two cement plants and two grinding plants in Italy, a building 5 materials plant in Germany, a grinding plant in southern India, a cement terminal in Sri Lanka, and the business activities in Ukraine. This means that we are well on the way towards achieving our goal of generating €1.5 billion from divestments by the end of 2020. In addition, we further expanded our market positions and vertical integration in key countries and metropolitan regions thanks to a series of acquisitions. Contents 5 1 To our shareholders | Letter to the shareholders For the capital market too, 2019 was a good year. As the stock markets recovered at the start of the year, the HeidelbergCement share recorded an upward trend, which was also helped by strong construction activity in the northern hemisphere. Our share closed at €64.96 at the end of the year, corresponding to a rise of around 22% in 2019. By comparison, the German benchmark index DAX grew by 26%. In view of the positive development of our business and the growth in profit for the financial year before non-recurring effects, the Managing Board and Supervisory Board will propose to the Annual General Meeting an increase in the dividend from €2.10 per share to €2.20 per share. This corresponds to a rise of 4.8%, i.e. a payout ratio of 40.0% of the Group share of profit. With the tenth consecutive dividend increase, we are continuing our progressive dividend policy. In times of low interest rates, when shareholders are looking for reliable share values with a good dividend yield for long-term financial investment, the HeidelbergCement share is such a value. Climate protection and sustainability Sustainable business is a fundamental and integral part of our Group strategy. In 2019, we drove forward the implementation of our Sustainability Commitments 2030. Our efforts focused on climate protection. Our goal is clear: by 2030, we intend to reduce our specific net CO2 emissions per tonne of cement by 30% compared with 1990. This objective was verified by the Science Based Targets initiative (SBTi) and is consistent with the Paris Agreement. This makes HeidelbergCement the first cement company worldwide with scientifically verified CO2 reduction targets. And we are making good progress: the reduction achieved in comparison with 1990 stood at roughly 20% in 2018 and was already around 22% in 2019. Our vision is to offer a CO2-neutral concrete by 2050 at the latest. In 2019, we once again invested in research into technologies for CO2 capture, storage, and utilisation (CCU/CCS). We also made progress in the development of cements with less clinker, thereby achieving a reduction in CO2 emissions. These efforts are also acknowledged by independent institutes. The sustainability rating agency CDP awarded HeidelbergCement a place on its Climate Change A List 2019, as a globally leading company in terms of its commitment to tackling climate change. Thanks to our employees More than 55,000 employees worldwide work towards the success of HeidelbergCement. On behalf of the entire Managing Board, I would like to thank them for their competent and passionate contributions, and their strong loyalty to the company. I would also like to thank the employee representatives, who have always cooperated closely, openly, and trustingly with the Managing Board for the benefit of our Group. Special thanks must go to my predecessor, Dr. Bernd Scheifele, who played a key role in shaping HeidelbergCement over the past 15 years and has helped it develop into a globally leading, vertically integrated building materials company. Challenges and opportunities There are exciting times ahead for us. The world is changing rapidly. As a globally active company, this means we will not only encounter new challenges, but also numerous opportunities, and we want to make the most of them.