April 18, 2024

German Industrials: Heidelberg Materials

German Industrials: Heidelberg Materials

Quick Facts

  • Heidelberg Materials is one of the world's largest building materials companies with over 50,000 employees and operations in five continents.
  • Newest addition to the Europe Wikifolio.


  • Strong financial performance with net income growth of 20.8%
  • Significant debt reduction over the last years
  • Dividend yield of 3.05% and share buyback program


  • Volatile energy and raw materials markets ❌
  • High exposure to currencies ❌
  • Geopolitical risks ❌

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Heidelberg Materials, one of the world's largest building materials companies, has recently been added to the Europe Wikifolio. The company operates on five continents with core activities in the production and distribution of cement, aggregates, ready-mixed concrete and asphalt.

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Heidelberg Materials has undergone an impressive financial transformation in recent years. From 2018 to 2020, the company focused on reducing its debt burden. This strategy has paid off, as leverage, calculated via net debt, was significantly reduced from 2.4x in 2019 to 1.2x in 2023. Since then, it has focused on shareholder returns and sales. This is clearly reflected in the increase in return on invested capital from 6.5% to 10.3%. In addition to this impressive improvement in profitability, the company has initiated an active share buyback program. By 2026, Heidelberg Materials plans to buy back €1.2 billion worth of shares, which currently represents approximately 6.7% of the share capital, and to keep the dividend constant. This not only signals strong confidence in its own business development, but also delivers direct value to shareholders through share price increases and higher dividends. In the financial year, shareholders received approximately 5.8% of the company's market capitalization as of December 31st, 2023 in the form of dividends and share buybacks. However, the company was also able to generate high growth with a 23% increase in sales per share to €10.4, resulting in an attractive price-earnings ratio (P/E) of 8.95.

Despite the impressive progress in financial and operational terms, Heidelberg Materials faces a number of challenges. The high energy demand of production processes leads to a strong dependence on energy prices, which can pose significant financial risks, especially in times of geopolitical tensions or global energy crises. In addition, as a globally active company, Heidelberg Materials is exposed to considerable currency risks. The company conducts transactions in various currencies, and exchange rate volatility can have a direct impact on cost structures and profitability. An additional disadvantage is the environmental impact of the cement and building materials industry, to which the company belongs. The increasing density of regulation, particularly with regard to environmental, social and governance (ESG) requirements, and non-compliance with new regulations can lead to significant fines and damage the company's public image. While the company has taken measures to reduce its CO2 emissions, such as developing low-CO2 products and investing in CO2 capture and storage technologies, the company must continue to find ways to effectively integrate these aspects into its business model without compromising financial performance. Striking a balance between environmental responsibility and economic efficiency remains an ongoing challenge.

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