November 8, 2012 / 8:56 AM / in 5 years

UPDATE 2-HeidelbergCement's profit saved by prices, cost cuts

* Q3 operating profit 649 mln eur vs 586 mln eur poll

* Helped by price increases, cost cuts, lower euro

* Launched programme to improve margins in aggregates business

* Says still has not recovered higher energy costs

* Shares rise 3.2 pct, outperform blue chip index, peers (Adds details on strategy, performance in regions, shares)

By Peter Dinkloh

FRANKFURT, Nov 8 (Reuters) - German cement maker HeidelbergCement beat third-quarter earnings forecasts as price increases, cost cuts and a lower euro made up for declining sales.

With a weak economy keeping a lid on overall demand, Chief Executive Bernd Scheifele is focusing on raising profitability with a series of programmes to lift prices and shave costs.

In global growth engine China, forecast to consume almost 60 percent of all cement globally this year, only “improved pricing in North China overcompensates for total volume decline,” the company said.

Austerity programmes in Europe are hurting infrastructure spending, making it the weakest region for the company.

“The global economy is still dominated by high political and economic uncertainties,” said the Heidelberg-based group, which is hoping product sales will rise in most regions for the full year.

That will help increase operating income, the company said, but not fully recover profitability lost to rising energy costs in 2011.

Cement makers are heavy users of coal, natural gas, oil and power to grind and burn limestone and gypsum into cement. Oil prices have hovered above $100 a barrel since July.

Scheifele aims to increase margins in the cement business, targeting 230 million euros in additional earnings by 2015. He has launched a new programme to raise margins in the aggregates business to make an additional 120 million euros in the period.

The company’s savings programme cut annual costs by 241 million euros as of the end of September, beating the 200 million euros originally planned, it said on Thursday.

Operating income in the three months through September rose 15 percent to 649 million euros ($828 million), compared with the 586 million average of estimates in a Reuters poll.

The shares rose 3.4 percent by 0816 GMT, beating both the 0.5 percent gain in the German blue chip index and a flat STOXX Europe 600 Construction & Materials index.

HeidelbergCement is also seeking to tap markets less affected by an economic slowdown, ramping up production in Bangladesh, India and Indonesia while also betting on more demand from Africa.

The strategy mirrors that of Holcim, the world’s second-largest cement maker by sales, which is banking on rising demand for cement in emerging markets and North America to shield it from lower sales in Europe for the rest of 2012.

Cemex, Mexico’s leading cement maker, is more pessimistic and said on Monday it anticipated weaker consolidated volumes for the year hurt by Europe’s tepid performance.

HeidelbergCement reiterated on Thursday it expects to increase operating income and sales in 2012, without being more specific. ($1 = 0.7840 euros) (Reporting By Peter Dinkloh, Editing by Christiaan Hetzner and David Cowell)

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