Heidelberger Zement AG

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Heidelberger Zement AG

Berliner Strasse 6
D-69120 Heidelberg
Germany
Telephone: (49)(6221) 481-227
Fax: (49)(6221) 481-203
Web site: http://www.hzag.de

Public Company
Incorporated: 1873 as Portland-Cement-Werk,
Heidelberg, Schifferdecker & Sohne OHG
Employees: 24,311
Sales: DM 7.65 billion ($3.91 billion) (1998)
Stock Exchanges: Frankfurt/Main
Ticker Symbol: HEI
NAIC: 32731 Cement Manufacturing; 32732 Ready-Mix Concrete Manufacturing; 327331 Concrete Block and Brick Manufacturing; 32739 Other Concrete Product Manufacturing; 327122 Ceramic Wall and Floor Tile Manufacturing; 322221 Coated and Laminated Packaging Paper and Plastics Film Manufacturing; 333993 Packaging Machinery Manufacturing; 484121 General Freight Trucking, Long-Distance, Truckload

Heidelberger Zement AG is one of the world’s five largest producers of construction materials. Its main product lines include standard and specialty cements, concrete products, limestone and lime products, building chemicals, dry mortar, special gypsums, sand lime bricks, and insulation materials. The company also offers specialty products and services for the construction of waste dumps and for the immobilization of toxic materials, as well as logistics services. While about one-third of its total sales are generated in Germany, Heidelberger Zement is active in Central and Western Europe, North America, and Asia. The company’s export and trade activities in over 30 countries are executed by a subsidiary, Netherlands-based HC Trading B.V.

Trainee Becomes Company Leader in 1873

Heidelberger Zement has its roots in two areas: the rich sources of limestone near the German town of Heidelberg and the entrepreneural spirit of Johann Philipp Schifferdecker, a young brewer from a small village. The struggling man moved to Eastern Prussia where he opened a brewery in Kónigsberg and made a fortune with it. In 1872 he sold his brewery and returned to Heidelberg where his son Paul began studying chemistry. Encouraged by the success of a nearby cement manufacturing plant in Mannheim, he decided to invest in this promising building material. In January 1873 Schifferdecker acquired the remainder of the bankrupt cement factory Bergheimer Mühle on the shores of the Neckar River near Heidelberg. That same year the work started on the transformation of the existing mills into a water-powered cement production facility. Schifferdecker, his son, Dr. Paul Schifferdecker, and his son-in-law, lawyer Rudolf Heubach, became shareholders in the newly founded Portland-Cement-Werk, Heidelberg, Schifferdecker & Sóhne OHG.

The first year of cement production was a disaster. The raw material used contained too much magnesium, and at the end of 1875 the Schifferdecker company reported a significant loss. However, the following year the company leased another limestone mine which provided raw material of better quality. Local farmers broke up the raw limestone at the edge of their fields, loaded it onto horse-drawn coaches and brought it to the cement factory. Three years later the company was able to acquire the land outright and employed independent mining professionals to collect the limestone, which was then shipped, again by the farmers, to the factory about four miles away. The cement was loaded into barrels and shipped to the local train station. At that time, cement was sold in drugstores where it was taken out of the bins and filled into little paper bags.

In 1883 the company built a railroad to transport the raw material to the factory. The track cut through the land of over 600 farmers, and the Schifferdecker company had to reach a contractual agreement with each of them. In 1888 a second factory, the “Cementwarenfabrik,” was built for manufacturing goods made of cement. It supplied building materials for large construction projects such as bridges, tunnels, harbors, and sewer systems in the German states of Bavaria, Baden, Wurtemberg, and Prussia, as well as Amsterdam in the Netherlands. The independent Schifferdecker enterprise existed for 15 years. However, the death of the company’s founder in 1888 marked the end of the era. The following year the company became a public enterprise and was renamed “Portland-Cementwerk Heidelberg, vormals Schifferdecker & Sohne.” Schifferdecker’s heirs became the company’s shareholders. On February 4, 1895, a fire devastated the wooden factory buildings; only the steam engines and ovens escaped with minor damage.

The Early Years of Expansion until 1913

Instead of giving up, Schifferdecker’s descendants started from scratch. A new cement factory, the most modern of its kind at that time, was built in the German town of Leimen. All the necessary machinery for breaking, drying, and milling the stones, as well as the shipping offices were located in one large hall, which was approximately 500 meters long and 60 meters wide. In the beginning, the work in the quarries proved difficult and timeconsuming. However, Portland-Cementwerk Heidelberg soon invested in better equipment which eliminated not only many back-breaking jobs but also significantly increased productivity.

Due to radical technological progress, the numbers of employees kept decreasing over the following years. In 1898, 1,100 employees produced 100,000 tons of cement at the Leimen plant. Only five years later, 130,000 tons were produced by 910 employees. By around 1900, the company boasted machines capable of measuring the quality of the produced concrete as well as a factory laboratory. Moreover, the tracks of the municipal electrical trams around Heidelberg were used to transport raw materials. Other technological improvements included the use of pneumatic drills for limestone mining, dust filters for the revolving ovens, and an automated packing department where cement was weighed, filled in sacks, and loaded onto about 120 railroad wagons a day.

The construction boom at the turn of the century provided a tremendous boost for the cement business, and the Portland-Cementwerk Heidelberg started expanding. Step by step the company acquired shares in brick factories, gypsum mines and cement-producing plants in Southern Germany. On June 5, 1901 the Portland-Cementwerk Heidelberg, vormals Schifferdecker & Sohne merged with the Mannheimer Portland-Cement-Fabrik AG, a competitor founded by Carl Dietzsch in 1860. The new Portland-Cementwerke Heidelberg und Mannheim AG was headquartered in Heidelberg. Two years later the cement factory in Mannheim was closed and the production transferred to a plant in Weisenau which also belonged to Mannheimer and to the Leimen plant. In 1913, many important buildings around the world were being built with Heidelberg-Mannheimer cement. The Military Academy in West Point, the Home Office Building in Philadelphia, and several buildings in New York City’s Manhattan were among them.

The Turmoil of War, Inflation, and Depression

When World War I began in 1914, most construction activities in Germany were cancelled or postponed, as were Heidelberg-Mannheimer’s plans to purchase a stake in a Brazilian cement enterprise. Because of the sudden drop in demand and shortages in coal supply, all plants were running well below their capacity, and in 1915 production in the smaller facilities was stopped completely. In one location, equipment was used to produce foodstuff for animals and fertilizers instead, a change which lasted until 1921. Between 1916 and 1923, the entire cement industry was run by the German government.

After the war was over, European construction markets remained depressed. On August 24, 1918 Portland-Cementwerke Heidelberg und Mannheim merged again with a public company in southern Germany, the Stuttgarter Immobilien- und Bau-Geschäft AG. Stuttgarter’s owned two brick plants, four cement factories with a capacity of 180,000 tons per year, and holdings on two other cement factories. The Treaty of Versailles required that Allied troops occupy the Saarland, German territory west of the Rhine River, so that all of the new Portland-Cementwerke Heidelberg-Mannheim-Stuttgart AG holdings except one were cut off from coal supplies which came mainly from the occupied coal mines. Consequently, all facilities except the cement factory in Weisenau had to be shut down temporarily.

This was not the end of the turmoil. In the aftermath of World War I, under the weight of Germany’s heavy financial obligations, the government began printing more money, and the German economy was thrown into hyperinflation. One year before the currency crisis reached its peak, prices for cement were 765 times higher than they had been in 1914. In 1923 the company’s balance sheet was a mere formality. Profits totaled over 22,890 trillion Marks. After the end of the hyperinflation, all company figures were revised to conform to the new German currency, the Reichsmark. Beginning in 1926, almost all factories of the Portland-Cementwerke Heidelberg-Mannheim-Stuttgart AG were once again in operation.

The year 1927 marked the beginning of a three-year investment rally. With a total investment of RM8.1 million, all of the company’s production facilities were electrified. However, two years later a worldwide economic depression rose on the horizon. All of Heidelberger’s factories were shut down during the winters of 1929–30 and 1930–31, and the cement output shipped dropped by almost two-thirds from 897,000 tons in 1927 to 304,000 tons in 1932.

Company Perspectives:

Environmental precaution measures accompany the entire production process: main areas are the conservation of raw materials, air purification, the recultivation of quarries as well as the reduction of primary energy consumption by utilization of waste materials from other branches of industry. The high German environmental standards represent a yardstick for all our international locations.

World War II and a New Beginning

Between 1935 and 1938 all factories of the Portland-Cementwerke Heidelberg-Mannheim-Stuttgart AG underwent another technological overhaul. Almost RM12 million were spent to boost productivity and expand capacities. (During this time, wooden barrels were replaced by paper sacks for shipping cement.) In 1936 cement shipments reach the total of one million tons for the first time. The next important step in expansion followed two years later. After renaming the company once again, this time to Portland-Zementwerke Heidelberg AG, an agreement with the Portland-Cementfabrik Blaubeuren Gebr. Spohn AG in which the Heidelberger Zementwerke already held 42,82 percent, sealed its financial and organizational dependence on Heidelberg. Heidelberg’s share increased to 88.9 percent while two positions on the Advisory Board were taken by members of the Spohn family. The lucrative Blaubeuren-based company with a high output of high-quality cement opened the door to the booming highway construction market. The output reached 1.5 million tons by 1938.

After the Nazis won political power in Germany, Dr. Erhard Schott, one of Heidelberger Zement’s top managers and director of the Leimen factory, was forced to resign because of his “distant attitude” toward the Nazi regime. One year after World War II had started, the Reichswirtschaftsministerium, Germany’s national economy ministry, passed a law that automatically enrolled all German cement factories in a newly founded trade organization, the Deutsche Zementverband. During the war, the cement industry was highly regulated by the German government. After Germany’s surrender, Allied troops occupied the partly-destroyed cement factories which were managed until 1948 by three trustees. One of them was Dr. Erhard Schott.

The years of reconstruction after World War II guaranteed that Heidelberger Zement’s order books would be full. This new era in Heidelberger Zement’s history was accompanied by the introduction of various new products. Loose cement was shipped in special silo vehicles. New gypsum products included different plaster mixtures and prefabricated walls. With compost from a newly established compost factory, Heidelberger Zement reclaimed quarries that had been closed down. Beginning in the late 1950s the company supported a new technology—finished wet concrete that was shipped in special vehicles with revolving metal containers (cement trucks). By 1960 almost half of the company’s concrete was shipped as pre-mixed concrete. In 1963 the Leimen factory alone produced one million tons of cement, and two years later Heidelberger Zement’s total shipments reached six million tons.

Heidelberger Becomes International Enterprise in 1970s

In 1971 a computer was utilized for the first time at a Heidelberger Zement facility to manage and control raw material processing. In 1970 Heidelberger Zement started producing chemicals that were added to concrete to change its characteristics. From the mid-1970s on, those concrete additives and other building chemicals were marketed under the brand name “Addiment.”

The first oil crisis in 1974 caused an economic recession, and construction activities dropped significantly. As a result, Heidelberger Zement’s cement shipments decreased by 15 percent in comparison to 1973. After the second wave of the oil crisis in 1978, the company decided to invest heavily in technology based on coal instead of oil. The conversion had been completed by 1981, a changeover which cost the company approximately DM 100 million. At the same time facilities for burning old tires were set up as an alternative energy source.

In 1971 a new executive took over as speaker of Heidelberger Zement’s Executive Board—Peter Schumacher—and under his leadership the company became an international enterprise. In 1977 Heidelberger Zement took over Alientown, Pennsylvania-based Lehigh Portland Cement Company, which was founded in 1897 by General Harry Clay Trexler and five businessman from Allentown. At the time of the takeover, Lehigh operated five cement factories with a total capacity of 2.7 million tons. To oversee its American subsidiary, the German parent created Heidelberg Cement, Inc. In the year of this groundbreaking deal, Peter Schuhmacher became CEO of the company, and in 1978 the company’s name was changed to Heidelberger Zement AG.

The 1980s began with another deal in the United States. Heidelberger Zement, Inc. purchased US Steel Corporation’s cement division, Atlas Cement Company, with seven cement production facilities. As a result, Lehigh expanded to operate operate 15 factories and employ 2,678 people. In 1984 Heidelberger Zement founded Addiment Inc., headquartered in Doraville, Georgia, to market its building chemicals product line in the United States.

Key Dates:

1873:: Johann Schifferdecker sets up a water-powered cement production facility near Heidelberg.
1889:: Company reincorporated and named Portland-Ce-mentwerk Heidelberg.
1901:: Merger creates Portland-Cementwerke Heidelberg und Mannheim AG.
1916:: German government takes over the country’s cement industry.
1918:: Merger with Stuttgarter Immobilien- und Bau-Geschäft AG.
1926:: Return to normal operations and recovery from postwar economic turmoil.
1940:: By law, all German cement factories are enrolled in a newly founded trade organization, the Deutsche Zementverband.
1965:: Heidelberger Zement’s total annual shipments reach six million tons.
1977:: Pennsylvania-based Lehigh Portland Cement Company is acquired.
1989:: First shares in an Eastern European cement factory purchased in Hungary.
1997:: International expansion includes acquisitions in China, Turkey, and Bulgaria.

New Products and New Markets after 1985

A significant drop in sales in the mid-1980s required the reduction of overcapacities. Heidelberger Zement’s strategy was aimed at cost reduction, concentration, product diversification, and international expansion. Three new programs, one a company-wide energy cost reduction program, one to streamline the company’s product divisions, and one to consolidate production locations, were implemented in the late 1980s. Addiment Italia s.r.l., headquartered in Casale Monferrato, was founded together with Italian cement manufacturer Fratelli Buzzi to produce and market concrete additives for the Italian market. The takeover of the French packaging producer Seraic S.A. strengthened Heidelberger Zement’s plastics, print, and paper division. The newly founded Heidelberger Baustof-ftechnik GmbH bundled the company’s activities in building chemicals, including “Addiment” and “Sealcrete” product lines. In 1991 Heidelberger Zement together with gas concrete manufacturer Hebel took over the French company Siporex, S.A., market leader for gas concrete in the Paris and Avignon/Nimes regions. Moreover, the unexpected breakdown of the eastern European Bloc opened promising opportunities for long-term growth.

The privatization of the Hungarian cement industry made it possible for Heidelberger Zement to acquire shares in three Hungarian cement factories. In Czechoslovakia, the company purchased a 40-percent share in Pragocement, a government-owned company that operated a large cement factory in Radotin near Prague. A second 40-percent share was acquired in the Czech cement manufacturer Kralodvorska Cementarna a.s. Other acquisitions in Eastern European countries included facilities in Kroatia and Poland.

The fall of the Berlin Wall also opened new markets right at Heidelberger Zement’s own front door, and this would prompt a major shift in the company strategy. Instead of product diversification, Heidelberger Zement aimed at concentrating its activities in the building materials markets. New production facilities for mortars, plasters, limestone, ready-mixed concrete, and concrete products were built in the East German states Saxony, Thuringia and Mecklenburg-Vorpommern. In 1993 Heidelberger Zement’s subsidiary for plastics took over a processing facility for agricultural products and transformed into a modern insulation materials production facility.

A New Dimension of Growth Begins in 1993

The end of 1993 was a milestone in the history of Heidelberger Zement. On December 21 the company acquired a 42.4 percent majority stake in the Belgian S.A. Cimenteries CBR from Société Generale de Belgique for approximately DM 1.1 billion. The CBR group was a perfect match for Heidelberger Zement. Both companies were about the same size and complemented each other in product range and geographical outreach. CBR operated 19 cement manufacturing plants in Belgium, the Netherlands, the Czech Republic, Poland, the United States, and Canada, with a total capacity of 17 million tons. The first consolidation of the CBR group in 1994 catapulted Heidelberger Zement to a new high. Some 24,000 Heidelberger Zement employees sold 27 million tons of cement in 15 countries around the world, generating a total of DM 6.3 billion in sales and profits of DM 362 million.

Because of the ongoing internationalization of the Heidelberger Zement group, the organizational structure was focused on four regions: Central Europe West, particularly Germany; Western Europe; Central Europe East; and North America. Activities in each of the regions were divided into three units: cement, concrete, and building materials. As one of the first German public companies, Heidelberger Zement began using International Accounting Standards in 1994; this was the last important corporate achievement of energetic CEO Peter Schuhmacher, who retired from his job after 18 years.

Heidelberger Zement’s new CEO Rolf Hülstrunk continued the company’s strategy of aggressive international expansion. All activities of Lehigh and CBR in North America, including 12 cement factories, more than 150 pre-mixed concrete production facilities, 58 locations for building chemicals, and 40 other building materials production plants, were bundled in the newly founded holding company CBR-HCI Construction Materials Corporation based in Allentown, Pennsylvania. In 1995 CBR acquired a five percent share in China Cement Century Limited, a company that owned three cement factories with a total capacity of 2.6 million tons in the Southern Chinese province Guangdong. In January 1996 CBR purchased a 97.7 percent stake in Canakkale Cimento Sanayii A.S., Turkey’s leading cement producer based in Istanbul. In the same year HC Trading B.V. was founded in Istanbul in order to exclusively coordinate and execute all export and trade activities of the whole Heidelberger Zement Group. In mid-1997 Heidelberger Zement entered the Bulgarian market by acquiring from the Bulgarian government a majority share in two cement factories there. In 1999 Heidelberger Zement announced that it was planning to purchase a majority stake in Scancern AB, a Swedish cement company which was the market leader in Scandinavia and the Baltic countries and the number two company in Great Britain, and production facilities in Africa and Bangladesh. If the transaction was approved by the European Commission, Heidelberger Zement was poised to become the third largest cement manufacturer in the world.

Principal Subsidiaries

Baustoffwerke Wittmer + Klee GmbH; Heidelberger Bauchemie GmbH; Heidelberger Baustoffwerke GmbH; Vulkan Verwaltungs-und Beteiligungsgesellschaft mbH; Schmitt & Weitz Baustoffwerke GmbH; WIKA-Beton GmbH&Co. KG (73.9%); ZEAG Zementwerk Lauffen-Elektrizitätswerk Heilbronn AG (27.4%); Anneliese Zementwerke AG (41.4%); Portland-Zementwerk Gebr. Wiesböck&Co. GmbH (32.3%); CBR-HCI Construction Materials Corporation (United States); Lehigh Portland Cement Co. (United States); ENCI N.V. (Netherlands); HC Trading B.V. (Netherlands); Südbayer Duna-Drava Cement-es Meszmuvek Kft.(Hungary; 50%); S.A. Cimenteries CBR (Belgium; 52.5%); Vicat S.A. (France; 35%); ZCW Gorazdze S.A. (Poland; 82.9%); Akcansa Cimento Sanayi ve Ticaret A.S. (Turkey; 39.7%); China Century Cement Ltd. (China; 30%); Ce-mentowina Strzelce Opolskie S.A.(Poland; 93.4%) Ceskomoravsky Cement a.s. (Czech Republic; 86.5%)