Moody's confirms HeidelbergCement

Moody's Investors Service said it confirmed the Ba1 ratings of HeidelbergCement AG and supported subsidiaries.

The outlook is positive.

Moody's said the confirmation reflects (1) the strength of HeidelbergCement's underlying business positions; (2) Moody's expectation that HeidelbergCement's underlying retained cash flow and profitability will strengthen over the forthcoming years due to an improving business environment and cost cutting measures; (3) an improved balance sheet profile following the March 2005 rights issue; (4) Moody's understanding that the recently completed acquisition of HeidelbergCement by Spohn Cement, a company related to the Merckle family, will at most have limited negative impact on HeidelbergCement's current capital structure; (5) the expectation that HeidelbergCement will be able to comfortably meet its immediate dividend requirements to service a portion of the sizable acquisition debt at Spohn Cement; and (6) Moody's expectation that HeidelbergCement has sufficient capacity to pay an increased dividend should other sources of Spohn debt repayment not materialize as expected.

Moody's said the rating also takes into account (1) the loss of flexibility to minimize dividends should the company need to conserve cash; (2) the emphasis placed on management to deliver on the group's restructuring measures; (3) the weakness in some of the European building materials markets; (4) continued reliance on the currently strong performing North American market; and (5) German cartel office fines for alleged price fixing pending since 2003.

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