Aggregates - Short Profile

The Aggregates division unites the mineral raw materials and asphalt mix lines under the roof of Basalt AG. Hard rock products are sourced from its own quarries for road, building, civil engineering, rail, and waterway construction. The basis of these products are natural rocks which differ due to their geological formation and mineralogical composition, making them suitable for different uses. Hard rock is also a raw material used in the manufacture of products in the asphalt mix line. In addition to the standardized mixes, the product range also includes a number of special asphalts, such as landfill and colored asphalt as well as asphalts with special noise-reducing properties.

According to information from the Central Association of the German Building Industry, one consequence of the economic crisis in the sales regions of the Aggregates division is a marked reduction in European construction activity. While public construction projects came to a virtual standstill in the central and eastern European export markets, the domestic market for the Aggregates division’s products developed relatively well. With a fall in net sales of around 4 % in the main German construction trade, the economic downturn affected the construction sector less than other branches of the economy. The  public economic stimulus programs supported the economy, leading to an increase in orders in Germany in the second half of the year. A weakening domestic economy, currency problems, and critical budgetary situations have meant that expenditure in the construction sector has been reduced in many foreign countries where the division is active. Sales of building materials consequently fell significantly.

Adjusted to allow for the effects of the initial consolidation and the currency conversion, the net sales for the Aggregates division were approximately 5 % above those of the previous year at € 1 373 million. While domestic net sales increased by 4 %, currency adjustments led to a 6 % reduction in net sales abroad. The effects of the currency conversion had a detrimental effect on net sales amounting to around € 22 million. The initial consolidation of four companies due to exceeding the size criteria, and the sale of one company, led to an increase in net sales of € 3 million.

The economic stimulus measures led to an increase in net sales in Germany for asphalt mixes in particular. As some of the stimulus measures predominantly involved the reconstruction of road surfaces, sales of raw materials were unable to benefit from these measures to the same extent, recording a fall in sales compared with the previous year. While unexpected cost increases in 2008 for raw materials derived from crude oil had a negative effect on the results for the asphalt mixes line in particular, the sales prices could be approximated to the cost situation in the year under review.

Fortunately, the Polish and Czech markets reached or exceeded the shipping volume of the preceding year. In contrast, however, Russia, Hungary, Sweden, and the Baltic states recorded significant drops in sales as the economic crisis hit the construction industries in these countries particularly badly. Overall, the earnings contribution from the foreign companies remained positive, albeit lower than expected due to currency effects. In the overall results for the division, the drop in volumes of raw materials in Germany and abroad was offset by increased sales of asphalt mixes at home, necessary price adjustments, and cost savings.

As a result of the subdued economic expectations, the Aggregates division reduced its investments in the business year and concentrated on replacements and strategic expansion projects. These included the development of another rock deposit and the construction of the infrastructure required for this in Russia. Over recent years and with targeted investment in plant technology, the Aggregates division has continually optimized the use of reclaimed asphalt as well as the energy mix in asphalt production at many sites. Organizational changes have reduced administration costs and increased efficiency. Overall, the division has achieved a good result which is above that of the previous year.

The Central Association of the German Building Industry predicts a fall in net sales of around 1.5 % in Germany for 2010. Thanks to the stimulus packages, it is expected that net sales will increase by 8 % for public construction works in Germany. However, the momentum generated by stimulus programs, particularly in civil engineering and road construction, will level off during the year. In addition, the decline in tax revenues, particularly in municipalities and federal states, will curb spending on infrastructure. After the phasing out of the stimulus programs, much depends on the economy picking up. There is still growth potential for the Aggregates division in central and eastern Europe. As was previously the case, there is catch-up demand in the infrastructure. As the foreign markets have been hit worse than the German market by the economic crisis, the recovery phase there will, however, take longer. Unreliable government finances, currency fluctuations, political instability, and the economic conditions make a rapid recovery and further growth less likely. Nevertheless, the outlook for the Aggregates division remains good.