HeidelbergCement Trail Peers in Combating Inflation; We Slightly Lower Our Fair Value Estimate

HeidelbergCement is one of the largest manufacturers of building materials in the world, with a significant contribution of revenue from cement production. The cement industry is a notorious contributor of carbon dioxide emissions, which has made the sector uninvestable for many investors due to environmental concerns. HeidelbergCement will accelerate investments into carbon capture and storage technologies to help lower its carbon footprint. However, the benefits are only likely to be realized in the second half of this decade and are unlikely to provide a catalyst for the market to assign a significantly higher multiple on the business in the short term. Unlike peers CRH and Holcim, there is no indication of HeidelbergCement entering the downstream building products sector, which has a lower environmental, social, and governance, or ESG, risk rating.