Heidelberg Materials: Cement Acquisition in Indonesia Confirms a Differentiated Strategy to Peers

With peers in the building materials sector pivoting away from cement and emerging markets, Heidelberg Materials' latest cement acquisition in Indonesia confirms its differentiated strategy. The acquisition of Indonesian local cement producer PT Semen Grobogan will expand the company's cement capacity by 2.5 million metric tons in Indonesia, which contributed 5% of group sales in 2022. This was the sixth-largest region for the group. While we believe the intangible asset moat source in emerging economies is weaker than for developed markets as a result of the high regulatory burden to operate a cement plant because of environmental reasons, we maintain our narrow moat rating for Heidelberg Materials. CRH remains our preferred pick in the sector due to its significant exposure to the United States, which enjoys a favorable outlook for construction spending due to recently signed legislative acts.