Heidelberg Materials posts higher Q2 profit despite sales downturn

ZURICH (Reuters) -Heidelberg Materials on Tuesday posted a 5% increase in second-quarter operating profit, despite a downturn in sales and what it called a "persistently challenging environment."

The group said its result from current operations (RCO) rose to 971 million euros ($1.05 billion) in the April-June period, although it missed analysts' forecast of 981 million euros as per a company-compiled consensus.

This was in contrast to the company's sales, which fell 2% to 5.51 billion euros. Analysts had forecast sales of 5.50 billion euros.

Heidelberg blamed the downturn on weak construction activity due to higher interest rates and inflation, and adverse weather in some countries like heavy rains which hit parts of Europe and the United States.

Still, the German company's profit margin rose to 23.4% from 22.1% a year earlier, helped by improvements in its North American business, where investments in new and more efficient production paid off.

"Especially our strong development in North America has contributed to increasing our result and margin in the second quarter again despite the continued slight decline in volumes,” said Dominik von Achten, chairman of Heidelberg's managing board.

Heidelberg confirmed its full-year guidance for RCO between 3.0 billion and 3.3 billion euros and a return on invested capital of around 10%.

The company said it expected construction demand to stabilise at a low level globally, with inflation and higher borrowing costs weighing on residential construction in particular.

($1 = 0.9240 euros)

(Reporting by John Revill, editing by Rachel More and Varun H K)