Bloomberg News

HeidelbergCement Says U.S. ‘Power Games’ Over Crimea Pose Risk

March 19, 2014

Germany’s HeidelbergCement AG (HEI) said its earnings would be hurt if the U.S. government decides to release strategic oil and gas reserves to punish Russia over the crisis in Crimea.

“The greatest risk is if the Americans play power games,” Chief Executive Officer Bernd Scheifele said yesterday at a press conference at the headquarters of the world’s third-largest maker of cement in Heidelberg, Germany. “If they tap their strategic energy and oil reserves, and release them partially into the global market, then experience shows that the oil price could drop.”

Scheifele’s comments show how companies with investments in Russia, including General Electric Co. (GE:US) and Boeing Co., are growing concerned as the U.S. prepares to impose tougher sanctions against Russia that may spur retribution against corporate interests. HeidelbergCement supplies building materials such as cement, crushed limestone, sand, clay and mineral powder to the Russian construction industry.

The Russian economy depends on the country’s oil and gas business, so a supply increase by the U.S. “bursts the Russian bubble very quickly,” the German executive said. “If the Russian state has no money, then all infrastructure and construction projects come to a standstill, and that will lead to the economy tanking very quickly.”

Test Sale

The U.S. Department of Energy earlier this month announced a test sale of 5 million barrels of oil from the Strategic Petroleum Reserve. White House press secretary Jay Carney said March 12 that the test was required by law to check the distribution system and was unrelated to the situation in Ukraine.

“I don’t speculate about uses of the SPR,” Carney said yesterday.

HeidelbergCement, which was founded in 1873 and yesterday reported a 2.1 percent decline in operating profit for 2013, said its business in Russia was “on track” in the first two months of this year.

“The impact will first start to come through in the coming weeks,” Scheifele said when asked about the effects of the Crimea crisis. “If the situation continues to develop in a tense fashion or the unclear situation continues, there will certainly be an impact on Ukraine and Russia.”

The company last year generated sales of about 500 million euros ($692 million) in Ukraine and Russia, the CEO said. While it made a loss in Ukraine, it posted a profit of about 30 million euros in Russia.

The company’s shares yesterday fell 1.8 percent to 60.22 euros in Frankfurt, valuing it at 11.3 billion euros.

To contact the reporter on this story: Alex Webb in Heidelberg at awebb25@bloomberg.net

To contact the editors responsible for this story: Simon Thiel at sthiel1@bloomberg.net Robert Valpuesta


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