A Short Note on Corporate Risk Management: The Case of HeidelbergCement AG

Abstract

Based on the most recent annual reports of HC we check its risk management. Since cement is manufactured through an energy-intensive process, the focus is on energy price risk. HC has been taken by surprise by soaring energy prices in Q1, Q2, Q3 and Q4 2018. This has led to (repeated) downgrades of their outlook but no upward move on the learning curve. Instead, HC bets on falling energy prices for the future despite being no expert in these markets. Thus, shareholders are getting a big short position in energy on top of being long cement. Only the latter confirms to the business purpose of HC. HC is not clear on this and equity analysts seem to have little interest neither. No sensitivities to energy prices are reported. Hence, for HC there are more steps to go towards state-of-the-art CRM.

Keywords: corporate risk management, commodity risk management, energy price risk, hedging, HeidelbergCement

JEL Classification: M1, M16