Holcim seen stronger than Lafarge in merger run-up

ZURICH/FRANKFURT - Swiss cement maker Holcim said its merger with Lafarge was on track to complete in the first half of the year as it reported a 6 percent rise in fourth-quarter core operating profit on Monday, outpacing growth at its French peer.

Holcim's fourth-quarter operating profit (EBITDA) rose to 1.01 billion Swiss francs ($1.06 billion), helped by faster-than-expected cost-cutting and strong cement sales in North America, slightly above analysts' estimates.

Lafarge last week reported a 1 percent like-for-like decline in fourth-quarter operating EBITDA (earnings before interest, tax, depreciation and amortisation).

The merger, if approved, will create the world's biggest cement maker with $44 billion in sales. The companies hope it will help them cope better with overcapacity and sluggish demand that have dogged the construction industry since the 2008 economic crisis.

Analysts have seen a potential divergence in earnings outlooks between the two companies as opening the possibility of a renegotiation of the terms of the deal, which foresees each Lafarge share being swapped for one Holcim share.

"Holcim's results were broadly in line with consensus expectations and once again confirm the better shape of the Swiss company versus its designated merger partner Lafarge, questioning the exchange ratio for the merger," said Baader-Helvea analyst Patrick Appenzeller, who rates the stock "hold".

Holcim shares closed up 1.1 percent at 73.15 francs, while Lafarge shares closed up 1 percent at 66.44 euros - about 2 percent below the Holcim price.

Asked whether Holcim's strong results versus Lafarge could affect the exchange ratio, Chief Executive Bernard Fontana told Reuters: "There is no automatic adjustment."

A Swiss-based Lafarge spokesman said a change to the merger terms was not on the agenda.

The all-share deal still needs anti-trust clearance in five jurisdictions including India - Holcim's biggest single market - the United States and Canada.

A capital increase needed for the merger to go through also needs to be approved by two-thirds of Holcim shareholders at a meeting expected to take place in late May or early June.

Holcim will shortly go on a road show to persuade investors of the value of the deal.

Harris Associates, Holcim's third-biggest institutional shareholder, declined to comment. Another top 10 investor who asked not to be named said it still backed the deal and was "fully supportive" of the share exchange.

Holcim reported a 2 percent increase in fourth-quarter net sales to 4.87 billion francs driven by stronger prices in North America, Europe and Asia-Pacific that outweighed lower volume sales in Europe, Latin America, Africa and the Middle East.

It said the franc's appreciation against the Indian rupee, the Indonesian rupee, the Canadian dollar and a number of Latin American currencies cost it 1.03 billion francs in net sales and 147 million francs in operating profit in 2014.

Holcim said cement volumes should rise in all regions except Europe this year, helping operating profit to rise to between 2.7 and 2.9 billion francs from 2.47 billion in 2014, with operating margins rising thanks to higher pricing and cost cuts.

It said it would pay a flat dividend of 1.30 francs per share, below expectations but in line with its policy of distributing one-third of net income.

Free cash flow fell 15 percent to 1.76 billion francs in 2014, Holcim said.

source: www.abs-cbnnews.com

Holcim's Income Falls To P2 Billion

MANILA, Philippines — Holcim Philippines, Inc. reported a 47 percent drop in profits from P3.85 billion in 2010 to P2.03 billion in 2011 which it described as a challenging one for the cement industry.

“Coming from a very strong market demand in election year 2010, Holcim’s full-year sales revenues dipped by almost 9 percent to P21.62 billion,” Holcim Chief Operating Officer Roland van Wijnen said.

He noted that, at the same time, given a continuous rise in prices for coal and electricity, which are the largest cost components in cement production, the energy costs per ton rose by 14 percent.

“The environment in 2011 was certainly tough, but I believe we were able to demonstrate our resilience as an organization by responding early to market challenges and focusing on areas within our control,” said Van Wijnen.

He added that “we managed to keep our market share within our target range and put in place various initiatives that have helped us improve operational efficiencies and effectively manage our costs. All these help us to position ourselves well for future growth.”

Van Wijnen also cited the improved performance of the Ready Mix Concrete and Geocyle businesses. Geocycle enjoyed a record year, as Holcim stepped up the usage of alternative fuels and raw materials to reduce the company’s dependence on coal.

Holcim's ready-mix concrete business registered a jump in volumes as it continued to gain the trust of its customers, especially premiere developers and contractors.

As for the company’s prospects this year, Van Wijnen said its outlook was one of “cautious optimism,” anchored on the government’s commitment to frontload infrastructure spending and the continued vigorous construction activity from the private sector — both of which were already apparent in the last quarter of 2011.

Even as Holcim looks forward to stronger demand, Van Wijnen added that the company will continue to explore ways to bring down costs through operational excellence and increased use of alternative fuels and raw materials.

“To ensure profitability levels that would enable us to make further significant investments to supply the market, cement prices will unavoidably have to be adjusted. For a sustainable operation, we need to return to 2010 price levels and recover the cost increases of 2011 and 2012,” he added.

source: mb.com.ph