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Southeast Asia problematic for LafargeHolcim

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World Cement,

The Asia Pacific proved a challenging market for LafargeHolcim in 2017 with its business there the only one to report lower earnings. Full year recurring EBITDA was down 6.9% on a like-for-like basis at CHF1.42 billion, despite like-for-like increases in sales volumes across the companies three product lines.

Like-for-like sales of cement were up 5.5% at 91.7 million t. Like-for-like aggregates volumes were also up strongly, growing 9.7% to 31.8 million t, while ready-mixed concrete sales showed marginal growth of 0.7%.

Performance was positive in India, where the company reported strong volume and earnings increases from its two operating companies, ACC and Ambuja Cement, China, and Australia. India is the company’s largest regional market, operating 67.8 million t of grinding capacity there.

In China, where the company owns a 41.8% stake in Huaxin Cement Co. Ltd, as well as two plants directly, “there was a solid operational and commercial performance […] supported by government initiatives on environmental protection.”

The positive performance in these regions was offset by weakness in Southeast Asia, however, where higher costs and a challenging pricing environment hit the company’s performance.

“In Malaysia, the introduction of new capacity in the market and soft demand impacted price levels. In the Philippines, delays in infrastructure projects and an influx of imports affected price and volume. Continued pricing pressure in Indonesia outweighed the benefit of volume growth,” the company said.

In the Philippines, operating EBITDA fell by 49.6% on the previous year, Holcim Philippines said in a release to the Philippine Stock Exchange, as lower revenues and higher production expenses caused by increased fuel prices hit the company’s bottom line. Revenues were down 13.9%.

The company booked writedowns on its assets in Malaysia and Indonesia, as part of the CHF3.83 billion impairment charge booked in 4Q17.

Asia Pacific is LafargeHolcim’s largest business area in terms of cement volumes, as well as employees. The company currently operates 117 integrated cement and cement grinding plants in the region with total cement grinding capacity of 117.4 million t. In addition to India, China, Malaysia, and the Philippines, the company also operates 3.9 million tpy of capacity in Bangladesh.

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