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Holcim posts first quarter results

World Cement,

Holcim recently posted a first-quarter net profit of CHF10 million (US$11.62 million), far behind an average forecast of CHF127 million in a Reuters poll of analysts and compared with a loss of CHF68 million a year ago.

The company, which competes with France's Lafarge, Mexico's Cemex and Germany's HeidelbergCement, said higher sales volumes could not fully compensate for materials and energy price rises. Holcim makes more than a third of its sales in the Asia Pacific region and has the largest exposure to the region among the big cement makers. It said that markets there continued to grow, particularly India.

Holcim holds 46% stakes in both ACC Ltd and Ambuja Cements Ltd, India's second and third-biggest cement producers, both of whose first-quarter results beat forecasts.

The two concerns strength has ensured a more than 8% rise in cement sales so far this calendar year, while the Indian domestic industry is struggling to maintain an 8% plus growth rate.

Last calendar year, ACC reported a decline in its production and sales, whereas Ambuja, a sister concern, did reasonably well. Holcim’s overall growth in India last year was affected by ACC’s poor performance. However, there has been a turnaround so far this year for ACC who has seen a 12.67% increase in sales during January – April. Ambuja’s sales are also up a more modest 2.7%. Both companies follow calendar year as their accounting year.

ACC’s capacity additions last year, taking the company to over 30 million tpa, has been cited by industry analysts as attributing to the sales growth. “The poor base of ACC in 2010 is proving beneficial for it in 2011, while the higher base of Ambuja is affecting it,” explained a research head at a domestic brokerage house.

Of course, until other cement producers release their sales figures, it is too early to assume April has witnessed high growth. According to dealers, ACC is pushing for volume growth. “We expect that the cement consumption scenario has not improved much. If ACC's sales are so robust, there could be a possibility that the company might be offering more discounts than its peers in its dominant markets to keep its sales high,” said an industry analyst.

"In the emerging markets of Asia and Latin America, the economic climate and demand for building materials continued to grow," Holcim said. "However, in many mature markets, infrastructure projects ready for execution were postponed. In Europe, a mild winter provided some compensation."

Shares in Holcim, which is providing the cement for the 2012 London Olympics, have risen more than 7% this year, just lagging the wider DJ Stoxx European construction index, SXOP.

On the Bombay Stock Exchange, ACC shares recently closed 0.86% down at Rs. 1098.65, while shares of Ambuja lost 1.35% at Rs 153.30.

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