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Holcim reports results for a difficult year

World Cement,


Recessionary environment in Europe and North America
The construction industry suffered a significant slump, particularly in Europe and North America. The situation was especially acute in the US, the UK and Spain, but the construction sector also underwent a severe recession in Eastern and Southeastern Europe, as well as Russia.

Better position in the growth markets
Asia started out in a better position, as did much of Latin America and Africa. Led by India and China, many of the countries remained on a growth trajectory. This proved beneficial for Holcim, as the Group has an emerging markets presence like no other international producer of building materials.

Robust cost management makes up for falling volumes
Volumes fell once again across all segments. In some cases, prices too came under greater pressure. Holcim nevertheless generated operating EBITDA of CHF 4.6 billion on consolidated net sales of CHF 21.1 billion.

The goal of streamlining processes and structures as well as lowering fixed costs by at least CHF 600 million was significantly exceeded, reaching like-for-like CHF 857 million. The increasing impact of the cost-cutting measures is reflected in the organic growth in operating EBITDA: still strongly negative in the first half of 2009, it improved significantly in the second part of the year.

The steepest fall in the Group's operating EBITDA occurred in Europe, followed by North America. Latin America held up well. Factoring out the deconsolidations in Venezuela due to nationalization, the region continued to grow. Group region Africa Middle East also performed slightly better in year-on-year terms.

In Asia Pacific, operating EBITDA showed a considerable increase. This positive result was due in particular to a strong performance by ACC and Ambuja Cements in India, but also to the performance in the Philippines and Indonesia, as well as the new consolidations in Australia.

Strong liquidity, lower net debt, balance sheet further strengthened
A series of capital market transactions and a capital increase raised a combined CHF 7.8 billion, thus covering all financing needs. Encouragingly, cash flow from operating activities showed an above average increase. Net financial debt was reduced by CHF 1.2 billion despite ongoing capacity expansion and equity-financed acquisition, thus further strengthening liquidity and the balance sheet. This was only possible thanks to the rigorous cost and cash management.

Plant closures in all product segments
Holcim reacted swiftly in the second half of 2008, when a fall in demand became apparent in a series of markets. Far-reaching measures were taken in the cement sector. Plants in Europe and North America in particular were shut down permanently or mothballed. All in all, 23 kiln lines with a production capacity of more than 10 million tonnes were closed. More than 100 aggregates and ready-mix concrete plants were also closed temporarily. This was accompanied by substantial job losses of 6% per the end of 2009; these were conducted in such a way as to minimize social impact.

Capacity expansion and acquisition create new potential
The Group's solid financial position enabled the 2009-2012 capacity expansion program targeted at strategically important areas to be continued, apart from some exceptions. The plant expansions and new facilities in the cement sector were concentrated on growth markets, in particular the Indian subcontinent.

The new Ste. Genevieve cement plant in the US state of Missouri deserves a particular mention. The plant was commissioned in July, as planned. Situated right on the Mississippi and equipped with its own port facility, the plant – which has a capacity of 4 million tonnes – is the largest and most modern in the US. It improves energy efficiency by around 40% compared with the US sites that have been closed. The plant boosts Holcim's market presence throughout the river system of the Midwest, right down to the Gulf of Mexico.

The successful acquisition of Cemex Australia – now Holcim Australia – is a significant achievement. The transaction also included the increase in the shareholding in Cement Australia from 50 to 75%. Both Group companies have been fully consolidated since October 2009. This means Holcim can now offer not only cement but also aggregates, ready-mix concrete and concrete elements in a strategically important, mature market.

Group outlook 2010
It is unclear how the building materials markets will perform in the current financial year. Uncertainty is at a high level, especially with regard to developments in Europe and North America. Much depends on whether the stimulus programs designed to expand infrastructure will indeed be implemented as proposed. Any revival in construction activity across a broad front will also be contingent upon stimuli from residential and commercial construction.

Many emerging markets start off from a better position. In particular, Holcim’s Group region Asia Pacific – also thanks to the acquisition in Australia – is likely to continue growing. Group regions Latin America and Africa Middle East are also likely to experience a stable business performance. Despite their confidence in the Group's strength and solid positions in important markets, the Board of Directors and Executive Committee refrain from communicating any detailed forecasts. The cost advantages gained in 2009 will be retained, and in 2010 the Group will continue to do whatever is required to strengthen the efficiency of its processes and competitiveness. Holcim will therefore start the next upturn from a stronger position, and will be able to get back on track toward achieving its long-term growth targets.

The full report can be found on the company’s website.

Read the article online at: https://www.worldcement.com/europe-cis/05032010/holcim_reports_results_for_a_difficult_year/


 

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