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LafargeHolcim reports strong sales growth in 4Q18

Published by , Editorial Assistant
World Cement,

LafargeHolcim has reported a growth in net sales of 5.1% on a like-for-like basis for FY18, which was largely driven by higher cement volumes. Net sales reached CHF27 466 million. Recurring EBITDA reached CHF6 016 million, which was up 3.6% when compared like-for-like with the previous year. The company’s cement, aggregates, and ready-mixed concrete segments all contributed to this outcome.

Before impairment and divestments, net income attributable to shareholders of LafargeHolcim was 10.8% higher than in 2017. Earnings per share before impairment and divestments amounted to CHF2.63 for FY18, compared to CHF2.35 for FY17. Free cash flow stood at CHF1 703 million, compared to CHF 1 685 million in 2017. For FY18, net debt amounted to CHF13 518 million, which was an improvement of CHF828 million over the previous year. The company has stated that this reflects the cash conversion of 28.3% and a positive impact following the classification of Indonesia’s local external net debt as held-for-sale. The Indonesia divestment closed successfully at the end of January 2019, and full effect will be reflected in 2019. Return on invested capital was reported to be 6.5%, compared to 5.8% in 2017. The company has stated that this is due to continuous improvement in capital allocation.

Strategy 2022 – ‘Building for Growth’

The company has stated that the global roll out of its new Strategy 2022 – ‘Building for Growth’ has been successfully started. Strong progress was made in all four drivers of the strategy, delivering results ahead of plan.

The most fundamental principle of Strategy 2022 according to the company, final results have been achieved and the growth momentum accelerated throughout the year, with a strong sales increase of 5.1% like-for-like. All four business segments contributed to this growth.

Growth was driven as four bolt-on acquisitions were completed in Europe and North America in 2018. This also added to the company’s presence in ready-mixed concrete and aggregates. The acquisitions had an immediate impact on profitability and brought the company closer to its end-customers. Four more bolt-on acquisitions have been signed in 2019 in Europe, Australia, and North America.

In terms of simplification and performance, the closure of four corporate offices in Singapore, Miami, Zurich, and Paris has been completed. The 400 million SG&A savings programme was executed successfully and results were delivered ahead of target. Strong progress was also made towards closing the gap to best-in-class performance in aggregates and ready-mixed concrete. Both businesses achieved significant improvements in profitability.

The strategy driver financial strength has also led to improvements across all key performance indicators. More than CHF1.5 billion was refinanced at attractive terms, thereby improving the company’s debt maturity profile and reducing financing costs. The sale of Indonesia contributes to the strengthening of the balance sheet. All initiatives resulted in a successful deleveraging, with the net financial debt/recurring EBITDA ratio improving 2.2 times (from 2.4 times in 2017).

With regard to vision and people, the new operating model and leadership team has been effectively established. Globally, leaders are empowered, and the simplified performance management system and the corresponding incentive system was implemented in all countries. All initiatives are supported by the launch of the new LafargeHolcim Business School.

2019 outlook

The company expects its solid global market demand to continue in 2019, with the following market trends:

  • Continued market growth in North America.
  • Softer but stabilising cement demand in Latin America.
  • Continued demand growth in Europe.
  • Challenging but stabilising market conditions in Middle East Africa.
  • Continued strong demand growth in Asia Pacific.

Based on the above trends and the successful execution of Strategy 2022, the previously communicated targets have been confirmed for 2019. These are the following:

  • Net sales growth of between 3% and 5% on a like-for-like basis.
  • Recurring EBITDA growth of at least 5% on a like-for-like basis.
  • Ratio of net debt to recurring EBITDA two times or less by the end of 2019.

For the 2018 financial year, the Board has proposed a dividend from the capital contribution reserves in the amount of CHF2.00/registered share. Subject to approval by the Annual General Meeting, shareholders will be given the choice of having the dividend paid out in cash, in new shares in LafargeHolcim at a discount market price, or as a combination of cash and shares. Via this so-called scrip dividend, investors will have the opportunity to participate in the company’s future growth.

“Our momentum accelerated in 2H18, during which we exceeded our sales targets while profitability increased over-proportionally,” said Jan Jenisch, CEO of LafargeHolcim. “We completed a very successful 2018, with a double-digit EPS growth and progressed significantly towards our deleveraging target. I am very proud of the fast roll-out of Strategy 2022 – ‘Building for Growth’ and congratulate all employees and teams on the impressive results. We are well-positioned and I am expecting a further acceleration of our growth and earnings dynamic in 2019.”

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LafargeHolcim news European cement news Cement news 2018