One of the world’s largest cement manufactures, Holcim, has reported that its 2011 profit may not grow after a decline in Q2 earnings due to slow demand in the US and higher raw material costs. CEO Markus Akermann said the US markets would remain "flat" to the end of next year.
The North American construction industry showed "no sign of any substantial progress", demand for construction from European government was subdued and Indian home building weakened, Holcim said.
A recent report from the EU’s statistics office revealed a drop in European construction output for the first time in three months in June, led by declines in Germany and France.
The Jona, Switzerland-based company emphasised that its operating profit for this year will come close to last year’s results on a comparable basis after a first-half decline of 7.2%.
In 2008 the company had aimed for average annual growth of 5% over the long-term. Earnings by that measure dropped in the past three years.
Chief Financial Officer Thomas Aebischer assured that "The second half will be slightly better than the first."
Holcim said it would continue to raise prices to offset rising costs for energy, raw materials and transportation, and would focus on managing costs. Net debt fell to CHF12.21 billion (US$ 15.38 billion) as of 30 June from CHF14.08 billion at the end of December. In the biggest intraday decline since March 2009, the company’s shares fell as much as 7.7%. They traded most recently at CHF44.75, down 6.5%, in Zurich.
Second-quarter net income fell 13% to CHF347 million from a year earlier, missing analysts’ CHF373.3 million average estimate. Sales dropped 11% to CHF5.9 billion, a slight improvement on estimates of CHF5.56 billion.
Another factor to take into account is the appreciation of the Swiss franc, which has gained 18% against the dollar this year. Currency effects shaved CHF916 million off sales in the second quarter and reduced operating profit by CHF203 million. That was more than the combined effects on revenue and profit in the previous three quarters.
Placing a ‘market weight’ recommendation on Holcim’s stock, Zuercher Kantonalbank analyst Martin Huesler explained, "To the best of my knowledge, we’ve never seen a currency impact this strong." Serge Rotzer, an analyst at Bank Vontobel, said he might cut his estimate for the company’s full-year earnings per share by 10 – 20%.
Holcim said it’s performance in Latin America was mostly positive, although the countries north of the Panama Canal continued to be influenced by the lackluster US economy. It plans to invest CHF720 million in Brazil to tap faster growth in this region. The company said it planned to add a second kiln line at its Barroso plant north of Rio de Janeiro and improve a rail terminal, increasing capacity by 49% to 7.9 million t by 2014.
Sales volume in the quarter grew 2.6% for cement, 7.5% for aggregates and 2.5% for ready-mix concrete.
Read the article online at: https://www.worldcement.com/europe-cis/19082011/holcim_second_quarter_results/