Holcim shares record results in 2023, achieving Strategy 2025 ahead of plan

Jan Jenisch, Chairman and CEO: “With record results in 2023, Holcim is stronger than ever, achieving Strategy 2025 two years ahead of plan. Thanks to our empowered and accountable performance culture, our 63 448 colleagues worldwide went above and beyond to deliver advanced branded solutions for our customers. Our 'multi-billion Swiss franc brands' from ECOPact and Elevate to Fuerte now represent 30% of our net sales. We accelerated our leadership in sustainability, reducing our CO₂ per net sales by 20% compared to 2022, while making decarbonisation a driver of profitable growth and driving fast-paced growth in circular construction, with a 24% increase in recycled construction demolition materials in 2023.

“Moving our business from volume to value, we have successfully shifted to the most attractive markets with strong growth drivers and margins. Through our disciplined M&A approach for superior value creation, Holcim delivered 97 value-accretive transactions since 2018, including six major acquisitions in Solutions & Products and 72 bolt-ons, of which 80% were family-owned companies bringing significant synergy upside, while closing 19 divestments.

“Thanks to our broad-based, profitable organic growth, we achieved a superior earnings profile, with industry-leading margins including a recurring EBIT margin of 17.6% and record free cash flow of CHF3.7 billion. As we move forward in 2024, we are committed to another year of record results and value creation for all of our stakeholders. I sincerely thank all our colleagues around the world for making Holcim the great company it is today.”

Profitable growth, significant cash generation

In the fourth quarter, recurring EBIT rose 17.9% organically compared to the prior-year period to reach a record CHF1117 million. Fourth-quarter net sales of CHF6602 million rose 5.5% on an organic basis versus the fourth quarter of 2022. Holcim’s profitable growth more than offset strong foreign exchange effects, with fourth-quarter net sales up 2.1% and recurring EBIT up 8.7% in Swiss franc versus the prior-year period.

Full-year net sales of CHF27 009 million for 2023 were up 6.1% on an organic basis compared to the prior year. Recurring EBIT reached a record CHF4760 million for 2023, up 14.7% organically compared to the prior year. This record result was driven by positive price over cost in cement, aggregates and ready-mix.

Free cash flow after leases for the full year rose 4.5% to reach a record CHF3705 million, with a record cash conversion ratio of 58%.

Earnings per share before impairment and divestments increased by 9% to a record CHF5.42. Since 2018, Holcim has delivered a compound annual growth rate (CAGR) of 15.6% in earnings per share before impairment and divestments.

Superior earnings profile, achieving Strategy 2025 ahead of plan

Holcim’s new level of financial performance is driven by its superior earnings profile, based on its industry-leading margins, strong balance sheet and deeply embedded and accountable performance culture with more than 500 P&L leaders empowered for customer-centric decision-making.

In 2023, Holcim’s recurring EBIT margin reached an industry-leading 17.6%. This strong performance reflects the Group’s successful shift from volume to value. Holcim also reported an industry-leading free cash flow margin of 13.7% for the year, up significantly from 6.2% in 2018.

Holcim’s return on invested capital (ROIC) for 2023 increased to 10.6% (2022: 9.5%). Its net financial debt was CHF7896 million at the end of 2023 for a net debt leverage ratio of 1.2x.

With these results, Holcim is achieving Strategy 2025 two years ahead of plan.

Growing in the most attractive markets

In 2023, Holcim grew fast in the most attractive markets. North America accounted for 39% of Group net sales and Europe for 34%, up from 22% and 28% respectively in 2018. Solutions & Products has expanded rapidly to account for 21% of Group net sales in 2023, up from 9% in 2018, and putting the company on track to reach its strategic goal of 30% of net sales from the segment by 2025. Net sales to external customers in Solutions & Products reached CHF5608 million in 2023.

Solutions & Products grew further in 2023 through 11 acquisitions, including the iconic Duro-Last brand. Holcim continued to expand its aggregates and ready-mix concrete portfolio with 17 bolt-on acquisitions, delivering significant growth and synergies. In addition to these 28 acquisitions, Holcim signed agreements to sell its businesses in Uganda, South Africa and Tanzania to further sharpen its geographic footprint.

On 28 January 2024, Holcim announced its intent to list its North American business in the US with a full capital market separation. It will be subject to shareholder approval at an Extraordinary General Meeting, as well as other customary approvals. Holcim post US listing of North America is expected to remain included in the Swiss Market Index.

Advanced branded solutions

Offering its customers the most advanced building solutions, Holcim generated 30% of net sales in 2023 from its 'multi-billion Swiss franc brands'. ECOPlanet low-carbon cement became a 'two-billion CHF brand' by net sales in 2023, reaching 19% of Group cement net sales, up significantly from 7% in 2022. ECOPact low-carbon concrete is now a 'one-billion CHF brand' and reached 19% of Group ready-mix net sales in 2023, compared to 13% in 2022.

Fuerte and Apasco are flagship brands for Holcim in Latin America, accounting for over CHF1 billion in net sales in 2023. In North America, OneCem, the leading US cement brand, and Elevate, the most advanced roofing system brand, each became 'two-billion CHF brands'.

Leading in sustainability

Holcim has continued to advance decarbonisation as a driver of profitable growth, reducing CO₂ per net sales by 20% in 2023 and by a total of 42% since 2020. In 2023, Holcim announced its goal to offer 8 million t of net-zero cement per annum by 2030. This will be enabled by Holcim’s Carbon Capture, Utilisation and Storage projects, six of which have now been selected for grants from the European Union Innovation Fund to capture 5 million tpy of CO₂ by 2030.

Driving fast-paced growth in circular construction, Holcim launched its proprietary ECOCycle^® technology platform to recycle Construction Demolition Materials (CDM) into new building materials. It recycled 8.4 million t of CDM in 2023, up 24% from the prior year.

In 2023, Holcim continued to make progress towards its net-zero 2050 targets aligned with a 1.5? trajectory, validated by the Science Based Targets initiative (SBTi). Advancing its leadership in nature, Holcim was selected as one of only 17 companies worldwide to pilot the world’s first science-based targets for nature with the Science-Based Targets Network (SBTN).

Profitable growth to continue with attractive returns

The strong operational performance of 2023 with record free cash flow and a strong balance sheet, combined with a positive outlook for 2024, allow Holcim to return additional cash to shareholders. The Board of Directors therefore proposes a 12% increase in dividend to CHF2.80 per registered share.

Holcim plans a share buyback programme for a total amount of CHF1 billion until year-end 2024, with the share cancellation to be approved at the Annual General Meeting in 2025. The buyback will be funded from available cash on the balance sheet. Holcim remains committed to a strong investment grade credit rating. The share buyback will be executed on a 2nd trading line on the SIX Swiss Exchange and is subject to the necessary regulatory approvals.

Outlook and guidance

Holcim delivered superior performance quarter by quarter in 2023 and has achieved an industry-leading earnings profile, despite challenging market conditions. Holcim is best positioned to capitalise on the growth opportunities ahead and expects continued profitable growth in 2024 with:

• Organic sales growth above 4%, additional growth from M&A of above 2%.
• Over-proportional growth in recurring EBIT.
• Increase in recurring EBIT margin to 18%.
• Free cash flow of above CHF3 billion.
• 20% growth in recycled Construction Demolition Materials to 10 million t.
• Progress towards US listing of North American business.

Read the article online at: https://www.worldcement.com/europe-cis/28022024/holcim-shares-record-results-in-2023-achieving-strategy-2025-ahead-of-plan/