Holcim Predicts Rising Profits From Savings and India Recovery

By Patrick Winters  Nov 18, 2014
Bloomberg
Holcim Ltd. (HOLN), the cement maker that’s merging with French rival Lafarge SA, said operating profit will rise as much as 21 percent next year on cost-cuts as well as recovering growth in India, Indonesia and the U.S.

Profit, excluding merger costs could grow to as much as 2.9 billion francs ($3 billion) in 2015, Holcim said in a statement. That compares with the 2.4 billion-franc average prediction of analysts for this year. Holcim has exceeded its target from a savings program started in 2012 by about 200 million francs, it said.

“‘Holcim is the best positioned company in its industry to capture both the recovery in mature as well as the opportunities in emerging countries,’’ Chief Financial Officer Thomas Aebischer said in the statement today. ‘‘Our current footprint will allow us to grow for several years without significant expansion needs, creating higher returns for our shareholders.’’

Chief Executive Officer Bernard Fontana is coming to the end of a 2 1/2-year cost-cutting program to add 1.5 billion francs to earnings with measures that included closing European plants where demand for cement was low as well as streamlining procurement and logistics.

India, Holcim’s largest market by sales, was partly to blame for cutting a sales forecast last year. Now, Holcim expects the recent favorable development under the new Indian government to continue, leading to faster-growing cement demand from 2015. Indonesia and the Philippines are expected to be the growth drivers in the South East Asia region, Holcim said.

The $40 billion merger will couple Lafarge’s African cement plants with Holcim’s Asian assets, to increase exposure to faster-growing regions while at the same time selling less dynamic European plants to get the deal past regulators.

Fontana became the first outsider to lead Holcim when he joined the 102-year-old Swiss company in February 2012. Drawing on his past experience of overhauling steelmaker Aperam, he implemented his so-called ‘‘Holcim Leadership Journey.” He will help to integrate the two companies before Lafarge chief Bruno Lafont becomes head of the merged entity next year.