Holcim Ltd. (HOLN), the world’s second- largest cement maker, said it will deepen cost cuts to help drive profitability after a standstill in European construction in February hit first-quarter earnings.

Chief Executive Officer Bernard Fontana, who took over in February, declined to say how much profitability would benefit from the reductions, which he plans to unveil next week. Holcim, based in Jona, Switzerland, said operating earnings before interest and taxes, depreciation and amortization declined 1.1 percent to 745 million Swiss francs ($804 million).

“We must clearly reduce our costs,” Fontana said on a call with journalists today.

Holcim is seeking to beat sluggish demand in Europe and improve profitability this year by cutting fuel costs and matching inflation with price increases. Under Fontana, who joined from Aperam, a spinoff from steelmaker ArcelorMittal (MT), Holcim will remain cautious about new investments, it said.

Holcim declined as much as 1.05 francs, or 1.9 percent, to 54.05 francs, and traded at 54.05 euros as of 11:42 a.m. The stock has gained 7.7 percent so far this year.

Cost Cuts

“A minimum of 400 million francs in cost savings is needed to move the needle,” Ian Osburn, an analyst at ING Wholesale Banking in Amsterdam, said by telephone. “Any less will be just a confirmation of Holcim’s good management but its shares already trade at a premium for that.”

Fontana reiterated Holcim’s target of reaching a return on invested capital after tax above 8 percent.

“In past years we have not reach that target,” Fontana said. “We want to be above this level as soon as possible.”

Holcim’s cost cuts come as Bruno Lafont, the CEO of larger competitor Lafarge SA (LG), seeks to dispose of 1 billion euros ($1.3 billion) of assets amid lower demand in Europe and higher energy costs.

Sales at Holcim advanced 7.1 percent to 4.76 billion francs, bolstered by a recovery in North America and surging demand for construction materials in emerging markets from Azerbaijan to the Philippines. Analysts estimated 4.7 billion francs.

Holcim reported 10 million francs in net income, becoming the only top-four cement maker to shrug off the combined effects of higher charges for transportation, energy and raw materials. Lafarge, HeidelbergCement AG (HEI) and Cemex SAB de CV (CX) all reported net losses in the period.

Cemex and Lafarge beat analyst targets for Ebitda while Germany’s HeidelbergCement failed to meet the mark on higher energy costs and colder-than-normal temperatures in Germany.

To contact the reporter on this story: Patrick Winters in Zurich at pwinters3@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net