Holcim Ltd., the world’s largest cement maker, lowered its sales forecast on disappointing shipments of cement in India and Mexico.
Sales won’t match last year’s level, on weakening demand for construction materials in key markets such as India, Mexico, and Canada, Holcim said in a statement today. Brazil also suffered though Europe stabilized.
Chief Executive Officer Bernard Fontana is pushing ahead with efficiency measures as well as seeking to trade assets with competitors to tweak more profits out of the company’s huge portfolio of cement and aggregates operations that span 70 countries. Fontana intends to use cash gained from savings to invest in faster-growing emerging markets.
Third-quarter net income rose 20 percent to 469 million Swiss francs ($515 million). Analysts surveyed by Bloomberg predicted 434.3 million francs. Jona-based Holcim’s sales of 5.3 billion francs missed the 5.54 billion-franc average estimate in a Bloomberg survey.
Holcim reported savings of 626 million francs from efficiency initiatives in the first nine months of the year, putting Fontana ahead of a full-year target of 700 million francs under his so-called Leadership Journey program that involves reducing energy costs, making savings in procurement, and closing underperforming plants.
Holcim followed Indian competitor Ultratech Cement Ltd. (UTCEM), which on Oct. 21 reported fiscal second quarter net income which missed analyst estimates, in highlighting persistent slow growth in India’s cement market. The Swiss company’s european rivals Lafarge SA (LG) and HeidelbergCement AG (HEI) are scheduled to report earnings Nov. 7.
Excluding acquisitions and disposals, earnings before interest, taxes, depreciation and amortization and operating profit are likely to increase this year, Holcim said, inline with an earlier forecast.
Holcim faces an in-depth European Union probe into an asset swap with Mexican rival Cemex SAB (CX:US) which is due to be finalized in the fourth quarter. Under the terms of the deal Cemex, the biggest cement maker in the Americas, will buy Holcim Ltd. (HOLN)’s Czech operations while selling plants in western Germany to the Swiss company as part of an asset swap to improve profitability in Europe.
Regulators said Holcim’s purchase of Cemex’s western German plants may substantially reduce competition.
The companies will also combine operations in Spain, with Holcim paying Monterrey, Mexico-based Cemex 70 million euros ($94 million) in cash as part of the transactions.
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