Holcim: brighter prospects for 2011

Holcim: brighter prospects for 2011
Published: 03 March 2011

Swiss cement major Holcim has reported a fall in 2010 net profit and looks to increase prices to offset rising input costs. However, for this year, the group expects a rise in sales across the board as construction markets recover in western Europe and North America.

“From a global perspective, it can be expected that the construction sector in the mature markets will recover and that the growth in the emerging markets will continue. Holcim therefore anticipates an increase in sales across all segments,” the company said in a statement.

Holcim’s turnover improved 2.5% to CHF21,653m, but in euro terms there was a 12.5% increase to €15,691m. Operating EBITDA declined 2.5% to CHF4513m but rose in euros by 6.7% to €3270m. The trading profit came down by 5.8% to €1898m, while the net attributable profit was off by 19.6% at €857m.

Asia Pacific has taken over from Europe as the leading source of turnover, rising by 24% to €6366m. Cement deliveries improved 6.1% to 71.4Mt. The strongest volume increases were seen in Sri Lanka, Bangladesh and Thailand and only in Australia and New Zealand were shipments lower. One important factor was the expansion of Ambuja Cement’s capacity in India, which resulted in an above-average increase in cement shipments and the new 12,500tpd kiln line at ACC’s Wadi plant is currently one of the largest in the world.

Holcim’s sharpest revenue decline came from its European operations as a harsh winter and difficult economic situation in southern and eastern Europe negatively impacted results. Turnover was down 10.7% to €5228m and EBITDA 15.2% to €836m. Cement deliveries were down 2.6% to 26.2Mt. While the company expects demand in western Europe to remain subdued in the coming months, a slight improvement is expected. However, eastern and southeastern construction markets are expected to continue in a muted manner. Only in Russia does it expect to see significantly higher sales.

In the USA, construction activity recovered slightly during the course of the year and cement deliveries improved 3.7% to 11.1Mt thanks mainly to good Canadian markets and a full year’s benefit of the new 4Mta Ste Genevieve works on the Mississippi. Cement volumes rose by 7.9% in Canada and by 2.2% in the USA, but US prices came down by 6.9%. The company noted that with the North American economy expected to improve, slight rises in US consumption are forecast.

In Latin America, construction activity increased and the group sold notably more cement in Brazil, Argentina and Colombia, with downstream products also being ahead in Chile. Turnover rose 2.8% to €2754m but EBITDA declined 7.2% to €799m. Despite falling volumes in Ecuador, Mexico and the rest of Central America, consolidated cement sales remained virtually stable. The new 1.6Mta Hermosillo plant in Mexico has strengthened the company’s position in the northwest of the country. A third cement mill increased the capacity of the Nobsa works in Colombia to 2.1Mta.

The Africa and the Middle East region is by far the smallest for Holcim and turnover decreased by 9% to €878m and EBITDA eased by 3.8% to €287m. Cement deliveries edged ahead by 1.1% to 8.9Mt. Holcim increased volumes in the Lebanon and in western Africa and the cement tonnage in the Indian Ocean area was stable, but concrete demand in la Réunion weakened.

In an effort to counter rising fuel and raw material costs, particularly at its Indian ACC business, Holcim said it will increase prices. "The group will do its utmost to counter the rise in production and distribution costs by vigorously pursuing price increases," the company noted.

In terms of new production facilities, cement capacity was increased by 4.2% to 211.5Mt. In 2011, Holcim expects to add an additional 7.4Mt, of which India should account for 3.6Mt, or some 49% of the total, Alpha Cement in Russia for 2.1Mt and Garadagh Cement in Azerbaijan for 1.7Mta, largely to replace its wet capacity. Next year, Holcim Ecuador should add 1.8Mt and, so far, 2.2Mt of new capacity has been announced for 2013, but there may also be a new Brazilian plant coming on-stream that year.