Holcim Ltd is to report a sharp increase in first quarter profits next Thursday compared to a very poor year-earlier period, with the cement maker’s business environment pointing upwards, analysts said. However, risks such as rising energy prices, currency fluctuations and weaknesses in selected markets remain, they warned. Net profit is forecast to rise to Sfr30-106m, from Sfr 10m a year ago, and EBIT at Sfr330-375m, against Sfr 290m. Sales are expected to come in between Sfr 2.627-2.678bn, compared to Sfr 2.467bn, they said.
’Following strong peer group results, we forecast strong like-for-like sales growth of 9 per cent,’ Citigroup Smith Barney said in a note. ’In our view, the group is undergoing a substantial profit recovery due to non-repetition of one-off costs and a wholesale cost saving programme across the group,’ it said.
Although one of the lowest risk companies among the European cement producers, Holcim remains exposed to the continuing weakness of the US dollar, with over 50 per cent of the group’s earnings in dollar or dollar denominated currencies, Citigroup warned. Moreover, higher energy costs could weigh as well as the risk of a US economic recession and potential weakness in certain European markets, it added.
’The first quarter 2003 was a very poor quarter due to a negative weather impact on the Northern hemisphere. Therefore the first quarter 2004 result is not comparable,’ Pictet analyst Matthias Egger noted. ’We will closely watch the impact of energy price increases,’ the analyst said, adding he believes that price increases will, however, more than compensate for rising energy price. Egger, who rates the stock a ’neutral’, forecasts a net profit of Sfr 106m, EBIT of Sfr 375m, and sales of Sfr 2.627bn.