Holcim estimates

Holcim estimates
Published: 11 November 2003

Despite the onset of winter analysts at Merrill Lynch hope
for some early green shoots to emerge.

Holcim announces nine month figures this week ­ despite
winter approaching Merrill Lynch analysts hope for some Œgreen shoots¹.
Price wars ending in Germany/Philippines/Egypt may not yet be visible in Q3,
but weather effects and reduced forex impact help, and the poor cashflow and
US performances should begin to turn around.

Merrill Lynch expects sales to fall 7.5% to CHF9.18bn. EBIT by 3% to CHF1,511mn and net income to rise 4% to CHF537mn. The improvement vs. larger falls at H1 comes mainly from currency  and weather effects (bad in H1 in USA and Q302 in Europe) as with Lafarge,  while improvements expected in the US EBIT is needed if Holcim is to come  close to its Œflat local currency¹ aim. Having seen little y-o-y reduction  in debt (all from currency translation so far) Holcim needs to begin to cut  debt given stretched credit ratios ­ this should begin in Q3 despite ongoing  need for high capex to turn around the US performance. Merrill has cut its FY  EBIT forecast by 3 per cent and EPS by a similar amount, with all regions bar
Asia-Pacific reduced and additional currency impacts. It also rates Holcim a sell ­ cheaper peers,  with better recovery potential and less currency risk offer greater opportunity, Merrill Lynch concludes.