Holcim's full-year volumes down, net income rises on Leadership Journey initiatives

Holcim's full-year volumes down, net income rises on Leadership Journey initiatives
Published: 26 February 2014

Tagged Under: Cost-cutting Results Holcim 

Holcim reported saw volumes decline in its cement, aggregates and ready-mix concrete segments in 2013, but operating EBITDA margin and net income increased due to the implementation of the Holcim Leadership Journey.

Full-year net sales were down 6.8 per cent to CHF19.72bn, but increased on a like-for-like basis by 0.2 per cent. The group reported that it was significantly harder to implement price increases in various markets than in the previous year. The Swiss franc exchange rate rose in 2013 against various currencies, particularly the Indian, Indonesian, and Brazilian currencies, while it weakened in respect of the Euro. Overall, this had an adverse impact of CHF798m on the net sales.

The group achieved operating EBITDA of CHF3.90bn compared to CHF3.89bn in the previous year. Postive contributions were made by Holcim US as well as operations in the UK, Germany, Ecuador and the Philippines.  By contrast, operating EBITDA was negatively impacted by group companies in India, Mexico, Canada, and Brazil. On a like-for-like basis operating EBITDA rose by seven per cent, while 2012 operating EBITDA was impacted by restructuring costs of CHF 239m.

Operating profit improved by 34.8 per cent to CHF2.36bn, up from CHF1.75bn. The Holcim Leadership Journey made a significant contribution to the positive result and achieved the objectives set for 2013. The various work streams of the strategy gathered pace from the middle of the year, contributing CHF943m to consolidated operating profit. This means that the Holcim Leadership Journey, together with the achievements of 2012, made a total contribution of CHF1.10bn. ROIC before taxes rose from 6.8 per cent in 2012 to 9.1 percent.

Net income rose sharply by 59.3 per cent to CHF1.60bn, up from CHF1.00bn. Net income attributable to shareholders doubled to CHF1.27bn from CHF610m.

Net debt fell by CHF864m to CHF9.46bnn.

Regional performance
In the 2013 financial year, Holcim’s cement sales fell 2.4 per to 138.9Mt from 142.3Mt in the previous year. The decline was mainly attributable to lower volumes in group region Asia-Pacific, while in Europe cement sales advanced mainly due to the sustained high demand in Russia and Azerbaijan.

Aggregates volumes contracted in 2013 by 2.4 per cent to 154.5Mt. Demand was higher in North America due to positive market development in the US. In Asia Pacific volumes were lower mainly on account of lower demand in Australia. Restructuring of aggregates activities resulted in a more pronounced fall in volumes in Latin America.

Deliveries of ready-mix concrete fell by 12.9 per cent to 39.5Mm3, as many group companies were restructuring their activities to improve their profitability in this segment. Asphalt sales were impacted by lower demand in Canada and the US, while sales in the United Kingdom were higher. Consolidated volumes contracted by two percent to 8.9Mt.

2014 outlook
For 2014 Holcim expects the global economies to show another mixed performance. It believes construction markets in Europe have bottomed out with a "slow recovery in sight". North American markets are likely to continue benefiting from further recovery, especially in the US. Latin America should show slight growth this year but Mexico could face continued uncertainties. Growth in the Asia-Pacific region is seen slowing while Africa Middle East should see gradual improvements.

The group expects cement volumes to increase in all regions this year, but did not provide any figures. Aggregate volumes are forecast to remain flat as negative volumes in Latin America are expected to offset gains in most other markets. Ready-mix concrete volumes are also likely to increase in most regions with the exception of Europe and Latin America.

The Board of Directors and Executive Committee expect that organic growth in operating profit can be achieved in 2014. “The ongoing focus on the cost base coupled with all the benefits expected from the Holcim Leadership Journey will lead to a further expansion in operating margins in 2014,” Holcim added.