Jefferies reduces Holcim’s full-year EBITDA estimates

Jefferies reduces Holcim’s full-year EBITDA estimates
04 November 2010

Due to its concerns about the shorter-term outlook in India, analysts at Jefferies International are reducing its operating EBITDA estimates for Holcim by 4% for this year and by 6% for next year.

In a recent note, Jefferies said it expects the Swiss-based maor to report a 6% decline in its third quarter operating EBITDA to around SF1388m. Despite an additional three month contribution from last year’s acquisition in Australia of around SF80m, it expects a reduction in the profit contribution from Holcim’s Asia Pacific businesses. Its Indian subsidiaries ACC and Ambuja Cements have already reported declines of 69% and 35% respectively in their 3Q EBITDA in local currency terms.

Reducing full year estimates. Jefferies have amended its forecasts for Holcim’s Indian subsidiaries to make them consistent with Bloomberg’s estimate of consensus. In Swiss Franc terms this equates to a decline of around 6% this year, and 1% next year, if we assume the Swiss Franc to Indian Rupee exchange rate remains at its current level.

Amending its Holcim estimates for these estimates, results in a reduction in our operating EBITDA estimate from SF4,907m to SF4,687m for this year and from SF5,248m to SF4,911m for next year. Our revised estimates are 6% below Bloomberg’s estimate of consensus for this year (SF4,970m) and nine per cent below the Bloomberg consensus estimate of SF5413m for 2011.

Jefferies concerns on India are shorter-term. The heavier than normal monsoons have with the industry’s current low rates of capacity utilisation, resulted in larger than normal price declines. However, in the medium term, the additional rainfall will boost agricultural production and ultimately cement demand. In its view in the longer-term, the excess cement capacity in India will be fully utilised and additional capacity required as cement consumption per capita in India is currently only around 170kg.
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