Cost cuts help Holcim 2Q net profit edge ahead

Cost cuts help Holcim 2Q net profit edge ahead
15 August 2013

Holcim has reported a slight increase in 2Q net profit as cost cuts helped boost profitability but weaker demand in India, Canada and Mexico fell short of expectations.

Net income edged up to CHF383m (US$411m) from CHF377m a year earlier. Revenue fell 3.3 per cent to CHF5.33bn in the three months through June as Ambuja Cements Ltd, its Indian subsidiary, struggled with an early monsoon season and weaker-than-expected economic growth in the country. Last month, Holcim restructured its operations in India to cut costs as profits at cement makers in the country come under pressure from a slowdown in home building and infrastructure projects.

"Global growth in the first half of 2013 was weaker than foreseen, with construction hurt by the severe winter as well as the bad weather in many regions," it said in a statement. "Demand fell short of expectations in India, Canada, Mexico and Morocco in particular."

India dragged on sales in Asia, which slipped 6.4 per cent, while in Europe, another important market, business was also difficult with revenue falling 2.6 per cent on the year.

Cement sales are expected to rise in 2013, but Holcim doesn't expect to reach the previous year's levels in the aggregates and ready-mix concrete businesses. "While the Asia Pacific and Latin America regions are expected to see higher cement sales, we are less optimistic with regard to Europe and Africa Middle East," it said.

Holcim achieved cost savings of CHF329m in the first half of 2013, and suggested that it will comfortably exceed its CHF400-500m full-year target. it confirmed its guidance to achieve organic growth in EBITDA and operating profit in 2013 but omitted the word "significant" which it had used in the previous quarter.

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