LafargeHolcim reports 9M15 results and outlines 2018 targets

LafargeHolcim reports 9M15 results and outlines 2018 targets
25 November 2015

LafargeHolcim today released its first set of results since the closing of its merger, with nine-month performance impacted by merger and restructuring costs, adverse foreign exchange, an economic slowdown in China and Brazil as well as softness in France and Switzerland. Good performances were seen in the US, UK and most countries in Asia-Pacific and Latin America. The group also announced medium-term targets ahead of the Capital Markets Day (CMD) next week.

Consolidated net sales in the nine-month period amounted to CHF22,042m (US$21,606m) at constant exchange rates, a slight decrease of 0.6 per cent at constant exchange rates, as better performances in North America, Latin America and the Middle East Africa (MEA) did not fully compensate for lower sales in Europe, China and India. During the third quarter, Latin America and Asia Pacific (excluding China and India) continued to see positive trends, while MEA group region experienced more difficult conditions in Egypt, Nigeria and Zambia. Overall, net sales in the quarter reached CHF7825m, down 1.1 per cent like-for-like.

Forex fluctuations had a significant negative impact on net sales of CHF1.4bn and adjusted operating EBITDA of CHF0.3bn in the first nine months of 2015. This was in part due to the effect of the unpegging of the Swiss franc from the euro at the beginning of the year, and in part to the devaluation of several emerging market currencies during the period. The most significant impacts were experienced across Europe, Latin America, MEA (with the largest impacts in Algeria and Nigeria) and Asia Pacific (mainly in Australia and Malaysia).

Adjusted operating EBITDA was down 3.2 per cent like-for-like to CHF4355m in the nine months through September. In the third quarter, adjusted operating EBITDA came to CHF1639m, down 8.9 per cent, or down 7.2 per cent excluding CO2 sales of CHF36m in the third quarter. 

Merger and restructuring, as well as other one-off costs, reached CHF699m in the year to date, of which CHF250m are merger transaction costs and CHF320m are merger implementation costs.

 Cash flow declined 55 per cent in the nine-month period to CHF697m and in the third quarter to CHF315m. This is due to merger costs, lower operating EBITDA and a "disappointing performance in working capital in the third quarter." Detailed plans are in place to improve working capital performance by year end.

In the third quarter, capital expenditure came to CHF581m, bringing the year-to-date total to CHF1688m. Net debt stood at CHF18.3bn at the end of September, impacted by the seasonality of working capital.

Volume update
Sales volumes across all product lines declined slightly in the first nine months of 2015 due to "lower than expected demand in a number of markets" impacted by an economic downturn notably in Brazil and China, and a lack of infrastructure projects in India. In the third quarter, volume trends stabilised in countries such as Argentina, Mexico, Philippines and the UK continued to perform well. In the US, where market recovery is well underway, the group is increasing capacity through the revamping and reopening of plants.

On a pro-forma basis, consolidated cement volumes for the group in the first nine months slipped by 1.3 per cent to 189.2Mt as increased shipments in North America and Latin America were offset by declines in Europe and China. Solid increases were reported in Egypt, Mexico, Philippines Canada and the US.

Aggregate volumes were 1.6 per cent lower at 216.3Mt as increases in the US and MEA did not compensate for lower volumes in Europe over the nine months and in Western Canada in the third quarter.

Ready-mix concrete volumes were down by three per cent to 42.6Mm3, mainly because of lower performances in Brazil, US and France.

Synergy action plans
The group reported that synergy action plans started to deliver with CHF36m generated in the third quarter. These primarily derived from immediate actions such as optimising logistic lows in overlap countries and launching a review of procurement contracts.

2015 outlook
The group estimates that cement volumes will be higher for 2015 in all regions except Europe. Aggregate volumes are expected to be higher in all regions with the exception of Latin America and Europe. Ready-mix concrete volumes are expected to decrease in all regions bar Asia Pacific group region.

Net debt is expected to below CHF17.5bn. The group confirmed 2015 synergy targets with CHF100m expected by the end of the year and capital expenditure below CHF1.4bn for the 2H15.

New targets
Management also announced new three year targets to 2018 including cumulative CHF10bn of FCF, EBITDA above CHF8bn in 2018, capex of CHF3.5bn and divestments of CHF3.5bn. More details are expected during the CMD, to be hosted on 1 December 2015.

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Tagged Under: LafargeHolcim Results