LafargeHolcim adjusts medium-term targets

LafargeHolcim adjusts medium-term targets
18 November 2016

LafargeHolcim has adjusted its medium-term group targets, according to the group’s 2016 Capital Markets Day statement.

In the last 12 months, the company reached net sales of CHF27.8bn and sold 244Mt of cement, 289Mt of aggregates and 56Mm3 of ready-mix concrete.

LafargeHolcim has identified and initiated CHF200m of additional cost savings, which enables it to upgrade its 2018 adjusted operating EBITDA target to CHF7bn. his translates into a 2018 run rate operating free cash flow range of CHF2.8-3.3bn, or CHF5 per share. The cement producer now expects a cumulated operating Free Cash Flow of CHF 7.5 billion over 2016-18.

In terms of capex, the company said it will continue to pursue rigorous capital expenditure management, keeping capex below CHF2bn in 2016 and under CHF3.5bn for 2016-17.

In 2016-18 LafargeHolcim expects to enter 19.5Mta of new cement capacity into service – most of which has already been commissioned. Before year-end 2017, it plans to bring online 0.4Mta at its Ravena, USA, 1Mta at St Genevieve, USA, and 1.1Mta at its HPI 10M works in the Philippines.

Eric Olsen, CEO of LafargeHolcim said: “LafargeHolcim has hit its stride. The Group is on track and the momentum of earnings and cash flow growth is accelerating. We re-affirm our commitment to a solid investment grade rating. Our potential to grow, benefiting from our unique portfolio, operational leverage, ability to differentiate our offer, and optimization of our cost base, underpins our 2018 targets. The result for shareholders is that, within our strict capital allocation discipline, we will deliver significant cash returns including the first tangible measures announced today.”

In a review of its worldwide operations, the company sees opportunities across its operational geography. In Asia-Pacific, the company views its outlook positively, supported by “improved route-to-market approach”. Opportunities include India’s long-term growth and performance improvement potential, continued positive market development in the Philippines and increasing infrastructure spending in Australia.

Population growth and ongoing urbanisation in the Middle East and Africa are forecast to drive cement consumption in this region with consumption growth on a per capita basis expected at around 3-5 per cent. To meet the needs of these markets, LafargeHolcim is bringing extra capacity online in Nigeria, Algeria, Uganda, Kenya, Cameroon and Côte d’Ivoire as well as improving its logistics network and its fuel diversity in countries such as Nigeria and Egypt.

North America is expected to see strong market growth from infrastructure and residential construction with oil-markets rebounding in the mid-term, providing a more hopeful business environment. To capture this growth, LafargeHolcim is adding new capacity to its current assets in the US.

In Latin America, the mid-term recovery of the Brazilian market and structural factors such as infrastructure and urbanisation are anticipated to give the cement producer a boost as per capita cement demand growth is forecast at 1-3 per cent.

With some western European markets showing signs of recovery and a mature European sector interested in value-added products and services, the cement producer also sees strong margin improvements in this stabilising market.

Published under Cement News

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