LafargeHolcim 1Q17 comparable net sales rise

LafargeHolcim 1Q17 comparable net sales rise
03 May 2017


LafargeHolcim reported today that net sales increased by 5.3 per cent on a like-for-like basis driven by favourable pricing and improving volume momentum.

Eric Olsen, CEO of LafargeHolcim, said: "Our good Q1 performance has got us off to an excellent start for 2017 and marks our fourth consecutive quarter of earnings growth.

"Continued pricing strength, improving volume momentum and synergies underpinned our results across the portfolio. Our Middle East Africa region performed particularly well with a recovering Nigeria making a notable contribution to earnings growth. India showed encouraging signs in the quarter with the impact of demonetisation behind us while our US business was robust despite tough prior year comparisons on the back of mild weather in the first three months of 2017.

"Our performance in the first quarter, our continued strong execution combined with our diverse portfolio reinforces our confidence in achieving our full year guidance and our 2018 targets."

Group performance
The group recorded increased like-for-like operating EBITDA Adjusted in four of its five regions: Europe, Latin America, North America and Middle East/Africa (MEA). However, challenging conditions in Indonesia and Malaysia, plus a relative softening of the Philippine market negatively impacted comparisons for the Asia Pacific region.

After a decline in 2016, the group's global cement volumes of 48.1Mt were flat on a like-for-like basis in 1Q17 supported by a strong March. Aggregate volumes of 51.7Mt rose by 3.9 per cent like-for-like, helped by good performances in the US and UK. Meanwhile, ready-mix concrete volumes fell 1.8 per cent like-for-like to 11.4Mm3.

The improvement in cement pricing seen over the previous year continued in 1Q17, with a 1.2 per cent sequential increase over 4Q16 and a 5.3 per cent improvement on a YoY basis, driven largely by positive movements in the MEA region and Latin America.

Synergies contributed CHF94m in the quarter and management stated that the group is on track to achieve the target run rate of CHF400m for 2017. Since the merger, nearly CHF900m in synergies have been delivered as at the end of 1Q17.

Operating EBITDA adjusted was CHF801m, up 14.5 per cent on a like-for-like basis. Favourable pricing and cost reduction were reflected in higher margins, up nearly 120 basis points like-for-like in 1Q17 despite inflation and an increase in energy costs.

Net income group share of CHF226m compares with a loss of CHF107m for 1Q16. The improvement in net income includes the profit recognised on the disposal of Vietnam in 1Q17 of CHF339m.

Net debt stood at CHF15bn at quarter end, marginally up on the 31 December 2016 figure, and down around CHF3bn compared to 1Q16. This reflects cash receipts from the Vietnam divestment and capex discipline during the period which helped offset the seasonal impact on cash flow, the group noted.

Regional performance
In the Asia Pacific region, challenging market conditions in some key countries – notably Indonesia and Malaysia – led to a 13.4 per cent decline in operating EBITDA adjusted for the region on a like-for-like basis. Cement and ready-mix volumes were flat in the quarter at 23Mt and 3Mm3, respectively, while aggregates volumes rose by 9.3 per cent to 7.1Mt.

Europe benefitted from higher cement and aggregate volumes (8.2Mt and 26.6Mt, respectively) to record an 8.7 per cent improvement in operating EBITDA adjusted on a like-for-like basis.

In Latin America a combination of positive pricing trends supported by cost discipline contributed to strong growth in earnings despite an overall decline in volumes. Cement volumes fell by 3.5 per cent on a like-for-like basis to 6Mt, while the decline in aggregates was 33.1 per cent to 1.1Mt and ready-mix concrete volumes fell 7.9 per cent to 1.7Mm3. Operating EBITDA Adjusted was up by 17.7 per cent on a like-for-like basis compared to the previous year.

Middle East/Africa
The MEA group region delivered strong earnings growth in the first quarter. Operating EBITDA adjusted was 48.5 per cent higher than 1Q16, with improved pricing outweighing lower volumes. Cement volumes were down by 4.1 per cent like-for-like to 9.1Mt, aggregates fell 8.7 per cent to 2.5Mt and ready-mix concrete were down 8.5 per cent to 1.2Mt.

North America
North America region recorded an improvement in earnings despite a tough prior-year comparison due to unusually mild weather in 1Q16.  On a like-for-like basis, cement volumes fell 4.5 per cent to 3.3Mt, while aggregate volumes were ahead by 5.3 per cent to 14.4Mt and ready-mix volumes increased by 2.5 per cent to 1.6Mm3.

Outlook
Going forward, LafargeHolcim said it will continue its focus on lower capex, structural cost savings, synergies and commercial differentiaon of its products and building solutions. This will be be supported by the contributions of several markets such as the US, India, Nigeria and some countries in Europe, it addded. Overall, management reiterated its guidance of demand in its markets to increase by between 2-4 per cent this year.

Published under Cement News

Tagged Under: Results LafargeHolcim