2nd UPDATE: Holcim Cost Cuts Boost Profit; Upbeat For 2010
(Rewrites and adds detail and comment.)
By Martin Gelnar
Of DOW JONES NEWSWIRES
ZURICH -(Dow Jones)- Cement and building aggregates company Holcim Ltd. (
HOLN.VX) Wednesday reported flat third-quarter net profit but rising margins due
to a tight grip on costs, and said its strength in emerging markets should help
drive profitable growth next year.
The Switzerland-based cement giant posted a third-quarter net profit of 673
million Swiss francs ($666 million), unchanged from the year-ago level, beating
market expectations of CHF474 million. The bottom line was boosted by
restructuring measures, including job cuts and plant closures, and by the sale
of carbon dioxide emission certificates worth CHF54 million. Companies can sell
such rights to emit a specified amount of greenhouse gases per year or carry
them forward to the next period, depending on future production needs.
Sales slipped 18% to CHF5.69 billion from CHF6.91 billion, below consensus
estimates of CHF5.76 billion.
Operating profit dropped to CHF1.03 billion from CHF1.12 billion but the fall
was less pronounced than that of the top line, leading to a rise in the
operating profit margin to 18.1% from 16.3% a year ago.
Analysts said the earnings and the outlook were strong, adding the results
underscored the company's ability to deliver solid results despite contracting
U.S. and European markets.
"The company surprised massively on the margin side after taking out costs and
capacity," Bank Clariden Leu analyst Markus Baechtold said, reiterating an
outperform rating and a CHF83 price target.
Bank Vontobel analyst Serge Rotzer, who has a buy rating on the stock, said he
would lift 2010 earnings estimates by roughly 10%.
At 1115 GMT, the shares traded up CHF3.55, or 5.1%, to CHF73.20, while the
benchmark SMI index traded up 0.6%.
Holcim's performance contrasts with those of global rivals Lafarge SA (LG.FR)
and Cemex SAB (CX). France's Lafarge last week lowered its volume expectations
for 2009 after reporting a 38% drop in third-quarter net profit, while Cemex in
October cut its operating profit forecast for 2009 after it reported volumes
were down in practically all its markets in the third quarter.
Holcim, which has a high exposure to fast-growing emerging markets, said it
would exceed its previous savings target of CHF600 million for the year. Holcim
has cut some 10,000 jobs over the past 12 months and shuttered or idled plants
in countries including the U.S., Russia, Mexico, Brazil and Australia.
It didn't provide a specific outlook but said operating profit should start
growing again next year, adding it has become more positive on North America,
where the market should rebound in the second half of next year due to economic
stimulus programs.
Business in Europe, its main market, is expected to remain subdued, while the
situation in emerging markets continued to be solid.
Chief Executive Markus Akermann was upbeat on economic growth prospects.
"I simply don't see any sign of slippage for the bigger part of our group," he
told reporters, pointing out Holcim's strong position in emerging markets such
as China and India, where Holcim is the No. 2 cement producer.
In the fourth quarter, Holcim likely will release EUR50 million to EUR60
million in provisions for a German cartel fine that was reduced earlier this
year, Chief Financial Officer Theophil Schlatter said.
No further capacity adjustments were foreseen for 2010, the CFO added.
Akermann reiterated the company isn't interested in Anglo American PLC (
AAL.LN) unit Tarmac, slated for disposal since 2007. Such a transaction would
create large overlaps in the U.K. and would face regulatory hurdles, he said.
The company recently bought the Australian business of rival Cemex SAB (CX)
for CHF1.7 billion.
Company Web site: www.holcim.com
-By Martin Gelnar, Dow Jones Newswires, Dow Jones Newswires; +41 43 443 8042;
martin.gelnar@dowjones.com
(END) Dow Jones Newswires
11-11-090712ET
Copyright (c) 2009 Dow Jones & Company, Inc.
|