Cement Giant Lifts Profit

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Tuesday, April 29th, 2014
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As it flags possible asset sales in order to gain approval of a mega-merger with French outfit Lafarge to create the world’s biggest cement, concrete and aggregates firm, Swiss giant Holcim has recorded a 9.3 percent rise in first quarter profit as earnings rose from CHF4.088 billion ($A5.007 billion) in the first quarter last year to 4.323 billion in the three months to March amid higher sales volumes across all product segments.

Driving the result was the Group’s European business, which saw profits rise from CHF29 million to CHF99 million as sales of asphalt, cement, ready-mix concrete and aggregates were up by 24.2 percent, 20.1 percent, 17.8 percent and 8.7 percent respectively on the back of rising sales in France, Germany and Russia – albeit with the outlook for Russia remaining highly uncertain amid political and economic uncertainty in that market.

This helped offset declining conditions in the Asia Pacific and Latin America regions and continued trouble in North America, where Holcim lost CHF71 million after having lost CHF87 million in the same quarter last year.

Holcim

The result comes as Holcim is in the process of creating a massive ‘ merger of equals’ with French giant Lafarge, which would create the world’s largest cement outfit with a capital value of more than $50 billion (before divestures).

Whilst few details were given in the latest announcement, the company has acknowledged asset sales will most likely be necessary in order to get the deal past anti-trust authorities. Media reports suggest the two companies will need to shed around five billion euros in assets across markets such as France, Germany, Romania, Serbia, Canada, Morocco and the Philippines.

Going forward, Holcim does not give specific numbers but says it expects organic growth in profits to be achieved in 2014 amid increases in volumes of both cement and (in most regions) ready-mix concrete, albeit with sales of aggregates remaining flat.

In geographic terms, it expects mixed market conditions as growth in Asia slows but Europe bottoms out and conditions improve in North America.

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