Holcim held back by material costs

By Helen Wright04 May 2011

Despite reporting a +6,8% like-for-like increase in net first quarter sales to CHF 4,6 billion (€ 3,6 billion), inflation-induced cost increases on raw materials and energy dampened overall results for cement producer Holcim.

The company said above-average cost increases for materials such as coal and petcoke, as well as for distribution and energy, had restrained profitability.

Nevertheless, Holcim reported a +85,1% increase in net income to CHF 122 million (€ 95,3 million), but pointed out that the increase has been distorted by a one-off tax charge of CHF 182 million (€ 142 million) that had lowered the previous year's first quarter results.

"Holcim experienced higher sales volumes in all segments, and in several markets prices could be adjusted. However, this was not enough to absorb fully the above-average cost increases for raw materials," the company said.

In Europe, a mild winter provided fuelled +12,5% growth in net sales to CHF 1,4 billion (€ 1,1 billion). Holcim reported brisk demand for ready-mix concrete in the UK, while in France sales increased across the company's entire product range - cement, aggregates, ready mix concrete and asphalt - as demand for building materials grew.

In Germany, Holcim said the economic recovery had been an impetus for both private and public sector construction projects, leading to higher sales volumes in all product segments. Increasing construction activity in Switzerland also produced higher sales, with ready-mix concrete enjoying particularly strong demand.

However, the company sold less aggregates and ready-mix concrete in Spain, where residential and infrastructure construction remained virtually idle.

Difficult economic conditions also persisted in Eastern Europe, where construction activity remained weak overall despite investment in infrastructure, according to Holcim.

Meanwhile, the company reported a -7% decrease in net first quarter net sales in North America CHF 396 million (€ 310 million) despite an increase in construction activity during the first quarter.

Holcim said demand for building materials continued to grow in the emerging markets. In Latin America, net sales grew +6,1% on a like-for-like basis to CHF 804 million (€ 628 million), while Asia Pacific sales grew + 9,7% to CHF 2 billion (€ 1,6 billion).

However, weaker market conditions were reported in Africa and the Middle East, where overall net sales dropped -7,9% during the first quarter to CHF 218 million (€ 170 million).

Holcim said it was confident that the construction sector in mature markets would recover, while growth in emerging markets would continue.

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