LafargeHolcim ‘on track’
By Sandy Guthrie27 July 2018
Strong revenue growth in the second quarter of the year is being reported by LafargeHolcim, which also claimed it was on track to deliver its Strategy 2022 – Building for Growth”.
The materials producer said its revenue was up 6.2% in the second quarter, and 4.8% in first half on a like-for-like basis, and it confirmed its full year targets for 2018.
CEO Jan Jenisch said, “I am very satisfied with the sales growth we achieved in the first half of the year, especially as we gained momentum in the second quarter.
“Increasing energy prices and cost inflation have been challenging. Operational issues in some markets have been addressed and we expect to deliver increasing margins as we capture the upward trend in demand through the second half of 2018.”
He said the group remained focused on delivering Strategy 2022 – Building for Growth. Recent bolt-on acquisitions in the US and France were said to demonstrate its focus on capturing the growth opportunities in its most attractive markets.
“The beneficial effects of simplification and cost reduction are also becoming more visible,” he said. “We continue to focus on delivering our 2018 targets.”
LafargeHolcim reported total net sales of CHF7.44 billion (€6.42 billion) in the second quarter. It said that for the first six months of 2018, net sales grew 4.8% on a like-for-like basis.
The first six-months saw recurring EBITDA (earnings before interest, taxes, depreciation and amortization) down -1.4% on a like-for-like basis. LafargeHolcim said that earnings increased in the second quarter, with recurring EBITDA up by 1.5%, largely offsetting a soft first quarter.
It said these strong overall trends were reflected in earnings and revenue growth for the six months in all regions apart from Middle East Africa, where conditions “remained difficult”.
The group reported that given these trends, as well as “the solid execution of simplification and performance measures”, the full-year targets for 2018 had been confirmed.
As part of Strategy 2022 – Building for Growth, LafargeHolcim said there had been good progress on all initiatives to deliver “a cost-disciplined operating model and corporate-light structure”.
It said that the regional and top management organisations had been successfully streamlined; Miami, US, and Singapore regional offices had been closed; the Zurich, Switzerland, and Paris, France, corporate office reorganisation was progressing; and countries had initiated extensive fixed-cost restructuring.
LafargeHolcim confirmed that all actions were expected to be completed by the first quarter of 2019, delivering cost savings of CHF400 million (€345.01 million) per year, measured at 2017 currency exchange rates.
The group confirmed its targets for 2018 of net sales growth of 3 to 5%, and an over-proportional increase in recurring EBITDA of at least 5% on a like-for-like basis.
It predicted strong market trends in Europe, continued solid growth in North America, good growth prospects in most countries in Latin America, India and China to remain supportive, Southeast Asia to stabilise and for the challenging outlook in a number of countries in Middle East Africa to continue.
In the Asia Pacific region, it said strong net sales and earnings growth had been achieved despite mixed market conditions.
China was described as a key driver in the first half, with a continued rise in profits supported by pricing momentum and sustained benefit from the vertically-integrated waste recycling business.
India delivered growth in net sales and profits driven by solid volumes, supported by sustained market demand and higher sales of premium products, it said.
Conditions in Southeast Asia remained challenging, although encouraging trends were observed in the Philippines and Indonesia. Revenue grew particularly in the second quarter, it reported.
In Europe, LafargeHolcim said top line and profit had grown throughout the first half of 2018. Strong market trends in most European countries led to improving volumes in all segments compared to the first half of 2017 on a like-for-like basis, it added, with strong momentum in the second quarter.
Net sales growth accelerated in Germany and France, although it claimed that production constraints had temporarily affected earnings growth. Volumes in the UK were broadly stable, it said, but profits were lower on the back of higher costs. Eastern and Central Europe were also said to have shown a strong performance.
Latin America was said to have achieved strong growth in top line and earnings, supported by solid performance in Mexico. Performance in Argentina was also described as good, despite higher costs to fulfil demand and currency volatility. Performance in Brazil was impacted by the national transport strike in May.
In the Middle East Africa region, conditions in several countries remained challenging, notably Algeria and Iraq, the group reported. Egypt’s performance was solid in the face of an increasingly volatile environment, it added.
Top line trends in Nigeria continued to improve, driven by higher market demand and commercial initiatives, it said, adding that results in South Africa had been affected by current operational issues.
In the North American market, earnings improved with volumes in the US accelerating throughout the first half of 2018 supported by positive market conditions as well as successful commercial initiatives.
The contribution from Canada was solid, said LafargeHolcim, despite persistent difficult conditions in the Prairies.
Earnings for the region overall were said to have been constrained by higher logistics costs and maintenance activities to cope with demand growth.