Holcim releases half-year results
By Andrew Macklin
July 29, 2015 – In the first half of 2015, Holcim generated higher cash flow from operating activities and increased net income supported by the gain from the divestment of the Group’s minority shareholding in Siam City Cement in March. However, the Group was faced with an overall challenging development in the first half of 2015 as lower than anticipated demand in some markets caused volume declines in cement and impacted financial performance. Positive dynamics in markets such as the United Kingdom, the United States, Mexico, and the Philippines were not able to compensate for these effects.
Holcim was again confronted with a mixed global economic environment that was influenced by moderate growth levels as well as political and economic uncertainty. Although lower oil prices influenced economic development positively in oil-importing regions, ongoing investment weakness more than offset these effects in both advanced and emerging markets. With its strong focus on prices and cost management as well as its balanced geographic footprint, Holcim was able to mitigate some of these effects. Cement volumes declined in all Group regions with the exception of North America and Latin America. More cement was sold in important markets including Romania, the Philippines, Vietnam, and the United States. Aggregate shipments were higher, mainly as a result of the acquisition of Cemex’s operations in Western Germany as well as solid growth in the United Kingdom and the United States. Ready-mix concrete volumes were slightly higher than last year’s period.
Adjusted for merger-related costs, operating EBITDA was lower, despite the positive developments in the Group regions North America and Latin America. Operating profit adjusted for merger-related costs also declined. While Group companies including Aggregate Industries UK, Holcim US, Holcim Mexico, and Holcim Spain reported increased like-for-like financial performance, the development in Indonesia, at Ambuja Cements, and in Switzerland and France was less favorable.
ROIC after taxes increased significantly and stood at 7.8 percent. Net financial debt over the last twelve months decreased by CHF 1,418 million and stood at CHF 9,057 million.
In the first half of the year consolidated cement volumes decreased 2.0 percent to 67.6 million tonnes as Group regions Asia Pacific, Europe, and Africa Middle East reported declines. Aggregates deliveries increased 3.4 percent to 72.0 million tonnes, building on the volume growth in Group regions Europe and North America. Ready-mix concrete deliveries increased slightly by 0.6 percent and reached 18.2 million cubic meters, as improvements in Europe based on the acquisition of Cemex’s activities in Western Germany could compensate for declines in North America and Latin America as well as Africa Middle East. Asphalt volumes increased significantly by 13.1 percent to 4.6 million tonnes.
Like-for-like net sales across the Group were almost unchanged in the first half of the year. Reported net sales were down 3.1 percent to CHF 8,646 million, as better performance in North America could not compensate for lower sales in other Group regions.
Operating EBITDA adjusted for merger-related costs of CHF 86 million was at CHF 1,557 million and 3.7 percent lower year-on-year. The adjusted operating EBITDA margin decreased to 18.0 percent. Reported operating EBITDA decreased 7.8 percent to CHF 1,471 million, impacted by merger-related costs and lower financial performance in the Group regions Europe and Asia Pacific. Operating profit adjusted for merger-related costs of CHF 86 million was down 5.5 percent to CHF 912 million. The adjusted operating profit margin decreased to 10.6 percent. Reported operating profit decreased by 12.3 percent to CHF 827 million, as increases in the Group regions Latin America and North America were not able to compensate for merger-related costs and lower performance in Asia Pacific, Europe, and Africa Middle East.
Net income increased by 4.9 percent to CHF 690 million, mainly as a result of the divestment of Holcim’s minority shareholding in Siam City Cement. Net income attributable to shareholders of Holcim Ltd was also up by 18.0 percent to CHF 573 million.
Cash flow from operating activities increased 13.6 percent to CHF 220 million in the first half year.
Outlook for 2015
Holcim expects for 2015 that the global economy continues its gradual recovery. Key construction markets of Holcim in countries like the USA, India, Mexico, Colombia, the UK and the Philippines are expected to be the main growth drivers. Europe overall should have a flat development. Latin America will continue to face uncertainties in Brazil but should overall show slight growth in 2015. The Asia Pacific region is expected to grow although at a still modest pace. A flat development is expected in Africa Middle East.
In this environment cement volumes should increase in all Group regions in 2015 with the exception of Europe and Africa Middle East. Aggregate and ready-mix concrete volumes are expected to increase. On a stand-alone basis and unconnected to the merger with Lafarge, it would have expected like-for-like operating profit adjusted for merger-related cost to be approximately 10 percent below the low end of the initial guidance of CHF 2.7 billion to CHF 2.9 billion in 2015. Following the successful completion of the merger the stand-alone guidance is not relevant any more as LafargeHolcim results will be impacted by several items including required divestments and ramp-up of the synergies.