HOLCIM, THE world’s biggest cement maker by sales, surprised investors with a profit warning after announcing it would take 775 million Swiss francs in one-off charges on its 2011 accounts.
The bulk of the impairment relates to a Holcim-specific issue in South Africa. But analysts noted the decision to write down the value of assets in parts of Europe and the US on the back of sharply lower demand could be echoed by other cement makers.
“Some mature markets will never again see the record levels of profitability of the mid-2000s. Other players could be forced to do the same,” warned Josep Pujal of Kepler Capital Markets.
Most of Holcim’s charges, comprising 415 million Swiss francs, stemmed from completely writing down its remaining South Africa investment following a steep fall in demand for construction materials since 2010. Holcim’s South African exposure stems from its former local subsidiary, the country’s biggest cement maker by sales, which in 2007 was reborn as AfriSam in line with the government’s black economic empowerment programme.The remainder of the write-offs stem from adjusting property, equipment and goodwill lines in the group’s accounts to much weaker markets. Some 328 million Swiss francs in writedowns related to Spain and eastern Europe, and 32 million Swiss francs to the US.
Spain’s indigestion after its property bubble has prompted massive problems not just to real estate but also construction, with cement consumption down 65 per cent since the 2008 financial crisis. Demand is also down 30 per cent in eastern Europe, Holcim noted. In the US, where demand for cement has fallen by 45 per cent, the charge relates to the permanent closure of two plants.
Switzerland-based Holcim said the charges, being non-cash, would not affect its ability to pay a dividend, with a decision on the pay-out to shareholders due at a board meeting next month, shortly before publication of the 2011 results on February 29th.
Holcim shares were down 2.7 per cent at 50.45 Swiss francs in early afternoon trading. – (Copyright The Financial Times Limited 2012)
