LafargeHolcim looks to cement its position with more asset sales

LafargeHolcim, under pressure to deliver on targets a year after the merger that created the world's largest cement company, reshuffled executives and pledged more asset sales after second-quarter earnings improved on pricing.

Adjusted operating earnings before interest, taxes, depreciation and amortisation (ebitda) rose 2.6 per cent to 1.71 billion Swiss francs, it said.

Chief executive Eric Olsen named new members to the company's executive committee and modified regional responsibilities as well as extending a plan to sell assets through the end of 2017.

Just over a year after the cement maker forged from France's Lafarge and Switzerland's Holcim began trading, Mr Olsen is still trying to deliver on profitability, which was the underlying rationale for the merger. High-profile executive departures further eroded investor confidence at a time when competitors such as HeidelbergCement are benefiting from improved demand in North America and Europe.

“Our focus on pricing and synergies is delivering visible earnings momentum,” Mr Olsen said in Friday’s statement.

Iseq heavyweight CRH acquired €6.5 billion in assets from LafargeHolcim last year.

The company kept 2016 targets, which include at least high single-digit growth in adjusted operating ebitda. It lowered the outlook for demand growth in its markets to between 1 per cent and 3 per cent from between 2 per cent and 4 per cent and it extended a plan to sell assets to 5 billion francs by the end of 2017.

Reduce debt

Mr Olsen was aiming to sell 3.5 billion francs in assets this year to reduce debt, a target the company said Friday it already exceeded. In rapid-fire succession, the company in the past weeks announced agreements to sell listed and non-listed Chinese cement assets as well as to holdings in Vietnam and Sri Lanka.

The company said cement prices increased by 2.2 per cent in the second quarter compared to the first. The increase was 1.2 per cent in the previous quarter. Globally, volumes were down 3 per cent.

Shares in LafargeHolcim have tumbled 36 per cent since they began trading on Zurich’s SIX Swiss Exchange last July, through to Thursday’s close, giving the company a market capitalisation of 28 billion francs.

HeidelbergCement shares have risen 0.6 per cent during the period. The German company last week reported profit that beat estimates and said it expected a “moderate to significant” increase in operating income this year.

– (Bloomberg)