LafargeHolcim reports operating profit below consensus

Swiss-French construction materials group sees sales fall 8.7% to 7.83bn francs


LafargeHolcim, the Swiss-French construction materials giant that is restructuring following a merger, saw third-quarter operating profit slip 16.1 per cent, more than analysts had expected, hurt by foreign exchange rates and a slowdown in China and Brazil.

Operating earnings before interest, tax, depreciation and amortisation (ebitda) were 1.64 billion Swiss francs ($1.61 billion), the company said in a statement on Wednesday, below the 1.75 billion forecast by analysts.

Sales fell 8.7 per cent to 7.83 billion Swiss francs, also just missing the 7.92 billion francs forecast by analysts.

The tie-up between Switzerland’s Holcim and France’s Lafarge, announced in 2014, was meant to help cut costs including for energy, counteracting weaker demand following the financial crisis that rocked construction markets starting in 2008.

But slowing markets in Brazil and China as well as the strong Swiss franc continued to dent results, even as business in the United States picked up.

“The first nine months of this year, and in particular the third quarter, have been impacted by the difficult economic context in some of our large markets, and considerable negative foreign exchange fluctuations,” said cheif executive Eric Olsen in the statement.

“In addition, the closing of the merger triggered both one-off costs and organizational changes, the benefits of which will start coming through next year.”

The company proposed a dividend for 2015 of 1.50 francs, more than the 1.30 francs it had suggested earlier this year.

Merger and restructuring as well as other one-off costs reached 699 million francs during the first nine months of the year, the company said.

LafargeHolcim is now targeting operating ebitda of at least 8 billion Swiss francs by 2018, a period over which it also hopes to boost its return on invested capital by at least 300 basis points from 2015 levels through operational improvements.

It aims for cumulative free cash flow of at least 10 billion francs from 2016 to 2018.

The company said it would exercise “dynamic portfolio management”, including expected divestments of 3.5 billion francs in 2016.

CRH said last week that integration of the businesses acquired from LafargeHolcim earlier this year was progressing well.