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Cement maker Holcim cuts costs

Aug, 17 2012

(Switzerland) -- Holcim is cutting costs and raising the prices of its cement and other building materials to meet financial targets, hit by a double whammy of deteriorating demand in cash-strapped Europe and high energy costs.

"While demand in North America should beat the previous outlook, Holcim now expects a decline in Europe," the world's second-largest cement maker said on Wednesday. Europe is Holcim's second-largest market by sales, after Asia-Pacific.

The firm's construction industry customers, especially those in southern Europe at the heart of the debt crisis, are suffering as governments slash spending in an attempt to get budgets under control.

At the same time, Holcim and rivals Lafarge, HeidelbergCement and Cemex have been trying to pass a surge in electricity, coal and oil costs on to customers by hiking the prices of their products.

Holcim was most likely to raise prices for its cement, aggregates and concrete in Asia, Latin America, the U.S. and Canada, chief financial officer Thomas Aebischer said, where markets are more robust. Question marks remain over Holcim's ability to implement prices hikes in Europe, he added.

The company declined to comment on the size of price rises it is seeking across its various markets and product groups, but said it was aiming to at least pass on inflation-induced costs to its customers.

The Zurich-based group said in May it would take out costs and improve efficiency to boost profit by at least 1.5 billion Swiss francs ($1.5 billion) by the end of 2014.

Analysts at Bank Vontobel said that while Holcim's overall outlook was almost unchanged, the contribution of Europe compared with North America was three times bigger, making this effectively a "reduction of the outlook".

Holcim stock was down 0.4 percent at 0923 GMT, after initially falling more than 2 percent. The Stoxx 600 European construction index was down 0.7 percent.

Second-quarter net profit rose 9.2 percent to 379 million Swiss francs on slightly higher sales of 5.6 billion francs, which was chiefly due to strong demand from emerging markets in Asia, Latin America and Russia.

Analysts in a Reuters poll had forecast on average a net profit of 377 million Swiss francs and sales of 5.69 billion francs.

Looking ahead, Holcim said it will "accord cost management the closest attention" and that planned spending would result in an additional operating income of at least 150 million francs this year.

($1 = 0.9724 Swiss francs)

By: Andrew Thompson
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