Holcim and Lafarge are showing signs of severe weakness

Cement and building aggregates maker Holcim Ltd Thursday echoed rivals in warning that weak cement demand in Europe is offsetting steady growth in Asia.

Reporting lower earnings for the second quarter, the company said there are no signs of a global economic recovery although some important countries such as the U.S. have stabilized and many markets in the Asia Pacific region continue to grow at a fast pace.

Holcim again refrained from repeating its long-standing target of 5% like-for-like growth in earnings before interest, taxes, depreciation and amortization, or Ebitda, after dropping that guidance in the first quarter.

Net profit fell to 399 million Swiss francs ($382 million) in the three months to June 30, from CHF453 million a year earlier, partly due to amortization charges. Meanwhile, sales rose 11% to CH6.16 billion from CHF5.56 billion due to acquisitions.

Holcim said prices in the first half declined by 2.1% on average, particularly in Europe and the U.S. An easing trend will likely remain in place in Europe in the third quarter, Holcim Chief Executive Markus Akermann said in a media conference call. In India, where Holcim is the second-biggest cement maker after Grasim Industries Ltd., prices are set to fall in the third quarter due to a strong monsoon before they will likely recover in the fourth quarter, he said.

Akermann also said the main focus will remain on cost management. “There are currently no acquisition plans,” he said. The company has recently taken over the Australian business of Mexican peer Cemex SAB (CEMEX.MX).

Holcim said it appointed Thomas Aebischer as its new Chief Financial Officer from April 1 next year. Aebischer, currently CFO of Holcim in the U.S., will succeed Theophil Schlatter, who will retire.

On the Swiss bourse 0850 GMT, Holcim shares were down CHF2.85, or 4.2%, to CHF64.85 in a slightly lower general market.

Bank Vontobel has put its Holcim price target of CHF95 under review, citing a downbeat outlook and indications of a continued price pressure.

Cement makers around the world were hit hard by the credit crisis and resulting economic downturn as construction markets contracted and responded by cutting costs and closing plants. There have been some signs of a pickup this year, although companies have reported that Europe is still experiencing a downturn.

French rival Lafarge SA (LG.FR) last month posted a 15% decline in second-quarter net profit and reduced its full-year outlook for cement demand due to a slower-than-expected recovery in its European markets. Mexican rival Cemex said that while it is seeing signs of a turnaround in some markets such as the U.S. and Mexico, it’s expecting sharp declines in markets such as Spain. It said it couldn’t predict where demand would go, due to continued economic uncertainty.

However, Germany’s HeidelbergCement AG (HEI.XE) said it expects demand, and its sales and earnings, to pick up this year on growing demand from Asia-Pacific, Africa and North America.

-By Martin Gelnar, Dow Jones Newswires, +41 43 443 8042; martin.gelnar@dowjones.com

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