Holcim Ltd. (HOLN), the world’s largest cement-maker, said it will book a 410-million Swiss franc ($446 million) charge as Chief Executive Officer Bernard Fontana accelerates a European cost-saving program to counter weaker demand.
The charge is for write-offs of property, plants and equipment and the company also expects 100 million francs of restructuring costs in the fourth quarter, the Zurich-based company said in a statement today. Holcim said today it’s targeting 120 million francs in savings as it streamlines capacity.
“Holcim is proceeding with its restructuring program faster than first assumed and hence cost savings are supposed to be reached earlier, too,” Christian Arnold, an analyst at Bank Vontobel in Zurich said in a note to investors. “However, additional write-offs of property, plant and equipments are somewhat worrying.”
Holcim and other global cement makers are facing mounting overcapacity in Europe as a construction slump erodes demand for building materials. Holcim is accelerating a program to deal with underperforming plants while peers from France’s Lafarge SA (LG) to Mexico’s Cemex SAB de CV (CEMEXCPO) sell assets to cut debts acquired during huge pre-crisis takeovers.
The Swiss cement maker’s shares dropped 0.9 percent to 65.10 francs at 10:11 a.m. in Zurich.
Fontana named a new manager for Europe in September and canvassed executives for ways to streamline operations as he faced a drop in demand in markets such as Italy, where volumes are about 25 percent lower. The company, which has avoided the junk status of peers with a Baa2 rating at Moody’s Investors Service, is closing a plant in Hungary and eliminating about 500 positions in Spain.
The 410-million franc writedowns cover assets such as cement plants and will be booked in the fourth quarter. Peter Gysel, a spokesman, said he couldn’t comment on where the writedowns will take place as Holcim is consulting with worker representatives. The writedowns don’t include restructuring which Holcim has already announced this year, he said.
The charges will reduce operating profit. Holcim is scheduled to report earnings Feb. 27. Analysts estimated annual operating profit of 2.5 billion francs for 2012, according to data compiled by Bloomberg.
The writedowns mirror a 775-million franc charge which Holcim booked in January after writing off South African investments and revaluing assets in sluggish markets from Spain to the U.S.
Holcim said its potential to pay dividends is in intact.
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