Holcim Shares Rise as Cuts Boost Profitability in Europe

Holcim Ltd. (HOLN) rose as much as 3 percent in Zurich trading after the Swiss cement maker said cost cuts helped to boost profitability at its units in Europe and Latin America in the first quarter.

The margin based on earnings before interest, taxes, depreciation and amortization rose to 29.7 percent from 26.2 percent in Latin America and to 2.8 percent from 1.8 percent in Europe, the Jona, Switzerland-based company said in a statement on its website today.

“The pleasant surprise is that Europe improved thanks to further cost-cutting as well as stable or slightly higher selling prices,” said Raymond James analyst Arnaud Palliez.

To counter a construction slump in Europe, caused by the region’s economic crisis, Chief Executive Officer Bernard Fontana has cut costs and expanded in emerging regions such as Latin America and Indonesia. In Europe, first-quarter sales dropped 11 percent, also impeded by snowy weather conditions that extended beyond March.

The stock gained as much as 2.20 francs to 74.70 francs and was up 2.2 percent as of 11:24 a.m. in Zurich trading, valuing the company at 24.2 billion francs ($25.8 billion). Before today, Holcim had added 8.4 percent this year, while German rival HeidelbergCement rose 22 percent and French competitor Lafarge (LG) SA gained 7.4 percent.

Cement Sales

Holcim’s total Ebitda fell 9.5 percent to 650 million francs in the first quarter while sales fell 7.2 percent to 4.32 billion francs. Analysts in a Bloomberg survey predicted 4.65 billion francs.

“Holcim anticipates an increase in sales of cement in 2013, but it will be challenging to reach the previous year’s levels in the aggregates and ready-mix concrete businesses,” the company said. “While Group regions Asia Pacific, North America and Latin America are expected to witness higher sales volumes, Holcim is somewhat less optimistic with regard to Europe and Africa Middle East.”

The companywide savings program is expected to help generate “significant organic growth” in operating Ebitda this year, it said.

Lafarge, which is also cutting jobs and procurement costs, yesterday reported a 26 percent decline in Ebitda. Germany’s HeidelbergCement reported a rise in first-quarter profit as growth in America and job cuts helped to offset harsh winter conditions that impeded building in Europe.

To contact the reporter on this story: Simon Thiel in London at sthiel1@bloomberg.net

To contact the editor responsible for this story: Simon Thiel at sthiel1@bloomberg.net

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