Holcim Ltd. (HOLN), the Swiss cement-maker that plans to merge with Lafarge SA (LG), reported lower profit and sales as a drive to cut costs and boost efficiency failed to offset the drag of devaluating currencies in emerging markets.
Net income in the three months through March fell 58 percent to 80 million francs ($90.7 million), missing the 110.5 million-franc average estimate of six analysts surveyed by Bloomberg. Sales fell 5.4 percent to 4.09 billion francs, short of the 4.2 billion-franc average estimate because of foreign exchange movements, Holcim said.
“Holcim made further progress with its operational performance though results continued to be negatively affected by foreign exchange effects,” the company said in a statement today. Since mid-last year, currencies in India and Mexico, where Holcim has significant operations, have devalued against the Swiss franc, lowering earnings for Holcim in its local currency.
Holcim and Lafarge have said they will merge by the the first half of 2015 and will shed assets with 5 billion euro ($6.9 billion) sales to get the deal past regulators. Holcim Chief Executive Officer Bernard Fontana will help to integrate the two companies before Lafarge Chief Bruno Lafont becomes head of the merged entity next year.
The asset sales represent about $1 billion of profits that Holcim and Lafarge estimate need to to be sold to satisfy antitrust regulators in a handful of countries. Two-thirds of the asset disposals will be in Europe. Disposals may also take place in Canada, the U.S., Brazil, India and China, Lafont has said.
Holcim’s said shipments of cement increased, showing improved business conditions despite declining sales. India’s cement market began to stabilize and Mexican operations gradually recovered from the low activity in the second half of 2013.
The Swiss cement maker reiterated a forecast for cement shipments to increase this year as well as confirming profit forecasts.
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