Holcim Ltd., the world’s second-largest cement maker, said it will book a 775 million-franc ($811 million) charge after writing off South African investments and revaluing assets in sluggish markets from Spain to the U.S.
The Swiss company is writing off 415 million francs related to debt and accrued interest owed by a former unit in South Africa, it said in a statement today. The Jona-based company is also booking 360 million francs in writedowns tied to plants in Spain, eastern Europe and the U.S.
“It’s a little bit of a surprise, but it comes down to the theme of excess capacity,” said Tim Cahill, an analyst at J&E Davy Holdings in Dublin. “Now companies and especially their accountants are taking the view that demand is not returning any time soon. This is the first of such writedowns, and we will see more throughout the industry.”
Holcim and other global cement makers -- including the industry’s No. 1, Lafarge SA of France -- are feeling the pinch from expansion drives as projects undertaken during times of economic growth now suffer from sluggish orders. Europe’s debt crisis has stalled economies, weighing down on government infrastructure spending as well as retail and property developments. Holcim will book the costs in the fourth quarter.
Shares of the Swiss building materials maker fell 1.1 francs, or 2.1 percent, to 50.75 francs as of 9:04 a.m. in Zurich. Lafarge was down 2.3 percent in Paris.
The charges represent a hefty dent to Holcim’s earnings, scheduled to be released on Feb. 29. Analysts estimated annual net income of 952.4 million francs, on sales of 20.24 billion francs, according to Bloomberg data. The company said today there remains potential for a dividend, based on 2011 earnings, and the level of the payout will be decided at the end of February.
Martin Huesler, an analyst at Zuercher Kantonalbank AG in Zurich, said he’s cutting 2011 estimates.
“The extent of the impairments surprise us and indicates that Holcim does not expect a rapid recovery in the affected markets, which, given the economic environment and the debt problem, is not astonishing,” Huesler said in a note.
Holcim will retain a stake of about 2 percent in AfriSam, which was taken over by a group of investors under the Black Economic Empowerment initiative, spokesman Peter Gysel said. The writedowns in eastern Europe related to operations in the Czech Republic and Hungary.