Holcim Ltd., the world’s largest cement maker, lowered its sales forecast because of disappointing shipments in India, Mexico and Canada.
Sales won’t match last year’s level given weakening demand for construction materials in key markets, Holcim said in a statement today. Brazil also suffered though Europe stabilized.
“The global economic trend remained subdued despite significant growth in several emerging markets and improved economic data from the U.S.,” the company said.
Chief Executive Officer Bernard Fontana is pushing ahead with efficiency measures as well as seeking to trade assets with competitors to squeeze more profit out of the company’s portfolio of cement and aggregates operations that span 70 countries. Fontana intends to use cash gained from savings to invest in faster-growing emerging markets.
Savings contributed to a 20 percent rise in third quarter net income to 469 million Swiss francs ($515 million), which beat the 434.3 million franc prediction of analysts surveyed by Bloomberg. Third-quarter sales 5.3 billion francs missed the 5.54 billion-franc average estimate in a Bloomberg survey.
Holcim reported savings of 626 million francs from efficiency initiatives in the first nine months of the year, putting Fontana ahead of a full-year target of 700 million francs under his so-called Leadership Journey program that involves reducing energy costs, making savings in procurement, and closing underperforming plants.
The Switzerland, Jona-based company announced management changes, adding more senior executive resources in Asia, triggered by the retirement of long-standing executive committee member Paul Hugentobler, who was responsible for South Asia & ASEAN excluding the Philippines.
Bernard Terver, the executive committee member heading North America and the U.K. will move to lead Africa and the Middle East as well as India, Sri Lanka and Bangladesh. Ian Thackwray, presently responsible for East Asia, Philippines and Oceania as well as Holcim Trading, will add South East Asia to his portfolio. The changes become effective Jan. 1.
Construction in India was slowed by the backlog of reforms, the weak rupee and higher inflation, Holcim said in its third quarter report, leading to a decline in cement sales at Indian units Ambuja Cements Ltd. and ACC Ltd.
Holcim follows Indian competitor Ultratech Cement Ltd. in highlighting persistent slow growth in India’s cement market. Ultratech reported last month fiscal second quarter net income that missed analyst estimates. The Swiss company’s European rivals Lafarge SA and HeidelbergCement AG are scheduled to report earnings on Nov. 7.
Excluding acquisitions and disposals, earnings before interest, taxes, depreciation and amortization and operating profit are likely to increase this year, Holcim said, matching an earlier forecast.
Holcim faces an in-depth European Union probe into an asset swap with Mexican rival Cemex SAB. Under the terms of the deal Cemex, the biggest cement maker in the Americas, will buy Holcim Ltd.’s Czech operations while selling plants in western Germany to the Swiss company as part of an asset swap to improve profitability in Europe.
Regulators said Holcim’s purchase of Cemex’s western German plants may substantially reduce competition.
The companies will also combine operations in Spain, with Holcim paying Monterrey, Mexico-based Cemex 70 million euros ($94 million) in cash as part of the transactions.
Holcim said today that it anticipates the competition authorities’ decision in the first half of 2014.