• CEO sees ``significant recovery potential'' in North America
  • Says considering asset swaps for portfolio, not just disposals

LafargeHolcim Ltd Chief Executive Officer Eric Olsen is confident the world’s largest cement maker will meet three-year cashflow and earnings targets and is well positioned to benefit from any upturn in the construction industry.

The company’s diversified portfolio will help it grow without making any major acquisitions and also provides a natural hedge against market volatility, the CEO said at a capital markets day in London on Tuesday. That will allow management to generate a targeted cash flow of at least 10 billion Swiss francs ($9.7 billion) through 2018, he said.

LafargeHolcim, created this year from a tie-up between Switzerland’s Holcim and Lafarge of France, is targeting $1.5 billion in annual savings from the merger and sees its industry-topping size helping to overcome a slowdown in demand for construction materials. The company is basing its targets on “conservative” underlying market-growth forecasts of 2 percent, and is therefore poised to reap extra rewards from any upswing, Olsen said. 

That could come from mature markets, which are now better positioned in the industry cycle than a few years ago, the CEO said. A slowdown in emerging markets such as Brazil and China hurt LafargeHolcim’s third-quarter earnings.

“We are confident we can grow with our markets,” Olsen said, citing North America as a mature market with significant recovery potential. “When demand improves there will be additional upward leverage.”

Returning Cash

LafargeHolcim aims to return cash to shareholders through dividends or share buybacks and is proposing a 1.50 franc per share payout for this year. The company is also targeting operating earnings before interest, taxes, depreciation and amortization of at least 8 billion francs in 2018.

Olsen said LafargeHolcim is considering asset swaps as well as divestments as it prunes its portfolio after the merger. The cement maker is planning 3.5 billion francs of asset sales next year and has already started talks on potential disposals.

The shares traded 0.2 percent higher at 55.10 Swiss francs as of 1:05 p.m. in Zurich, valuing the company at 33 billion francs.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE