Holcim Scales Back 2013 Profit Forecast on Global Economy

Holcim Ltd., the world’s largest cement maker, reported a 376 million-franc ($403 million) boost to earnings from a savings program instigated by Chief Executive Officer Bernard Fontana to help counter weaker demand.

The savings tally puts Fontana on the front foot to make a full-year target of 700 million francs under his so-called Leadership Journey program that involves reducing energy costs and closing underperforming plants. Holcim shares rose as much as 2.3 percent in Zurich, as efficiency gains eclipsed quarterly sales that missed estimates.

“Sales were light mainly in India and Canada but more importantly the cost leadership margin recovery program was visible in Europe and Latin America,” Ian Osburn, an analyst at Cantor Fitzgerald Europe wrote in a note to investors. He has a buy rating on a stock.

Fontana, the first outsider to lead Holcim when he took over last year, is pressing ahead with plant closings across Europe to free cash for investments in cement plants in emerging markets. Holcim stuck to a forecast for increasing cement sales this year, driven by higher sales in Asia Pacific and Latin America.

The Swiss company, based in Jona, traded 1.6 percent higher at 71.6 francs as of midday in Zurich.

Holcim, in a statement today, lowered its prediction for North America, saying that it now expects sales to be unchanged compared to a previous forecast for growth.

French competitor Lafarge SA said July 26 that it will sell more assets to cut debt after a decline in European demand and poor weather for construction cut second-quarter profit.

Economies Falter

Global economic growth in the first six months of 2013 was disappointing, Holcim said, adding that construction activity was hurt by bad weather for building. Excluding acquisitions and disposals, earnings before interest, taxes, depreciation and amortization and operating profit are likely to increase this year, it said, scaling back from a May 8 forecast of “significant organic growth.”

Full-year operating profit growth expectations “are not the same,” mainly because of lower demand for cement in India in the six months through June, Fontana said on a call today. Holcim’s sales of 5.3 billion francs in the second quarter fell short of the 5.5 billion-franc average estimate in a Bloomberg survey.

“The market is digesting a different level of growth,” he said, adding that India’s early monsoon is “quite good quality” and may boost the construction of rural housing in the second half, a major market for Holcim in India.

Second-quarter net income rose 1.7 percent to 383 million Swiss francs from 377 million francs a year earlier. Analysts surveyed by Bloomberg predicted 369 million francs.

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