Holcim Says Disposal Talks Positive Amid Europe RecoveryPatrick Winters
Holcim Ltd., the Swiss cement maker that plans to merge with Lafarge SA, said talks over the asset sales needed to gain antitrust approval are “very positive,” with recovering European cement sales providing a favorable backdrop to doing deals.
Mild weather in Europe this year helped boost construction and Holcim’s results in the region were “particularly strong,” it said. The region that will account for two-thirds of the 5 billion euros ($6.9 billion) in disposals.
The world’s two largest cement companies are looking to wrap up the merger by the first half of 2015. Holcim is preparing packages of divestments and the paperwork to satisfy regulatory requirements, Holcim Chief Financial Officer Thomas Aebischer said on a call today. European sales grew 15 percent in the first quarter, the biggest gain of all regions.
“We expect improved top line and margin momentum in coming quarters and potential disposal moves should increase merger confidence,” Bank Vontobel AG analyst Christian Arnold said in a note to clients.
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 as a drive to cut costs and boost efficiency failed to offset the drag of devaluing currencies in emerging markets. Shares of the company were little changed at 79.15 francs in Zurich as of 12:45 p.m.
Aebischer declined to give a sales forecast because currency movements mean such a forecast would be “speculating.”
Since the middle of 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. Currencies cut 500 million francs from first quarter sales, Chief Executive Officer Bernard Fontana said on the call.
Holcim 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.
Aebischer said he assumes emerging market currencies will stabilize where they are today: “As we go into the second, third and fourth quarter if currencies remain where they are, the headwind should ease up.”
Holcim’s 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 profit that Holcim and Lafarge estimate need to sell to satisfy antitrust regulators in a handful of countries. Disposals may also take place in Canada, the U.S., Brazil, India and China, Lafont has said.