LafargeHolcim Raises Dividend, Sells Assets as Brazil Slows

  • Cement maker to focus on free cash flow generation to 2018
  • Company says merger integration process is `well on track'

LafargeHolcim Ltd. promised a bigger payout to shareholders and 3.5 billion Swiss francs ($3.4 billion) of asset sales next year as a slowdown in Brazil and China hurt third-quarter earnings.

The Swiss-French company, created this year in a $35 billion merger of Holcim Ltd. and Lafarge SA, has started talks on the potential disposals, Chief Executive Officer Eric Olsen said on a call with journalists.

“There are interested strategic and non-strategic buyers,” he said. The target includes an ongoing sale of cement assets in India that were required for the merger.

Shares rose as much as 5.6 percent, the most since April, 2014, and were trading 4.9 percent higher to 56.25 francs at 11:25 a.m. in Zurich.

Olsen is under pressure to deliver on some $1.5 billion in annual savings as LafargeHolcim looks to leverage its size and gain a cost advantage over rivals after the economic crisis cut demand for building materials and forced some kilns to run at a loss. The company said the integration is “on track” and confirmed the synergy targets for this year, according to a statement on Wednesday.

Stronger Swiss Franc

The third quarter was hit by “the difficult economic context in some of our large markets, and considerable negative foreign exchange fluctuations,” Olsen said in the statement. The results were hurt by a strengthening of the Swiss franc and an economic downturn in Brazil and China.

Third-quarter sales fell 1.1 percent to 7.83 billion francs compared with an estimate of 7.92 billion francs compiled by Bloomberg while earnings before interest, taxes, depreciation and amortization fell 9 percent on a comparable basis to 1.64 billion francs.

The earnings were “disappointing,” Kepler Cheuvreux analysts including Josep Pujal wrote in a note to clients. This was partly offset by “better” promises for the longer term.

In mid-term targets unveiled ahead of its capital markets day next week, LafargeHolcim said it would generate at least 10 billion francs in cash flow through 2018 as well as return cash to shareholders through dividends or share buybacks.

LafargeHolcim proposed a dividend of 1.50 francs per share for 2015, up from earlier guidance given in July of at least 1.30 francs.

“That’s a signal of our absolute commitment to return value to shareholders and our confidence in achieving synergies going forward,” Olsen said. The cement maker will exceed the 100 million francs in cost savings targeted for 2015, he said.

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