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Bernard Fontana, CEO, comments on the results: “Holcim increased sales of both cement and aggregates in the first half of 2014, despite an uneven development of the global economy. Group regions North America, Africa Middle East, and Europe recorded particularly strong cement sales. Mild weather conditions at the beginning of the year supported building activity, especially in Europe where the Group continued to restructure activities in 2014. In Asia the market situation stabilized, and as a result ACC and Ambuja Cements in India, Holcim’s largest Group companies in the region, were able to increase cement sales."
On a like-for-like basis operating EBITDA increased slightly and operating profit was up, too. Higher cement volumes across many parts of the Group combined with the ongoing momentum of the Holcim Leadership Journey and strict cost management were the main reasons for this positive development. However in Swiss Francs the operating performance continued to be negatively impacted by exchange rate effects. Restructuring and merger costs of CHF 50 million also impacted operating EBITDA.
On a like-for-like basis higher operating profit was recorded in Group regions North America and Europe in particular, while the development in Africa Middle East was stable. Helped by the restructuring measures taken in 2013, strong growth in operating profit was seen in Europe while North America benefited from the better economic environment especially in the United States. Despite progress in a number of countries in Asia Pacific negative exchange rate effects continued to be a main burden on the Group region’s financial results. In addition, postponed projects in the energy and resources sector negatively impacted the financial performance in Australia. The impact of the restructurings in 2014 amount to CHF 59 million on operating profit level.
Operating profit margin before restructuring and merger costs of 11.3 percent increased compared to the previous year.
Compared to the first half 2013, ROIC before taxes improved from 7.1 percent to 8.4 percent while net financial debt decreased.
Consolidated cement sales rose in the first half of 2014 by 2.0 percent to 70.0 million tonnes. This positive development was due primarily to progress in Group regions North America, Africa Middle East, and Europe. Strong growth was reported by the United States and Morocco in particular while in Europe the strong development earlier slowed down towards the middle of the year. Aggregates volumes increased slightly by 0.2 percent to 69.6 million tonnes, which is mainly attributable to improved results in North America and Asia Pacific. Ready-mix concrete volumes were down 3.9 percent to 18.1 million cubic meters, with growth in several European countries as a result of restructuring measures in 2013 unable to compensate for volume declines in Latin America that were caused by the restructuring of the segment in 2013. Asphalt volumes increased by 21.8 percent to 4.1 million tonnes.
Group-wide net sales decreased by 6.1 percent to CHF 9.06 billion, with negative currency effects across the whole of Latin America as well as in India, Indonesia, and other markets taking their toll. On a like-for-like basis, net sales increased by 4.8 percent.
Like-for-like operating EBITDA for the Group increased by 0.2 percent and adjusted for restructuring and merger costs it increased by 3.0 percent and operating profit by 8.3 percent. Consolidated operating EBITDA decreased by 10.6 percent to CHF 1,627 million. Thanks to both increased sales and the successful restructuring measures of 2013, higher operating EBITDA was recorded in the United States and in most European Group companies. On a like-for-like basis, Africa Middle East also reported an improvement in operating results.
Net income fell by 13.5 percent to CHF 657 million compared to the previous year which benefitted from the gain of a reduction of participation in Cement Australia. Net income attributable to shareholders of Holcim Ltd declined by 14.9 percent to CHF 485 million.
Cash flow from operating activities of CHF 183 million decreased by 31.6 percent when compared to the same period last year. Net financial debt over the last twelve months stood at CHF 10.62 billion, down CHF 340 million from CHF 10.96 billion. Revenue from the sale of CO2 emission certificates increased slightly by CHF 0.15 million to CHF 4.63 million.
Holcim Leadership Journey
The Holcim Leadership Journey remains well on track to achieve its target of an increase in operating profit of CHF 1.5 billion by the end of 2014, compared to the base year 2011 and under similar market conditions, and contributed strongly to the Group’s operational performance. The total realized benefits to date already amount to CHF 1.45 billion. During the first six months of 2014 the contribution of the Holcim Leadership Journey was CHF 348 million in total. The Customer Excellence stream contributed with CHF 133 million and the cost initiatives with CHF 215 million to the result.
Continued portfolio optimization
The Group has made progress with its plans of a strategic portfolio optimization in Europe that includes a series of transactions together with Cemex. Holcim has secured approval for the transaction with Cemex in the Czech Republic, received unconditional clearance by the European Commission for its proposed acquisition of Cemex West in Germany, and is awaiting the decision on the other part of the transaction in Spain. The closing of the transaction is expected for the second half of 2014.
Merger to create LafargeHolcim
On April 7, 2014 Holcim and Lafarge announced their intention to combine their activities in a merger to create LafargeHolcim, the most advanced and innovative group in the building materials industry, operating in 90 countries and creating superior value for its stakeholders.
In the meantime Lafarge and Holcim have taken a further step towards the completion of this transaction. A Divestment Committee was set up by both companies and has drawn up a list of proposed asset disposals in anticipation of potential competition authorities’ requirements. Both companies will continue to consider whether divestments would be necessary where there might be overlaps or depending on regulatory requirements. The proposed divestments are subject to review and further discussions with the regulatory authorities and to the agreement of our business partners when relevant. The closing of the planned merger is expected in the first half of 2015.
Outlook for 2014
For 2014 Holcim expects the global economies to show another year of uneven performance. Construction markets in Europe are expected to have reached the bottom with slow recovery in sight. At the same time, North American markets are expected to continue to benefit from a further recovery especially in the United States. Latin America on the other hand could continue to face uncertainties in Argentina but should overall show slight growth in 2014. The Asia Pacific region is expected to grow although at a comparatively slower pace than experienced in recent years. Africa Middle East is expected to gradually improve.
Holcim expects cement volumes to increase in all Group regions in 2014. Aggregates volumes are expected to remain flat overall as increases in Asia Pacific, Europe, North America and Africa Middle East are offset by negative volumes in Latin America. In ready-mix concrete volumes are also expected to increase in most regions with the exception of Europe and Latin America.
The Board of Directors and Executive Committee expect that organic growth in operating profit can be achieved in 2014. The ongoing focus on the cost base coupled with all the benefits expected from the Holcim Leadership Journey will lead to a further expansion in operating margins in 2014.
Additional information such as the 1st half year Interim Report 2014 including detailed information on the Group regions is available at www.holcim.com/results
Holcim is one of the world’s leading suppliers of cement and aggregates (crushed stone, gravel and sand) as well as further activities such as ready-mix concrete and asphalt including services. The Group holds majority and minority interests in around 70 countries on all continents.
This media release is also available in German at www.holcim.com/news
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