Zurich: The world’s second biggest cement maker,Holcim Ltd, said first quarter profit rose 3.9% on higher financial income.
Net income rose to 370 million Swiss francs (about Rs1,429 crore) from 356 million francs a year earlier, the Jona, Switzerland-based company said in an emailed statement on Tuesday. That beat a 346 million franc median estimate of six analysts in a Bloomberg survey. Sales fell 3.8% to 5.51 billion francs.
Tight credit resulting from the subprime mortgage crisis slowed homebuilding in the US. The Swiss company sold most of its holding in Holcim South Africa in June, retreating from a growing market where it was outspent. Holcim has focused on Asia, and particularly on India, where it controls a quarter of the market and is the country’s second largest cement maker.
A concrete transporter at the Holcim plant in Hamburg, Germany. The Swiss company sold most of its holding in Holcim South Africa in June, retreating from a growing market where it was outspent
“Oil prices and the slowdown in the US aren’t leaving Holcim untouched,” Dieter Winet, a senior portfolio manager who helps oversee 63 billion francs, including Holcim shares, at Swisscanto Asset Management in Zurich, said before the release. By contrast, he said, the company “is a global infrastructure play. Infrastructure has to be built anyway”. Holcim has fallen 16% this year in Zurich trading on concern that a US economic slowdown may spread and rising global capacity will start to impede price increases. Paris-based Lafarge SA, the world’s biggest cement company, which will report first quarter earnings on Wednesday, has fallen 7.6%. The two cement makers are competing for global market share in faster growing emerging economies, with both building plants and acquiring local producers.
Holcim and Lafarge were both downgraded to “sell” from “neutral” by Goldman Sachs Group Inc. last week. The broker said rising energy costs are outpacing price gains for the Swiss company, and the French company’s purchase of Egypt’s Orascom Construction Industries for €8.8 billion (Rs55,176 crore) increased its risk profile.
AfriSam Consortium Ltd purchased 85% of Holcim’s 54% holding in Holcim South Africa in a sale completed on 5 June.
Last month, Huaxin Cement Co., Holcim’s Chinese affiliate, said first quarter profit and sales rose 21% on increased production and demand.
Investment in new urban construction projects in China accelerated more than a quarter in the three months through March, faster than a year earlier, according to government figures.
Demand will continue to outstrip supply in China’s cement industry in the next few years as the government closes older plants, limiting production growth, KGI Securities said in an 8 April report.
India profit down 42%
In India, Holcim unit Ambuja Cements Ltd’s first quarter profit declined 42% because of higher power costs and taxes, while revenue at the Mumbai-based company rose 17%.
Holcim, which generates about two-thirds of its operating profit in developing countries, sells cement and aggregates as well as ready-mix concrete and asphalt.
It works in more than 70 countries and employs about 90,000 people.
In Venezuela, Holcim and its rivals may face state takeovers of their operations.
The South American country started negotiations last month with Holcim, Mexico’s Cemex SAB and Lafarge. The decline in home construction in the US, exacerbated by tighter credit conditions, is slowing demand for construction materials.
Cemex, the world’s third largest cement maker, predicted on 22 April lower demand for cement this year than the company previously forecast in the US, Spain and Mexico, its three largest markets.
US housing starts plummeted 25% in 2007, the deepest drop since 1980, and Spain is also experiencing a housing decline.