Zurich: The world’s second biggest cement maker, Holcim Ltd, said third-quarter (Q3) profit rose 28% as plants in China and India ran at full capacity.
Bright future: Holcim chief executive officer Markus Akermann said the company has a very dynamic growth in Asia and future expansion in India would be very strong.
Net income climbed to 877 million Swiss francs (Rs3,030 crore), or 3.31 francs a share, from 684 million francs, or 2.7 francs, a year earlier, the Jona, Switzerland-based firm said. Analysts in a Bloomberg survey predicted profit of 744 million francs. Sales rose 9.8% to 7.28 billion francs.
Holcim said on Wednesday much of the global construction industry remains in a “robust state.” It’s spent at least 2.6 billion francs on acquisitions in India alone to help skirt a weakening US market, where housing starts in September sank to their lowest level in 14 years. Emerging markets now account for about half of Holcim’s revenue.
“It continues to be an emerging market story,” said Patrick Appenzeller, an analyst at Helvea in Zurich, with an “accumulate” rating on the stock. “On the other hand, some people fear that the US subprime crisis may spill over into the non-residential market, where Holcim generates most of its US business.”
Holcim shares fell 1.4 francs, or 1.1%, to 128.2 francs as of 1.13pm local time, in line with the Swiss Market Index. The stock has risen 15% in Zurich this year, giving the cement maker a market value of 34 billion francs. Its bigger rival, Paris-based Lafarge SA, reports Q3 results on Thursday and has fallen 2.3% in Paris.
The Swiss company has expanded in 20 markets since 1989, investing more than 19 billion francs on acquisitions and factory upgrades. Holcim 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.
“Everything remains positive, we have very dynamic growth” in Asia, chief executive officer Markus Akermann said in a press conference in Zurich. Future expansion in India will be very “strong,” he said.
India alone needs to double spending on roads, ports, power and other infrastructure over the next five years to sustain its record economic growth, finance minister P. Chidambaram said on 29 October. The country, which spends a third of China’s $150 billion (Rs5.9 trillion) investment in public works each year, has since April boosted spending by 40% to Rs1.34 trillion to help modernize infrastructure.
Quarterly profit at Chinese affiliate Huaxin Cement Co. Ltd almost doubled after higher demand enabled Holcim to push through price increases. By contrast, the situation in the US real-estate market “remains difficult,” Holcim said. Quarterly sales volumes there fell, led by the Mid-west and the catchment areas of the Mississippi and Missouri rivers. Weaker demand from the US housing market as well as interest costs tied to its $14.2 billion purchase of Rinker Group Ltd led a decline in profit at Mexico’s Cemex SAB, the world’s third-largest cement producer.
Sales declined 2.3% in North America in the first nine months of this year while they jumped 40% in the Asia/Pacific region. Closer to home,Holcim reported increases in construction activity in the UK and France. Switzerland and northern Italy showed some signs of market saturation.
In another development, a delayed open offer by Holcim for a further 20% in Ambuja Cements Ltd will start on 14 November and close on 3 December, nearly a month behind the original date, a newspaper ad showed.
Holcim, which already owns about 40% in Ambuja, had said in August it planned to buy a further 20% in Ambuja, or up to 306.6 million shares, from its public shareholders at Rs154 per share, beginning 18 October. In October, offer manager DSP Merrill Lynch said the open offer was postponed till further notice and did not give a reason for the delay.
Assuming full acceptance, Holcim will hold 60.4% in Ambuja on closing of the offer, DSP Merrill Lynch said in the advertisement.