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Holcim warns on 2010 as India monsoon hits Q3

Holcim warns on 2010 as India monsoon hits Q3
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First Published: Wed, Nov 10 2010. 04 08 PM IST
Updated: Wed, Nov 10 2010. 04 08 PM IST
Zurich: Holcim, the world’s second-largest cement maker, warned that meeting last year’s core profit would be a challenge after third-quarter income was hit by sliding Indian cement prices during a heavy monsoon.
Holcim’s cautious outlook came after Lafarge, the world’s biggest cement producer, posted disappointing results for the quarter last week, and Cemex, the world’s No.3, blamed weak European and US markets for a quarterly loss.
While Holcim’s attributable net income beat forecasts, core earnings before interest, taxation, depreciation and amortization (EBITDA) fell 16% to 1.234 billion francs, missing a Reuters poll average for 1.4 billion.
Holcim said the European and North American construction markets, where it makes almost half its sales, would remain subdued, and chief executive Markus Akermann said the severity of the winter weather could determine whether it would miss last year’s EBITDA of 4.63 billion francs. “It’s challenging, but it’s not impossible,” he told a news conference.
Holcim shares, which have fallen 17% this year, compared with a 3% fall for the STOXX Europe 600 construction index, were down 2.9% at 64.85 francs at 03:15 pm, underperforming a 0.2% weaker sector index.
“The operating outlook seems to be rather cautious,” said Vontobel analyst Serge Rotzer in a note. “Operating results missed expectations, and we will fine-tune our 2010 forecast.”
He added that Holcim beat Lafarge and Cemex in terms of volume growth in the quarter, but was behind HeidelbergCement.
India Exposure
Holcim said it was hit by falling prices in important markets including India, Europe and the United States, and higher variable production and distribution costs.
“Holcim was severely affected by this in India. The onset of the monsoon -- which was particularly harsh this year -- prompted a slide in cement prices right across the country,” it said.
However, it predicted a rapid rise in demand for building materials after the monsoon.
Holcim holds 46% stakes in both ACC Ltd and Ambuja Cements Ltd, India’s second and third-biggest cement producers. Both have already reported a weak third quarter. Holcim makes more than a third of its sales in the Asia Pacific region, giving it the largest exposure to the region among the big cement makers.
Holcim warned in August that government cuts would limit infrastructure spending in Europe and North America, which had been buoyed by stimulus packages following the financial crisis.
Mexica’s Cemex said last month economic conditions had stabilised in most of its main markets and it expected the fourth quarter to be a turning point, while German rival HeidelbergCement beat expectations for the quarter as U.S. states started using federal funds for highway projects.
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First Published: Wed, Nov 10 2010. 04 08 PM IST
More Topics: Holcim | Cement | Profit | Monsoon | Income |