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Holcim to pick up stock worth $1 bn in Ambuja

Holcim to pick up stock worth $1 bn in Ambuja
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First Published: Thu, Aug 23 2007. 11 23 PM IST
Updated: Thu, Aug 23 2007. 11 23 PM IST
Zurich: Holcim Ltd, the world’s second biggest cement maker, increased its profit more than analysts estimated on expansion in China and India, and plans to buy more than $1 billion (Rs4,100 crore) of stock in Ambuja Cements India Ltd.
Second-quarter net income more than tripled to 2.07 billion Swiss francs (Rs7,013 crore), boosted by a 1.1 billion franc gain from the sale of a stake in its South African unit, the Jona, Switzerland-based company said in a statement on Thursday. Sales rose 16% to 7.27 billion francs.
Holcim plans to offer as much as $1.34 billion to gain a majority of Mumbai-based Ambuja, the fourth biggest cement maker in India, where plants are running at full capacity as the economy grows at its quickest pace in almost 20 years. Second-quarter sales climbed 34% in Asia and fell 0.8% in North America, where a US housing slump crimped demand.
“The company is well positioned in emerging markets and it is doing the right thing in investing the proceeds from the disposal in the expanding Indian market,” said Martin Huesler, an analyst at Zuercher Kantonalbank with an “outperform” rating on the stock.
Profit excluding the South African disposal and a special dividend, was 807 million francs, according to Holcim spokesman Roland Walker. That beats the 736 million franc median estimate of eight analysts.
India expansion
Holcim, which already owns 32.3% of Ambuja Cements, plans to buy a 3.9% stake from the founding families for about $220 million and will make an offer to acquire another 20% for as much as $1.12 billion, the company said.
The Swiss cement maker will decide whether to increase its Ambuja stake further after the currently planned purchases are completed, chief executive officer Markus Akermann said in a conference call.
“The very dynamic volume growth in India will continue as there is a huge backlog in housing and infrastructure,” Akermann said.
Holcim now gets almost half of its revenue from emerging markets. Chinese affiliate Huaxin Cement Co. earlier this month reported that first-half profit doubled on an increase in construction projects. Holcim holds 26% of Huaxin and is seeking to boost the stake further, Akermann said.
The company expects to exceed its long-term growthtarget of 5% in internal operating earnings before interest, taxes, depreciation andamortization.
Holcim’s major rivals are also pursuing a strategy of worldwide expansion. Second-quarter profit at Lafarge, based in Paris, gained 17% as the company raised prices and added factories in China, Poland and Russia.
Profit at Cemex SAB gained 6%. By the end of last year, the six largest cement companies controlled 30% of the global market, said analyst Michael Betts at JPMorgan Chase & Co. in London.
Spending on US construction projects unexpectedly fell in June as cutbacks in residential construction surpassed gains in spending on hotels and office buildings, according to the commerce department in Washington DC.
Cemex became the US leader with a market share of about 15% after its $14.2 billion acquisition of Rinker Group Ltd. That compares with about 13% for Holcim and Lafarge, according to JPMorgan.
Cement consumption in the US will probably decline by 5-7% this year, Akermann said.
US market
Holcim’s acquisition programme has also targeted the North American market.
Earlier this month, the company bought the remainder of the shares it didn’t own of Canada’s St. Lawrence Cement Group Inc. for almost C$700 million (Rs2,695 crore).
In Canada, Lafarge is the market leader with around 34% and Holcim follows with about half that share.
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. The company is present in more than 70 countries and employs almost 90,000 people.
Akermann said Holcim would be interested in some assets of Tarmac, the asphalt unit that Anglo American Plc. plans to sell.
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First Published: Thu, Aug 23 2007. 11 23 PM IST
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