Holcim profits drop on weak European results

By Helen Wright10 November 2010

Holcim reported a -22.5% drop in third quarter net income to CHF 612 million (€ 456 million). The cement and aggregates supplier was hit by poor demand for building materials in Europe.

The Switzerland-headquartered company said it was impacted by challenging economic conditions in Western Europe, commenting that the construction sector made "hardly any progress" during the quarter.

"Reluctance to invest on the part of governments, together with declining commercial and industrial construction activity, muted the demand for building materials", Holcim said, adding that this effect outweighed the slight recovery in residential construction in some western markets.

The decline in net income was also reflected in the company's nine-month figures.

For the period ended 30 September, Holcim said net income slipped -22.4% to CHF 1,2 billion (€ 909 million).

This was offset slightly by a +5% increase in net sales year-on-year to CHF 16,5 billion (€ 12,3 billion), compared to CHF 15,7 billion (€ 11,7 billion) in the nine months ended 30 September 2009.

The rise was driven primarily by group-wide sales of ready-mixed concrete and aggregates, which increased +13.2% and +15.1% respectively.

Operating EBITDA slipped -16.1% in the third quarter to CHF 1,2 billion (€ 894 million), while the nine-month figure dropped -1% to CHF 3,5 billion (€ 2,6 billion).

Holcim said it will be "challenging" for it to match 2009's operating earnings before interest, taxes, depreciation and amortization (EBITDA) at year-end.

Looking ahead, the company said prospects for the European construction markets "remain subdued" for the rest of the year. Similarly little change is anticipated in North America, which also saw muted demand, although developments will hinge on weather conditions for building work towards the end of the year.

In contrast, Holcim expects the construction industry in Latin America to "remain robust in most cases", with exceptions of Mexico and Central America.

And business in the Africa Middle East and Asia Pacific regions "will continue to grow", according to the company. Holcim also forecast a "rapid rise" in Indian demand for building materials following the monsoon season.

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