Emerging markets continue to drive Holcim sales

Holcim's consolidated sales for 2011 fell 4.2% on the previous year to CHF20.7bn (US$23.1bn), although the company says that on a like-for-like basis it saw a +7.5% increase in revenues. Due to cash-neutral impairments totaling CHF775m, net income was down 57.9 per cent to CHF682m.

While operating EBITDA decreased 12.3 per cent, on a like-for-like basis it remained virtually stable at minus 0.2 per cent.  In many markets, Holcim said increased costs due to inflation, especially for raw materials and energy, could not be completely passed on to sales prices. This, combined with various local factors, negatively affected performance above all in the Philippines, India, North America and Great Britain, Holcim said.

Cement sales were up +5.6% to 144.3Mt, while aggregate sales were up +9.6% to 173Mt and the volume of ready-mixed concrete increased +5.4% to 48.4Mm3. Holcim did however see a -2.8% fall in asphalt sales, to 19.3Mt. Most of the increases in demand it has seen have come from emerging markets and it is increasing its capacity in these regions accordingly. Only the Group region Africa Middle East saw slight declines in sales volumes. However, Holcim says the rise in demand has been accompanied by an increase in costs. It says raw materials, energy and transport costs all rose last year.

In 2011, further efficiency improvements were undertaken. This primarily involved the temporary or permanent closing of production facilities almost exclusively in developed markets, and not only in cement, but in all segments. Spain, Italy, several Eastern European markets and the US were particularly affected by closures and restructuring. In terms of capacity increases, last year the company began operations at the new Shurovo plant in Russia and shortly before the end of the year, Garadagh Cement in Azerbaijan produced its first clinker.  In Latin America, cement capacity was substantially increased in Ecuador.

In Asia, which has large deficits in residential and infrastructure construction,Holcim is also in the process of adapting existing capacity to developments on the demand side. In India, ACC began operating what is currently the largest clinker kiln in the world at its Wadi plant. The Chanda plant was also significantly expanded, while Ambuja Cements added additional clinker capacity in Rauri and Bhatapara, as well as two new grinding stations. The Group company ACC will increase cement capacity in east India by additional 5 million tonnes by early 2015. At Jamul, the existing facility will be replaced by a state-of-the-art clinker plant and grinding capacity increased simultaneously. In addition, the capacity of the existing Sindri grinding plant will be increased, and a new grinding plant will be built at Kharagpur. Both installations will source clinker from the new Jamul plant. Overall capacity of ACC will then increase to 35Mt. The Tuban plant in Indonesia, a dynamic market with great potential, is another installation under construction and will produce cement starting in 2013. Finally, Holcim Brazil will bring a new kiln line on stream at its Barroso plant in 2014.

On its outlook,  Holcim expects demand for building material to rise in emerging markets in Latin America and Asia, as well as in Russia and Azerbaijan in 2012. A slight improvement for North America can also be expected. In Europe, demand should remain stable, provided that the situation is not undermined by further systemic shocks. In any case, Holcim will accord cost management the closest attention and pass on inflation-induced cost increases. Holcim’s approach to new investments will be cautious. Holcim expects that the Group will achieve organic growth in terms of operating EBITDA.