LafargeHolcim 2Q16 results

LafargeHolcim released its second quarterly results today, which reported net sales of CHF7.28bn (US$7.47bn). Adjusted operating EBITDA (excluding merger, restructuring and other one-offs) increased six per cent like-for-like in the quarter to CHF1.7bn (US$1.75bn). Net income increased CHF318m (US$326.5m) to CHF452m (US$464m) for the first half of the year and the group's annual divestment target of CHF3.5bn (US$3.59bn) was exceeded.

CEO of LafargeHolcim, Eric Olsen, said, “Our focus on pricing and synergies is delivering visible earning momentum, driving a 210 basis points year-on-year improvement in operating margins and a six per cent increase in like for like adjusted operating EBITDA in Q2. … With the recent divestments announced in India, Sri Lanka, China and Vietnam, we have exceeded our CHF3.5bn commitment for the whole of 2016 in a little over seven months. … Following the successful execution of our divestment program to date, we are extending the program to CHF5bn [US$5.13bn]. We expect to complete the remainder of this by the end of 2017.”

The group’s annual cement production capacity for the period January-June 2016 stood at 368.1Mta, a 1.6 per cent decrease from 374Mta seen in the same period in 2015. Cement prices increased 2.2 per cent QoQ.

Markets which delivered good earning growth include Mexico, the Philippines, US, Algeria and Lebanon, while China showed signs of recovery through cost control measures and targeted marketing strategies. India also made some strong progress through implementation of pricing, marketing strategies and delivery of synergies.

Nigeria, however, was a challenging market for LafargeHolcim this quarter, with strikes and interruptions to gas supplies preventing them from serving the growing market. Performance in Nigeria alone accounted for a fall of CHF96m in operating EBITDA, like-for-like, in the quarter. “Without the effect of Nigeria, where are plants were affected by gas shortages, adjusted operating EBITDA would have increased by 13 per cent in the quarter,” according to CEO, Eric Olsen.

Net debt stands at CHF18.1bn (US$18.57bn), compared to CHF17.3bn in 4Q15. This higher figure reflects a dividend payout of CHF900m (US$923.8m) in May 2016. Total one-off cots for the first half of 2016 were CHF176m (US$180.6m), which includes CHF116m of implementation costs related to synergies.