LafargeHolcim's cement volumes increase by 4.7 per cent in 3Q17
LafargeHolcim announced cement volumes were up 4.7 per cent in 3Q17 and 1.8 per cent for the year to date. Globally, cement prices improved by 5.6 per cent in the quarter compared to the prior year on a like-for-like basis.
Operating EBITDA adjusted increased by 5.9 per cent in the quarter to CHF1.750bn (US$1.751bn) on a like-for-like basis and was 9.2 per cent higher for the year to date. Net income group share, at CHF1446m, was up 8.1 per cent year to date reflecting the increase in operating EBITDA and a lower effective tax rate for the nine months 2017. Net income group share for the quarter declined to CHF433m on higher proceeds from disposals in the prior year period. Recurring net income grew by 7.9 per cent to CHF 1270m for the year to date and was down to CHF589m for 3Q17.
Jan Jenisch, Group CEO of LafargeHolcim said: "In the past two months I have visited many of our operations and have been impressed by the experience and enthusiasm of our employees. LafargeHolcim is a first-class company with growing profits in an attractive industry. While the company delivered solid quarterly results, they do not reflect our full potential. As the market leader, we will hold ourselves to a higher standard than anyone else in our sector.
"Today we have reset expectations for the group's outlook to a level that reflects the current business dynamics. While I am reviewing the business, I have an immediate focus on simplification, cost discipline and performance management. We will reduce complexity and focus on operational excellence in order to fully realize the potential of LafargeHolcim. My goal is to generate leading margins and an attractive growth profile, positioned for sustainable value creation for our employees, customers and shareholders."
Regional results
In the Asia Pacific region operating EBITDA adjusted was 5.9 per cent lower than the prior-year period on a like-for-like basis despite a 13 per cent increase in like-for-like net sales. India continued to perform strongly in the context of a normal monsoon season, when demand is normally muted. Higher volumes and prices more than offset higher fuel costs. In the Philippines, market conditions in the quarter remained challenging. Prices there are down compared to the prior-year period, and some large government infrastructure projects have been delayed.
Operating EBITDA adjusted for Europe was up 5.2 per cent on a like-for-like basis compared to 3Q16, with particularly strong contribution from countries in Central and Eastern Europe including Russia. Earnings in the UK were lower on a like-for-like basis, driven by project delays and general economic slowdown. Underlying trends in France were solid as cement and ready- mix concrete volumes increased compared to the prior-year period. Aggregate and ready-mix concrete volumes were lower in Switzerland than in the prior-year period.
Latin America delivered a strong performance on the back of positive sales growth, translating to a 25.6 per cent increase in operating EBITDA adjusted like-for-like compared to the prior year. Mexico delivered continued strong margins and earnings as the business delivered on its commercial strategy despite the impact of September’s earthquakes on economic activity. Operating EBITDA adjusted for Ecuador improved on the prior-year period on a like-for-like basis. In Argentina commercial initiatives helped deliver another quarter of earnings growth.
Operating EBITDA adjusted in Middle East/Africa was 2.1 per cent lower than in the prior-year period on a like-for-like basis. Earnings in Nigeria, which is slowly exiting from recession, were higher in the quarter than in the prior-year period, with favorable pricing more than offsetting an increase in cost. Economic conditions in Algeria deteriorated over the third quarter, which led to a marked decline in 3Q17 volumes compared to the prior-year period.
Operating EBITDA adjusted for North America was up 7.6 per cent for the third quarter on a like- for-like basis. Earnings in the US were significantly higher than in the prior-year period despite unfavorable weather. Demand for aggregates in the US was also impacted by a cautious sentiment for both private and public sector investment. Continued work on cost reduction and the ramp up of key plants such as St.Genevieve and Ravena are supporting earnings growth. In Canada volumes of cement, aggregates and ready-mix concrete increased, underpinning an uplift in earnings.
Merger
Merger, restructuring and other one-offs amounted to CHF165m for the nine months 2017 consisting of CHF301m of merger-related and restructuring costs, partly offset by other one-offs of CHF136m resulting from the reversal of provisions in 2Q17. Synergies of CHF97m were delivered in 3Q17, with the Group exceeding its year-end target of CHF1bn of total synergies already in July. The share of profits from associates in the year to date increased by CHF51m reflecting a larger contribution from Huaxin Cement, China, as a result of higher prices in the market and the integration of the Lafarge assets sold to Huaxin on 1 January 2017.
Net financial expenses of CHF583m are CHF 24m lower compared to the first nine months 2016. Net debt stood at CHF15.5bn at quarter end.
