UPDATE 2-Holcim expects profit pay-off from cost cuts

Wed Feb 27, 2013 7:28am EST

* Q4 net loss 161 mln Sfr vs forecast 98 mln loss

* Sees pick up in demand in N. America, Asia and LatAm

* To raise dividend to 1.15 Sfr per share vs 1.00

* Shares fall 1.3 pct initially (Recasts, adds shares, analyst)

By Caroline Copley

ZURICH, Feb 27 (Reuters) - Holcim expects major cost cuts to boost profits in 2013 after the Swiss cement maker reported a bigger-than-expected fourth-quarter loss due partly to restructuring charges.

Holcim has had to step up a cost-cutting drive to cope with weak demand in Europe, where sluggish construction markets have forced cement makers, including France's Lafarge and Germany's HeidelbergCement to shave costs and sell non-core assets tackle overcapacity.

Holcim said on Wednesday it aimed to cut cement capacity in Europe by around 10 percent. At the same time, it plans to expand capacity in high-growth emerging market countries like India, Indonesia, Brazil and Ecuador.

In its outlook, Holcim predicted higher cement sales in North America, Asia and Latin America in 2013, but was less optimistic about Europe, Africa and the Middle East.

Chief Executive Bernard Fontana said he expected to be able to push through price rises in Asia and Latin America this year and had raised cement prices by $5-$7 per tonne in the United States since Jan. 1.

Rivals Lafarge and HeidelbergCement have both predicted stronger demand for cement this year, driven by growing volumes in emerging markets and a recovery of the U.S. home construction industry.

COST-CUTS ACCELERATED

Holcim, currently the world's largest cement maker by market value, had said in May cost-cuts would boost profits by at least 1.5 billion Swiss francs by the end of 2014.

The group stepped up the pace of the overhaul in December and flagged restructuring charges and write-offs of more than 500 million francs.

In the fourth quarter, the company booked 457 million francs in write-offs on property and plant equipment. For the full-year the costs related to its savings programme were 239 million francs compared to guidance of 200 million.

These contributed to a fourth-quarter net loss after minorities of 161 million francs, compared to an average analyst forecast of 98 million loss in a Reuters poll.

France's Lafarge earlier this month had produced stronger than expected fourth quarter earnings.

Holcim's sales rose 1 percent in the fourth quarter to 5.3 million francs, also short of the average analyst expectations.

Vontobel analyst Serge Rotzer said European sales were disappointing and only partially explained by restructuring costs. He said the start to 2013 would be challenging: "We fail to see strong catalysts in the short term."

Shares in Holcim, which have risen some 47 percent since mid-June last year, fell more than one percent before turning positive. They were 0.1 pct higher at 71.95 francs by 1220 GMT, underperforming the European construction and materials sector index.

"For further substantial increases in the share price, the world economy will presumably have to show clear progress," Notenstein analysts said in a note.

Holcim said it would pay a dividend of 1.15 francs per share, up from 1.00 franc a year earlier. ($1 = 0.9315 Swiss francs) (Reporting by Caroline Copley; Editing by David Holmes and Jane Merriman)