Holcim reins in profit forecast on weak sales in India
ZURICH (Reuters) - Holcim (HOLN.VX), the world's largest cement maker by market value, gave more muted guidance for full-year earnings as a slowdown in home building and infrastructure spending weighs on sales in India, its biggest market.
Holcim said on Thursday it should achieve organic growth in earnings before interest, tax, depreciation and amortization as well as operating profit this year. It had previously forecast "significant" growth in both performance measures.
"We are confident there is growth. The fact is that in H1 we faced adverse market conditions in India," Chief Executive Bernard Fontana told an analyst call.
Holcim's sales fell 3 percent in the second quarter to 5.3 billion francs, below a consensus analyst forecast of 5.43 billion, dragged down by falling demand in India, Canada, Mexico and Morocco.
Net profit at both its Indian subsidiaries ACC (ACC.NS) and Ambuja Cements (ABUJ.NS) tumbled more than 30 percent in the second quarter. Cement sales in the country were also hit by an early monsoon season.
The company also sounded a note of caution on North America and now expects flat sales there this year, down from its previous guidance for higher sales volume.
About 17 percent of Holcim's sales were in India last year and Vontobel analyst Christian Arnold said Holcim was more exposed to the south Asian country than its rivals Cemex (CMXCPO.MX), Heidelbergcement (HEIG.DE) and Lafarge (LAFP.PA).
He said Holcim overall had not performed as well as those companies in terms of second-quarter organic sales growth.
Holcim stock trades at 13.6 times estimated forward earnings over the next twelve months, in line with Lafarge of France and Germany's HeidelbergCement, according to Thomson Reuters data.
"It will be crucial to show better momentum in India/Asia Pacific and in North America in the second half of 2013," said Arnold, who has a "hold" rating on Holcim stock.
Shares in Holcim, which have gained more than 10 percent since this year's June 24 low of 63.40 francs, rose 1.2 percent to 71.30 francs by 0747 GMT (2:47 EDT).
Bad weather has weighed on the sales of cement makers this year, prompting Lafarge to trim its forecast for market growth to between 0 and 3 percent. It had previously forecast growth between 1 and 4 percent.
Faced with a slump in the European construction industry, Holcim Chief Executive Bernard Fontana has slashed costs and cut capacity in the region, at the same time expanding into high-growth emerging countries such as Indonesia, Brazil and Ecuador.
The company said cost cuts had helped boost profitability in Europe and Latin America.
Earnings before interest, tax, depreciation and amortization (EBITDA) inched up 0.3 percent to 1.17 billion Swiss francs ($1.25 million) in the second quarter. Analysts on average had forecast a fall of 4 percent to 1.14 billion.
($1 = 0.9341 Swiss francs)
(Reporting by Caroline Copley; editing by Tom Pfeiffer)
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