Holcim: higher cement prices needed for profits

MUMBAI, June 29 (Reuters) - Higher cement prices in India and other markets were necessary to maintain margins in the face of rising energy costs, a senior executive of Swiss cement maker Holcim (HOLN.VX) told India's Business Standard paper at the weekend. Holcim holds more than 40 percent each in India's ACC Ltd (ACC.BO) and Ambuja Cements Ltd (ABUJ.BO).

"If we compare the first quarter of this calender year with the same period of last year, our profitability has come down by 5-7 percent," Paul Hugentobler, a member of Holcim's executive committee, was quoted as saying. "If input costs continue to rise like this, we will not have any other option but to raise prices."

Cement prices across the world had to rise by $20 to $30 a tonne so companies can maintain profits, he told the paper.

But higher prices could lead to a slowdown in demand, he said.

Booming emerging markets helped Holcim post an 84 percent increase in 2007 net profit, but in India government measures to contain inflation were putting pressure on cement firms to hold down prices.

If that were to continue, Hugentobler said, cement companies may have to shut shop in the fast-growing market.

"There is no way out," he was quoted as saying.

Holcim was using alternative fuels to cut energy costs, he said.

"Of course our margins are under pressure," he said. "Coal prices have gone up by 60 percent. We are looking at the option of substituting oil and coal with windpower, waste steam and alternative fuel."

On speculation that Holcim will eventually merge ACC with Ambuja Cements, he said: "We can always send the accountants to merge the balance sheet, but it is very difficult to merge the culture of both the companies."

"We have no plans as of now to merge the two entities." (Reporting by Rina Chandran; Editing by Alan Raybould)