PREVIEW-Emerging market demand to bolster Holcim, Lafarge

By Katie Reid

ZURICH, May 5 (Reuters) - The world's largest cement makers will show they are well placed to cope with slower demand in the United States and some European markets when they post results this week, thanks to unabated demand in emerging markets. Analysts are upbeat about the outlook for Lafarge (LAFP.PA) and Holcim (HOLN.VX) despite concerns that higher energy and transportation costs, as well as negative currency developments, could weigh on first-quarter earnings and margins.

"With 63 percent of EBITDA (earnings before interest, tax, depreciation and amortisation) from growth emerging markets and only around 8 percent from the United States, Holcim is correctly placed, in our view, to face tougher times in western economies," said UBS analyst Mark Stockdale.

Both Holcim and Lafarge are benefiting from strong demand in countries such as India and China as a result of rapidly growing cities, housing shortages and infrastructure expansion.

Holcim is likely to say it is confident about reaching its long-term growth target of 5 percent in internal operating EBITDA in 2008 on Tuesday, despite expectations that first-quarter net profit at the Swiss group will be little changed at 354 million Swiss francs ($337.8 million), according to a Reuters survey of nine analysts.

Operating profit is seen falling 9 percent to 824 million francs on sales down 3 percent to 5.5 billion, according to Reuters data, as the group is hit by the divestment of its South Africa unit, and some delays in price increases.

In April, Mexico's Cemex (CX.N)(CMXCPO.MX), the world's third largest-cement maker posted an 18 percent rise in first-quarter net profit but warned it did not see any recovery in the U.S. residential housing market in the next 12 months.

ACQUISITION BOOST

Lafarge, however, is seen reporting a 30.4 percent rise in recurring operating profit to 450 million euros ($695.3 million) on Wednesday as the French group is getting a boost from its $13 billion-acquisition of Orascom Cement, which lifted its exposure to high-growth emerging markets, the Middle East in particular.

Additional savings and strong cement prices, which offset higher costs, are also likely to help Lafarge, analysts said.

Lafarge, which is seen confirming its outlook, raised its cost savings target to 400 million euros by the end of 2008 in February, and confirmed it would announce a new cost cutting plan later this year for the 2009-2011 period.

"Lafarge remains our favourite stock in the European building materials sector due to high exposure to emerging markets, notably oil and gas producing countries post Orascom (and) strong cost cutting programme," said analysts at UBS.

Meanwhile, Germany's Heidelberg Cement (HEIG.DE) is seen benefiting from the consolidation of British group Hanson Plc, which it bought last year, when it reports on Thursday.

Holcim's big cash pile means it could also splash out on buys, taking part in industry consolidation and helping to offset an organic slowdown.

Lafarge is trading at 10.63 times expected 2008 earnings, at a slight premium to Holcim, which is trading at nearly 10 times, while Cemex is trading at 10.38 times and Heidelberg Cement is trading at nearly 6 times.

For a detailed Holcim poll, click on [ID:nL0296826]

For a detailed Lafarge poll, click on [ID:nL05871877] (Additional reporting by Marie Maitre in Paris; Editing by David Cowell)