May 15, 2019 / 4:50 AM / 12 days ago

LafargeHolcim sees cement demand up, defying slowdown fears

ZURICH (Reuters) - LafargeHolcim, the world’s largest cement maker, expects demand to continue rising this year, pushing aside concerns about slowing economies and trade tensions weighing on the construction industry.

FILE PHOTO: The logo of LafargeHolcim, the world's largest cement maker, is seen at its headquarters in Zurich, Switzerland March 2, 2017. REUTERS/Arnd Wiegmann/File Photo

Chief Executive Jan Jenisch said on Wednesday he was seeing “very good market demand globally” after the Swiss company beat sales and profit expectations during its first quarter.

He forecast volume demand for cement would increase by 2 to 3 percent this year, with the United States and Europe running at the same level, though China could be flat to slightly down.

LafargeHolcim shares were up 2.4% at 0720 GMT.

“In Europe we have very good order books in most of the countries,” Jenisch told reporters. “Germany continues to have very strong construction activities, so does France, so does eastern Europe. The formerly more difficult markets in the south are all growing again.”

His confidence was supported by a return to growth in German GDP during the first quarter, after the economy stalled at the end of 2018.

Britain, in the midst of a messy exit from the European Union, was the exception in Europe, Jenisch said, adding he expected a 2% volume decline there this year.

LafargeHolcim was also confident about the United States and India, its two largest markets, Jenisch said.

Quarterly core operating profit rose 15.5% to 809 million Swiss francs ($802 million) under pre IFRS 16 accounting standards, beating market expectations of 754 million francs.

Sales increased 2.2% to 5.96 billion francs, just ahead of expectations for 5.92 billion francs. Like-for-like sales, stripping out currency moves, acquisitions and divestments, climbed 6.4%.

The performance was led by Europe, where price increases helped lift sales by nearly 16% and core operating profit leapt by a reported 73%, helped by higher efficiency at its cement plants and an early start to the construction season.

LafargeHolcim’s North America and Asia Pacific regions also did well, though Latin America and Middle East and Africa struggled.

Jenisch has been concentrating on North America and Europe and cutting costs, closing offices in Zurich, Miami and Paris.

The company has also pulled out of South East Asia, selling business worth $4.9 billion in Indonesia, Malaysia, Singapore and the Philippines. Proceeds will be used to pay down debt.

Jenisch said the deals signaled the end of larger divestments and he would now focus on increasing sales.

LafargeHolcim confirmed its 2019 targets for sales growth of 3-5 percent on a like-for-like basis and recurring core operating profit growth of at least 5 percent.

Jenisch left the door open to raising those goals.

“We have a successful, but small quarter behind us, we have good order books. Let’s see throughout the year.

“Maybe we can move towards the upper end of the guidance.”

($1 = 1.0087 Swiss francs)

Reporting by John Revill; Editing by Michael Shields and Mark Potter

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