- Increase in net income and cash flow from operating activities despite disappointing net sales development, most especially in India and Mexico
- Progress in reducing fixed and variable costs strengthens the Group
- Rise in operating EBITDA and operating profit on a like-for-like basis in spite of weak demand in key markets such as India and Mexico
- "Holcim Leadership Journey" is on track and leads to higher ROIC
- Further reduction of net financial debt
- Organic growth in operating EBITDA and operating profit should be achieved in 2013
The global economic trend remained subdued despite significant growth in several emerging markets and improved economic data from the US. Demand for construction materials fell in key markets such as India, Mexico, Canada and, to a lesser extent, Brazil, while Europe stabilized.
Despite these circumstances, Holcim generated a further increase in net income and cash flow from operating activities and a slightly improved operating EBITDA margin. This success was based primarily on positive earnings performance in Group regions Europe, North and Latin America and the cost discipline applied throughout the Group. Weaker operating results in India, Mexico, Brazil and Canada in particular led to a reduction in consolidated operating EBITDA and operating profit for the first nine months of the year. However, on a like-for-like basis, i.e. factoring out changes in the scope of consolidation and the clearly negative currency translation effects, both operating results improved. This upward trend also intensified in the third quarter of the current business year.
ROIC before tax increased, while net financial debt was reduced by CHF 1.3 billion to CHF 10.2 billion from CHF 11.5 billion in third quarter 2012.
Sales volumes for the Group were down in all three segments in the first nine months, with the greatest declines occurring in ready-mix concrete. These developments are partly attributable to the lower demand for building materials in some markets, but are also driven by the targeted restructuring measures already introduced to improve margins, for example in Europe and Asia Pacific.
Operating results for Europe, North and Latin America exceeded those for 2012. In these three Group regions, in particular Aggregate Industries UK, Holcim US and Cemento Polpaico in Chile made a significantly higher contribution to operating EBITDA. The results in Azerbaijan continued to be robust. In Asia Pacific, Holcim Philippines achieved a markedly better operating result. However, developments in this Group region were slowed by poorer financial performance by the Indian Group companies. In Africa Middle East, Holcim Lebanon was the main company to post better results. Holcim Morocco only reported a distinct positive performance in the third quarter.
Sales volumes and price development
Consolidated cement sales fell by 2.6 percent to 104.3 million tonnes. However, on a like-for-like basis there was a slight increase of 0.2 percent in the third quarter. The markets with sales growth in the first nine months of the year, included Ecuador, Russia, Azerbaijan, the Philippines and Argentina. Sales of aggregates were down by 3.7 percent to 114.8 million tonnes. However, considerable progress was made in this segment by France, Switzerland, Aggregate Industries US, Bulgaria and Croatia. Sales of ready-mix concrete amounted to 29.5 million cubic meters, a fall of 14.3 percent. However, in this segment Holcim’s sales did improve amongst others in Indonesia, Malaysia and Italy. Due mostly to the results of Aggregate Industries US and Holcim Canada, sales of asphalt declined by 3.1 percent to 6.4 million tonnes.
Sales prices, which generally saw only a gradual improvement, were weighed down in the consolidated results by weaker cement prices in India and lower aggregate and ready-mix concrete prices in Australia.
Consolidated net sales in the first nine months of 2013 fell by 6.1 percent to CHF 14.94 billion. Operating EBITDA came to CHF 2.95 billion, a decline of 4.1 percent on the previous year’s figure. The main reasons for this are the lower results posted by the Group companies in India, Mexico, Canada and Brazil. On a like-for-like basis, however, operating EBITDA increased by 1.0 percent, and by as much as 3.6 percent in the third quarter. Consolidated operating profit decreased by 1.7 percent to CHF 1.80 billion. On a like-for-like basis, however, it improved by 4.0 percent over the first nine months of the year and by 9.6 percent in the third quarter. This positive development was driven primarily by restructuring in aggregates and ready-mix concrete in particular and substantial savings in fixed and variable costs across all segments.
Net income rose by 16.8 percent to CHF 1.28 billion, and net income attributable to shareholders of Holcim Ltd was up by 33.5 percent to CHF 1.04 billion. Revenue from the sale of CO2 emission certificates decreased by CHF 12 million to CHF 10 million.
"Holcim Leadership Journey" gains momentum
The cost programs of the "Holcim Leadership Journey" have contributed CHF 531 million and the Customer Excellence program CHF 95 million to consolidated operating profit so far this year, despite some difficult market environments. The initiatives in the areas of Logistics and Procurement have gathered pace since publication of the half-year results. This confirms that with the measures taken the Group can achieve its target of an increase in operating profit of at least CHF 1.5 billion by the end of 2014 compared to the base year 2011 and under similar market conditions.
Outlook for 2013
Holcim does not expect to reach the previous year’s sales volumes of cement, aggregates and ready-mix concrete in 2013. While Group region Europe is expected to witness higher cement sales volumes, Holcim is somewhat less optimistic with regard to Latin and North America and Africa Middle East. In Asia Pacific cement sales are expected to reach similar levels to previous year.
Turning to operating EBITDA and operating profit, the Board of Directors and Executive Committee expect a further improvement in margins. The "Holcim Leadership Journey", which gains further momentum, will contribute to this development. Under similar market conditions, organic growth in operating EBITDA and operating profit should be achieved in 2013.
Holcim is one of the world’s leading suppliers of cement and aggregates (crushed stone, gravel and sand) as well as further activities such as ready-mix concrete and asphalt including services. The Group holds majority and minority interests in around 70 countries on all continents.