Holcim Ltd increased again its sales volumes in the three core segments cement, aggregates and ready-mix concrete. Practically all Group companies achieved their operating targets as measured in local currency, partly because the selective restructurings of recent years have started to bear fruit. Consolidated net sales of CHF 6,441 million (first half 2001: 6,582) fell just short of the strong results in the first six months of 2001 owing to currency movements. Main factors were the weakness of the US dollar as well as the euro. In addition, a number of local currencies in Latin America, the South African rand and the Egyptian pound all fell substantially. Adjusting for currency movements, consolidated sales exceeded the results in the corresponding year-back period, and also consolidated operating profit of CHF 935 million (first half 2001: 997) compared favorably with the same period in the previous year. EBITDA at CHF 1,706 million (first half 2001: 1,789) held up well. Cash flow from operating activities rose by 26.6 percent to CHF 781 million (first half 2001: 617), which is a gratifying result. However, Group net income after minority interests posted a drop to CHF 292 million in the first half of 2002 (first half 2001: 397). The reason for this is additional ordinary income. It fell from CHF 102 million in the first half of 2001 to CHF -18 million in the first half of 2002, largely due to depreciation and amortization of non-operating assets of CHF 63 million related to the unresolved crisis in Argentina, lower interest income owing to market developments and a fall in dividend income from affiliated companies.
Increased efficiency in Europe
Developments in the economic environment in Europe did not hold any surprises. While building activity remained brisk in Spain, the crisis in the German construction industry worsened. Most countries in central and eastern Europe reported solid demand for building materials. Consolidated cement sales and deliveries of aggregates were both up. Only sales of ready-mix concrete came in slightly below the figure for the previous year. Operating profit for Group region Europe posted an above-average gain of 12.3 percent to reach CHF 274 million (first half 2001: 244). This substantial improvement reflects the success of rationalization measures in the preceding years.
Production bottleneck in Colorado (USA) removed
In the Portland plant, clinker production started on schedule in the second quarter of 2002. This gradually removed the production bottleneck that had existed in the US Midwest for the previous year. The commissioning phase is now completed, and the new plant will have an annual production capacity of two million tonnes of cement a year. Thanks to this modern facility, it will be possible to close the neighboring, cost-intensive Fort Collins plant on August 31, 2002. Compared with the first quarter of 2002, the decline in cement sales of Holcim US has slowed, while all segments of the Groups Canadian company continue to benefit from the ongoing strength of the local market. However, this is not enough to compensate for the direct and indirect loss of earnings and additional costs caused by the delays in bringing the Portland plant on stream. With an operating profit of CHF 77 million (first half 2001: 157), the North American region moved back into the black in the first six months of 2002, after posting a loss in the first quarter.
Stable results in Latin America
Despite difficult economic conditions, particularly in Argentina, both sales and earnings in the Latin American region remained stable. Consolidated deliveries of cement and clinker as well as sales of ready-mix concrete came in marginally below the results for the first half of 2001, while sales of aggregates actually rose. Holcim also improved its financial position in Latin America. Cost efficiencies and the solid market position managed to cushion the succession of huge devaluations in the Argentine, Venezuelan and Brazilian currencies and the depreciation of the US dollar against the Swiss franc. Operating profit of CHF 417 million (first half 2001: 425)
in the Latin American region was virtually unchanged. Better operating results in Mexico, Central America, the Caribbean and Chile were particularly pleasing.
Further growth in Africa and the Middle East
This regions contribution to the Group's results gained in significance. The favorable developments in the construction sector in each of these important markets continued at a steady pace, and in some cases even gathered strength. The larger Group companies in Egypt, Morocco and South Africa managed to post considerably higher sales, whereas the level of new orders in West Africa, Madagascar and La R鵮ion was unsatisfactory. The earnings trend apparent in the first quarter continued into the next. In the first half of 2002, operating profit in Group region Africa Middle East improved by 8.1 percent to CHF 120 million (first half 2001: 111).
Strong volume growth in Asia Pacific
Economic recovery in the ASEAN region continues to make good progress. The building sector in particular is expanding robustly on the back of strong growth in residential construction in several countries. Shipments of cement from the Thai company exceeded expectations, and all plants in Saraburi are operating at full capacity. Sales growth in the region was bolstered by the full consolidation of the Indonesian PT Semen Cibinong, which Holcim acquired at the end of 2001. The Groups company in Australia also managed to increase sales of cement, and its aggregates and ready-mix concrete segments reported substantially higher volumes. However, in the first half of 2002, operating profit in Group region Asia Pacific declined 6.9 percent to CHF 81 million (first half 2001: 87), due to the cost of integrating the newly consolidated Indonesian subsidiary.
The flattening global economy and negative currency developments influence the outlook for the year
In recent months, overall economic conditions have deteriorated perceptibly, and some countries have had to revise their growth forecasts downwards. Despite the progress made in operations in the first half of 2002, factors beyond Holcim's control remain a source of uncertainty. This applies particularly to international economic developments and to currency movements vis-୶is the Swiss franc. Given the current economic situation, it seems unlikely that Holcim will match last years results. However, thanks to consistent programs to improve efficiency, a general trend of falling interest rates and measures taken to stabilize the financial markets, the Board of Directors and the Executive Committee are confident about the medium-term outlook.
|Group Holcim January - June||2002||2001||+/-%|
|Annual cement production capacity||million t||139,7||121,2||+15,3|
|Sales of cement and clinker||million t||43,5||42,1||+3,3|
|Sales of aggregates||million t||42,3||40,0||+5,8|
|Sales of ready-mix concrete||million m3||12,2||12,2||-|
|Personnel||number||50 128||48 022||+4,4|
|Net sales||million CHF||6 441||6 582||-2,1|
|Operating profit||million CHF||935||997||-6,2|
|EBITDA||million CHF||1 706||1 789||-4,6|
|Cash flow from operating activities||million CHF||781||617||+26,6|
|Group net income before minority interests||million CHF||427||511||-16,4|
|Group net income after minority interests||million CHF||292||397||-26,4|
|Earnings per dividend-bearing bearer share||CHF||7.48||10.56||-29,2|
|Earnings per dividend-bearing registered share||CHF||1.5||2.11||-28,9|
|Earnings per bearer share pre goodwill amortization||CHF||11.22||13.78||-18,6|
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You can download the complete half-year report from www.holcim.com. There you will also find the consolidated statement of income, consolidated balance sheet, statement of changes in consolidated equity and the consolidated cash flow statement.
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With majority and minority interests in over 70 countries on all continents, Holcim is one of the world's leading suppliers of cement, as well as aggregates (gravel and sand), concrete and construction-related services.
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