[Skip to content]

Search our Site
27 October 2017

LafargeHolcim in talks with PPC after posting encouraging Q3 2017 results

LafargeHolcim, the French-Swiss building materials giant, is the latest industry heavyweight to enter talks with the Board of Directors of Pretoria Portland Cement Ltd. (PPC) regarding a possible transaction in Africa. PPC is a leading regional cement manufacturer with a presence in southern and eastern Africa.

No agreement with PPC has yet been reached and LafargeHolcim says no assurance can be given at this stage that a transaction will materialise. CRH, Dangote Cement, Titan Cement and HeidelbergCement are among other leading global building material names who are reported to have been weighing up a potential move for PPC.

LafargeHolcim has also published its Q3 2017 trading figures. Sales during the quarter grew 4.1% year-on-year to CHF 6.9 billion on a like-for-like basis. Q3 2017 Operating EBITDA was up 5.9% to CHF 1.75 billion on a like-for-like basis.

Jan Jenisch, Group CEO of LafargeHolcim said: “In the past two months I have visited many of our operations and have been impressed by the experience and enthusiasm of our employees. LafargeHolcim is a first-class company with growing profits in an attractive industry. While the company delivered solid quarterly results, they do not reflect our full potential. As the market leader, we will hold ourselves to a higher standard than anyone else in our sector.

“Today we have reset expectations for the Group’s outlook to a level that reflects the current business dynamics. While I am reviewing the business, I have an immediate focus on simplification, cost discipline and performance management. We will reduce complexity and focus on operational excellence in order to fully realize the potential of LafargeHolcim. My goal is to generate leading margins and an attractive growth profile, positioned for sustainable value creation for our employees, customers and shareholders.”

LafargeHolcim delivered solid like-for-like Operating EBITDA Adjusted growth in the third quarter with positive contributions from Latin America, North America and Europe. Market conditions were challenging in Asia Pacific and Middle East Africa where actions are being taken to address weakness in key countries.

Like-for-like cement volumes were up 4.7 percent in Q3 and 1.8% for the year to date. Globally, cement prices improved by 5.6% in the quarter compared to the prior year on a like-for-like basis.

Synergies of CHF 97 million were delivered in Q3, with the Group exceeding its year-end target of CHF 1 billion of total synergies already in July.

Operating EBITDA Adjusted increased by 5.9 in the quarter to CHF 1,750 million on a like-for-like basis and was 9.2% higher for the year to date. Pricing, cost discipline and synergies contributed to higher margins with Operating EBITDA Margin Adjusted improving by 80 basis points in Q3 and 100 basis points for the first nine months.

Net Income Group share, at CHF 1,446 million, was up 8.1% year to date reflecting the increase in Operating EBITDA and a lower effective tax rate for the nine months 2017. Net Income Group share for the quarter declined to CHF 433 million on higher proceeds from disposals in the prior year period. Recurring Net Income grew by 7.9 percent to CHF 1,270 million for the year to date and was down to CHF 589 million for Q3.

LafargeHolcim net debt stood at CHF 15.5 billion at quarter end.

Overall, LafargeHolcim expects cement demand globally to increase by 1 to 3% in aggregate for 2017. Following a strong first half and solid Q3, growth in like-for-like Operating EBITDA Adjusted is expected to moderate further for the remainder of 2017.

For 2017, the Group expects to deliver 5-7% growth in Operating EBITDA Adjusted over 2016 on a like-for-like basis; Growth in Recurring EPS; and Net debt / Operating EBITDA Adjusted of around 2.5x.

For 2018, the LafargeHolcim has reset some of the volume and pricing assumptions that underpinned earnings targets to reflect current business dynamics. The Group expects that this will translate into a growth rate for Operating EBITDA Adjusted on a like-for-like basis of at least 5%.

LafargeHolcim’s business review is under way, including country strategies and a focus on simplification, cost discipline and performance management. A strategic and outlook update will be provided in March 2018 when full year 2017 results are published. On this occasion, the Group will also give an update on portfolio management. So far, the disposal program has completed CHF 4.4 billion in enterprise value.

Companies in this article

Pretoria Portland Cement
Titan Cement
Page Comments