LafargeHolcim is upbeat about the prospects for the building materials industry to stage a rapid recovery from the COVID-19 pandemic in the second half of the year.
The Swiss-based company, which is the world’s biggest cement supplier, posted an 11.2% fall in year-on-year net sales to CHF5,293m (€5,005m) in the first quarter of 2020 as the effects of the global outbreak took hold.
LafargeHolcim CEO Jan Jenisch said he is “confident” that the company will emerge from the pandemic as a major contributor to economic recovery as building activity gets back to normal.
“I expect all the projects to resume when the health (situation) is under control,” he was quoted by Reuters as saying. “We are positive for the second half of the year; the recovery will come.”
The company expects the most significant impact from COVID-19 to come in Q2 and says the full effect of the crisis on the company’s 2020 results cannot currently be assessed.
It says it is looking forward to the rest of 2020 with confidence, given the encouraging April data on the rebound of activity in China. More fundamentally, it adds that the building industry is resilient and expected to benefit from future recovery plans from governments and central banks.
The company said it had had a strong start to the year as Q1 performance remained well ahead of last year’s results until mid-March when the impact of COVID-19 spread beyond China into all business regions.
Europe delivered reliable results despite disruptions in key markets, with good market growth in Eastern Europe and resilient performances in Switzerland and Germany. COVID-19 impacted volumes in France, the UK and Spain. Recurring EBIT improved on a like-for-like basis as a result of operational efficiencies.
The company said that North America delivered excellent improvement in volume growth across all business segments. The region showed a continuation of strong cement demand trends from 2019, further supported by favourable weather, while megaprojects along the Mississippi River drove aggregate volume improvement of 12% in the quarter. The US and Canadian operations both delivered solid industrial performances, with only minor impact from COVID-19 in the quarter.
It added that Latin America produced a resilient performance, led by a reliable performance in Mexico. COVID-19 lockdown measures impacted Brazil, Argentina, Ecuador and Colombia since mid-March. The Recurring EBIT margin was resilient thanks to valid price and cost management.
Performance of Asia Pacific was affected by the COVID-19 outbreak, with China significantly impacted in Q1. There was significant profitability improvement in India despite lockdown measures towards the end of March. The market slowdown in Australia continued.
Middle East Africa delivered an over-proportional increase in Recurring EBIT with turnaround initiatives offsetting COVID-19 impact in the region. Nigeria, Algeria and Iraq were notable contributors, while lockdown measures impacted South Africa and Lebanon.
LafargeHolcim says it has a strong balance sheet and liquidity, with a ratio of Net Financial Debt to Recurring EBITDA of 1.5x as at the end of 2019.
It added that the early implementation and execution of its “Health, Cost &” Ash” action plan against the pandemic would further strengthen business resilience.
The company says it is not planning any job cuts among its 70,000-strong workforce at the moment.
