By Caroline Copley
ZURICH (Reuters) - Swiss building materials group Holcim (VX:HOLN) posted a drop in quarterly sales and profits on Monday as a recovery in India following May's elections failed to offset foreign exchange headwinds and weakness in Europe and Latin America.
The group, which is in the process of merging with France's Lafarge (PA:LAFP), reported higher sales in markets such as the United States and India, where infrastructure spending has picked up following the election victory of Narendra Modi who campaigned to revive stalled construction projects.
But Europe remained challenging as recovery prospects dimmed and growth in Germany and France slowed. In Latin America, Holcim's performance was hurt by uncertainties in markets such as Argentina.
The company became more cautious on its outlook for cement sales and now no longer expects volumes to rise in Europe.
Third-quarter sales slipped 2.1 percent to 5.18 billion Swiss francs (3.37 billion pounds), falling short of the average forecast of 5.27 billion in a Reuters poll.
That was behind the 3 percent sales growth recorded by Mexican rival Cemex (MX:CMXCPO) for the third quarter.
Adverse exchange rate moves, in particular a fall in emerging market currencies against the Swiss franc, have dragged on Holcim's results this year, and wiped 1.05 billion francs off its revenues in the first nine months.
Excluding the negative currency impact, sales rose 0.9 percent in the third quarter.
Net income attributable to shareholders fell 4.7 percent to 447 million francs, also shy of the poll estimate for 459 million francs.
Shares in Holcim, which have risen just 2 percent so far this year, were indicated to open flat, according to premarket indications by bank Julius Baer
The stock trades at 14.7 times earnings forecasts, at a discount to Lafarge's 18.3 times but ahead of HeidelbergCement's (DE:HEIG) 11.3 times.
SALES NEGOTIATIONS START
The third-quarter earnings report follows on from a formal notification to the European Commision last week of Holcim's plans to merge with Lafarge to create the world's top cement group with $44 billion in annual sales in the industry's biggest ever tie-up.
The pair have drawn up a list of assets they plan to sell, representing about 12 percent of combined sales, in order to steer the deal past anti-trust regulators. Seven countries have already given the deal the green light.
Holcim said on Monday the two cement makers had started the sales process and were in negotiations with potential buyers.
Cemex (MX:CMXCPO) has ruled out a bid for any of the assets.
Several people familiar with the matter told Reuters in October that Germany's HeidelbergCement (DE:HEIG) and Brazilian firm Votorantim Cimentos SA
Several private equity groupings have also been formed to pursue a deal for the assets, which could be valued at anywhere between 4 billion and 7 billion euros ($5-8.85 billion), according to sources.
(Editing by Biju Dwarakanath and Mark Potter)