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LafargeHolcim counts on price hikes, lower spending

Stock MarketsMar 17, 2016 15:40
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© Reuters. The company's new logo is pictured at the headquarters of LafargeHolcim in Zurich

ZURICH (Reuters) - LafargeHolcim, the world's biggest cement maker, intends to boost prices and curb capital spending to shore up 2016 profits as it attempts to wring more savings from last year's merger.

The Swiss-French group reported a fourth-quarter loss of 2.86 billion Swiss francs (£2 billion) after taking 3 billion francs in impairment and other charges to end a year in which it was formed by merger on a downbeat note.

"What we see is a more favourable pricing environment," Chief Executive Eric Olsen told reporters on Thursday, adding he expected the group to make a net profit this year.

The company intends to keep capital expenditure below 2.0 billion Swiss francs, down from 2.6 billion in 2015, as it trims operations pooled by France's Lafarge (PA:LAFP) and Switzerland's Holcim (SIX:LHN).

LafargeHolcim expects "at most" to match the cement market's 2-4 percent expansion this year, Olsen added, as markets in China and Brazil remain problematic.

"We would expect real pockets of growth in North America, we see markets in Europe in a better position in 2016 compared to 2015," he said, adding Mexico, East Africa and the Philippines, as well as India were growing well, partially due to low oil prices.

"China will continue to be more difficult. Brazil will continue to be difficult," he added.

Its shares gave up initial gains to slip 1.8 percent by 1305 GMT, bringing the decline this year to around 20 percent.

However, it maintained the 1.50 franc per share dividend announced in November and said it was on track to hit its 2018 financial targets.

In Germany, rival HeidelbergCement (DE:HEIG) hiked its dividend by 73 percent after increasing 2015 net profit by two thirds. It forecast investment of 1.1 billion euros (£857 million) this year and said strength in Britain and the United States was outweighing weakness in Asia.

BELOW FORECASTS

Fourth-quarter adjusted operating earnings before interest, tax, depreciation and amortisation (EBITDA) for LafargeHolcim fell 15.3 percent to 1.40 billion francs, below the 1.45 billion expected by analysts polled by Reuters.

Sales fell 5.9 percent to 7.44 billion francs, below the 7.51 billion expected by analysts.

"Trends clearly worsened in Q4 despite higher than expected synergies," Bernstein analysts wrote.

"This, combined with a massive impairment taken in several emerging markets, make it difficult to reconcile management's confidence about still being able to meet 2018 earnings and cash flow targets," they added.

Olsen contends the merger's challenges were largely "behind us," and forecast "notably more" than 450 million francs of incremental EBITDA synergies this year.

LafargeHolcim counts on price hikes, lower spending
 

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