HOLCIM, the world’s second- largest cement maker, yesterday said that profit may not grow this year after a decline in second- quarter earnings due to slow demand in the US and higher raw material costs.
US markets would remain "flat" to the end of next year, CEO Markus Akermann said .
The North American construction industry showed "no sign of any substantial progress", demand for construction from European government was subdued and Indian home building weakened, Holcim said.
European construction output dropped for the first time in three months in June, led by declines in Germany and France, a report from the European Union’s statistics office showed yesterday .
Operating profit for this year will come close to last year’s results on a comparable basis after a first-half decline of 7,2%, the Jona, Switzerland-based company said yesterday.
Holcim said that in 2008 it had aimed for average annual growth of 5% over the long term. Earnings by that measure dropped in the past three years.
"The second half will be slightly better than the first," chief financial officer Thomas Aebischer said yesterday .
Holcim said it would continue to raise prices to offset rising costs for energy, raw materials and transportation, and would focus on managing costs. Net debt fell to Sf12,21b n ($15,38bn) as of June 30 from Sf14,08bn at the end of December. The shares fell as much as 7,7%, the biggest intraday decline since March 2009. They traded at Sf44,75, down 6,5%, in Zurich yesterday.
Mr Akermann, who on March 2 said the goal would be challenging to reach this year, is fighting rising raw material costs and the appreciation of the franc, which has gained 18% against the dollar this year.
Second-quarter net income fell 13% to Sf347m from a year earlier, missing the Sf373,3m average estimate of seven analysts. Sales dropped 11% to Sf5,49bn, missing estimates of Sf5,56bn.
Currency effects shaved Sf916m off sales in the second quarter and reduced operating profit by Sf203m. That was more than the combined effects on revenue and profit in the previous three quarters.
"To the best of my knowledge, we’ve never seen a currency impact this strong," Zuercher Kantonalbank analyst Martin Huesler said. He has a "market weight" recommendation on the stock.
Serge Rotzer, an analyst at Bank Vontobel, said he might cut his estimate for Holcim’s full-year earnings per share by 10%-20%.
Holcim said it will invest Sf720m in Brazil to tap faster growth in Latin America. The company said it planned to add a second kiln line at its Barroso plant north of Rio de Janeiro and improve a rail terminal, increasing capacity 49% to 7,9-million tons by 2014.
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