LafargeHolcim, the world's largest cement producer, said its Australian and New Zealand operations are not on the sale block.
Speculation has emerged that the newly created Swiss-French building materials company may exit from the region. LafargeHolcim announced a plan last week to divest almost $5 billion of assets in 2016 after posting weaker-than-expected third-quarter results.
That has left the door open to a possible $3 billion spin-off after the completion of a $60 billion global merger.
But in an internal email sent to staff on Monday, Holcim Australia chief executive Mark Campbell said the company was "not currently being sold" but could not rule out an exit in the long term.
"I have checked whether the LafargeHolcim group had made a decision to sell the businesses in Australia and New Zealand and started a sale process without my knowledge, and the answer I have received is no," Mr Campbell said.
"That said, as we know, organisations change focus over time and it is impossible to say that we will always be part of the LafargeHolcim group."
Australian-listed rivals, including Boral, Fletcher Building and Adelaide Brighton, are seen as potential acquirers should the multinational giant choose to sell off its local arm, and Ireland's CRH may also be interested if a sale proceeds.
However, Morgan Stanley said many of LafargeHolcim's local competitors may run into competition issues given the market is concentrated among several large players.
"Should Adelaide Brighton fully participate, we cannot rule out that the 50 per cent share in Cement Australia would be divested due to Australian regulations, given Adelaide Brighton's already-strong share in cement," Morgan Stanley analyst James Rutledge said.
Other players such as Fletcher and Boral may also face acquisition issues.
"While we think Fletcher Building is unlikely to be in a position to participate in industry consolidation, a change in owner that was less integrated into the region may be a positive for Fletcher Building at the margin," Mr Rutledge said. "Given Boral's strong share in aggregates and the concrete market, we believe it will be difficult to participate in industry consolidation. Any transaction in the space, however, could focus the market on the sum-of-the-parts value for Boral."
LafargeHolcim chief executive Eric Olsen last week acknowledged weakness in Australia during an investor conference call, where its third-quarter earnings fell 1.1 per cent to 7.83 billion francs ($10.6 billion), missing a consensus forecast.
"What's happening in Australia is you've got a lot of infrastructure projects, which are slowing down, and its overall economic effect in the economy," said Mr Olsen. "And we've seen [aggregates] price declines going down – prices going down in Australia and ... we all see the mining sector in Australia which has been strongly impacted."
Expansion
Mr Campbell said he has been surprised by speculation the Australian and New Zealand division could be sold but told the company's 3000 staff not to be distracted by the rumours.
"I was not aware of any such speculation until the story was printed and I, like many of you no doubt, was caught a bit by surprise," he said. "As you know our priority is keeping people safe, meeting our customers' needs and meeting our financial targets. That's what we all need to stay focused on."
While Lafarge has a limited local presence in Australia and New Zealand, Holcim has beefed up its operations after buying a string of Australian assets from Mexico's Cemex in 2009 for $2 billion, and now boasts more than 350 sites nationwide. .
Cemex paid $16 billion to buy Australia's United States-focused Rinker Group – a former subsidiary of CSR – in 2007 in a hostile takeover battle but struggled to repay debts on the transaction after the 2008 financial crisis crimped borrowing and construction activity.
Holcim swooped in to buy the local Australian assets from Cemex, establishing the Swiss-based company as one of the country's biggest cement makers.
Holcim made the decision last year to close its New Zealand manufacturing plants, with cement to instead be imported to its Auckland and Timaru plants from a Mitsubishi-owned plant in Japan.
LafargeHolcim will host a capital-markets day for investors on Tuesday when it may directly comment on the possible divestments, according to Morgan Stanley.
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