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LafargeHolcim still confident on global construction market after doubling H1 profit

Comments / {{hitsCtrl.values.hits}} Views / Thursday, 1 August 2019 05:15

ZURICH, REUTERS: LafargeHolcim, the world’s largest cement maker, said on Wednesday it had a strong order book going into the second half after it doubled first-half net profit on solid demand, rising margins and cost reductions. 

Sales growth slowed in the second quarter and was below analyst expectations but the company maintained its full-year guidance, saying the construction sector was showing resilience in the face of trade wars and a slowdown in the global economy. 

Britain, however, was a weak spot due to Brexit uncertainty. 

“We have very healthy demand in construction and building materials and expect this to continue in the second half,” Chief Executive Jan Jenisch told reporters on Wednesday after the company reported first-half net income of 780 million Swiss francs ($788 million), up from 371 million francs a year earlier. 

“We believe that construction is probably one of the most resilient demand segments and we also see that in our order books,” he said. 

The company’s shares, which have gained 21% this year, were 2.2% higher at 0849 GMT. 

During the second quarter the group’s like-for-like sales increased 1.2% to 7.01 billion francs, missing Refinitiv forecasts for 7.39 billion francs and slowing from 6.4% growth in the first quarter when the company benefited from an early start to the construction season thanks to good weather. 

Recurring EBITDA rose 7.1% in the second quarter to 1.85 billion francs, in line with analysts’ expectations. 

The strong overall first-half performance came as the company’s restructuring costs fell by 229 million Swiss francs ($231 million) from a year ago, while financial expenses also dropped as it refinanced and cut debt with cash from selling businesses in Southeast Asia. 

Jenisch noted that while a global economic slowdown and the U.S.-China trade dispute had hit industries like car manufacturing, the construction sector had been unaffected. 

LafargeHolcim was seeing an order backlog in the United States, where supply had been crimped by flooding on the Mississippi River it uses to ship cement, he said. 

While Britain, one of its top 10 markets, had seen weaker market conditions, Jenisch said he saw solid demand in the rest of Europe. 

Lower interest rates are boosting investments in real-estate and infrastructure, while population growth and urbanisation are also supporting building projects. 

Germany’s HDB construction industry earlier this month lifted its forecast for 2019 sales growth as Europe’s largest economy experiences a boom in homebuilding. 

LafargeHolcim’s first-half earnings before interest, tax, depreciation and amortisation rose by 11% on a like-for-like basis to 2.66 billion Swiss francs, while like-for-like sales rose 3.5% to 13.06 billion francs. 

As a result, it confirmed its full-year guidance for net sales increase of 3-5% and improving EBITDA by at least 5%. 

“In our view, the FY19 guidance is well backed by a very strong order book and positive pricing momentum in the U.S.,” said analyst Bernd Pomrehn at Bank Vontobel. 

When asked if the company’s guidance was too cautious, Jenisch said he didn’t want to make a more precise forecast at this stage. 

“We are just more confident than at the beginning of the year,” he said. “We have good orders books and we have solid demand in the second half. We don’t see major markets in trouble.”

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