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Wednesday 26 July 2017

Cement group LafargeHolcim cuts global demand outlook

 LafargeHolcim, the world's largest cement maker, cut its forecast for global demand on Wednesday citing weakness in Southeast Asia and Nigeria but said it remained on course to hit its 2017 profit targets.
The company said it now expects the global market to increase by 1 to 3 percent this year, down from 2 to 4 percent previously.Image result for Lafarge cement
LafargeHolcim's more cautious view runs counter to upbeat forecasts by the International Monetary Fund, which has lifted its 2017 growth forecast for the global economy citing manufacturing and trade gains in Europe, Japan and China.
"We have six months in the bag now ... and we have a good outlook of what the markets are doing," Chief Financial Officer Ron Wirahadiraksa said. "We have reset it for what is happening in specific markets."
The company had expected low-single-digit growth in Nigeria, but the economic downturn meant it now forecasts a drop in market demand, he said.
Expected infrastructure projects in the Philippines had not begun, while there was overcapacity in Indonesia and strong competition in Malaysia.
The Franco-Swiss company's U.S. sales volumes also declined during the first half as bad weather weighed and expected government infrastructure projects did not materialise.
But the lower market outlook would not prevent LafargeHolcim from meeting its goal of increasing core operating profit at a double-digit rate in 2017, the CFO said, with profit and margins rising due to higher pricing and efficiencies.
The group brought forward the start date for its new CEO Jan Jenisch to Sept. 1. He joins following a payments scandal involving a former Lafarge cement plant in Syria. Current Chief Executive Eric Olsen is stepping down in the wake of the scandal but has said he was not involved or aware of any wrongdoing.
LafargeHolcim reported slightly better than expected second-quarter results. Its adjusted operating profit rose 10.1 percent on a like-for-like basis to 1.735 billion Swiss francs ($1.82 billion) for the three months ended June 30, ahead of the average estimate of 1.714 billion in a Reuters poll.
Jenisch's appointment would not affect the company's 2017 and 2018 targets, Chairman and acting CEO Beat Hess said.
"The targets are the targets; our strategic roadmap stays in place. Of course, once Jan Jenisch will have started in his position he will certainly have a look at all of that and have his own views."
The stock rose 0.8 percent as analysts praised the margin improvement and the early CEO start.
"It is going to be harder to achieve their targets with the weaker outlook for the global market, but I think they will get there," said Martin Huesler, an analyst at Zuercher Kantonalbank.
© Reuters News

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