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LafargeHolcim Raises Sales Outlook in Battle Against Costs

Company also lowers forecast for full-year profit.

LafargeHolcim Raises Sales Outlook in Battle Against Costs
Wet cement is poured into a builders hop during building work on a social housing site, under development by Spanish construction company Sacyr SA in Barcelona, Spain. (Photographer: Pau Barrena/Bloomberg)

(Bloomberg) -- LafargeHolcim Ltd. raised its outlook for sales growth this year as Europe’s biggest cement maker managed to beat back higher energy prices that are pushing up production and transport costs.

Key Insights

  • Chief Executive Officer Jan Jenisch appears to be keeping his five-year plan to improve profitability on track after quarterly profit published Friday surpassed the average forecast.
  • The Swiss producer was able to sell more cement at better prices in a bid to overcome the higher oil costs that have been feeding into the expenses of manufacturers like chemical maker BASF SE, which also reported earnings Friday.
  • Jenisch is trying to steady the LafargeHolcim ship. The company suffered from a loss of investor confidence following its creation in a Franco-Swiss merger and remains entangled in a French probe into possible terrorist payments in war-torn Syria.
  • Overcapacity, falling prices in some markets and energy costs are a challenge for cement makers. LafargeHolcim’s results are a strong indicator for the wider industry. Rivals Vicat SA and HeidelbergCement AG are set to report on Nov. 6 and 8 respectively.

Market Reaction

  • The shares rose as much as 5.4 percent, the most intraday since May 2017, and were trading 2.4 percent higher at 42.90 francs as of 9:22 a.m. in Zurich. They are still down by about a fifth since the start of the year.
  • Vontobel analyst Bernd Pomrehn kept his recommendation to buy shares partly because of the expectation that earnings growth will continue in the last quarter

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  • Revenue rose 5.8 percent to 7.36 billion francs, matching the average estimate of 7.36 billion francs of analysts surveyed by Bloomberg.
  • Recurring Ebitda rose 8.1 percent to 1.87 billion francs, beating the 1.78 billion franc estimate.
  • The cement maker sees revenue growing 4 percent to 6 percent instead of a previous forecast of 3 percent to 5 percent. A goal for recurring Ebitda was adjusted down to 3 percent and 5 percent growth from at least 5 percent previously.
  • For more details from the earnings statement, click here.

To contact the reporter on this story: Mara Bernath in Zurich at mbernath1@bloomberg.net

To contact the editors responsible for this story: Lukas Strobl at lstrobl@bloomberg.net, Phil Serafino

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