Emerging Markets Help Boost Holcim 2007 Profit


Booming emerging markets helped Holcim post an 84 percent rise in 2007 net profit, making it confident about goals for the year, but a number of weak spots in the results weighed on shares.

Net profit at the world's second-largest cement supplier rose to 3.9 billion Swiss francs ($3.58 billion), roughly in line with the 3.85 billion franc average in a Reuters poll, helped by a 33 percent sales rise in Asia-Pacific.

Holcim cautioned it was not easy to judge the effect of turbulence in financial markets on the economy.

Despite this, it expects to hit its long-term growth target of 5 percent in internal operating earnings before interest, tax, depreciation and amortization (EBITDA) in 2008 thanks to growth in emerging markets.

"There is huge pent-up demand in the growth markets of Asia, Latin America and eastern Europe," the group said.

Internal operating EBITDA -- Holcim's benchmark for core profit -- grew 10.8 percent in 2007, the company said, while sales rose 13 percent to 27.1 billion francs.

"This was not a positive surprise ... (operating income) was a bit below expectations and the USA and Europe came in a bit weaker than expected," said ZKB analyst Martin Huesler.

Holcim shares were down 1.53 percent at 109.50 francs, having touched 108.80. The broader Swiss blue-chip market was roughly flat.

In Asia-Pacific, internal operating growth was 16.5 percent as it benefited from the first-time full-year consolidation of India's Ambuja Cements and ACC, Holcim said.

Internal operating EBITDA fell 1.9 percent in North America due to a decline in demand and a rise in energy costs, but the group said internal operating EBITDA growth was 11.5 percent in Europe on the back of demand in eastern and southeastern Europe.

Holcim, which sells cement and asphalt as well as ready-mixed concrete, is well positioned to stave off a slowdown in the United States thanks to its broad geographical spread and presence in emerging markets, which account for three-quarters of its production capacity.

This month, larger French rival Lafarge gave an upbeat outlook for its business after posting a 39 percent jump in full-year net profit, helped by cost savings and strong demand in emerging markets.

Holcim shares trade at nearly 10 times expected 2009 earnings, in line with Lafarge and at a slight premium to Mexico's Cemex on 8.5 times, Reuters data show.