“We continue to operate in a demanding global market environment and this has affected our first-half performance,” says Eric Olsen, CEO of LafargeHolcim.
“However, as a new company we have hit the ground running.
“A team of 200 senior leaders of LafargeHolcim met as early as last week to align on priorities, targets and initiatives to drive the integration process. It is a great team we have on board. We have launched a set of synergy acceleration activities covering areas such as capital expenditure (capex), procurement, cement industrial performance, network optimisation as well as commercial transformation. We expect to see the first tangible results in all areas by the end of 2015.”
LafargeHolcim expects to deliver at least €93.9 million in synergies, impacting earnings until the end of 2015 as part of its programme to achieve €1.4billion run rate synergies by the third year of operations.
LafargeHolcim has also launched a review of its asset base and the planned capital expenditures for the remainder of 2015. It targets an overall reduction in capex of at least €18.8 million until the end of 2015, compared to what both companies had planned to spend on a standalone basis. This results in capex of below €1.31 billion for the second half of 2015. In parallel, the company has also launched a portfolio review for further optimisation.
Further, LafargeHolcim has defined capital allocation discipline as a key focus area with a view to reduce capex and maximise cash generation and returns for shareholders.
As a first step, LafargeHolcim has decided on a progressive dividend policy, starting at least at €1.22/share for the financial year 2015, subject to approval at the annual meeting in 2016. This will apply to all shares, including the new shares to be awarded to shareholders as a scrip dividend of one share per 20 shares held that was announced in March 2015. This scrip dividend is now expected to be issued on 8 September, 2015.
LafargeHolcim expects net proceeds of around €5.63 billion by the end of 2015 from divestments that will be used to reduce debt, supporting a solid financial structure.
This would lead to a net debt below €14.1 billion by the end of 2015, prior to the fair value adjustment on the Lafarge debt and a potential squeeze-out of Lafarge.
Holcim reports lower sales volumes in H1 2015
In the first half of 2015, Holcim generated higher cash flow from operating activities and increased net income supported by the gain from the divestment of its minority shareholding in Siam City Cement in March 2015.
The company was faced with a challenging development in the first half of 2015 as lower than anticipated demand in some markets caused volume declines in cement and impacted financial performance. Positive dynamics in markets such as the United Kingdom, the United States, Mexico and the Philippines were not able to compensate for these effects.
In the first half of 2015 consolidated cement volumes decreased by 2% to 67.6 million tonnes as group regions such as Asia Pacific, Europe and Africa Middle East reported declines. Like-for-like net sales across the group were almost unchanged in the first half of 2015.
Net sales were down by 3.1% to €8.12 million, as better performance in North America could not compensate for lower sales in other group regions. Operating earnings before income, taxes, depreciation and amortisation (EBITDA), adjusted for merger-related costs of €80.8 million, fell by 3.7% to €1.46 million. Operating EBITDA decreased by 7.8% to €1.38 million, impacted by merger-related costs and lower financial performance in Europe and Asia Pacific.
Operating profit adjusted for merger-related costs of €80.8million, was down by 5.5% to €857 million.
Operating profit fell by 12.3% to €777 million.
Net income increased by 4.9% to €648 million, mainly as a result of the divestment of Holcim's minority shareholding in Siam City Cement.
Looking ahead, Holcim expects that in 2015, the global economy will continue its gradual recovery.
Lafarge reports higher sales in 2015
Lafarge has reported mixed results for the second quarter and first half of 2015, with lower cement volumes but higher sales for both periods.
In the second quarter of 2015, cement volumes decreased by 3% due to lower export sales while on its domestic markets, Lafarge's volumes increased by 2%.
Cement prices fell by 0.5% year-on-year but rose by 0.5% quarter-on-quarter.
Lafarge's sales grew by 5% year-on-year to €3.54 billion in the second quarter of 2015.
Exchange rates continued to be favourable with a positive impact on sales of €249 million, or 8%, while the impact of Lafarge's divestments, notably in Ecuador, Russia and Pakistan, reduced its sales by 3% (€75 million).
Lafarge’s EBITDA improved by 1% to €820 million, although its operating income fell by 3% year-on-year to €608 million.
Results in the second quarter of 2015 were impacted by one-off items in connection with the creation of LafargeHolcim, and these include €450 million of impairment on some of the assets to be divested to CRH in the third quarter of 2015.
Pre-tax merger costs of €94 million were booked in the second quarter of 2015 and one-off restructuring costs, mainly reflecting reorganisation measures in France, amounted to €51 million compared to €32 million in the same period of 2014.
Excluding one-off items, Lafarge's net income was €210 million in the second quarter of 2015, down by €27 million from the same period of 2014.
Lafarge received €232 million in cash for divestments in the second quarter of 2015, mainly reflecting the proceeds for its operations in Pakistan.
For the first half of 2015, the group reported a 4% year-on-year reduction in cement sales to 54.7million tonnes, while its sales grew by 5% to €6.32 billion. EBITDA grew by 6% to €1.22 billion and its operating income grew by 8% to €813 million.
