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Last updated: December 17, 2012 5:37 pm
Holcim will take charges totalling SFr510m ($556m) against its fourth-quarter earnings, as the Swiss cement maker presses ahead with the overhaul of its troublesome European operations.
Cement makers have been struggling with overcapacity in Europe, where construction levels have plummeted since the onset of the financial crisis. In May, Holcim’s new chief executive, Bernard Fontana, launched a cost-cutting drive aimed at boosting annual operating profits by SFr1.5bn by 2014.
Holcim said on Monday that the cash costs of this programme would be SFr100m in the fourth quarter, and that it would also write down the value of properties, plant and equipment by SFr410m.
The world’s largest cement maker by sales said that its “group region Europe continues to adjust production capacity in all segments” and added that it had begun a consultation process over the job losses that could result, although it did not disclose how many employees or which countries could be affected.
Serge Rotzer, an analyst at Bank Vontobel in Zurich, said that the announcement had mixed implications. “The good news is that the restructuring is going faster than expected. The bad news is that the impairment means that cash-generating units will generate lower cash flows in future,” he said.
Holcim’s overhaul follows a leadership shake-up in August, as part of which Holcim consolidated its European operations and placed them under the control of Roland Köhler, a member of the company’s executive committee.
“Measures evaluated and already initiated will lead to annual cost savings of at least SFr120m, a better utilisation rate of the capacity and a more efficient allocation of the capital expenditure,” Holcim said on Monday.
Mr Rotzer said that the problems of European cement makers, which are grappling with high input prices as well as overcapacity, had been compounded by the collapse of the carbon price.
“The market for carbon credits has collapsed – prices have halved from €14 to €7 – and, as a result of this, some plants can no longer be run profitably, and this is why we are starting to see closures,” he said.
Holcim added that the moves would not prevent it from paying a dividend this year. “The group’s payout potential for the 2012 financial year [pre-write-offs] remains,” the company said.
The Swiss group will announce its full-year profits on February 27. In the nine months to September 30, the group achieved sales of SFr16.2bn, up 4.8 per cent on the preceding year. The European market accounts for about 30 per cent of the company’s overall sales.
Shares in Holcim fell 0.8 per cent to SFr65.15 on Monday in Zürich.
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