holcim strength performance passion third quarter interim report 2010 holcim ltd

Third Quarter Interim Report 2010 Holcim Ltd Strength. Performance. Passion. Key figures Group Holcim January–September 2010 2009 ±% ±% like-for-like Annual cement production capacity million t 208.4 202.9 1 +2.7 +2.7 Sales of cement million t 102.8 99.1 +3.7 +2.2 Sales of mineral components million t 3.1 2.5 +24.0 +8.0 Sales of aggregates million t 118.8 103.2 +15.1 –1.0 Sales of ready-mix concrete million m 3 34.4 30.4 +13.2 0.0 Sales of asphalt million t 7.8 8.1 –3.7 –3.7 Net sales million CHF 16,568 15,774 +5.0 –2.3 Operating EBITDA million CHF 3,577 3,614 –1.0 –6.7 Operating EBITDA margin % 21.6 22.9 EBITDA million CHF 3,897 4,033 –3.4 Operating profit million CHF 2,178 2,337 –6.8 –12.5 Operating profit margin % 13.1 14.8 Net income million CHF 1,223 1,577 –22.4 –24.2 Net income margin % 7.4 10.0 Net income – shareholders of Holcim Ltd million CHF 875 1,200 –27.1 –29.3 Cash flow from operating activities million CHF 2,053 2,192 –6.3 –12.7 Cash flow margin % 12.4 13.9 Net financial debt million CHF 12,723 13,833 1 –8.0 –2.7 Total shareholders’ equity million CHF 21,805 22,044 1 –1.1 Gearing 2 % 58.3 62.8 1 Personnel 83,302 81,498 1 +2.2 +2.2 Basic earnings per share 3 CHF 2.73 4.10 –33.4 Fully diluted earnings per share 3 CHF 2.73 4.09 –33.3 Principal key figures in USD (illustrative) 4 Net sales million USD 15,630 14,211 +10.0 Operating EBITDA million USD 3,375 3,256 +3.7 Operating profit million USD 2,055 2,105 –2.4 Net income – shareholders of Holcim Ltd million USD 825 1,081 –23.7 Cash flow from operating activities million USD 1,937 1,975 –1.9 Net financial debt million USD 12,983 13,430 1 –3.3 Total shareholders’ equity million USD 22,250 21,402 1 +4.0 Basic earnings per share 3 USD 2.58 3.69 –30.1 Principal key figures in EUR (illustrative) 4 Net sales million EUR 11,834 10,446 +13.3 Operating EBITDA million EUR 2,555 2,393 +6.8 Operating profit million EUR 1,556 1,548 +0.5 Net income – shareholders of Holcim Ltd million EUR 625 795 –21.4 Cash flow from operating activities million EUR 1,466 1,452 +1.0 Net financial debt million EUR 9,566 9,284 1 +3.0 Total shareholders’ equity million EUR 16,395 14,795 1 +10.8 Basic earnings per share 3 EUR 1.95 2.72 –28.3 1 As of December 31, 2009. 2 Net financial debt divided by total shareholders’ equity. 3 EPS calculation based on net income attribut- able to share- holders of Holcim Ltd weighted by the average number of shares. 4 Statement of income figures translated at average rate; statement of financial position figures at closing rate. 2 Third Quarter 2010 In many emerging markets demand for construction materials grew Economic and seasonal influences negatively impacted operating EBITDA in the third quarter Overall stable volume development, but increased price pressure in cement Trend toward higher production and distribution costs, but substantially lower fixed costs Operating EBITDA similar to the previous year’s nine months Net income continued to be impacted by the non-recurring cash-neutral tax charge in connection with the restructuring of the Group’s interests in North America in the first quarter Dear Shareholder As anticipated in our half-year report, the building materials markets suffered a setback in global terms in the third quarter of 2010, but many of the emerging markets – in which Holcim has a very good footing – continued to experience further strong growth. However, there were temporary challenges due to economic and seasonal influences, particularly in the US, Mexico, Eastern Europe and India. However, operating EBITDA – our key operational performance indicator – declined only slightly in the first nine months of the year. The reasons for this decline are increased pressure on prices in important markets and a trend toward higher variable production and distribution costs. Holcim was severely affected by this in India. The onset of the monsoon – which was particularly harsh this year – prompted a slide in cement prices right across the country. In addition, ACC in India had to contend with delivery bottlenecks due to operational fac- tors. In the third quarter especially, the price situation also worsened in Europe and the US. Encouragingly, price levels in Latin America and Group region Africa Middle East were generally stable or even slightly better. Mexico, however, suffered a further decline in volumes owing to market and weather conditions. Holcim successfully managed factors it could influence directly. Despite the commissioning of around 5 million tonnes of new cement capacity in emerging markets, the Group succeeded not only in maintaining its fixed costs on a year-on-year basis, but reduced them further from quarter to quarter. Overall, total fixed cost reduc- tion for the first nine months was CHF 188 million. This is the outcome of the major savings exercise conducted in all business areas and across the whole Group. Like-for-like, the aggregates segment virtually matched the previous year’s level. Thanks to the successfully integrated Australian company, activities could be expanded further. Worthy of particular mention is the fact that a number of Group companies have achieved substantially better results in the current financial year. They include Holcim Canada, Holcim US and Holcim Brazil, as well as Ambuja Cements in India and our companies in Indonesia and the Philippines. A substantial contribution to the successful operating performance was made by the two Australian firms, which have been fully consoli- dated since October 2009. Our broad-based strategy of geographic diversification therefore continues to prove itself to be an important cornerstone of the Group’s success. 3 Shareholders’ Letter Group Jan–Sept Jan–Sept ±% ±% 2010 2009 like-for-like* Sales of cement in million t 102.8 99.1 +3.7 +2.2 Sales of aggregates in million t 118.8 103.2 +15.1 –1.0 Sales of ready-mix concrete in million m 3 34.4 30.4 +13.2 0.0 Sales of asphalt in million t 7.8 8.1 –3.7 –3.7 Net sales in million CHF 16,568 15,774 +5.0 –2.3 Operating EBITDA in million CHF 3,577 3,614 –1.0 –6.7 Net income in million CHF 1,223 1,577 –22.4 –24.2 Net income – shareholders of Holcim Ltd – in million CHF 875 1,200 –27.1 –29.3 Cash flow from operating activities in million CHF 2,053 2,192 –6.3 –12.7 * Factoring out changes in the scope of consolidation and currency translation effects. 1 Including a non-recurring cash-neutral tax charge of CHF 182 million in connection with the restructuring of the Group’s interests in North America. 4 Third Quarter 2010 Sales development and financial results Consolidated cement deliveries increased by 3.7 percent to 102.8 million tonnes in the period to end-September. The biggest increases were posted by Ambuja Cements in India and the Group companies in Brazil and Thai- land. Cement Australia was fully consolidated in this reporting period for the first time. Sales of aggregates were up 15.1 percent at 118.8 million tonnes, while for ready-mix concrete there was a rise of 13.2 percent to 34.4 million cubic meters. The increase in these segments was primarily attributable to the newly consolidated Holcim Australia. Sales of aggregates were down slightly on a comparable basis, and volumes of ready-mix concrete remained at the year-back level. Operating EBITDA declined by 1 percent to CHF 3.6 billion. On a like-for-like basis, however, it fell by 6.7 percent. Negative factors included not only the trend in volumes, prices and costs, but also the weak euro and low US dollar exchange rate. In the aggregates business, margins slightly increased while decreasing in the other segments. Cash flow from operating activities reached CHF 2.1 billion, a fall of 6.3 percent. Net income was down 22.4 percent at CHF 1.2 billion and the share of net income attributable to shareholders of Holcim Ltd declined by 27.1 percent to CHF 875 million. The reduction in net income is explained not only by the poorer level of business but also by the previously reported one-off, cash-neutral tax charge in connection with the restructuring of the Group’s interests in North America in the first quarter of 2010. Subdued demand for construction materials in Europe The contrasting economic development in Western and Eastern Europe continued into the third quarter of 2010. While economic activity picked up in the UK, France and especially Germany – despite the euro crisis and austerity measures in the public sector – most countries in Southern and Southeastern Europe struggled with their high levels of government debt. The European construction sector made hardly any progress. Reluctance to invest on the part of governments, together with declining commercial and industrial construction activity, muted the demand for building mate- rials. This effect outweighed the slight recovery in residential construction in some western markets. Group July–Sept July–Sept ±% ±% 2010 2009 like-for-like* Sales of cement in million t 35.0 34.0 +2.9 +1.2 Sales of aggregates in million t 45.6 40.7 +12.0 –1.7 Sales of ready-mix concrete in million m 3 12.5 11.1 +12.6 0.0 Sales of asphalt in million t 3.4 3.8 –10.5 –10.5 Net sales in million CHF 5,666 5,692 –0.5 –4.8 Operating EBITDA in million CHF 1,234 1,471 –16.1 –19.2 Net income in million CHF 612 790 –22.5 –23.5 Net income – shareholders of Holcim Ltd – in million CHF 544 673 –19.2 –20.8 Cash flow from operating activities in million CHF 1,147 1,387 –17.3 –21.7 * Factoring out changes in the scope of consolidation and currency translation effects. 5 Shareholders’ Letter Aggregate Industries UK sold more aggregates, primarily for infrastructure projects, as highway construction in Scotland led to higher asphalt deliveries. Volumes of ready-mix concrete declined, however. Holcim France Benelux could increase cement and ready-mix concrete volumes. Sales of aggregates declined. Thanks to deliveries to the Nord Stream gas pipeline consortium, Holcim Germany managed to nearly maintain cement sales. Deliveries of aggregates and ready-mix concrete increased. Holcim Southern Germany and Holcim Switzerland sold higher volumes in all segments. The construction industry benefited from an excellent order situation in residential construction and infrastructure projects. For Holcim Switzerland, the start of work on the NEAT rail tunnel through the Monte Ceneri also had a positive impact. The crisis in the Southern European construction sector continued. Holcim Italy experienced lower sales of cement and aggregates, however posted a rise in deliveries of ready-mix concrete. Holcim Spain increased its sales of cement, but only due to higher exports. The demand situation for aggregates and ready-mix concrete remained difficult, and sales volumes decreased. In the markets of Eastern and Southeastern Europe, sales were impacted by the limited awarding of construc- tion contracts by the public as well as the private sector. Thanks to EU-funded infrastructure projects, the decline in deliveries slowed over the course of the year. The Czech Group company recorded a rise in cement shipments. In all other markets in the region, there was a fall in sales volumes. The economic situation as well as weather conditions also negatively impacted sales of aggregates and ready-mix concrete. Holcim sold more aggregates in Hungary, the Czech Republic and Slovakia, as well as more ready-mix concrete in Slovakia and Serbia. Europe Jan–Sept Jan–Sept ±% ±% 2010 2009 like-for-like* Sales of cement in million t 20.1 20.9 –3.8 –4.8 Sales of aggregates in million t 59.5 59.6 –0.2 –0.8 Sales of ready-mix concrete in million m 3 12.4 13.0 –4.6 –5.4 Sales of asphalt in million t 4.4 4.2 +4.8 +4.8 Net sales in million CHF 5,136 5,664 –9.3 –5.2 Operating EBITDA in million CHF 855 1,035 –17.4 –14.0 Europe July–Sept July–Sept ±% ±% 2010 2009 like-for-like* Sales of cement in million t 8.1 7.9 +2.5 +1.3 Sales of aggregates in million t 22.0 21.6 +1.9 +0.5 Sales of ready-mix concrete in million m 3 4.6 4.7 –2.1 –2.1 Sales of asphalt in million t 1.5 1.5 0.0 0.0 Net sales in million CHF 1,832 2,061 –11.1 –3.2 Operating EBITDA in million CHF 355 476 –25.4 –20.4 * Factoring out changes in the scope of consolidation and currency translation effects. * Factoring out changes in the scope of consolidation and currency translation effects. 6 Third Quarter 2010 Russia’s economy recovered even though the lengthy drought – followed by wide-spread forest fires – damp- ened activities. Following an easing of mortgage lending, private residential construction in Moscow increased. Nevertheless, Alpha Cement could not offset the fall in deliveries from the first half of the year. Garadagh Cement in Azerbaijan benefited from solid demand for construction work. Cement deliveries increased despite project delays and ongoing pressure from imports. In Russia and Azerbaijan, expansion of cement and clinker capacity proceeded according to plan. Cement sales in Group region Europe declined by 3.8 percent to 20.1 million tonnes. Deliveries of aggregates fell marginally by 0.2 percent to 59.5 million tonnes. Ready-mix concrete sales contracted by 4.6 percent to 12.4 million cubic meters. Operating EBITDA for Group region Europe decreased by 17.4 percent to CHF 855 million. This figure includes sales of CO2 emission certificates totaling CHF 75 million (2009: 61). Many Group companies could only partly offset the decline in volumes and prices through cost-cutting measures. Additionally, the result was impacted by an unfavorable currency translation effect. Internal operating EBITDA development was –14 percent. Differing market developments in North America Economic growth continued in the US. The recovery, however, was less vigorous than expected and demand for building materials remained subdued. In Canada, better economic activity positively impacted the construction industry. The insufficient demand for residential and commercial real estate in the US prevented a sustained recovery in volumes. The number of homes for sale increased again when the tax break for prospective homebuyers expired. Unfavorable weather conditions put further pressure on the construction sector. Industrial building projects and the economic stimulus program initiated by the Obama administration last year took up some of the slack in terms of volumes. Infrastructure projects at the state level were hit by the precarious budget situa- tion. At local level too, public-sector construction projects were either postponed or canceled. Nevertheless, cement sales at Holcim US remained more or less stable. North America Jan–Sept Jan–Sept ±% ±% 2010 2009 like-for-like* Sales of cement in million t 8.4 8.3 +1.2 +1.2 Sales of aggregates in million t 28.8 29.7 –3.0 –3.0 Sales of ready-mix concrete in million m 3 4.2 4.1 +2.4 +2.4 Sales of asphalt in million t 3.4 3.9 –12.8 –12.8 Net sales in million CHF 2,449 2,626 –6.7 –7.2 Operating EBITDA in million CHF 366 328 +11.6 +9.8 * Factoring out changes in the scope of consolidation and currency translation effects. Aggregate Industries US recorded a fall in the volume of shipments of aggregates and ready-mix concrete. Difficult market conditions prevailed in the northeast and west of the country, while demand was sustained by transportation projects on the Atlantic coast, as well as airport and roadbuilding projects in the Midwest. In Canada, stronger residential and industrial construction activity coupled with stimulus programs in the in- frastructure sector ensured rising demand for building materials. Holcim Canada sold more cement and ready- mix concrete. In Holcim’s key province of Ontario, the improved order situation in the automotive components industry exerted a positive effect. Also Quebec and the country’s central provinces saw some increase of con- struction activity. Sales of aggregates reached previous year’s level. Consolidated cement deliveries in North America increased by 1.2 percent to 8.4 million tonnes due to the growth in sales at Holcim Canada. In the aggregates segment, there was a decline of 3 percent to 28.8 million tonnes owing to the difficult US market. Consolidated sales of ready-mix concrete increased by 2.4 percent to 4.2 million cubic meters, however. The drastic cost reduction achieved over the last few months in the US and the very good efficiency of the new Ste. Genevieve cement plant, as well as the better results of Holcim US and Holcim Canada, led to a consolidated operating EBITDA increase of 11.6 percent to CHF 366 million. Group region North America posted internal operating EBITDA growth of 9.8 percent. Stable delivery volumes in Latin America In general, the construction sector in Latin America proved relatively resistant to the crisis. In most countries of South America, construction sector activity remained solid, with a particularly large volume of work in Brazil and Argentina. However, construction markets in Mexico and Central America remained under pressure. 7 Shareholders’ Letter Latin America Jan–Sept Jan–Sept ±% ±% 2010 2009 like-for-like* Sales of cement in million t 16.8 17.1 –1.8 –1.8 Sales of aggregates in million t 9.0 8.9 +1.1 +1.1 Sales of ready-mix concrete in million m 3 7.7 7.6 +1.3 +1.3 Net sales in million CHF 2,587 2,527 +2.4 –0.1 Operating EBITDA in million CHF 762 818 –6.8 –8.3 North America July–Sept July–Sept ±% ±% 2010 2009 like-for-like* Sales of cement in million t 3.4 3.3 +3.0 +3.0 Sales of aggregates in million t 13.3 14.4 –7.6 –7.6 Sales of ready-mix concrete in million m 3 1.7 1.8 –5.6 –5.6 Sales of asphalt in million t 1.9 2.3 –17.4 –17.4 Net sales in million CHF 1,044 1,181 –11.6 –10.9 Operating EBITDA in million CHF 226 243 –7.0 –7.0 * Factoring out changes in the scope of consolidation and currency translation effects. * Factoring out changes in the scope of consolidation and currency translation effects. 8 Third Quarter 2010 Latin America July–Sept July–Sept ±% ±% 2010 2009 like-for-like* Sales of cement in million t 5.7 5.9 –3.4 –3.4 Sales of aggregates in million t 3.1 3.0 +3.3 +3.3 Sales of ready-mix concrete in million m 3 2.8 2.7 +3.7 +3.7 Net sales in million CHF 862 853 +1.1 +1.1 Operating EBITDA in million CHF 239 275 –13.1 –12.0 In Mexico, the demand for cement was impacted by weak domestic economic activity. Furthermore, construc- tion activity in some parts of the country was to a large extent adversely affected by hurricanes and record rainfalls. New construction projects were scarce, and there were no export opportunities. Holcim Apasco conse- quently sold less cement. However, thanks to major infrastructure projects, the Group company was able to sell more aggregates and ready-mix concrete. The government of El Salvador had to cancel previously announced housebuilding programs and postponed planned highway construction projects. Private construction activity also declined, with the result that Holcim El Salvador sold less building materials. Market conditions in Costa Rica and Nicaragua were comparable. Both local Group companies shipped less cement. Holcim Colombia benefited from higher grinding capacity at the Nobsa plant, and sold more cement. Sales of aggregates fell due to the temporary closure of a gravel operation near Bogotá. The situation in ready-mix concrete was slightly better. Activity in the Ecuadorian construction sector cooled after a lengthy period of expansion. New projects were few and far between, and a number of road expansion projects on the coast were put on hold. Holcim Ecuador’s delivery volumes declined in all segments. In Brazil, the robust state of the economy strengthened demand for building materials. Growth drivers were private construction as well as infrastructure projects in the run-up to major sporting events. Holcim Brazil has experienced a continuous rise in sales of cement and aggregates since the start of the year. In ready-mix concrete, the company concentrated on high-margin projects with shipments similar to the previous year’s level. In Argentina, Minetti increased cement sales in the domestic market and raised cement and clinker exports to Bolivia and Paraguay. The volume of aggregates declined, while sales of ready-mix concrete benefited from highway construction projects. In Chile, Cemento Polpaico recorded lower cement sales in a difficult competitive environment. Following the earthquake, the Group company felt the effects of a temporary fall in housebuilding approvals. Initial measures to rectify major damage, but also new mining projects, resulted at least in an increase in deliveries of aggregates and ready-mix concrete. Cement deliveries in Group region Latin America fell by 1.8 percent to 16.8 million tonnes. Shipments of aggre- gates showed a positive trend, and were up by 1.1 percent to 9 million tonnes. Sales of ready-mix concrete increased by 1.3 percent to 7.7 million cubic meters. Operating EBITDA reached CHF 762 million, representing a decline of 6.8 percent. The substantially better results achieved by the Group companies in Brazil and Argentina could not offset the reductions in other markets, particularly Mexico. Internal operating EBITDA development was –8.3 percent. * Factoring out changes in the scope of consolidation and currency translation effects. [...]... consolidated third quarter interim financial On October 1, 2009, Holcim acquired 100 percent of the share statements (hereafter interim financial statements”) are pre- capital of Holcim Australia (formerly Cemex Australia), including pared in accordance with IAS 34 Interim Financial Reporting its 25 percent interest in Cement Australia The accounting policies used in the preparation and presentation of the interim. .. sector Holcim usually experiences a reduction in sales during the first and fourth quarters reflecting the effect of the winter season in its principal markets in Europe and North America and tends to see an increase in sales in the second and third quarters reflecting the effect of the summer season This effect can be particularly pronounced in harsh winters 22 Third Quarter 2010 4 Information by reportable... 26.4 12.4 22.2 (36) (56) 24 Third Quarter 2010 Cement1 Information Aggregates Corporate/ Total construction by product line Other Eliminations Group materials and services January–September (unaudited) 2010 2009 2010 2009 2010 2009 Net sales to external customers 9,644 9,600 Net sales to other segments 1,042 872 1,197 996 5,727 5,178 714 515 445 10,686 10,472 2010 2009 2010 2009 Statement of income... restructuring step following the buyout of the minority million) was realized through “other financial income” interests in Holcim (Canada) Inc., Holcim (US) Inc transferred in the first quarter 2010 its entire stake in Holcim (Canada) Inc to its parent company Holcim Ltd As a consequence, Holcim (US) 13 Other long-term assets Inc realized a capital gain in the amount of CHF 518 million, This position includes... reportable segment Information Europe North January–September (unaudited) Africa Asia Corporate/ Total America by region Latin America Middle East Pacific Eliminations Group 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 cement1 50.0 49.4 20.6 20.6 31.4 31.0 11.2 11.2 95.2 90.7 208.4 202.9 Sales of cement 20.1 20.9 8.4 8.3 16.8 17.1 6.8 6.6 53.2 49.9 (2.5) (3.7) 102.8 99.1 – of which... 25.8 26 Third Quarter 2010 5 Change in consolidated net sales Jan–Sept Jan–Sept July–Sept July–Sept 2010 2009 2010 2009 Volume and price (358) (2,000) (273) (612) Change in structure 1,106 (134) 426 (82) 46 (1,432) (179) (520) 794 (3,566) (26) (1,214) Million CHF Currency translation effects Total 6 Change in consolidated operating EBITDA Jan–Sept Jan–Sept July–Sept July–Sept Million CHF 2010 2009 2010. .. Financial Statements 23 Information Europe North July–September (unaudited) Africa Asia Corporate/ Total America by region Latin America Middle East Pacific Eliminations Group 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 Sales of cement 8.1 7.9 3.4 3.3 5.7 5.9 2.1 2.1 16.7 15.8 (1.0) (1.0) 35.0 34.0 – of which mature markets 4.6 4.4 3.4 3.3 1.3 0.7 (0.2) (0.2) 9.1 8.2 – of which... the third quarter 2011 August 18, 2011 November 9, 2011 Holcim Ltd Zürcherstrasse 156 CH-8645 Jona/Switzerland Phone +41 58 858 86 00 Fax +41 58 858 86 09 info @holcim. com www .holcim. com Corporate Communications Roland Walker Phone +41 58 858 87 10 Fax +41 58 858 87 19 communications @holcim. com Investor Relations Bernhard A Fuchs Phone +41 58 858 87 87 Fax +41 58 858 80 09 investor.relations @holcim. com... (2009: 667), income taxes CHF 623 million (2009: 580) and depreciation, amortization and impairment CHF 1,434 million (2009: 1,280) 2 14 Third Quarter 2010 Consolidated statement of comprehensive earnings of Group Holcim Jan–Sept Jan–Sept July–Sept July–Sept 2010 2009 2010 2009 Million CHF Unaudited Unaudited Unaudited Unaudited Net income 1,223 1,577 612 790 (1,027) 266 (1,316) (746) Other comprehensive... economic environment, Holcim assessed whether there are any indications of impairment relating to goodwill allocated to the respective group of cash generating units Based on this review, Holcim concluded that there is no need for goodwill impairment as at September 30, 2010 (1,324) 401 Excluding goodwill previously included in the accounts of Cement Australia 20 Third Quarter 2010 The total goodwill . Third Quarter Interim Report 2010 Holcim Ltd Strength. Performance. Passion. Key figures Group Holcim January–September 2010 2009 ±% ±% like-for-like Annual. 4,033 –3.4 1,466 1,684 –12.9 14 Third Quarter 2010 Consolidated statement of comprehensive earnings of Group Holcim Jan–Sept Jan–Sept July–Sept July–Sept 2010 2009 2010 2009 Million CHF Unaudited. 9,169 18,714 3,091 21,805 18 Third Quarter 2010 Consolidated statement of cash flows of Group Holcim Notes Jan–Sept Jan–Sept ±% July–Sept July–Sept ±% 2010 2009 2010 2009 Million CHF Unaudited