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By Martin Gelnar Of DOW JONES NEWSWIRES ZURICH -(Dow Jones)- Cement and building aggregates company Holcim Ltd. (HOLN.VX) Wednesday reported flat third-quarter net profit but rising margins due to a tight grip on costs, and said its strength in emerging markets should help drive profitable growth next year.
The Switzerland-based cement giant posted a third-quarter net profit of 673 million Swiss francs ($666 million), unchanged from the year-ago level, beating market expectations of CHF474 million. The bottom line was boosted by restructuring measures, including job cuts and plant closures, and by the sale of carbon dioxide emission certificates worth CHF54 million. Companies can sell such rights to emit a specified amount of greenhouse gases per year or carry them forward to the next period, depending on future production needs.
Sales slipped 18% to CHF5.69 billion from CHF6.91 billion, below consensus estimates of CHF5.76 billion.
Operating profit dropped to CHF1.03 billion from CHF1.12 billion but the fall was less pronounced than that of the top line, leading to a rise in the operating profit margin to 18.1% from 16.3% a year ago.
Analysts said the earnings and the outlook were strong, adding the results underscored the company's ability to deliver solid results despite contracting U.S. and European markets.
"The company surprised massively on the margin side after taking out costs and capacity," Bank Clariden Leu analyst Markus Baechtold said, reiterating an outperform rating and a CHF83 price target.
Bank Vontobel analyst Serge Rotzer, who has a buy rating on the stock, said he would lift 2010 earnings estimates by roughly 10%.
At 1115 GMT, the shares traded up CHF3.55, or 5.1%, to CHF73.20, while the benchmark SMI index traded up 0.6%.
Holcim's performance contrasts with those of global rivals Lafarge SA (LG.FR) and Cemex SAB (CX). France's Lafarge last week lowered its volume expectations for 2009 after reporting a 38% drop in third-quarter net profit, while Cemex in October cut its operating profit forecast for 2009 after it reported volumes were down in practically all its markets in the third quarter.
Holcim, which has a high exposure to fast-growing emerging markets, said it would exceed its previous savings target of CHF600 million for the year. Holcim has cut some 10,000 jobs over the past 12 months and shuttered or idled plants in countries including the U.S., Russia, Mexico, Brazil and Australia.
It didn't provide a specific outlook but said operating profit should start growing again next year, adding it has become more positive on North America, where the market should rebound in the second half of next year due to economic stimulus programs.
Business in Europe, its main market, is expected to remain subdued, while the situation in emerging markets continued to be solid.
Chief Executive Markus Akermann was upbeat on economic growth prospects.
"I simply don't see any sign of slippage for the bigger part of our group," he told reporters, pointing out Holcim's strong position in emerging markets such as China and India, where Holcim is the No. 2 cement producer.
In the fourth quarter, Holcim likely will release EUR50 million to EUR60 million in provisions for a German cartel fine that was reduced earlier this year, Chief Financial Officer Theophil Schlatter said.
No further capacity adjustments were foreseen for 2010, the CFO added.
Akermann reiterated the company isn't interested in Anglo American PLC (AAL.LN) unit Tarmac, slated for disposal since 2007. Such a transaction would create large overlaps in the U.K. and would face regulatory hurdles, he said.
The company recently bought the Australian business of rival Cemex SAB (CX) for CHF1.7 billion.
Company Web site: www.holcim.com
-By Martin Gelnar, Dow Jones Newswires, Dow Jones Newswires; +41 43 443 8042; martin.gelnar@dowjones.com
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Publié le 11 novembre 2009 Copyright © 2009 Dowjones

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