LafargeHolcim cuts full-year earnings forecast as costs bite

29 October 2018

LafargeHolcim increased its sales outlook for 2018 but reduced its profit expectations as the world’s largest cement maker reported better-than-expected earnings during its third quarter.

The Swiss company said on Friday it now expected annual sales to grow in the 4% to 6% range, up from its previous expectation of 3 to 5%. But higher costs for things like fuel and raw materials meant the company now expects its recurring earnings before interest, depreciation and amortisation to increase by 3 to 5% this year, down from its previous view of “at least 5%”.

Chief Executive Jan Jenisch spoke of “steep cost inflation” which the company was tackling by increasing prices, boosting efficiency programmes and increasing sales volumes. LafargeHolcim‘s main production costs are materials, fuel and electricity as well as personnel. During the third quarter LafargeHolcim reported a 8.1% increase in recurring EBITDA to 1.87-billion Swiss francs ($1.87-billion), beating forecasts of 1.78-billion francs in a Reuters poll of analysts.

Net sales increased 5.8% on a like-for-like basis to 7.36 billion francs, slightly ahead of expectations. The company said it expected sales growth to continue in the fourth quarter, helped by a continued upturn in North America and strong markets in Europe. The problems of rising costs for the building materials sector were highlighted last week when LafargeHolcim‘s German rival HeidelbergCement trimmed its profit guidance for 2018, sending its shares down as much as 10% to a near four-year low.

HeidelbergCement blamed higher-than expected energy costs and persistent bad weather in the United States for cutting its outlook, as North America accounts for more than a third of the group’s core earnings. 

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