By Peter OBIORA InvestAdvocate
Lagos (INVESTADVOCATE) – World’s building materials and cement producers, LafargeHolcim said on Friday it sustained its earnings growth in the third quarter (Q3) 2016 which was driven by pricing strategy, synergies and disciplined cost management.
The financial highlights made available by the company shows that its adjusted operating EBITDA was up 10.5 percent like-for-like in Q3, also margins continue to improve; up 290 basis points in Q3 versus prior year.
It recorded net sales of CHF 7 billion in Q3, 3.1 percent lower on a like-for-like basis and operating free cash flow in Q3 improved by CHF 826 million versus prior year.
Also, the world’s cement manufacturer posted a net income of CHF 1.1 billion in the review period. It said full year incremental synergies target of CHF 450 million was achieved at the end of Q3; “at least CHF 550 million of synergies expected to be delivered for 2016,” the company said in the result highlights.
LafargeHolcim’s net debt stood at CHF 16.5 billion at end of Q3 compared to 18.3 billion for Q3 2015. “On track to achieve full year targets and 2018 objectives,” the highlight affirmed.
Eric Olsen, CEO of LafargeHolcim said: “With these results, we are demonstrating that our focus on pricing, synergies and cash flow is delivering results. Our earnings momentum is accelerating and we are on track to achieve our commitments for 2016, resulting in a year of solid progress towards our 2018 objectives.
“These results demonstrate the strength of our balanced portfolio with solid contributions from both mature and emerging countries across our regions. As we anticipated, challenging conditions in Nigeria continued to impact our earnings, but we started to see the positive effects of higher prices and of our actions to diversify our fuel mix towards the end of the quarter.
“Beyond the benefits from the divestment program, we continue to focus on reducing net debt and driving strong cash flow generation.”
2016 Outlook
2016 will be a year of progress towards our 2018 targets.
We expect demand in our markets to grow at between 1-3% for the full year. Our pricing recovery actions, commercial excellence initiatives and a continuing focus on growth will demonstrate tangible results in 2016.
Based on the trends we see, our full year expectations remain unchanged, except for synergies where we now expect to deliver at least CHF 550 million of incremental synergies in 2016.
For 2016 we therefore expect:
- Capex to be below CHF 2 billion
- Incremental synergies of at least CHF 550 million of adjusted operating EBITDA
- Net debt to decrease to around CHF 13 billion at year end, including the effect of our planned divestment program
- CHF 3.5 billion divestment program to be completed. Target extended to CHF 5 billion by end of 2017
- At least a high single digit like-for-like increase in adjusted operating EBITDA
We are committed to maintaining a solid investment grade rating and commensurate to this rating, returning excess cash to shareholders. We confirm our commitment to the 2018 targets announced in November 2015 and will provide an update at our Capital Markets Day presentation in London on 18 November 2016.
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