Solid start to the year thanks to strong operating base and growing economic momentum

13 May 2004
  • Sales volumes increase across all segments.
  • Consolidated net sales up 11.9 percent to CHF 2.76 billion.
  • Operating profit rises by 30.7 percent to CHF 375 million.
  • EBITDA margin reaches 25.1 percent (first quarter 2003: 24.2).
  • Consolidated net income after minority interests jumps to CHF 57 million (first quarter 2003: 10).
  • Cash flow from operating activities at CHF 60 million (first quarter 2003: 98).



Continued growth in volumes and earnings

In a more stable economic environment, Holcim made solid advances on the operations front in the first quarter of 2004. The Group's financial performance showed a strong improvement.

Financial year 2004 got off to a good start across all Group regions. Demand for building materials showed a distinct revival. Sales and delivery volumes were higher across all segments. Unique global positioning and strong local anchoring enabled Holcim to systematically exploit the available opportunities and capitalize on a growing level of economic activity. The continuing improvement in the fitness of the Group's operations is striking. Programs to boost efficiency and ensure control over costs are proving effective, enabling further improvements in operating margins to be made. The deterioration in value of the US dollar, compared to first quarter 2003, was only partly countered by a rise in the value of other Group currencies. Consolidated net income nevertheless was significantly higher.

Cement and clinker sales rose by 12.9 percent compared to the same quarter in 2003, and sales of aggregates rose 13.5 percent. The biggest increases in sales in percentage terms were in Europe and North America. In ready-mix concrete, there were gains in all Group regions. In overall terms, the increase came to 8.9 percent.

Consolidated net sales were up 11.9 percent to CHF 2.76 billion. Operating profit grew 30.7 percent to CHF 375 million, and consolidated net income after minority interests amounted to CHF 57 million (first quarter 2003: 10). The positive results were attributable to higher sales and also a lower financial charge and the elimination of extraordinary expenses. Cash flow from operating activities, which was subjected to seasonal fluctuations, totaled CHF 60 million (first quarter 2003: 98). In overall terms, the quarterly results were at the upper end of the expected range and may be described as encouraging.

Europe benefits from favorable weather and stronger demand for cement

Group region Europe held up well against a mildly better economic backdrop. Virtually all national companies increased their sales of cement. Of particular note was the impressive volume performance in Spain, especially in the Andalusia region. The market situation in Switzerland and Germany remained difficult. The northern German market nevertheless continued to stabilize, thereby facilitating price adjustments. In Central and Southeast Europe, the order situation remained very healthy.

Operating profit in Group region Europe rose significantly in local currency terms. There was also an impressive increase in Swiss franc terms to CHF 84 million (first quarter 2003: 58). The Group companies in Spain and France, as well as Central and Eastern Europe, all made stronger contributions to results. Inadequate pricing in Germany and falling construction volumes in Switzerland remained negative factors. Holcim Germany was nevertheless able to scale back its loss.

In the Netherlands, Holcim France Benelux acquired a minority interest in leading ready-mix concrete producer Den Boer, providing access to a key sales channel, and gain closer proximity to the customer base. The integration of southern German-based Rohrbach Zement with the rest of the Group is proceeding on schedule. The activities of Russia's Alpha Cement were consolidated for the first time after Holcim increased its minority stake to 68.8 percent. This important cement producer controls two strategically located plants that service the burgeoning Moscow market.

Holcim has received approval from the relevant antitrust authority in Bulgaria to purchase the Pleven cement plant. At the same time, the minority interest in Cementarnica Usje in Macedonia was sold.

Improved market environment in the US

The North American construction sector consolidated its already strong position to turn in an encouraging overall performance in the first quarter of 2004. Thanks to an increase in cement demand in the market area served by the new Holly Hill plant in South Carolina, Holcim US was able to increase cement deliveries. In Canada, the general economic situation remained robust, with St. Lawrence Cement slightly exceeding its prior-year sales numbers for cement and concrete. There was a massive rise in deliveries of aggregates. The acquisition of a quarry and gravel/sand operation near Toronto impacted positively on output in this segment.

The North American construction sector is normally dependent on weather factors at the beginning of the year. For this reason, as in previous years, Group region North America reported a loss both in local currency terms and in Swiss francs. It amounted to CHF 25 million in the first quarter of 2004 (first quarter 2003: -24).

The financial results of Holcim US showed a further improvement. This development is partly explained by the improved economic situation and rising market prices. In primary terms, systematic upgrades to production facilities and strict cost management are increasingly paying off. Holcim is convinced the US Group company will continue to benefit from the attractive market environment.

The results posted by St. Lawrence Cement were somewhat weaker, the reasons being temporarily lower prices in the Northeast of the USA and an extraordinary earnings item in first quarter 2003.

Largely positive picture for LatAm construction sector

Group region Latin America began the year on a strong footing amid variations in growth momentum at a local level. Cement sales once again increased at Holcim Apasco in Mexico, while in Central America as well as Colombia and Ecuador there was an impressive rise in the volume of sales. At Holcim Venezuela, the pent-up demand in construction due to political troubles there led to higher deliveries across all segments. Brazil continued to lack any sustainable impetus and construction activity was hampered by an exceptionally lengthy and violent rainy season. For that reason, Holcim Brazil's sales volumes failed to match those of the prior-year period. In Chile too, the demand for cement edged marginally lower. Argentina's Minetti was buoyed by continuing market growth that showed a strong improvement in financial performance.

For Latin America as a whole, there was a significantly higher operating profit in terms of the US dollar, which is key to the region. In Swiss franc terms, the consolidated figure rose to CHF 201 million (first quarter 2003: 185). This once again confirmed the unbroken momentum in construction sector activity in the emerging markets.

In January 2004, Holcim submitted a public bid to the minority shareholders in Holcim Apasco. By the time the offer period expired on March 12, 2004, 24.5 percent of the share capital had been sold at a price of USD 590.9 million. In the meantime, the shareholding in Holcim Apasco has risen to 99.9 percent, thereby creating the necessary platform to capitalize fully on the potential regional and financial integration with the rest of the Group in the future.

Marked rise in sales in Africa Middle East

Sales at Group companies on the North African coast continued their strong run. Infrastructure expansion and housebuilding provided a strong impetus to activity, particularly in Morocco and Egypt where demand for cement increased. In the Indian Ocean region, i.e. Madagascar and La Réunion, the Group companies were able to grow their cement sales. Business activity also recovered slightly in the West African markets. As with the Middle East, political uncertainty unfortunately remained a fact of life. Holcim Lebanon saw significant sales growth on the back of additional clinker deliveries to the grinding facility in Cyprus acquired in the previous year. Group company Egyptian Cement was buoyed by slightly higher pricing and growth in cement sales. In Morocco and South Africa, Holcim once again achieved solid results; at Holcim South Africa this was above all a manifestation of rising sales of aggregates and ready-mix concrete.

Operating profit for Group region Africa Middle East rose significantly in local currencies as well as Swiss francs following a rise in revenues at all companies. At CHF 67 million (first quarter 2003: 45), it surpassed the corresponding period in 2003 by 48.9 percent.

Fresh gains for Asia Pacific construction markets

Construction sector activity in the markets of Group region Asia Pacific was encouraging. Demand for cement rose in all ASEAN nations in which Holcim operates. Only Bangladesh suffered a seasonal setback in construction sector activity.

Holcim Vietnam achieved significantly higher delivery volumes, reflecting strong construction activity in the south of the country. The faster pace of economic activity in the region was also mirrored in higher output for the Group companies in Sri Lanka, Malaysia, the Philippines as well as Indonesia and New Zealand. Siam City Cement in Thailand likewise increased its deliveries.

In financial terms, this Group region took another major step forward with a majority of the national companies achieving improved financial results - in particular Union Cement, Holcim Lanka, Siam City Cement and Holcim New Zealand. Consolidated operating profit for Group region Asia Pacific improved strongly in local currency, but also climbed 54.1 percent in Swiss currency to CHF 57 million.

More increases in revenue over course of the year

The business performance in the year to date has reaffirmed the belief of the Board of Directors and Executive Committee that Holcim is on track to meeting its targets. Holcim is optimistic it can sell more cement, aggregates and concrete across all Group regions. Forecasts for financial year 2004 - indicating internal growth of 8 percent at operating profit level - are corroborated by the results for the first three months of the year.

Key Figures
Group Holcim
First quarter
  2004 2003 +/-% +/-% local currency
Annual production capacity cement million t 145.2 145.2 1    
Sales of cement and clinker million t 21.9 19.4 +12.9  
Sales of aggregates million t 20.2 17.8 +13.5  
Sales of ready-mix concrete million m 3 6.1 5.6 +8.9  
Net sales million CHF 2,760 2,467 +11.9 +12.3
Operating EBITDA million CHF 694 597 +16.2 +19.4
Operating EBITDA margin % 25.1 24.2    
EBITDA million CHF 708 609 +16.3 +19.0
Operating profit million CHF 375 287 +30.7 +36.2
Operating profit margin % 13.6 11.6    
Net income before minority interests million CHF 113 58 +94.8 +112.1
Net income after minority interests million CHF 57 10 +470.0 +550
Net income margin % 2.1 0.4    
Cash flow from operating activities million CHF 60 98 -38.8 -25.5
Cash flow margin % 2.2 4.0    
Net financial debt million CHF 9,538 8,299 1 +14.9 +12.7
Shareholders' equity including interests of minority shareholders million CHF 9,441 9,499 1 -0.6 -2.9
Gearing 2 % 101.0 87.4 1    
Personnel 31.3. 46,998 48,220 1 -2.5  
Earnings per dividend-bearing share 3 CHF 0.29 0.05 +480.0 +560.0
Earnings per share (fully diluted) 3 CHF 0.29 0.05 +480.0 +560.0
Cash earnings per share 3 4 CHF 0.69 0.39 +76.9 +87.2
Principal key figures in USD (illustrative) 5          
Net sales million USD 2,190 1,814 +20.8  
Operating EBITDA million USD 551 439 +25.5  
Operating profit million USD 298 211 +41.0  
Net income after minority interests million USD 45 7 +515.2  
Cash flow from operating activities million USD 48 72 -33.9  
Net financial debt million USD 7,452 6,693 1 +11.3  
Shareholders' equity million USD 7,376 7,660 1 -3.7  
Earnings per dividend-bearing share 3 USD 0.23 0.04 +475.0  
Principal key figures in EUR (illustrative) 5          
Net sales million EUR 1,758 1,678 +4.8  
Operating EBITDA million EUR 442 406 +8.8  
Operating profit million EUR 239 195 +22.3  
Net income after minority interests million EUR 36 7 +433.7  
Cash flow from operating activities million EUR 38 67 -42.7  
Net financial debt million EUR 6,114 5,320 1 +14.9  
Shareholders' equity million EUR 6,052 6,089 1 -0.6  
Earnings per dividend-bearing share 3 EUR 0.19 0.03 +533.3  


1 As of December 31, 2003.
2 Net financial debt divided by shareholders' equity including interests ofminority shareholders.
3 Adjusted for 5-for-1 conversion of bearer shares into registered shares on June 10, 2003.
4 Excludes the amortization of goodwill and other intangible assets.
5 Income statement figures translated at average rate; balance sheet figures at year-end-rate.

Holcim is one of the world's leading suppliers of cement, as well as aggregates (gravel and sand), concrete and construction-related services. The Group has majority and minority interests in more than 70 countries on all continents.


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