LafargeHolcim accelerates growth momentum Revenue increased 6.2% in Q2
- Strong revenue growth of 6.2 in Q2 and 4.8 in first half on a like-for-like basis
- Recurring EBITDA up 1.5 for Q2, -1.4 for first half on a like-for-like basis
- Full year 2018 targets confirmed
- On track to deliver Strategy 2022 – “Building for Growth”
PERFORMANCE OVERVIEW1
| CHFm | 2018 | 2017 | ± | ± LfL | |
|---|---|---|---|---|---|
| Operational performance | |||||
| Net Sales H1 | 13,272 | 12,918 | 2.7 | 4.8 | |
| Net Sales Q2 | 7,442 | 7,085 | 5.0 | 6.2 | |
| Recurring EBITDA H1 | 2,484 | 2,582 | -3.8 | -1.4 | |
| Recurring EBITDA Q2 | 1,784 | 1,774 | 0.6 | 1.5 | |
| Half year performance | |||||
| Operating profit | 1,078 | 1,413 | -23.7 | - | |
| Net Income Group Share bef. Impairment & Divestments | 371 | 651 | -43.0 | - | |
| Free Cash Flow | -473 | -661 | 28.4 | - | |
| Net financial debt | 16,127 | 15,745 | 2.4 | - | |
Jan Jenisch, Chief Executive Officer of LafargeHolcim said: “I am very satisfied with the sales growth we achieved in the first half of the year, especially as we gained momentum in the second quarter. Increasing energy prices and cost inflation have been challenging. Operational issues in some markets have been addressed and we expect to deliver increasing margins as we capture the upward trend in demand through the second half of 2018.
“We remain focused on delivering Strategy 2022 – ‘Building for Growth.’ Recent bolt-on acquisitions in the US and France demonstrate our focus on capturing the growth opportunities in our most attractive markets. The beneficial effects of simplification and cost reduction are also becoming more visible. We continue to focus on delivering our 2018 targets.”
Revenue grew 6.2 in the second quarter, with total Net Sales of CHF 7,442 million. For the first six months Net Sales grew 4.8 on a like-for-like basis. Over the first six-month Recurring EBITDA was down -1.4 on a like-for-like basis but earnings increased in the second quarter, with Recurring EBITDA up by 1.5 , largely offsetting a soft first quarter. These strong overall trends are reflected in earnings and revenue growth for the six months in all regions apart from Middle East Africa, where conditions remained difficult. Given these trends, as well as the solid execution of simplification and performance measures, the full-year targets for 2018 have been confirmed.
The Net Income attributable to shareholders for the first half of 2018 before Impairment and Divestments decreased from CHF 651 million in 2017 to CHF 371 million in the current year. As is the case with the operating profit, both figures are predominantly impacted by restructuring costs in connection with the simplification plan that is being implemented and that will lead to yearly CHF 400 million cost savings from Q2 2019 onwards.
STRATEGY 2022
The execution of Strategy 2022 - “Building for Growth” is well on track across all regions and segments. Bolt-on acquisitions in France, the UK and the US in 2018 illustrate one important lever for growth going forward.
There has been good progress on all initiatives to deliver a cost-disciplined operating model and corporate-light structure: the regional and top management organizations have been successfully streamlined, Miami and Singapore regional offices have been closed, the Zurich and Paris corporate office reorganization is progressing and countries have initiated extensive fixed-cost restructuring. As previously announced, all actions are expected to be completed by Q1 2019, delivering cost savings of CHF 400 million per year, measured at 2017 currency exchange rates.
The commitment to maintaining an investment-grade rating is confirmed as well as building financial strength and shareholder value.
OUTLOOK 2018
The Group confirms its targets for 2018 for Net Sales growth of 3 to 5 percent and an over-proportional increase in Recurring EBITDA of at least 5 percent on a like-for-like basis.
- Strong market trends in Europe
- Continued solid growth in North America
- Good growth prospects in most countries in Latin America
- India and China to remain supportive; Southeast Asia to stabilize
- Challenging outlook in a number of countries in Middle East Africa
REGIONAL PERFORMANCE1
| Net Sales | Recurring EBITDA | |||||||
| CHFm | H1 2018 | H1 2017 | ± | ± LfL | H1 2018 | H1 2017 | ± | ± LfL |
|---|---|---|---|---|---|---|---|---|
| Asia Pacific | 3,807 | 3,676 | 3.6 | 9.4 | 773 | 692 | 11.7 | 17.1 |
| Europe | 3,664 | 3,326 | 10.2 | 3.4 | 599 | 550 | 8.9 | 1.2 |
| Latin America | 1,428 | 1,459 | -2.1 | 12.9 | 488 | 497 | -1.7 | 5.2 |
| Middle East Africa | 1,535 | 1,738 | -11.7 | -7.4 | 365 | 592 | -38.3 | -33.5 |
| North America | 2,475 | 2,403 | 3.0 | 2.3 | 470 | 473 | -0.4 | 2.0 |
| Corporate & Trading | 363 | 316 | 15.1 | 18.4 | -212 | -222 | 4.3 | 3.2 |
| Group | 13,272 | 12,918 | 2.7 | 4.8 | 2,484 | 2,582 | -3.8 | -1.4 |
Asia Pacific
Strong net sales and earnings growth have been achieved despite mixed market conditions. China was a key driver in the first half, with a continued rise in profits supported by pricing momentum and sustained benefit from the vertically-integrated waste recycling business. India delivered growth in net sales and profits driven by solid volumes, supported by sustained market demand and higher sales of premium products. Conditions in Southeast Asia remained challenging, although encouraging trends were observed in the Philippines and Indonesia. Revenue grew particularly in the second quarter.
Europe
Top line and profit grew throughout the first half of 2018. Strong market trends in most European countries led to improving volumes in all segments compared to the first half of 2017 on a like-for-like basis, with strong momentum in the second quarter. Net Sales growth accelerated in Germany and France, although production constraints temporarily affected earnings growth. Volumes in the UK were broadly stable, but profits were lower on the back of higher costs. Eastern and Central Europe also showed strong performance.
Latin America
Strong growth in top line and earnings have been achieved, supported by solid performance in Mexico. Performance in Argentina was also good despite higher costs to fulfill demand and currency volatility. Performance in Brazil was impacted by the national transport strike in May.
Middle East Africa
Conditions in several countries of Middle East Africa remained challenging, notably Algeria and Iraq. Egypt’s performance was solid in the face of an increasingly volatile environment. Top line trends in Nigeria continued to improve, driven by higher market demand and commercial initiatives. Results in South Africa were impacted by current operational issues.
North America
Earnings improved with volumes in the US accelerating throughout the first half of 2018 supported by positive market conditions as well as successful commercial initiatives. The contribution from Canada was solid despite persistent difficult conditions in the Prairies. Earnings for the region overall were constrained by higher logistics costs and maintenance activities to cope with demand growth.
OTHER FINANCIAL ITEMS1
| CHFm | H1 2018 | H1 2018 before impairment & divestments |
H1 2017 before impairment & divestments |
Variation |
|---|---|---|---|---|
| Net Sales | 13,272 | 13,272 | 12,918 | 354 |
| Recurring EBITDA | 2,484 | 2,484 | 2,582 | -97 |
| Impairment, Depreciation & Amortization | -1,106 | -1,104 | -1,125 | 21 |
| Restructuring and others2 | -300 | -300 | -38 | -262 |
| Operating profit | 1,078 | 1,080 | 1,418 | -338 |
| Profit/loss on disposals and other non-op. items | -52 | -4 | 41 | -45 |
| Share of profit of associates | 9 | 9 | 20 | -11 |
| Financial income / expenses | -449 | -455 | -398 | -57 |
| Income taxes | -191 | -186 | -306 | 120 |
| ETR | 32.7 | 29.5 | 28.3 | - |
| Net income | 394 | 444 | 774 | -331 |
| Net income - Group share | 318 | 371 | 651 | -281 |
| EPS (CHF) | 0.53 | 0.62 | 1.07 | -0.45 |
Restructuring, litigation, implementation and other non-recurring costs stood at CHF 300 million compared to CHF 38 million in H1 2017. This increase is mainly due to the restructuring costs incurred in connection to the streamlining of corporate and countries’ fixed costs structures. The first half of 2017 included a significant positive impact coming from reversal of provisions.
Net financial expenses excluding impairment and divestments stood at CHF 455 million in H1 2018 compared to CHF 398 million in H1 2017. The increase is mainly driven by financial expenses related to legal cases.
Excluding impairment and divestments, the Group's effective tax rate improved to 29.5 compared to an effective tax rate of 30.5 before impairment and divestments in FY2017.
EPS excluding impairment and divestments amounts to CHF 0.62 for the first half of 2018 compared to 1.07 for the same period of last year. On a reported basis, EPS was CHF 0.53.
Net capital expenditure for the first half was CHF 526 million, flat versus prior year. Free cash flow stood at CHF -473 million which was an improvement over H1 2017 of CHF 187 million, driven by improvement in Net Working Capital.
Net Financial Debt as of 30 June 2018 amounted to CHF 16,127 million.
REGIONAL VOLUMES1
| H1 2018 | H1 2017 | ± | ± LfL | Q2 2018 | Q2 2017 | ± | ± LfL | |
|---|---|---|---|---|---|---|---|---|
| Asia Pacific | ||||||||
| Sales of cement | 45.5 | 46.6 | -2.4 | 5.1 | 22.9 | 23.4 | -2.1 | 6.2 |
| Sales of aggregates | 15.9 | 15.6 | 1.4 | 1.4 | 8.2 | 8.5 | -3.4 | -3.4 |
| Sales of ready-mix concrete | 6.1 | 6.1 | 0.2 | 0.8 | 3.1 | 3.1 | -1.8 | -1.8 |
| Europe | ||||||||
| Sales of cement | 21.3 | 20.2 | 5.5 | 5.5 | 13.1 | 11.9 | 9.6 | 9.6 |
| Sales of aggregates | 59.0 | 60.0 | -1.6 | 3.7 | 33.6 | 33.4 | 0.6 | 7.4 |
| Sales of ready-mix concrete | 9.3 | 8.9 | 4.3 | 3.7 | 5.2 | 4.9 | 7.4 | 6.3 |
| Latin America | ||||||||
| Sales of cement | 12.6 | 11.9 | 6.5 | 12.1 | 6.6 | 6.0 | 8.5 | 13.8 |
| Sales of aggregates | 1.7 | 2.3 | -25.3 | -5.5 | 0.9 | 1.2 | -27.4 | -6.9 |
| Sales of ready-mix concrete | 2.8 | 3.0 | -6.6 | 15.9 | 1.5 | 1.5 | -1.3 | 22.7 |
| Middle East Africa | ||||||||
| Sales of cement | 17.7 | 18.1 | -2.5 | -2.5 | 8.7 | 9.1 | -4.1 | -4.1 |
| Sales of aggregates | 4.1 | 5.3 | -21.7 | -21.7 | 2.2 | 2.8 | -19.9 | -19.9 |
| Sales of ready-mix concrete | 2.0 | 2.5 | -20.0 | -20.0 | 1.0 | 1.2 | -17.0 | -17.0 |
| North America | ||||||||
| Sales of cement | 8.8 | 8.5 | 3.4 | 3.4 | 5.5 | 5.2 | 6.4 | 6.4 |
| Sales of aggregates | 44.5 | 44.8 | -0.6 | -0.6 | 30.5 | 30.4 | 0.5 | 0.5 |
| Sales of ready-mix concrete | 4.4 | 3.9 | 12.5 | 1.8 | 2.6 | 2.3 | 16.3 | 6.3 |
| Group | ||||||||
| Sales of cement | 108.2 | 107.6 | 0.6 | 4.4 | 58.2 | 57.1 | 2.0 | 5.9 |
| Sales of aggregates | 125.3 | 128.0 | -2.1 | 0.7 | 75.5 | 76.3 | -1.1 | 2.1 |
| Sales of ready-mix concrete | 24.6 | 24.4 | 0.7 | 1.4 | 13.4 | 13.0 | 3.4 | 3.6 |
Volumes of cement and aggregates are expressed in millions of tonnes. Volumes of ready-mix concrete are expressed in millions of cubic meters.
RECONCILIATION TO GROUP ACCOUNTS
Million CHF |
H1 2018 |
H1 2017 |
|---|---|---|
| Operating profit | 1,078 | 1,413 |
| Depreciation, amortization and impairment of operating assets | 1,106 | 1,130 |
| Restructuring, litigation, implementation and other non-recurring costs | 300 | 38 |
| Recurring EBITDA | 2,484 | 2,582 |
Million CHF |
H1 2018 |
H1 2017 |
|---|---|---|
| Net income | 394 | 1,154 |
| Impairments | (1) | (4) |
| Profit/(loss) on divestments | (49) | 384 |
| Net income before impairment and divestments | 444 | 774 |
| Net income before impairment and divestments Group share | 371 | 651 |
Adjustments disclosed net of taxation
Million CHF |
H1 2018 |
H1 2017 |
|---|---|---|
| Cash flow from operating activities | 53 | (138) |
| Purchase of property, plant and equipment | (586) | (578) |
| Disposal of property, plant and equipment | 61 | 55 |
| Free Cash Flow | (473) | (661) |
About LafargeHolcim
LafargeHolcim is the leading global building materials and solutions company. The company offers four businesses: cement, aggregates and ready-mix concrete as well as advanced solutions and products that include precast concrete, asphalt and mortar. With its broad portfolio LafargeHolcim solves the toughest challenges facing masons, builders, architects and engineers, bringing industry-leading innovations and services to customers challenged by urbanization, population growth and the demand for sustainability. Headquartered in Switzerland and with leading positions in all regions, LafargeHolcim employs approximately 80,000 employees in around 80 countries and has a portfolio that is equally balanced between developing and mature markets.
Important disclaimer - forward-looking statements:
This document contains forward-looking statements. Such forward-looking statements do not constitute forecasts regarding results or any other performance indicator, but rather trends or targets, as the case may be, including with respect to plans, initiatives, events, products, solutions and services, their development and potential. Although LafargeHolcim believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions as at the time of publishing this document, investors are cautioned that these statements are not guarantees of future performance. Actual results may differ materially from the forward-looking statements as a result of a number of risks and uncertainties, many of which are difficult to predict and generally beyond the control of LafargeHolcim, including but not limited to the risks described in the LafargeHolcim's annual report available on its website (www.lafargeholcim.com) and uncertainties related to the market conditions and the implementation of our plans. Accordingly, we caution you against relying on forward-looking statements. LafargeHolcim does not undertake to provide updates of these forward-looking statements.
1 Net Sales include only sales to external customers. Net Sales H1 2017 have been restated by CHF 438m due to the reporting of Gross Sales from trading activities, following the application of the IFRS 15, effective 1 January 2018. This had no impact on Recurring EBITDA. Recurring EBITDA H1 2017 was restated by CHF 46m due to the reclassification of the Group share of net income of Huaxin to joint ventures.
2 Others include litigation, implementation and other non-recurring costs
