LafargeHolcim ( HCMLY) , the world's biggest cement maker, posted a double-digit increase in third quarter earnings Friday despite falling sales as savings from its formative merger boosted margins and left it on course to meet its full year profit targets.
The Jonas, Switzerland-headquartered group said adjusted third quarter operating Ebitda came in at Sfr1.69 billion ($1.74 billion) up 10.5% on the same period in 2015 after margins improved 290 basis points year-on-year. Sales for the quarter fell 3.1% to Sfr7.04 billion as a weak Brazilian economy, gas outages in Nigeria and a long monsoon season in India weighed on demand.
LafargeHolcim shares changed hands at Sfr294.60 each by mid-day in Zurich, up Sfr6.2 or just over 2.6%, on their Thursday close.
Bank of America Merrill Lynch analysts described the results as "solid" and said it expected LafargeHolicm "to continue to deliver in Q4" as demand for building materials improved pushing sales volumes higher.
LafargeHolcim said targeted savings from the 2015 merger of Swiss-based Holcim and France's Lafarge were running ahead of schedule and that the total Sfr450 million of gains forecast for this year had already been realized. The company increased target savings from the merger to "at least Sfr550 million" by the end of 2016.
"We are demonstrating that our focus on pricing, synergies and cash flow is delivering results," CEO Eric Olsen said in a statement. "Our earnings momentum is accelerating and we are on track to achieve our commitments for 2016."
The company reiterated its full year earnings target of "at least a high single digit like-for-like increase."
LafargeHolcim said it had taken in a total Sfr$1.4 billion from sales that have completed this year and claimed to be on target recoup its targeted Sfr 3.5 billion by the end of the year. It also reiterated a plan, announced in August, to sell a further Sfr1.5 billion of asset over 2017. Since the merger, the company has divested assets in South Korea, Morocco, Sri Lanka and Saudi Arabia and secured divestments for assets in India, China and Vietnam.
Cash from the asset sales has been used to pay down loans, taking net debt at the end of September to Sfr16.5 billion from Sfr18.3 billion a year earlier. The company is targeting a net debt of Sfr13 billion by the end of this year.
The disposals have won support from credit rating agencies, including Moody's Investors Services, which in April placed LafargeHolcim's Baa2 rating on watch for a possible downgrade because of weak sales and concerns that the company would miss its disposal target.
Bank of America Merrill Lynch analysts described the results as "solid" and said it expected LafargeHolicm "to continue to deliver in Q4" as the market for building materials improved providing support for sales volumes.