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Holcim Ltd (HOLN.VX) Wednesday said it will announce a cost reduction program next week as the world's largest cement maker tackles rising costs and stagnant demand in Europe.
"The aim is to significantly improve operating profit and therefore to support a higher return on invested capital," Holcim said in a statement, without giving further details.
Cost-saving has been a feature of the building supplies industry, which has been fighting rising raw material and fuel costs, while demand in Europe has been falling as infrastructure projects have been put on hold and the housing market in many countries stalled.
French rival Lafarge SA (LG.FR) cut EUR70 million in the first quarter towards its EUR400 million cost reduction target in 2012, while HeidelbergCement AG (HEI.XE), cut almost EUR184 million more in annual costs than it planned in 2011 and increased its savings program to EUR1 billion by 2014 compared with its 2010 cost base.
Speaking in February, Holcim Chief Executive Bernard Fontana said he planned to implement further cost savings and would focus on returning the company's return on capital invested back to its minimum target of 8% after tax.
Fontana, who replaced Markus Akermann as chief executive on Feb. 1, said the company had opportunities to improve costs in logistics, procurement, energy and fixed costs and that he was open to selective divestments.
"My view is that a lot has been achieved, but we still have numerous opportunities to further continue what I call our 'cost leadership journey.' I expect significant initiatives to be further deployed on cost improvements," Fontana said in February.
Wednesday, Holcim said it expected rising demand in Emerging markets in Asia and Latin America as well as Russia and Azerbaijan during 2012.
Jona-based Holcim said a slight improvement is expected in North America, but gave only a muted view on demand in Europe saying the market "should remain stable, provided the situation is not undermined by further systemic shocks."
Holcim said it would also look at passing on cost increases triggered by rising raw material and energy costs.
The outlook came as Holcim reported lower than expected net profit and sales for the first three months of 2012.
Net profit was flat at CHF10 million, lower than analyst forecasts of CHF38 million. Sales were slightly above expectations, rising 2.2% to CHF4.76 billion.
Holcim shares closed Tuesday at CHF55.1, valuing the company at CHF18.02 billion. The company's stock has risen 9.7% since the start of the year.
-By John Revill, Dow Jones Newswires; +41 43 443 8042; email@example.com