- 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”
Regulatory News:
LafargeHolcim (Paris:LHN):
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 PacificStrong 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.
EuropeTop 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 AmericaStrong 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 AfricaConditions 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 AmericaEarnings 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 beforeimpairment
&divestments
H1 2017 beforeimpairment
&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
Reconciling measures of Recurring EBITDA to the consolidated
statement of income of LafargeHolcim
Million CHF H12018
H12017
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
Reconciling measures of net income before impairment and
divestments to the consolidated statement of income of
LafargeHolcim
Million CHF H12018
H12017
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
Reconciling measures of Free Cash Flow to the consolidated
statement of cash flows of LafargeHolcim
Million CHF H12018
H12017
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)
NON-GAAP DEFINITIONS
Some non-GAAP measures are used in this release to help describe
the performance of LafargeHolcim. A full set of these non-GAAP
definitions can be found on our website.
Measures
Definition Like-for-like Factors out
changes in the scope of consolidation (such as divestments and
acquisitions occurring in 2018 and 2017) and currency translation
effects (2018 figures are converted with 2017 exchange rates in
order to calculate the currency effects).
Restructuring,
litigation, implementation and other non-recurring costs
Significant items that, because of their exceptional nature,
cannot be viewed as inherent to the Group's ongoing performance,
such as strategic restructuring, major items relating to antitrust
fines and other business-related litigation cases. In the
comparative periods, they also included costs directly related to
the merger such as legal, banking fees and advisory costs, employee
costs related to redundancy plans and IT implementation costs.
Profit/loss on disposals and non-operating items
Comprises capital gains or losses on the sale of Group
companies and of property, plant and equipment and other
non-operating items that are not directly related to the Group's
normal operating activities such as revaluation gains or losses on
previously held equity interests, or disputes with non-controlling
interests.
Recurring EBITDA Previously
Operating EBITDA Adjusted, defined as:
+/– Operating profit
- depreciation, amortization and
impairment of operating assets
- restructuring, litigation,
implementation and other non-recurring costs
Recurring EBITDA Margin Recurring EBITDA
divided by Net Sales
Net income before impairment and
divestments +/- Net income (loss)
- capital gains or losses on the sale of
Group companies
- impairment of goodwill and assets
Earnings Per Share (EPS) before impairment and divestments
Net income before impairment and divestments
attributable to the shareholders of LafargeHolcim Ltd divided by
the weighted average number of shares outstanding.
The Net
Maintenance and Expansion Capex (“Capex” or “Capex Net”)
+ Expenditure to increase existing or create additional
capacity to produce, distribute or provide services for existing
products (expansion) or to diversify into new products or markets
(diversification)
+ Expenditure to sustain the functional
capacity of a particular component, assembly, equipment, production
line or the whole plant, which may or may not generate a change of
the resulting cash flow
– Proceeds from sale of property, plant
and equipment
Free Cash Flow Previously “Operating Free Cash
Flow”, defined as:
+/– Cash flow from operating
activities
– Net Maintenance and expansion Capex
Net financial debt (“Net debt”) + Financial
liabilities (Long Term & Short Term) including derivative
liabilities
– Cash and cash equivalents
– Derivative assets
Net working capital + Trade accounts
receivable
+ Inventories
+ Prepaid expenses and other current
assets
– Trade accounts payable
– Current income tax liabilities
– Long-term income tax liabilities
– Other current liabilities
Invested Capital + Net working capital
+ Investments in associates and joint
ventures
+ Property, plant and equipment
+ Goodwill
+ Intangible assets
+ Deferred tax assets
+ Pension assets
– Short-term provisions
– Defined benefit obligations
– Deferred tax liabilities
– Long-term provisions
Net Operating Profit After Tax (“NOPAT”) +/–
Net Operating Profit (being the Recurring EBITDA, adjusted for
depreciation and amortization of operating assets but excluding
impairment of operating assets)
– Standard Taxes (being the taxes applying
the Group's tax rate to the Net Operating Profit as defined
above)
ROIC (Return On Invested Capital) Net
Operating Profit After Tax (NOPAT) divided by the average Invested
Capital. The average is calculated by adding the Invested Capital
at the beginning of the period to that at the end of the period and
dividing the sum by 2 (based on a rolling 12 month calculation)
Cash conversion Free Cash Flow divided by
Recurring EBITDA
Additional Information
The analyst presentation of the first half update is available
on our website at www.lafargeholcim.com
The financial statements based on IFRS can be found on the
LafargeHolcim Group website.
Media call: 09:00 CESTSwitzerland:
+41 58 310 5000France: +33 1 7091 8706UK: +44 207 107 0613US: +1
631 570 5613
Analyst call: 10:00
CESTSwitzerland: +41 58 310 5000UK: +44 207 107 0613US: +1 631 570
5613
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. More
information is available on www.lafargeholcim.com
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
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