LafargeHolcim Raises Sales Outlook in Battle Against Costs

(Bloomberg) -- LafargeHolcim Ltd. raised its outlook for sales growth this year as Europe’s biggest cement maker managed to beat back higher energy prices that are pushing up production and transport costs.

Key Insights

• Chief Executive Officer Jan Jenisch appears to be keeping his five-year plan to improve profitability on track after quarterly profit published Friday surpassed the average forecast.
• The Swiss producer was able to sell more cement at better prices in a bid to overcome the higher oil costs that have been feeding into the expenses of manufacturers like chemical maker BASF SE, which also reported earnings Friday.
• Jenisch is trying to steady the LafargeHolcim ship. The company suffered from a loss of investor confidence following its creation in a Franco-Swiss merger and remains entangled in a French probe into possible terrorist payments in war-torn Syria.
• Overcapacity, falling prices in some markets and energy costs are a challenge for cement makers. LafargeHolcim’s results are a strong indicator for the wider industry. Rivals Vicat SA and HeidelbergCement AG are set to report on Nov. 6 and 8 respectively.

Market Reaction

• The shares rose as much as 5.4 percent, the most intraday since May 2017, and were trading 2.4 percent higher at 42.90 francs as of 9:22 a.m. in Zurich. They are still down by about a fifth since the start of the year.
• Vontobel analyst Bernd Pomrehn kept his recommendation to buy shares partly because of the expectation that earnings growth will continue in the last quarter