Holcim speeds response to slow European construction
ZURICH (Reuters) - Swiss cement maker Holcim Ltd (HOLN.VX) is booking 510 million francs ($553.3 million) of restructuring charges and write-offs as it accelerates its response to sluggish construction activity in Europe.
The world's second-largest cement maker is bringing forward the measures having in May announced a programme to cut costs and seek efficiency measures, saying at the time the plan was expected to cost 200 million francs, mainly to be taken in 2013.
The cement industry has been suffering as infrastructure spending is hurt by government austerity programmes, especially in southern European countries which have been at the heart of the euro zone debt crisis.
Holcim and rivals such as world no. 1 Lafarge (LAFP.PA), HeidelbergCement (HEIG.DE) and Cemex (CX.N) (CMXCPO.MX) have also been struggling to deal with a surge in electricity, coal and oil costs, which they have been trying to pass on to customers by hiking prices.
Holcim said on Monday it had speeded up its restructuring plans and would charge 100 million francs in costs in the fourth quarter, on top of 58 million already booked in the first nine months of the year.
It said it had begun talks about an undisclosed number of job cuts. A spokesman declined to give further details, citing consultation processes in different countries.
Holcim also said it would write down 410 million francs of property, plant and equipment in the quarter and would introduce a leaner management structure in Europe to adapt to the lower level of construction activity.
"Holcim is proceeding with its restructuring programme faster than first assumed and hence cost savings are supposed to be reached earlier, too," said Vontobel analyst Christian Arnold.
"However, additional write-offs of property, plant and equipments are somewhat worrying."
Holcim shares, which had risen on Friday to their highest level in 18 months, were down 1.1 percent at 64.95 francs at 1051 GMT, compared with a 0.1 percent weaker European construction index .SXOP.
Analyst Josep Pujal at brokerage Kepler said the write-offs were a positive sign.
"In our view, it is a good thing, as they are related to 'real' capacity closures instead of goodwill depreciation, a good initiative to avoid pricing pressure," Pujal said.
"Should other players do the same, it would be a very good warranty for the safety of selling prices in Europe in future."
Holcim's measures echo others being taken in the industry.
Last month, HeidelbergCement said a savings programme had cut annual costs by 241 million euros as of the end of September, beating the 200 million originally planned.
Meanwhile, Lafarge has been shedding non-core assets and refocusing on its cement and concrete business, after the debt it racked up to acquire Middle Eastern cement maker Orascom in 2007 led to the loss of its investment-grade credit rating last year.
Holcim, which paid a 1 franc per share dividend for 2011, said the group's payout potential for 2012 remained and would be finalised by the board when the company reports full-year earnings on February 27.
($1 = 0.9218 Swiss franc)
(Editing by Dan Lalor and David Holmes)
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