July 30, 2020 / 4:59 AM / 8 days ago

Cement giant LafargeHolcim says it has weathered coronavirus 'tsunami'

ZURICH (Reuters) - LafargeHolcim (LHN.S) said it had weathered the “tsunami” of the coronavirus crisis battering the construction industry after a tough second quarter marked by falling sales and profit.

FILE PHOTO: The logo of LafargeHolcim, the world's largest cement maker, is seen at its headquarters in Zurich, Switzerland March 2, 2017. REUTERS/Arnd Wiegmann

The world’s biggest cement maker is seeing the start of a recovery, Chief Executive Jan Jenisch said on Thursday, adding he was confident about the sector’s ability to withstand any second wave of COVID-19.

Sales in all five of its regions had returned to 2019 levels by the end of June as lockdowns eased, the Swiss company said,

“This is a tsunami crisis and in our case it is already over,” Jenisch told reporters. “We expect a solid second half of the year based on June’s full recovery, the trend of our order book and upcoming government stimulus packages.”

His upbeat comments were echoed by German competitor HeidelbergCement (HEIG.DE) which also said it was seeing an improvement in construction activity during the second quarter.

LafargeHolcim said its sales fell 24% to 5.4 billion Swiss francs (4.56 billion pounds) in the quarter, although above the 4.93 billion francs expected by analysts in a company-gathered consensus.

Recurring operating profit (EBIT) shrank 32% to 932 million francs, beating the 725 million francs consensus.

The company’s share price was up 3.4% in early trading.

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“The V-shaped demand recovery experienced by LafargeHolcim in June is very encouraging,” said Bank Vontobel analyst Bernd Pomrehn. “The expected approval of infrastructure stimulus programs should provide more confidence that this demand recovery is sustainable.”

However some analysts pointed to possible problems ahead for the sector, with companies’ ability to maintain prices potentially limited in future as economies struggled with the aftermath of COVID-19, while infrastructure government stimulus packages could take some time to be approved and implemented.

Emerging markets dependent on tourist or oil income could particularly struggle, they added.

With very few exceptions, LafargeHolcim was in full operation at all its plants, Jenisch said, adding the company’s profitability was being helped by cheaper energy prices as well as being able to raise prices by around 1%.

Jenisch did not think a second wave of the virus would derail the recovery, following precautions taken by governments and companies at building sites.

“You will see waves and hotspots, but I don’t think construction sites will necessarily be affected by this,” he told reporters.

Reporting by John Revill; Editing by Michael Shields and Pravin Char

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