LafargeHolcim, the cement maker formed this month in a Franco-Swiss tie-up, said it needs to cut costs to improve profit margins after both merging companies reported earnings below analysts’ forecasts.
The new company will cut spending by at least 200 million Swiss francs (€188 million) over the rest of 2015, when compared to what both companies had planned to spend on a standalone basis, LafargeHolcim, based in Jona near Zurich, said in a statement on Wednesday. It also predicts 100 million Swiss francs of cost savings in the period.
“A disappointing quarter for both Lafarge and Holcim indicative of these companies’ exposure to challenging markets,” Phil Roseberg, an analyst at Bernstein, wrote in a research note.
“This is not a good start for the merged entity, but does lower the bar for incoming management.”
LafargeHolcim has predicted the merger to form the world’s largest cement maker will lead to cost savings of €1.4 billion annually within three years, giving it an advantage over competitors after a global recession eroded demand for building materials.
The stock was down 6 per cent as of 12:16 pm in Zurich, valuing the company at 36.1 billion francs.
“We continue to operate in a demanding global market environment and this has affected our first-half performance,”said chief executive officer Eric Olsen.
“However, as a new company we have hit the ground running.” Geographic Reach Lafarge’s earnings before interest, taxes, depreciation and amortisation rose 1 per cent in the second quarter to €820 million, missing the average analyst estimate of €844 million.
Bloomberg
