Switzerland’s Holcim reports higher first quarter profit

Switzerland's Holcim, which is merging with French competitor Lafarge to form the world's largest cement maker, reported higher first-quarter profit as the proceeds from divestments and cost cuts helped to make up for sluggish demand in Europe and Canada.

Net income rose to 310 million francs (€297.5 million) from 80 million francs a year earlier, the company said in a statement on Thursday.

Sales declined 2.8 per cent to 3.97 billion francs, missing the 4.04 billion-franc estimate by analysts.

Holcim and Lafarge have predicted the merger, which needs to be approved by shareholders next month, will lead to cost savings of €1.4 billion annually, giving them an advantage over rivals after a global recession eroded demand for building materials and forced some kilns to run at a loss.

Holcim's second-biggest shareholder, Eurocement Holding, yesterday agreed to back the merger in the latest step toward securing investor approval for the deal.

The companies tweaked the original merger agreement in recent weeks to win over Holcim investors who were unhappy about the performance of Lafarge since the deal was agreed last year.

The Swiss company will now have a bigger stake in the new entity, and the cement makers also appointed Eric Olsen to lead their combined operation after Holcim shareholders opposed Lafarge CEO Bruno Lafont as head of the new group.

Thomas Schmidheiny, Holcim’s largest shareholder and the billionaire co-architect of the merger, supported the tie-up from the beginning.

Corporate governance adviser International Shareholder Services recommended last week that investors back the deal.

Two-thirds of Holcim’s stakeholders need to approve a capital increase for the merger to go through and create a cement maker with a market value of more than $46 billion.

Holcim today confirmed its outlook, saying it still sees 2015 operating profit excluding merger costs in a range of 2.7 billion francs to 2.9 billion francs as the Swiss manufacturer reduces spending and cement markets rebound.

Bloomberg