The tills also rang when they won. Overall, analysts’ expectations were exceeded at all levels. Holcim is now raising its growth target for the year as a whole.
In the first six months, the world’s largest building materials group achieved sales of 14.7 billion Swiss francs. This is an increase of 16.9 percent compared to the same semester in the previous year and a new record.
A series of company takeovers contributed to the steep growth, which drove sales up, especially in the first quarter – above all the billion-euro acquisition of the US roofing specialist Firestone, which was completed at the end of March 2021. On a comparable basis, i.e. excluding acquisitions and sales of parts of the business, sales would have increased by 12.7 percent in the first half of the year.
In total, Holcim made eight bolt-on acquisitions in the first half of the year. In addition, great progress has been made in restructuring the portfolio with the further expansion of the roofing, insulation and special construction solutions business.
On the other hand, Holcim is exiting a number of emerging markets in the traditional cement business: the group has signed deals to sell businesses in India, Brazil and Zimbabwe for expected proceeds of over $7 billion.
New record operating profit
The company based in Zug also earned significantly more operationally. The recurring operating profit EBIT rose by 9.6 percent to 2.2 billion Swiss francs, as Holcim announced in a communiqué on Wednesday. This is also the best operating result in the company’s history. On a comparable basis, it would have grown by 5.7 percent.
This does not include restructuring, litigation and other non-recurring costs or impairments of operating assets. The result is all the more remarkable given that Holcim had already increased its recurring operating profit by two-thirds in the same semester last year.
All in all, Holcim made a net profit of 1.2 billion Swiss francs. That’s a whopping 38 percent growth. The group thus significantly exceeded the previous year’s level of 839 million.
Overall, Holcim performed significantly better than analysts had expected. Growth in the second quarter in particular far exceeded the experts’ forecasts.
The new Solutions & Products segment generated 18 percent of the company’s total sales in the first half of the year. This brings Holcim closer to the goal of achieving 30 percent of sales with solutions and products by 2025. The division’s profitability also improved significantly: the recurring EBIT margin rose to 15.0 percent in the second quarter from 8.8 percent in the previous year.
Goals set even higher
“Particularly outstanding was our roofing and insulation businesses, which are on track to achieve pro forma sales of 3.5 billion Swiss francs in 2022. This remarkable achievement gives us confidence to raise our 2022 guidance: we expect sales growth of at least 10 percent on a comparable basis,” said CEO Jan Jenisch in the communiqué.
The company’s top management is thus increasing its targets for 2022 as a whole, which Holcim only raised in April. Up to now, Holcim had assumed comparable sales growth of 8 percent. In Swiss francs, net sales are expected to grow by at least 10 percent. This goal remained unchanged.
In the new Solutions & Products division, which was created through the purchase of the US roofing specialist Firestone Buildings, Holcim is expecting double-digit sales growth to over CHF 5 billion.
Recurring EBIT on a like-for-like basis and in Swiss francs is also expected to increase. Holcim also continues to expect free cash flow of over 3 billion francs.
Holcim share clearly in positive territory
In Zurich trading, Holcim’s shares temporarily gained 5.61 percent to 43.65 Swiss francs. The analysts agree that the group has again achieved a very good quarterly result. Sales increased by 17 percent and reached a new record high of CHF 14.7 billion. And Holcim also increased its EBIT by almost 10 percent, and by a good 7 percent in the second quarter. “Holcim’s recurring EBIT in the second quarter of 2022 exceeded market expectations by no less than 10 percent, supported by strong pricing power,” said the Vontobel analyst.
The good result was primarily due to the Solutions & Products segment, as all the analysts emphasize. Holcim created this division with the major acquisition of the US roofing specialist Firestone, which was completed in March last year.
“The key question will be whether the strong performance of Solutions & Products, which is currently mainly active in the private construction sector in the US, can be sustained,” said the analyst at UBS. According to company boss Jan Jenisch, the segment should achieve the targeted 30 percent sales contribution before 2025.
With the expansion of the division, Holcim is consistently driving forward the transformation towards a less cement and energy-intensive manufacturer of building materials. That makes the investment case more interesting, according to the ZKB.
The responsible analyst at ZKB is also enthusiastic about the update on sales expectations for the year as a whole. “It is gratifying that the sales guidance for the current year was increased slightly and the EBIT guidance was confirmed despite the challenging environment.”
The company also confirms guidance for earnings and free cash flow. “Holcim is well on the way to achieving its financial targets, accelerating the restructuring of its portfolio and paying an attractive dividend,” says the Vontobel expert.
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