Holcim shrugs off interest rate fears to raise guidance

By John Revill

ZURICH (Reuters) -Holcim AG shrugged off concerns about rising interest rates dampening building industry demand as the world’s biggest cement maker raised its full-year guidance after beating forecasts for the first quarter.

U.S. construction spending declined in February, data showed earlier this month, as the country’s housing market bore the brunt of the aggressive interest rate hikes delivered by the Federal Reserve in its battle against high inflation.

Other countries such as Britain have also seen downturns so far this year, as higher interest rates weigh on building projects.

But Holcim (SIX:) was undeterred, raising its outlook after what it called a strong start to the year.

The Swiss company now expects its full-year sales to increase by more than 6%, up from its previous outlook for an increase of 3%-5%, and said it expected its organic recurring operating profit to increase by more than 10%.

“With strong underlying trends across all our businesses, we are confident we will close the full year strong,” said Chief Executive Jan Jenisch.

During its first quarter, Holcim’s sales fell to 5.73 billion Swiss francs ($6.41 billion) from 6.44 billion francs a year earlier, beating the 5.66 billion francs forecast by analysts in a consensus of estimates.

The downturn was largely attributed to the $6.4 billion sale of Holcim’s India business – previously its second largest by sales – which was completed last September.

Recurring operating profit fell to 493 million francs, but topped the 464 million francs forecast.

On a like-for-like basis, which cuts out the impact of divestments and currency swings, sales increased 8%. Recurring operating profit increased by 12%.

Since the start of 2023, Holcim has made 12 acquisitions, in areas such as flooring, roofing and pre-cast concrete products, as it diversifies from carbon-intensive cement production.

The company has been seeking to expand its presence in these areas because they produce lower carbon emissions, while also providing increasing and resilient demand from the repair and refurbishment customers.

($1 = 0.8933 Swiss francs)