25 de noviembre de 2015 / 6:54 / en 2 años

UPDATE 3-LafargeHolcim increases dividend as CEO focuses on cashflow

* World’s biggest cement maker boosts proposed dividend

* Targets at least 10 bln Swiss francs cashflow through 2018

* Q3 results, however, miss market expectations (Adds quote from CEO about divestitures in 2016)

By John Miller

ZURICH, Nov 25 (Reuters) - LafargeHolcim, the Swiss-French cement giant in the midst of a post-merger restructuring, lifted its proposed dividend and said it now expects to generate free cashflow of at least 10 billion Swiss francs ($9.9 billion) by the end of 2018.

The targets eclipsed third-quarter sales and profit figures on Wednesday that missed analysts’ expectations, although some analysts said the medium-term goals were too ambitious.

The tie-up between Switzerland’s Holcim and France’s Lafarge, announced in 2014, forged the world’s biggest cement maker and aimed to cut costs and counteract slumping demand for cement after the financial crisis depressed construction.

Chief Executive Eric Olsen said the company was closing Chinese plants and combining management at businesses there to reduce costs and ride out “genuine declines in demand”.

“China is a fantastic example of ... bringing Lafarge and Holcim assets together where we can do things in reducing costs that we wouldn’t have been able to do otherwise,” Olsen told reporters on a call. “We need to prepare ourselves for demand that’s not going to come back. In a situation like that, it’s low cost that wins.”

Weakness in demand in China and Brazil, is being partially offset by “continuing positive trends” in the United States, Mexico, Britain and the Philippines, LafargeHolcim said.

The company proposed on Wednesday a 2015 dividend of 1.50 francs, up from the 1.30 francs it had suggested in July.

“It’s my ambition that by the end of 2018 LafargeHolcim will have changed the game in free cashflow generation in our industry,” Olsen said. “We’ll be looking at returning value to shareholders through dividends and/or share buybacks.”

The company’s shares were up 3.9 percent by 0930 GMT, after falling 18.6 percent this year.

Operating earnings before interest, tax, depreciation and amortisation (EBITDA) declined 16.1 percent in the third quarter to 1.64 billion Swiss francs, below the 1.75 billion forecast by analysts.

Quarterly sales dropped 8.7 percent to 7.83 billion francs, just missing analysts’ forecast for 7.92 billion francs.

“The mid-term outlook seems promising,” J. Safra Sarasin analysts said in a note. “The U.S., UK and most countries in Asia Pacific and Latin America showed good development.”

The cumulative cashflow target of 10 billion francs between 2016 and 2018 would mark a turnaround from 2014, when the companies still reported results separately and Holcim had free cashflow of 1.76 billion francs, while Lafarge’s cashflow was 592 million euros ($628 mln).

LafargeHolcim also said it is aiming for operating EBITDA of at least 8 billion francs by 2018 and hopes to boost return on invested capital by at least 300 basis points from 2015.

Some analysts said these mid-term goals were too bullish.

“We find it difficult to reconcile the current poor operating performance with management’s optimistic medium-term outlook,” Bernstein’s Phil Roseberg said in a note.

Third-quarter net profit rose to 812 million francs, from 504 million in the 2014 period, on asset sale gains, including selling its stake in Thailand’s Siam City Cement.

LafargeHolcim said it would continue “dynamic portfolio management”, expecting divestments worth 3.5 billion francs by the end of 2016. The figure includes disposal of two Indian plants announced in August for 750 million francs.

“Where we don’t have a position where we think we can win, we’re going to be looking to either divest and/or swap to strengthen our portfolio,” Olsen said. “We’ve got many discussions underway, with a good portion of those.” ($1 = 1.0149 Swiss francs) (Editing by Maria Sheahan and Susan Fenton)

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