LafargeHolcim launch globally combined building materials

LafargeHolcim, the company formed by the recent merger between Holcim and Lafarge, on Wednesday officially launched their new combined building materials company and committed to delivering savings of 1.4 billion Euros ($1.54 billion) within three years.

 

The new company with a combined global capacity of 386 million tons per annum (mtpa) aims to shift focus to faster growing emerging markets in Africa and Asia where cement demand is booming.

“By the end of 2016 we will have completed the integration,” LafargeHolcim Chief Executive Eric Olsen said in a conference call in Zurich. “Within 1,000 days we will realise the full synergy potential.”

LafargeHolcim Ltd was launched after making its debut on the Swiss and Paris stock exchanges on Tuesday, and has a market capitalisation of roughly 41 billion Swiss francs.

The merger created a company with combined sales of 33 billion francs and operations in 90 countries.

About 60 percent of the new firm’s 2014 pro forma sales came from emerging markets including Nigeria.

Africa recently overtook China and India to emerge as the world’s fastest growing cement market.

Cement consumption in China, the world’s largest cement market, has decelerated markedly over the past two years and is poised to decline further in 2015, according to Africa focused frontier market research firm, DaMina advisors.

African economies are expanding fast (IMF expects 5.4 percent GDP growth for the SSA region in 2015) however there is often inadequate infrastructure to keep pace with that growth.

The cost of addressing Africa’s infrastructure deficit is estimated to be approximately $90b every year for the next decade, with spending needed for new investments in roads, bridges, dams, seaports, airports and other major structures that use a lot of concrete, according to data from consulting firm Ernst and Young.

Lafarge Africa listed in Lagos is the African subsidiary of LafargeHolcim.

Lafarge SA, in June 2014 combined its Nigerian and South African assets to form a new company (Lafarge Africa) with cement production capacity of 12 million metric tons and combined revenue of $1.03 billion (N205.8 billion) in 2014.

Sub – Sahara Africa cement consumption rose by 6.8 percent in 2014, compared with 5.2 percent in India, 3.5 percent in China, 6.4 percent in North America, and 3.7 percent in South Asia, according to data from global cement report, Morgan Stanley and DaMina Advisors.

Lafarge Africa reported fully diluted EPS of N1.84 for the first quarter of 2015, revenues were up 15 percent year on year (YoY), while cash generated from operations improved 7 percent to N14.6 billion.

“We remain positive on its outlook as the defective units return to service, and the Nigerian market resumes its growth trajectory following the recent elections,” Roy Mutooni, an analyst at Renaissance Capital said in a May 11 note.

Lafarge Holcim says it expects 6 percent compound annual growth rates CAGR for global construction outputs until 2025.

Holcim and Lafarge will present their half year results as standalone companies later this month and report their first results as a combined company at the nine month stage later this year.