© Reuters. FILE PHOTO: A blast is pictured at a quarry of the cement plant of Holcim near the eastern Swiss village of Untervaz November 26, 2014. REUTERS/Arnd Wiegmann
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 first-quarter forecasts.
U.S. construction spending declined in February, data showed this month, as the housing market bore the brunt of aggressive interest rate hikes by the Federal Reserve in its battle against high inflation.
Other countries such as Britain have also seen downturns 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 annual sales to increase by more than 6%, up from a previous forecast 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,” Chief Executive Jan Jenisch said.
“I can just confirm for Holcim, all good, all in the right territory. We have volume growth, especially in Latin America and North America,” he told reporters.
Holcim, which competes with Mexico’s Cemex and Germany’s Heidelberg Materials, expects infrastructure and housing projects in North and South America to support demand, he said, although European demand has been soft.
Interest rates “have been rising since last year, this is not an issue for us,” said Jenisch, who expects an internal candidate to replace him as CEO when he becomes chairman next month.
Holcim’s first-quarter sales fell to 5.73 billion Swiss francs ($6.41 billion) from 6.44 billion, but beating the 5.66 billion 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 which analysts had forecast.
On a like-for-like basis, which cuts out the impact of divestments and currency swings, sales rose 8% and recurring operating profit increased by 12%.
Investors reacted positively to the outlook upgrade, with Holcim’s shares 2.4% higher in pre-market activity in Zurich.
“The fact that the company is already now upgrading its FY23 guidance indicates Holcim’s confidence on its project pipeline and pricing power,” said Bank Vontobel analyst Bernd Pomrehn.
($1 = 0.8933 Swiss francs)