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Switzerland: Holcim has reported its first quarter of 2014 operating results, citing increased like-for-like sales and sales volumes in all of its business segments.
"Holcim reported a significant increase in operating profit during the first quarter of 2014, mainly driven by higher like-for-like cement volumes in all group regions and the continued strong momentum of the Holcim Leadership Journey coupled with strict cost management across the group," said Bernard Fontana, CEO of Holcim. "Margins continued to increase and cash flow from operating activities was also better than in the first quarter of 2013."
Consolidated cement sales increased by 2.9% to 33.0Mt in the first quarter of 2014. This positive development was mainly attributable to Europe, where France, Germany and Russia reported the strongest increases. Net sales reached Euro3.35bn, a fall of 5.4% that was mainly influenced by negative currency effects. On a like-for-like basis net sales were up by 7.8%. Consolidated operating earnings before interest, taxes, depreciation, and amortisation (EBITDA) decreased by 5.1% to Euro507m but grew by 10.1% when adjusted for foreign exchange effects and changes in consolidation. Driven by higher sales, most European group companies reported higher operating EBITDA, while North America, the Middle East and Africa recorded better operating results.
Operating profit was Euro242m, an increase of 9.3%. On a like-for-like basis the growth in operating profit reached 28.4%. Net income, which in the first quarter of 2013 benefited from the sale of a 25% stake in Cement Australia, decreased by 39.5% year-on-year and reached Euro147m. Adjusted for this transaction in 2013 net income was up by 19.6%. Net income attributable to shareholders of Holcim Ltd was down by 57.5% to Euro65.6m. Cash flow from operating activities, which is traditionally negative in the first quarter, improved by 24.9% and reached negative Euro199m. Over the last 12 months Holcim reduced its net financial debt by Euro589m from Euro8.86bn to Euro8.20bn.
As part of the Holcim Leadership Journey, the company continued to optimise its portfolio in the first quarter of 2014 and sold its activities in French Guyana and acquired a port facility in the Philippines. Holcim has made progress with its plans to further optimise its strategic portfolio in Europe, having secured approval for the transaction with Cemex in the Czech Republic and is awaiting the decision on the other parts of the transaction. For the planned streamlining of the ownership structure of its Indian operations, Holcim has received approvals from the High Courts in Delhi and Gujarat and is now awaiting final approval from the Foreign Investment Promotion Board.
On 7 April 2014, Holcim and Lafarge announced their intention to combine the two companies through a merger of equals, which was unanimously approved by their respective board of directors and fully supported by the core shareholders of both companies. After a strategic optimisation of the portfolio through a proactive divestment process in anticipation of regulatory requirements, LafargeHolcim would occupy complementary positions. The proposed combination would be structured as a public offer filed by Holcim for all outstanding shares of Lafarge on the basis of a 1 for 1 exchange ratio and closing is expected in the first half of 2015.
For 2014 Holcim expects global economies to show another year of uneven performance. Construction markets in Europe are expected to have reached the bottom with slow recovery in sight. North American markets are expected to continue to benefit from a further recovery, especially in the United States. Latin America could continue to face uncertainties in Mexico but should overall show slight growth in 2014. The Asia Pacific region is expected to grow, although at a comparatively slower pace than experienced in recent years. Africa and the Middle East are expected to gradually improve. Holcim expects cement sales volumes to increase in all regions in 2014.
Lafarge faces price-fixing penalties 25 April 2014
Kenya: Lafarge could face penalties by the Competition Authority of Kenya (CAK) for suspected price-fixing. CAK has accused Lafarge of possible price-fixing owing to its cross-directorship in East African Portland Cement Company (EAPCC) and Bamburi Cement. Lafarge has a 41.7% stake in EAPCC and a 58.9% stake in Bamburi.
"Cross-shareholdings such as these are widely recognised to dampen competition," said CAK. "Even passive shareholdings change the incentives to set prices, as some of the earnings from sales diverted to a rival are now internalised."
CAK is expected to rule in June 2014 as to whether or not Lafarge is culpable of having 'Unwarranted concentration of economic power.' If found guilty, CAK could force Lafarge to sell off its stake in one of the businesses. The Competition Act (No 12 of 2010) also stipulates that Lafarge directors, if found guilty of price fixing, could be forced to pay up to US$115,000 in fines or serve five-year jail terms.
The report comes four months after the Kenyan government, which together with the National Social Security Fund (NSSF) has a controlling stake of 52.3% in EAPCC, accused Lafarge of attempting to destabilise the cement maker to protect its interests in Bamburi. Lafarge countered that its minority stake in EAPCC is insufficient to exert control over the firm. They added that EAPCC is a genuine competitor of Bamburi Cement and that Lafarge stands to lose if it were to destabilise EAPCC.
The director-general of CAK, Kariuki Wang'ombe, stated that the current shareholding structure is not good for fair business. "Cross-directorship could lead to price-fixing since this creates a position where a competitor is privy to the strategic decisions of another competitor. However, it is not conclusive that there is price-fixing going on," said Wang'ombe.
Two executives at China Resources detained 25 April 2014
China: According to local media, Chinese authorities have detained two senior executives at units of China Resources Holding as the chairman of the state-run conglomerate, Song Lin, is being investigated for corruption.
Wang Hongkun, an executive director of China Resources Land and Wu Ding, chief executive of China Resources Capital Holdings, were detained. China Resources Land said that Hongkun had resigned due to personal health reasons.
China's top anti-corruption body said it was investigating Lin for a 'Serious violation of discipline.' Song has denied the allegations.
China Resources Holdings said that it had appointed Fu Yuning, a former chairman of China Merchants Group, as its new chairman.
Ukraine: HeidelbergCement Ukraine has appointed Wolfram Gaertner and Robert Breyer as supervisory board members for three years. In addition, Andrzej Balcerek, Klaus Schwind and Andreas Kern were re-elected as supervisory board members. At the same time, Ernest Jelito was removed from the supervisory board.
Spain: The European Commission (EC) has launched an in-depth probe into Cemex's plan to buy the Holcim's Spanish cement business. The regulator is due to make a decision on 5 September 2014.
The move follows an initial investigation, which revealed that the transaction could substantially harm competition in the Portland cement market in some areas of Spain. According to the regulator, the reduction in the number of rivals could prompt coordination between the remaining competitors, while the merged firm might control price levels in certain areas. The in-depth probe is intended to either confirm or reject the EC's initial concerns.
Under the deal, which was agreed in August 2013, Cemex will combine its cement, ready-mix and aggregates operations in Spain with those of Holcim and will hold a 75% stake in the enlarged firm. The transaction is part of several interconnected deals, under which Cemex will take over Holcim's operations in the Czech Republic, while offloading its western German operations to Holcim.
In October 2013 the EC also opened an in-depth probe into the deal in Germany, which remains unresolved. The transaction in the Czech Republic was approved by the local anti-trust watchdog in March 2014.