© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, welcome to the Q3 2018 results media conference call. I'm Nirvana, the Chorus Call operator. [Operator Instructions] And the conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Eike Christian Meuter. Head of Media Relations. Please go ahead, sir.
Good morning, ladies and gentlemen. Welcome to LafargeHolcim's Q3 media conference call. I'm here today with our CEO, Jan Jenisch; and our CFO, Géraldine Picaud. As usual, we'll start the call with a brief overview of our results and then open the line for Q&A. And over to you, Jan, now.
Yes, good morning, everyone, and thank you for joining our call. I'm very excited to speak to you as we have very strong results in the third quarter. The -- I think it's the first time now we see the results of our Strategy 2022, and we had a strong top line growth of almost 6% and then an overproportional growth in operating profit of more than 8%. I'm very pleased with the results.When you look at the growth, you'll see that it doesn't come from 1 area, but we could grow it across all 4 business segments. So we have strong growth in Cement, but also in Aggregates, Ready-Mix Concrete and our new forced segment of Solutions & Products. Very good to see. Our new strategy is about growth, and we are now starting to deliver. We have also completed another 3 bolt-on acquisitions in the third quarter in the U.S. and in France, and this will further add to our momentum for the future.For the results, I'm very pleased that we show an overproportional improvement in the bottom line. This is the fundamental of our strategy to grow top and then over proportional growth in the bottom line. You see, we made a lot of progress. Our cost-saving program is ahead of target. We have already our new operating model of lean -- leadership direct reporting lines from the countries to the group and also closing down -- our corporate sites in Miami, Singapore is already closed. Now we have our action plan for Paris and Zurich, both locations will be closing beginning of the new year.We also see that the performance in Aggregates and Ready-Mix Concrete is now improving also margin wise. So very pleased with the progress we have seen there.On the financial side, our divestment plan is on target. So hopefully in the near future, we are able to make some announcements, how we will do that CHF 2 billion of divestments. We have refinanced CHF 1.3 billion of our debt giving us a very good debt profile and also with significant savings on financing cost. And last but not least, we have our organization in place. Our team is in place, and we are, I think, in a very good position here to continue the momentum into the quarter 4, but also for the years to come. Our outlook is positive. You will see the continued growth both on top and bottom line for the fourth quarter of the year. And I'm very happy to see that despite the steep cost inflation we have from energy and other areas, which is maybe the steepest increase you have seen in recent years, we were able to handle that through our volume growth and our efficiency programs that we have been successfully doing that in the third quarter, and I expect this to continue also into the future. I think with this, I'm happy to have your comments and questions. We have Géraldine, our CFO, here. So I think it's the best if you ask your specific questions around our results of the third quarter.
[Operator Instructions] The first question from the phone comes from the line of Mara Bernath with Bloomberg.
You said you will give an update too and so you will announce more on the disposals before the end of the year. And maybe if you could give some geographical narrowing and whether it's 1 big one or several small ones?
Yes, thank you for the question. I wish I can give you more details, but it's currently in the making. So we have to be a bit more patient. We have the original divestment target to be achieved in the course of the Q1. And I'm hopeful we will have some announcement, but nothing I can talk about as of today.
The next question from the phone comes from John Revill with Reuters.
Couple of quick questions. Are you -- also talk about some trade tensions with China and the U.S. and to -- plus spillover effect. Are you seeing any kind of slowdown in kind of -- or any risks affecting the building industry, affecting either the parts or whole sum as a result of this? So we see any of that materializing yet? That's my first question. And then the second one is just M&A. I mean, you've made 3 small deals so far, Jan. Are there any more in the pipeline? Or what's the sort of strategy moving forward there, please?
All right. Okay. I think on the global trading, so I think I have 2 positive answers for your question. So firstly, we don't see a slowdown. So our orders book are well filled. So we will see some good volumes in the U.S., in Europe, of course in Asia, stabilization in Africa, Middle East. So we don't see a slowdown from that angle. Then in principle, our products are produced locally, so our cement, our concrete, our aggregates are produced in more than 2,300 sites, which means I have very, very little transfer of goods across borders. So whatever happens from that, I mean, I hope we don't get a trade war, probably not be good for the global economy. But from a product standpoint, for us, it doesn't make a difference. It may be even increase of the pricing power so that the markets...
Okay. And on the M&A?
Yes, I think we have announced in March that the bolt-ons are part of our growth plan. And very happy to see that we gain -- so much of the momentum from the bolt-on that come from local market. So we have quite a pipeline of projects. So you can expect us to continue in about the same speed into the future.
Your next question from the phone comes from the line of [ Gareth und Frederik ] from NZZ.
I would like to know more about -- you said, the steepest inflation. Can you say that which raw materials are concerned? And if you compare that with a bit little long term, can you say more -- something about that?
Yes. So we are, I think, affected by very general trends in global pricing. So you have energy cost. If you see the crude oil, that was even above $80 for some time in the third quarter. You see the -- so the energy cost are rising, but you also have logistic cost, which is partly fuel impacted, but also you hear a lot of situations in countries where truck drivers are in a not sufficient supply there and in other areas. So we have quite some increase in logistic cost, which actually we can handle very well. It's maybe even an advantage for us as our products are priced, including logistics. Then -- but you have other areas, third parties, packaging, services and so on. I would say maybe it's fair to say that overall, the economy is running at quite a strong capacity level. So you see price increases in a lot of areas. I think the good news is, we have seen this coming for this year. So we announced already last year, beginning of this year that this would be our challenge, and I'm very happy to see that our people are on the spot and we are able -- through efficiency programs, through extra efforts in the buying departments but also through strong pricing of our products that we were able to overcome these cost challenges. In the third quarter, I expect it to continue. I think, again, the percentage rise in cost was maybe the steepest in recent years. Now I think it will remain a challenge, but I think we are in a good position to handle.
[Operator Instructions] The next question from the phone comes from Johannes Ritter, FAZ.
Your positive judgment on how things are running is not quite reflected in your performance at the stock exchange. Your share lost 24% since the beginning of the year, whereas TSMI only was 7%. What's your explanation for this? And do you feel rising pressure from your shareholders?
I think -- first of all, I think it looks like it's a great time to buy the stock. And of course, your observation is correct. I think in general, if you look at building material stock, so from cement, but also to other building material, you will see that there was a big meltdown in the share price. That's totally correct. And you will find that we are actually among the lowest -- we have the lowest meltdown in share price, but nevertheless uncomfortable. But I think there were concerns about the cost inflation, concerns about emerging markets, volatility and all this. And I think we can prove with the third quarter results that this is not really applying to us or affecting us. So let's see. But I try to make this a great company going forward, growing top and bottom line, and investor side is decided by the investors. So this is nothing. I will never debate about share prices too low or something. I think we will see how our results are appreciated and -- also going forward.
So you have the impressions that your main shareholders are still calm and not getting nervous?
No. I think when you look at the -- at what we have started in the last 12 months is the new strategy and how -- I mean, what a high speed we implement now. And now you see -- for the first time, you see the results. I would say, my key shareholders are very pleased. We are fully aligned. I have a great board here in the company. I have all the support we need.
The next question from the phone comes from [ Charles Amman ], [ Radio SRF ].
I was wondering whether rising carbon cost in European Emission Trading are of any -- are a topic for you?
I think the reduction in CO2 is one of our main targets. And I think it's a huge opportunity for us. We want to be at the front of reducing CO2 with the newest manufacturing technology, but also with the best concrete products, with the best building materials, reducing the CO2 footprint. So it's a challenge. It's right. I think, for us, it's rather an opportunity to have innovation and to make something good out of it. So I am not concerned. We have a strong action plan in the company, how to lower it. Fully compliant of following the European Union regulation. And we try to be better than others.
So you're not concerned that -- I mean, I read Moody's study recently, which was anticipating that earnings could be down by 20% or something like that. You're not concerned about that?
All these experts, what they don't see is, such a change is always an opportunity for the good ones. To give you an example, in China, in the last 2 years, the government has implemented very strong policies for emission and CO2 reduction. And we have achieved amazing results. Our manufacturing lines are the cleanest. We have really benefited. The cement price went up significantly in China. So and we were able just to be among the winners and to be a part of the solution and not part of the problem. If someone tells, like if the European scheme, there's a 20% minus in profit, only 10% of our profit is concerned about this regulation in Europe. So from the mathematical viewpoint, already, it doesn't make sense. And -- but again, without losing sight here or too much detail, we have a great opportunity with CO2, and I'm very excited now to execute a very strong action plan.
[Operator Instructions] We have a follow-up question from Mr. Revill from Reuters.
Could you just give us some more clarification on the drivers issue in terms of where are you actually facing a lack of drivers? And what's the kind of financial impact there then? Does that mean you have to pay higher wages then?
Drivers for what, John? Sorry.
You said, in different -- you're facing a lack of drivers.
Okay.
And as on where was that happening geographically? And then -- and now it was leading to inflation. Was it -- does that mean you have to pay higher wages then to get the drivers then? Or what the mechanics there?
I tell you one thing we've done. If logistic cost arising, it's actually a good thing for us because it gives us more pricing power. Our heavy materials beneath transportation is big part of it. But actually, transportation is an issue, it's good for us. So it's not a challenge like maybe for other industries because I'm only a local supplier. I produce locally, I supply locally. So logistic cost is not an issue. Now regarding the drivers, I think, maybe the biggest shortage at the moment is in the U.S. They are a big part. And as you say, it has to be regulated by the salaries, and I'm sure, the U.S. market will balance this off. But it didn't cost us any volume, by the way. We're just observing base rise in logistic cost. So we have to make sure we charge the right pricing for our logistic services to the customer. We have other areas. I was in Romania the other day, and it's amazing in Romania. They have maybe the biggest lack of drivers because they -- wherever is the driver, they go a lot to drive in the European Union because of maybe higher salaries. So there are now programs to have more women driver in Romania because they like to -- they don't like to be away from home. And so there's a lot of efforts in the mid-run. It's not a problem, it's just a observation that logistic cost are rising and has to be addressed. What I'm proud of this year is that our people have addressed the logistic cost with the pricing in a very timely manner.
But the costs are actually rising in logistics because you actually are having to pay the drivers more to get the drivers because of the shortage. Is that the mechanics that are happening? You're paying -- haven't you pay higher wages now?
It depends from market to market. But, again, there's no alternative. Our product need to be transported and it's paid by the customer. So therefore, us, it's not like we are supplying now the product globally and we compete with the locally produced product. For us, logistic is fully taken care of by the customer. So you just have to be sure if there is an increase in wage or fuel cost, we make it in a timely manner.
Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Mr. Jenisch.
Okay. Thank you very much for joining. I look forward to see you in the near future. And pleased to have a good Friday. Thank you very much.
Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.