August 5, 2010

Cement-makers Lafarge, Cemex post weak outlooks

FRANKFURT

European cement makers recently posted weak or opaque outlooks, adding to investor concern about the patchy recovery in global construction markets.

A lower outlook from world No. 1 Lafarge and a vague one from smaller peer HeidelbergCement was followed by No. 5 producer Italcementi’s forecast for an uneven recovery, all of which weighed on the sector.

France’s Lafarge cut its 2010 outlook estimate for demand in its global markets and posted underwhelming second-quarter results, while HeidelbergCement beat quarterly operating profit forecasts but gave a non-committal outlook. Italy’s Italcementi, the world’s No. 5 cement maker by output, then predicted an uneven recovery when posting a larger than expected fall in quarterly net profit.

HeidelbergCement repeated that it should grow faster than the overall economy this year and next.

“Lafarge was particularly unlucky in the regions where it has a relatively strong presence,” said Helvea analyst Patrick Appenzeller. He said that amid the French company’s strongest European markets were Spain and Greece, where construction activity was particularly glum due to austerity measures.

Government stimulus programs in North America are shoring up the building industry there and bolstered HeidelbergCement’s earnings, the German company said.

The region accounted for a quarter of first-half sales at HeidelbergCement. Lafarge derived only 18 per cent from North America and Italcementi just seven per cent.

Italcementi, which aims to expand in areas such as India and North Africa, said construction would remain lively in emerging countries and U.S. demand would pick up in the second half, while government austerity measures would hit Europe.

Construction activity in Europe is seen falling a further 3.7 per cent this year. 2009 marked the worst year in more than a decade with output down 7.5 per cent to 1.2 trillion euros.

Lafarge said it would limit investments to 1 billion euros to reduce debt.

Mexico’s Cemex the industry’s No. 3, recently cut its 2010 growth estimates after posting disappointing quarterly results as it struggled with bleak sales in the United States and Europe.

REUTERS

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