August 24, 2010

Government austerity programs will impact infrastructure, Holcim says

ZURICH

Holcim, the world’s second-biggest cement maker, warned government austerity programs would limit infrastructure spending in the months ahead.

Cuts to government spending in Europe and North America, which together accounted for 42 per cent of net sales in the first half, are hitting demand there, the company said.

Pricing pressure in countries such as Spain and Italy coupled with government austerity schemes prompted concern that gains from emerging markets would be offset even as Asia, Latin America, Africa, and the Middle East do well.

Holcim said it would focus on containing costs to insulate its bottom line, but the market was skeptical. Holcim’s first-half net profit fell 37 per cent to 331 million Swiss francs ($335 million) following a 186 million franc charge for restructuring operations in North America to save on local taxes.

Infrastructure companies have benefited from government stimulus packages but state budget belt-tightening is set to weigh on earnings in the sector.

Top cement maker Lafarge last month reported falling first-half sales and profits and cut its 2010 estimate for cement demand given the uncertain pace of economic recovery.

REUTERS

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