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Third quarter + outlook for 2003
1
Third quarter 2003
The key facts at a glance
Holcim is on track despite subdued demand in some regions and unfavorable exchange rates in most cases.Higher sales in all segments and revenues up in local currency terms.Improved margins and higher consolidated net income onthe back of productivity gains and cost savings.Stable results in Europe, unsatisfactory performance inNorth America, solid income in Latin America and better results in Africa Middle East and Asia Pacific.
Despite subdued economic environment Holcim remainson track .
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2
Third quarter 2003
Positions in Europe
Group:Cement plantGrinding plantTerminalParticipation:Cement plant
Cement capacity Group (Europe): 39.9 m t; additionally with partners: 9.9 m t.
3
Third quarter 2003
Slight recovery in the European construction sector in general.Activity remained buoyant in Southern Europe, particularlySpain and Italy.Decline in demand in Germanyand Switzerland.Reforming countries of Centraland Eastern Europe becoming noticeably stronger. Demand patterns also encourag-ing in the construction markets of Southeast Europe.
Europe
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4
Third quarter 2003
Europe: the facts
Acquisition of Cementos Hispania boosts Holcim Spain and underpins financial results.Buoyant construction activity in Southern and Southeast Europe brings higher sales volume in all three core seg-ments.Difficult sales situation in Germany and declining volume of demand in Switzerland adversely affect results.Operating profit for this Group region increases slightly dueto rising performance in Southern and Southeast Europe.Holcim to acquire Rohrbach Zement in first quarter 2004.
Continued exploitation of synergies will impact positivelyon our margins over the coming years.
5
Third quarter 2003
Positions in North America
Cement plantGrinding plantTerminalCement plant project
Cement capacity Group (North America): 21.3 m t.
4
6
Third quarter 2003
Subdued picture overall for the construction sector on this conti-nent.In Canada, the order situation in the construction sector remained healthy; the weather-related order shortfall at the start of the yearhas not yet been fully offset.In the US, volumes and prices declined in several market re-gions – such as Colorado and the Southeast of the country.
North America
7
Third quarter 2003
North America: the facts
Efficiency-improvement program set in train by new manage-ment is having a positive effect.The Holly Hill plant successfully commissioned by Holcim US at the end of June will contribute to lowering costs.The weak state of the US market adversely affected theresult of Holcim US.St. Lawrence Cement benefited from the healthy order situation in Canada, though it was unable to fully offset demand-induced setbacks in the Northeast of the US. Together with the sharp fall in the value of the dollar, oper-ating profit for North America was unsatisfactory in overall terms.
Programs to reduce costs accorded top priority.
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8
Third quarter 2003
Positions in Latin America
Group:Cement plantGrinding plantTerminal Participation:Cement plant Grinding plantTerminal
Cement capacity Group (Latin America): 31.0 m t; additionally with partners: 9.9 m t.
9
Third quarter 2003
Positive and negative develop-ments in Latin America more or less cancel each other out.Brazil continued to prove resistant to crisis.Political instability hampered developments in the Venezuelan economy.The market in Argentina stagedan unexpectedly strong recovery, while construction activity alsogrew in Chile and Mexico.
Latin America
6
10
Third quarter 2003
Latin America: the facts
Pleasing sales figures for Mexico, the Caribbean and Chile.Marked increase in sales at Minetti in Argentina.Holcim Brazil holds up well in a market that is in need of a fresh boost.Increase in deliveries of cement and ready-mix concrete;fall in demand for aggregates.Major progress on productivity in all areas.Sharp increase in regional operating profit in US dollars despite poorer operating situation in Venezuela. Latin America remains the Group’s strongest region interms of operating profit.
Strong presence in key markets gives us optimism.
11
Third quarter 2003
Positions in Africa Middle East
Cement capacity Group (Africa Middle East): 12.9 m t; additionally with partners: 6.3 m t.
Group:Cement plantGrinding plantTerminal Participation:Cement plant Grinding plantTerminal
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12
Third quarter 2003
Very positive market develop-ments in Africa.Morocco and South Africa proved to be the main growth drivers.In Lebanon and West Africa the market situation continued to be strained.Despite persistent pressure on prices, the market situation in Egypt has stabilized slightly.
Africa Middle East
13
Third quarter 2003
Africa Middle East: the facts
Significant increase in volumes in core segments of cement and ready-mix concrete; fall in the case of aggregates.Higher cement deliveries in Egypt, Madagascar, La Réunionand Morocco in particular.Regional uncertainties hit performance of group West Africa.Good results in South Africa and Morocco leading to higher operating profit in this Group region.Holcim Lebanon acquiring grinding facility in northernCyprus.
From a Group perspective, this region has gained further significance .
8
14
Third quarter 2003
Positions in Asia Pacific
Group:Cement plantGrinding plantImportant terminalGrinding plant projectParticipation:Cement plantGrinding plantImportant terminal
Cement capacity Group (Asia Pacific): 36.0 m t;additionally with partners: 14.6 m t.
15
Third quarter 2003
Further increase in construction activity in this Group region.In Vietnam, Malaysia and New Zealand, cement demand remain-ed very impressive.Volume increases also achievedin the Philippines, Thailand and Indonesia.The potential demand in housing construction and the infrastructure sector remains huge.
Asia Pacific
9
16
Third quarter 2003
Asia Pacific: the facts
Slightly higher cement sales in the Philippines almostentirely due to consolidation changes.Successful integration of PT Semen Cibinong in Indonesiaand correspondingly improvement in financial results.Substantially higher operating profit also being generated by the Group companies in Thailand, Australia and New Zealand.The plants in Vietnam are operating at full capacity dueto high demand; expansion of cement capacity in Ho ChiMinh City proceeding in line with schedule.Operating profit for Group region Asia Pacific grew markedly despite negative exchange rate fluctuations.
This Group region continues to offer enormous future potential for the construction industry.
17
Third quarter 2003
The Group is strengthening market integration and buildinga new, cross-border cluster .
Strategic transactions strengthen core business
Cement Australia was included in the consolidated accountsfor the first time in the third quarter. It is the market leader on that continent and benefits from optimal distribution channels. The bleak order situation in Germany and Switzerland is resulting in capacity adjustments. The Geisingen plant in southern Germany and Morbio grinding facility in Ticino/ Switzerland are to close. Eternit AG, based in Niederurnen, has been sold and is no longer consolidated. BA Holding AG of Baar is to continue using the Eternit brand name.These transactions will mean a total charge of CHF 40 million to the consolidated accounts for fourth quarter 2003.
10
18
Third quarter 2003
Key financial figuresFull Year
2002 2002 2003 in CHF in loc. curr.
Net sales 13'010 9'928 9'395 -5.4% 1.1%
Operating profit 1'903 1'559 1'550 -0.6% 8.1%
Operating EBITDA 3'341 2'616 2'537 -3.0% 5.2%
EBITDA 3'399 2'719 2'597 -4.5% 3.0%Group net incomeafter minority interests 506 514 518 0.8% 8.2%Cash flow fromoperating activities 2'388 1'732 1'527 -11.8% -4.9%
EPS in CHF 2.59 2.63 2.65 0.8% 8.4%
Cash EPS in CHF 4.14 3.76 3.81 1.3% 7.7%
+/-Million CHF 9 Months
19
Third quarter 2003
Major changes in the scope of consolidation
Effective as at Cementcapacity
+ Novi Popovac, Serbia April 15, 2002 1.4 million t
+ Union Cement, Philippines, from proportionate to full consolidation October 1, 2002 + 2.4 million t
+ Cementos Hispania, Spain January 1, 2003 0.8 million t
+ Proportionate consolidation of Cement Australia (integration of Queensland Cement) June 1, 2003 –
– Baubedarf, Switzerland October 1, 2002 –
+/– Various smaller companies
11
20
Third quarter 2003
Exchange ratesStatement of incomeaverage exchange rates in CHF 9M 01 9M 02 9M 03 +/-1 EUR 1.52 1.47 1.51 2.7%
1 USD 1.70 1.59 1.36 -14.5%
1 African Basket (EGP, ZAR, MAD) 1) 1.29 1.00 1.02 2.0%
1 Asian Basket (AUD, NZD, THB, PHP) 1) 1.03 1.00 0.93 -7.0%
Balance sheetexchange rates in CHF 30.9.02 31.12.02 30.9.03 +/-1 EUR 1.46 1.45 1.54 6.2%
1 USD 1.49 1.39 1.32 -5.0%
1 African Basket (EGP, ZAR, MAD) 2) 0.96 1.00 1.04 4.0%
1 Asian Basket (AUD, NZD, THB, PHP) 2) 1.04 1.00 1.05 5.0%
1) weighted by net sales 9 months 20022) weighted by net sales full year 2002
21
Third quarter 2003
68.0 70.5
63.668.967.964.8
18.8 18.9 19.7
9M 2001 9M 2002 9M 2003
Sales volumes
Cement sales in million tAggregates sales in million tReady-mix concrete sales in million m3
+ 3.7% + 1.5%
+ 4.2%
+ 6.9% + 4.8%
+ 0.5%
12
22
Third quarter 2003
9'3959'92810'301
9M 2001 9M 2002 9M 2003
Net sales
Volume / price -12 -0.1% 39 0.4%Change in structure 319 3.1% 71 0.7%Forex movements -680 -6.6% -643 -6.5%Total change -373 -3.6% -533 -5.4%
Million CHF
23
Third quarter 2003
Net sales by region
Million CHF 3308 3343
21031844
25002136
853 9211286 1308
∆ 9M 02/9M 03 Volume/price
Change instructure
Currency Total
Europe -1.0% -0.2% 2.3% 1.1%North America -1.6% 0.0% -10.7% -12.3%Latin America -1.2% 1.0% -14.4% -14.6%Africa Middle East 8.8% 0.8% -1.6% 8.0%Asia Pacific 9.3% 3.7% -11.3% 1.7%Total 0.4% 0.7% -6.5% -5.4%
9 months 20029 months 2003
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24
Third quarter 2003
Latin America22%
AfricaMiddle East
10%
Asia Pacific14%
Europe35%
North America19%
9 months 2003
Net sales by region
25
Third quarter 2003
2'5372'6162'565
27.0%26.3%24.9%
9M 2001 9M 2002 9M 2003
Operating EBITDA
Million CHFMargin
Volume / price / cost 183 7.1% 82 3.2%Change in structure 53 2.1% 53 2.0%Forex movements -185 -7.2% -214 -8.2%Total change 51 2.0% -79 -3.0%
14
26
Third quarter 2003
2'5972'7192'747
27.6%27.4%26.7%
9M 2001 9M 2002 9M 2003
EBITDA
Million CHF Margin
- 1.0%- 4.5%
27
Third quarter 2003
1'553 1'559 1'550
15.1%15.7%
16.5%
9M 2001 9M 2002 9M 2003
Operating profitMargin
Volume / price / cost 132 8.5% 97 6.2%Change in structure -8 -0.5% 29 1.9%Forex movements -118 -7.6% -135 -8.7%Total change 6 0.4% -9 -0.6%
Million CHF
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28
Third quarter 2003
Operating profit by region
Million CHF 475 478
225179
603 593
201 208 118 151
9 months 20029 months 2003
∆ 9M 02/9M 03 Volume/price/cost
Change instructure
Currency Total
Europe -6.1% 4.4% 2.3% 0.6%North America -10.6% 0.0% -9.8% -20.4%Latin America 14.9% 0.5% -17.1% -1.7%Africa Middle East 7.0% 1.0% -4.5% 3.5%Asia Pacific 35.6% 2.2% -9.8% 28.0%Total 6.2% 1.9% -8.7% -0.6%
29
Third quarter 2003
Other income and financial expensesOther Income
Million CHF 2002 2003
Dividends earned 41 68
Financial income 14 2
Other ordinary income (expenses) 48 -9
Depreciation and amortization of non-operating assets -84 -62
Total 19 -1
Financial Expenses Net
Financial expenses -517 -431
Interest earned on cash and cash equivalents 47 43
Foreign exchange gain (loss) net 15 -8
Financial expenses capitalized 19 10
Total -436 -386
9 Months
16
30
Third quarter 2003
Group net income
773727 723
613
514 518
9M 2001 9M 2002 9M 2003
Before minority interests in million CHFAfter minority interests in million CHF
31
Third quarter 2003
Cash flow from operating activities
1'447
1'732
1'527
14.0%
17.4%16.3%
9M 2001 9M 2002 9M 2003
Million CHF Margin
17
32
Third quarter 2003
Cash flow statementMillion CHF Full Year +/-
2002 2002 2003
Cash flow from operating activities 2'388 1'732 1'527 -11.8%
Investments to maintain productive capacity and to secure competitiveness -843 -543 -510 -6.1%
Free cash flow 1'545 1'189 1'017 -14.5%
Expansion investments -409 -300 -323 7.7%
Financial investments net -245 -140 -483 245.0%
Dividends paid -358 -330 -335 1.5%
Financing surplus (requirement) 533 419 -124 -129.6%
9 Months
33
Third quarter 2003
FinancingMillion CHF Full Year +/-
2002 2002 2003
Financing surplus (requirement) 533 419 -124 -129.6%
Equity capital paid-inby minority interests -10 – –
Movements of treasury shares net -1 -5 4
Increase in financing liabilities 334 699 661
Equity component of convertible bonds 58 60 –
De(In)crease in marketable securities 16 -79 -22
Increase in cash andcash equivalents 930 1'094 519 -52.6%
9 Months
18
34
Third quarter 2003
Financial position
9'6959'4359'8259'1448'8579'260
94.2% 93.9% 94.3%
30.09.2002 31.12.2002 30.09.2003
Equity in million CHF Net financial debt in million CHF Gearing
35
Third quarter 2003
Outlook for 2003 I
Europe: further improvement at operating level against persistently difficult situation in German and Swiss markets.North America: it will be 2004 until the expected economic recovery and greater level of efficiency at Holcim US impact positively on this Group region’s operating result.Latin America: despite a mixed picture across the market, a very solid contribution to consolidated results is expected.Africa Middle East: income flow can be expected to remain stable.Asia Pacific: though the US economic situation has a major influence on these markets, our margins will increase.
Balanced flow of income between industrialized and emerging markets.
19
36
Third quarter 2003
An economic recovery in key markets would lead to clear improvements in results for Holcim in 2004.
Outlook for 2003 II
Assuming there are no fundamental changes in thegeneral framework in the final quarter of 2003, we canmake the following financial forecasts with regard to thefull financial year:
Margins will improve further on the back ofefficiency improvements.After adjusting for exchange rates, operating profitand consolidated net income after minorities willexceed the prior-year figures.