LafargeHolcim, the world’s biggest cement producer, is confident that a rally will continue in emerging markets this year even as others see raw materials from oil to iron ore faltering.
Higher cement buying in countries such as India, Indonesia, the Philippines and Vietnam is offsetting slower growth in China, leaving LafargeHolcim CEO Eric Olsen optimistic about continued expansion in markets that represent about 55% of his company’s footprint.
“Our volumes in emerging markets are fantastic,” he said on Monday. “Things are growing and growing well throughout large parts of the world.”
While cement producers’ customers are similar to those buying steel, aluminium and oil, companies such as Zurich-based LafargeHolcim are protected from roiling seaborne commodities markets, said Krostoffer Inton, an analyst at Morningstar. Because cement is made and sold locally, its producers get the benefit of regional growth without the volatility of commodity prices.
“The China story only matters for cement in China,” he said. “It doesn’t affect your plants in Africa and the Middle East. Your plants in Latin America, your plants in North America are not affected by China.
Olsen has promised to sell $3.5 billion in assets this year to streamline the company’s portfolio and comply with regulators, while committing to an additional $1 billion of internal cost savings.
LafargeHolcim’s shares have tumbled 39% in the last 12 months amid slower growth in China and Brazil, key markets for the combined company.
“No one will debate that growth in the emerging markets will come at some point,” said Inton, of Morningstar. “At some point they will develop and they’ll need the cement. The bigger question is how long it will take.”
