LafargeHolcim’s new CEO cuts unrealistic profit target

Thursday, 2 November 2017 00:11 - - {{hitsCtrl.values.hits}}

Zurich (Reuters): LafargeHolcim’s new boss Jan Jenisch lowered a key profit target last week, knocking its shares with his first public move since becoming chief executive of the world’s largest cement maker.

Jenisch, who took over as CEO last month after a scandal over payments to armed groups in Syria triggered the exit of Eric Olsen, said nothing was wrong but it would be tough to match the last quarter of 2016.

The Swiss company said it expected adjusted core operating profit to rise by 5-7% this year, down from a double-digit target set by Olsen which Jenisch said was too optimistic.

LafargeHolcim’s stock lost ground following the cut and were down 1.3% to 56.6 Swiss francs.

“We just have to realise the base effect from last year is a big challenge...and it’s not realistic to achieve double-digit in 2017,” Jenisch told reporters.

The new outlook follows a review of the business by Jenisch, which the former CEO of Sika said was still ongoing and which he would present with full-year results in March.

LafargeHolcim also lowered some of its assumptions regarding pricing and volumes for 2018, saying it expected an improvement in operating adjusted EBITDA of “at least” 5% in 2018, which meant it was abandoning its goal of achieving 7 billion francs in operating adjusted EBITDA in 2018, Jenisch said.

The target, which would have represented a 20% increase from the 5.83 billion francs for 2016, along with the double-digit goal for 2017, had been seen as ambitious.

For the third quarter, LafargeHolcim reported sales up 4.1% on a like-for-like basis to 6.94 billion Swiss francs ($ 6.95 billion), matching analyst estimates in a Reuters poll.

Operating EBITDA of 1.75 billion francs rose 5.9% but was slightly below expectations, rising by 9.2% on a like-for-like basis.

“We were not expecting Jenisch to move so quickly here which suggests to us that the gap between previous management’s guidance and reality was far greater than we expected,” Bernstein analyst Phil Roseberg said.

LafargeHolcim said that it was in talks with the board of Pretoria Portland Cement regarding a possible transaction in Africa, although Jenisch declined to give further details.