ZURICH (Reuters) - A record-high Swiss franc and soaring raw material and energy costs pummeled cement maker Holcim’s <HOLN.VX second-quarter net profit, sending its shares sharply downwards.
Holcim is struggling to offset higher coal, diesel and oil prices, which increase production and transportation costs, and is suffering from a sluggish construction recovery in North America, and high inflation in emerging markets such as India.
The franc, which has hit one record after another against the euro and dollar in the past six months, has hurt profits at several Swiss companies, among them pharma giant Roche ROG.VX and chemicals maker Clariant CLN.VX.
The group said cost cuts and further price rises should put it on track to achieve like-for-like operating EBITDA (earnings before interest, tax, depreciation and amortization), which strips out the currency impact, at a similar level to last year.
Rivals Lafarge LAFP.PA and HeidelbergCement (HEIG.DE) also posted disappointing earnings after price rises failed to offset a surge in energy and raw material costs.
Holcim’s net profit after minorities fell 13 percent in the second quarter, missing expectations in a Reuters poll and sending the company’s shares down 5.3 percent at 4:26 a.m. EDT. The STOXX Europe 600 Construction & Materials index .SXOP fell 2.5 percent.
“Higher production and transportation costs could not be compensated for sufficiently through price increases,” ZKB analyst Martin Huesler said. “More price increases are necessary.”
Holcim, the world’s second-largest cement maker, raised prices by 3.6 percent in the second quarter, and Chief Financial Officer Thomas Aebischer said further increases were planned.
“We’re going to have to keep raising prices to balance out cost inflation,” Aebischer told a conference call.
Operating EBITDA fell in all regions, despite a 2.6 percent increase in sales volume, as currency headwinds wiped out gains.
Some analysts pointed out that although Latin America and Asia drove up the company’s top-line performance, they dragged down profitability as cost inflation and currency effects weighed on margins.
Holcim has hardly sold any C02 emissions certificates so far in 2011, which also hurt results.
($1 = 0.793 Swiss Francs)
Additional reporting by Silke Koltrowitz; Editing by David Cowell and David Hulmes