LafargeHolcim's higher
payout fails to cheer investors
Send a link to a friend
[November 18, 2016]
By John Revill
ZURICH
(Reuters) - Building materials group LafargeHolcim <LHN.S> lowered its
profit target for the medium term on Friday, overshadowing its proposal
to increase its dividend by a third and buy back its own shares.
The world's biggest cement maker, created by a merger of France's
Lafarge and Switzerland's Holcim last year, announced plans for up to 1
billion Swiss francs ($993 million) in share buybacks and held out the
prospects for special dividends, part of an increased focus on
shareholder returns.
Chief Executive Eric Olsen said improved cash returns were a "key
promise we are making good on, it was at the core of the merger and one
of the things we are going to change."
But after an initial rally, LafargeHolcim stock slipped back as concerns
about lower earnings guidance hit sentiment. At 1230 GMT the stock was
down 1 percent, although it is up around 8 percent over the year so far.
The company now expects to reach operating earnings before interest,
tax, depreciation and amortization of 7 billion Swiss francs by 2018,
down from the previous goal of "at least" 8 billion francs. Markets had
been expecting a reduction.
![](http://archives.lincolndailynews.com/2016/Nov/18/images/ads/current/charrons_bch041713.png)
"The company has quite clearly reduced its operating targets at the
EBITDA level and also said it expects free cash flow to be lower," said
one Zurich trader.
"On the other hand the management wants to win favor by increasing the
dividend and buying back shares. It seems the first concern has a higher
weighting at the moment."
LafargeHolcim said the cut to its outlook reflected a spate of sell-offs
since the merger, which has seen it exit countries such as Chile and
Vietnam, as well as the impact of unfavorable currency movements.
Olsen said he was confident about reaching the lower target identifying
an improvement of up to 1 billion francs in operating EBTIDA as subdued
markets like Australia, Nigeria and Malaysia recovered.
[to top of second column] |
![](../images/111816pics/busine15.jpg)
The company's new logo is pictured at the headquarters of
LafargeHolcim in Zurich, Switzerland, July 15, 2015. REUTERS/Arnd
Wiegmann/File Photo
![](http://archives.lincolndailynews.com/2016/Nov/18/images/ads/current/graue_16_encore_110716.png)
Extra cost savings of 200 million francs and the remaining synergies
from the merger would also help, he said.
A potentially bigger prize could be the United States -- along with
India its largest market -- where president-elect Donald Trump plans to
rebuild the country's crumbling roads and bridges.
"The U.S. has under-invested in infrastructure for many years and we are
pleased to see that the topic is really coming on the table with
concrete plans," Olsen said.
"Between the commitments to increased funding of infrastructure projects
and increased residential growth we are very confident for the U.S.
going forward."
($1 = 1.0074 Swiss francs)
(Additional reporting by Rupert Pretterklieber; Editing by Michael
Shields/Keith Weir)
[© 2016 Thomson Reuters. All rights
reserved.] Copyright 2016 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
![](http://archives.lincolndailynews.com/2016/Nov/18/images/ads/current/mcentire_sda_FLYERS_2016.png) |