Holcim: Media release on third quarter 2010

Weaker demand for construction materials in the third quarter
As anticipated in the half-year report, the building materials markets suffered a setback in global terms in the third quarter of 2010, but many of the emerging markets – in which Holcim has a very good footing – continued to experience further strong growth. However, there were temporary challenges due to economic and seasonal influences, particularly in the US, Mexico, Eastern Europe and India. (Details on Group regions after the outlook)

Operating EBITDA declined only slightly
Operating EBITDA – the key operational performance indicator – declined only slightly in the first nine months of the year. The reasons for this decline are increased pressure on prices in important markets and a trend toward higher variable production and distribution costs. Holcim was severely affected by this in India. The onset of the monsoon – which was particularly harsh this year – prompted a slide in cement prices right across the country. In addition, ACC in India had to contend with delivery bottlenecks due to operational factors. In the third quarter especially, the price situation also worsened in Europe and the US. Encouragingly, price levels in Latin America and Group region Africa Middle East were generally stable or even slightly better. Mexico, however, suffered a further decline in volumes owing to market and weather conditions.

Holcim successfully managed factors it could influence directly. Despite the commissioning of around 5 million tonnes of new cement capacity in emerging markets, the Group succeeded not only in maintaining its fixed costs on a year-on-year basis, but reduced them further from quarter to quarter. Overall, total fixed cost reduction for the first nine months was CHF 188 million. This is the outcome of the major savings exercise conducted in all business areas and across the whole Group.

Like-for-like, the aggregates segment virtually matched the previous year's level. Thanks to the successfully integrated Australian company, activities could be expanded further.

Worthy of particular mention is the fact that a number of Group companies have achieved substantially better results in the current financial year. They include Holcim Canada, Holcim US and Holcim Brazil, as well as Ambuja Cements in India and the companies in Indonesia and the Philippines. A substantial contribution to the successful operating performance was made by the two Australian firms, which have been fully consolidated since October 2009. The broad-based strategy of geographic diversification therefore continues to prove itself to be an important cornerstone of the Group's success.

Consolidated cement deliveries increased by 3.7 percent to 102.8 million tonnes in the period to end-September. The biggest increases were posted by Ambuja Cements in India and the Group companies in Brazil and Thailand. Cement Australia was fully consolidated in this reporting period for the first time. Sales of aggregates were up 15.1 percent at 118.8 million tonnes, while for ready-mix concrete there was a rise of 13.2 percent to 34.4 million cubic meters. The increase in these segments was primarily attributable to the newly consolidated Holcim Australia. Sales of aggregates were down slightly on a comparable basis, and volumes of ready-mix concrete remained at the year-back level.

Operating EBITDA declined by 1 percent to CHF 3.6 billion. On a like-for-like basis, however, it fell by 6.7 percent. Negative factors included not only the trend in volumes, prices and costs, but also the weak euro and low US dollar exchange rate. In the aggregates business, margins slightly increased while decreasing in the other segments. Cash flow from operating activities reached CHF 2.1 billion, a fall of 6.3 percent. Net income was down 22.4 percent at CHF 1.2 billion and the share of net income attributable to shareholders of Holcim Ltd declined by 27.1 percent to CHF 875 million. The reduction in net income is explained not only by the poorer level of business but also by the previously reported one-off, cash-neutral tax charge in connection with the restructuring of the Group’s interests in North America in the first quarter of 2010.

Outlook
Apart from a few exceptions, prospects for the European construction markets remain subdued for 2010. Also in North America, little is set to change on the demand side. In both continents however, developments hinge to some extent on weather conditions for building work into year-end. The construction industry in Latin America is expected to remain robust in most cases – the exceptions being Mexico and Central America. The Group regions of Africa Middle East and Asia Pacific will continue to grow. In India, a rapid rise in demand for building materials is expected following the monsoon.

It will be challenging for the Group to reach previous year’s operating EBITDA.

Holcim continues to place a strong emphasis on strengthening its cost and environmental efficiency and competitiveness.

Contact
Holcim Hagenholzstrasse 85 CH-8050 Zurich Switzerland T.: +41 58 858 87 87 F.: +41 58 858 80 09