Release Date: July 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Holcim Ltd (HCMLF, Financial) achieved record profitable growth in H1 2024, with EBIT up 12.7% in local currency and 8.1% in Swiss francs.
- Net sales grew by 1.6%, and the company achieved a record recurring EBIT margin of 23.2%.
- Earnings per share increased by 10%, and the company completed 11 acquisitions and four divestments in H1 2024.
- Significant progress was made in sustainability, with a 7% reduction in CO2 per net sales and the publication of the third climate report.
- Strong performance across all regions, with North America, Latin America, Europe, and Asia and Middle East Africa all showing EBIT margin growth.
Negative Points
- Organic sales growth was flat, indicating some challenges in driving growth without acquisitions.
- Softer volumes were experienced, particularly in the US, due to weather conditions.
- FX headwinds impacted results, although less than in the previous year.
- The ready-mix concrete segment was affected by weather conditions, leading to a decline in margins.
- Concerns about the deceleration in organic growth in the solutions and products segment, particularly in Q2.
Q & A Highlights
Q: Can you talk a little bit more about solutions and products? There's a notable deceleration in the organic growth in the business in the second quarter. How do we think about growth in that business into the second half? Can you deliver double-digit organic growth?
A: Pricing is resilient across all our markets. We have moved to dynamic pricing, which means more frequent price increases. Our roofing business continues to grow, and we are sold out in some of our factories in the US. We have seen a significant increase in net sales and recurring EBIT. We will see accelerated growth in H2 in roofing in the US. (Miljan Gutovic, CEO)
Q: Can you talk about your intentions around price increases for your heavy side businesses in Europe and in the US as we move through the second half of the year?
A: Pricing is resilient across all our markets. We have moved to dynamic pricing, which means more frequent price increases. We see potential to increase prices in selective markets in certain countries. (Miljan Gutovic, CEO)
Q: A couple of questions on the demolition materials, 10 million tons target. I'm trying to get a sense of the revenue and margin opportunity. Is there a change in the mix? And does the 20 million tons by 2030 CHF800 million revenue still stand?
A: Circularity is the biggest opportunity we have at the moment. Our EBIT margins on these products are currently higher than 15%, and we are using recycled construction and demolition materials in cement, ready-mix, asphalt, and to replace primary aggregates. The margins will continue to increase driven by upcycling of these products. (Miljan Gutovic, CEO)
Q: Your full year sales guidance seems to have reduced. Are you disappointed by underlying volume trends across your markets?
A: We are not losing market share. We had some softer conditions due to weather in the US and other markets. Our main focus is on our sustainable building solutions where we are getting pricing premium and continue to grow in these products. (Miljan Gutovic, CEO)
Q: Can you give us a sense of what happened in H1 and where you see this going in H2 in terms of potential outlook for the Solutions & Products segment?
A: Roofing is the key product range in Solutions & Products. We also have a presence in mortar specifically in Europe and some precast businesses globally. Roofing will continue to grow, and we see enormous potential to increase our market share and geographical footprint across Europe and outside Europe. (Miljan Gutovic, CEO)
Q: Can you discuss if there are any differences between traditional cement products and ECOPact/ECOPlanet in Europe?
A: Pricing in Europe has been resilient. We have moved to dynamic pricing, and there are opportunities to increase product prices in certain markets and business segments. We are delivering superior value for our customers with ECOPact and ECOPlanet, and we are getting pricing premium for these next-generation building products. (Miljan Gutovic, CEO)
Q: Can you give us some insights about how you see residential cycle and residential demand in Europe?
A: Europe is a region with the highest growth in EBIT. Some residential markets might be softer, but we see a good pipeline of projects in infrastructure and renewable energy transitions. We are focusing on building wind farms and solar parks across Europe. (Miljan Gutovic, CEO)
Q: Can you provide more details on the drivers behind the significant margin expansion in Q2?
A: Our margin expansion is driven by scaling up sustainable building solutions, including roofing, ECOPact, and ECOPlanet. We are also advancing initiatives in decarbonization and circularity, and our M&A strategy is helping by acquiring companies in attractive markets and segments. (Miljan Gutovic, CEO)
Q: What are the main barriers to increasing the penetration rates of low-carbon products further?
A: We are making great progress and continue to scale up sustainable building solutions. ECOPact is now 28% of our total ready-mix sales. This opens the door for innovation, and we aim to be the fastest in capturing this growth. (Miljan Gutovic, CEO)
Q: Can you provide an update on the US listing?
A: The US listing is progressing well and will happen in H1 next year. We have a dedicated team working on it, and we are pleased with the progress. (Steffen Kindler, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
