Cost inflation to rain on cement makers’ results

3 Min Read
Demand on cement has plummeted leading prices downwards during the past months. (AFP PHOTO)

Some of the world’s largest cement makers report first-quarter earnings on Thursday with investors concerned that energy and materials inflation will spoil the industry’s recovery.

Lafarge, the world’s largest cement maker, and major peers HeidelbergCement, Italcementi and Titan Cement will be closely watched by investors for signs that they can offset costs by hiking their prices.

“The operational results will be closely watched, but also balance sheet issues and restructuring will be in focus as some of these companies, such as HeidelbergCement, suffer from too much debt,” WestLB analyst Ralf Doerper said.

Holcim, the world’s second-largest cement maker, cast a long shadow on cement stocks on Wednesday after it missed first-quarter profit forecasts on high raw material and energy costs.

Mexico’s Cemex also reported a worse-than-expected loss last week, warning that the US residential sector had not been performing as it had expected.

Cost inflation has hit European cement makers just as they had started to see their sales recover on the back of a gradual improvement in residential construction in Europe and the first glimpses of a recovery in the US housing sector.

Seasonally adjusted production in the European Union’s construction sector rose 0.7 percent month-on-month in February, according to the latest figures from Eurostat.

The US construction sector also found momentum as the first quarter ended, with spending on projects up more than at any time in the last 11 months, driven by private residential and nonresidential outlays, a government report showed this week.

Infrastructure spending in developed markets has remained subdued by budget restraints. In emerging markets, public works activity is more robust, but western cement makers are under pressure to keep their prices low.

Irish building materials group CRH, the leading asphalt producer in the United States, on Wednesday warned of the impact of austerity measures on its business in debt-stricken Ireland, Portugal and Spain.

Exposure to Middle East and North Africa has also emerged as another issue for investors, particularly given the sizeable presence that Lafarge, Italcementi and Titan have in Egypt, which witnessed a revolution in the first quarter.


Share This Article
Leave a comment