Resilient Half-Year performance, full recovery in June

30 July 2020
 

? Early priorities on health measures for employees, partners and communities

? Resilient performance with net sales decrease 10.8% LFL, Recurring EBIT decrease 22.0% LFL

? Rapid execution of action plan “HEALTH, COST & CASH” delivering visible results

? Over-proportional cost decline vs volumes development in May and June

? Excellent free cash flow1 generation of CHF 749m (+198%), strong balance sheet and liquidity

? Further strengthening leadership in green construction

? Fast demand recovery with an encouraging outlook for second half of 2020

 

PERFORMANCE OVERVIEW

Group (in million CHF) H1 2020 H1 2019 ±% ±% LfL
Net Sales 10,693 13,059 - 18.1 - 10.8
Recurring EBIT 1,194 1,667 - 28.4 - 22.0
Recurring EBIT margin 11.2 12.8    
Net income2 347 1,009 - 65.7  
Net income before impairment and divestments2 501 769 - 34.8  
EPS 0.55 1.68    
EPS before impairment and divestments 0.80 1.28 - 37.1  
Free cash flow1 749 252 + 198  
Net financial debt 10,652 12,650 - 15.8  


Jan Jenisch, CEO: “I’m very proud of our teams’ rapid and agile response to the crisis since the beginning of January. We were quick to respond and take all necessary measures to protect the health of our people while supporting our communities, from donating materials to build emergency field hospitals all the way to supplying essential goods, touching the lives of over four million people around the world.

“Our half-year results demonstrate the great resilience of our business. I’m encouraged by our team’s agility to weather the storm with the rapid execution of our “HEALTH, COST & CASH” action plan, effectively driving cost savings ahead of expectations, improving net working capital and delivering record free cash flow1.

“The peak of the crisis is behind us. We expect a solid second half of the year based on June’s full recovery, the trend of our order book and upcoming government stimulus packages.

“As an essential sector to keep society running, we look forward to playing our part in driving the recovery. We are accelerating our sustainability efforts to ensure our green solutions are fully part of the recovery. I am confident LafargeHolcim will emerge stronger from this crisis.”
 

RESILIENT PERFORMANCE AND RECORD FREE CASH FLOW1

Net sales of CHF 10,693 million decreased by 18.1% compared to the prior year, of which 10.8% was on a like-for-like basis, reflecting the severe impact of the implementation of strict lockdowns of construction sites in several major operating countries. The strong appreciation of the CHF against all currencies accounted for 6.2% of the absolute decrease. Following the easing of the lockdowns, net sales in all five regions resumed prior-year levels by the end of June.

Recurring EBIT reached CHF 1,194 million, a decrease of 22.0% like-for-like for the half year. Swift implementation of the “HEALTH, COST & CASH” action plan helped to offset the earnings impact of the crisis.

Tax and financial expenses have continued to reduce, allowing net income2, to reach CHF 501 million.

Earnings per share3 were CHF 0.80 for the first half of 2020 compared to CHF 1.28 in the prior-year period.

Free cash flow1 reached a record CHF 749 million in the six-month period, up 198% compared to CHF 252 million in the first half of 2019.

Net debt amounted to CHF 10.7 billion as at 30 June 2020, down by 15.8% compared to CHF 12.7 billion as at 30 June 2019.
 

BUILDING A HEALTHIER WORLD TOGETHER
Since the beginning of the crisis, LafargeHolcim teams around the world have undertaken extraordinary measures to fight COVID-19 across their communities, touching the lives of more than four million people. Advancing access to health infrastructure for all, LafargeHolcim donated five million kilograms of material to build emergency field hospitals from Wuhan to Boston. Furthermore, the Group donated over two million relief and emergency kits, including personal protective equipment, food and water.

In the first half of 2020 LafargeHolcim achieved a number-one Environmental, Social and Governance (ESG) ranking in the construction materials sector out of more than one-hundred peer companies, according to ESG research and ratings agency Sustainalytics. Playing its part in a green recovery, LafargeHolcim is advancing its leadership in sustainable and circular construction, notably with the worldwide rollout of ECOPact, its green concrete. Further accelerating the transition to renewable energy, LafargeHolcim leveraged 3D printing in an innovative partnership with GE Renewable Energy and COBOD to build more powerful wind turbines.
 

OUTLOOK 2020
Based on the speed of June’s rebound, the company expects a solid second half of the year and anticipates for full year 20203:

  • Fast demand recovery with an encouraging outlook for the second half of 2020

  • Execution of action plan “HEALTH, COST & CASH” to continue ahead of targets

  • Free cash flow1 generation above CHF 2 billion

  • Debt leverage below 2x

  • Solid second half of the year expected  

 

KEY GROUP FIGURES

Group Q2 2020 2019 ±% ±% LfL
Net sales (CHFm) 5,400 7,099 - 23.9 - 17.0
Recurring EBIT (CHFm) 932 1,362 - 31.6 - 26.1
Recurring EBIT margin (%) 17.3 19.2    
 
Group H1 2020 2019 ±% ±% LfL
Net sales (CHFm) 10,693 13,059 - 18.1 - 10.8
Recurring EBIT (CHFm) 1,194 1,667 - 28.4 - 22.0
Recurring EBIT margin (%) 11.2 12.8    
Operating profit (EBIT) 1,005 1,581 - 36.4  
Net income2 347 1,009 - 65.7  
Net income before impairment and divestments2 501 769 - 34.8  
EPS before impairment and divestments 0.80 1.28 - 37.1  
Cash flow from operating activities 1,330 1,067 24.7  
Free cash flow1 749 252 198  
Net financial debt 10,652 12,650 - 15.8  
 
Group results by segment  H1 2020 H1 2019 ±% ±% LfL
Sales of cement (mt) 87.2 103.8 - 16.0 - 13.1
Net sales of cement (CHFm) 7,029 8,783 - 20.0 - 11.6
Recurring EBIT of cement (CHFm) 1,131 1,441 - 21.5 - 14.0
Recurring EBIT margin of cement (%) 16.1 16.4    
Sales of Aggregates (mt) 113.8 121.7 - 6.5 - 6.0
Net sales of Aggregates (CHFm) 1,699 1,907 - 10.9 - 5.5
Recurring EBIT of Aggregates (CHFm) 101 174 - 42.0 - 40.1
Recurring EBIT margin of Aggregates (%) 5.9 9.1    
Sales of Ready-Mix Concrete (m m3) 19.2 23.6 - 18.6 - 15.8
Net sales of Ready-Mix Concrete (CHFm) 2,103 2,595 - 19.0 - 12.3
Recurring EBIT of Ready-Mix Concrete (CHFm) - 47 13 - 475.6 - 617.4
Recurring EBIT margin of Ready-Mix Concrete (%) - 2.2 0.5    
Net sales of Solutions & Products (CHFm) 819 996 - 17.8 - 13.9
Recurring EBIT of Solutions & Products (CHFm) 6 39 - 84.0 - 94.9
Recurring EBIT margin of Solutions & Products (%) 0.8 3.9    
 

REGIONAL PERFORMANCE H1

Asia Pacific

The Asia Pacific region experienced the most severe COVID-19 related disruption yet delivered a resilient Recurring EBIT margin, led by India and supported by effective cost and price management as well as lower input costs. China delivered a full recovery over the second quarter with volumes closing at higher levels than in the prior-year period and activity was also resilient in Australia.

Asia Pacific H1 2020 H1 2019 ±% ±% LfL
Sales of cement (mt) 28.0 38.9 - 28.0 - 21.0
Sales of aggregates (mt) 13.1 13.3 - 1.4 2.2
Sales of ready-mix concrete (m m3) 3.6 5.2 - 31.0 - 16.4
Net sales to external customers (CHFm) 2,413 3,417 - 29.4 - 18.0
Recurring EBIT (CHFm) 437 682 - 35.9 - 29.6
Recurring EBIT margin (%) 18.1 19.9    

 

Europe

Results for the Europe region were impacted by COVID-19 with full recovery in June. Markets in Germany, Central and Eastern Europe were resilient. Strict lockdown measures in the UK and France impacted the performance of the region. Volumes suggest a V-shaped recovery in June for the majority of markets, except in the UK.

Europe H1 2020 H1 2019 ±% ±% LfL
Sales of cement (mt) 20.9 22.5 - 7.0 - 7.0
Sales of aggregates (mt) 51.9 57.2 - 9.3 - 9.2
Sales of ready-mix concrete (m m3) 8.3 9.6 - 14.2 - 14.6
Net sales to external customers (CHFm) 3,274 3,796 - 13.8 - 9.4
Recurring EBIT (CHFm) 288 408 - 29.4 - 26.2
Recurring EBIT margin (%) 8.7 10.6    

 

Latin America

The Latin America region showed an expanding Recurring EBIT margin amid COVID-19, with an especially strong contribution from Mexico. Performances in Ecuador, Colombia and El Salvador were significantly impacted by the pandemic. Most markets experienced a strong recovery in June.

Latin America H1 2020 H1 2019 ±% ±% LfL
Sales of cement (mt) 10.4 12.1 - 14.3 - 14.3
Sales of aggregates (mt) 2.2 2.0 7.8 7.8
Sales of ready-mix concrete (m m3) 1.6 2.5 - 34.7 - 34.7
Net sales to external customers (CHFm) 980 1,331 - 26.4 - 12.1
Recurring EBIT (CHFm) 275 358 - 23.0 - 12.0
Recurring EBIT margin (%) 27.9 26.7    

 

Middle East Africa

The Middle East Africa region showed resilient margins and recovery from the impact of COVID-19 by June. Volumes declined in Algeria, Egypt, Iraq and South Africa due to government restrictions and curfews. Ramadan in May slowed down the recovery in the respective countries. Nigeria delivered a resilient performance.

Middle East Africa H1 2020 H1 2019 ±% ±% LfL
Sales of cement (mt) 15.6 17.6 - 11.6 - 11.6
Sales of aggregates (mt) 1.4 3.4 - 60.1 - 60.1
Sales of ready-mix concrete (m m3) 1.2 1.9 - 35.7 - 35.7
Net sales to external customers (CHFm) 1,177 1,476 - 20.3 - 14.8
Recurring EBIT (CHFm) 137 193 - 29.3 - 27.0
Recurring EBIT margin (%) 11.5 13.0    

 

North America

The North America region delivered a remarkable performance with a Recurring EBIT up 20 percent for the first half of 2020 over the prior-year period on a like-for-like basis. This leading performance amid COVID-19 was largely due to fast and effective cost management in the US, partly offset by the impact of lockdowns in Eastern Canada and the economic challenges facing Western Canada due to a slowdown in the oil & gas industry.

North America H1 2020 H1 2019 ±% ±% LfL
Sales of cement (mt) 8.9 9.0 - 1.4 - 1.4
Sales of aggregates (mt) 45.2 45.7 - 1.1 - 0.6
Sales of ready-mix concrete (m m3) 4.5 4.4 2.7 1.5
Net sales to external customers (CHFm) 2,566 2,645 - 3.0 0.8
Recurring EBIT (CHFm) 260 225 15.6 19.7
Recurring EBIT margin (%) 10.1 8.5    

 

RECONCILIATION TO GROUP ACCOUNTS

Reconciling measures of profit and loss to the LafargeHolcim Group’s consolidated statement of income

Million CHF H1 2020
(Unaudited)
H1 2019
(Unaudited)
Net sales 10,693 13,059
Recurring operating costs (8,717) (10,658)
Share of profit of joint ventures 176 272
Recurring EBITDA after leases 2,152 2,673
Depreciation and amortization of property, plant and equipment, intangible and long-term assets (958) (1,007)
Recurring EBIT 1,194 1,667
Restructuring, litigation and other non-recurring costs (39) (71)
Impairment of operating assets (151) (14)
Operating profit 1,005 1,581
Million CHF H1 2020
(Unaudited)
H1 2019
(Unaudited)
Recurring EBITDA after leases 2,152 2,673
Depreciation of right-of-use assets 185 205
Recurring EBITDA 2,337 2,878
Million CHF H1 2020
(Unaudited)
H1 2019
(Unaudited)
Recurring fixed costs (2,922) (3,436)
Recurring variable costs (5,795) (7,222)
Recurring operating costs (8,717) (10,658)
Million CHF H1 2020
(Unaudited)
H1 2019
(Unaudited)
Net income 447 1,128
Impairment (143) (23)
Profit/(loss) on divestments (11) 265
Net income before impairment and divestments  601 886
Net income before impairment and divestments Group share 501 769

 

Reconciliation of the Free Cash Flow after leases to the consolidated cash flows of the LafargeHolcim Group

Million CHF H1 2020
(Unaudited)
H1 2019
(Unaudited)
Cash flow from operating activities 1,330 1,067
Purchase of property, plant and equipment (442) (647)
Disposal of property, plant and equipment 30 41
Repayment of long-term lease liabilities (169) (209)
Free cash flow after leases 749 252

 

Reconciliation of Net financial debt to the consolidated statement of financial position of the LafargeHolcim Group

Million CHF H1 2020
(Unaudited)
H1 2019
(Unaudited)
Current financial liabilities 2,736 2,862
Long-term financial liabilities 11,697 12,886
Cash and cash equivalents 3,736 3,045
Short-term derivative assets 14 29
Long-term derivative assets 31 25
Net financial debt 10,652 12,650

 

Non-GAAP definitions

Some non-GAAP measures are used in this release to help describe the performance of LafargeHolcim. A full set of these non-GAAP definitions can be found at the links on the right of the page.

 

Additional information

The analyst presentation of the results and our 2020 half-year report are available in the links to the right of the page.

The financial statements are based on IFRS can be found here

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ABOUT LAFARGEHOLCIM

LafargeHolcim is the global leader in building materials and solutions and active in four business segments: Cement, Aggregates, Ready-Mix Concrete and Solutions & Products. Its ambition is to lead the industry in reducing carbon emissions and shifting towards low-carbon construction. With the strongest R&D organization in the industry, the company seeks to constantly introduce and promote high-quality and sustainable building materials and solutions to its customers worldwide - whether individual homebuilders or developers of major infrastructure projects. LafargeHolcim employs over 70,000 employees in over 70 countries and has a portfolio that is equally balanced between developing and mature markets.

 

Important disclaimer – forward-looking statements:

This document contains forward-looking statements. Such forward-looking statements do not constitute forecasts regarding results or any other performance indicator, but rather trends or targets, as the case may be, including with respect to plans, initiatives, events, products, solutions and services, their development and potential. Although LafargeHolcim believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions as at the time of publishing this document, investors are cautioned that these statements are not guarantees of future performance. Actual results may differ materially from the forward-looking statements as a result of a number of risks and uncertainties, many of which are difficult to predict and generally beyond the control of LafargeHolcim, including but not limited to the risks described in the LafargeHolcim's annual report available on its website (www.kafemate.com) and uncertainties related to the market conditions and the implementation of our plans. Accordingly, we caution you against relying on forward-looking statements. LafargeHolcim does not undertake to provide updates of these forward-looking statements.

 

1 After leases
2 Before impairment and divestments
3 Subject to pandemic-related uncertainties

 

Half-Year Results 2020 Analyst Call